Hain Celestial Group Inc (HAIN) 2004 Q2 法說會逐字稿

Good morning and welcome to the Hain Celestial Group's second quarter 2004 financial results teleconference. Today's conference is being recorded.

Before we begin today, I would like to remind you today that statements made on this call that are estimates of past or future performance are based on a number of factors, some of which are outside the Company's control. Statements made on this call that state the intentions, beliefs, expectations or predictions of the Hain Celestial Group and its management for the future are forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements.

Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained from time to time in filings of the Hain Celestial Group with the US Securities and Exchange Commission. Copies. Copies of these filings may be obtained by contacting the Hain Celestial Group or the SEC.

I would now like to turn the call over to Irwin Simon, Chairman, President, and Chief Executive Officer of the Hain Celestial Group. Please go ahead.

Thank you. Good morning everybody and welcome to our Q2 conference call. With me this morning is Ira Lamel, our Chief Financial Officer. Kevin Mosley, our Vice President of Sales, will take you through some of the distribution that we have gained on our new Carb Fit line and some of our other products. And Adam Levit, who now runs our Snack Group, will tell you about some of the great things that are happening with Terra, Garden of Eatin' and our overall snack business.

I hope each of you have had an opportunity to read our press release that was issued this morning.

Our sales for the quarter were 142.8 versus 123 a year ago, up 16.1 percent. Our gross margin is 33 percent versus 33 percent versus a year ago. Pre-tax income, $16.7 million versus 13 million 150, a 27 percent increase. Our EBITDA, which is an important number, 19.8 million versus 16 million, a 24 percent increase. Net income, 10.4 million versus 8.2 million, a 27 percent increase. Earnings per share for the quarter, 29 cents versus 24 cents, a 21 percent increase. And number of outstanding shares this year versus last year, 36 million 135 versus 34,467,000 shares.

I'm going to tell you some things about our business. Adam will tell some things about our snack business in a few minutes. But our Melville business grew over 17 percent, and that was driven by strong snack sales, strong Earth's Best sales, strong Health Valley sales on our cookies and crackers, and again trans-fat hydrogenated oils. I will tell you about some of the things that we're doing on cereals and some of the things we're doing on soup. We see a lot of great things happening with our Walnut Acre business in regards to the juice business, which is a newly acquired business for us at the end of June. And of course, we will all talk about what's happening with Carb Fit and some of the exciting things that happened there. And Carb Fit, which was worked on, started in May has seen some tremendous success.

Our key business grew six percent, and that's with coming off some tough comps versus a year ago. And you've got to remember, back in December and November we still enjoyed some of the warm weather that we're not enjoying in the months of January and hopefully continues into February and March.

Our Canadian business was up 15 percent. And again, that was off some tough comps from Yves. But we're seeing some good growth on the Yves business. In the US, some good growth in the natural food business in the US. In Canada we're also seeing some great things happening with Imagine, our Rice Dream and our soup business and a continuous strong roll out Earth's Best and Terra up there. Our European business was up 68 percent. We're seeing some strong growth with the Imagine business, our Rice Dream business. We've made some changes over there on distribution. And our Grains Noirs business continues to see some good growth.

Let me tell you a little bit about our businesses. And you have heard me say about Earth's Best, which is one of my all-time favorite businesses and I think one of our strongest brands continues to lead the category natural food as the number one baby food, up 26.1 percent versus a year ago. And helping to drive the double-digit growth was the launch of our new line of Toddler's, including cereal bars, organic Crunchin’ Blocks and other bakery snacks. In addition, we will be out with cereals, will be out with convenient pack size. And in grocery, which was not a big market for us, were up 13.1 percent versus a year ago. And world pace in the category is only up 1.3 percent. Our share has increased over 2.5 points to 23.1 percent. So we're seeing a lot of good growth on our Earth's Best business. And again, eating healthy for kids is something out there that major today. We, of course, are introducing a lot of new products. You have heard me say about a lot of our Toddler's products are our KIDZ products. And continue to watch for the whole Earth's Best line of Toddler products to keep coming out.

Our business Arrowhead Mills, which I can see is a sleeper, and what's happening in the whole organic market, the new organic regs which were introduced in 2001, I think are finally catching on. People today understand the difference between 100 percent organic, 95 percent organic and made with organic ingredients. Demand for organic which we're seeing is just tremendous growth across all our brands that our organic brands are made with organic ingredients. And today Hain probably has close to 1000 SKUs which are organic products.

Our baking from our Arrowhead Mills was up over 23 percent. Our beans, grains and rice -- and again this comes back -- beans, grains and rice, which we'll talk about a little while -- on the good carbs and the bad carbs can even though a lot of people out there are looking to cut back on their carbs, beans and grains are the good cards, up 36.5 percent. Our hot cereal business was up eight percent. So we've got a lot of good things happening, a lot of new products coming out, and pretty excited about what's happening with Arrowhead Mills. We've done a complete conversion on packaging here and this line has become basically a total organic line for us in the Company.

Our Health Valley soups, for total soups Hain Celestial Group enjoys the number one and number two position in natural with a commanding 43 percent share and number one and three in grocery with a 43. It's great to be in the soup business when you have the type of whether we've had in January and February. We show some good growth in the natural foods, up 17.9 percent. We're not seeing the same growth in grocery. We've had some manufacturing issues with our soups which are behind us now, and we've pulled back on grocery. We want to make sure that we went out and made sure we had distribution and we had our products in the natural food side. Our Imagine soups continue -- and that's the aseptic soups -- again all organic -- continues to show strong growth across soups and broth, up 17.5 percent in grocery and 4 percent and natural. So a lot of new products coming out in Asian cuisines on our Imagine products, and also a lot of new products rolling out -- have rolled out within our Health Valley soup line.

One of the things we continue to see, trans-fats hydrogenated oils. Again, all our Health Valley bakery products do not contain trans-fats and never had. We continue to hold the number one position and snack bar category for the natural channels with a 33 percent share. In grocery Health Valley has moved into the number two position, actually behind Dr. Atkins low carb bars.

In natural and grocery the launch of our sandwich creams, which I would put them up against the number one other sandwich cream out there that begins with an O and does not contain hundred hydrogenated oils, I think is a pretty good tasting product, and anybody that has always said the same. We also have something called our Premium Chunk Cookies, and there's another brand out there that contains hydrogenated oils in many cookies, and I would put them up against them and we're seeing some up 27 percent in natural and 6 percent in grocery with our cookie products. So we see a lot happening on our baked goods and we will continue to see that, and tremendous opportunity for us to leverage the growth in our whole grocery area.

Our cereal business, we're number five position in cereal. And you have heard me talk before about our decline. We've had double-digit decline. Right now our decline, we're down 2.6 percent. We've launched our new Slender HeartWise product only in September, so I think we're seeing some good things and we're happy with what's going on out there.

Kevin in a few minutes will tell you about Carb Fit, but Carb Fit started to roll out of here in mid-December. I have seen tremendous, tremendous acceptance of the product. Actually one major supermarket chain has put our cookies in the main cookie aisle. And you have got to remember, we started on this project in May and we are the only one who is natural -- no GEI -- and kosher product out there in the Carb Fit. I think what's important is we're doing low carb products that are truly low carb products. I think there's a lot of people out there today that are coming out with low carb products that are already low carbs.

I think what's also important here, we're now spending -- we've been spending a lot of money on the launch to development of this product. We've been rolling this out as we go along, so pretty excited about what we're seeing on the whole low carb side.

In regards to our whole soy and our aseptic soy, the Southern California markets, which have hurt us -- and Southern California for us is a big soy market -- 900 stores out there, and we have a tremendous ACV. So our soy area -- aseptic categories down. We're down both on aseptic -- the category is down 8 percent in grocery, 0.2 percent in natural. We're down 12.6 percent in -- actually 12.6 and 4.4 in grocery, 5.5 and 3.3 in natural.

On the aseptic rice side the category is down, but we're up both in grocery and we're up both in natural. So we've introduced a new HeartWise product, so I think what is driving other consumers as heart-wise has been known to reduce cholesterol.

We're seeing some good growth on our Walnut Acres. The category is up 48.3 percent. Walnut Acres in grocery was up 61 percent. And in natural the category is up 23.6 and we're out 9.1. We're still in the midst of fixing this line on pricing and product and out of stocks. And we've put a lot of emphasis in the Walnut Acres line, basically against the juice. We've discontinued a lot of the soups and sauces and salsas. So we have some great things planned for Walnut Acres, and I like what I see so far.

We've opened up a lot of new distribution on Westsoy and Rice Dream in the super masses and other non-traditional supermarket chains which are not included in the numbers above. So we're seeing some good growth in other areas from Soy Dream, Rice Dream and Westsoy.

Celestial Seasonings up six percent on units; dollar sales strong coming off some strong comps. And again, Celestial is sold -- our third-best market is the L.A. market, which does affect us. In food, drug and mass our target 12 weeks ended 12/27 Celestial gained 2.5 percent in units against an overall category 2.7. The brand share is almost -- is 29 percent, virtually even with last year. We posted good gains in Black, up 16 percent; Green, up 12 percent, outpacing the category; Herb was off a bit; while Wellness continue to decline for the brand, but it's beginning to rebound for the category and we see some opportunities there.

The drug unit volume grew 43 percent versus a year ago behind some strong distribution gains, increasing share from 42 percent last year to a 62 percent. So we're seeing some great growth coming out of our drug chains. We're also seeing some great growth coming continuously coming out of our mass-market chains.

In natural foods for the three months ending 11/29 we grew almost 7 percent. The category was up 17 percent, but Yogi and Tazo were the big movers there.

Our advertising program, we've done some things with magnets and in-store couponing. What we've been doing with Celestial a little different, Celestial has been -- has previously in the past has done a lot of consumer advertising. We spent a lot of money this quarter back on coupon and price, and I think it's helped drive our sales. And I think that's what consumers are looking for.

We're recently have introduced on the bag side True Blueberry Herb Tea, Perfectly Pear White, Madagascar Vanilla Red, Apricot Honeybush, and is capitalizing on those trends. We've seen some great -- and a lot of you we've shown you our new Teahouse Lattes, our Chais -- continue to build distribution and we're quite happy with that -- our Natural Ciders. And we're in the midst of introducing two new Women's Wellness Tea, capitalizing on a trend towards proactive health management that will shift very shortly.

In some of our other areas -- McDonald's, L.A. continues to increase in sales; San Francisco, Southern California successfully were added in January and continually do well; the Portland market, the Austin market. So we're continuously seeing good things happening for McDonald's and look to open up other markets.

New business for us which will come in the third quarter and fourth quarter, Sysco. We've been approved in Q3 for a kickoff in US and Canada, eight products to be marketed by Yves, and we'll also be doing their private-label moon rose (ph) products, which we see as a big opportunity. So this is something new and food service is something that we have always had on our drawing board and look to see some big areas for that.

Our C store (ph) business with 7-11 continues with a lot of new products and a lot of things happening. We're shipping Wawa for the first time. And we're continuing to look at other convenience stores and opportunities for us.

Other food service, if you fly Delta Airlines you can get Terra and Garden of Eatin'. We've expanded with Amway. We've also expanded our business with the US government. And it's interesting, the US government is putting organic sections in their commissaries, which is for the first time.

You heard me talk about Canada. For 12 weeks ending December 27 the category was up 7 percent, Yves was up 7 percent, and we have an 89 percent market share. For 52 weeks the category was up 7 percent, and Yves was up 7 percent in dollars, so we do have a good great share and the category is up there.

One of the things we're doing in the Canadian market, and we're doing with the Yves brand, we're repositioning it. Right now four percent of the population are vegetarians that eat the Yves products. What we're doing is looking at putting some eggs and dairy products that basically will help improve some of the taste of the product, and as we look at a lot of people today that want to reduce just their meat intake that are not vegetarians, it opens up the product for them also.

We're seeing some great things happening in Canada on our Rice Dream products. Our Imagine business -- the category was up 1 percent, we were up 11 percent with a 37.8 percent share. On 52 weeks the category was up 5, Imagine was up 16 percent with 36.3 percent. We just recently introduced Rice Dream Refrigerated into Canada, and seeing some good results from that. And actually the same with our Imagine soup business has been very strong up there.

In regards to launching Carb Fit in Canada, you're not able to launch products in Canada with carb as the brand name, so we're introducing our Carb Fit line as Resolution (ph) and the first SKUs of snacks will launch very shortly. And some major chains have already accepted it and our first ship is April 12 for all these products. So we feel real good about that.

Our Earth's Best business continues to be strong. Our Terra Chip business continues to grow up there. And we're in the midst right now of relaunching many more Health Valley products, and looking just to make sure with the Canadian pricing that we're competitive in the opportunity up there. So Canada has a lot of new opportunities for us.

In regards to Europe, we're also in the midst of launching some low carb products in Europe, first with the UK, going into ASDA, and that will probably ship the end of March, early April. Again, low carb over there is just catching on. We see some big opportunities. We're seeing some great growth coming out of our Imagine business over there and we continue to roll out rice milk and soy milk, and we look for some big opportunities coming within the soy category very shortly. Our Grains Noirs business was up 31 percent versus a year ago and our big measures are continuously how do we consolidate Grains Noirs and our Biomarche business. The other thing is how do we roll out Lima. Lima today is basically sold only in natural food stores and our big challenge is how do we continuously open up into the supermarket and the super masses. We continue to look at acquisitions in Europe, identified quite a few, and quite excited about the European market.

As you read in our press release today, we've made some people changes with a lot happening. John Carroll, who was at Heinz and other consumer packaged goods company, is coming into New York to be Executive Vice President of Melville businesses, which would exclude snacks. And John will basically have full P&L responsibility of all those businesses. Again, it frees myself up to concentrate on acquisitions, Europe and touching bases with some of our other businesses.

You can see also we've made some changes to the Board. Myself and the Heinz Board members are considered insiders, cannot sit on committees or do not sit on committees. I think today with the work with Sarbanes it's important to have a good Board where you can spread people around, spread the work around. And also I think Boards also need transition and if you decide to make a Board bigger or smaller it's important to have succession planning on a Board. So I'm adding actually two new people to the board -- Barry Alperin, who has a great background and will help, us will join our Audit Committee; and Lou Schiliro, who actually has a great background with the FBI for 25 years and who has a tremendous background, will also join our Board. And replacing Joe Jimenez, who I would like to thank, who has been a great Board member and Neil Harrison who has been a Board member will come off the board from Heinz, and they will be replaced by Mitch Ring and Ed Smyth.

In regards to the acquisition market, we're seeing a lot of interesting opportunities and ideas out there and we will continue to look at them in new categories and new areas for us, both in Europe and the US and Canada. And actually, a major market that we're looking at right now is the whole Asian market. There's a major natural food's show in Asia in March, which I will be spending some time there. So looking forward to the opportunity of looking at that market.

One of the things I want to come back and reconfirm our numbers. For our fiscal '04 95 cents to $1.03. With our snack business, our Earth's Best business, our foodservice opportunities with Sysco, with McDonald's, our whole launch of our Carb Fit, Europe and Canada and we're continually on our track of 30 in 3, I feel very good for the year. And I have got to tell you, I feel very good about this here quarter, even though this here quarter we had a California strike which hits us hard, a switch in distributors at Wild Oats and a lot of costs going into the launch of Carb Fit. I think we've put out an outstanding quarter and put up an outstanding quarter.

What I would like to do is turn it over to Adam Levit. He will tell you all the great things that are going on in snacks. One thing -- I've got to put a plug in for Adam -- make sure you try his new Terra Kettle Chips because you will not be able to stop eating them. Hopefully you saw Adam's add on the Super Bowl.

Good morning. Before I tell you about the results of our snack division, I'd like to tell you a little bit about myself. As Irwin mentioned, I am currently running our snack business unit and I've been with Hain for about six years. People who know me say I grew up on a snack route truck. I have got about 20 years experience in the snack business, in all facets of the business. I have been involved in sales, R&D, DSD distribution and marketing.

Our snack business focuses on three key areas, and I'm happy to report today that we have had major progress in each of these areas. The first is new distribution. Every day there are new outlets opening up carrying our products and I'm happy to say consumers will be able to find them across the country more frequently. The second is new products. We continue to be a leader in innovation, delivering products that consumers are looking for and meeting all the new consumer trends that come to market. And the third, our big focus is on pounds on the floor. We continue to refocus our organization to be able to gain incremental off-the-shelf display, which really helps to drive the volume of our snack business.

The second quarter was a great quarter for our snack brands. Total growth for the division was up 18 percent over the prior year. A good part of that driven by our Terra brand which continues to show strong growth, up 10 percent for the second fiscal quarter. Our exotic vegetable chip segment has led the rebound of the Terra brand. That segment is showing growth of 49 percent over last year and we believe there is continued opportunity within this segment by increasing the distribution of our new flavors Zesty Tomato and Mediterranean.

As Irwin started to talk about, this last quarter we launched three new SKUs called Terra Kettle Blends. These SKUs put Terra into an entirely new class of snacks, a class that is growing very rapidly. And we look forward to reaping some of the benefits of that category.

In the past you have heard Irwin talk about speed to market and innovation. Terra Kettle Blends are a great example of both of those. These SKUs were brought to market in less than nine weeks, and that's from product concept to the first day these products were on shelf. And that's a great accomplishment by our entire snack team. Not only we were fast bringing Kettles to market, but these products deliver great taste, and more importantly they have 40 percent less fat than the competitive products on the market, contain no trans-fats and no hydrogenated oils.

Terra is also continuing to expand and alternate channels of distribution, another major focus for our group. In the last quarter we've launched Terra into a major national drug chain, a regional wholesale club with a new 15 oz. size of our exotic vegetable chips, and Terra's currently being tested in a major super mass and the early results are extremely positive and we look forward to great things for the balance of the year from that account.

Our Garden of Eatin' brand also continues to be on fire and leads the organic tortilla chip market, posting 19 percent growth for the quarter over prior year. Consumption on Garden continues to be strong, up 16 percent in grocery and just shy of 8 percent in the natural class for the latest 52 weeks.

We follow Garden very closely to Terra with new product launches. Garden has had a number of new items come to market lately two SKUs of organic taco of shells; two SKUs of toasted corn; and two flavors of tortilla ships to round out our line -- nacho cheese and guacamole.

So that's a little taste of what's going on in our snack business. You'll continue to see focus in our three key areas. And we look forward to a strong rest of the year.

With that I'd like to turn it over to Kevin Mosley to talk about some of our other brands.

Good morning. This morning I'd like to discuss four topics that have been a source of conversation within the Hain Celestial group. The topics that I'm going to cover are the Carb Fit launch results to date, the refrigerated non-dairy milk update, the Wild Oats transition and the impact of the Southern California grocery strike.

On Carb Fit, this by far is one of the most exciting launches that I have ever been involved in my career from the development, launch and execution of an organically grown brand, Carb Fit. Carb Fit is the only co-branded natural foods offering available today in the low-carb arena. Our initiative involves co-branding our great tasting, reduced carb offerings with our well-recognized natural food brands -- Health Valley, Deboles, Hain PureSnax, Westbrae and Walnut Acres.

The development of Carb Fit began in May of 2003 and launched officially on January 16, 2004. We began to ship our distributor partners 11 SKUs in late December 2003 and have continued to roll out nationally. We have also introduced an additional eight SKUs in January to further enhance the line. We anticipate growing the line to a total of 80 SKUs by May of 2004, achieving a grocery ACV of 50 percent.

A burning question that is always asked of us on sales calls is, "how is this being received?". The simple answer is with wide open arms. We have been successful in securing distribution in both the super-naturals, and we continue to gain distribution on all new items within weeks of their introduction. Our co-branding with our natural food brands has given the trade and the consumers the confidence in the ingredients and the quality of our products.

We have also simultaneously launched the Carb Fit line into supermarkets and alternative channel venues. To date we have authorizations in four of the top five supermarkets, the leading mass market account and the leading convenience store chain. We expect to further expand the line within all channels of business as we move forward.

Many people have asked if the low-carb buzz is a fad, a trend or a lifestyle change. We at Hain believe that the consumer has embraced the lowering of their carb intake and that this way of eating will continue as a lifestyle change.

As we talk about our refrigerated non-dairy milk update, we have taken the initiative to expand our distribution into the Northeast corridor. We have been successful in the last 90 days in securing distribution of 650 supermarkets and anticipate shipping these locations within the next month. We will continue to pursue distribution opportunities as we move forward, and currently our ACV stands at 23 percent.

A lot of people have asked, "okay, what's the Wild Oats transition doing to our business?". Well, as we all are aware, Wild Oats has decided to change distribution methods. What we have experienced is some inventory adjustments at Tree of Life which occurred in Q2, and as we move forward we anticipate a smooth transition the next three to four months with United Natural Foods. The impact of this transition in our second quarter was approximately $3 million.

The impact of the Southern California strike -- as we know, the grocery workers in Southern California have been on strike for 16 weeks. The work stoppage has already affected our ability to sell goods in 900 supermarkets in Southern California, which is the second-highest developed natural foods market in the country. Los Angeles accounts for roughly eight percent of the Hain Celestial Group sales.

Fortunately for the Hain Celestial Group Southern California market also has many natural food stores. These alternative stores have enabled us to minimize the effect that the strike has had on the overall Hain Celestial Group business, although when we calculate all the pluses and minuses we still and up short on the volume side. Based upon our estimates of the market we're able to quantify the loss of revenue for the second quarter at $6 million.

In closing, we are extremely excited with the new initiative in Carb Fit and all of our other exciting new products. We look forward to introducing these into the market and giving you the results in the coming months.

Good morning everybody. As Irwin discussed in his remarks earlier, our sales in the second quarter this year reached a quarterly record of $142.8 million, up 16.1 percent over our sales last year in the same quarter of $123 million. We also achieved record net income of $10.4 million in the second quarter this year, an increase of 26.7 percent over the net income of the 8.2 million last year.

Diluted earnings reached 29 cents per share on 36,135,000 shares, an increase of 21 percent over the prior year's quarterly earnings of 24 cents per share on 34,467,000 shares. Diluted shares increased by almost 1.7 million shares over last year's average shares, a large portion of which came from a 45 percent increase in the average price of our common stock on the market. This price increase had a negative effect on our diluted per-share earnings by almost one cent.

Gross profit for the second quarter this year was flat compared to the same period last year. In this year's second quarter, gross profit was impacted by higher trade and consumer spending which is charged against sales. We spent over $0.75 million in promotional allowances above the norm with the introduction of our new Carb Fit line and the expansion of our refrigerated non-dairy beverages. In addition, we spent almost $1 million more this quarter on consumer couponing than we did in the same quarter last year. This spending had a full one point drag margins. Also impacting our margins is the change in our mix of sales. Our Celestial Seasonings brand represents about three percentage points lower as a component of total sales this year than it did last year. And we expect our other businesses to grow at faster rates than Celestial. We continue to see improvements and our margins coming from our delivery and warehousing expense reductions, and we expect those improvements to continue in the future.

Our SG&A in the second quarter this year was 30 million, or 21 percent of net sales, compared with 27 million, or 21.9 percent of sales in the prior year. We continue to see reductions in G&A as a percentage of sales as our sales base increases and we benefit from the synergies of integrating acquired companies. We spent more dollars on selling and marketing expenses in this year's second quarter by approximately $1.7 million over last year's second quarter.

Operating income for the quarter this year was $17.1 million, or 11.9 percent of revenue, as compared to $13.4 million, or 10.9 percent of revenue last year.

In this year's second quarter interest expense and other expenses totaled $350,000 versus $200,000 last year. Our interest expense was $130,000 higher this year as the result of higher balances outstanding during the period, principally all of which came from acquisitions that we made in the last full year.

Our EBITDA is up 24 percent over the prior year, coming to $19.8 million, or 13.9 percent of revenues, versus 16 million, or 13 percent last year.

Depreciation and amortization in this year's quarter was 2.4 million as compared to 1 million 9 in the prior year.

Our balance sheet continues to be very strong. Our working capital was $109 million with a current ratio of 2.4-to-1 this year and increase in working capital of $26 million over the prior year. We had 46 days in receivables this year versus 44 last year. Our inventories carried 68 days this year versus 60 last year, and the inventory increases came from inventories we acquired in the Acirca and Grains Noirs acquisitions, additional inventories of organic ingredients brought in to protect future requirements and the intentional inventory increases we had in our Celestial Seasonings business where we produced inventory a little bit earlier in the season to even the flow of goods and during Celestial's busiest month. Finally, we had additional inventories necessary to support our new Carb Fit brand.

Total assets are now almost 625 million and our stockholders' equity is 474 million at December 31st. Debt as a percentage of equity remains at that very low 13.9 percent.

That's the summary of second quarter results, and at this point we would like to open it up for questions.

(OPERATOR INSTRUCTIONS) Carol Buyers, RBC Capital Markets.

It's actually Eddie Arn (ph) calling in for Carol. A couple questions on Carb Fit. I was just hoping you could maybe quantify what the revenues were for the quarter and what you're expecting for the year and give us a sense if you're seeing anything coming on the competitive front. And then second, I was wondering if you could give us a sense of how much of your growth is coming from what you would consider non-traditional sales channels.

I'm not going to break out what Carb Fit was in sales. I am not breaking out brands. It was much below $10 million. And as you heard Kevin say, it was only nine products that we launched in the December. But again, from running on track and getting the 80 products out, we're looking -- and you have heard me say it before -- anywhere from 10 to $100 million and I think probably somewhere in the middle range there. As we have it rolled out of the year it could easily be a 50 to $75 million business for us.

The other thing you have got to take into account -- Carb Fit is cannibalizing some of our sales because people are not eating carbs. On the other hand, we're picking up a lot of sales where people are replacing other products that are not eating carbs. It's not a total additional sales for us. But we're pretty excited. You heard me say our cookies have gone in mainstream cookie aisles. We've been tracking on a regular basis weekly sales by chains and the repeat has been strong. So we look for some big things when we have the 80 full product out there.

In regards to a lot of competition out there, we know that and some of the bigger companies are looking at that. And I think one thing that we've stuck to -- number one, what we are is natural; number two being no GEIs; number three, being kosher; and number four, is co-branding it with our existing brands. So Deboles pasta is known, Health Valley cookies are known. I think we have definitely some advantages. I also think we have some incredible tasting products. And being out there quick with it is important for us.

In regards to other channels, other channels right now is probably representing somewhere around 10 percent of our sales. And the upside in the opportunity for us is tremendous. In regards to one other major mass market, soy and Carb Fit the month of December was the first time we started to ship there. So there is big upside for us at other classes of trade.

If you could give me the breakdown of natural versus grocery in the Southern California market as a percentage of your sales?

If you come back today -- and you heard Kevin say -- we probably do anywhere from 10 to $15 million a quarter at wholesale in Southern California. There's 900 stores versus 60 stores between Trader's, Whole Foods and Wild Oats. Vons does half of Safeway's total volume on soy milk, so that can kind of tell you the type of volume out there. Southern California has always been a big, big natural food market. And of course the strike, as Kevin said too, has been picked up for us with sales going through Whole Foods and Wild Oats and Trader's, but you just don't replace the 900 stores. The stores out there, Stater Brothers and Food For Less, are not where customers are going to shop -- or Kmart or other mass markets are not where customers are going to shop for natural organic foods.

Thanks a lot.

John McMillin, Prudential Equity Group.

Good morning everybody. I ask the same question every quarter, I guess, but I'm just trying to extract some kind of internal number. You had Walnut Acres this year; you didn't have at last year. I guess you got a two-month benefit from Imagine Foods. But I kind of calculated a benefit from acquisitions of about 20 million, leaving you with relatively flat internal sales in the quarter. Is that analysis correct?

Absolutely not, John. I think there's a couple of things and you heard me say. Number one, in regards to Walnut Acres -- or in regards to Imagine, quarter-over-quarter last year December is the biggest month for Imagine because of the soup business. So October and November were not big months for Imagine. The second thing is at Walnut Acres we have discontinued -- as you remember, Walnut Acres was big into the soup business, big into the jarred soup business, big into the been business, big into a brand called Sherry Ann's (ph). Walnut Acres also had an ingredient business, a part of it. We discontinued all of that. So by no means is our business anywhere near flat. I basically -- you can come back and say half could come from acquisitions and half could come from growth.

You think he internal sales growth in the quarter approximated eight percent?

Again, I'm not coming out with it, but I don't think you're far off.

It seems a little high, but -- Again, you you're not adding back the California impacts (multiple speakers) you're just talking about unreported sales.

You taught me don't add back sales you don't have, so I'm not adding back California and I'm not adding back anything for Wild Oats.

Again, you could argue that the category you're in -- natural and organic -- is growing a lot higher than this single digit rate you're suggesting. And clearly Whole Foods and United Natural, there are some players in this industry that are getting kind of a proportional piece of the growth. What can you comment -- maybe this is the Cagney (ph) question -- what can you do to get your fair share now that Kraft and others seem to be pushing in?

Let me get back to you about Whole Foods and Wild Oats. Number one -- or United Naturals. I think again when Whole Foods reports store comps they report store comps on a total store, which includes fresh produce, prepared foods, everything. So let's come back and compare apples-to-apples here on dry groceries. I would tell you this year we're outpacing a category growth from any of those when you come back to the dry grocery area. So that's number one.

If you come back, John, and add back -- and I don't like to add back -- the California piece and the transition with Oats and some of the other stocks there, no different when I said, I'm always looking for eight to eleven percent organic growth, which is pretty good growth.

In regards to other people in the category, I'm not sure. I haven't seen any numbers from anybody yet that have shown any higher growth numbers in some of the things that we're doing.

We will see you in a couple of weeks.

Scott Van Winkle, Adams Harkness.

First, I must have missed your comments on soy milk. Could you make (technical difficulty) on non-dairy in general what you were up year-over-year? And second, was the manufacturing issue you mentioned with soups, was that the aseptic soups or the dry soups?

On aseptic soy the category was down 8.2 in grocery and in natural it was basically flat. In regards -- we were down on Westsoy 4 percent and 12 percent, both in grocery. And in natural we were down 5 percent and Westsoy was down 3. That is Southern California for us and that is a big effect in the Southern California. Again, in natural that only includes Wild Oats and Whole Foods. It does not include Trader's and any other super masses -- a Wal-Mart or anything like that.

In regards to rice milk, the category is down, but we are up in both grocery and natural on the aseptic side.

Okay.

In regards to our manufacturing issues, two things that have happened to us. In this here quarter we had a tremendous out of stock problem, both on canned soups and our aseptic soups.

On our canned soup we decided back in May of last year to consolidate to one co-packer, and it was a bit of a mistake as that co-packer could not commit or supply our demand, and we just could not fulfill it and we had tremendous issue. That has been fixed, and we're in the midst of fixing from a co-packer standpoint.

In regards to our aseptic soups, again demand on our Imagine soup, as you heard me say, being up 17 were 18 percent on numbers, getting some of the organic ingredients was a big problem for us in regards to chicken and some of the fruits and vegetables. That's what caused the problem there. Again, that problem has been solved.

But that's where it came, both on aseptic and canned. One was ingredient and one was a manufacturing issue.

Thank you. With regards to the distribution switch by Wild Oats, if you go back 18 months ago did you see the same taught of situation when the switch was away from UNFI where you had a little de-loading early and then you caught out later? Is that how I understand you expect it to kind of roll out this --?

Absolutely. I think Kevin said it, what happens basically as the switch is happening -- some in this month, some at the end of March -- I think what you have is distributors taking -- one distributor taking inventory down, and then you will ultimately have another distributor start to buy in for it. I think at the end of the day, when service levels run at 98 percent it's a benefit for us.

Just one question on foodservice. What types of products do you see go into foodservice first?

Right now from a foodservice standpoint -- and we've spent a lot of time on our foodservice -- tea is a definite for foodservice. Secondly, Terra Chips, whether 1 oz. or 0.5 oz., which we're looking at, is definitely for foodservice. The whole Yves line, our burgers, and difference chicken chunks are stuff like that. And we're also in the midst of looking at bag in a box and some things on our soy area.

Thank you.

Eric Larson, Piper Jaffray.

Could you explain -- this might be a question for Ira -- some of the dynamics of what happened in the margins in the quarter? Your gross margins were down, and also you had very good expense control. You mentioned that your marketing spending was up 1.7 million in the quarter. I don't know if I don't know if that was a rate that was faster growth rate in revenue or slower. Could you talk a little bit about the margin dynamics in the quarter?

Were you talking about margins down at the bottom or at the gross margin line? Because when you talk about selling and marketing those were below gross margin.

Yes, no, the growth -- I'm trying to get the idea -- what happened between the gross margins and then what happened with SG&A. Gross margins were down in the quarter, but then your selling and marketing was down -- or your SG&A was down significantly as well.

As a percentage of sales SG&A clearly is down, and what we're getting there is we're seeing a flattening -- almost a pure flattening -- of our G&A base as our sales increase. I would say that our total G&A had a swing of only $100,000 consolidated. So any of the increases that you're getting are really variable increases in the selling and marketing expenses to the sales line. So that's holding up very well.

When we give you the $1.7 million swing in selling and marketing expenses, we're not including in that number pure increases of dollars and things like broker commissions and so on because that is pure variable at a flat rate. So what you're seeing it is really flat G&A -- which is what we've been talking about for a while -- that will level out with the growth in sales. And that's where the incremental earnings are coming from on the bottom line. And of course, as we increase sales we're just getting the normal contribution down to the bottom line.

And then your gross margin -- just a slight erosion of gross margin. Is it higher raw material costs, is it mix? What were the dynamics there?

The gross margin, when you say slight I think it was like one-tenth of a point or less in change. What we discussed earlier in the call was the fact that we've been spending higher against the trade and higher to the consumer. And under the rules that the accounting world imposes on companies like us, those higher spends actually come off the top on the sales line. When that happens you get some margin compression. So we lost a little bit of gross margin simply by spending more to consumers. We had about $1 million in incremental couponing this quarter and we had the incremental trade spending on launching the Carb Fit line. All of that hit the sales line; all of that impacted gross profit percentages.

Thank you.

Terry Bivens, Bear Stearns.

First of all, it's always nice to have someone with an FBI background in senior management there, so congratulations on that.

You know he checked us out pretty well.

Irwin, a couple of things. Just on the soup, obviously we're having a conducive quarter here to soup. Are you feeling good that the manufacturing problems are fixed, so in effect we don't lose what could be a pretty good opportunity here as we go through March on the soup side?

I feel 100 percent on aseptic -- and matter-of-fact, our January soup business on our aseptic business -- and I can say it -- we probably made our whole quarter in one month on aseptic. You know, we're better off on our canned soup in January than we were in December, but we will get through it. And I think that's the best way I can put it. We did get through it. But aseptic business is through the roof. We've been able to go back to fill all orders. In cans we're limping through.

Campbell keeps talking about doing something that would kind of get near Health Valley. Have you seen any moves at all buy them?

I have not, not at all. I think, on the other hand, stay tuned because we see soup as a tremendous category. Soup is a meal, soup is a snack, and soup is used for cooking. And there's a lot of new technology in packaging and things that we're working on from the soup business. Today we have an extremely big soup and bean business, and we will continue to emphasize that. There's some production issues we've still got to work out, but I feel good about where we are in soups.

This plays off a previous question, but as UNFI ramps up for the Wild Oats account will there be a quarter where we kind of get their inventories being replenished?

I think we're going to see -- listen, they're picking up 140 stores and I definitely see that they're going to start buying into supply those stores. They pick up some of them in February, some of them the end of March and April. So yes, over the next couple of quarters they definitely will ramp up to buy it, just as Tree has started to take the inventory out of the system. But I see that definitely as spreading out and a benefit for us.

Earth's Best obviously had a very good quarter. Del Monte is launching the rebranded Heinz baby food in the grocery stores this month. How do you see that going? Does that affect you?

I think what it does, I think -- the baby food business, you want to talk about brand loyalty here. I think what we have going for us is a brand that's been around a long time that has a tremendous amount of equity. It's 100 percent organic, 100 percent GEI and we are a kosher product. The Del Monte product is not organic and is another product just out there competing with Gerber. They are replacing the existing Heinz category. So I think to come in on apples-to-apples, it's not the same product as Earth's Best. It's a different product than Earth's Best. And the other thing, again it's getting mothers used to buying a new brand of baby food.

I guess the last thing is more in the way of a comment. We do have other companies in the category that are able to give us more of an apples-to-apples core growth number, and to the extent that you are able to do that I think that will clear up a lot of confusion that seems to come up on the calls. So just a comment there.

Thank you Terry. We appreciate that, and I think we're working more and more to be able to get to that. And I think it comes to adding products, discontinuing products, and I think making sure the information can come out and be accurate is most important to us, especially with an FBI guy now. But I hear you and thank you for your comment on that.

Mark Checkinow (ph), Sidoti.

One comment maybe on the current quarter. Obviously the cold weather, especially in the Northeast, is going to help out a matter -- a portion of your tea and soup business. Can you comment maybe initially on how the initial tea looks so far in January? Also, with regard to your guidance, do you need to see the end of the labor strike in California to hit these numbers? Or what kind of assumptions have you made regarding the rest of the year and that kind of lost revenue?

I think you can see we've put up a very good quarter, as you heard me say, with the strike in our face today and with the Tree of Life issue in our face. We now have full quarters of Carb Fit coming, we now have Sysco, we now have a lot of things happening.

So the strike in Southern California would be nice if it was over, but I don't think that's the key to us bringing the year in because there's a lot of great things I feel -- you heard Adam tell you about some great things with snacks, you heard me talk about Earth's Best, you heard me talk about Arrowhead Mills, man we've got a lot of great things happening.

Can you comment again maybe how tea is looking so far in this quarter? I assume there would be a benefit from the icy weather.

From a tea standpoint the only thing I can tell you, it is it's hard to tell on four weeks. But from a tea number, our numbers ending 12/27 we saw Celestial brand outpacing the category. And one of the things which is interesting -- and January has been a been a very, very, very strong month. We like when there is an alert of a snowstorm and people go out and shop and fill up their cupboards. We like the idea of the new Whole Foods opening up in the Time Warner building where that's happening. So January overall on all our products has been a very, very strong month for us.

Also, could you talk a little bit about some of the other benefits of Oats switching back to UNFI?

I think just benefits are continuously -- Oats is an important customer -- sell a lot of product. Whether they had service levels or whether they had issues, I think what's important it is, number one, that service levels are maintained and if their service levels were not maintained before, being their largest grocery supplier will benefit us. And the other thing is insuring new products (indiscernible) the market speed and things like that will also benefit us.

Just the last question, you talked a little bit about the super masses, and we all have a certain customer in mind. But could you talk a little bit about the success you have had there, again reiterate what other types of opportunities are they looking at in addition to maybe perhaps more Carb Fit lines, maybe in the snack chip aisle perhaps?

I think that other super mass out there have seen some good success on Carb Fit, some good success on soy, and some good success on Terra Chips. And I think -- listen, they know trends out there better than anybody else. They know what consumers want. And they know a partner within Hain, so I think where there is opportunities -- but again, I'm going to make sure I emphasize this -- Whole Foods and Wild Oats are the foundation of this business and we've got to make sure that supply-demand, uniqueness of product -- if you went into any Whole Foods store and Wild Oats in the month in January you would have seen a great end aisle display of Carb Fit products. So it's not like we ran to somebody else first. We make sure that Whole Foods and Wild Oats, if they're ready, will have Carb Fit product because they weren't able to take Atkins because it contained a lot of ingredients. So that's important for us. And we have seen tremendous success in the month of January and great sell-through on the Carb Fit product at Whole Foods and at Wild Oats.

Andrew Wolf, BB&T Capital Markets.

Some follow-ups. A lot of my questions were touched upon. First, on the sales drags, if you apply your 12 percent EBIT contribution margin that would be worth about two cents per share. Is there any reason I shouldn't think that way?

I think absolutely and I think actually I think you're probably low on that. But we're not adding all the other costs and everything. After cost of goods and your spending as a percentage is probably even a little higher. So I think on the conservative side you're probably right.

You mentioned Health Valley. Was it a significant drag on sales and earnings, either one or both?

What I mentioned on Health Valley and Imagine, we did have -- Health Valley our cereals, our cookies and cracker business was very strong for us in the quarter. We did have some issues on our soup business, along with our Imagine soup business. That was not a drag; it was major cuts.

So in other words, an opportunity lost on sales of (multiple speakers) like a big number, like 3 million or something?

Probably a little higher when you add both together.

It sounded like you're sort of transitioning back to where you should be on that.

We're transitioning where we can have good quality product to supply the demand for Health Valley soups. And there is a big demand for Health Valley soups. You go into your Pathmark or your ShopRite, you're going to see the tags on the shelf and you're going to see some holes there.

Why did you go to consolidate to one co-packer? Is that part of 30 in 3 or was that sort of a prior decision?

Part of it was a prior decision, but as we have 100 co-packers one of the things we like to do is consolidate. That's one of the disadvantages with co-packers. You consolidate and they can't service or there is certain equipment that they don't have. Some of these are smaller co-packers and financially you become their bank for them too. So definitely some issues here. That happened and unfortunately one of the people that were running it passed away that were (indiscernible) so it just was a long story that affected us, and we're now plowing through some of the ramifications on it. And the good news is there's other places to go and there's other opportunities for us out there.

My last question is on the switch to UNFI. Are we in the current quarter where it's going to start to actually swing, not just from a 3 million sales drag but something positive on a net basis?

I think you know better than anybody it's minimal. I think you know what United -- when the transition takes place -- a little bit in this quarter, but the big part will come in the fourth quarter.

Thanks.

Andrew Lazar, Lehman Brothers.

Just wanted follow up briefly, just so I understand, on John's question earlier around the top line. Basically what you're generally saying is don't necessarily build in or assume that sales contribution in the quarter from acquired businesses is necessarily what we might have thought originally because you took some actions voluntarily early on for certain parts of those businesses that you did not want to keep, whether it was SKU culling or certain brands within them that were sort of cut right away and wouldn't really be in the sales base (multiple speakers) assuming. Is that kind of what you're getting at?

Absolutely. Walnut Acres had jarred soups, which we could not make, and went out of business. So that line was discontinued. Walnut Acres had Sherry Ann's (ph) which we discontinued. They had beans. They had products that were being sold below cost. So we basically took the Walnut Acres business and focused on the juice part of the business and that was it. And there was some ingredient businesses in there, so that was stuff that we immediately cut away and never even went into.

Just so I'm clear, going forward when do you lap of these businesses? And just to get a sense of what (indiscernible) expectations perhaps for what contribution from acquisitions should be perhaps in the next two quarters or the back half of the year?

The only thing right now, Imagine has totally lapped. The only one in there today is Walnut Acres and the Grains Noirs, which is a little business, but you saw the growth in Europe; it grew over 31 percent last quarter. It was a 5, $6 million business, but it's growing nice. So the only one out there today in lapping is Walnut Acres. And that laps till the middle of June.

It doesn't lap until we hit a full Q1 of '05 (inaudible).

In terms of 30 in 3, just to be a little more specific, I think you said at one point that really the benefits obviously start to accrue in the back half of this fiscal year. I know you said you're on track with it, so would you generally think that whenever it is -- 4 or 5 million or so of that 30 -- can start to come through in the back half of this fiscal year?

You're right on the big piece, that it is coming in the back half. We are --

I'm trying to get such a sense of margin expansion potential.

What we're going after, the first big area is warehouse and transportation. We've consolidated in this here quarter one of our bigger warehouses on the East Coast and we're also consolidating a lot of the purchasing. We started to consolidate plants. We had an issue with one. But the back half is where it's coming from.

And will we get it all that we want it to in the next two quarters? Not sure. On the other hand, there's a lot -- our sales have been extremely strong, so there's a lot expansion coming from just growth in sales. And there's good margins on our Carb Fit line which should definitely help, good margins on foodservice, great margins on Earth's Best, good margins on Arrowhead Mills which are made in our own plant. So if it's not all coming from 30 in 3, our expectation, there's a lot of other good areas that it is definitely going to come to. But we're pushing the 30 in 3, and if there's upside we will take it.

The last thing, generally speaking where is a Wal-Mart on their overall plan in terms of moving towards the natural and organic kinds of shelf set? Have they kind of made a decision, do you think, on where they really want to be and what that will mean or in what categories it will be across? Or is it still small and evolutionary?

I think opinion only, and I think what we're seeing in organic right now is hot. All our organic businesses are growing nicely. I think what people are -- mad cow disease I think has affected the growth in organic to the positive than any other category.

And I think what people are looking at -- I think it's taken a long time, Andrew, for people to truly understand what organic was -- 95, 170 percent. I think natural is important, but doesn't have the same weight that organic. And I think most people are stepping back today and really putting their emphasis on organic and want organic ingredients. Nothing against Breyers Ice Cream, but Breyers Ice Cream has "natural" on it and some guar gum (ph) in it. So that would be my belief that -- and again it's my belief -- that there is the emphasis on organic. And anybody out there today within the supermarket business or the mass-market that's not focused on organic -- and Andrew, you have been at most the big, major food companies calls -- I think they all come back and said nobody took -- I think the big companies have taken for granted the importance of natural organic obesity and how health concerns are important out there and so -- whoa, we've missed that trend.

So you'd say there's still more to go in even the super masses in terms of just what they will ultimately end up doing around shelf sets, not just for you, but around the overall category?

I think organic becomes more and more mainstream than any other -- people continuously ask me what are the big new trends out there. I think Carb Fit just replaces -- becomes more mainstream as people just look for products that are low-carb products. If you're going to eat a cookie six net carbs versus ten net carbs it's a big difference in regards to carbs and trans-fat. I think it moves into a whole other area, the good carbs versus bad carbs.

I think whole organic -- and organic pricing is coming down tremendously because of the availability. We're out there today purchasing organic ingredients two, three years out. We're probably the biggest purchaser today of organic fruits and vegetables because of Earth's Best and now our Walnut Acres.

So I see organic becoming much more mainstream and I see Carb Fit becoming much more mainstream, just replacing regular products on the shelf.

Thanks a lot.

The time allowed for our question and answer session has expired. We will now take our final question from Greg Badishkanian, Smith Barney.

Just a question as we look out over the next quarter or so in terms of your seasonal sales. What percentage of your business next quarter would you say is seasonal?

This here being one of our biggest quarters because of tea, soup, cereals -- the January/February/March quarter is a big quarter for our tea business, probably our biggest quarter for tea. I don't like -- even though its 40 degrees out there today and most people welcome the warm weather, I don't. And the trends continue. This would be our second biggest quarter for seasonal, and then the May -- what happens in the April/May/June quarter, we start to go into warmer weather, barbecue season, whatever. So from a seasonal -- from a weather standpoint, this quarter and next quarter are our two biggest quarters.

And just so we know what type of impact the weather will be, is it -- I think a year ago or so you mentioned it was about a third of your business. Is that still about the same -- like tea, soup, hot cereal, etc. -- or is it a little bit less?

No, it's become a lot less because of soy milk now, and Rice Dream, and Walnut Acres business coming in here. So it's -- Celestial today, you can figure out Celestial being 100, $110 million business in our sales, you can figure out what that is. And total soups is probably somewhere about a 40, $50 million business for us. That's what I would call more from a seasonal. Yes we have some hot cereals and whatever, so maybe 150, $170 million within seasonal.

Again, I come back and emphasize on soups, be careful with that because people cook all year-round and come into April, whether is during Passover or Easter, broths are a big part of people's menus. So soups, you've got to be careful with.

And people do drink tea all year-round. Now with our iced tea and a lot of our new tea products, tea has just not become as seasonable as it used to be.

Just a question on Carb Fit. The cookies taste really good and I'm wondering if in terms of your chips, I don't -- I think some people -- we've done a little bit taste tests, and they don't test as good. Any way to sort of reformulate those to make those a little bit better tasting?

Number one, you probably tasted our twists, which some people do like, some people don't. But I tell you what, we do have some excellent tortilla chips out there, we do have some excellent cheese puffs coming out and pretzels. And this morning I had the ability to cook on CNBC our pastas and we have had the ability to cook our pasta and our spaghetti sauces for one of the major mass markets, and they thought it was pretty good.

I think we're one of the first out there and is there modification as we go along? Yes, there is. I think there are some areas we need some improvements on the taste.

But just to your point on cookies, our cookies, the perception of our cookies have been unbelievable. And I don't know if you were on the call when I mentioned it before, in one of the major supermarkets the cookies has gone into the main cookie aisle within the store. So there definitely is some improvement and I appreciate the feedback. Adam is here listening to it.

Thank you.

Since that is our last call, I want to thank everybody for participating in today's call. I feel good, as I said to you, about where we are today. Hain has been consistent and I think we've been plagued with missing numbers and things coming out of the back door. We did have two big things -- Southern California and the Tree of Life transition, some other major manufacturing issues -- hit us for the quarter, but we've had a lot of great things happening and I feel good about what's out there in front us.

We have recognized the trends where a lot of the other major food companies out there said they never really took serious how consumers would be interested in eating healthy, how obesity would affect this country, and how organic. And I wish I could say I was that smart that I looked into the globe and I knew that the world would change the way it eats. I come back and say I wasn't, but I feel good and great of where we are today about the way the world is eating and the changing of eating habits.

Today, for myself, bringing John Carroll in to help here at Melville, is continuously showing where I want to strengthen the bench and how we want to become more and more of a global company. And we need talent to help our current talented members who have done a great job on a lot of things here. Very few companies could launch and execute and get the distribution of Carb Fit and some of the other products and the growth that is happening, whether it is tea, whether it's Carb Fit, Health Valley, Earth's Best or snack business, in the timeframe that we have. We've done a lot here. But bringing bench strength and help in is something that a company needs to do and allows me to do other things.

And again, to show our corporate governance and strengthening the Board. And I think most of you, as you read the bios of the two Board members today, they're very strong, independent board members that will help myself and this company.

I feel good about the future. I feel good about today's earnings. I'd like to thank you as our shareholders, I would like to thank our employees and wish everybody a happy, healthy day. Thank you.

That concludes today's conference call. Thank you very much for joining us. You may now disconnect.