The Hain Celestial Group, Inc. (HAIN)

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The Hain Celestial Group, Inc. (HAIN)

F2Q2013 Results Earnings Call

February 5, 2013 4:30 PM ET


Mary Celeste Anthes - Vice President, Investor Relations

Irwin Simon - Founder, President and CEO

Ira Lamel - Executive Vice President and CFO

John Carroll - Executive Vice President and CEO, Hain Celestial U.S.

Rob Burnett - Chief Executive Officer, Hain Daniels


Greg Badishkanian - Citigroup

Bill Chappell - SunTrust

Andrew Wolf - BB&T Capital Market

Ken Goldman - J.P. Morgan

Scott Van Winkle - Canaccord Genuity

Amit Sharma - BMO Capital

Sean Naughton - Piper Jaffray

Mineo Sakan - UBS

Ed Aaron - RBC Capital



Good afternoon. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hain Celestial Second Quarter Fiscal Year 2013 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. Ms. Mary Celeste Anthes, you may begin your conference.

Mary Celeste Anthes

Thank you, Tiffany. Good afternoon and thank you all for joining us today. And welcome to the review of our second quarter fiscal year 2013 results. We 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 U.S.; and Rob Burnett, Chief Executive Officer, Hain Daniels.

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 2012 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 one 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. Irwin?

Irwin Simon

Thank you, Mary, and good afternoon. I hope everybody had an opportunity to look at our press release that was released at 4 o’clock today. And another record earnings quarter for Hain, as you come back, our sales were up -- sales $455.3 versus $364.8, up 25%.

Our gross margin $28.7 versus $28.7 a year ago and that’s what higher commodity costs, some higher input costs but really how we focus on the margin. Our SG&A 16.6% of sales versus 17.4%, and which really shows how we are integrating acquisitions, how we are really watching our costs and how we are actually making a lot of these acquisitions work for us.

Our EBITDA which and I’ve talked a lot about EBITDA, what I like to be as a objective for -- objective of sales and $67.3 million, which is 15% of sales versus $49.7, and up 35% versus a year ago. So some great EBITDA and we are really hitting those metrics out there and an adjusted EPS of $0.72 versus $0.53, up 36%. So as you can see, great number, great record earnings.

In the quarter, we really focused on sales we really focused on profitable sales. And certain brands here in the U.S., Rob, will talk about what we did in the U.K. in regards to our ambient brands and how we focus on that and how we really look at getting higher prices and less promotional products.

If you really come back and look at our free cash, our free cash of $106.8, up 47%, so we are focused on cash and how we turn our inventories in the cash and cash conversion and Ira will talk about that.

Let’s talk about the quarter. It’s hard to believe when we last year earnings here we were sitting through a major hurricane, one of the worst hurricanes in the 100 years in the Northeast, a lot of stores close. We lost a lot of shipping days with that and we are able to overcome that and John will talk about some of the effects of Sandy, but its way behind us and we filled a lot of shelves.

From an inventory, sales have been strong and you’ve about us having to do without stocks and inventory. And again, October, November we had to build up our inventories on Arrowhead Mills, DeBoles and the whole GlutenFree, our pouches and back in December we’re really back in stock, so we had overcome that and some shortfall in the quarter.

In the quarter we closed on the Premier acquisition of brands and we’ve owned it two months and as I’ve said before, when you, could do all your due diligence you want before you acquire business when you own it, you make a lot of decisions and within two months, Rob and the team have made a lot of decisions going forward, a lot of products that we will discontinue and rationalize the business.

How we will focus on building the brands and how we will focus on really building that business out both on the, our Hartley’s brand, our Sun-Pat brand, our Gale’s brand and our Robertson’s brand, and how we’ll also focus on building out the profitability of the plant.

We’ve had 16 brands in the quarter that are up double digits. We had three that are up high single digits, five up low single digits. John will talk about his Nielsen numbers, over two years, as you stack the number how they are up.

And one other things, you come back and look at the whole food industry, AOC numbers were up 4 times in AOC channels what regular -- what conventional foods are. So natural organic is growing and it’s a major part of the growth within food today and the consumer is converting to more and more healthy foods.

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