The Hain Celestial Group, Inc. (HAIN)

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The Hain Celestial Group (HAIN)

Q1 2013 Earnings Call

November 01, 2012 4:30 pm ET


Mary Celeste Anthes - Senior Vice President of Corporate Relations

Irwin David Simon - Founder, Chairman, Chief Executive Officer and President

John Carroll - Executive Vice President and Chief Executive Officer of Hain Celestial United States

Rob Burnett - Chief Executive Officer of Hain Daniels

Ira J. Lamel - Chief Financial Officer and Executive Vice President


Scott Van Winkle - Canaccord Genuity, Research Division

Gregory R. Badishkanian - Citigroup Inc, Research Division

Kenneth Goldman - JP Morgan Chase & Co, Research Division

Edward Aaron - RBC Capital Markets, LLC, Research Division

Scott Andrew Mushkin - Jefferies & Company, Inc., Research Division

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division

Jared W. Madlin - Piper Jaffray Companies, Research Division

Sean P. Naughton - Piper Jaffray Companies, Research Division

Amit Sharma - BMO Capital Markets U.S.

Andrew P. Wolf - BB&T Capital Markets, Research Division



Good afternoon. My name is Keena, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hain Celestial First Quarter Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] Mary Anthes, you may begin your conference.

Mary Celeste Anthes

Thank you, Keena. Good afternoon, and thank you joining us today. Welcome to the review of our First 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. [Operator Instructions]

Now let me turn the call over to Irwin Simon, Irwin?

Irwin David Simon

Thank you, Mary, and good afternoon and first, I want to put our well wishes out to all those affected by Hurricane Sandy. It was quite a devastating storm and from a Hain standpoint, #1, we have 5 plants that were down, Monday and Tuesday, 4 back up Wednesday, all our distribution centers are out there distributing except one. We have one plant that should be back up running. We have no power in our Long Island Corporate offices, but we've moved a lot of the functions out to Boulder, but we are here taking orders and billing and we are absolutely back up to speed. But again, we're here to help out with food and everything else we can to get people back to normal and our thoughts are with everybody.

With that, now let's look at Q1 and our first quarter fiscal '13. It seems like we just reported Q4 a few days ago. Very strong quarter, great quarter. Our sales, $359.8 million versus $286.6 million, up 25.4%. Not included in those $359.8 million is $12.2 million of discontinued sales.

Our gross profit, $95.2 million versus $79.8 million, up over 19% and our operating income non-GAAP, $32.9 million versus $25.3 million, up 30%.

EBITDA non-GAAP for the quarter, $40.4 million versus $32 million, up 26%.

EPS GAAP of $0.42 versus $0.28, up 50% and EPS non-GAAP, $0.40 versus $0.30, up 33.3% and our free cash, which I think is the most important and what pays the bills is cash, $102.1 million, up from $85.5 million and Ira will talk more about that later so it shows we're generating a lot of cash here.

So let's come back and talk about the quarter. #1, you heard me talk about strong sales. You heard me talk about our gross margins up 19%. We paid down over the last 11 months since we did the Daniels acquisition, over $100 million, which allows us to go out there and do other acquisitions or do buybacks or do other things with our capital. We've gained tremendous amount of new distribution, which John will talk about when he speaks and Rob when he talks, some of the new distribution.

We sold the ICL business, which was a private label meals business in August, which closed. We will close on our U.K. -- we'll close on our sandwich business, food to go, daily bread business tomorrow. We have closed on our U.K. grocery business, which was project done to the Premier Foods brands of Sun-Pat, Hartley's, Gale's and Rosie's. We are pretty excited about that. I have spent some time over the last couple weeks with Rob and his team and there's so much we could do and I happened to get a chance to visit a few U.K. retailers and one U.K. retailer says, hey, we're behind the health and wellness trend in the U.S., with Hain's depth and breath of products, can you help us with a lot of health and wellness products just even with gluten-free, nondairy, lower sodium and just a few. So we are absolutely looking to do that and being a bigger player now in the grocery side of the business, that will help us and Rob will talk about that shortly.

Our Cully & Sully business in sales are strong up in Ireland and we'll look to introduce a lot of our other products into the Irish market.

Our U.S. business, on an adjustment up 10%, that's on shipments, consumption even higher, which John will talk about and we had to overcome major cuts on Earth's Best and MaraNatha, Earth's Best due to demand of pouches and some of our other products from a co-packer and MaraNatha, just with the demand of peanut butters and nut butters, because of the Sunland recall. So great consumption but we just can't keep up with demand. John and his teams margin up 67 bps with high commodity cost and taking a price increase that's not effective 'til October. And just to come back, our tea sales, we're not even into tea season yet and our tea sales are up over 11%. Our Greek Gods, our Yogurt business and a lot of new products coming from yogurt and exciting products and you're going to see the next evolution of Greek yogurt, up 35%. And now with Greek Gods going into Canada in a much bigger way on both coasts, Rob will talk about introducing it into the U.K. in November. We'll continue to become much more of a major brand within Hain.

Gluten-free, and we hear a lot about gluten-free and there's a lot of talk and size and scale. Arrowhead Mills and DeBoles, which have a lot of gluten-free products, both brands up over 35% and there's brands that we've created, gluten-free products within the brand and it really gone out and expanded distribution.

So, great growth there. Linda McCartney, the whole Tempe Tofu business, both up double-digits, 13%, 14%, which shows again, the whole meat-free category and the continuous demand for meat-free and meat-free Monday has really caught on. Our Personal Care business and our NSF and concern with what you put on your body and Personal Care products and in regards to baby products in the ingredients, big growth in that area for us.

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