Hain Celestial Group Inc (HAIN) 2010 Q2 法說會逐字稿

Good afternoon. My name is Bonnie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hain Celestial second quarter fiscal year 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Thank you. I would now like to turn the call over to Mary Anthes, Vice President, Corporate Relations. Please go ahead, ma'am.

Thank you, Bonnie. Good afternoon. I am pleased to be with you today to introduce our second-quarter fiscal year 2010 earnings conference call discussion of our financial results which were issued earlier today.

We have several members of our management team here to discuss our results; Irwin Simon, President and Chief Executive Officer; Ira Lamel, Executive Vice President and Chief Financial Officer; and John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial US.

Our discussion today will include forward-looking statements which are current as of today's date. We do not undertake any obligation to update forward-looking statements, either as a result of new information, future events or otherwise.

Our actual results may differ materially from those projected, and some of the factors which may cause results to differ are listed in our publicly filed documents, including our 2009 Form 10-K filed with the SEC.

This conference call is being webcast, and an archive of the webcast will be available on our website at www.Hain-Celestial.com under Investor Relations. Our call will be limited to approximately an hour, so please limit yourself to one question and a follow-up question. If time allows, we will take additional questions, and management will be available after the call for further discussion.

Now let me turn the call over to Irwin Simon, our President and Chief Executive Officer. Irwin?

Thank you, Mary, and good afternoon. I hope everybody had an opportunity to review our press release. And let's talk about some of the great things happening in the quarter, some of our consumption growth and, as you saw in the headlines, our GAAP earnings growth quarter-over-quarter and some of the interesting things we have going on in Europe.

So sales, $242.9 million (sic -- see press release) versus $250.8 million. In that $242 million was inventory destocking, which continues. And over the last full year, almost $48 million of inventory has come out. And we, even though it hits us at the time in the quarter, we look at it as a one-time event, and as consumption increases, which it is, we ultimately get that back. But distributors continuously take down inventory.

Also, the Marks and Spencer discontinuing of sandwiches is in that quarter. But overall, there was some good growth in the quarter, and we will talk about that in a little while.

Our gross margin, 28.9% versus 26.2%. And earnings per share on a GAAP basis, $0.27. And in that $0.27 was $0.04 that were absorbed in the quarter.

One of the things -- as we focus on fundamentals, we focus our balance sheet, we focus on our debt levels. And running a business in today's economic environment, those are all very important pieces. Our free cash year-over-year up $59 million, and that is something that -- as we continue to focus on our business.

So all in all, as you come back and look at our business -- and John will talk about his consumption levels, and I will talk about the rest of the world -- but our consumption levels in certain chains were up moderately over the last four weeks. A lot of our core SKUs were up.

One that I really want to point to is Celestial Seasonings up 7% consumption growth, and John will talk about that. Earth's Best, Terra Chips, and they're two brands with good growth in Terra Chips, good turnaround, and the team has done a great job on that. And there is a lot of other of our brands we will talk about in a little while.

The landscape in supermarkets is changing. The landscape in retailing is changing, and consumers, crossover shoppers. Where is our growth coming from? Our growth is coming from super naturals that are growing. Last year at this time, super naturals were down about 5%.

The mass market, which is all new territory for us, and there is a lot of the mass-market retailers that we are not in today, is growing. Specialty stores, specialty shops, like Babies "R" Us, which is a major customer for us in the whole infant feed and baby area today, has been a major growth area for us.

What we are seeing is declines on certain grocery chains, and we are seeing growth on certain grocery chains. So we are seeing our mix of business change and evolve among multiple channels.

Our business in our Canadian market grew 16%. And the good news, we had great growth, over 37%, in Canada's largest chain, and anybody familiar with Canada will know who that is.

One of the things, the Olympics, which happens in about 10 days, and three years ago we signed up for the Olympics as a sponsor. We tied in with a lot of the retail chains. And that has helped tremendously drive our growth in Canada, and we will be serving multiple of our brands, multiple of our products with a lot of signage at the Vancouver Olympics.

Terra Chips -- and this is consumption, and I like to talk about consumption, because that is what goes through the cash register -- our consumption is up 27%. Garden of Eatin', up 29%, Health Valley up 48%.

And we -- just got authorized in the Loblaw chain, and are introducing the Martha Stewart line of products going into Canada over the next few weeks.

Let's talk about Continental Europe, and watching CNBC today and looking at Continental Europe and looking at Greece and Spain and Portugal and that, things concerning Continental Europe, which the good news is they are not a big part of our European business. But our Continental Europe business grew 21%.

And continuously great growth from Lima, Rice Dream, Celestial, Terra. And even our fresh business, Grains Noirs, was up 7%. So very happy with our performance in Europe.

Our UK business -- and I'm going to look at our UK business from two aspects. Fakenham, which is our manufacturing facility of frozen foods and frozen desserts, our overall Fakenham facility, our sales were up 19%. Our Linda McCartney business was up 23%.

And in the facility, yes, we had startup costs, which we absorbed, of over GBP300,000. But our business right now in our frozen facility has gone from a GBP14 million business last year this time to a GBP28 million run rate at the end of this year. And I think what is important -- and to see what is going on in our frozen business, because we are using a lot of the same blueprint on our fresh business.

So today, we are producing and selling Linda McCartney (technical difficulty), Sainsbury, Asda, where last year this time we were not producing for any of those customers. We also have our dessert business, which is up and going. So that is a big part of the Group from Fakenham. Fakenham will be running profitable by the end of March, and trust me, we look forward to that.

Our Daily [Bread] business, which is our fresh sandwich business, was flat for the quarter. And our biggest decline in the UK market was our Luton facility. And Luton today needs new accounts, one major account, as we lost Marks and Spencer. And we are in the midst of reviews right now with four or five major accounts. And we probably have about an GBP8 million gap of what we need to do in Luton to break even.

And I feel, and the team feels, with the accounts that we're in the midst of looking at today and our success in Fakenham, that we will get to that GBP8 million that we need. And I'm over there next week, and I will spend some more time there.

But that today has come on -- the Luton facility and getting business has come a lot slower than we have anticipated. But I'm happy with the success of what's happening in Fakenham. I'm happy what's happening with our Daily Bread business.

Our protein business continues to grow nicely. The protein business on antibiotic-free turkey grew 34%. So it shows you -- the demand for antibiotic-free chicken grew 10%. In the second quarter, we sold over 65 million pounds of commodity turkey. That is a lot of turkey. And sales were strong. That is the good news.

The bad news is we didn't get our price, and we sold it at $0.10 lower than our price. But we didn't go into this quarter with any turkey going in the freezer. We were able to reduce all our inventories of commodity. And that business ultimately is something that we are totally out of, is commodity turkey, and just focus on antibiotic-free turkey and antibiotic-free chicken.

Our kosher business, which we went into last April, we continued to get a lot of new accounts, a lot of good supermarket accounts. Right now, it is not profitable for us on our kosher, but I've got to tell you, there is a lot of excitement out there that we will continue to achieve and a lot of new accounts coming our way on our kosher. And demand has been very, very strong.

Our China deal, which we started to ship some product in December, and our products now today have hit PARKnSHOP and Watsons, and will continue to hit other markets in Hong Kong. Our Earth's Best product will start to roll out in China. And we are looking for our Asian business to contribute $3 million to $5 million in the back half of this year, and with some great success. And there has been some great fanfare and we look at that as a big opportunity.

I know we took a writedown on the stock at Yeo Hiap Seng, and I think they've had to do the reverse to us. But we continue through Yeo Hiap Seng to sell our products into Singapore and Malaysia, and they are countries that we will continue to focus on.

Our Martha Stewart brand, which has got a lot of fanfare, product launched the end of December, going into Home Depot. So if you walk into any 2200 Home Depot across US and Canada very shortly, you will find a wide display of Martha Stewart products.

We have about 11 products in there. Right now, seven or eight, we are getting good pull, good consumption. And we haven't really started our advertising, and we start that next week with our digital consumer blitz, our media campaign. And Martha has been out there touting the product and on our blogs, on her show, and we look for some big things from there.

And we'll continue to go into other accounts. We are into Publix, Giant Eagle, Fairway, ShopRite, Loblaw's in Canada, and you heard me say Home Depot. And that is -- again, we just started to ship that product the end of December.

Our balance sheet is strong, and if you look at net debt less cash, $208 million versus $275.3 million a year ago. Our debt level down $84 million. We've paid down in the quarter about $5 million of debt.

So we continue to focus on our balance sheet. We continue to pay down debt. And you heard me say originally in the quarter, our free cash of $59 million.

As we looked at our business and we looked at what brands, what fits, we've gone through a divestiture strategy and there are certain businesses as we go throughout the year, we will look to divest. And the business we will look to divest is businesses were, as I referred to, neither fish nor fowl. We are not number two or three in the category. We're not going to grow within those businesses. And we will look at the margin structure there.

On the reverse side, acquisitions. We are looking at acquisitions that are strategic, that make sense in our business and that are accretive. But we are going to be very, very disciplined and very, very fussy on our acquisitions.

I like what I see out there in regards to consumption coming back. I like what I see on the demand for natural, healthy products. You saw in the last couple days the President's wife focusing on healthy foods and obesity within children, and it is something that we do well.

So all in all, a good quarter. Our biggest challenge going into the back half is making up for some of the distributor deloading out there. But with good growth among our mass market and good growth in China, good growth in Europe, I think we'll do that. So I am feeling good about that.

With that, I will turn it over to John. He will take you through what is going on in his business, then he'll turn it over to Ira, and we will come back for some questions. Thank you.

Good afternoon. As Irwin mentioned, Hain US delivered a strong Q2 operating results despite top-line challenges due to inventory reductions at our two leading distributors.

Looking at the quarter and starting with top line, our Q2 sales were down versus year ago. And again, it was the inventory reductions and, in this case, the Celestial Seasonings SKU rationalizations. Ex those two factors, US sales were up for the quarter.

More importantly, we are beginning to see improved consumption across the Hain Celestial portfolio in the US. Our last four weeks' all channels consumption was positive, led by actually what was an 8% Celestial Seasonings gain, along with mid to high single-digit increases on Terra, Imagine soup, Earth's Best, Rosetto, Hain, Avalon and Alba.

Turning to the margin side of the business, US Q2 gross margin expansion was the key driver behind the Company's 200 plus basis point improvement. All US units, grocery, personal care and tea, experienced gross margin gains.

The key drivers behind the gross margin improvement were improved fuel and commodity costs versus year ago, productivity savings of $1.9 million, the Celestial Tea SKU rationalization and the personal care warehouse consolidation, and increased utilization of our Culver City facility. We have now doubled the Alba and Avalon products that are produced there, and we've significantly increased our capacity utilization, while driving increased throughput efficiency.

Moving on to SG&A, US Q2 SG&A was up very slightly as a percent of sales, and that was primarily due to the lower sales resulting from the inventory reductions.

Finally, turning to inventory and cash management, US Q2 inventory was down $19 million versus year ago, as we continue to improve our operating free cash flow by reducing our inventories, which are of course our biggest use of cash.

Now as we look at the second half of F10, our strategies continue to be very, very focused. We are looking to drive profitable consumption and sales growth. We are looking to expand our margins and increase our operating free cash flow, just as we've done in the previous quarters.

And the key to the delivery of our F10 plan continues to be objective number one, driving profitable consumption and sales growth. I'm going to give you a few examples of the initiatives that we are executing now and executing well to achieve this objective.

First, in the area of expanding distribution, which is key to driving our growth here on the top line, we have closed significant distribution gaps in Q2 at major accounts, on top of the gains that I talked to you about in the last call. So this quarter, at Wal-Mart, for example, we gained 2500 points of distribution for our new chocolate nut butter and 2100 points of distribution for Rosetto ravioli.

At Safeway, they just authorized 15 new Hain personal-care SKUs. At ShopRite, they just authorized eight new Ethnic Gourmet and gluten-free frozen SKUs. At Harris Teeter, they just authorized 16 Hain personal-care SKUs. Hannaford authorized six new Arrowhead Mills, DeBoles and Spectrum SKUs. And of course, importantly, at Whole Foods, they just recently authorized six new Almond Dream frozen SKUs throughout the chain.

So those are just a few examples of the accounts where we are achieving new distribution, which is key to growing top line profitably.

The second thing I want to talk to you about is take a quick look at what happened over at Celestial Seasonings, where we are seeing strong execution across several fronts. As mentioned previously, our latest four weeks' food-drug mass consumption was up strongly, up 8%. More importantly, we saw consumption gains across all key brand segments -- herb, wellness, and, for the first time in years, green tea.

Celestial Seasonings green tea was up 9%, showing that our restage of this important segment, which has lagged for this brand for years, is now starting to get traction.

That is not all. In the area of distribution expansion, we've seen that our distribution of our new Sleepytime Vanilla SKU has doubled since September.

And finally, in the area of innovation, which is key to driving top line, you should look for our new Celestial Seasonings refrigerated Kombucha Tea launch that is going to occur in April. This will be our first entry into the refrigerated, ready-to-drink tea market, and we are going to do it with a totally differentiated proposition. Look for that. It is going to be a great-tasting and a very different product.

So to close, Hain Celestial US had a strong Q2, as we offset distributor inventory declines with margin expansion to post strong operating results. We are also seeing improved consumption across the portfolio. And while we forecast some continuing second-half inventory reductions at our key distributors, we will look to offset them with strong execution against our key consumption and sales growth initiatives.

So with that, I will turn it over to Ira Lamel.

Thanks, John. Good afternoon, everyone. I want to apologize to you for some difficulty I am having, since I've been dealing with a pretty bad sinus infection that has caused me to have somewhat of a strained voice and has really affected my hearing. I'm assured it's temporary, and hopefully sometime soon I will have to start hearing the people around this table again and I'll be able to tell them to stop screaming at me. Hopefully, later in the call, I will actually hear your questions. Again, my apologies.

Our net income this quarter was $11.2 million as compared to $8.1 million in last year's quarter, showing an improvement of 37%. After charges, we earned $0.27 per diluted share versus $0.20 last year. The $0.20 -- excuse me -- the $0.27 this year is after absorbing a total of $0.04 of charges for the consolidation of two Food-to-Go production facilities in the UK, amounting to $1.2 million, or $0.02 per share, and for the non-cash write-down of our equity investment in Yeo Hiap Seng in Singapore, amounting to another $1.2 million, or $0.02 per share.

Our improved earnings this year comes from the solid performance in the US, where pretax income improved by $5.5 million over the prior year, after deconsolidating Hain Pure Protein from the US amounts. Pretax earnings from our foreign operations declined by $0.5 million.

Sales in the second quarter this year were $242 million compared to $250.8 million last year, after deconsolidating Hain Pure Protein. That is a net change of $8.8 million. Included in that change is $16.6 million of destocking at two major distributors, one of which has recently been sold, and $8.8 million from the phasing out of production of fresh sandwiches from Marks and Spencer in the UK. These items were offset in part by favorable impacts of current currencies totaling $4.8 million.

Gross profit for the second quarter this year was 28.9% as compared to 22.5% in the first quarter last year. Adjusted for the deconsolidation of Hain Pure Protein, gross profit in last year's second quarter was 26.2%. The 270 basis point increase on the adjusted amount was driven by margin improvements in each of our US operations. Overall, we realized improvements principally from a moderated cost environment, coupled with continued productivity improvements, as John mentioned.

Our pricing initiatives of a year ago have lapped, and therefore provided little benefit in this quarter.

During the second quarter of this year, in the UK, we incurred $0.5 million in our Fakenham frozen operations, coming from the startup of new products for both new and existing customers, as that operation ramps up toward increased sales and moves toward profitability. That $0.5 million depressed our consolidated gross margins by 20 basis points. And overall UK gross margin performance, which of course has been affected by this as well as the phaseout of production from Marks and Spencer, depressed our consolidated gross margins by approximately 211 bps, such that gross margins without the UK would have been approximately 31%.

Our SG&A in the second quarter this year was 19.5% versus 19.1% in last year's second quarter, adjusted for the deconsolidation of Hain Pure Protein. Our SG&A rate increased due to the lower overall sales. SG&A was lower by $650,000, even though SG&A was unfavorably affected by approximately $1 million due to currency translation.

Operating income for the quarter this year was $21.6 million, or $22.8 million before the charge of $1.2 million for the UK plant consolidations, compared to $17.9 million last year, after deconsolidating Hain Pure Protein, and before last year's restructuring, giving us an improvement of 27%.

EBITDA in the quarter was $27.9 million versus $22.8 million last year, again adjusted for Hain Pure Protein.

Depreciation and amortization in this year's quarter was $4.8 million compared to $5.1 million. And again, that has been adjusted for last year's Hain Pure Protein deconsolidation.

Stock compensation in the quarter was $1.7 million compared to $1.5 million last year. And capital expenditures amounted to $2.2 million this quarter.

As we entered fiscal 2010, we anticipated that Hain Pure Protein would be profitable, and much of that profitability would occur in the second quarter as the holiday season provides Hain Pure Protein with its most significant sales quarter. Volumes during the second quarter were strong, but prices did not reach the levels anticipated, and the selloff of frozen commodity turkeys, which had accumulated during the period prior to converting to an all-antibiotic-free model were at prices below expectations.

Our after-tax minority share of the net loss of Hain Pure Protein was $136,000, an amount that was almost $2 million lower than our expectations and approximately $800,000 lower than we earned from Hain Pure Protein in last year's second quarter.

We continue to focus our attention on improving our working capital turnover and generating improved cash flows. And I want to give you more detail on cash and debt than Irwin did, and these numbers will be a bit more exact.

For the trailing 12 months through December 31, operating free cash flow was $37.7 million this year versus a net usage of $21.5 million for the comparable 12 months ended 12-31-08. That is an improvement of $59.2 million.

As a result, we repaid $7 million of borrowings in the second quarter and $82 million in the past 12 months, which has helped reduce our interest expense.

Our working capital was $219.9 million, giving us a current ratio of 2.7-to-1 at December 31, 2009. Our stockholders' equity was at $732.2 million. Our debt as a percentage of equity is at 32.1% this year, with debt totaling $235.1 million at December 31, 2009.

On cash conversion, our inventory days have remained flat year-over-year, with inventory down by $14 million since December 2008. We have held payables two days longer than last year, although our receivable days are up by eight days year-over-year, but are flat to the fourth quarter ended June 30, 2009. Receivable days are up principally due to the lower sales.

As we've discussed in our earnings release, we have adjusted our guidance for the full year. We have reduced our sales guidance for the year to $920 million to $940 million. We have called out distributed destockings in each of our first and second quarters, and we anticipate that these actions by distributors will continue through this fiscal year.

We have also seen very good progress in the UK in moving toward profitability in our Fakenham operations, and we continue to see a sales exit rate from the fourth quarter, as Irwin mentioned, of about GBP28 million. We expect that will make this operation profitable in fiscal '11. But its rampup to that rate has been slower than we originally anticipated, with the UK economy continuing to suffer, and therefore it is impacting our 2010 results.

As a result of these factors, we have also adjusted our earnings guidance to be between $1.05 and $1.10 for the full fiscal year.

Thanks for putting up with my voice. I hope I hear all your questions. And at this point, we will open it up for those questions.

(Operator Instructions) Scott Mushkin, Jefferies & Company.

Thanks for taking my questions, and I really appreciate the work you've done on the income statements to make them much clearer and easier to model. So I appreciate that. I know that's something you have been working on for a while, and it definitely shows this quarter.

My question has to do with -- we've been talking about this inventory reduction at distributors for some time. And Irwin, I know we've discussed that at some retailers that use these distributors, it appears that the inventory levels, particularly in Earth's Best, are not optimal.

I was wondering if you can discuss efforts to try and sip your brands directly, and perhaps John could share what that means to margins. And I guess the final thing is I was wondering if you had a success story where someone has taken it direct, and you've seen volumes increase, and it's kind of a better situation.

I think -- and again, Scott, good point here -- and I think there is a couple things. As our business grows to multiple mass-market accounts and brands that have velocity, it is going to go direct. And at the end of the day, I think that is important for price. That is important for being in stock.

And we do have an account that did take their inventory down. And just on Earth's Best baby food, the consumer that goes in -- as a mother that goes in and buys four jars of one flavor and four jars of another, and two mothers go in and buy the same flavor of applesauce, they were out of stock.

So with that, we did a major restocking with that customer -- approximately $2 million. And we saw their consumption jump dramatically, because just on a replenishment, they were not being able to get to the stores.

So it absolutely concerns me on fast-moving items that -- when inventories come down. And from a Hain standpoint that is where we have to take matters and go direct on those accounts. Because with the cost of money today taking inventories down, being out of stock is so much more expensive than that. So that's number one.

Number two, I think we've got some incredible brands that will continue to go direct. And the good news about that is we have a lot of opportunities in markets today that -- we have major distribution gains in just a few that John talked to you about, a lot of those are going on a direct basis.

So it is something we will continue to do.

With our two partners, UNFI, Kehe Tree of Life, there is absolutely need to work with them. But over the last year, over $50 million of inventory has come out of our business by inventory destocking. But at the end of the day, the strength has to be in the brands and driving the brands.

And we are seeing -- and John talked about it -- good consumption numbers. And that is what is important. Being out of stock is an absolutely concern.

On the margin piece, I'll let John answer that. But I think more important -- what has got to happen here, Scott, on a direct -- on the direct value here is price points. And that is coming back today. We are in a world where people are looking for good products. But price, I don't care what it is, is important. John?

Just to touch on what Irwin said, the primary advantage to going direct, other than making sure that we are in stock, is that because there is no middle mark-up, the price points are much sharper. And that drives a lot more movement at a good margin to us, because basically the sharper price point is coming out as a function of being direct.

If I could have maybe two follow-ups. I guess you talked about destocking continuing through the balance of the year, and gosh, it has been going on for a while. So when do we finally kind of get to the bottom of that and it is not a drag on sales?

And then of course, there is some channel shifting going on, and you guys talk about our Earth's Best and Babies "R" Us. It's in Wal-Mart now. When does the new door effect overwhelm the destocking effect and we return to a more robust growth rate?

Well, I think, Scott, just come back, take in this here quarter -- take away just destocking and add back what we did -- the Marks & Spencer, and add that back, and look at our growth in this quarter.

So from a standpoint there, we are seeing good growth. But there is a time you only can take your inventories down to so many days. You can't -- in our business, we are not like milk or eggs. You can't have seven days of inventory.

So I think by the end of this quarter -- by the end of our fourth quarter, I think they are going to be at levels where nobody can take their inventories lower than that. And that is something that we are going to have to police ourselves, because we are the one making the calls on the retailers. And if we are seeing tremendous out-of-stocks, we are going to have to do something about that with the retailer.

And Irwin -- and it's my final, final -- is this something that you are doing? Are you guys getting a little bit more aggressive, saying, hey, XYZ grocer? I mean, you go in there, especially with some of your better brands, and there is five things on the item -- on the shelf; you are losing sales. It's not good for the retailers either to be in this position. So is this something that has really come up and you are actively pursuing more direct accounts?

Listen, we have, again, a great relationship with our distributors. And the last thing we want to do is be in competition with our distributors. But at the end of the day, with all our brands today and our size and scale and velocity, if the opportunity presents itself for us to get price, for us to make sure we are in stock, we're not going to sit on the sidelines.

At the end of the day, Scott, everybody is watching everybody else's retail prices out there today. So when you see prices at those guys out of Bentonville or those guys out of Minnesota or Babies and Toys "R" Us, and if they are buying direct, retailers are watching each other's price today.

That's a great point. Thanks for taking so much time to answer my questions.

Christine McCracken, Cleveland Research.

Just wondering, I guess, on your comment around the channel shift if you can provide a little more color around your comment specifically on certain grocery chains moving away from your -- is there anything specific behind that, or is it that the growth into some of these other channels is maybe a little bit faster offsetting some of that maybe sales into certain chains being flat? I didn't quite understand what you were --

What I was saying, Christine, I think today the biggest seller of food in the US today is Wal-Mart. As consumers crossover shop and doing a lot more shopping at the Costcos, the BJ's and the Sam's of the world.

And I've said this before. I think half the supermarkets in the US are doing okay, and the other half are struggling. And there are still 33,000 supermarkets out there that are independents. So I think it's began where we shipped product into grocery stores, but you're not getting the consumption there.

It is not them moving away from natural, though?

No, it is not that moving away from natural. It is them -- and I think the greatest opportunity for us, what we are seeing, is consumers today are shopping for natural, organic products, not only in super naturals. Are going into mass market, are going into specialty chains and are going into other chains, and the demand is growing across the country in multiple outlets -- classes of trade.

Great. And then just as a follow-up, it sounded like Alba and Avalon had a good quarter. Drug was a problem for you, I think, in the past. I'm wondering are you seeing a pickup there? Has that normalized then?

No, actually, Christine, drug's gotten better. But the drug class in total is struggling right now in terms of the products in the front of the store. And it has not been a key driver to driving Alba and Avalon and JASON sales.

So that is really into groceries and mass that you are seeing this?

(Multiple speakers) Right, that's not where the (multiple speakers).

And that is not where our growth is coming from in drug. There is a lot of drug stores out there. But to John's point, it is the grocery and our natural stores where the growth is coming from, and mass.

All right. Thanks.

Andrew Wolf, BB&T Capital Markets.

I just wanted to ask on the guidance and sort of figuring out some of the things you said -- this is for you, Ira -- can you hear me?

Yes, Andy (multiple speakers).

All right. It sounded like you missed -- you were expecting $0.05 per share more earnings this quarter in protein, right?

That's right.

Okay. So -- and if you look at -- and using round numbers, the earnings per share guidance is down about $0.15. So is the other -- it looks like the other $0.10 comes from the -- mainly from -- well, it looks like it is actually kind of split between the lower sales expectation in the back half plus protein to some extent.

But could you kind of walk us through that, how you get that? If $0.05 is on protein that already occurred in the quarter, what is the other $0.10 or so?

It is really rather, I think, simple from the perspective of we went into the quarter with sales guidance of $1 billion. We are now saying sales guidance is going to be $920 million at the low end, $940 million at the high end. So we are going to have either a $60 million to an $80 million decrease for the full year.

And if you look at that from the perspective of where we said our sources of income come from, whether it is the UK, where we say we are going to get a little reduction in what our overall first -- beginning of the year expectation was, because it is still slower to ramp up than expected, even though it is getting there. And when you consider the two quarters' performance at Hain Pure Protein so far, it is probably split, as you said, between those things and our core business experiencing the de-stocking at the distributors.

Now what is going to happen, as you can well imagine, is our G&A rate is going to be higher as a percentage of sales because the dollar spending is not going to come down quite as fast as the sales will come down. But we still think we are going to finish the year with very strong core performance and go into '11 having set ourselves up for a pretty good fiscal '11. Now, we will see how we finish the back half, but you could do the math on $1.05 less what we've already performed.

But Andy, back to your question, the majority of it is coming from inventory reduction. Because all your fixed costs, if you take $15 million, $20 million, coming out of distributors, there is a major contribution that goes to the bottom line from that there, because everything else, after cost of goods and spending, it is substantial.

But at the end of the day, our objective is, as we know, the good news is consumption is strong at the distributor level. Consumption is appreciating or growing at retail. And that helps overall grow our sales even stronger.

Got it. So on the Pure Protein business, because you did have $0.05 below expectations, sounds like you have a lot more visibility because the mix is a lot more predictable. Is that how you are looking at the second half?

Well, the second half, we have a lot more predictability. But Andy, at the end of the day, what we decided to do on Hain Pure Protein was we could have stayed at the end of the quarter and put a lot of turkey in the freezer. We sold it and turned it into cash, and it was a smart move.

So we sold 62 million pounds at $0.10 less. I don't know what turkey would have been last year.

So the good news is, as someone said earlier on the call, we are managing our balance sheet. We are doing the right thing for the business. And we are investing back into antibiotic-free. So it was the right thing absolutely to do for the business.

Okay.

And you heard what I said before. Our antibiotic-free turkey and chicken business is growing nicely, where there is much higher prices.

And last thing, and this also relates to guidance, and I don't want to hog the call -- on your sales guidance, it is roughly flat, down a little, up a little. But if you X out the $32 million expect to come in further destocking, it is up pretty nice. It is sort of about a 5% to 9%. Is that kind of what you think the business is going to do X destocking?

I think what I said before, if you look at our first and the second quarter, if you take Marks and Spencer, you take inventory destocking and you take our growth, you can get to the number that we grew in this quarter.

So you know, going into the back half, we like what we are seeing on consumption. We like what we are seeing in Asia. We like what we are seeing on Martha Stewart. And we will continue to focus on growth.

What we don't want to do is focus on inventory and distributors and have to spend additional dollars and do those things. We would rather be spending money back to the consumer, driving value and driving consumption.

Okay. Got that. All right, thanks.

John Heinbockel, Goldman Sachs.

I wanted to focus on the top line a little bit. If you look at this quarter to date, because you said we are running positive this quarter to date and we ran positive last quarter, making all the adjustments -- it sounds like your comment is that there has been a pickup, on an apples-to-apples basis, third quarter to date versus second quarter using the same methodology. Is that fair?

Well, we are in second quarter -- we are just in third-quarter now, so in January, if that is what you are talking about, John -- in the month of January, we are seeing consumption January over January absolutely, yes.

And that is better than it was in November/December?

That is much better than it was in November/December.

How about on a two-year basis? Is it only the comparison, or the two-year, you are also seeing improvement?

I don't have a two-year right here in front of me, but I would believe we are -- on a two-year basis, we are.

Okay. So you think that we are seeing -- because we haven't seen many signs up until now of real consumption improvement really anywhere across the retail. It has been more stabilization, but not improvement. You think we are seeing real signs of improvement now, a greater health on the part of the consumer, at least in terms of your products?

We are seeing -- and John, it is not going -- it is coming from, again, more and more consumers eating at home. It is coming from us, new distribution gains, like John mentioned. And last but not at least, it is coming from us spending promotion dollars to drive it at retail. And I think the three are absolutely working for us.

When you see the consumption numbers and you look at products like Terra, the growth on Terra, the growth on Celestial Seasonings, we haven't seen 7% consumption growth on Celestial in a long time. And you step back, what is happening, the consumer is not buying the expensive $7.00 teas, not buying -- it was definitely cold out there. But you are seeing consumers wanting value, but also -- consumers want good products, but they are looking for value, too.

So if -- would you agree that at one point, we thought that all of the destocking would eventually give way to some restocking, and that might pop shipments for a period of time. That seems like that may no longer be the case, or do you disagree with that?

You know, I think consumption drives that, and I am not seeing it at distributors. I'm seeing it at some direct accounts.

But by and large, John, we are seeing that both distributors and retailers are learning to work on much lower inventory levels.

So that would sort of suggest if there is no -- if we go to a neutral position on restocking, destocking, fiscal 2011, you could get back to a high-single-digit top-line growth rate.

We would like to, John.

And John, I think the reason -- and I'm not going to commit to that, getting back to that -- but I think the reason we will continue to do that, number one, distribution gains with a lot of our product. Demand will continue to pick up. And I think we have the opportunity to go out there and steal a lot of share.

Does it matter, do you think -- if unemployment stays at 10% plus and pressure continues to exist on the consumer, do you think -- does that -- how do you think that affects takeaway on your business?

As long as it is not all the bankers that are laid off, John. I think what is important -- listen, again, I come back and look at value at eating out, value at out of the home purchases versus buying and staying at home. And listen, this is a big weekend for us. This is Super Bowl weekend.

And as you walk into supermarkets and that across the country, we have the displays, we have the snacks, the healthier snacks. This is a big snack weekend for us. So as we participate, and as we grow our business in other channels and look to take out costs, I think we would like to get back to those growth numbers.

All right. One final thing. You have talked about wanting to do acquisitions, but not liking the values that are out there that people are asking for. Has that changed much?

Same thing. I guess I look at it this way. Instead of doing acquisitions right now, I continue to improve my balance sheet, work on the $0.05 in Hain Pure Protein, the $0.07 on our fresh business in the UK, and there is $0.12 of additional earnings, and I don't have to pay, and I don't have to integrate them and stuff like that.

But we are going to streamline our business. We are going to -- even though some assets within the business that contribute to earnings, and if they are a small part of our business, we will look to divest them and use the cash. And there will be acquisitions out there, and we will just have the right warchest when it makes sense. And it is literally almost two years since we've done an acquisition. We've seen a lot of stuff. But we are absolutely going to do the right things for the business.

Okay, thanks.

Andrew Lazar, Barclays Capital.

Just a couple quick things. One, I know that you have worked with couponing and other forms of in-store merchandising in a bigger way this year to deliver value and whatnot directly to the consumer.

Do you have a sense of the return profile of those sorts of actions? I mean, are those things what are more effectively driving consumption, do you think? I mean, has the payoff been in-line or better than what you would anticipate?

The best example I can give you -- two examples I can give you are Celestial and Terra, where we shifted the mix toward couponing. So the same investment, just driving it against couponing. And we saw reversal of our consumption trends from declines to turnaround. And so as we take more and more of our budget to couponing, we are seeing a much stronger return.

As you look to your second-half sales expectations, separate from ongoing retailer or distributor destocking, pricing -- I know you've said you've come -- pretty much lapped at this point, so I guess whatever you get on sales will be sort of volume and some mix. But is there a concern at all that additional trade spending off the top line could cut into some -- or could offset some of that potential volume growth, or is that not a concern at this stage?

I think we've pretty well factored that in, Andrew, into our guidance. And that was some factoring in the first half of our sales also, is our promotional dollars that we spent, our couponing. And that has affected the top line also.

Yes. Within the context of your portfolio, so food is typically largely not discretionary, but have you found in this kind of consumer environment that there are parts of your portfolio that have proven to be a lot more discretionary than other parts, that you would not necessarily have thought a year ago? Consumers making those much, much tougher choices on kind of what they need to sort of whatever -- feed their family versus stuff that they just don't "need."

Andrew, I think there are two places across our entire portfolio where I think we are seeing some sensitivity in that area. The first one would be in some personal care items, in some higher-end, down-the-drain items, where consumers are just having to make some choices to go back to non-natural products because they can't afford it.

The other piece is, candidly, this is an industrywide phenomenon, both of them are -- is in supplements, where we've seen some weakening of trends in our Spectrum Essentials business.

Other than that, we have not seen any specific declines that we would attribute to consumers saying look, I can't afford to be in this category anymore. We are seeing things like our ingredients that are going up because more home cooking. But I think the two that we would identify are personal care down-the-drain and supplements.

And Andrew, on the other hand, the growth with Terra, and again with couponing, I mean, with the price points, very surprised, because Terra is not your traditional bag of chips, not your traditional snack, and there has been some great growth.

On our Earth's Best line, what we've seen on our diapers, our chlorine-free diapers and our wipes, we've seen some nice growth. On our formula business, which is much more expensive than regular formula business, organic, we are seeing nice growth there.

We are seeing some movement in the nondairy category. We are seeing great growth on almond and rice, switching out of soy. So we are seeing some switching. Our DeBoles pasta.

And one thing I must mention is our whole gluten-free line of products. Just a very, very hot category for us. We have over 300 products today.

So again, it is interesting how you see in New York City the focus on sodium, and anything with low-sodium you see our sales jump tremendously. Our cleaning products that we've come out with, our Martha Stewart line of products, you would come back and think they would be a focus on that. But right now, being at Home Depot and being priced, we are seeing some good movement on most of the SKUs in the Martha Stewart line right now.

And last quick thing. And this is more of a -- definitely a more general question -- so I apologize for that upfront. But Irwin, when you take a step back and you think about where Hain is today, some of the acquisitions you've made, what you want things to look like a couple years down the road, do you worry at all -- or when you guys all get together and talk about it amongst senior management, about -- do you think there is an aspect of Hain that is too thinly spread? Because you have clearly the core US Hain Celestial piece of the business, outside of obviously the distributor piece, seems to be where obviously a lot of the focus is and ought to be and where things are delivered.

It is some of the other stuff, right, some of the ancillary things, which may have opportunities sort of further down the road, admittedly, where things have been slower to happen, or where some of the losses have come in in the near term.

And I don't know, do you think about -- I realize there are some potentially easy earnings to come if you can just get UK profitable or Hain Protein profitable. But I wonder at what point do you think maybe without some of those things and without some of those distractions and focusing in on the core is really where you were going to ultimately get the value of Hain?

Because it almost seems like every quarter, we go through what is the top line in that core business? That is kind of what investors care about, and where I think potentially more of the shareholder value ultimately is created, right? Because that is where the margin is anyway. It is a general question, but I just want your thoughts.

Well, 85% of our sales come from North America today. And that is where we are going to focus our growth. We do have a good business in Continental Europe. I think there is some good opportunities in the UK for us.

You heard what I said before. As we stepped back and we sat among ourselves, there is definitely some divestitures that we are going to look at. So I happen to agree with you that there is a focus here, and there is a lot of distribution opportunities for brands like Earth's Best, Terra Chips, Garden of Eatin', Celestial, Arrowhead Mills, within the United States. And I'm glad I'm not in Greece and Spain and Portugal in a big way today.

Okay. Thank you.

Scott Van Winkle, Canaccord Adams.

A quick question. Irwin, you've talked about consumption in Q1 and gave some data in the December quarter. Do you have a consolidated consumption number, Nielsen spend data, in either dollars or units, to give us an idea to be able to kind of fall back and compare it to what shipments were and see the destocking impact?

Sure. I think -- and that is where I see reports out there, Scott, where our most recent report said our consumption is down. Well, where the business has changed today dramatically -- and if you look at grocery, on Earth's Best baby food, you see consumption down. But no longer is our number one customer out there today on Earth's Best baby food a grocery chain.

So what we measure, Scott when we look at consumption, we take -- and Wal-Mart and Babies "R" Us, and we get loaded in there, because we get from the retail chain on a weekly basis what our sales are going through the cash register. So when we are giving you consumption numbers now, it is not just Nielsen numbers. It is consumption numbers that we are getting from the retailer themselves.

Okay. Do you have a number for the December quarter?

Yes, yes. Go ahead.

For the December quarter, our consumption was flat versus year ago. For January, we are starting to see growth.

And does that include or exclude the impact of SKU rationalizations?

No, actually the number I gave you is just straight consumption.

Great.

Scott, that does not include Canada. That does not include Europe. That does not include Asia, and that would not include shipments of Martha Stewart product.

And is that dollars or units, John? Sorry.

Dollars. Although at this point, given that our -- as Ira said, there is no benefit for us at this point on a rate basis. Dollars and units are moving pretty hand in hand right now.

Okay. And then if you look forward into the guidance for the back half of the year, how would you break out the reduction in guidance among brands? Or would it be more channel specific? How would you break that out? I mentioned brands. Obviously, I would assume you've got some momentum in Celestial and you can kind of piece them apart. You've got a thought there?

I missed that question. I didn't understand that question. Can you (technical difficulty) ?

The guidance reduction for the back half of fiscal 2010, so the next two quarters, how would you break out that reduction in revenue guidance across your brands?

That is hard to do, Scott. I mean, if you come back -- you could figure out who are our biggest customers, our biggest brands. But I'm not going to be able to do that with you right now.

We kind of know where our growth is coming from in some of our biggest brands, and that is what you've got to go back and look at it on.

So when you -- when Ira sat down and kind of rounded out a number from what you guys were telling him for thoughts for the back half of the year, did you do it more channel specific? Saying, all right, on the supernatural channel, we've got to bring it down here, or in the mass market here or whatever channel. Is that how you do it, rather than brand by brand?

It's a bottom-up forecast, built on a consumption basis. And then the next piece is the destocking piece that needs to be layered on top of it. Where the destocking comes on a brand basis is difficult to tell, because you don't have great visibility to the distributors' inventory levels on a brand level.

And Scott, we figure it out. We know, again, on information, what is going out the door on a weekly basis. So if it is going from eight weeks to six weeks, we know what is going out per week. Now, do we know the mix and everything? No. And that also changes by promotion etc.

But we have pretty good data. This is just not a number we pull out of the air. And then on the other hand, as we build the back half built on consumption, we build it what we think our consumption is going to grow in other channels. But again, most of this is going either super naturals or through retailers that is going through distributors.

Great. And the final question, with Kehe Tree of Life, do you have anything baked in? You talk about channel deload. Do you know what their plans are for closing facilities? Is there going to be more destocking over the next couple of years as maybe they consolidate an operator who is used to running out of one DC, now has -- what -- 15 question? And have you had any conversations with them about pricing and partnerships and market power? And if you said this earlier, I apologize. I didn't catch it.

No, I think step back. It just closed and we have not had a meeting with them, and we have a very good relationship with Kehe. And I think at the end of the day, we will look forward to work with them and their efficiencies no different than we have with UNFI.

I think the good news is here, whether it is UNFI, Tree of Life, Kehe, we all got the same objective, how we sell product and drive volume. And that has changed dramatically from prior years. And at the end of the day, it is no longer stack 'em high and watch them fly. It is how you get value.

From our standpoint, and I would tell this to UNFI and I'd tell it to Kehe, we've got to spend more money on the brand. We have to spend more money on value to drive volume. Because you can't have $6.00, $7.00, $8.00, $9.00 items out there and think they are going to sell. And that is where the distributor and us have to be partner, because price is so important today.

Great. Thank you.

David Palmer, UBS.

Irwin, just to discuss this inventory and SKU stuff, in your release and in this discussion you've mentioned the successful efforts to get the SKUs stocked at new retailers and new channels. And you've talked also about SKU reductions and distributor inventory reductions.

I wonder, a lot of this oftentimes is talked about in light of retailers' and distributors' efforts to become leaner and meaner in terms of inventory. But how much of this also could be about Hain losing facings of perhaps slower-turning SKUs at retail at the same time that you are perhaps gaining facings of new -- in new channels.

I guess what I'm wondering is perhaps Hain not lately a net gainer of facings. Perhaps part of this 3% to 4% type sales decline is the facings that are being reduced for the Company?

Let me -- in regard to -- you always have churn on new products, right? You get new products in distribution and your long -- your tail of your products drops off. So that I understand.

Let me just be clear, though. In regard to the distributor destocking, these are specific initiatives by distributors to take weeks of inventory out, where they've actually come to us and said, we are here, we want to be there. And basically, we've watched them come out because what we see is our consumption is stronger than our shipments. So you see the inventory coming out. It is distributor based. It is not retail distribution based.

Could we talk specifically about facings and how much your consumer is seeing your products net of all of that? I certainly believe that you have inventories being reduced by distributors. But as far as what we are seeing at retail, there is SKU reduction out there, that is not all just the supplier's choice or the distributor's choice. How would you characterize that?

Here again, we are not seeing in the natural sections of grocers significant shelf reduction. Because to your point, we know of certain customers, like, for example, Meijer, who was taking out the whole top shelf across their store. So we are hearing a lot about that.

That is not the key causal factor in this. It is more -- because I can look at the consumption at customers and things of that sort, and I can look at the gross ACB points of customers. It is more distributors taking out specific weeks of inventory.

And David, we're out in front of this, because the last thing we want with our inventories with short shelf lives is products from a code standpoint, from products that are not selling sitting in our warehouse. So we are watching our inventories, and we are -- if a product is not selling, we are discontinuing it ourselves. And we go through major SKU rationalization and look to cut our products.

If you come back and look again -- and I've said this -- if you look into natural food stores, the independents, we could have anywhere from 1700 to 2000 SKUs in a small natural foods store. You go into Whole Foods, we probably have 1700 SKUs. You go into a supermarket, we could have 400 to 600 SKUS. You go into mass market, we could have 100 SKUs.

So today with data, we are on top of our movement by products. And if it is not selling, we want to be going to the retailer and say, this is not selling; we are going to replace it with this, instead of them coming to us.

I guess where I am going with that is if you are -- it seems like there are certain companies out there and suppliers out there that are seeing somewhat less of this SKU rationalization going on out there. And they oftentimes are the ones that scientifically, with as much science as could be applied to this, is they have some of their faster-turning items in their categories, in their respective categories. And when I just see some of this stuff that is going on for quite some time, I'm wondering if there is a particularly long tail of perhaps slower-turning SKUs in the grand scheme of things in this category.

But David, we wouldn't see consumption growth the way we are seeing it, if that is what you were suggesting.

Okay, thank you very much.

Ultimately, we'd see consumption declines.

Colin Guheen, Cowen and Company.

Most of my questions have been answered. Just one clarification, though. The back half guidance for Hain Pure Protein is to be profitable, neutral, or --?

Neutral.

Can you just go over them again?

Neutral, Colin.

Okay, great. And one other question. I know you had some supply chain efficiency pickups in Earth's Best. Maybe can you talk about those and then see how those leverage over to the other brands as you have gained more and more scale on different points of distribution?

I think supply chain efficiencies I had talked about is retailers that increased their inventories to make sure they were not out of stocks. And I think, again, you come back and look at the growth in Earth's Best. We sell a lot of jars of baby food but I think the same thing. Our inventory levels and our out of stocks and our efficiencies, our service levels were in the 98%, 99%, John?

Yes.

So across the board, Colin, the last thing you want in today's day is to be out of stock. If you can get two, three points just by service levels, it helps our sales tremendously.

And then one last thing. Can you comment about commodities in the second half and how much confidence you have around your outlook that is embedded in guidance?

Overall, we are seeing stability in our commodities for the second half because as you know most of them we bought out for the full year. The two areas that are going to go up on us that we're going to have to manage our way through our almonds and canola oil, both of which are important to our business.

Great, thanks.

We are approaching the time for the allotted questions. Please limit your time to one question and one follow-up. Ed Aaron, RBC Capital Markets.

I was hoping, Ira, you could maybe clarify your guidance for the year. Is it still a GAAP number?

It includes the charges we've taken.

It includes the charges that you've taken year to date --?

Charges that we've called out, meaning the consolidation of the two plants in the UK and the Y.H.S. or Yeo Hiap Seng equity charge this quarter, which of course was not cash.

Right. And does it also include the charge from the first quarter?

Yes.

Okay, so it is GAAP?

That is correct; it is GAAP.

Okay, perfect. And then I actually just wanted to follow up on, John, on an answer you gave to one of Scott's questions earlier. I think you mentioned that you couldn't track the destocking at the brand level because you didn't have that much insight into exactly what the distributors are carrying.

But if you get weekly reports from retailers on what the sell-through looks like across the business, why wouldn't you be able to track it by brand, if you know exactly what is being sold through at retail and you know exactly what you're selling into the channel?

Because, Ed, we don't have their list of customers. So on a macro level, I can see it. I cannot see in distributor A and distributor B which customers they are selling these products to.

Eric Larson, Soleil Securities.

Good afternoon, everyone.

Eric, how are you? Good to hear your voice.

I'm well, thanks, and it is good to hear yours, as well. It is nice to be back online with you guys.

Let me just ask the revenue question kind of going forward, just on a very simple basis. Forget all the stuff. If I just take the second half HPP sales out of your second-half sales last year and put a zero number, no growth, that kind of gets me to the top end of your guidance.

Which means that if you are growing, let's say 3% to 4% core growth, which is kind of what you had guided to at the beginning of the year, then the UK destocking and all that other stuff is basically offsetting that kind of core growth rate. Would that be a fair way to just simply look at your second-half revenues?

Pretty well, yes. So if you take the Marks and Spencer business, which has gone away, you take Hain Pure Protein out --

And adjust for the sales reclass (multiple speakers) promotional (multiple speakers).

And adjust for sales reclass, that's exactly where the number comes out on the growth number.

Okay. That -- simply stated, I think that is how the numbers work, and I just wanted to make sure that of the five or six factors that are all influencing here, I wasn't getting kind of messed up on that.

Could you just clarify -- I missed the destocking numbers. I think you said $16.6 million in the quarter for distributor destocking. Is that a correct figure, and then $8.8 million for the UK business?

Yes, it was $16.6 million for the distributors and $8.8 million for Marks and Spencer.

Okay, good. Thanks.

And then just one quick follow-up. Your SG&A expense as a percent of sales, obviously, your sales are going to be down pretty sharply, so that number will go up. Is there enough -- could you give us a range of where you might expect operating expense ratios to end the year or second half or however you would like to describe that?

I think that our SG&A rate is going to approach 20%, rather than stay in the 19% or 19.5% that I had originally guided to, at the beginning.

At this time, there are no further questions. Presenters, are there any closing remarks?

Thank you very much, operator. I would like to thank everybody for listening to today's call.

Again, in today's times, I think from a standpoint I am happy where our quarter came out. I think we have tremendous runway and a lot of room to grow our brands, grow our product. And the input on focus on certain brands and US versus Europe is something that we, as we sit around the table and write our strategic plans and focus on, and what we are going to divest, are things we are continuously focusing on.

So the world wants to eat healthy. The world wants better for you foods. And every piece of material, every piece of data you pick up, whether it is Michelle Obama, whether it is Mayor Bloomberg, is a big part of our lives. And it is going to be a big part -- Hain is going to be a big part of feeding America over the next 25, 30 years. And it is something that we are going to focus on.

If it is not sodium, it is gluten-free. If it is not gluten-free, it is trans fat. If it is not trans fats, it is high-fiber. So we live that world every day, and that is a big part of our business, and we will continue to expand distribution.

And at the end of the day, I mean, I come back, from a size standpoint, I think in this here quarter -- and I'll use my hockey phrase -- we stickhandled through inventory destocking from distributors. We stickhandled through absorbing some losses in the UK that we thought we would get earlier, selling off commodity birds at Pure Protein. And even continuously spending on our brands. And I think if you come back and look at a GAAP basis where we ended up, I think the team in this Company deserves some high marks. So thank you, everybody, for listening.

This concludes today's conference call. You may now disconnect.