Hain Celestial Group Inc (HAIN) 2011 Q4 法說會逐字稿

Good afternoon my name is Misty and I will be your conference operator today. At this time I would like to welcome everyone to the Hain Celestial fourth-quarter and fiscal year 2011 earnings call.

All lines have been placed on mute to prevent any background noise. After the speakers remarks there'll be a question and answer session. (Operator Instructions). Thank you. Ms. Mary Anthes, Senior Vice President Corporate Relations, you make begin your conference.

Thank you, Misty. Good afternoon. Thank you all for joining us today and welcome to the review of our fourth-quarter and fiscal year 2011 results. We have several members of our management team here today 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 United States.

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 2010 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 with 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 very much, Mary. With great earnings like we came out with, I think we might have caused an earthquake out there today. Anyway, like I said, let me take you through what happened in the quarter, what happened in our fiscal 2011, and let's look at moving forward in fiscal 2012.

As you saw in our press release that was released this afternoon, our sales for the quarter are $292 million versus $222.7 million, up 31%. Gross margin -- and with tough times out there with commodities -- 27.9% versus 26%, up 1.9 BPs -- up 1.9%. EBITDA, $35.2 million versus $18.2 million. And our EBITDA is up 93% versus a year ago.

Operating income $27.6 million versus $12.8 million. And that is up 116% versus a year ago. And earnings per share GAAP $0.28 versus $0.16, up $0.75 versus year ago. And adjusted EPS $0.35 versus $0.25, up $0.40 versus a year ago.

So great fourth-quarter and a great end to our fiscal 2011. Our growth in the quarter you heard me say is 31%. Our organic growth was approximately 13%, so half came from acquisitions of the 31%, the other 13% came from our organic growth of our existing brands.

In regards to the full year, our sales $1.130 billion versus $917,337,000, up 23.2%. Gross margin up 28.3% versus 27.4%, up 0.9 BPs. Operating income $106.7 million versus $71.1 million, up 34%. Adjusted $107.7 million versus $80.5 million, up 34%. Sorry, the operating income was 30% non-adjusted.

EBITDA $139.8 million versus $95.5 million, up 47%. And adjusted EBITDA $140.8 million versus $104.9 million, up 34.2%. And earnings per share for the year $1.23 versus $0.69. And adjusted earnings per share $1.35 versus $1.01, up 34%.

And Ira will take you through a lot more of the numbers and the margins. He thinks I take his job away by telling -- by taking you through a lot of the numbers, but he will take you through a lot more detail in his remarks.

We really focused on inventory. We really focused on cash conversion. Our cash conversion was down 10 days. The group has done a great job there. Our EBITDA as a percentage of sales 12.1% versus 8.2%, and my objective getting us to somewhere around 15% EBITDA, we are well on the way to that.

In regards to inventory, our inventory -- we turned our inventory 5 times, and we really focused on that. That is even with all the acquisitions that we have done, all the different SKUs, all the new product and really focused on our inventory turns -- and that is running service levels in the 98% service level, so that is a pretty big accomplishment.

Acquisition-wise and net debt, our net debt is the same this year versus last year. And we funded internally and paid down about $58 million to fund our acquisitions. So overall our organic growth for the full year ran about 12%, which considering all in all that happened out there, I think that is tremendous growth.

So let's go back and look at the year, the brands. And we really have some great brands. I'm not going to go into brand details and specific brands, but just to come back and look at some of our growth. We have 11 brands that grew over 20% in the quarter. We have four brands that grew over 10%. And we have five brands that grew over 6%. For the year we have 10 brands that grew over 20%. Some of these grew in the 30% to 40% range.

We have five brands that grew over 10% and five brands that grew over 5%. So with that, we have a lot of good brand growth. Yes, we have had some declines in brands because of product repositioning and packaging repositioning, but that is opportunities for us. And we see some good things happening there, some good repositioning and opportunities for us moving into fiscal 2012.

John is going to talk about high consumption in single digits and growing in most classes of trade. And we are really happy what we're seeing on the consumption side, and really happy what we are seeing the products and the movement and the mix.

In regards to productivity, the team has done a great job in productivity around the world. We have probably get about $17 million in productivity throughout the year. And that offset a lot of inflation. Just in this quarter alone we had approximately $5 million worldwide that we had to absorb in inflation, and that is a lot of inflation to absorb. We did take a price increase effective July 1, so there was really no benefit of a price increase that we really saw in this quarter.

One of the big things I really admire about Hain is our flexibility, our nimble, being entrepreneur, and how the Company is able to move quick. But new products -- and new products are the lifeblood of this Company. And new products have -- and you come back and look at our innovation, whether it is on product, packaging, and you look at the brands.

But we deliver over $20 million of sales -- $30 million of sales -- I am being corrected -- worldwide of new product sales -- you know, coming from new products. And that is almost like an acquisition and going out and buying something, and we created that internally and deliver that internally. At the same time funded it through our growth.

We completed and integrated five acquisitions throughout the year. We have really upgraded people and made some good people changes. And saw some great growth on the acquisitions, which I will talk about in a little while.

In regards to the acquisitions, we saw the growth in Sensible Portions up almost -- over 50%. Greek Gods up over 80%. Our Danival brand up over 14%. Seeing growth on GG Cracker, and actually we are in the midst of taking back GG Cracker sales for the US in September and really have some big things focused on that.

Our Canadian business grew over 10%. Our customer growth was across all our customers. And one of the good things that has happened in our Canadian business, Sensible Portions and Greek Gods, which were not in those markets, we have introduced them and seen some good growth.

Good focus on our personal care business. Our European business saw good growth on our Lima brand, our Dream brands. And really what we are seeing is good growth on our nondairy business, our Terra Chips business.

Hain Pure Protein saw a great turnaround this year, with grain prices where they were. We saw our sales up 26% for the year. And our EBITDA grew double-digit, so really good turnaround on that business. And good consumption numbers considering where grain markets were.

Asia, which we have talked about quite a bit, our overall Asia business was up 80% year-over-year, which I believe we're just in the midst of starting to rollout things. We, in January starting to rollout our formula, which we should see some good things for, so I am pretty excited about formula.

Acquisitions, we're really focused on acquisitions. You have heard me say that before. With the opportunity to borrow money at these rates, and valuations, I think, have come down somewhat. There are four or five real good acquisitions that we are looking at. There is no guarantee we will complete them or do them, but we are absolutely out there looking at some good acquisitions, strategic acquisitions, and most important, accretive acquisitions.

One of the things you come back and look at our customer base, and John will talk about growth in his -- consumption growth. But we really have a good consumer and customer base out there, a well-diversified customer base. And it is a customer base of retailers that are growing today, and plan that is where Hain products are really moving into.

I hear a lot, and actually people talking with the economy the way it is and the stock market, does that affect your product? And I have said it many times, eating healthy is not a fad, it is not a trend, it is becoming more and more a part of life, whether it is gluten-free, whether it is low-sodium, whether it is caloric intake. And more and more consumers it -- and more and more consumers read labels today and really look at nutritionals.

So we are in a great spot. And I always say this here -- we're in the second or third inning of the game of where our growth and our opportunities are.

Back this past summer there was a big recall in the protein category, which drove consumption in other categories for us. And consumers really want to buy good food and food that is not contaminated and healthy food. What we're also seeing is there is a big shift where the consumer is staying at home and eating more and more at home. And we continually see those trends moving in our direction.

With that, I'm glad our 2011 is behind us. We are already two months into 2012. We are seeing continuously good consumption growth. I will let John take you through our fiscal (technical difficulty) grocery business. And then Ira will take you through some other numbers, and we will be back to you for questions and answers. Thank you. John.

Great, thank you, Irwin. Good afternoon. I'm pleased to report a very strong Q4 and F11 for Hain Celestial US. I'm going to start with Q4. Now there are many highlights in the quarter. I am just going to call out a few, starting with we had 30% plus US sales growth for the second consecutive quarter.

Now this was driven by healthy growth across all of our US units. Remember, that is grocery and snacks, personal care and Celestial Seasonings. Coupled with very strong sales gains from The Greek Gods and Sensible Portions acquisition.

Another Q4 highlight was our US consumption growth of 7%, which was actually 1 point higher than what we experienced in Q3. And was driven by gains across the portfolio. Picking up off what Irwin said, the growth was driven by in our business 12 brands with double-digit or high single-digit increases. Importantly, we experienced growth across all key channels -- natural, grocery and mass merchandisers.

In fact, there our US grocery channel consumption was up 6%, the fourth consecutive quarter of growth in that very important channel. Also in the quarter US gross margin increased significantly, despite absorbing over $3 million in commodity and fuel-driven inflation. We were able to offset these increased costs with productivity savings and the Q2 price increase that I have mentioned in previous calls.

The majority of the US gross margin improvement was driven by our Hain Celestial US business ex the acquisitions. So it is a core business that drove the gross margin increase. However, it should be noted that both acquisitions were also margin accretive.

Additionally, our Q4 SG&A as a percent of sales was up only slightly, and that was driven entirely by the acquisition amortization costs, and the in-store demo expenses to support the Sensible Portions club business.

Hain Celestial US SG&A, ex the acquisitions, was down, reflecting the increased sales and the better leverage of our marketing, trade and headcount investment.

Finally in Q4 our US inventory, which included the acquisitions, was up only 3% despite supporting over 30% sales growth. This inventory leverage, coupled with our Accounts Receivable improvement, was a major driver in the Company's improved cash conversion metrics.

Now as we turn to our full year performance, we see our Q4 results topped off another strong year for Hain Celestial US. Our US business model, our strong portfolio of brands, as Irwin has alluded to, and our focused strategy enabled us to overcome consumer uncertainty and rampant commodity and fuel inflation to deliver topline growth of 26%, including the acquisitions; gross margin expansion, driven in part by productivity savings, of over $14 million; improved inventory turns and cash conversion; strong double-digit income growth; and record years by our core businesses, grocery and snacks, personal care and Celestial Seasonings.

So that is 2011. Now as we look in 2012, we are again very bullish about our business. We continue to see strong momentum across the US business, dating back to second half fiscal 2010. We believe it is sustainable despite the uncertain economy and turbulent commodity and fuel cost environment based on five key factors.

The first factor is our continued consumption gains. Q4 was our sixth consecutive quarter of consumption growth. Importantly, our two-year comps, are showing a robust 11% growth. And as I mentioned earlier, we are seeing growth across all key channels.

The second factor is what Irwin refers to it as the lifeblood of our Company, or innovation. And we have a really strong innovation pipeline. Now F11 US new products totaled over $30 million in sales. Look, we expect to do that again in 2012 or beat it. And there is a couple of FY 12 new products that are already using showing signs that they can be breakout hits for us. And I want to call them out.

The first one is our Earth's Best Sesame Street yogurt smoothies in shelf-stable pouches. This is a truly differentiated product from all the other pouches in the baby food category. This line is quickly getting distribution everywhere, and demonstrating turns equal to our jarred baby food, while garnering a higher price point.

The second one is Celestial Seasonings Sleepytime K-Cups. Celestial's ongoing alliance with Green Mountain Coffee has been a terrific source of profitable growth, as well as being the brand's very first successful venture beyond bagged tea. Celestial K-Cups are now available in over 15,000 grocery stores, as well as online and in specialty and department stores. So some new areas of distribution for us.

Now this year's launch of Celestial Seasonings Sleeptime K-Cups expands the usage of Green Mountain's current machines to a new daypart, evenings, because they are primarily used in the mornings. And this should be another source of profitable growth for Hain US.

Then while we're speaking of Celestial, let me add to you -- talk to you about the launch of our new Kombucha Energy Shot. Now this features the first product combined to hot trends in the ready-to-drink category, Kombucha and energy, in an all-natural refrigerated beverages. These products will launch in October in the natural channel, and are getting great distribution pick up already.

Now on the personal care front, I want to talk to you about Queen Helene Royal Curl, which is our new hair care treatment system targeted at the ethnic market. This launch has already helped reverse Queen Helene's consumption decline. In fact, Royal Curl is turning as fast as last year's breakout personal care hit, Alba ACNEdote. Now both Royal Curl and Alba ACNEdote will be great contributors to our FY 12 personal care growth.

And the final early breakout new product hit is Garden of Eatin' Sweet Potato Tortilla Chips. Now Garden of Eatin' was one of few US brands that experienced a consumption decline last year. But the brand has been given a total overhaul with improved product quality and great new packaging and highlighted by the launch of our new Sweet Potato Tortilla Chips.

This product is on trend; it is unique and it is rapidly gaining distribution across channels, including one mass merchandiser customer that does not currently stock Garden of Eatin'.

The third reason we feel bullish about FY 12 is the continued momentum we are seeing on our US acquisitions, Greek Gods and Sensible Portions. Our FY 11 consolidated results from these acquisitions exceeded our forecast and are poised to do the same in FY 12. Both brands are gaining distribution at a rapid clip and still have a lot of distribution and innovation runway ahead of them.

The fourth reason we are bullish is that our US positioning relative to input inflation. Now, look, we are seeing the same input inflation as everybody, but we believe we are positioned well relative to our supply needs for our key organic and natural commodities. We are long where the crop is in short supply, like sweet potato, versus some areas we are going short on commodities where we think the market may move downward.

Now, look, we will still experience significant commodity and fuel inflation, but we expect to offset it with better -- with careful buying as well as our July 1 price increase, which will be realized in late Q2 and our full line of productivity initiatives.

The final reason to feel bullish about FY 12 is the great momentum we have on our highest margin businesses, Hain personal care and Celestial Seasonings. Both businesses delivered record results in FY 11, which is pretty impressive when you realize Celestial is almost 42 years old and Jason Natural Products just turned 50.

These businesses are very vibrant, showing strong shipment and consumption trends, great innovation. And as last year demonstrated, we are seeing new runways to get new users, be it expanded grocery and mass distribution personal care or K-Cups for Celestial Seasonings.

So to close, Q4 and FY 11 were strong for Hain Celestial US, highlighted by double-digit topline growth, margin expansion, improved cash conversion, and double-digit income growth. And we are very bullish about our FY 12 prospects, given our strong consumption trends, our innovation pipeline, our position relative to commodity inflation and pricing, and the momentum on all of our businesses.

Now I will turn the call over to Ira Lamel.

Thanks, John. Good afternoon everyone. Our net income in the fourth quarter this year came in at $12.8 million compared to $6.7 million in last year's quarter. We earned $0.28 per diluted share on a GAAP basis this year versus $0.16 last year.

Before acquisition-related items, integration costs, a discrete tax adjustment, and a non-cash impairment charge at our unconsolidated equity investee, Hain Pure Protein, adjusted net income was $15.7 million, compared to $10.6 million last year, improving by 48.1%. And adjusted earnings per share was $0.35 compared to $0.25 per share last year, improving by 40%.

Our share count increased by 3 million shares as compared to the same quarter last year, with approximately 1 million of that increase coming from share equivalents in the earnings-per-share weighted average calculation, and the remainder principally in connection with acquisitions and stock compensation.

Net sales reached a fourth-quarter record of $292 million, an increase of 31.1% compared to $222.8 million last year. We saw strong increases in sales across all of our reporting units, including the sales from acquisitions.

Gross profit in the fourth quarter this year improved by 186 basis points to 27.9% on a GAAP basis compared to 26% in the fourth quarter last year. There were no adjustments to gross profit in the fourth quarter this year, thus the improvement was 168 basis points compared to last year's adjusted gross profit.

We realized improvements in our gross profit performance from a more favorable mix of sales worldwide, an effective trade spend, which together with productivity improvements overcame the challenges of the increasing input cost environment.

Inflation in product inputs amounted to 181 basis points drag on gross profit this quarter as compared to last year's quarter. The inflation impact was higher in the fourth quarter as compared to what we have experienced in previous quarters this year.

Our SG&A in the fourth quarter was relatively flat at 18.4% of sales. And the SG&A rate includes 35 basis points of increasing amortization from intangibles acquired in recent acquisitions.

Operating income for the quarter this year was $27.7 million or 9.5% on a GAAP basis compared to $12.8 million last year, or 5.7%. That was an improvement of 373 basis points. On an adjusted basis operating margin was 9.5% this year, or 7.9% last year, improving by 153 basis points.

Depreciation and amortization in this year's quarter was $6.5 million as compared to $4.7 million last year, with the increase coming from those acquisitions. Stock compensation in the quarter was $1.7 million and was flat to last year.

Our net income in the full year came in at $55 million compared to $28.6 million in the prior full year. We earned $1.23 per diluted share on a GAAP basis this year versus $0.69 last year.

Before the acquisition-related items, the Hain Pure Protein asset impairment and the discrete tax adjustment, adjusted net income was $60.2 million compared to $42 million last year, improving by 43.5%. Adjusted earnings per share was $1.35 compared to $1.01 last year, improving by 33.7%. Our share count, as in the fourth quarter, increased 3 million shares for the full year.

Net sales reached a full year record of $1.13 billion, an increase of 23.2% compared to last year's $917.3 million. We saw strong increases across all the units for the full year as we did in the fourth quarter. Gross profit in the full year improved by 89 basis points to 28.3% on a GAAP basis compared to 27.4% in last year's full year -- excuse me, in last year after 147 basis point impact from inflation. Adjusted gross profit this year improved by 91 basis point.

Our SG&A in the full year was flat at 18.8%. The incremental amortization from acquisitions had a 31 basis point impact on SG&A as a percent of sales. Operating income for the full fiscal year was $106.7 million or 9.4% on a GAAP basis compared to $71.1 million last year or 7.8%, improving by 168 basis points. On an adjusted basis op margin improved by 75 basis points to 9.5% this year.

As Irwin mentioned, we continue to focus our attention on improving working capital turnover and generating improved cash flows. For the full fiscal year operating free cash flow was $47.2 million. We invested $30 million of our profitability into working capital to support the Company's growth.

Days sales outstanding was 45 days versus 47 days at the same time last year. Our inventories days are down year-over-year to 73 from 86. And our payables have shortened by five days. As a result, our cash conversion cycle is down 10 days to 78.

Capital expenditures in the quarter were $3.6 million, and for the year $11.5 million. As you saw in our press release, we have given guidance for the full fiscal year 2012. We expect net sales to be in the range of $1.23 billion to $1.26 billion on an estimated sales growth of 9% to 11%. We anticipate earnings per diluted share will come in at $1.50 to $1.60, giving us 11% to 19% earnings growth.

Some of the significant estimates we used in arriving at our guidance include our estimate of consolidated gross profits for the year, which we expect in the range of 28.4% to 28.75%. SG&A is estimated to land at about 18.4%. We have estimated our tax rate at about 39%. And last major assumption is that our share count will approximate 45.2 million shares for the year.

Our estimates do not include acquisitions. And the guidance is given on a non-GAAP basis. And as we go through the year we will point out any adjustments, such as acquisition, expenses or integration costs that we incur.

Finally, we estimate that our earnings will continue to be strongest in our second and third quarters, as they have been in the past years. At this point we will open up the call for questions.

(Operator Instructions). Scott Mushkin, Jefferies & Co.

Thanks for taking my questions. And just an outstanding fiscal year, so that is really great news. So with that, I will just go and start being a Debbie Downer a little bit. I know John went through a lot of why he thinks 2012 was going to be good. And clearly Hain is really well-positioned, so there is really no doubt about that.

I guess, the elephant in the room, and I want to take a wack at this, are you seeing anything in the last week or two that would lead you to believe things could slow down here a little bit?

Number one, let's step back, and we don't look at our business by week -- weekly. We look at it on a 12-month basis. And I think, to step back July and August are actually some of our slower months within the year. But there's no indication out there today that shows us that there is any slow down at all. You saw Whole Foods came out with their numbers a few weeks ago -- good consumption, good growth. You saw their new store plan of opening up new stores. So we are excited about that.

You heard John talk about good consumption in grocery. You heard him talk about consumption in the mass market. So what has happened in the last week, if anything, there is no indication. The only thing I think is consumers are staying more at home and shopping, and not going away on trips and buying healthy food, which will ultimately help sales.

Again, you heard what I said before, we have developed multiple new products. We are expanding more and more distribution into more and more doors. There is great category growth. Our retailers that we are the strongest in are opening more and more stores.

At the end of the day what I have said before is -- commodities, we are seeing some relief on fuel. Even though we have taken pricing, if we have to go spend money to drive volume, we will go do that. But we are feeling okay going into fiscal 2012. There is nothing that has spooked us.

Okay, so basically no -- you haven't seen any changes as of yet. It is a slow time of year, but you really do feel like you have things in place to drive growth, even if things were to macroly slow down a litt bit. If that is even a word. Is that paraphrase, Irwin?

Listen, there is so many things in place to drive growth that if a couple of them check out there is enough other growth vehicles in place to take their place here for us. It is new products; it is new distribution. It is some of the growth in some of our brands, growing internationally, emerging markets. We're just not concentrated on -- focused on one product, one category.

And I say this wholeheartedly, the Company today that is only focused on one category, only focused on one class of trade, and is only focused on the US, that they could have some challenges out there. That is not the case here at Hain.

So going along the productivity line, I think you guys had some nice productivity gains last year. This has really been a theme, I think, since really the last downturn in 2008, where you guys really buckled down on operations. Where are we? What inning are we in? Are we going to see some nice productivity gains in 2012 as well, the potential there? So maybe you can just give us really some thoughts on that.

To come back and look, we are turning our inventory five times. So look at what we have done on inventory. Look what we have done on productivity. We have 50% of our production is done in our own plants. The other 50% is outsourced, but we're out there sourcing ingredients, sourcing packaging. And again, size does matter here, and with our size we are able to do it a lot more efficiently. And with consumption growing the way it is, it is helping the matter.

And [Jim Meiers] and his team and the infrastructure that we have in place here in the US, the group in Canada and the group in Europe have just done a great job on productivity and production planning.

Okay, and then one final one and I will yield the floor. Just maybe a quick update on the UK. And thank you for taking my questions, and really great work, great to see it.

Thank you. Update on the UK, we have appointed [David Matwee], who was running our Fakenham facility and our Linda McCartney frozen meat-free business and our dessert business -- we have appointed him Managing Director of all the UK. And he has done a great job in turning around the frozen business. It is on the road now to profitability.

In regards to food-to-go, he is now in charge of the food-to-go business. And we feel good about what we see next year in the UK. I think, number one, there is turnaround in the economy there. We like what we see. And I will feel a lot better about what I -- I hope to see a lot better things in the UK than we saw this year and last year. So we're on the right path.

Greg Badishkanian, Citigroup.

Great quarter. I just wanted to follow up on the question about last month with all the stock market volatility, were there any changes in terms of maybe product categories? And as you think back to 2008, early 2009 recession, were there some things there that happened that maybe you are seeing the early signs of that, or is this just totally different and the higher-end consumer is holding up, your consumer is holding up, and you're not really seeing it?

I think back in 2008, and I remember exactly when we saw the downturn in October/November, and we absolutely saw it. Number one, is we have not seen anything similar to that. Our consumer is part of the 90% that is working today. Our consumer, I don't think, is out there concerned about housing and what is going on in the mortgage market. Our consumer is educated and aware of their health. And being healthy and being able to work today is very important out there.

So I think from a positive standpoint we're in the right niche. Our average food product today is in the $4 plus range. Our average personal care product is in the $8 range. So it is not like we're out there selling Hermes bags or Coach bags or a high luxury item. And if you come back and look at the cost for our products versus eating out, it is a lot cheaper to be able to purchase our products.

So the good news is we saw the consumer run to private label. We saw the consumer trade down. Once the market turned we saw the consumer come back and buy in branded healthy products. I think they tried it once before, so I feel they will stay there.

The other thing is, there is a lot of consumers that are gluten-free. There is a lot of consumers that are lactose intolerant. There is a lot of consumers who are looking to reduce their sodium. There are a lot of consumers out there today that are really educated about of high fructose corn sweeteners, hydrogenated oils. Mothers are not going to stop feeding their baby. And someone, as yourself, as a new father, you're not going to trade down and start feeding your infant or toddler regular baby food. You're going to make sure it is organic, GMO free.

And you recently just read where our former President, Bill Clinton, has just become a vegan. So consumers are all changing from all facts of life.

Right, right. Good point. I definitely see it in the longer term secular growth. I just was wondering -- and it is good to hear that nearer-term things are holding up well.

And then just as a follow-up question, with respect to inventory at the trade, maybe a little bit of color how you think things are at distribution as well as at the retail level. [They are] at the right amount, or maybe just kind of your thoughts and how much inventory should be out there?

Listen, from our standpoint, turning our inventory back five times, I think, we have done a good job at managing inventory. That helps its shelf life and that helps having fresh inventory.

As we move into holiday season, and I think we've had a discussion with our vendors and our partners, how do we make sure we have stocked shelves and not out of stocks, because out of stocks absolutely hurt you. And I think our retailers are aware of that and our distributor partners are well aware of that. It is a big focus of ours to make sure that there is not holes on the shelves.

Right. Great, thank you, and nice job again.

Ed Aaron, RBC Capital.

You guys sound pretty fired up today. I can't tell if it is the good numbers or the energy drink.

A little of both.

It is both.

A little of both, good. So, looking back on this past year you made a really nice push expanding distribution and getting more consumption, and particularly with the recent acquisitions coming into the mix. As you think about fiscal 2012, just maybe a little bit on where you see the most distribution gain opportunity as you look across the US business?

John?

Clearly, as I said in the presentation, we have a lot of room to go on our two acquisitions. Both of them do not have grocery distribution any higher than about 30%. That is the first opportunity.

But then, again, across our business here that is one of the great things about the Hain Celestial business, we are not saturated from a distribution perspective. There is still great opportunities in grocery. There is still great opportunities in mass. And still great opportunities for us in club. So that coupled with making sure we have the right mix in natural, give us a lot of runway to drive the distribution on this business.

Just to pick up on that, you heard me say in our Canadian business today it is close to $100 million. We were just launching Sensible Portions, Greek Gods. We're expanding other Hane products into Canada. You've got Target coming into Canada next year. You've got good growth with our [Lavalar] change. You've got additional Whole Foods opening up in Canada. So we look for some good things out of Canada, even though there is only 28, 29 million people there.

At the same time with our acquisition with Danival, some good things coming out of there, our acquisition of GG Crackers, and and I am looking for some real good things in the UK this year. And I really believe we have one of the best management teams that we've ever had in place there, a really good strategy. And we've had our lumps over the last couple of years. And I feel that we are really on the right track here.

Our Asia business, you heard me say we are up 80% Asia year-over-year. So emerging markets and outside the US for us is going to be a big important part of our growth. And we're looking at additional acquisitions outside the US.

Great, thanks for the color. That is helpful. Actually your comment about the UK was a good segue into my follow-up question. That has obviously been an area that has been a bit of a challenge. Can you maybe -- you didn't talk about it a whole lot in your prepared remarks, but especially when you think about 2012, what sort of planning assumptions are you making or have you incorporated for the UK business in terms of profit improvement, looking out to this coming year? And then also maybe along the same lines what are you looking for in the protein business? Thanks.

So let me come back with the protein business first. The protein business had a great turnaround, EBITDA -- double-digit EBITDA growth. And we're looking for the same with that this year. And just to come back to protein, Hain Pure Protein, antibiotic-free chicken, antibiotic-free turkey, and you heard what I said up 29%. Within protein today chicken is the fastest growing protein of any product out there. You had a recall on turkey with Cargo and we saw good consumption, a lot of consumer moving towards antibiotic. And a lot of the salmonella supposedly coming from products that are not fed -- are not injected with -- that are injected with antibiotics.

So we really feel we are in a good space there, or Hain Pure Protein is in a good space. So we're looking for double-digit EBITDA growth within that business next year. And really looking for some good growth within turkey and chicken, and the expansion across a lot of retail chains.

In regards to the UK, the UK was in a loss position this year. And we think with all of UK, and that includes central cost and other costs, that we will be in basically a breakeven, maybe $1 million loss or so this year in the UK, but basically breakeven to $1 million loss in the UK in this coming year.

With a big turnaround in frozen, a big turnaround in food-to-go, and we're on the way to those. It is not like we're out there hoping. Our frozen business and our frozen dessert business in the UK ended last year with that. In our food-to-go business there is a good plan in place today with a lot of new customers that we picked up. And we think adding GBP4 million or GBP5 million of sales will ultimately get us there, and there is lot of good leads on doing that.

Great, well, thanks for taking the questions, and nice job on the year. Thank you.

Amit Sharma, BMO Capital Markets.

Just a couple of modeling questions. Ira, I missed what is the share count for next year's guidance.

45.2 million. That is our estimate.

John, can you provide sales growth for your segments for the year -- snacks, groceries, or should we wait for the K for that?

No, we don't provide that.

For the quarter?

No, it will be in the 10-K next week.

Okay, got it. Now I want to take a different crack at the economy question. Notwithstanding what is happening to the consumer, internally how is Hain positioned differently versus 2008, 2009, if the economy turns down again?

Well, I think a couple of things. Number one, you heard what I said before in regards to productivity and costs and we're continuing to focus on that. And the question asked, do we have a plan in place for 2012, and yes, we do. If we hit 17 we are looking for 20 plus worldwide in productivity in 2012.

Number two, is we did take pricing in December across the board. And we hope if commodities come down that there is going to be opportunities to spend back on volume. And part of our plan for 2012 is just not to let our products sit on a shelf. It is ultimately drive volume through promotions, demos and building more awareness.

We have a pretty -- which we think tight cost structure within Hain. And we run our business very lean and mean. And I think we will continue to do that.

But we're a growth company. When your green, you're growing; when you are ripe, you rot. We are green and we're growing, and we think the economy turns down, I still think there is great growth out there, because I don't think, like yourself or a lot of other people on this call, you are not going to turn away and start eating spam and stop eating healthy food. So there is still a very, very good market out there for us and there will be good demand.

If you are gluten-free, you're going to eat gluten-free products. If you're watching your sodium, you can't just go out there and start eating products that are full of sodium, or hydrogenated oils, high fructose sweetener. We have moved beyond where the consumer today is so much more educated and that is the demand for product.

So, yes, will there will be falloff if the economy turns down? But I think what we have is, number one, is a lot of strategies in place of how to drive volume, not just cut costs.

And we haven't abandoned the tools that we used to get us through 2008. That is the only comment I would make on top of that. But we're still -- we still use -- deliver value via coupons. We still have a strong focus on margin. And we still have a very strong focus on expense control.

That's great. I appreciate it. And also, Irwin, you said you are actively looking at four or five acquisition targets. And I'm not asking for the names of those targets, but where does the focus today to grow in terms of categories, in terms of channels, in terms of geography? If you can provide a little bit more color -- and the size of acquisitions as well.

We are looking -- I'm not going to go into categories or anything like that, but we are looking at strategic acquisitions that can have categories that we already have today. We are looking at where margins, where they are margin accretive, where they're sales accretive.

And a prime example is the four or five of acquisitions we did last year and the growth. And just you come back and look at Greek Gods and that business almost tripled. At the same time we expanded Earth's Best and took it into the yogurt category, and that helped us to get into the yogurt category.

Sensible Portions helped Hain to get into the club stores in a bigger way. So what we are looking for is acquisitions that are accretive and growing, at the same time help some of our other brands and help some of the other categories. At the same time, you heard me talk internationally. I do think there is some big opportunities, again, internationally. If I come back and look at Hain, I would like to be doing 50% of our business with inside the US and 50% of our business with outside of the US. Today it is probably 75/25.

So there is a focus there. And I have said this before, if you can borrow money at 2%, 3% today, and if you can't get a 15% internal rate of return then we shouldn't be doing acquisitions.

And the size of the acquisition, like how -- can you -- is there any upper limit, Ira?

It is Irwin, you're talking to.

I know.

You get in trouble when you mistake me for Ira.

No, I meant to ask the question to Ira, like sure, (multiple speakers).

Size-wise as you saw last year, Greek Gods was in the 15 to 18 when we acquired it, and look what we did. And Sensible was in the 50s. So we like niche add-in, tuck-ins in the $15 million to $100 million range.

If something came along and it is really transforming for the Company, we would absolutely look at it. But one of the things I come back and say this here, and I had the discussion with somebody today, what is unique about Hain and where we stand is we have stuck to a strategy. We only want to buy and participate in natural organic categories and good growth categories. That is what is very important to us that fit within the overall strategy of Hain.

Let me supplement that with one comment. And this is Ira. Our leverage is very low. We are dropping down as we pay debt down, and we are currently only a bit over 1.5 turns on leverage under our banking agreement. So there is a tremendous amount of head room for us to finance just about anything that we want to go that is out there in the market.

That is important. I would like to sleep at night, so having a lot of debt and 3, 4 times EBITDA is not something I would look for. 2.5 times EBITDA -- 2.9 times EBITDA is something I could put my head on the pillow with and rest comfortably with.

I appreciate it. Thank you very much for taking all the questions.

Andrew Wolf, BB&T Capital Markets.

Good afternoon.

We are glad you survived the earthquake. We were worried about you.

Yes, it was -- I didn't feel it, actually. John, I wanted to ask you a follow-up. You said you are short some commodities. Now does that just mean you don't have prices locked in via forward contracts or does that mean you have physical possession and you're in the market shorting them? Could you just (multiple speakers).

No, no, no. We have just bought out maybe a quarter of six months maximum, as opposed to going the full year on some other commodities.

Okay. And then I wanted to ask about the gross margin expanding 168 BPs in the face of all the input cost pressure. And it sounds like most of that was not price, but could you give us a sense of how much was price versus mix?

I think you are right. Most of it wasn't price. It is almost all mix. There was a little bit of price, almost immeasurable. Remember, we put a price increase in for July 1. And the mix was improved immensely by help from Sensible Portions and from Greek Gods.

I think we had a better mix almost all the way across the board on all of our reporting units, and therefore, we got contributions across all of them. But the leader in margin improvement was in personal care. And we look to holding those margins and improving them as we move forward.

When you reference productivity gains is that something that is helping the gross margin particularly or the expense ratio?

The dollar value that Irwin mentioned is all in the gross margin line. It is really product, productivity. It is not productivity on the G&A line. If you look at G&A, which we didn't quantify, the fact that we were flat on G&A as a percentage of sales in the face of amortization being included in that, then you can get a measure of how our G&A dropped a bit while we had that infrastructure that supports the continued growth in the acquisitions we put into place.

I would like to just turn to sales for a moment. And first just on the 13% organic growth rate on existing brands, so does that mean -- are you including incremental growth on Greek Gods and Sensible or is that just on brands that were at Hain in the quarter -- in the year ago period?

What that includes is existing Hain brands that have been here for more than the year and the organic growth on acquisitions -- Sensible Portions and Greek Gods and Danival. And (multiple speakers) what I said when I originally pointed that out.

So I guess my question is kind of a flip of some of the questions about what if the economy tanks, which is a good question. But on the other hand, if you just looked at the trends, it strikes me the 9% to 11%, given you got pricing coming in for a little over half a year it sounds like, you're definitely looking for some kind of slow down in the budget, just doing the numbers either in takeaways or distribution gains that are pretty decent sized. Again, layering in that there is going to be much more price this year than last year.

So I guess the question is as you looked at what was going on with the stock market and the economy getting soft, did you -- is that reflected in the budget? If we were cruising along, and we hadn't had the last two months and disruptive with this budget maybe it looked a little more aggressive.

Not at all. I think, if you were anyone else here could sit here today on August 23 and project what we are going to be doing next June 30, we are all pretty good.

So as we step back there are not too many companies coming out there today projecting even 9% to 11% growth. So considering the economy, considering, as John was talking before of commodities -- listen, we report every fourth quarter and we can give updates every fourth quarter, and if there is an opportunity to change our forecast, we will absolutely do that.

So with that, I think a budget is a budget, but we reforecast every quarter, and we go back and look at our numbers. And I think if we're coming out there with numbers we want to make sure that we are coming out there, and the visibility that we are seeing today is the visibility that we can deliver.

Okay, that is clarifying. Lastly, getting back to the acquisitions, I think you have -- from my point of view, the track record in the US having real big winners is clearly -- maybe it is the law of large numbers, you had more to pick from. But a lot of times it is just very simple businesses do better where they're domiciled than when they go overseas.

So if you go into more acquisitions in Europe, let's say, or in Asia, what can you tell us about any disciplines, partners you're going to bring in, partners you're ready have it might help you, so we can feel more assured that they will be on the winning side of the ledger?

I think you have to go with our track record before -- that we have done. And I think we have done some great acquisitions. And we have a great partner in the UK.

That is all I can say is hopefully Asia speaks for itself, and you've got to have confidence in management. We are not going to go out there and do a dilutive acquisition. We are not going to go out there and do an acquisition to where we have not -- don't have the management team in place.

And, yes, we have had some challenges in the UK. But considering what we have been -- what we have done on acquisitions, considering the amount we have done, I think our record speaks for itself.

We are not going to go out there and bet the farm acquisition anyway that we would ever do something like that. So it is niche, unique acquisitions. And we have a lot of good products that with the right acquisition, whether it was in Europe, and we are not going to Greece or Spain, would help our business grow over there.

But, yes, listen, we're focused a lot on the US, and looking for acquisitions here. So I hope that answers your question.

Well, it is helpful as well. And also congratulations on the year as well. Thank you.

(Operator Instructions). Sean Naughton, Piper Jaffray.

Thanks for taking my question, and great job on the top line in the fourth quarter. A quick question, just on the margins in Q4 did they come in where you were budgeting them for your internal plan? Did gross margin SG&A margins meet your internal expectations?

I would like to look at it on a full-year basis. When we set out at the beginning of the year we guided to 28.5, we came in at 28.3. And that was in the face of all the input cost inflation. So I think both the sales team and the supply-chain team did a pretty darn good job of meeting the targets that were set out for them at the beginning of the year.

I think what is important, again, stepping back from that, with the cost of inflation over $5 million for the Company in the quarter, that affected our margin by 1.5 points. So all in all I think we have exceeded where we set out to be, but we have also went out there and sold a lot more product and consumers consumed a lot more product.

Sure, that is fair. Then I guess in terms of the inflation, last quarter you had mention some stuff on some almonds and sweet potatoes as some of the two biggest culprits on dragging down some of that margin. Were those similar categories in the fourth quarter? And how do you see those playing out over the next -- the balance of -- like the back half of this calendar year?

As we look at -- almonds continue to be very high. So we don't see any relief there. Sweets, we are actually seeing a little bit of relief, but it is being offset by oil -- sunflower, canola, those are up very high.

Listen, we hope commodities come down and that ultimately, as you saw with coffee prices -- you know, two companies rolled back their coffee prices -- not that we're [intending to rolling them] back, but I think it gives you the opportunity to promote and spend back on the consumer here.

Got it. And then one last little housekeeping. You guys have mentioned the 13%, I think, organic growth rate in the fourth quarter. Do you have that number for the full year?

It is 12% for the full year.

12% for the full year.

12.2%.

Okay, you have it exactly then, okay. All right, well, great, thank you very much, and best of luck in fiscal 2012.

Thank you very much. With that, that being our last question, I want to thank everybody for listening to our call today in the middle of August. I know a lot more people are on vacation.

Again, thank you for your congrats on a great year, and it was. And we have a tremendous, tremendous team in place that (technical difficulty) 2011 happen, and that is the key is having the infrastructure and the people. That is something we are continuously doing is upgrading our organization and adding to the organization.

So we do have an unbelievable team. Secondly, is we have -- you heard me talk about brands. How many companies today have as many brands that we have that are growing -- 11 brands growing 20% plus or even higher, five brands growing 10% -- growing in those numbers in this tough economy out there. So we have tremendous, tremendous brands with a lot of values and a lot what the consumer wants today.

Our strategy is clear. And if you come back and look at our strategy on healthy food, healthy personal care products, focused on the environment, focused on animal welfare, focused on packaging, whether it is BPA, whether it is recyclable (technical difficulty) what is in glass versus plastic today, it is tremendous what we focus on as a company.

Just coming back and looking at turning our inventory with a complex company like us five times. So we our focused on metrics. We're really focused on a lot within the Company. And our strategy is clear. And last, but not least, we are out there knowing what shareholders want today, and out there looking for good value and good returns for our shareholders.

And with that, I want to thank everybody for listening to our call. And I will look forward to talking to you again in October. And look forward to a good year and things moving in the right direction. And enjoy the rest of your summer and live healthy and eat healthy. Thank you.

This concludes today's Hain Celestial fourth-quarter and fiscal year 2011 earnings conference call. You may now disconnect.