Hain Celestial Group Inc (HAIN) 2012 Q4 法說會逐字稿

Good afternoon, my name is Stephanie, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Hain Celestial fourth-quarter fiscal year 2012 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 will now turn the conference over to Mary Anthes. Please go ahead.

Thank you, Stephanie. Good afternoon and thank you all for joining us today, and welcome to the review of our fourth-quarter and fiscal-year 2012 results. We are pleased to have several members of our management team here today to discuss our results. Irwin Simon, our Founder, President and Chief Executive Officer; Ira Lamel, Executive Vice President and Chief Financial Officer; John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial US; and in person, Rob Burnett Chief Executive Officer, Hain Daniels Group from the UK.

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 2011 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 Founder, President and CEO. Irwin?

Thank you, Mary, and good afternoon, everybody. And I hope you have had the opportunity to see the two releases that we released at 4.00 PM this afternoon.

Well, first of all, it's our biggest year ever. And it's our biggest net income and operating income year ever. With great pleasure, I will take you through Q4 and our fiscal '12 numbers. So our sales for the quarter, $350.7 million versus $286.8 million, which is up 22.3%. Not included in our numbers is $23 million of discontinued operations, which were ICL and our sandwich business. In regards for our full year, $1.378247 billion. Not included in that number is $74 million -- versus $1.217207 billion a year ago, up 24.3%.

Our gross margin in the quarter, if you take away our acquisition of Daniels and Europe's Best, was basically flat. What a great accomplishment, both for the quarter and the year, 28.2% for the quarter, and 28.8% versus 28.8% for the year. Considering all the input costs, considering all commodities and fuel, that we were able to achieve a flat year-over-year on the quarters and year, excluding the lower acquisitions of gross margins, which we talked about. For the quarter, 26.6%, versus 28.4%. Actually, for the year, 27.8% versus 28.9%

Our operating income, which you heard me say, our biggest ever, our biggest income producing year for the quarter, $36.2 million versus $28.6 million. That's 26.6% versus a year ago. And for the full year, $144.9 million. I guess we can round that to $145 million, versus $111.5 million versus a year ago, up 30% on operating income. So some great accomplishments on our operating income and our gross margin.

EBITDA for the quarter, $45.6 million versus $35.5 million, up 28.4%. And our EBITDA for the year, $179.1 million versus $141.9 million, up 26.2%. So again, great accomplishments on our EBITDA. Our EPS for the quarter --adjusted EPS, $0.47 versus $0.36, up 30.6%. And for the full year, $1.86 versus $1.43, up 30.1%. So some great growth. Our operating free cash, $101.5 million versus $47.2 million. So we doubled our operating free cash.

So let's go back and look at the year. Fiscal '12 was a great year, with many challenges out there from the commodities, from the economy, but again, eating healthy has continued to be on the top of consumers' lists. Our sales growth, 24%. Operating growth -- operating income growth, 30%. Earnings per share, up 30%. Productivity worldwide, over $25 million. We were able to take pricing throughout the year for about 2%. Our market cap grew over $1 billion.

We reduced debt $90 million, up to today, and that's including with the Daniels acquisition. We went ahead last year with an acquisition of Daniels, which was a great acquisition for us in the UK. It was on trend. It was fresh soup, fresh juice, fresh fruit, fresh desserts, hot eating desserts. Still, a lot of those things, we will still bring to the US, especially our fresh soup and some of the fresh juice. With juicing becoming a big part of the consumers' lives today, we see tremendous opportunities there. But it really allowed us to put a real foothold into the UK. And we'll talk more about the UK and its acquisitions in my presentation and Rob's in a little while.

We did a great acquisition in Canada in October, with Europe's Best. It gave the Canadian group a good solid business in the fruit and veg area and with some great growth, and it's really helped our business there. Cully & Sully, which is a fresh soup, fresh meals business based in Ireland, gave us a foothold in Ireland and gave us some new innovation to bring into the UK, and with some new packaging and we are pretty excited about that.

New products -- and I've always said this, new products are the lifeblood of any company, and of course, of ours. We introduced over $60 million of products and over 100 new products this year. So our pipeline of new products and innovation continues to be strong. Hain Pure Protein, which we own 49%, the protein business, which shows you consumers are eating antibiotic-free, organic chicken and turkey. With pink slime that happened out there, consumers moved more and more to eating more turkey and more chicken. Our sales were up 13%. Our pre-tax income was up 51%, and we continue to see great growth in that category.

As I talked on our last call, we would look and always evaluate some of our assets, some of our businesses. And with the acquisition of Daniels, and to reposition the UK, we decided, in our last call, which we announced, that we were going to divest our ICL business, which was a private label of ready-to-eat meals business, which we felt just -- we couldn't take it to the next level. It was not a branded business, and we decided to divest it. We have closed on that deal, have sold it to Green Core, and we feel good about that.

At the same time, we talked about our sandwich business. Some of it was branded, with Daily Bread. And some of it was private label. We have decided to divest that business. We have found a strategic buyer. We have entered into a heads of terms. We expect to close sometime in September. It is accretive to earnings, and it's just not on strategy now, with all that we have going on in the UK.

You know, the US has integrated Sensible Portions, saw good growth in that business, cleaned up the portfolio, and right on trend for healthy snacks, for kids' snacks, and we continue to see that. And we have tremendous growth opportunities in grocery, which John will talk about. Greek Gods, which we acquired two years ago in July -- the Greek yogurt category has grown tremendously. Today, Greek Gods has about a 30%, 33% ACV with tremendous growth, both US, Canada, Europe and UK, and we are pretty excited about that and the opportunities there. Our personal care business, as we have gone out and reformulated our product line, Avalon, to fit within the NSF standards, and we continue to see good double digit growth and a product line that is well-positioned.

In the US, our consumption growth has continued double digits in the most recent quarter, up 14%, which John will talk about. But as you look at other consumer packages goods companies, and you see consumer packaged goods companies volume flat or declining, where is the volume? What are consumers doing? Where are they eating? And again, what shows, when you have 14% consumption, and you see the growth within Supernaturals, Whole Foods, natural food independents, and mass markets, you know the consumer is converting and moving over, and I will talk about it in a little while, more and more to natural foods. We continue to invest in our Asia investment. We continue to see great growth, and we will continue to do that.

So in 2012, we had 11 brands that were up double digits, we had 4 brands that were up high single digits, and we had 11 brands that were up single digits. So, great brand growth. And again, we have tremendous opportunity now, as we have taken over the managing of their GG crackers here in the US, great opportunities in meat-free. Celestial Seasonings has had a great year, both with K-Cups, its energy shots. We are seeing tremendous growth on Terra repackaging on Garden of Eatin'. And one of the most exciting is Earth's Best, with the pouch product, which now have become 20% of Earth's Best's sales, and we continue to see tremendous growth there. And again, with the baby rate down, we are continuously seeing tremendous growth within the Earth's Best category.

If you look, the consumer -- we are moving our product line through more and more types of distribution. And John and Rob will talk about that in Whole Foods and mass market. We really have beefed up our management team, our sales team, Rob and his group within the UK, to lead with his group in Europe, and Beana with her group in Canada. So we've really focused on our people. And with our customers, today, as we've diversified and we've really grown within our customer base, we've put teams in place to really manage our customers. And that's why you are seeing so much growth within our mass market.

Our sales for Canada grew 34%; ex-acquisition, 7%. Our gross margins were up 1.3 bps on apples-to-apples business. With Europe's Best it's down a bit, because margins in that business are a little lower. But Europe's Best has been a great acquisition for the Canadian group. Our Dream business up 6%, our Spectrum business is up 13%. Our Greek Gods business and our Sensible Portions business, one up 171%, the other up 225%. So it shows you when we buy acquisitions or do acquisitions in the US, we are able to transfer them to our Canadian business and they really have been able to do great things with them. Strong growth within our Loblaws chain, Sobeys, Costco, and Target coming to Canada in December, we expect some good growth, there.

In Europe, our Europe business was up 9% -- 9.9%. And that includes the Danival acquisition. It was flat, if you take away acquisitions. And I've got to tell you, all that has happened in Europe and having a flat business over there, our business is profitable. It's not where we would like it to be. But again, we are focused on growth and we are focused on a lot of new areas. We are in the midst of building a new non-dairy and soup plant in Germany, which will be able to give us a lot of efficiencies, a lot of new productivity, and a lot of new products. We will continue Lima, Danival, to really bring some of those products into the US, grow throughout Europe. And we have a big focus on our GG cracker.

So, we announced today that we are acquiring from Premier Foods, a consumer packaged goods business. And with that -- it's Hartley's, Sun-pat, Gales and Robertson. It's about $250 million in sales. Rob will speak more of it in a little while. But our thought, as we look to enter the UK, we now have nine categories which we are in fresh and frozen. If we wanted to go into the consumer and be in package, we really needed a good foothold with great brands. And we think with Hartley's, taking it into kids products, taking it into other fruit products, taking it into fruit snacks, we think Sun-pat with its almond butters, cashew butters, Gales with honey, and our Robertson's product, we have tremendous opportunities.

But taking our intel of a lot of the Hains products there, you know, UK retailers are looking for a lot of US products. It makes us, today, among the top food and beverage companies, the 40 largest in the UK, and we saw great value here with this company. As we looked at acquisitions, we are paying about 6 to 6.5 times EBITDA, before synergies and before the growth that we think we can get out of that. So with that, we just saw some great value and really gave us a foothold to get into the UK in a much bigger way in the consumer packaged goods business.

You know, as you come back and look at US and you look at acquisitions that we have looked at here, and we have looked at a lot, multiples seem to be sometimes in the hemisphere. Multiples in organic food are in the hemisphere a little bit, excluding ours, of course. But if you look at $81 million of new distribution sales that John and his team were able to get this year, which is about $20 million of EBITDA, if we went out to buy that and paid at eight times, it's $160 million. So going out there and just growing distribution ourselves and really focus on it, is what we are going to do. But again, we are out there to really focus on acquisition. And John will take you through how him and his team will build our space out there and grow through distribution.

So if you look at fiscal 2013, and Ira in a little while will take you through our forecast and what our numbers are for 2013. A very interesting thing, as I was going through preparing for today, I was presented with growth, and I came back and I always hear, what happens if the economy turns? What happens if the consumer stops eating healthy? If you can back 48% of consumers buying organic, they are 40 and younger. There's a lot of consumers out there that will continue to buy our products. There's a lot of consumers out there that will build -- we will build a lot of brand equity with. And with social networking today, there's a lot that we can do.

Consumer is eating healthier. New organic categories, consumers are buying 11% more. Consumers have bought $2.5 billion of more organic foods. And again, if we get to 10% of what sales are, $700 billion of total food, there's a big number of organic food to be able to jump into. So, a lot of excitement out there to grow. You know, 50% of Hain products are organic. And almost 98% of our products today are GMO-free. So we have a lot to be able to tell the consumer about our products and how good they are.

So with that, the chapter will close on 2012, and we really feel we have done a lot, accomplished a lot. And in 2013 -- we are two months into it, we like what we see in July and August. And with that, we feel we have a lot of good things in place to really go out there and accomplish what we want to do in 2013.

With that, I will turn it over to Ira, who will take you through our 2012 numbers and will give you our guidance for 2013. Thank you.

Thanks, Irwin, and good afternoon, everyone.

As we said in our press release, all of our full year and fourth-quarter income and EPS numbers from continuing operations are the highest in the Company's history. Net income from continuing operations in the fourth quarter this year was a fourth-quarter record of $35.7 million, compared to $13.7 million in last year's quarter. Earnings per diluted share from continuing operations on a GAAP basis came in at $0.77 in this year's quarter, compared to $0.30 per diluted share in last year's quarter. Adjusted net income was $21.7 million, compared to $16.5 million, improving by 31.8%. Adjusted earnings were $0.47 per diluted share, compared to $0.36 per share in last year's quarter, improving by 30.6%. Our adjustments to net earnings consist of an earnout reduction of $15.5 million, offset by acquisition-related expenses, including integration and restructuring charges of $1.9 million, and the loss from discontinued operations of $12.3 million.

As mentioned in our press release, during the fourth quarter, we decided to dispose of our Daily Bread sandwich operations. Daily Bread, now classified as a discontinued operation, generated a net operating loss in the quarter of $382,000, which was $0.01 per share. Other one-time charges associated with this pending disposal of Daily Bread, reduced earnings by a further $13 million, or $0.28 per diluted share. Along with the UK private-label ready meals business, which generated a net income of $1.1 million in the quarter, net earnings from all the discontinued operations reduced our earnings per diluted share by $0.26.

Net sales from continuing operations in the fourth quarter were $350.8 million, an increase of 22.3%, compared to $286.9 million last year. Foreign currencies negatively impacted sales growth by $4.1 million. We saw a strong increase in sales across all of our segments, coupled with sales contributed by our acquisitions. Sales from continuing operations include our recent acquisitions of Daniels Group, ex- the private label ready meals operation that has been disposed of, and Europe's Best for the full quarter, as well as Cully & Sully for two months of the quarter. Sales of discontinued operations of $23 million are not included in reported net sales for the quarter. Gross profit in the fourth quarter was 26.6% of net sales. Input cost inflation amounted to 3.9% in the fourth quarter this year, measured against last year. Inflation was offset by a better mix of sales at our pre-acquisition operating units, the impact of pricing actions we effected at the beginning of the fiscal year, and productivity improvements.

Our SG&A for the quarter, excluding acquisition-related expenses and integration costs, were 16.3%, compared to 18.4% in last year's fourth quarter. This improvement comes from a combination of the lower SG&A rates we expected at the Hain Daniels Group in the UK, and in Canada, where our Toronto-based G&A base was leveraged across the sales added by Europe's Best. As mentioned in the third quarter, we continued to see the benefits from the integration of the Sensible Portions operations, where we closed its separate back-office in the first quarter of this year, the integration of certain functions in the UK into the Daniels Group operation, and our focus on leveraging our existing G&A base across all of our segments.

Operating income for the quarter from continuing operations was $49.9 million, or 14.2% on a GAAP basis, compared to $28.6 million last year. On an adjusted basis, operating income was $36.2 million this year, increasing 26.6% from $28.6 million last year. With the reduction of contingent consideration increasing our GAAP earnings for the quarter, and not having any associated tax impact, our effective income tax rate from continuing operations was significantly reduced to 21.2% of pre-tax income in the fourth quarter this year, compared to 35.1% last year. Our adjusted effective income tax rate from continuing operations was an expected 31.6% for the fourth quarter, compared to 38.8% last year. The effective rate on adjusted income this quarter was -- as I said, was expected, in order to achieve our estimated full year income tax rate of 34%. The lower rate this year was a result of the change in mix of our worldwide income, principally the result of the inclusion of Daniels, with the lower corporate income tax rate in the United Kingdom.

For the full fiscal year 2012, our net income from continuing operations came in at $94.2 million, compared to $59 million in the prior full year. From continuing operations, we earned $2.05 per diluted share on a GAAP basis this year, versus $1.32 per diluted share last year. Before acquisition-related items and integrations costs, adjusted income from continuing operations was $85.5 million, compared to $63.5 million, improving by 34.7%. And adjusted earnings per share was $1.86 per diluted share, compared to $1.43 per share last year, increasing by 30.1%.

Net sales reached a full-year record of $1.378 billion, an increase of 24.3% compared to last year's $1.109 billion. Foreign currency reduced net sales in the year by $3.3 million. We saw strong increases in net sales across all our segments for the full year, as we did in the fourth quarter. Sales coming from our discontinued operations of $73.8 million for the year are not included in reported net sales.

Gross profit in the full year was 27.8% on a GAAP basis, compared to 28.9% in last year's full-year, and was offset by a favorable trend in our SG&A rate to 17.2%, from 18.8% in the prior year, each as expected, due to the impact of the Daniels, Europe's Best, and Cully & Sully acquisitions. This resulted in operating income for the full fiscal year of $151.5 million, or 11% on a GAAP basis, compared to $111.2 million last year, or 10%, improving by 97 basis points. On an adjusted basis, operating margin improved by 46 basis points, to 10.5% this year.

Depreciation and amortization in this year's quarter was $8.1 million, compared to $6.5 million in the prior-year quarter, with the increase coming principally from this year's acquisitions. For the full year, depreciation and amortization reached $30.5 million, as compared to $24.1 million last year. Stock compensation in the quarter was $2 million, as compared to $1.7 million last year, and was $8.3 million for the year, compared to $9 million last year.

Our balance sheet continues to be a strong one. Our working capital was $246 million, with a current ratio of 2.2 to 1 at June 30. Our stockholders' equity was $964.6 million. Our debt as a percentage of equity is at 40.5%, and debt to total capitalization is now 29.2%. Total debt at the end of the quarter, and of course the end of the year, was $390.6 million, with 38% of our debt carrying interest at a fixed rate and the remaining 62% at floating rates. At the time of our acquisition of Daniels, we drew down $235 million of floating-rate debt under our credit facility. Through June 30, we had repaid $75 million of that debt, and since June 30, an additional $15 million, such that we have now already paid $90 million of the debt borrowed at the time of the Daniels acquisition.

We continue to focus our attention on improving our working capital turnover and generating improved cash flows. For the trailing 12 months through June 30, 2012, operating free cash flow was $101.5 million this year, versus $47.2 million for the prior year. Days sales outstanding was 47. Inventory is at 65 days, and our payables at 44. As a result, our cash conversion cycle has been reduced to 68 days, from -- that's a 12 day decrease, as compared to June 30 a year ago. CapEx amounted to $7.5 million in the quarter, and $20.5 million for the year.

Guidance for 2013. Our net sales guidance for the full fiscal year 2013 is expected to be in the range of $1.6 billion to $1.615 billion. We anticipate earnings per diluted share from continuing operations to come in between $2.10 per share and $2.20 per share. Some of the significant estimates we used in arriving at this guidance include an estimate of consolidated gross profit for the year, which we are expecting to be in the 27.75% to 28% range. Our SG&A rate, as a percent of sales, is estimated to land at about 17.25%, and we have also estimated that our effective annual tax rate will approximate 34%. The last major assumption in our guidance is that our share count will approximate 47 million shares for the year. Our estimates do not include any results of the discontinued operations, or any restructurings or acquisition activity. We estimate that our earnings will continue to be somewhat seasonal, with the second and third quarters being the strongest of our years -- of the year.

We have not included in our guidance the anticipated impact of our just-announced agreement to acquire brands from Premier Foods. We anticipate a closing at the end of October. And for the 8 months from the date of closing at the end of October through the end of fiscal '13, we expect sales to approximate $180 million from that acquisition and earnings to have accretion of $0.25 from that acquisition. Again, those amounts are not included in the guidance we have given you for the full fiscal year.

At this point, I will turn the call over to John.

Thank you, Ira. Good afternoon.

Q4 was a very strong quarter for Hain Celestial US, providing a great finish to FY '12. We had many highlights in the quarter, starting with our Q4 Nielsen all outlets combined, or AOC, consumption growth of 14% as Irwin previously mentioned. This reflects our accelerating consumption momentum in the grocery, mass, and club channels. Our Q4 total consumption was 10%, which was one point higher than the last quarter's growth. Hain Celestial US total consumption reflects the Nielsen AOC results combined with our high single-digit growth in the national channel. Our 10% total growth was driven by gains across the portfolio, including 14 brands with double or high single digit increases.

Our Q4 sales were $242.6 million, up 5.3% versus year-ago. The difference between our 10% total consumption growth and our 5% sales growth reflects lapping $5.2 million in year-ago sales from discontinued low-margin club, private label, and Martha Stewart SKUs, and $4.2 million in year-ago distributor forward buys against last year's July 1 personal care price increase, which we did not repeat this year. Q4 US sales growth, ex these two adjustments, was between 9% and 10%, in line with our 10% total consumption growth.

Also in Q4, our gross profit margin was up 55 bps, despite absorbing 4% in commodity and fuel-driven inflation. We were able to offset this inflation with productivity savings, dairy cost favorability, and last year's price increase. Also, our Q4 SG&A as a percent of sales was down 65 bps, reflecting the sales increase and the synergies realized from consolidating the Sensible Portions business into Melville. All this led to our Q4 operating income of $36.7 million, or 15.1% of sales, which was up 14% and 120 bps, respectively, versus year-ago. We leveraged our top line growth with our gross profit improvement and our SG&A efficiency to drive significantly increased profits.

Finally in Q4, our US inventories were down $2 million versus year-ago, while supporting our sales growth. This increased US inventory turns by 0.2 of a turn versus year-ago. And this inventory leverage, coupled with our accounts payable improvement, was a major driver in the Company's improved cash conversion and operating free cash flow.

Now as we turn to our full year '12 performance, we see our Q4 results topped off another strong year for Hain Celestial US. Our US business model, with our strong portfolio of brands and our focused strategy, enabled us to overcome consumer uncertainty and commodity inflation to deliver FY '12 top line sales of $991.6 million, which was up by 9% versus year-ago, driven by our accelerating consumption growth. We also delivered operating income of $149.8 million, or 15.1% of sales, which was up 15% and 80 bps versus year-ago, respectively, driven by strong top line growth, gross margin expansion, and again, increased SG&A efficiency.

Finally in regard to '12, our increased profitability, along with our improved inventory turns and cash conversion metrics led to a 20-plus percent increase in US operating free cash flow. Now as I've said before, on previous calls, we continue to be very bullish about our US business. We continue to see strong momentum across the business. And we believe it is sustainable, based on the latest metrics from the four key factors I've discussed on previous calls. The first factor is our continued US consumption gains. Q4 was our 10th consecutive quarter of consumption growth. Importantly, our consumption growth is accelerating, as demonstrated by our Q4 total and Nielsen AOC consumption numbers.

The second factor is our demonstrated ability to offset input inflation. Hain Celestial US offset 5.1% COGS inflation in FY '12, with productivity savings and pricing. Our productivity initiatives generated $20 million in FY '12 savings. We have a full menu of projects to continue to drive savings in FY '13, including in-house production of our rapidly growing pouch business. We also saw full recognition of our FY '12 price increase in the second half of '12, just as we said we would. I want to let you know that we announced a FY '13, 2% to 3% price increase on grocery, snacks, and tea, that will be effective on October 1. We are confident we will see full recognition of this increase in the second half of '13.

The third reason we feel bullish as we walk into '13, is the strong results from our US sales force reorganization. For the third consecutive quarter, we saw a quantifiable benefit from our US sales reorg. Specifically, our Q4 US Nielsen distribution trend improved 160 basis points for the latest 12 weeks, versus our 52-week trend. This improvement was again across our entire product line, not just our core SKUs. Additionally, our strong Nielsen AOC consumption growth of 14% indicates we are making great progress penetrating channels and customers where we had previously struggled or had a limited presence. Our eight new customer teams, at accounts like Whole Foods, Kroger, Wal-Mart, are growing their business at two times the rate of all the other accounts. And those all other accounts are growing, as well. Finally, filling in distribution whitespace will continue to drive our future growth. A quick fact for your consideration. Increasing our top 50 -- that's our top 50 US SKUs from 36% to 50% ACB distribution, is worth over $200 million in annual retail sales. Our sales reorg will help us realize this opportunity.

The final reason we are bullish about our FY '13 prospects is our continued positive response to our innovation. FY '12 US new product sales totaled a record $40 million, up significantly versus year-ago, led by $20 million in pouch product sales. And in FY '13, we will introduce over 100 new products, leveraging the hottest emerging trends in grocery, snacks, beverages, refrigerated and personal care. These products have all been consumer-tested, and will continue to drive distribution and consumption growth for Hain Celestial US.

So to close, Q4 and FY '12 were strong for Hain Celestial US, highlighted by 9% top line growth for the year, accelerating consumption momentum, margin expansion, 15% operating income growth, and over 20% plus operating free cash flow. We are bullish about FY '13, given our consumption trends, our demonstrated ability to offset COGS inflation, our US sales force reorganization results, our strong innovation pipeline, and the momentum on all of our businesses.

Now, I will turn the call over to Rob Burnett.

Thanks, John. Good afternoon, everyone.

Overall, the UK had a solid fourth quarter, with annualized like-for-like sales up almost 6%, and 400% year-on-year with the effect of the Daniel's and Cully & Sully acquisitions. Highlights in sales for the quarter included New Covent Garden soup up 20%, Linda McCartney frozen meat-free brand up 10%, and prepared fruit up 13%. Our UK gross margin mix improved, thanks to the higher soup sales and lower input costs from drinks in the period. Our SG&A mix was also significantly lower than last year.

The fourth quarter has seen significant progress on a number of strategic revenue synergies that commenced following the Daniel's acquisition in late October. We have confirmed our first listings with a major retailer for UK-purchased Greek Gods yogurt, which we expect to commence in November this year. And preparation for the launch of Linda McCartney brand inter-chilled are at an advanced stage, and we've received our first listings from multiple retailers. This exciting project demonstrates the extended competencies of the Hain Daniels Group following the acquisition last year, as the products for this range will come from three different UK locations. Our New Covent Garden has launched, successfully in the fourth quarter, fresh bowls, which is in test, at the moment, in convenience stores and expected to be rolled out in the autumn. This innovative product utilizes soup side for the base product and our fresh innovations center in Luton to finish the product off.

On a full-year basis, sales were up 400%, of course, due to the acquisitions of Daniels and Cully & Sully. Like-for-like sales were up almost 5%. And Linda McCartney frozen meat-free was the star performer in our branded portfolio, up over 20%. The acquisitions also improved significantly the gross margin and SG&A ratios for UK and Ireland. The Cully & Sully business acquired in Q3 continues to post impressive like-for-likes in the soup category, and has overtaken its nearest competitor in Ireland to be the number one brand in the category. Preparations are underway for a major investment in our Fakenham site, which we expect to complete in May 2013, adding circa 150 new full-time jobs for the facility and approximately $40 million in annualized new revenue in year one.

Now, announcement today of the acquisition of market-leading grocery brands from Premier really establishes the Hain Daniels business in the UK as a scale player across all sectors; fresh, chilled, frozen, and now ambient grocery. Our leading portfolio of brands in the UK include -- the number one fresh soup in the UK, New Covent Garden; the number one fresh soup in Ireland, Cully & Sully; the number one freshly squeezed juice brand in the UK, Johnson's; the number one peanut butter in the UK, Sun-Pat; the number one jelly and fruit brand in the UK, Hartley's; the number one jam in the UK, Hartley's; number one marmalade in the UK, Robertson's; number two honey brand in the UK, Gale's; and number two meat-free brand in the UK, Linda McCartney. A very impressive portfolio of brand leaders.

The acquisition comes with a real great portfolio of brand leaders that have continued to prosper, despite being starved of investment for a number of years, from their previous owner. The business has real category scale in spreads and desserts, which can be further strengthened with a focused resource and dedicated team. We believe we can modernize the portfolio and make it more relevant today with a relatively uncomplicated new product development. We believe the key brands of Hartley's and Sun-Pat have the capacity to stretch into new and adjacent categories. The acquisition gives us a scale modeling growth rate, which we expect to expand by introducing complementary Hain US grocery brands, such as MaraNatha, Earth's Best, Rice Dream, and many more. The site, in Cambridgeshire, has capacity and a free footprint to enable us to develop those things ourselves, or through outsourcing.

We also expect significant procurement leverage with this deal. Now, we are acquiring a scale consolidated brand leading business, which will be accretive from day one, and one that helps position the enlarged group into being the number one branded provider of fruit and veggie solutions for the widest possible range of consumption occasions for all consumer groups in the UK.

Today, we have also announced the completion of a sale of our private label business to Green Core, and announced a letter of intent to sell the Daily Bread brand. We intend to transform our sandwich site into our high care fresh innovation center, to deliver some of these innovations. These two divestitures further refine our portfolio in the UK around branded fruit and veggie solutions, and improves the mix of brand within our portfolio from 40% of sales to well over 50%.

Now we enter the new financial year with considerable confidence. The integration of Daniels and Hain has brought significant new revenue synergies, which will start to play out in fiscal '13. Cully & Sully offer a new dimension to trading in Ireland and beyond, and the acquisition announced today gives the UK and Ireland group real scale across all food formats. And perhaps more importantly, a real identity focus and market-leading position in branded fruit and veggie solutions, helping to enhance the group's healthy eating proposition.

Thank you.

Operator, any questions?

( Operator Instructions)

Greg Badishkanian, Citigroup.

Thanks. Good quarter and congrats on the accretive acquisition.

Thank you, Greg.

Just two questions, really. The first is, in terms of your sales growth, your consumption, it looks like consumption accelerated. What do you think drove it? Are you seeing any big change in fiscal -- your current fiscal first quarter, to date? Or is it pretty consistent?

So, number one, Greg, I think, as I said before, there are just more and more consumers buying more and more natural, organic products. And with distribution gains that we have been making, when you have more and more products available and more and more outlets, that's what's driving the growth number and driving consumption. I think I mentioned it -- I go to Portland, Maine, outside, and I've been going there for five or seven years. And each year, I go to visit a major mass-market up there. This year, I was there and I just couldn't believe the amount of products that we had in that store. The consumer's demand, number one. Because you can get distribution and the consumer is not buying it, it's staying on the shelf. So, consumer demand and increased distribution is the key to it. They say August, lazy days of summer, we are not seeing the lazy days of summer.

Right. Good.

Then, with respect to the acquisition, I guess it was -- I believe it was $0.25 accretive for 2013. Would the run rate -- if that's 8 months, do we just do the math to get to a 12-month annual period, or would 2014 be more accretive? And what are you assuming to get to that $0.25 accretion, in terms of whether it's sales, or margin improvement, or any assumptions in that?

So, 2000 -- as we said, $0.25 -- around $0.25 accretive for 2008 -- 2013. Boy, I'm going backwards. And with that, that does not include any synergies, integration costs that we'll have. We are spending, as you heard Rob say before, these brands have been starved for marketing dollars. Going into 2014, we think it will be additionally accretive, as we expand distribution. There's no new products in 2013. We will have a slew of new products -- a slew of innovation coming right behind this, a lot of synergies. And I think complementary to our current product line. I don't think you can just take the $0.25 and add four more months to it and say that's what the number's going to be for 2014.

Right. Great. Congrats again.

Thank you, Greg.

Scott Mushkin, Jefferies.

Hello, guys. How are you doing?

We're good.

So, the 200 -- I have a couple clarifications. In the press release, it's says $250 million of revenues. Is that pounds, or is that dollars?

That's dollars, Scott.

That's dollars. Because then the rest of it is in pounds, correct?

Well, we gave the acquisition cost in pounds, because we don't know what currencies will do between now and closing. But the dollars, if we were to incorporate the full year, that's what it would've been.

Great. Thank you, Ira.

And then, I think, Irwin, in your prepared remarks you talked about 6 to 6.5 EBITDA before synergies. Were you referring to this acquisition?

Yes.

Okay. That's good.

And you guys went through a good rundown of where the brands stand in the UK, number one here. And a lot of number one's were rattled off. Why has Premier Foods -- this is not part of what they call their premier brands -- sp why have these brands been neglected? That's question number one.

And then number two, if we think about Hain and its growth here in the US, Hain Celestial, it's been on the back of natural and organic. How do these brands fit into that kind of growth and how is natural and organic positioned in the UK in branded ambient grocery? And where do you think that goes over time?

So number one, Premier Foods is going through a major deleveraging of its balance sheet. And it's been selling off assets and have focused on key categories. In discussions, this was a business they would love to keep, because it is very profitable. There's growth and some significant brands. But it's about, they are ultimately -- key strategy is in survival. So that's why they decided to sell it.

With that, from a standpoint -- as we looked at the UK and our overall Hain strategy is, how do we grow our business with 50% within the US and 50% was outside the US? And we feel from a retailers, we feel from food, we feel from health, that the UK is a market that we want to blueprint what Hain is in the US, and be the largest manufacturer and marketer of healthier foods. We feel we have that today with refrigerated, with New Covent Garden, with Johnson's, with our desserts, with our fresh fruit, with our Linda McCartney -- to really get into the packaged goods side of the business.

And as we've tried, Scott, to take our products, today, whether it was Terra Chips, whether it was Dream -- and we add Rice Dream and Almond Dream in there, and we do about 6 or 7 million pounds. We do sell a lot of Lima products through Whole Foods. But really to move into the Tescos and the Sansbury's, we needed well-known brands there were already in the UK. And if we could buy some brands that were over 100 years old, and really clean up these brands and take a lot of our intel, that we really could create a good consumer packaged good business.

Now, in the UK, organic is not as important as the US But clean ingredients, as we know, all products sold in the UK are GMO-free. What they are looking for, today, in the UK, are healthier products, gluten-free products, more and more natural products. Matter of fact, Tesco has gone ahead and put in an American branded product line in a lot of its stores today, as they've copied some of the Fresh and Easy concept here in the US.

So we feel Sunpak, we are in nut butters -- it's been a big growth business for us. We have a great formula for growing our nut butter business. We think honey is the natural sweetener. We think honey can be expanded into a lot of different products.

We feel with jam and marmalade are a big part of the British consumer's breakfast eating habits. We think adding products to it, we think doing a lot in kid's products, because it's base fruit. We have pouches today in Hain, and doing a lot of pouch products. We really believe Hartley's could be our baby food product co-branded with Earth's Best. Instead of walking into the UK and saying, here we are with the Earth's Best, when you have a strong brands like Hip, Ella's, and that already there. So the base of the business is fruit and veg. It has tremendous brand equity.

You heard Rob say, number one and two in so many categories. With that, we really feel a base business of $250 million, that -- and all of a sudden, we've now become the 40th largest food vendor -- manufacturer in the UK, it really gives us a big opportunity to bring our healthy products in. I mean, we have tried to get into the UK with Terra Chips. We've tried to get in. We can get in, but it's really small.

Rob, anything you want to add to that?

I think it gives us a proposition score in the UK as being the largest fruit and veg provider. You know, there's quite a lot of the products in the portfolio that are low-calorie. This quite a lot of (Inaudible) and they did not have the money to invest, to launch, making the products more fruit, one a day, two of your five a day. They have been starved of investment. We think we can unlock that, and then add some volume from our other businesses to create new category opportunities, alongside the big brands of Hartley's. And Hartley is over a 40 million pound brand. It's something that's well respected by families and children. We think it's a great opportunity for a master brand in many different fruit and snack categories.

So Scott, coming back, we have strong brands. We've got good-sized. We've got good positioning in retailers. We have a tremendous amount of synergies with our existing business, and that's why we sold our sandwich business. That's why we sold our ready-to-eat meals private label business. You know, today, 65% to 70% of our business will be branded business in the UK. And if we wanted to go into the UK with what we have here, this was the way to do it, to buy some of the scale. Because there's no natural and organic foods over there of scale to really get into the UK. We think at 6, 6, 65 times EBITDA, real good value.

That was a fantastic explanation. I am going to yield there. I have so many questions, but I know this call is going a long time. So I'm just going to yield and maybe take some more off-line.

Thanks, guys. I really appreciate the thoroughness.

Thank you.

Ed Aaron, RBC Capital Markets.

Hello, everybody, and congratulations from me, as well.

Thank you, Ed.

To just kind of drill into the UK a little bit more, the $0.25 of accretion, does that include the accretion that you were already planning on getting from the Daniels deal? Or is that incremental to those synergies?

That's incremental. The accretion from Daniels is included in our 2013 guidance. The $0.25 accretion from this transaction is not.

Okay. Ira, can you address the earnout reduction on Daniels? I guess it would seem to imply that maybe it hasn't come and gone as well as might have been planned or accrued for up front? Can you help me understand that?

Yes. It's not that it hasn't gone well, It's gone very well. But, the earnout was based upon the plan that was presented to us by the seller, Sachs. We, of course, put that up as a liability, based on the accounting rules. But it was discounted on probability and normal net present value discounts. What's happened is there have just been some changes in the business that we have affected, that the market has affected. And we don't see, going forward, that they are really going to hit that earnout. So we have evaluated it, and we have taken that liability down. Now of course, we don't view it as part of core earnings. That's why we have adjusted earnings of 47, rather than including that in what we have tried to explain our operating income to be.

Thanks. And then, just one last one. I guess maybe kind of a bigger picture question.

Buying businesses at a multiple or half of where you are trading it, that's good for your shareholders, as long as it's not a (Inaudible) quality business. As I talk to some people about the story, one of the concerns that sometimes you hear is that maybe you get what you pay for, and there are some pushback about whether the quality of the assets that you are maybe buying in the UK -- is it as good as what people have come to expect from a good natural organic asset in the US.

Irwin, I was hoping you could address that at a high level. Thanks.

So from a standpoint, Ed, going back, you get what you pay for. On the other hand, at the same time, when you overpay, you get what you pay for, too. Okay? You know, I come back and I think from a Daniels standpoint, where we are today, at the time -- we probably paid about nine times with synergies and growth. Today, it's down to about seven times. We think there's a lot more value, there.

At the same time, buying at 6.5, it is strong brands. And I come back and say this, here, Ed, brands, brands, brands, brands. They are not going away. There are brands that I think, that really need some spending, some focus, and they are brands where the core is fruit and veg, which is the base of our business. If we really want to get into the UK, we've got to buy great brands.

We go into the UK and start from scratch, and we saw that with our sandwich business, where we went in there with private label. We had a brand. We had a lot of competition in that area. We weren't one or two. We got our heads handed to us, in some places.

Here, we have a good team on the ground. We have, today, we are a major player. I think we brought an asset at great value and great categories. And it's not like we bought a brand, where if something happened with Hartley's, that's your only eggs in the basket. Again, Ed, we have proved it here. We bought MaraNantha and we have almost tripled that business, okay? The honey business is a big part of the UK consumers habit. So are jams and jellies, which are a big opportunity for kids' products.

So, I think it's taking brands, taking our innovation, taking our health and wellness strategy, and capitalizing upon it. If we were here just to buy it for the sake of buying it, that's one thing. But if we are here to buy it, modernize it, and help take our old UK business to a whole new level, I think that's where that is unique and exciting for us.

Thanks. I will pass it on. Thank you.

Thank you.

Andrew Wolf, BB&T Capital Markets.

Good afternoon, and congratulations on certainly ending the year with a bang.

On to the Hartley's brand, to piggyback on what the last couple of guys are talking about. Help us think about -- I was thinking, as I was waiting to ask you some questions, what brands in your Hain's portfolio may be needed kind of a repositioning? The one that came to mind for me was Health Valley, with some better ingredients, freshen up the packaging and other things. Is that a good analogy to what you think -- I think Rob was talking about with Hartley's? More fruit and that kind of thing? Sort of an ingredient upgrade? Is it also marketing upgrade, packaging, or is it really a repositioning, to really -- if you are going to extract greater value with Hartley's, and get consumption and velocity up?

I think it's a number of these things. Hartley's, itself, its almost -- it's 92 -- $95 million brand. It's a very, very scale brand at present. But it's really had no investment. And when we say no investment, I mean $0 for over five years. And it's still maintained number one position in jams and fruit and jellies.

Rob, sorry to cut you off. Does that mean brand innovation investment? It certainly doesn't mean marketing dollars?

It means marketing dollars, zero. It's coming from a business that has had -- this business has done extraordinarily well over the last couple of years. Of course, the overall group has not. It is taking those businesses that have been very, very much cash driven, taking that back to center, and not reinvested in certain businesses. It's almost $100 million of Hartley's on its own. It's had no marketing dollars, zero marketing dollars. And it's still got a phenomenal brand equity. We have done quite a lot of due diligence, as you can imagine, into the brand equity. It's very, very strong, particularly with young families, children, and even, 65 plus'ers.

We think there's a lot we can do in the base business just by communicating the benefits of the brand. It's called the best of British. It's been in Britain -- it's been a brand leader in Britain for over 100 years. But, it's got a long, long way to go and stretch. It's still got -- as I mentioned on the pipeline -- products that can be more of one of your five-a-day, two of your five-a-day. They've got some very strong low-calorie products that have been supported by dieting groups in the UK. And they have got quite a lot of innovation in the jam category that they really haven't had the money to do. It's a whole mixture of things, brand stretch, investing in the base brand, getting people to understand the categories more, investing in the categories, and having a dedicated resource team, which this business has not had for a number of years now.

Okay.

I think the intel that we have in new products from the US that we can take to the UK, and market under the Hartley's brand, where we had to go market under Health Valley and create a brand from scratch, the dollars that we would have to spend, and the time, would be very difficult and very costly.

And by the way, you mentioned Health Valley. Health Valley, this year, with repositioning, repackaging, is up 36% for the year. The same with Garden of Eatin'. The new repackaging -- I'm sorry, for the quarter -- and the same with Garden of Eatin', up 26% for the quarter, with the new packaging and new products. So, new packaging and repositioning and spending on it is very important. And we have a full plan for that.

Okay. That's really helpful.

The other part of the UK question I would like to ask is, I think you mentioned Greek Gods is going to gain distribution being produced over there. Just a sense of how broadly that distribution is going to be. Is it into the mass market, the Tesco's and the like? And then, I think Earth's Best and MaraNantha specifically were mentioned, and maybe another brand. Are those very likely, or is that more hypothetical, would make sense to piggyback on the Hartley's acquisition?

Well, first with Greek Gods, we chose Greek Gods as our first venture with the US brands, because it obviously is doing fantastically well here in the US and Canada. But it's also a refrigerated brand, which is our core area of operation. What we have done is we've taken the Hain model. We've not invested in assets. We've got a fantastic cold packer. And we're going to launch with our largest customer in the UK later in the fall, and give them a three or four month exclusivity, look how it's doing, and then get ready for a full national launch in the spring. That trial in our biggest customer will still cover 15% to 20% of the UK population. It's a significant trial across all their stores.

Is Greek yogurt a hot category in the UK, like it is here?

It is. The yogurt category overall in the UK is very, very large. It's very well established. And Greek is the highest growth area.

And Andy, in regards to Earth's Best and MaraNantha. We had tried to launch them in the UK as a stand-alone. There's many baby products there today. We have thought about co-branding it, Earth's Best Hartley's, or MaraNantha Sunpak wit our nut butters, and that would be our way to get into the UK and that market. Or just take our cashew almonds butters and expand it. Right now, it's only peanut butter they sell. They don't sell any almond butters, cashew butters or anything else. We saw the explosion of pouches here in the US, and putting Hartley's into a kids product with a pouch which is fruit, we think there's tremendous opportunity there. Whether we call Earth's Best Hartley's, we are not sure yet. But that's things we are going to look at.

Great. Just one last question, coming back to the US It's pretty high level. But I think it's fairly topical.

You mentioned 98% of your product -- of Hain's product is GMO-free. Assuming 100% everywhere but the US, it's still a pretty high number in the US, over 95%, I think. So California's proposition 37 is on the ballot. Some polls that I read suggest it's probably going to pass, or could pass. What is -- and I know, the Grocery Manufacturers Association of America is strongly opposed to that. I just want to ask you a business question, not a political question. Business wise, with your strong GMO positioning, what does that mean for the brand? Is that a major competitive advantage for Hain in that marketplace? Just from a cost perspective, how do you view this, purely businesswise, hypothetically, if the proposition passes?

Andy, the thing is, Hain Celestial has published and we've supported GMO's early on. No GMO, sorry. It's been a long couple of days.

You know, in essence, if it passes, it's what we have been saying all along. I think there will be a lot of fallout across the rest of the US. I think there are some changes to the proposition that will have to happen. But, if we didn't believe in it, we wouldn't have 98% of our product today that are GMO-free.

Yes. Okay. That's great. I will also pass it on. Congratulations, again, on such an incredible year.

Thank you.

You're welcome.

Bill Chappell, SunTrust.

Hello, everybody. This is Sara Miller on for Bill.

Ira, a question for you is, you talked about, when you ran through some of the financials, what the balance sheet looks like at the end of the quarter and the end of the fiscal year. I'm just wondering with the disclosure of the other sale and now this acquisition, what is the shape of the balance sheet after the transactions? What is your capacity and your appetite for more deals? So could you give us a little bit more color around that?

Sure. The balance sheet that's included in the press release identifies the assets held for sale. So you can look at that balance sheet, without those assets, and make the appropriate assumption that that is what we look like. So, the assets aren't very significant on those businesses. And we will be just as strong without them on the balance sheet, actually stronger than with them.

As far as our leverage is concerned, and our capacity for greater acquisitions, we are only leveraged at about 2.1 right now under our credit facility. And we have the capacity to continue to fund acquisitions. And there's a very heavy taste in the credit market for Hain to move it's credit facility availability to higher levels. So we are being chased on that. Lots of room for more deals.

Then, I guess follow-up question on that. What is the M&A market looking like now? Are you still going to focus on the UK? Or now that this deal is done, what is the environment looking like and what kind of stuff are you looking into?

So, you heard what I said when I was going through my presentation. Last year, in 2012, John and his team with $81 million in new distribution contributed $20 million of EBITDA. That did cost something, but it's not like we had to go out and pay 8, 9, 10 times.

So number one, our appetite is to grow our business, organically, gain new distribution. But if there is good, smart, strategic acquisitions out there, we are going to buy it. And like Ed Aaron said before, if you are trading at 9, 10 times EBITDA, and you can buy 5, 6 times. Unfortunately, we have a lot of brands that we can turn into bunnies and we can turn into rabbits within ourselves to go out and pay those kind of multiples. So, we are not going to go out and pay the crazy multiples. We would rather go out and buy great assets, great brands, like we did from Premiere at 6, 6.5 times, and really put our marketing innovation, our distribution clout and take them to a whole other level.

And we are going to look at acquisitions abroad. We are going to look at UK and maybe in Australia, Asia. But you know, the US, for us, is where our major market is. We think we did a great acquisition in Canada, with Europe's Best. So, we are definitely going to be opportunistic. As Ira said, we have the balance sheet to go out there and do it. On the other hand, if we don't do another acquisition this year, we are in great shape.

Okay. Great. Thanks so much, guys, and congratulations.

We have time for just a few more questions. Andrew Lazar, Barclay.

Good afternoon, everybody.

Hello, Andrew.

Just two things. First would be on the core business and the guidance, ex- the most recently announced acquisition of 210 to 220. That is a bit higher, quite a bit higher than the consensus for fiscal 2013 had stood. Just trying to get a sense of where we on the Street might have potentially been too conservative if you come in at the high end of that range, or what you are seeing that gives you that level of visibility. Is it the sales piece was roughly in line with where we had it modeled? So my sense is it's more on the cost side. Maybe it's your visibility into where your input costs are locked in for part of the year? Perhaps you can address that first.

Andrew, let's come back for a second. Again, number one, everything disseminates from sales, okay? So, we feel good about our organic growth. We feel good about the consumer continuously buying healthier natural, organic products. You heard what John took you through, in regards to operation whitespace and his growth with his retailers. At the same time, we feel good about that in Canada. We really feel good that we can develop new products like we have done in the past.

Now that we will have a full year of the UK, Daniels, we will not have our sandwich business to focus on. And we feel there is tremendous growth opportunities with Linda McCartney Fresh, our yogurt business. We have had some challenges last year in Europe with Danival. We think we've got a lot of that straightened out. Our GG cracker business, and taking it back to the US and a lot of great things happening from there.

So we have a lot of things lined up throughout 2012, Andrew. We are in the midst of converting our personal care product line to all new ingredients. Let me tell you something. You just had Johnson & Johnson come out and say, we are going to take formaldehyde out of our products by 2013, 2014. There absolutely never has been formaldehyde in any one of our products, but just what we are seeing on calls and demand on our personal care products. Like, oh my God, you are really telling me that that was in our products?

So again, it comes back from our growth, our distribution. I really think we have our hands around procurement and purchasing. Yes, there is some out there risk from commodities. You know, our guys have been buying natural organic ingredients a long time. They have really got their heads screwed on right where they are buying it, where their getting it, and how they're sourcing. So, I think we really have a good plan in place. We feel good about executing.

On the other hand, Whole Foods will open up 50 more stores. More and more Wal-Marts and Targets are bringing in more and more natural products. More and more products are wanted by Tesco and Sainsbury and Whitgroves. So, that's why we are feeling very, very, very good going into this year.

That's helpful. Just a quick one would be perhaps for Rob.

I'm going to say, given all that you've done in the UK over the past two years and such, I must admit I probably lost a little bit track of where you are in the overall UK business with respect to your capacity situation. I don't know what it looks like at the [Hispen] facility, but I seem to remember Premiere always had an issue with excess capacity, and that perhaps Hain on your own core UK business, you had some there, as well. I'm just trying to get a sense on a pro forma basis for all the businesses that you now own or will own in the UK, is there any more significant opportunity to get the overall supply chain in a much better place, true up capacity and be much more consistent with where your demand is. What are the opportunities there? I must admit, I've lost track of it.

Certainly. Particularly, the new acquisition first, [Histen], has got quite a bit of capacity. It's also got an interesting site within the boundaries that they are not using. So we are taking a good look at that to see whether we can convert it into some NPD, or perhaps take some snacks back from some co-packers, et cetera. So the [Histen] business is well invested and got quite a little bit of free capacity.

Across the range of our businesses in the UK, I mentioned in the release that we are building some capacity into [Feakenham] plant to facilitate a new business that is coming in there in2013. That's going to free that site up for a number of years. We still have got capacity in our core businesses in soup and drinks. We have not got a lot of capacity in fruit, but the reorganization of Lutin site, which now will exit sandwiches, will enable that site to free up in fruit, salads, and some high care innovation products. We feel pretty good about the footprint at the moment. We are not anticipating any significant spend to enable us to get the growth that we need, other than the one big CapEx at [Feakingham], which is going to bring in this $40 million of new revenue in 2013.

Andrew, being your own manufacturer in the UK is important. Retailers come back and say, if you are not you're own manufacture and you just have our brand, why do I need your brand, because I'm paying more for it. Or, I can anywhere else, because my brand is the strongest. So having a factory there -- and the UK has some of the most of our factories. We think our facility that we are acquiring can really do a lot of the Hain ambient products that either we are shipping over there now, and bring it into the plant.

Thanks for that. I appreciate it.

By the way, Premiere did invest heavily into that facility. That was one of the facilities that they consolidated as they acquired it, and really have focused on it and spent a lot of money in that plant. There was no shortage of capital put into that facility.

Got it. Thank you.

You're welcome. Thank you.

David Palmer, UBS.

This is actually [Mineo] filling in for Dave. First of all, congratulations on the quarter, of course. Clearly, you have had some great momentum here, with solid consumption and like-to-like growth. Given these trends, this momentum, how are you thinking about the reinvestment of incremental dollars? You have mentioned sales realignment. But do you perhaps see potential upside or improving ROI from increased advertising or marketing, for example?

Listen, I think if we come back, and you heard what I said, as we go after the younger consumer and the way we are marketing to the consumer today, through social media, through our networks, and a big part of our growth that came, whether it was our key business, a big part of our growth with Earth's Best is being out there in front of the consumer. It doesn't mean we have got to be advertising on the Olympics or the Super Bowl. It means we've got to be reminding our consumers who are buying healthier products all the time. So from the standpoint of that, our consumers are educated. Our consumers are expecting value. And our consumers read labels. So telling the consumer about our products is something very important. That is something that we will continuously heavily invest in. We are spending a lot more money in the US, this year, on consumer advertising. We will continue to spend a lot more money in the UK, to take these brands that we are acquiring. We are spending a lot of money this year on New Covent Gardens, as the number one fresh soup, to take it to a whole other level.

So yes, there is a big investment to the consumer on our part. You can't starve brands and we've seen what happens when you starve brands.

Great. Thank you.

You're welcome.

( Operator Instructions)

Eric Larson, CL King.

Hello?

Operator, I think he has dropped off. Can we take the next question?

Sean Naughton, Piper Jaffray.

Hello, guys, and congrats on the US operating margin expansion. Very solid execution there.

Thank you.

Just a couple of quick questions. One, Irwin, you have such great visibility across all the different channels. Maybe just giving us a little bit of a deeper look in that independent, natural, and organic space. Are you seeing some of the nice consumption trends there that you are seeing across the rest of the channels?

Secondly, maybe just your outlook, as you look into FY 2013, given some of the crop conditions we are hearing about today. What is your assumption around inflation for FY 2013? How did retailers react to this October 1 price increase? Thank you.

The independents -- I'm going to let John -- he's got great visibility, too. John, just on the independents, just touch base on that and then I will come back to commodities.

Actually in terms of the natural independents, we have actually even their momentum as a channel accelerate. And actually, where they were previously dragging behind the rest of the categories, they are now growing as quickly as anybody in natural and organic.

That's interesting, because basically, a lot of the independents grew with vitamins. They were more perceived as a pill shop. It is really good to see the independent back growing again, because they were flat, if not down, for many, many years. We continue to see good growth among the independents. And a lot of new independent stores continuously opening up.

In regards to commodities, I think from a standpoint -- the team has gone out. It has bought out on commodities and have protected ourselves. With that, we have to make sure we absolutely have delivery in that. I come back and I say this, here, Sean. I think, yes, there is some concern out there from commodities. We have to take pricing and we will get pricing. We had a situation where we got into a major retailer and we got major pricing, because they saw what the commodity went up.

At the end of the day, I think you are going to see commodities back off. I think there's probably a dollar or two a bushel speculation in corn and soybean. I think you're going to see demand fall off. Yes, we did have drought. But I think we are going to be able to source a lot of commodities all over the world.

And that's a big factor within Hain today. Jim Myers and his group had a worldwide procurement meeting in July for all our divisions to start procuring from. Now, with Daniels, with Europe's Best in Canada, with all our facilities in the US, and now with the acquisition, with the amount of companies we have buying fruits and vegetables and commodities, today, it just gives us the ability to buy so much better and to by all over the world. We are buying in Africa. We are buying in South America. Where before, we just weren't able to do that.

So with that, yes, we are all in the same boat. The only difference is we are out there buying a lot more organic than anybody else and we are out there buying GMO-free. We have such experienced teams that I will say it's not going to be a problem. But, we are definitely on top of it.

Okay. It looks like you guys are looking for gross margin expansion next year. I guess the way to think about that is you are looking to offset whatever inflation does come through the channel with continued productivity gains and then sales mix and maybe some pricing actions, is that the right way to think about it?

Exactly. You know, we took a price increase in July. We will not see the full effect of that, probably until next March or April. But, productivity -- I was going through some things today where we've had a 5% reduction on packaging and need to continue to focus on those things, and efficiencies, consolidate brands, consolidate some of our manufacturing. So that is a big thing that we have in place here that we will continue to do.

Great. Best of luck in FY 2013.

Thank you.

Doug Thomas, JT Equity.

It was close enough.

I sent Mary an e-mail. All I had was a one-word line to my client that just said, wow. I mean, it was a heck of the year. You guys should all be congratulated. I appreciate the effort.

A lot of people would have cut and run from the UK, Irwin, and you didn't. You've figured out how to make it work. I think that's also a significant accomplishment. Maybe you could talk a little bit about how that all played out, looking back at the last couple of years. Because clearly that has is going to be a big success for you.

The second question I have really is for John. It has to do with one of the last questions. And that has to do with being on the tip of the iceberg, in terms of these large national accounts where you have teams in place. I am wondering what the real marketing opportunity -- what the leverage -- Irwin, you talked about leverage. We've got these loyalty cards and these tailored marketing programs for their customers. I am wondering if you guys will be able to benefit from all of that.

So number one, thank you, Doug for the wow. I really appreciate that. You've been here when there was a lot of boo's, too. It's great to get wow's. Again, arrogance and business don't get along, so we don't take those wows and fly high in the cloud. We know there's -- those that live in glass houses, there's a lot of rocks that can be thrown at you.

This was the case in the UK. We had a lot of investors and a lot of analysts say, get out of the UK and run away from it. There were times I thought the same thing. But, a couple big things that I come back and say in the UK. I really believe we found the right mix of brands. I really believe we found the right categories. I know we have found a great management team, and we've had some trip up with the management team in running these businesses.

Last, but not least, in going out and looking at the Premiere business, we went back and forth many, many times and said is it on strategy? Is it perfect? I think what happens, sometimes, there's not the perfect fit. There's not the perfect life. Is not the perfect wife. There's not the perfect product. With that, if we don't look for perfection, we'd never be able to do anything. I think, what we come back and look at, what would be out there to really take our UK business. UK has some of the best retailers in the world, in regards to Tesco and White Rose and Stainsbury.

Let me tell you something, there's a hell of a lot we've learned in the US from our UK operations. There's a lot of innovation that we will take back from there and vice versa. There's a lot of innovation that our UK retailers are looking from the US to take back there. It will become a big part of our business. I think we are getting in at the right price at the right time when everybody is down on Europe or the UK. But, it's going to come back. And you know, we will be there.

In regards to the US, John, I think John and the team has done a great job in building teams. And when you put teams in place, the results will show it, John.

Look. I think, you asked in terms of support with these accounts and being able to get enough scale to take advantage of some of the programming with the accounts, and as Irwin talked about our increased marketing spend, we are definitely increasing our investment with our key account, to drive consumption at these accounts. It's the most targeted way we can get our business distribution and our consumption growth.

I mean, it seems to me, John, clearly, the type of demographics your customer base should be -- I don't know what the word I'm looking for is -- they should be able to be turned on by the power of these custom marketing efforts, especially as it relates to the brands that you guys have.

Absolutely. These are brands that they actually want to be merchandising in their different vehicles, because they bring customers in from all different channels.

I would also think, and again, I don't want to -- my phone's almost dying -- but I would also wonder, Irwin, if some of the success you are seeing and also down the road, obviously, the success in the US marketplace, which is a very competitive market, your ability to help your customers drive top line, has to be helping you gain support overseas. I am talking, maybe, even outside of Great Britain. And maybe even in Europe. I think from a contrarian point of view, that this isn't a bad time. I see there's a headline about Delhi's investing in Greece today, which I thought was kind of interesting. Your ability to help your customers demonstrate terrific results has to be beneficial for you as you seek to grow outside the US.

Exactly. I think, you know, again, timing is everything. But I think what I said before -- who is buying natural organic today? It is your younger consumer, who has disposable income, and they will be consumers that will be around a long time. That's who we want to build long-term relationships with and long-term equity with. That's what happened to cans of soup. That's what happened to certain other products, where they are no longer in vogue and the younger consumer is not buying them.

Just quickly, any thoughts on the White Wave spin-off?

I don't think it's appropriate for us to comment on that.

Okay. I am just asking. Thanks, guys. Congratulations, again.

Good evening, and thank you for the wow.

Sure.

Thank you.

We have time for one final question. Amit Sharma, BMO Capital Markets.

Hello. Good afternoon, everyone.

Good afternoon.

I might have missed it. The $40 million sales opportunity for fiscal 2013, can you give us more details around that? What is that?

That's -- we are building a plant at the moment in [Feakenham]. That will be online in May 2013. Actually, its more of a fiscal 2014 opportunity. It will be about $40 million new revenue in fiscal 2014.

And that will be frozen meals?

That is chilled.

Okay. Chilled meals. Got it.

And then, distribution gains are a big story in the US operation. But I imagine that the brands that you are acquiring over there are fully penetrated in the UK?

The brands are pretty fully penetrated in multiple retail channels. But what we think is that there has been a lack of investment in terms of the consumer. We think there's a great opportunity to leverage new positions for them in NPD and the US brands.

The big thing, here is, as you heard what Rob said, there's good distribution out there on the products. But how do we increase velocity? The major thing is, how do we really drive new products on these well known brands?

Sure. That make sense.

And then, one for Ira. Ira, you gave 47 million share count for next year. It's a little bit higher than what we have in 2012. You are not counting for the share as part of the acquisition, right?

No. I am not. But we typically se, because of stock compensation plans and other factors, that our shares typically increase by a little bit less than 1% a year, just naturally.

All right. That's all I have. Thank you, guys.

With that, this is the end of our call for our year-end Q4 of 2012, our outlook and our overview for fiscal 2012, our 2013 forecast out there and talking about our acquisitions in the UK.

I sit here, today, and am very proud to report these numbers. Proud because number one, I get to work with a great team around the world. Hain, after this acquisition, will have close to 4,500 people, worldwide. Hain was started in 1993, and today, being one of the largest natural, healthy organic food companies in the world. And we are changing the lives of so many people. It's something that feels great.

On the other hand, with obesity being a major concern, you talk about health care, not that I want to get into politics, but healthcare keeps coming up with Medicare and everything else. Eating healthy is one of the biggest cures and one of the biggest prevention of diseases out there. We really feel we are in the right space, and bringing users in at young ages will ultimately help a lot of the problems that face our nation, today.

So with that, thank you for listening to us on this lazy day of summer in August. We look forward to reporting to you at the end of October, early November, on our first quarter. Enjoy the rest of your summer. Have a safe Labor Day or bank holiday in the UK, or wherever else around the world.

Have a good evening. Thank you.

Thank you. This concludes today's conference. You may now disconnect.