Hain Celestial Group Inc (HAIN) 2014 Q3 法說會逐字稿

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(technical difficulty) our founder, President, and Chief Executive Officer; John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial US; and Steve Smith, Executive Vice President and Chief Financial Officer; and several other members of our management team are with us today to discuss our results.

Our discussion today includes 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 what is described in these forward-looking statements; and some of the factors which may cause results to differ are listed in our publicly filed documents, including our 2013 Form 10-K filed with the SEC.

A reconciliation of GAAP results to non-GAAP financial measures is available in our earnings release, which is posted on our website at www.Hain.com under Investor Relations. This conference call is being webcast and an archive of the webcast will be available on our website under Investor Relations.

Our call will be brief, so please limit yourself to one 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 Chief Executive Officer. Irwin?

Thank you, Mary, and good morning. Hope everybody had an opportunity to look at our press release that was released this morning. I hope you've had a chance to go over our numbers.

Today I will start with a brief review, overview of the quarterly results, as well as an update on our strategic growth initiatives and our recent acquisitions, including Tilda, which unbelievably we owned for two-and-a-half months, which we closed on January 13, and Rudi's, which we just completed last week.

We continue to experience strong demand for our organic and natural brands, as demonstrated by the increasing consumption of our products. This strong demand has translated into yet another record quarterly performance for Hain.

We generated our largest sales quarter in Hain's 20-year history, up 22% to over $557 million, representing our 13th consecutive quarter of double-digit sales growth, the 13th consecutive quarter of double-digit adjusted earnings growth. Together, we are executing on our mission to be the leading manufacturer of organic and natural, better-for-you products.

Today, this has more relevance than ever. Our products are available on more shelves across more geographies and sales channels than ever before.

And we believe the opportunities ahead of us are even more compelling as we expand distribution with new and existing customers. A key strategic initiative that we have addressed over the last few years in our distribution whitespace opportunities in the US, our latest four-week consumption measured by Nielsen, showed strong 12.4% growth. What a great number.

Taking on our top 100 SKUs in the US from approximately 30% ACV to 50% ACV would represent an incremental at-retail sales opportunity of $250 million. John will take you through some of this great success Hain has in the US and how we are going to go about it.

Now I'll focus on a few third-quarter performance highlights, as Steve will provide you with a lot more detail in a few minutes. As you heard me say, our net sales were up 22% to $557 million.

Specifically in the quarter, our brand performance was strong, with broad-based increase. We had 17 brands up double-digits. We had eight brands up mid to high single-digits.

Including our recent Tilda and Ella's Kitchen acquisition, we had 27 brands whose sales were up at least 5% during the quarter. Wow, what a great accomplishment.

Approximately 60% of our sales comes from the US, with the remaining 40% coming from the international businesses. We currently today sell into approximately 65 countries. My objective is to get to over 100 countries that we will be selling product into.

So looking at our operating segments, Hain Celestial US sales were up 15% to a record $319 million. I remember Hain as a Company did $319 million. They experienced a great quarter, with strong consumption trends which John will take you through in a few minutes.

In the UK, Rob and Jeremy and their team generated with Hain Daniels good growth, with up 6% in local currency, with local digit sales growth from Hartley's, Sun-Pat, and Gale's brands. We've achieved a lot of new listings at Sainsbury's, Tesco's, and Morrisons.

Our January Tilda acquisition was also a contributor for part of the quarter. Our soup business was basically flat in a declining market; and those that you know, the UK has had a very warm winter. We have a lot happening in our soup business in regards to new product, new packaging, new formulation; and we are pretty excited about what is going to happen in next year's soup season in the UK.

The Rest of the World segment, with Beena Goldenberg in Canada and Bart Dobbelaere in Europe and their teams, generated sales of over $60 million with low double-digit growth in local currency.

In Canada, we have had some good success with Terra, MaraNatha, Greek Gods, and the Casbah brands. And we achieved a lot of new listings. With Costco, MaraNatha, Sensible Portions. With Loblaws and Shoppers Drug coming together and Loblaws being our biggest customer there, we have tremendous opportunities. Along with Sobeys and Safeway, exact same thing.

In Europe, we had solid growth from Lima, Danival, Natumi, as well as Terra and Celestial Seasonings as we introduced several new nondairy products from our Natumi plant that we feel now we have it up and running. And we had some challenges, but still the plant is turning out a lot of product, which is important. Our dream brands in Europe are up 13%, and what a tremendous amount in opportunities we have with our nondairy growth in Europe and the UK.

We have also expanded listings of our continental -- in Continental Europe, including our Robertson's products from our UK, which shows you we are now taking products from the UK, expanding them into Europe. And that is Ella's, Robertson's, Hartley's, Sun-Pat; and we are taking European products and expanding them into the UK and the rest of Europe.

During the third quarter, we completed the previously announced divestiture of our Grains Noirs business in Europe, along with other products with lower margins that we will ultimately evaluate, where margins and sales do not hit our hurdles. We will continue to review our portfolio brands in an effort to streamline our business and focus our core strategy on organic and natural brands with growth.

And we will, of course, continue to review strategic acquisitions to complement our future growth opportunities like we did with Tilda, like we did with Rudi's, like we did with Ella's, like we did with BluePrint.

Now I will focus on some other key drivers that led our strong sales performance. Our organic growth was up high single digits, excluding currency. We continued to experience growth from our new distribution, deeper penetration in key accounts, and new existing products and strong, consistent consumer demand.

Eating healthy is not a fad, not a trend. It will continue.

Our strong brand contribution and operating leverage drove our record third-quarter adjusted earnings of $0.88 versus $0.72 in the third quarter last year, up 22%. Despite several headwinds on our key commodities rising in the quarter and putting pressure on gross margin, we're able to effectively manage our expenses to report adjusted operating income up 25% and operating margin up 13%.

EBITDA, which is important to me, was $83 million or 14.9% of sales. My objective has been always to get to between 15% to 18% of net sales for EBITDA, and this is something we are well on our way to delivering.

We continue to be excited about our sales growth and integration opportunities from BluePrint and Ella's Kitchen, and the expansion and distribution from both these products. John will talk a little bit about these in a little while, on how he is going to grow them, how he is going to integrate them, and the innovation coming out of both these businesses.

We have now owned Ella's Kitchen exactly one year. On this call last year we announced the acquisition, and we are pretty excited what we have been able to do in one year in our growth in US, Canada, Europe, and now some of our expansion into Asia and India.

At this year's Natural Foods Show, which some of you had been, there was close to 70,000 people, with some of you on the phone were there. We featured over 100 new exciting food and beverage and personal-care products with very strong response.

We met with leading accounts from across all distribution accounts -- all distribution channels around the world. As we have said before, branded product innovation is driving the growth in the natural organic grocery and mass channel. Hain's growth from new products and our new products have grown from innovation in natural over 25% and mass-market 35%.

Recently you heard the news from our mass retailer customer: they plan to expand into private-label organic packaged food products. While there is little overlap with our product offerings, we believe this speaks to the growing consumer demand for organic and natural products.

They cited that 91% of customers would buy organic food products if they were available for purchase, which is great for the natural organic food industry and which is great for Hain. Availability of organic and natural products is on the rise, whether at your local conventional food retailer, specialty food retailer. Competition for the customer's share of wallet is increasing.

At the same time this dynamic is helping to drive the growth of our portfolio of all the Hain brands. With the overall food market at $700 billion, with the natural segment is approximately $50 billion and growing, we believe Hain has an opportunity to benefit from the consumer shifting to more and more natural organic products.

So we believe distribution whitespace is key to us. As I said before, wherever food is sold, wherever there is a cash register, I want to see at least one Hain product; but I know there will be a lot more. Correct, John?

We believe Hain as well positioned for the future as a leading manufacturer, marketer, and seller of organic and natural products in the US, if not the world. We believe our legacy business and our long-term relationship with our farmers, our growers, should ensure our ingredient supply on a consistent basis. And these are relationships that go back 20, 30 years that we have purchased ingredients, products from these farmers.

We continue to look at our vertical integration, and this summer we are testing our first farm in New York that will supply BluePrint brand with parsley, cucumber, kale, red beets, romaine lettuce, and spinach, all organic.

We will continue to build out our future infrastructure to support future growth with additional investment in CapEx, as we did this quarter with our investment in our Oregon facility, to meet the increasing demand for MaraNatha. And this is well worth waiting for, because demand for MaraNatha has been well up over double digit.

Our Hain Pure Protein joint ventures continue to do well, with net sales up 12%. Demand for antibiotic and organic protein has been at the highest levels that I have ever seen.

Our Hutchison Hain organic joint venture also did well with sales increase in the high teens, principally from China, Philippines, and Singapore. I am in Asia next week as we look to build out the infrastructure there. We look where we need to build out facilities to supply our demands of snacks and infant formula and baby food.

Focusing on our recent acquisition of Tilda, a 100% branded leading premium basmati and specialty rice company. This acquisition expanded our branded grocery product offerings with basmati rice into the ethnic special channel and into new geographies in the Middle East, North Africa, and India.

What we found out is there are over 25,000 independent ethnic stores around the world that sell ethnic products. None of them today sell any Hain products. What an opportunity.

The third quarter was our first quarter of Tilda, and we are very pleased with the high single digit performance to date. I was in India in March with our team and will be in Dubai next week. I am very excited about our prospects as we look to grow Tilda brand, integrate Hain product into these new markets.

Just remember: in India, there is a new baby born every 3 seconds. 1.3 billion people live in India, and half the population is under 35. What a demographic for Hain products.

We think Tilda and our broader brand portfolio have tremendous opportunity for growth in these region as consumers increasingly trade up to branded packaged foods. Under Rohit Samani, who is responsible for all of Tilda operations in the UK, India, and the Middle East, we have a very experienced team that will work with local farmers and grow our distribution.

We are opening up our own office in India, which will have close to 80 people that will look to gain supply-chain procurement efficiencies and increase our ingredients that we will need to grow out the Hain chain supply. In addition, we will seek to leverage our infrastructure in India for certain raw materials and quality assurance testing.

As you step back, whether it is Tilda rice pasta, rice milk, rice snacks or rice-based products, you come back and look at our procurement opportunities, and we believe there is tremendous synergies. We hope there are many occasions for healthy eating with basmati rice -- and Ramadan will be observed on month beginning June 28.

Most recently we announced a strategic acquisition of Rudi Organic Bakery, a leading, certified organic bread brand. This is a great opportunity for us to enter the category, and we feel we also paid a great price at it. John will take you through this in a little while, which will take you through the consumer trends that show how the consumer today wants organic whole grains bread and gluten-free products.

Hain has proven ability to expand great distribution products into various channels of distribution, including conventional, mass, club, and we see significant opportunities there. This is exactly what we did with Spectrum, MaraNatha, Ella's, and we will do the same with Rudi's.

Looking ahead and something that we continuously talk about, Jim Meiers and his team and the teams around the world have focused on productivity. And I am happy to say we are within reach to hit our $50 million objective in productivity for fiscal 2014.

I look at other food companies and other companies out there today that talk about putting in productivity. It is something that we put in the beginning of every year, and it is something that is very important to our growth of all our products worldwide.

We have done a great job in managing headwinds. And trust me, when you are dealing with agriculture products today, they are headwinds out there.

We are working to meet our operating margin goals, although none of us can fully predict the future commodity prices. And that is probably one of the most difficult things about our business: where are commodities going?

Our team will continue to invest to support our future growth. And as a reminder, last year alone we spent $70 million of investments to build out our infrastructure.

Our balance sheet is strong and will continue to provide the financial flexibility to pursue strategic opportunities as they present their self. One thing that is important is cash, cash, cash; and every day I look at certain things: I look at sales, I look at margin, and I look at cash. Our operating free cash flow the nine months was $91.6 million, a great reflection on the strength of our business.

Before I pass the call over to John to take you through this great quarter that he had with his US results, I want to thank again our tremendous team for their efforts on a global basis. Hain has over 4,500 people around the world today, and having the right people to execute our long-term strategic growth initiative is a paramount, and we are always looking for ways to further enhance our team and support our future growth.

People are a key to it. In the UK, Jeremy Hudson, our CFO at Hain Daniels today, will be assuming Rob Burnett's duties at Hain Daniels at the end of June. Rob is taking on a new opportunity at Bernard Matthews Farms in the UK. In addition to his duties as CFO at Hain Daniels, he will also be responsible for operations and played a pivotal role in supporting the growth and profitability of Hain Daniels. Jeremy will be building additional team members around him, and we've got some great exciting things ready for the UK for next year.

We've had other exciting management changes. I am big, as an old hockey player, how we build bench strength and how we build the bench.

In January, Sheila Stanziale joined us as President of US Baby and Refrigerated. Sheila has a great background working for Diageo-Guinness, where she led the successful business turnaround. Sheila has served in various positions of an increased responsibility at Pepsi, Nabisco, and General Mills.

John Heuer, who joined us in February as Chief Customer Officer, John was VP of Strategic Customers Team for H.J. Heinz. John understands the customer, understands what we need to do with the customer, understands how we grow our e-tailing, e-commerce; and we are excited to have John on the team.

Last but not least, Emma Froehlich-Shea, who has been SVP of our Personal Care and Marketing, was appointed Chief Digital Officer. This is a tremendous opportunity for Hain, and I have always said that this is where the future is going and how we are going to communicate to our consumers.

On Facebook alone, we now have nearly 2 million fans among our collective brands from content that generate double Facebook average engagements. We have over 11 million moms a month that visit our Earth's Best and Ella's site. Emma is also leading the effort to redesign new corporate logo -- new corporate websites later this year.

In summary, after all that I can just sum it up. It has been a record performance for Hain across our brands, our businesses, our people, and across many, many geographies.

We are pleased with our progress to date in fiscal 2014. April continues to be a strong month for Hain. With two months left in our fiscal year, or a month and a half, it is amazing as we look out to 2015; and ultimately we will come back to you with what we see in 2015.

As we look to the future, we believe we are well positioned for growth as demand for organic and natural products increase well over the demand GMO products. We represent 600 products enrolled in the Non-GMO Project today.

In fact, today is an historical day. Vermont signed into legislation a requirement that food products should be labeled GMO-free.

In addition, in the US we have 77 million Millennials, 50% whom spend more on product for socially responsible companies and 60% on environmentally friendly products.

With that, I will turn it over to John, and he will give you a lot more information about his business. John?

Thank you, Irwin. Good morning. Q3 was a record quarter for Hain Celestial US. Key highlights from the quarter included net sales of $319.5 million, up 15% versus year ago.

Importantly, we had strong Q2 organic growth of 8%. This was achieved while funding a $6 million shift to account-specific point-of-sales programs.

These programs, as we discussed last call, are classified as reduction of sales. The impact of this shift took our net organic sales increase of 10% down almost 2 points, but still to a very strong 8% organic increase.

Our latest 12-week Nielsen AOC consumption growth accelerated to 11.6%, which was 30 times the AOC total channel growth of 30 bps -- actually it was more than 30 times. Our growth was achieved even as we lapped strong year-ago comps, resulting in a two-year stack consumption gain of 21.4%.

These results were driven by gains across the US portfolio, including 14 brands with double or high single digit increases. Our Q3 operating income increased to $56.7 million, up 11% versus year ago.

Now our Q3 operating income margin was 17.7%, which was down 70 bps versus year ago. However, this reflected the lower operating margin structure of Ella's Kitchen, which we actually had mentioned when we acquired it. Ex-Ella's Kitchen, our US operating income margin was 18.6%, or up 20 bps versus year ago.

Now on previous calls we talked about how we review five key factors as we look out for the balance of the year. Five key factors are: where our consumption trends; what is going on with our AOC distribution growth; how is our innovation faring; where are we on productivity; and how are our most recent acquisitions performing?

Now when we reviewed our latest results it showed strong momentum against all five key factors, starting with our continued consumption growth. Q3 was our 17th consecutive quarter of strong US consumption growth.

We drove growth across all key channels, despite going against very strong year-ago comps. And as I said before, we delivered accelerating AOC growth that was more than 30 times the channel average.

Our second key factor that we looked at is: what is going on with our AOC distribution growth? And what we saw was our top 13 brands, which account for 80% of our AOC sales, saw a distribution gain of 7% in Q3 versus year ago. This gain was consistent with our Q2 increase and 1 full point higher than our Q1 result.

We continue to fill in the distribution whitespace on key brands and at key customers. Now, as Irwin mentioned, we saw some great distribution wins in the third quarter at key accounts, and I am going to give you a few examples.

Start with Kroger. Kroger authorized four new Imagine organic simmer sauces and three new Spectrum Essential blends.

How about Publix? Publix added seven new snack SKUs and a MaraNatha coconut almond butter.

Take a look at Sprouts. Sprouts added Greek Gods new 24-ounch peach yogurt, two new Celestial Kombucha products, four new Earth's Best pouches, two new Earth's Best frozen SKUs, and two new Dream sunflower beverages.

Target added three new Spectrum oils, four new Greek Gods yogurts, and one new Earth's Best baby wipes. Walmart added two new Dream frozen novelties and nine new Alba Botanica Good & Healthy hair care and skin care products. And Whole Foods authorized global auto-ships on two new Imagine soups, one new sprouted rice Dream, three new Alba sun care products, and eight new gluten-free personal care SKUs.

So as you can see, we continue to make significant progress with our retail partners, filling in our distribution whitespace.

The third factor fueling our optimism is our strong innovation. We introduced over 100 new products at Expo West to a very strong response from the trade. And this was a trade across all channels.

Remember, we are seeing innovation positively impact our consumption growth across all channels, not just in the natural channel. More and more conventional retailers are recognizing the importance of innovation in driving organic and natural sales and are increasing their speed to shelf execution on new products.

The fourth factor we looked at is: where are we on productivity? Now if you recall, we have talked about this. Almond, coconut, quinoa, and dairy pricing has been up significantly year to date and was up, of course, significantly in Q3.

Now we released a price increase in April on the products affected by these commodity increases, and this price increase will take effect in FY15. So the key to offsetting these cost increases in Q3 was our productivity program and, secondarily, SG&A synergies.

Q3 productivity savings were over $8 million. We realized significant productivity gains in increased plant efficiencies, increased internal production, and value engineering.

Now, as Irwin mentioned that he is going to be in India, Dubai, and Asia next week. Steve and I are going to go visit Lancaster, Pennsylvania, which is a great example of our productivity program.

We have our new Sensible Portions factory in Lancaster, Pennsylvania; and at that factory we have realized significant savings from this plant across three key productivity buckets. Increased plant efficiencies, as we are running more efficient than we ever could have dreamed of in the factory that came with the acquisition. We have brought more production, so we have increased internal production. And we have value engineering opportunities that we have leveraged that we could have never done in the old plant.

We expect to see a similar result in FY15 from our new almond butter production line that Irwin mentioned that is being -- that is installed in Ashland, Oregon. Jim Meiers and his guys successfully started up the line in April; the line will be running at 100% by the end of Q4 and, like Lancaster, will drive savings throughout FY15.

The fifth and final key factor that is driving our optimism is our latest acquisitions: BluePrint, Ella's Kitchen, and Rudi's Organic Bakery. We have owned BluePrint for over a year and doubled the business. Our Ella's Kitchen AOC consumption is up more than 40%.

And both businesses are delivering against our target for expanded distribution, increased consumption, accelerated innovation, productivity, and SG&A synergies. We believe there are still more opportunities to drive against all these levers for these acquisitions while continuing to integrate the businesses further into our SG&A platform for SG&A synergies.

We are thrilled with our latest acquisition, Rudi's Organic Bakery. The reason we are thrilled is this business fits all of our key acquisition criteria. Now, let me take you through it.

First, we always look for a leading organic brand in the natural channel. We believe that that is a great opportunity for us to drive that across our platform on sales across different channels.

Secondly, we look for brands that are in high-growth categories. Rudi's is in a high-growth category; its whole-grains, organic, and gluten-free bread and baked goods sales are up double digits.

We look for brands with significant distribution whitespace opportunities, and Rudi's has that as their top-five SKUs average only 16% ACV in the AOC channel.

We also look for businesses that have significant SG&A synergy savings available as well as supply-chain productivity opportunities. Now remember, Rudi's is located in Boulder, Colorado. We already have a facility in Boulder, Colorado, with our key Celestial Seasonings business; so there is an opportunity for SG&A synergy there, as well as Jim Meiers and his team have been at Rudi's Bakery all this week identifying and prioritizing productivity opportunities.

Finally, as Irwin mentioned before, Hain purchased Rudi's at a very reasonable valuation, or equal to about 1 times sales. So we believe the acquisition of Rudi's represents a significant value-add to Hain shareholders.

Just as importantly, we believe Rudi's Organic Bakery will be Hain Celestial's next $100 million brand. Rudi's is growing strongly in both the organic and gluten-free segments. They have a tremendous innovation queue in place, and we believe the brand is extendable beyond bread and baked goods.

Also excited about the opportunities to grow Rudi's Organic Bakery across channels as well as increase its profitability via productivity and SG&A synergies. So we are very excited about where we're going to go with Rudi's Organic Bakery.

So to close, Q3 was a really strong and a record quarter for Hain Celestial US, highlighted by 15% top-line growth, 8% organic growth, and accelerating AOC consumption growth of 11.6% in the latest 12 weeks. We also had an 11% gain in operating income versus year ago and, ex-Ella's Kitchen, a 20 bps increase in operating income margin.

After reviewing the five key factors we look at every quarter, we are optimistic about our go-forward prospects given our continuing strong consumption trends, our growing AOC distribution base, our innovation queue, our productivity initiatives, like Lancaster and Ashland, Oregon, and our strategic acquisitions: BluePrint, Ella's Kitchen, and our latest acquisition, Rudi's Organic Bakery.

So with that, I will now turn the call over to Steve Smith.

Thank you, John, and good morning, everyone. They say the third time is the charm, and so with that I will begin my third quarterly results call.

I'm going to take you through the financial highlights of our third-quarter performance and then we will have a few comments on guidance. First, I want to highlight a few items which impacted our net sales performance versus the prior year.

Our acquisition of the Ella's and Tilda businesses increased sales by $69 million in the current quarter, with each of these businesses showing strong growth versus the same period last year when they were under prior ownership. Our performance versus a year ago was also benefited by currency movements; however, the benefit versus the guidance we provided in February was nominal, less than $1 million, as currency rates underlying our guidance were very consistent with average rates for the quarter in our most significant foreign currencies.

Another factor impacting sales performance was increased point-of-sale trade spend activities versus a year ago. This activity, which is shown as a reduction of net sales, increased and impacted net sales approximately 80 basis points on a consolidated basis versus a year ago, with an offset in reduced SG&A spend.

Finally, as we discussed on our February conference call, businesses we got out of in Europe impacted sales for the quarter by approximately $4 million.

Our adjusted earnings from continuing operations was $0.88 per diluted share, compared to $0.72 per share in last year's quarter, improving by 22%. We earned $0.75 per diluted share from continuing operations on a reported GAAP basis.

Additionally, we took a $0.06 charge for the sale of our Grains Noirs business. In the prior year, we reported $0.87 per diluted share from continuing operations, which included a one-time tax benefit of $0.28 from a worthless stock deduction.

Adjusted income from continuing operations was $44.5 million this year, compared to $34.4 million last year, improving by 29%. Income from continuing operations in the third quarter this year was $38 million, compared to $41.8 million in last year's third quarter; and as noted in our press release, our current-quarter adjustments to income from continuing operations of $6.5 million are principally from acquisition-related fees and expenses, including integration costs from Tilda and the UK Ambient Grocery brands and factory start-up costs.

Gross margin on an adjusted basis was 27.6%. While gross margins improved as compared to the second quarter this year, they are 50 basis points below same period last year. The gross margin compression was driven by both the US and the UK.

And the compression is primarily driven by the continued shift of certain trade spend activities, which are classified as an SG&A expense, to point-of-sale activities, which are classified as a reduction of sales. I said before this shift resulted in about 80 basis points of margin compression versus a year ago. Performance against our expected results was also impacted by about 80 basis points.

While productivity initiatives continue to track to plan, the timing of the realization of the productivity savings was slightly delayed as certain of these savings will be realized as the associated inventory turns and is sold. And then additionally against expected performance we were also impacted by product mix.

As John mentioned, we continue to be impacted by increasing commodity pricing including almonds, their yields, and milk prices. The impact of input cost inflation amounted to about 2.4% in the third quarter this year as measured against the third quarter last year; and this was offset by productivity initiatives and, to a lesser extent, price increases.

SG&A expense for the quarter on an adjusted basis and excluding amortization of acquired intangible assets was 13.9% of net sales, a 90 basis point improvement as compared to 14.8% last year, and that was even greater against our expectations. The rate of spend decline in the quarter was mainly from the aggregate impact of our acquisitions, as we achieved strong additional operating leverage in addition to the shift in spend I just mentioned.

As a result, despite the gross margin compression we continue to show very robust operating margin expansion. I want to remind everyone that our marketing and SG&A spend -- our marketing spend can move between above or below the line depending upon the nature of the spend; and our SG&A rate can vary from quarter to quarter based on both the timing of the underlying activities and the spend amount. Not all spend is fixed or incurred on a linear basis.

On an adjusted basis, operating income was 13% of sales, at $72.3 million this year, increasing 25% from $57.6 million or 12.6% of net sales in last year's third quarter. Operating income on a GAAP basis for the third quarter was $63.6 million or 11.4% of net sales, as compared to $51.1 million or 11.2% of net sales in the prior year. Operating income in the quarter was also impacted by acquisition-related expenses and other charges when compared to last year.

On a GAAP basis, our effective income tax rate from continuing operations was 34.2% for the third quarter this year, compared to 3.7% last year. Prior year's tax rate resulted from the one-time tax benefit of $13.2 million recorded as a result of the worthless stock deduction.

Our adjusted effective income tax rate from continuing operations was 32.3% for the third quarter, compared to 34.3% in last year's quarter. The reduction in the adjusted effective tax rate is primarily due to the increased income in the UK as a result of recent acquisitions and the associated lower tax rate in that jurisdiction.

Depreciation and amortization in this year's third quarter was $12.8 million, as compared to $9.8 million in the prior year, with the increase coming principally from our capital spend in the prior year and the acquisitions. Stock compensation was $3 million as compared to $3.2 million last year.

Our balance sheet continues to be very strong. Working capital was just under $375 million, with a current ratio of 2-to-1 at March 31.

Our stockholders equity was $1.55 billion. Debt as a percentage of equity is at 54%, and debt to total capitalization is now at 35%.

Total debt at the end of the quarter was $833 million. And excluding the debt resulting from the Tilda acquisition, our debt declined from June 30 by $68 million, while our cash balance was $101 million, increasing $60 million from June 30.

For the nine months ended March 31, 2014, operating free cash flow increased to just under $92 million versus $18.8 million for the prior-year period, and the increase is principally the result of our improved earnings. Cash conversion cycle was three days better versus the prior year at 61 days.

Lastly, I would like to turn to guidance. Including the acquisitions of Tilda and Rudi's Organic Bakery, our guidance for net sales for the full fiscal-year 2014 is expected to be in the range of $2.145 billion to $2.15 billion, an increase of 24% versus the prior year, and it implies sales of $575 million to $580 million for the fourth quarter. We anticipate earnings per diluted share from continuing operations will be in the range of $0.87 to $0.90 for the fourth quarter, or $3.14 to $3.17 per share for the year.

The Rudi's acquisition will be dilutive to EPS in the fourth quarter by $0.01 or $0.02, and that is reflected in the quarterly and annual guidance that I just mentioned. Looking ahead to fiscal 2015, we do expect Rudi's acquisition to be accretive to earnings, as will the divestment of the Grains Noirs business that we did earlier this year.

Consolidated gross margin for the year is now expected to be 27.1% given our performance year to date, while our annual SG&A rate, which includes amortization related to intangibles, is estimated at about 15.2%.

Full-year operating margin is estimated at 11.9%, plus or minus some single-digit basis points, and our effective annual tax rate is about 32.5%. Estimates again are based on upon current exchange rates.

Weighted-average diluted share count is estimated at 51.2 million for the fourth quarter and 50 million shares for the full fiscal year. These estimates include the shares we issued in April in connection with the acquisition of Rudi's, which is about 134,000 shares.

Our estimates do not include any results of discontinued operations, restructurings, or future acquisition activity. And, finally, on our next call in August when we release earnings, we will provide guidance for the full-year fiscal 2015, including color on expected seasonality.

With that I will turn it back to Irwin.

Thank you, Steve. I guess after all that long commentary, you've got lots of questions out there. So let's open it up for questions.

(Operator Instructions) Sean Naughton, Piper Jaffray.

Hi, thanks. This is actually Jared on for Sean. Congrats on the strong quarter and thanks for taking the questions.

I guess just first of all, could you provide an update on the out-of-stocks in the quarter? Then should we expect that to entirely normalize going forward with the new launch of the MaraNatha line?

John, you go with US and I will talk to Rest of the World.

What we actually saw was the US in-stock fulfillment was at about 95% to 96% and MaraNatha got into the low 90%s. We will have some challenges in Q4 on the MaraNatha line, as what we are getting is a lot of pent-up demand and people filling out their backroom inventories.

So we will chase that through Q4, and as we go into FY15 we expect to be in our 97% to 98% targeted percent level for fulfillment in the US.

Jeremy, in regards to the Rest of the World -- Jared, sorry. In regards to the Rest of the World, we had some production issues with our New Covent Garden Soups in the UK, and that is back up. In regards to Europe, we have had some challenges even with 13% growth on our non-dairy business out of our Germany facility; and that is just keeping up with demand plus a startup.

Then what John mentioned with MaraNatha, there are some of the effects in Canada that we have that affect some of our growth in demand there. So we have had some challenges with out-of-stocks; and hopefully with MaraNatha up in the new line, with our soup facility now being retrofitted and some new lines coming in.

And in regards to our Germany facility and a lot of it is demand. We have had to move to co-packers and we are looking: do we add some more lines there? We hope to overcome out-of-stocks.

Great. That color was very helpful. If I could just squeeze in one more here. On the marketing side, the ad spend, how are you guys measuring the return of the success of the ships there versus what you were doing prior? Just anything you could offer there.

Sure, it's actually easier to measure with what we are doing now. What -- and I've said this in previous calls, we have identified three areas where we went to spend marketing money. One is social media; second is account-specific marketing; and the third is innovation. If it is not one of those three areas, we shouldn't be spending the money.

In account-specific marketing, we are looking at the brands that are in these key accounts, and we are measuring if we are seeing an increase in our base volume level ongoing after the investment.

Jared, we see it on consumption data. I mean you see it right at the retail account; and that is where you see it account-specific.

And the big thing is, again, those that cover big consumer packaged goods companies, you commit to TV advertising or print advertising. Oh, my God, the quarter looks good; we are not going to spend; we pull it back.

Here again we can see performance instantly because you are seeing it at shelf and you are seeing it at retail, and that is what is driving some of this consumption number out there. Yes, it affects some of the top-line numbers; but if it is driving the sales, let's continue on that.

Let me add one last point. That is why it is so key to look at your base consumption level. Anybody can drive volume with promotion.

Our promotion level is relatively flat to year-ago. It is our base that is driving our increase in our consumption.

Excellent. Thanks again.

Scott Van Winkle, Canaccord.

Hi, thanks. John, you mentioned the strong growth in both -- on Rudi's, sorry. On Rudi's you mentioned strong growth in both gluten-free and organic. Can you compare the relative growth rates of those two segments?

Yes. The organic is low double digit, and the gluten-free is like about double that. So basically assume that organic is running at 10 to 12, and gluten-free is running 20-plus.

Where do you see the opportunity? If you were going to move that growth rate now under the Hain umbrella, do you think the gluten-free is what you could accelerate, or the organic? I am wondering what the thoughts are that you could make an impact on the business.

Look, we were excited about both. Basically Rudi's -- the significant part of that business right now is in organic; and we don't feel like there has been enough attention paid to really keep leveraging the leadership position they have in organic.

While you know as well as I do, Scott, that everybody wants more gluten-free, so we think that it is actually going to be an opportunity to drive organics, particularly in natural, and gluten-free everywhere else.

Scott, I think the big thing is -- listen, bread is a big category. And if you come back and look at the whole size of the bread category and where white breads are moving towards organic and whole grains, at the same time gluten-free, we today have over 400 gluten-free products, do over $100 million with our own products.

And the opportunities with our Arrowhead Mills, the opportunities with our other products, I mean Rudi's has basically sold less than $1 million in Canada. And taking Rudi's to the UK and Europe and building it out there.

And one of the key factors that came along with Rudi's is the infrastructure and the plant and the production. You heard Jim say before we had our team out there yesterday watching the lines and speeds and the opportunities to expand, whether it is into buns and into other bread-type products.

So it is an exciting category. And we saw many, many gluten-free offerings to us, but we waited for the first one, and we are excited about this.

Great. Then another if I could. Obviously, broadening distribution of natural and organic is the topic du jour this week. John, you gave a stat of 7% distribution growth across your top 13 brands.

I am wondering: how do we foot that against, let's call it 10% organic growth on your gross sales line? That 7% distribution gain, what did that translate into contribution of your 10% organic growth? How much came from distribution?

I would -- based on the math we are doing on something like this, about half to two-thirds of it is driving the increasing consumption. Because remember you are just getting seated on some new items and new distribution.

So basically, let's assume that if it is 7%, it is accounting for 3.5% to 4.5% of our double-digit consumption organic growth number.

That pickup of the 7%, from 6% I believe it was last quarter, is there a trajectory here that we are undergoing currently, where we are seeing accelerated distribution gains?

As I took you through the different accounts, we have actually seen a really strong response in the most recent 90 to 180 days in terms of accounts being more aggressive in grabbing more of our natural and organic products for new distributions.

Scott, I think what you are seeing -- you visit stores -- I mean it's Whole Foods opening more stores, Wegmans opening more stores. But more and more retailers like Kroger, like Publix, which John talked about, bringing more and more natural organic products within their stores.

And the big thing is, there is more space that is being dedicated. My whole thing has been this here: there's $700 billion of food sold; and why is consumption with a lot of the big CPG companies not growing? It is the consumer transforming and buying more and more natural organic products.

Also seeing a strong correlation to where we have account-based teams sitting in the same locations as the accounts to driving distribution. When you think about the accounts I talked about, Kroger, Publix, Sprouts, Target, Walmart, Whole Foods, all of which we have dedicated teams to drive those businesses.

Great. Thank you very much.

Amit Sharma, BMO Capital Markets.

Irwin, a quick question on the Whole Foods slowdown that we saw yesterday. Any impact on your sales in the natural specialty channel from this apparent slowdown?

So when you say is there any -- I don't understand your question. Is there any in the natural channel?

Right.

Listen, I think the natural channel -- a couple things. And coming back at Whole Foods slowdown, was it their comps? Some of it was pricing. Some of it is cannibalization in stores, etc.

Don't forget, every time a new store opens up for Whole Foods, it is not cannibalization for us, okay? It is more products going into that store, when you've got 22,000 products.

In regards to if pricing is coming down, in actuality we are seeing in some cases, if they're good hot promotions, an increase in sales. So we are still seeing good, solid growth at Whole Foods.

And the other thing which is interesting, the independents. We are not seeing a slowdown in the independents. I think they have their loyal customers and consumers.

And at the same time, I mean with Sprouts, I think you saw their numbers yesterday. We are seeing good demand at Sprouts.

So the natural channel for us is not slowing down at all. I think what happens today, consumers are crossover shoppers. They may go to Whole Foods for certain products, then will shop at Kroger for other products. So the answer to your question is no.

Great. Then Steve, if I may ask you one question on gross margins. You took down gross margin expectation for the full year. Is that simply a function of moving the sales support investment from above the line to below the line?

It's a combination of year-to-date performance as well as continued shifts in the trade spend versus the way it was originally forecasted.

Some of it also is mix. You also got some commodities. I mean, with almonds and dairy prices.

So I think a little bit of everything has hit our gross margin. Also, you've got some businesses in there with lower gross margins. So I think it is the combination of all of them.

Great. So going forward, is this a good run rate for the gross margin? Or we think there is more room for those spend to move around between those lines?

Go ahead, Steve.

I'm sorry; can you repeat the question?

I am saying, is this a good run rate for gross margin, accounting for seasonality? Or there is more opportunities for moving the sales spend between above and below the lines?

Well, I think that is something we will evaluate as we move forward into next year and plan against next year's fiscal year. There is clearly opportunities to expand gross margins.

Tilda, we have said, will be accretive to slightly accretive to our gross margins. But Rudi's on the flip side will be dilutive to our gross margins. So we have different things going on, but there will be opportunities in underlying business performance to improve gross margin.

I think, Amit, as this here, we completed the year close to $50 million of productivity. On a worldwide basis we are going to be looking for a lot more as we go into 2015.

With the procurement team that we have in place today, and you heard me talk about procuring from India, Middle East, and South America, and how we take more and more costs out is something. Listen, we -- our objective is to get our gross margins up.

On the other hand, we are not going to just get our gross margins up and take our spending and put it below the line where it is not going to get the growth out of our business. I mean, we have such opportunity to grow our business and operation whitespace, we are going to invest continuously back in our business in spend that is going to drive the growth.

Amit, the one thing I would like to say is that while we will continue to focus on expanding gross margins, what we want to do is not only expand the gross margins but expand operating margins to an even larger extent.

That is a perfect example, is our free cash. The other thing, Amit, what we are able to do here is the integration of acquisitions. You see our SG&A, and the SG&A and the savings, and there is more work to do on SG&A savings, whether it is still for BluePrint, whether it is from Ella's, whether it is from Rudi's. I mean, we are carrying everybody still in Rudi's.

Ella's, we have not integrated anything in the UK, anything in the back room. We have not integrated anything from Tilda. Hain Daniels we just finished integrating Histon in Hain Daniels.

So there is a lot of SG&A savings for us over the next couple years that we will continuously get. That will ultimately help our operating margins. That will allow us to invest back in the business.

No, that's great. We are certainly seeing a lot of SG&A productivity over the last several quarters; and if that trend continues, I think that will be good.

Thank you.

That's all I have. Thanks.

Andrew Wolf, BB&T Capital Markets.

Hi, good morning. Hey, Irwin and everyone. Encouraging to me that the UK really moved the needle this quarter. Wanted to ask if you could, without knowing exactly what Tilda's margins are, but making some, I guess an educated guess -- back of the envelope it looks like the non-Tilda business probably had around 200 basis points of operating margin expansion.

Is that a reasonable guess? So that we can try to understand the underlying business's ex-Tilda, its profitability improvement?

No, actually, what happened was most of the operating margin expansion in the UK came from Tilda.

Okay. So my math was 50-50. You are saying it is closer to almost all of it was --

No. No, no, no, no, no. But I think the big thing is, this year, is the integration and getting the benefits out of Histon. And one of the big things where the opportunity is in the UK is the benefit of our New Covent Garden Soup where that hurt us in the quarter, where we didn't get the growth.

So is it 60/40 Tilda versus Hain Daniels? But the opportunity on the upside is our New Covent Garden Soups with 50% margins, Andy.

Absolutely, so there was a more modest improvement in the underlying business, but it is not 100% driven by Tilda.

Exactly, not 100% driven by Tilda.

Made Tilda quite the acquisition if it was. All right, so that was encouraging.

Well, we only owned Tilda for two-and-a-half months also, Andy, so it would make it a phenomenal acquisition.

All right. So, John, moving down to Ella's, also back of the envelope, given the numbers you gave, it looks like Ella's is running about 5% EBIT margin or thereabouts. If that is a good guesstimate, what is in that? Why would that be, and where should that head?

Ella's is running low single -- I mean mid to high single digit operating margins.

Okay.

As Irwin said --

I thought you said the operating margin. I apologize for the interruption; I thought I heard you say the operating margin in the US would've been up 20 bps if you excluded Ella's. That is why I said that.

That's correct. That's correct.

Okay, so it just -- okay, so -- but my math was wrong. It's --

Right.

So it is still about 6%, 7% below the rest of the portfolio?

The key there -- and Irwin has already alluded to it -- remember Ella's, we have done no integration of Ella's UK into any of our UK platforms. So ultimately, that will have a significant improvement on their operating margins going forward.

We have worked with them in regards to procurement and productivity. But it is still a standalone. Paul and team are still in place, and it runs as totally a separate operating unit within the UK. So.

Have you talked internally or externally about a timetable for that to occur?

Yes, we are going to make some pretty significant moves in that area in FY15.

Okay. The last thing is just on Rudi's. I guess I heard you say it's a bit dilutive but turning accretive. To me, the math was it came out accretive out of the gate. Is there some costs in there that you just don't plan to exclude, that are really more or less one-time? Transition costs or (multiple speakers)

Andy, there is about 17, 18 people that are still in the business that will ultimately exit the business throughout the quarter. And they are still in our cost, so that is the big number.

Okay. Well, congrats on what looked like a fine quarter. Thank you.

Scott Mushkin, Wolfe Research.

Hey, thanks, guys. Thanks for taking my questions. I guess the first thing I wanted to do is a more strategic -- Irwin, question for you. Is that it seems, if my math is correct, about -- gosh, you are over 40% now coming from international. It sounds like you have some pretty big plans in Asia and India to grow that business.

Strategically, how do you see this business breaking down over the next three years or so? I know it has always been a goal of 60% the US and 40% international; but it seems like we are tilting more internationally, and I was just wondering where your head is that way.

Hey, Scott, you heard what I said. Wherever there is a cash register, I want to sell food. So wherever there is more cash registers, that is where I am going.

Seriously, 50-50. I think if you come back and look at the world population and look at the US, there is -- what, 320 million, 360 million people in the US. You look around the world, you look at India and look at China; it's 2.3 billion people. It's 8 times the size of the US, and natural and organic big opportunity.

I have got so much demand in the Middle East for Hain products where these guys are Procter & Gamble distributors today, want to bring on our product. So we sell in 65 countries today and my objective is to get to at least 100 countries over the next couple years.

With Jim Meiers and the team, we have gone through how much we ship today on containers and boats. It's amazing. I think it is 10,000 containers a year that we are shipping product across the channel.

So with that, it is at least 50-50, and we include Canada on that side. The opportunity for us today in Mexico where we sell to, and we've had lots of calls from Walmart just on e-commerce in Asia and some of the stuff they are doing. So that is where we look to go.

And it is not with every product. Big opportunity on baby. One of the things in Asia next week we are talking about is putting up a snack factory there, looking at our whole infant formula business there.

In Dubai and the Middle East, the exact same thing. So it's maybe 25, 30 of our products.

The other big opportunity for us, Scott, is taking a lot of our existing US products, which we are doing right now, and bringing them to the UK and to Europe. We are rolling out with our team all our nondairy products throughout the UK. We are looking at Celestial Seasonings.

Whoever could believe that you could sell tea to the Brits? And they should be buying our tea.

What a big opportunity with Sensible Portions in the UK. Right now, we are looking with our teams to roll out Ella's throughout Europe.

Australia is a market. Even though it is 22 million people, there is an opportunity there.

So just come back with two countries, 2.6 billion people. And if I sold $0.50 to everyone, that is a big upside for us.

So we are absolutely going to get bigger internationally. And I think the key is what Hain has done is laid out the infrastructure to do that. To sell, to procure.

And no different what John said before, we are selling well where we have our teams. Today, we have an office in the Middle East; we will have an 80-person office in India in August. We have an office in Europe. We have two or three offices throughout the UK. We have an office in Hong Kong today.

So the infrastructure and our people are on the ground to go ahead and do that.

Perfect. Then I had two more, so I will probably have to pick now, because --

Go ahead. You can have one more, Scott.

I have one more. So I guess this is (multiple speakers)

Mary is yelling at me because I allowed you to do it, Scott, but go ahead.

Steve, I was just wondering if you could maybe -- and maybe my math is a little bit off. But it seems like gross margins are going to pop pretty good in the fourth quarter. I was just wondering, what is the underlying reason for that to happen, for gross margins to come up in the fourth quarter? Just to make me understand a little bit better what is going on in the business.

It is going to be mix in the business and it is going to be the timing of the productivity savings kicking in, which we always said was going to be back-end loaded.

Okay. But I am correct, you are going to see a very sharp increase in your gross margin rate. Is that correct?

Yes.

And, Scott, as you said, some of it has got productivity, which there is a big piece coming in the fourth quarter. It's a big sales quarter for us. You've got a full quarter of Tilda, which is a big quarter at Tilda for Ramadan, etc.

So that is a lot what is going to happen. It is a big snack quarter going into Memorial Day.

Okay, great. Thanks, guys. Appreciate it.

David Palmer, RBC Capital Markets.

Morning, guys. I am sure you can understand there has been a lot of curiosity about channel dynamics lately in the natural channel, and ultimately putting it beyond the natural channel, and ultimately what that means. Everything from Walmart with its commitment to natural and organic, and seemingly concurrently more committed to a retailer brand in that space. And Whole Foods obviously having some share losses in natural.

Some theories out there from clients or worries is that these shifts will be in some way negative longer term for your margins. I just wonder if you would comment on that.

Then separately, your M&A strategy, it seems to be shifting a little bit or at least there seems to be a tweak in that. When you are looking to buy stuff, whether it is Tilda's or Rudi's or Ella's Kitchen, you are looking to these to be global cross-selling opportunities, that you think you might be able to sell it into another region better than the next guy. Would you comment on that, too, please? Thanks.

So in regards to our growth, there is a lot of noise within natural organic because of the demand for the category. So number one, I always come back and say, David, if you are in a category where you are not getting a lot of noise, there is not a lot of growth; not a lot of people want to come in it.

So I step back for a second. Hain has been doing this for 20 years. We are probably the largest natural organic food and personal care company in the US, if not the world.

And We want to get bigger. I will use a CNBC commentator that said it; we want to be the gorilla in this category. Okay?

And as the gorilla in the category, we want to be in every category that makes sense. We want to be the best in buying. We want to have the best in brands.

And doing this for 20 years, first of all, we have set up great sales teams. So we have a sales team in Minnesota, Bentonville, in Cincinnati, in Austin, our club store business. So we have an infrastructure and a sales team that is set up, number one, to sell into these accounts.

Number two is we have a distribution system that is able to deliver to these accounts, which we think is at the lowest cost you can.

Thirdly is, you heard what I said before -- from growers and supply. If I had to say this year that what keeps me up at night is just keeping up with demand and supply.

By 2018, everything sold in Whole Foods will be GMO-free. The state of Vermont will pass today where it has to be labeled GMO-free. And it's not that there is any science out there, David, that GMO-free is better for you, etc.; it's full disclosure where the consumer should know.

So with that everybody wants to jump into this category. And whether Walmart has talked about it with the Wild Oats brand, whether other retailers have gone out and said we're going to do private label, we are in it today with over 40, 50 brands.

We are in it on a global basis. We are procuring on a global basis. We are in the top 18 categories. So we are well situated.

And I think -- listen. Again in regards to transformation and more and more coming from that $800 billion consumer package good company gives us the opportunity.

In the US, 80% of sales that are sold are branded products; 20% are private label. With that I see just great growth.

And if you want to be in the natural organic food and personal-care category, you have to do business with Hain to have our great brands. So that is the answer to your first question.

And absolutely, are we aware of competition? Are we aware of private label? We are all over it.

But you heard what we said before. We introduced over 100 new products at the Natural Organic Food Show, and innovation is key.

The other thing we got to really keep our eye on is cost. Consumers today are very concerned with cost, and what we can't do is just cost our self out of the marketplace. So that is where we are in regards to that.

In regards to global, I think that was your second question. In regards to global, what has changed? Listen, we are seeing the opportunity.

We are seeing the opportunity in Asia today where Asians want organic baby formula, organic food. We are seeing today Asians giving organic food as gifts instead of alcohol. So we are seeing the demand.

We are seeing the demand in retailers in India wanting it. So what we have done, David, is we have traveled around the world; we see where are some of the biggest opportunities.

And if we already have the Hain products -- listen, global brands is what is important. So today, what do we have in global brands?

There is Ella's, there is Earth's Best, there is Celestial Seasonings, there is Terra Chips, there will be Sensible Portions, there is MaraNatha. And that is our big thing today, how do we build out our global brands? Because I think we have tremendous brands with tremendous ingredients; and how do we grow them around the world?

Thanks very much.

Thank you. I think -- are we at the last question? One more question, operator.

Ken Goldman, JPMorgan.

Hey, thanks very much. Irwin, just as a Rangers fan, you may want to reconsider mentioning hockey today. Just saying.

Hey, Ken, I am a Montreal Canadien fan, not a Ranger fan.

I've seen you in a Rangers jersey; you'd debate that. I know you aren't giving 2015 guidance yet, so I am not asking for numbers. But as we think about your margins generally going forward from here, is there a reason to expect SG&A to climb back to historical levels?

Do you expect it to continue dropping over time, stay flat? Just like I said, general color would be really helpful. Because one of the questions I am fielding today is if these SG&A levels going forward are sustainable. Thank you.

I will let John talk about his SG&A, and then I will talk about it on a global basis, Ken. Or Steve will.

Okay, so in regards to the US SG&A levels, look, a lot of what you are seeing in terms of our SG&A reduction is a function of leveraging our investment in people over a larger business, over a larger top line.

And that is one of our key things here. Look, we want to bolt on businesses to the US platforms and not only get the ability to leverage the platform to drive top line more aggressively than we could as a standalone, but also to get great synergies in SG&A. Because we only add the people that absolutely are essential to the business, which is usually much different than the number of people that are allocated to the business when we first acquire it.

So I would expect that we will continue to drive SG&A synergies.

Ken, what you will see is what we are -- these $60 million, $100 million businesses, as we have acquired them, one of their biggest challenges is the SG&A they have in front of them and how they support that, and have trouble making money because of their SG&A infrastructure.

But I think if you come back and look at Hain and growing high single digits, low double digits organic growth and adding $100 million of acquisitions on, and our sales that grow in a 22% because of acquisitions and because of growth, we are not adding. The infrastructure is in place.

And that is my whole point that I have been talking about. We have, as we set up the infrastructure, we have 31 plants around the world today; we have all these offices around the world. And you are going to see SG&A come down as we continue to grow the top line, and do these $100 million acquisitions, and grow it with the infrastructure we have.

And we will continue to add to people, but it is nowhere near the levels that we need to do to run some of these businesses.

That's very helpful. One quick clarification. Does that mean just officially there is nothing in these numbers this quarter, last quarter, in terms of SG&A that you think is unusual that will have to be added back next year, so to speak? Just want to make sure.

Like what? No.

From the adjusted numbers? No.

No. No. There is no one-time, no.

All right. That's very helpful. Thanks, guys.

Thank you, Ken. Well, thank you, everybody, for our third-quarter call. As you heard remarks from John, Steve, and myself, the category continues to be an exciting category, and I am very, very proud of our global team.

And as I said, eating healthy, not a fad, not a trend. It is just going to continuously get bigger and bigger, and we are well entrenched into it.

And we today -- if you come back and look at Hain, as I say, we've got 4,500 people around the world, a big part of Hain is the employees that work within our factories that make our products. But a lot gets done with the management team that is not long and wide.

It is amazing how we achieved our largest quarter, $557 million, and our $0.88. I really feel good about our business. I feel good of what happened in April; our fiscal 2014 is coming to a close the end of June.

With the headwinds and commodity costs and competition, we really performed out there. And we are a complicated business. We have lots of brands to manage; we have plants; and again we are procuring a lot of agriculture products around the world.

We are very different from your traditional consumer packaged goods company of how we spend our money with the consumer. And you heard what I said before about appointing Emma Froehlich with our Facebook, with our social media, with Millennials.

That is who our consumers are. And again the way this business is changing in e-commerce and selling on a global basis, and that is something that we will keep up to and we have been all over.

But just as I come back how packaging is changing and ingredients are changing, and here we are today, Vermont as a state approving that it has to be labeled GMOs. Most people three, four years ago didn't know what a GMO was and a genetically modified ingredient.

So again, it is projected that organic natural chains could add over 1,000 new stores by 2020, and that is just natural organic stores and looking at Whole Foods, Sprouts, and a lot of the independents. And from Hain's perspective, we have the infrastructure that is able to go do that.

So thank you so much for your interest, participation. Have a great day.

So don't forget, number one, to stock up on our snacks for Memorial Day, which is in two weeks. Also, those that are celebrating Ramadan, our Tilda basmati rice is a great product.

And let me tell you something: you are what you eat. And if you eat healthy, life will be a lot longer for you. So have a great day and thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.