HAIN

The Hain Celestial Group, Inc. (HAIN)

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The Hain Celestial Group, Inc. (HAIN)

F4Q09 (Qtr. End 6/30/09) Earnings Call

August 25, 2009 4:30 am ET

Executives

Mary Anthes - VP, IR

Irwin Simon - President and CEO

Ira Lamel - EVP and CFO

John Carroll - EVP and CEO, Hain Celestial, US

Maureen Putman - CMO, Snacks and Grocery

Analysts

Greg Badishkanian - Citigroup

Edward Aaron - RBC Capital Markets

John Heinbockel - Goldman Sachs

Scott Mushkin - Jefferies & Company

Andrew Wolf - BB&T Capital Markets

Andrew Lazar - Barclays Capital

Michael Picken - Cleveland Research

Jason English - JPMorgan

Edward Aaron - RBC Capital Markets

Presentation

Operator

At this time, I would like to welcome everyone to The Hain Celestial fourth quarter and fiscal 2009 conference call. (Operator Instructions)

Ms. Anthes, you may begin your conference.

Mary Anthes

I am pleased to be with you today to introduce our fourth quarter fiscal year 2009 Earnings Call discussion of our financial results, which were issued earlier today. We have several members of our Management team here today to discuss our results, Irwin Simon, President and Chief Executive Officer; Ira Lamel, Executive Vice President and Chief Financial Officer; John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial, US.

Our discussion today will include forward-looking statements, which are current as of today's date. We do not undertake any obligation to update forward-looking statements, either as a result of new information, future events, or otherwise. Our actual results may differ materially from those projected and some of the factors, which may cause results to differ, are listed in our publicly filed documents, including our 2008 Form 10-K filed with the SEC.

This conference call is being webcast and 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 and a follow-up question. If time allows, we will take additional questions, and Management will be available after the call for further discussion.

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

Irwin Simon

I hope everybody has had an opportunity to read our release. Ira will take you through our release in a few minutes, with our adjustments and with and without chicken, but let me just talk about a couple of things and then I will turn it over to John. '09 what a tough year it is, and actually I am quite happy its over, but still all in all we've had some great things happen. Hain continues to grow topline even in these tough times.

Our free cash increased $28 million to $33 million. We reduced our debt by over $47 million and what a strong balance sheet we have. Our gross margin in the fourth quarter was up 1.56 Bps and our earnings per share $0.28, with a $0.04 loss included from frozen. John will talk about all the good growth going on in his division, in grocery, non-dairy, Celestial and what's happening to Earth's Best. I will then take you back and go through Europe, about our turnaround program in Europe, our growth in Canada and what I see happening on Hain Pure Protein and the turnaround there, and our outlook for fiscal '10, acquisitions and strategic alliance.

So, let me now turn it over to Ira.

Ira Lamel

Our adjusted earnings came in at $0.28 per share in the fourth quarter and $1.24 adjusted for the full fiscal year. These earnings include a $0.04 loss per share in the quarter and $0.18 loss per share for the full year coming from Hain Pure Protein.

Reported sales for the fourth quarter this year totaled $262.7 million, with sales negatively impacted by $10.7 million due to changes in currency rates this year's fourth quarter compared to last year's.

For the full fiscal year, sales totaled $1,135.3 million after the negative impact of $35.6 million from currency changes. On a constant currency basis, sales for the year grew by 10.8% year-over-year.

As our press release today points out, our focus on cash generation in recent quarters gave us strong results this quarter, and just to clarify what Irwin said earlier, we generated $28 million of operating free cash flow in the fourth quarter, which is an improvement of $33.2 million over the prior year's fourth quarter.

This allowed us to pay down debt by $30.2 million in the quarter. For the full year, we paid down $47.2 million in debt, reducing the total outstanding to $258 million, of which $150 million is represented by non-amortizing fixed rate 5.9% rate notes due in 2016. We continue to have sound financing in the face of market conditions today.

We saw a strong result from our focus on gross margin expansion. Our adjusted gross margins without Hain Pure Protein improved by 156 basis points in this year's fourth quarter as compared to last year's fourth quarter. This improvement came from the strength of our US operations where the benefits of our pricing actions early in the year, our productivity initiatives and reduced diesel prices, all combined to increase the margin results.

While we have seen some input costs come down, overall, we experienced higher input costs in the fourth quarter this year compared to last year's fourth quarter. If you remember, the inflation accelerated during the first half of our fiscal year this year, so it really didn’t exit to any large measure in the fourth quarter of '08.

We also continue to move promotional spending from our selling and marketing expense programs, classified as SG&A, to increase our use of consumer couponing, which is classified as a reduction of sales. In the fourth quarter this year, we spent 64% more on consumer coupons than in the prior year.

Our margins were impacted by this shift in promotional spending and margin performance in Europe also brought down overall margins in this year's quarter as compared to last year's quarter.

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