Dunham Winoto - Director, Investor Relations William W. Lovette - President, Chief Executive Officer & Director Fábio Sandri - Chief Financial Officer.

Farha Aslam - Stephens, Inc. Adam Samuelson - Goldman Sachs & Co. Kenneth B. Zaslow - BMO Capital Markets (United States) Omar J. Mejias - BB&T Capital Markets Michael Leith Piken - Cleveland Research Co. LLC Bryan C. Hunt - Wells Fargo Securities LLC Lubi John Kutua - KeyBanc Capital Markets, Inc..

Good morning, and welcome to the Second Quarter 2015 Pilgrim's Pride Earnings Conference Call and Webcast. All participants will be in listen-only mode. At the company's request, this call is being recorded.

Please note that the slides referred during today's call are available for download from the Investor Relations section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions.

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 results and financial results for the second quarter ended June 28, 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 we'll 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 Fábio Sandri, Chief Financial Officer.

Before we begin our prepared remarks, I would 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 those factors has been provided in today's press release, our 10-K, and our regular filings with the SEC. I'd like now turn the call over to Bill Lovette..

Good morning, everyone, thank you for joining us today. Our net revenue was $2.05 billion for the second quarter of 2015 resulting in an adjusted EBITDA of $426 million or 20.7% margins.

Our net income of $242 million compared favorably to the same quarter of 2014 with a 27% year-over-year increase while adjusted earnings per share was $0.94 compared to $0.73 in the same quarter of last year. Our team has once again delivered strong results in quarter two despite the ongoing export challenges.

It is important to note that we're weathering the headwind from exports much better than at any time in our past. This is a testament to what we've done to implement our strategy and our diverse portfolio of business model is a critical enabler in delivering this performance.

Our well balanced approach to bird sizes, key customers, end markets and geographies reduces the impact of isolated segments and give us lower overall volatility and a strong consistent performance over an extended period of time.

As an example of the diversity of our portfolio, we have a leading position in the small bird category and have continued to see this as a strategic segment even as many of our peers have scaled back their exposure over the past few years.

Our strong presence in this category has proven to be a winning strategy for Pilgrim's as small birds has once again outperformed this past quarter and given us an ability to offset weaker market conditions.

On top of diversity in bird sizes, our fresh case-ready operating strategy of aligning key customers with specific plant locations and our agility in the pricing approach are further optimizing our risk management and price elasticity across our entire business.

Beyond fresh, we're continuing to make progress with our prepared food sales and operations. We're on a path of sustainable growth to support increasing demand from our key customers. School food service main broad line distributors, key regional and national chain operators are among the major customer segments on which we're focusing our efforts.

To support this strategy, a significant portion of our CapEx for the next two years will be spend on investments, which will enhance our prepared food capacity and efficiency and improve our Pierce brand presence.

We believe this approach, combined with our enhanced agility to grow versus buy when financially beneficial will create a more consistent earnings profile for our company. Another illustration of the benefit of our diversification strategy can be seen in light of the weak export environment.

Although Mexico remains our largest importer and continues to perform well with solid demand and steady pricing, we've seen weak demand and significant market volatility in other export markets due to the continued impact of lower oil prices, weak currencies on several traditionally large importing – chicken-importing countries.

The lack of export demand is pressuring bulk leg quarters where prices have been driven to significantly low levels, which would impact producers with a simple mix based on commodity cutout.

On the other hand, our well balanced portfolio of different bird sizes and diversified product mix within each category significantly reduces our dependence on any one market and is creating opportunities for us to counter balance the volatility and demand in pricing in individual segments to produce more consistent results.

Although we have a four year proven strategy of growing value added exports, which have helped us become less dependent on commodity leg quarter market pricing, we are further reducing our reliance on commodity exports by continuing to make investments in increasing our leg deboning capacity.

With the installation of leg meat deboning operation in our largest big bird deboning plant during this quarter, we're on track to have the capacity to debone over half of our jumbo leg quarters by the end of the year for both domestic and export customers. In addition, we will process others into whole legs for domestic and export consumption.

We see this strategy as an opportunity to take advantage of the shift in U.S. demographics, increase our options for export and generate higher margins than pure commodity products. We are continuing to make progress on our goal of the relentless pursuit of operational excellence.

The adoption of zero-based budgeting in 2013 has delivered significant cost savings to us which translates directly to the bottom line. Furthermore, these savings will allow us to better withstand less favorable market conditions.

And we're not yet done, as we expect $200 million in cost reduction goal for 2015 and we are well on our way to hitting that target. Contributing to this goal, we're implementing more effective strategies to further improve deals across our production footprint.

We're also applying more aggressive strategies to improve labor efficiency, water usage, wastewater treatment and maintenance and repair expenses at every plant. Our Mexican operations delivered another solid quarter and are continuing to produce commendable performance despite the impact of a much stronger dollar.

Supply and demand was well balanced and the outlook remains quite encouraging as indicative of ongoing growth in chicken demand. As we had announced before, we received approval for the purchase of Tyson de México operations last month, which we subsequently closed.

We're pleased to report that the integration process is progressing very well and is on schedule. We expect synergies of approximately $50 million on an annualized basis, mainly from increased scale and combining our live production, processing plants, logistics, feed sourcing, and back office operations.

Construction at Veracruz is proceeding as expected with both the feed mill and hatchery currently ready to run and the first batch of hatching eggs set to go into incubators this quarter. We expect to begin the commercial production of live chickens around late summer, and for the first chicken to hit the market in early October.

Together with the acquisition of the new operations, we will be a much stronger player in all geographies in Mexico and are well positioned to serve the future growing needs of this market.

On high-path avian influenza, we remain vigilant to the possibility of new cases of infection as fall and winter approach and migratory birds begin to fly southward. While we do not know exactly which areas of the country are most at risk, we must assume that all migratory flyways could be vulnerable.

Therefore, we are continuing to employ a high biosecurity alert status at all U.S. production complexes and have increased training for all team members involved. As even before this year's initial outbreak, we test every broiler prior to slaughter and constantly test for the presence of the virus in our breeders.

We've also – have a localized response plan ready to employ at all production complexes in the event of an active infection in our own birds or those owned by others nearby. Next we'd like to make a few comments regarding input costs.

Recently, corn and soybean mill futures have seen increased volatility due to some concerns of the wetter than normal weather in the Midwest. Nevertheless, USDA's view on corn and soybean in the U.S.

and globally has not materially changed and remain very good given clinical stocks of both corn and soybeans as well as positive upcoming harvest expectations in South America.

As such, we expect no material change to our previous outlook and continue to believe that feed costs will reflect ample supplies and continue to be relatively moderate for the rest of this year and into 2016.

In terms of supply, we believe pullet placements, which have been volatile, are continuing to reflect the ongoing replacement of an older breeder stock, a breed change, and hatching egg exports. Further supporting this notion, hatching layer growth has remained quite moderate considering the relatively high number of pullets added over the past year.

We view these data as suggestive of normal growth rate. For 2015, we expect total industry production to grow at approximately 5% and the modest increase in hatching layers is indicative that we can expect the industry to expand 2% to 3% in heads with modest gains in weight for 2016, which is in line with our prior projections.

While we realize these are very early data points, we have increasing confidence that we are in the right range in terms of production, growth expectations for the next year.

As a reminder, the industry is currently capacity-constrained by slaughter facilities since producers are already operating at a very high utilization rate, which limits the ability to process a large increase in supply of birds within the short term to medium term without significant investment in the whole value chain.

We're continuing to see solid demand from our customers particularly at quick-service restaurants. And assuming current supply growth rates, we believe supply and demand to remain in balance. Chicken still provides the best value relative to other options. And chicken to beef pricing spread has remained at record levels.

Wings and tender prices have remained very good while breast have pulled back on tough comps versus a very robust 2014. Even though cold storage inventory is at a fairly high level compared to last year due to export difficulties, it has been on a downtrend over the past couple of months as low prices are already stimulating more demand.

Overall, we continue to see positive signs for demand and chicken continues to be the most attractive protein option available for retail and food service. With that I'd like to ask our CFO, Fábio Sandri, to discuss our financial results..

Thank you, Bill, and good morning, everyone. We reported $2.05 billion in net revenue during the second quarter of 2015 resulting in an adjusted EBITDA of $426 million or 20.7% margins. That compared to $2.19 billion in net revenue and an adjusted EBITDA of $337 million or 15.4% margin the year before.

Net income of $242 million compared favorably to $190 million in the same quarter of 2014 or a 27% year-over-year increase. Adjusting for the reconstructing cost of selling our property in Dallas and the non-cash FX losses, our earnings per share was $0.94 compared to $0.73 in the same quarter of last year.

The good quarterly results reflect the efforts we made in positioning our portfolio both in internal markets and external markets to be more resilient to volatility in specific markets. Our results were solid for both the U.S. and Mexican operating units during this quarter despite some challenge internationally as commented by Bill.

During the quarter, we only achieved modest volume growth as we implemented significant operational improvements at two of our largest facilities, which affected their production days but should ultimately translate to improved efficiencies and enhanced sales mix opportunities.

Also supportive of our bottom line, we are on track to reach $200 million in target operational improvements for 2015. Our teams continue to evolve in the zero-based budgeting model to actively identify additional cost savings opportunities.

And we believe we are building a sustainable competitive advantage for our company regardless of market conditions. Our SG&A expense continues at 2.4% of net sales in spite of the increased incentive accruals for the level of performance our team members have delivered.

The level of competitiveness of our SG&A focusing on adding value to our operations, show our commitment to operational excellence not only in the industrial standpoint but also from our sales and support teams.

Given that we only closed the acquisition of our new Mexican operations after the end of the Q2, we expect to start fully consolidating results this quarter.

The integration process is going very well and our teams have already identified close to $50 million in annualized synergies with major opportunities by leveraging our combined scale of purchasing of ingredients and feed inputs, redundancy in distribution and back office operations.

Our balance sheet continues very strong 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 $246 million in free cash flow after taxes and capital investments reaching a leverage ratio of 0.26 times last 12 months EBITDA even after the payment of our Mexican acquisition, our leverage only reached 0.52 times last 12 months' EBITDA.

Our strong cash flow generation leaves us plenty of room to continue to seek the right investment opportunities. We'll continue to focus on opportunities with a superior return and projects that increased efficiency, quality and safety.

As an example, during Q2, we completed the projects in two of our big bird facilities, the expansion in our fully-cooked lines, infrastructure projects such as waste water improvements and new feed mill and various cold chain projects.

Each of these projects improves our ability to provide the best quality products to our customers, lower costs, improved efficiencies, and enhanced our sales mix opportunities. We're committed to our CapEx outlook of $175 million in 2015.

Given there is no change in existing debt, our interest expense for 2015 should continue to be in the range of $30 million to $40 million.

Yesterday, we also announced that our board has approved $150 million share repurchase program, which demonstrates our commitment to creating shareholder value, our financial discipline, and our confidence in the future.

We will continue to consider and evaluate all relevant capital structure strategies that will enhance and compliment the pursuit of our growth strategy. With the strong cash flow from operations, our leverage has remained low and our commitment to pursue the right growth strategy remains intact.

We'll continue to review each prospect according to our value creating standards. Operator, this concludes our prepared remarks. Please open the call for questions..

Thank you. We will now begin the question-and-answer session. In the interest of allowing equal access, we request that you limit your questions to two then rejoin the queue for any follow-up. At this time we'll pause momentarily to assemble our roster. The first question comes from Farha Aslam with Stephens. Please go ahead..

Hi, good morning..

Good morning, Farha..

Congratulations on a great quarter..

Thank you..

Thank you..

And then, just a question on your buyback. You've announced the $150 million share buyback.

How aggressively do you plan to implement it? And kind of what's the timing around that buyback?.

Well, the buyback time is one year and we'll look into the open market at times and amounts considered appropriate by us at any given day. So there is no set target for any given day other than the $150 million during one year..

Okay. So you want to do $150 million in one year.

So you're going to take out about 10% of your float?.

That's correct..

Okay. Perfect. And then, just as a follow-up, could you comment about your U.S. business? We've recently seen pricing that's been quite soft in the broader market. How do you think that's going to impact your business? Because I understand you do sell on contracts.

And then how do you think you can offset it with your cost savings?.

Well, this is Bill. I'll start with that one. I believe what you're referring to is really the spot market, or (20:04). And I'll agree with you, it has declined significantly. For example, the cutout has gone down about 24%. If you look at any one component, it may be down 30%, 25% versus a year ago; wings actually are up 20%.

USDA whole is down 12.5%, but a couple of things that I would remind you. First of all, we're not out on the spot market in any large degree. We have – most all of our chicken is sold in a given program and we have a different mix than the spot market might indicate.

The other thing I would remind you of is feed cost is down year-over-year approximately $50 per ton; on broiler feed, it's about 17%. So from a margin perspective, despite the drop in the spot market, margins, while maybe weaker than a year ago, on any given day they're not down as indicative as the spot market might indicate.

And I'll give you an example of our mix and how it plays. For the quarter, quarter two, if you just take the Composite Market Index, it was down about 13% while our mix was down only 4%. And given again the decrease in feed cost, that's what created that margin that we just reported.

So, obviously, higher prices are better, but with our mix management, our portfolio strategy plus our agile pricing strategy, we believe our margins will remain much better than the average company in our business..

Great. Thank you so much..

Thank you..

Our next question comes from Adam Samuelson with Goldman Sachs. Please go ahead..

Thanks. Good morning, everyone..

Good morning..

Maybe continuing on the line of discussion that Farha started on there. Bill, as you look at the margin improvement that you've had in the last couple of years, you look at the mix strategy improvement that you've done, how – you just said we think we'll be better than the average chicken company.

But help us think about what normalized margins for Pilgrim's actually mean moving forward, whether that's on a percent basis, on a dollars per head, a dollar per pound. How can – how are you thinking about that over time because this is a cyclical business. And maybe I'll leave it there first..

Thanks, Adam, and you're correct. It is a cyclical business. We have a lot of factors beyond our control. Input cost, spot markets, high-path avian flu. And all of that combined makes it extremely difficult to tell you specifically what normalized margins could or should be in our industry.

I would point out though that given what's happened the last two years to three years with competing meat prices with our own industry showing discipline in matching supply and demand, we believe that normalized margins, whatever they maybe, are structurally higher than they were 10 years ago or even seven years ago.

And in addition to that, whatever the average margin is for the industry, I believe, we've demonstrated the last few quarters that our business model close off better margins than the average company.

And we believe that spread should continue to grow in time as we get better with zero-based budgeting execution, as we get better with our management method. And also I'd point to the agility in our pricing strategy.

We look to the future, we form a point of view about what we believe supply and demand will be in the next six months to 18 months and we change our pricing strategy commensurate with what we believe will happen and we've done that so far this year, and we believe that will continue to be constructive for us as well..

And Adam, speaking about the operational improvements, the best way to see the results within our performance compared to our peers in the industry. While in 2011, we were below the average company profitability, today, we are in top 25 category. And that is a moving target because the poultry industry as a whole is also improving their operations..

Okay. That's helpful. And maybe it's part short term and part kind of ties into the previous question. Can you – you think about the relative profitability in your business today and longer term, small bird versus big bird – and I know tray pack is somewhere in the middle – but those two really stand out.

And you really do see the pricing differences kind of be very stark today between small bird and big bird. And I'm trying to think about how much that's contributed to your relative outperformance in the last nine months to 12 months, and how much you think that contributes moving forward..

Well I will point to somewhere a year ago when commodity spot pricing was at a near term high. And there were some companies that were strictly focused on large bird deboning that were better us in margin. But this is the time when markets are not as strong or spot commodities that our mix tends to do better than those companies.

And we have, again, we believe such a balance portfolio that we get benefit when spot prices go up, perhaps not as much as a singularly focused large bird deboning player. But we still get the upside and we'll end up downside as we have suggested..

Yeah, the most important point of the portfolio is to reduce volatility and give us more resilience to downside of the any given specific segment..

Yeah. Okay, that's helpful. I'll pass it along, thanks..

The next question comes from Kenneth Zaslow with BMO Capital Markets. Please go ahead..

Hey, good morning, everyone..

Good morning, Ken..

Good morning, Ken..

I guess my question is kind of tie on the similar ones. But you had a peer out there who has put out a target margin for next year, for 2016.

I guess my question is really to this, do you have the same visibility as you would – is it possible to have that visibility that that company has? Are you different? Are you moving towards that type of visibility? And is there a period of time that you will be able to give some sort of outlook on a year-out basis, even in the environment that we're in over the last month or two months where prices have changed pretty markedly? Would that also change your outlook for 2016?.

Ken, I believe we have the same visibility in terms of publicly available information as any company obviously. And we use it to construct our plants. But we've recognized that we're in a commodity industry, it's cyclical, and there is so many things that affect margin that are beyond our control.

We don't believe it's prudent for our business to talk about what margins might be in 12 months from now. I believe last summer, there was many predictions that we were at peak cycle in the business. And here we are 12 months later and we actually threw off higher margins than we did in quarter two of last year.

So, again, that points to how difficult it is to think about projecting margins 12 months out..

I guess I just – and I won't take up more time – is there a bottom to your margins? And I know that you've said that you'll outperform the industry.

But is there a way, through the portfolio configuration that you have, that there's a limit to the downside to which you can actually always say – hey, look, the world can come close to an end, and we're still going to be able to have a margin structure of X, given that we have a balanced portfolio between formula-based contracts, Georgia dock-based contracts – all these contracts throughout the – in your portfolio.

Then I'll leave it there. Thank you..

Great question, Ken. Couple of things I'll mention there. We went back recently and measured the delta of our performance as Fábio mentioned back in 2011 using 2010 as a base. Coming forward, we measured the absolute value of the improvements that we've made versus the average company.

And if you add up all that value, it's something like a $0.5 billion. And so, we would point to the market conditions that were prevalent in the industry in 2011, which I believe were if not the worst year for margin in the industry – certainly one of the worst years. If we applied our business model to those conditions today, we would be profitable.

So if it gets any worse than 2011, that's kind of a scary thought, I don't believe that's going to be the case anytime soon, but if it did, we would still be profitable..

Great. I appreciate it. Thank you..

The next question comes from Brett Hundley with BB&T Capital Markets. Please go ahead..

Good morning, gentlemen. This is actually Omar filling in for Brett..

Hi, Omar..

Good morning..

My first question is related to bird flu potentially impacting Mexico in the fall. After looking at flyways and bird patterns related to migration, we have become increasingly concerned that it could be a problem this fall for Mexico. We think biosecurity is now strong there.

So we just want to get your take in what could this potentially mean for PPC..

There's has been prevalence of H7N3 avian influenza in Mexico since early 2012. Vaccinations has been ongoing for grandparents and breeder stock since that time. And today there's no evidence that the virus in Mexico has been eradicated. I would point out it's a different virus, it's a different disease, a different flu.

And as far as we know, the virus that has been in the U.S. the past few months has not been detected in Mexico. We don't know for certain that that virus through migration of wild birds or any other means will make it to Mexico.

But again, I would point out to the fact that Mexico has been dealing with another form of high-path avian influenza for over three years now. And the market has handled it rather well, consumption continues to grow, and producers have improved biosecurity since that time.

And it has not had a long term devastating effect over the past three years although 2012 and again another pocket of infection I believe in 2014 occurred. But so far this year, we've not seen rapid increase in the number of infections there..

And for Pilgrim's, we've been giving our growth both in the acquisition and new operations in verticals we are more geographically diversified than in the past. And we have the operations in U.S. to provide eggs to Mexico if needed. So we are less exposed to that risk..

That's very helpful.

And just a follow-up on that, could you guys talk about some of the precautions you guys are taking in Mexico, along with some of the things you're hearing in the industry's ability to use vaccination this year?.

Sure, we employ the same biosecurity strategies in Mexico as we do in the U.S. We limit traffic, human foot traffic on the farms, we use foot baths, we use protective gear to cover clothing. We're very limited in terms of even our own personnel going to farms across various regions. We monitor, and we have a surveillance program set up.

And so far, it's been very effective both in Mexico and in the United States..

Great. And switching over to the operational side, we noticed that some of the other costs outside of feed were much better than anticipated.

Is that the result of some of the operational improvement work you guys have been doing recently? And if so, how sustainable is that at varying points of the cycle?.

That's an accurate observation. We had I believe the best quarter in terms of plant cost reduction that we've had in the four years that we begun to implement our strategy. We believe that as we have executed and implemented zero-based budgeting, we've gotten better at it.

We expect that we'll continue to get even better with zero-based budgeting and our management method. And we believe our rate of improvement will continue to impress, and we have very, very high expectations for all of our operations. We expect our operations to improve on a step-up basis.

Meaning, if they're in the top quartile, their goal is to get to the top five. If they are in the top five, their goal is to get to the zero-based target. And so, we continually monitor and challenge our operations team as well as our sales team to get better in every key performance indicator upon which they are measured..

Just, the two major buckets where we see the operational improvements is in operating performance or cost, and also in yields. The yield gain is continuously adapted to market value of the products we sell. So when we talk about $200 million, that is already adjusted for the current market conditions..

That's very helpful. Thank you very much guys. I'll pass it along..

Thank you..

The next question comes from Michael Piken with the Cleveland Research. Please go ahead..

Yes, good morning. I just wanted to dig into the pullet numbers a little bit more closely and sort of get your perspective on how much of the pullet flock is moving to Mexico with the pullet eggs after they're hatched, as well as how much is being used to replace some of the older breeders, versus how much is actual expansion. Thanks..

So, again, we would point to several things that are indicative, from the increase in pullet placements and the growth of the breeder flock. We believe that there is a breed change going on inside the U.S. as more processors move to the larger birds, they move to a different breeder which is less productive in terms of chicks per hundred hens housed.

And we believe that that accounts for about a 1% supply growth in the breeder flock. We also believe that over the past year, we've seen something in the order of 3% supply growth attributable to the growth of exports of hatching eggs going to Mexico.

And then the balance of the growth number is taken up in what we've seen by 2% to 3% increase in head placement slaughtered for U.S. production. We believe going forward into 2016, that we could see another 2% to 3% increase in head placement slaughtered 2016 over 2015, but we don't see that there is much risk for appreciably more than that..

Okay, great. And then, in terms of your own production, could you give us any sort of color in terms of what we should expect in terms of your volume for 2015, and if you have a read on 2016, both – if you could break it out between the U.S. and Mexico, either including the Tyson assets you recently acquired or excluding that, that would be helpful..

Yeah, Michael, we expect to growth in line with the market. With the acquisition in Mexico, that will add $650 million roughly in terms of revenues for us that's just the acquisition in Mexico. But in U.S. and on our current operation in Mexico, we expect to grow in line with the market..

Okay, thank you very much..

Thank you..

The next question comes from Bryan Hunt with Wells Fargo Securities. Please go ahead..

Thank you for your time, just two questions.

Bill and Fábio, I was wondering – if you look back to 2011 in other markets where we've seen supply growth outpace demand, or at least, like we've seen prices come down on the cutout values that you quoted earlier, Bill, oftentimes, customers, whether they're under contract or not, come back and push back pretty hard on pricing.

Can you talk about – one, are you experiencing that; and two, have you had any of your contractual customers come back and try to renegotiate with you given the price movement in the last six weeks?.

Bryan specific to your question, no, we have not. I would remind you, back in 2011, we implemented a strategy where we focused on our key customers and we build our portfolio that we've been talking around about rather – around those demands from the key customers.

And we have relationships with those key customers such that our business with them is much more than just price. We deliver a lot of value beyond price, a lot of value actually beyond the product itself. And for those reasons prices again it's not the most important thing in many cases and the relationship with our key customers..

Great. And then, my next question is around avian influenza. You all mentioned immunization is down in Mexico. The USDA has developed a product in the United States, which protects birds from the current virus that has been spreading.

And I think there was a conference last week discussing the potential to use the product in the United States on the flock.

Can you talk about whether, one, you had any discussions with your customers around potentially immunizing your birds, and what the reactions may be to such an attempt?.

We have not had discussions directly with our customers about vaccination. We have discussed it internally; we had discussions with APHIS, a branch of USDA that regulates that.

And what we've said is we're supportive of limited and strictly controlled vaccination once a vaccine is developed and is proven effective, which from what I understand we're getting closer, but don't believe that there has been a vaccination that's been approved just yet for that.

And again, we believe it can be a part and only part of an effective eradication plan. The downside to vaccination is, in the past, when some countries that vaccinated their importing customers from those countries have banned exports from the vaccinating country to that importing country.

And we certainly don't want or don't desire for anymore bans to occur because of vaccination in the U.S. And that's why we believe if it's limited in terms of geography and strictly controlled then it can be a part, but only a part of an affective eradication plan. We've had high-path avian influenza in this country a couple of times.

And we dealt with it very effectively by eradicating the disease. And again, we believe that total eradication is really the only way to minimize or mitigate the risk long-term and that's what we're in favor of..

And my last question is – looking at the M&A environment, can you just talk in general what you're seeing in terms of multiples of businesses that are for sale out there? I know you all have been very disciplined in the past in terms of acquisition targets and multiples you're willing to pay.

Has that changed at all given your strong free cash flow generation? I guess you're communicating, with the stock buyback, you'd rather buy your own company than buy someone else's.

But again, can you discuss M&A?.

No I think the multiple change as the market expectations changed as well. But the multiple – is not the most important thing for us. What we evaluate is the amount of synergies and the operational improvements we can achieve with the acquisition of that target. So the multiple of course is only a consequence of what we are willing to pay.

And that's, again multiples have changed with the expectations in the market. So what we're seeing is there are targets out there and we are pursuing our growth strategy..

Well, very good. I appreciate your time. And best of luck next quarter..

Thank you..

Thank you Bryan..

The next question comes from Akshay Jagdale with KeyBanc Capital. Please go ahead..

Hi good morning. This is actually Lubi filling in for Akshay. I wanted to ask a question, a follow-up question, to one that was asked a little bit earlier. I'm just curious, how much is your own production in the U.S. up year-to-date? I mean, I know you guys provide details on the amount of pounds you sold.

But I'm wondering if there's a meaningful difference between pounds produced versus pounds sold. And the reason I ask is because the increase in production so far this year for the industry as a whole, which I believe is around 5% or so.

It just seems to be much higher, I think, than what yourselves and Tyson have indicated you guys are increasing production by, which – and obviously, given the fact that Pilgrim's and Tyson make up a significant portion of the industry's volume, I mean, it would just seem that other players in the industry have increased their own production pretty significantly, which I guess kind of calls into question the level of discipline that we're seeing in the industry right now.

So I'm just curious to get your thoughts on that..

Couple of things Lubi. We had two of our largest plants that were down for a number of days during the quarter to make some capital improvement projects as we've alluded to before. And that definitely affected our volume in the quarter.

As Fábio said earlier, it's our desire to grow production and market share while in line with our current share and with the market. But I'd also point out that we do have a buyer growth strategy for our prepared foods business.

When the market prices are such that it's financially better for us to buy the raw material on the open market for our prepared foods business, that's exactly what we'll do. And I expect that there may be an opportunity in the future to purchase more of that on the open market.

In that case we would not grow and slaughter the bird, but we would buy the components from other company..

Our pounds produced and sold this quarter was marginally higher than the same quarter last year. And they are working in line as you can see because our inventories have not increased. So all the pounds sold and produced were in line..

Okay, that's helpful. And then, my second question is just in terms of pricing, so there's been some softness, as you alluded to earlier. But Georgia Dock prices seem to have held up pretty well. So I'm just curious if you could talk a little bit about maybe what's driving that.

And then, in your view, do you see some risk to Georgia Dock prices as – with the potential of pork prices coming down further at retail? Thank you..

So Georgia Dock market is reflective of whole birds. And you have a mix of small whole birds and medium sized whole birds in that mix. And we believe that it's the value of all those birds combined that it has been supported for keeping that price relatively high.

And we believe especially given the actual decline in the number head of small bird production this year over last and we don't see that's going to grow significantly in the future. We believe that's Georgia Dock will continue to be supportive by the demand for that product..

Okay, thank you. I'll pass it on..

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

Thank you. I believe again the second half of 2015, we remain optimistic our portfolio will create the best opportunities for us to deliver a more consistent result regardless of market conditions.

At the same time, we continue to be vigilant against the potential of avian influenza on our flocks as we get closer to return of migratory birds flying southwards.

We would like to thank our team members, customers, and other interested parties in our company, and I ask you to continue to follow our journey to become the best managed and most respected chicken company in the world. Thank you all for joining us today..

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