The Hain Celestial Group, Inc. (HAIN) Q1 2009 Earnings Report, Transcript and Summary

Good afternoon, my name is Erica and I will be your conference operator today. At this time, I would like to welcome everyone to The Hain Celestial first fiscal year 2009 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Ms. Anthes you may begin your conference.

Thank you, Erica. Good afternoon. I'm pleased to be with you today to introduce our first quarter fiscal year 2009 Earnings Call discussion, with our financial results, which were issued earlier today. We have several members of our management team here with us 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, United States; and Peter McPhillips, Executive Chairman, Hain Celestial, Europe. 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 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 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?

Good afternoon, everybody and thank you, Mary. And I hope everybody has had the opportunity to look through our first quarter fiscal '09. It seems like we just reported our fiscal fourth quarter 2008. We are definitely in different economic times and I think we have a lot of good things to talk about what’s going on in the category and what’s going on in the marketplace, what’s going on in organic food. And if you read the New York Times or the Wall Street journal you would think not good things, but that’s not what we are hear to talk about today. Our sales for the quarter $289.3 million versus $237.2 million up 22%, our gross margins as reported $25.9 million versus $29.5 million. On an apples-to-apples basis $28.6 million versus $30.8 million and if we took our price increase, which we enacted in august it would add two to three points. So our margins would have been up a little and Ira and John will both take you through the margins and going forward as they talk about their businesses. Our SG&A, which we continuously focus on and will $18.2 million versus $20.2 million. When we talk about productivity; we talk about acquisition integration, we talk about efficiencies and we're really focused on that SG&A line and will continuously do that. Net income on an adjusted basis $11.4 million versus $11.9 million and earnings per share $0.28 versus $0.29 adjusted versus a year ago. One of the good things about the company is in the good days things are going great and in tougher times how you adjust. And I think one of the great things at Hain today, we really don't have to adjust for economic times and how do we service a consumer? How do we…

Irwin, thanks very much. Ladies and gentlemen, hello. For those of you who don’t know me, Peter McPhillips. I have worked with Hain, since the beginning of this financial year and I joined by the acquisition of Daily Bread. I find Hain Celestial extremely exciting company, and a company that’s positioned to take advantage of the current economic climate, we find ourselves in. What an interesting time that is it. I’ve spend 30 odd years in the food industry, it's never been a boring industry. And I think it’s probably set now to get say a complete change in restructure the way it operates. I am going to focus on three things if I can. First of all I am going to focus on the capital goods and the focus that we’re building today. Secondly, I am going to focus on the customers those have to deal with most of the downward and thirdly on the structure of people to deliver that. We have now pulled our business in UK and in Europe into three categories; food to go, which is about sandwiches, salads, and food on the meal; that’s a market that’s growing in the UK. Yes, it's seeing some movements in terms of price, and assume some of our major customers looking to changing the ranging that they have got there, but still a very exciting opportunity. I mean, Diary Product acquisition has meant that the linking facility that we have had is able to spread the channels and the customers that it goes after. But having to readdress our range we are launching a complete new range of daily gold products on to the market which are positioning our products between a pound and 1.50 pound. Excuse me if talk in sterling, but the our presence is…

Thank you, Peter, now I’ll turn it over to John.

Good afternoon today I will review the Hain Celestial US Q1 performance, which includes Hain Grocery and Snacks, in Personal Care and Celestial Seasoning. Starting with Hain Grocery and Snacks we saw another strong quarter of growth on top line. We are up 15% versus year ago and up 7x the acquisition. Our Q1 growth was experienced across all channels and was driven by core SKU velocity continuing expansion of distribution and exiting new products such as our Rosetto Steam ‘n Eat, Imagine Low Sodium Broths, Almond Dream and our Garden of Eatin', multigrain and baked products. We saw growth across the portfolio and some key brands that are growing our Rice Dream and Soy Dream, WestSoy, DeBoles, Earth's Best, Sesame Street, Imagine soup, Garden of Eatin', Spectrum, Rosetto and MaraNatha. So, you can see it’s widespread across the portfolio. And we expect to see the growth continue, because we have a very strong new product line up that we just introduced at Expo East, which includes products such as the first organic stuffing product that can be prepared in a microwave, our Arrowhead Mills stuffing expressed. Our WestSoy longevity product, which is a nondairy beverage for baby boomers and especially fortified for them. Our Earth's Best gourmet blenders, which are very strong in high protein, which is a real growth area for us. Our Terra salted sweet potatoes and some seasonal products including the launch of our Rice Nog. There are Rice Dream brand as well as and again bringing back a new stuffing on Arrowhead Mills, our cornbread stuffing. Moving on to the middle of the P&L, we experienced Q1 dollar gross margin growth, but we were down as a percentage, which is similar to what other CPG companies have reported. The key issue was not being able…

Thank you John, good afternoon everyone. I am going to walk you through some of the details on our adjustments for the quarter to the earnings. As we've discussed with you in previous quarters, we continue to incur start up costs in connection with consolidating manufacturing facilities and processes into our UK Fakenham plant into the first quarter this year. That phase of the integration is now complete. The integration arose in connection with our acquisition of Hall Bane Foods in the UK, and we determined to eliminate two Hall Bane facilities. In completing the integration project in the first quarter, we incurred $2.5 million of costs, which impacted after tax earnings by $0.04 per share and included the unabsorbed overheads resulting from our expired Co-Pack Agreement at that plant. We are continuing with our reorganization program as discussed in both Q3 and Q4. During our first quarter, the program cost us $900.000 or one penny per share for the cost of closing the warehouse facility and reducing our headcounts. And as John discussed, the personal care margins in connection with this program have started to rise as anticipated when we initiated it. We also pointed out to you in the past that we were obligated under a co-pack and processing agreement with the former owner of our new Oxford turkey operations to provide products at prices significantly lower than market. While our contract obligations are now completed, and the contract has expired, our first quarter results were negatively impacted one penny per share in earnings. As a result of our obligations under this agreements coupled with the severe increases in corn and soy meal prices during the summer months, gross margins in our Hain Pure Protein joint venture declined from 12% a year ago to 5% in this quarter.…

(Operator Instructions) Your first question comes from the line of David Palmer with UBS.

Great, thanks. The release said that the company expects that the benefits from price increases will improve margins during the second half by 200 to 300 basis points. I'm wondering exactly, what does that mean? Is that your year-over-year trends will improve by that? In other words, the gross margin deterioration will be reduced from the 350 plus to 50 to 150. You know, how exactly should we be thinking about that?

David, its Ira. The way we look at it is that the price increases that we announced in July and went into effect in the middle of August had a small impact on Q1, probably only about $1 million dollars worth of sales increase purely from that price increase. We expect that the price increases that we have implemented will give us another $6 to $7 million in sales and without using the funds from those increased sales for any other purposes, if it drops straight to the margin line that would improve our gross margins by that 200 to 300 basis points. Typically it takes till the second or third quarter after a price increase for it to mature in full and that's why we expect that it will help margins in the back half of the year.

And if we were to kind of breakdown the gross margin, you gave lots of data points there. You said at one point, Hain Pure Protein if you excluded that it would be only 218 basis point of decline or something like that. I guess that was implying that there is 130 or 150 basis points of the decline, was due to that one division being down to a 5% margin from 12%? Is that correct?

You're right on in that number. It was about 150 basis points decline on the consolidated margins resulting from Hain Pure Protein and you are right. I mentioned it went from 12 to 5. But remember this quarter; we took the effect of inflation that really started to accelerate on us beginning with the end of the second quarter and last fiscal year. So, on an anniversary basis we are just getting there and we had about 7% rate of inflation on our inputs.

And David, the other thing is, in the first quarter, we did not hedge, we bought out. If we were to buy that same corn today in the first quarter, it would be about $3 million difference in price. So coming back to our 12%, 13% operating income or margin on our chicken that’s our protein business, that's how we are looking to get there.

And if I had one last follow-up, it will be on the tea business. Some of the things that John was talking about it, it seem like improvements for the second half of the fiscal year, this is a very seasonal business and I'm wondering has the inventory ship already sailed and the marketing plans already kind of predated John and his improvements, whatever he was talking about there. I guess, there was some new displays, but are we really talking about a top line recovery more in next tea season?

David, this is John. Actually the program that drove the increase in four week consumption was something we implemented late this summer. So, the answer to your question is this program will impact this tea season. And I am looking to reverse consumption losses in this tea season.

And David, I think, one of the other things that we are seeing out there is, where consumers are now buying the 299, 329 tea and trading down from the higher priced $8, $9 teas and seeing the benefit of that. But, we are seeing already a lot of the benefits and a lot of the benefits that were put in place at shelf, flavor, some of the new packaging, some of the promotions are absolutely in for this tea season.

Thank you.

You are welcome.

Your next question comes from the line of Scott Mushkin with Jefferies & Company. Mike Halley - Jefferies & Company: This is actually [Mike Halley] for Scott. Just one quick question. Irwin you seemed to be some seeing significant incremental business with mass merchants and supermarkets like [Kruger]. I know you have been in some of these retailers for sometime. So, what inning, do you think you are in terms of the merchandising of that channel and why are they taking more of your product and what advantages does Hain have over the traditional CPG companies and other small organic companies? Is there kind of a margin opportunity for more of your product in this channel going forward?

Well. I think a couple of things. Number one as I look through a list today, whether it’s Gerber organics, Smuckers organics, [Monsoon] organics, [Raghu] organics, [Prager] organics, Kellogg's Organics. And I want to come back here and say and hey they are not great brands, but there was a lot of organic brands, a lot of conventional brands that converted to organic that the consumer saying right see, I see it on the shelf of one premium, why I am paying a premium price and I don't understand why this is organic. So, number one, where they went into supermarkets first they are now coming out of supermarkets, a lot of these categories and brands are going away. The second thing is there is a lot of small brands out there and again this was a fragmented industry, where a lot of these brands are just not going to make it. And Hain today, going in as one of the largest natural organic food in Personal Care and protein company, we are going in there with a solid program, solid support and particularly as we are going in their with data to show what’s going on here, no different than we are showing data consumption numbers today and whether it's Kruger, whether it’s big mass merchant that’s what they are used to dealing with and that’s the kind of products and brands. And with our diversification in products and SKUs that’s where we are seeing a lot of growth. Mike Halley - Jefferies & Company: Okay. Thank you very much.

You are welcome.

Your next question comes from the line of Greg Badishkanian with Citigroup.

Hey. Thank you. Hey just a question..

Get your name right one of these days.

Question on the sales line, I am estimating about $3 million in sales from acquisitions about 10% organic growth companywide and how far off am I?

Greg you are going to have to come up with new questions.

And Greg, I think you figured it out pretty closely.

All right.

I think we are absolutely within range of that.

Yeah.

And you know.

Okay. Good that’s an acceleration from last quarter. And so my question is just having been out at the Expo, we were seeing a number of the vendors actually had canceled smaller vendors I am assuming part of that has to do with market share as well just a robust industry. Just with the credit markets, financial markets in distress are you noticing a number of your smaller competitors not having capital to expand and grow and just kind of a nice opportunity for you to pickup some share from the difficulties in the financial markets?

We are definitely seeing that and we are hearing that from our grocer and we are hearing that from certain mass markets, where there might have been a product or two from a small company in place and they are coming to us and whether it's a belly bar or something for a pregnant mother or something like that, can you guys do that. Can you take one of your brands and we are absolutely seeing that. The other thing is some of these smaller companies, where they are co-pack and don't have the capital from a co-pack standpoint. The other big thing today is every company out there is worried about quality controls and what is this company spending on quality control and quality insurance and that’s something that’s at the highest standards here. So you are going to see this industry go through some changes. And I think, as we read some of the articles out there about organic consolidating or organic slowing, not so much organic or slowing. You are going to see no different than you saw in other categories a lot of brands and products go away and some of the smaller ones and I think it's great for us for a shakeout here in this category of people going to go back and focus on what they do best. And we are absolutely seeing this on conventional grocery brands.

And just as a follow up, obviously very strong growth in the quarter. As you mentioned I think in the press release that October was strong as well. Are you seeing any deviation from sell through at retail with shipments or this is again this I'm assuming that retail and your shipment growth are kind of pretty consistent. Because I don't know many retailers out there that are building up inventories in this environment.

Well, if anything, Greg, and I didn't mention this earlier and that's a good point. What we've seen is some of our customers reducing inventories no different than we are trying to take inventories down. So not factored in our numbers is customers that have taken down inventory. And the numbers that John Carroll gave you were all consumption numbers. So they are sell-through numbers at retail.

Okay.

The numbers I gave you were shipment numbers, John's numbers are consumption numbers.

Okay. Good, nice job in the quarter too. Thanks.

Thank you.

Your next question comes from the line of. Jacklyn Rider with Lazard Capital Markets

Hi, just a few questions. So, going into the key holiday season for the proteins --

Hey, Jackie, can you speak up?

I'm sorry about that.

It's okay.

So, going into the key holiday season with the protein business, you no longer have any of these contracts that cause you to lower the prices of your products or anything along those lines, correct?

Absolutely. I think number one was, when we acquired this business and one of the reasons of acquiring this business was a contract that we had to produce for Pilgrim's Pride at our absolute cost, turkey meat, turkey breast which they sold to the customer. And with that we -- as prices moved up, because grains prices moved up, we could not sell that to other customers. So it was part of the contract, part of the purchase agreement. As of October 1st that is behind us.

Excellent. And then also on your commodity costs inflation here. What percentage of your raw materials is coming from organic versus conventional? I know organic prices aren’t coming down. So, when we are watching these conventional prices coming down dramatically, how much of a benefit will you get from that?

Jackie, over a 50% of our contracted commodities are organic.

Okay.

And Jackie, when we say organic, prices are not coming down what it is. Organic prices -- we purchase it once a year, and secure that I mean we have purchased this as we said in August and September, and we'll probably purchase out to the third quarter. I think the good news, is this year if we’re buying stock, yes stock prices may come down, but we're not going to be doing a lot of that because we have thought -- we can sit here today and assure you on a couple of things. Number one, sitting here last year we didn't know where commodities were going and sitting here today we know they're not going up. And the other good news is, we as a company have taken pricing to be able to support the prices that are out there today and that's how we plan to hit our full forecast, year et cetera. But you know, I think the big thing was secure supply and as some of these other organic companies decide to exit the category, I think there should be an opportunity for additional supply and prices in our second half will start to come down in our third and fourth quarter. I mean, don't forget, we're 30 odd or we're only six weeks away from our year and half being over here. So, very shortly we are into next year's contracts and a lot of organic ingredients start to come out of the ground next July, August, so we're almost a year out. But on the positive side from our protein business, we hedged out and we're buying at much lower prices in the second quarter. We’ll buy much lower prices in part of the third quarter, but going into the fourth quarter we're going to start buying contracts very shortly for all our protein businesses.

Okay, great, and one question on acquisitions. It sounds like okay, so you are going to take a pause right now. But if the right acquisitions do come along I'm sure the pipeline is still active. If prices do come down, will you still pull the trigger?

We will pull the trigger if it's strategic, if it's non-dilutive and its accretive and we’re going to buy it right, I think. We feel the days of double-digit EBITDA numbers are over. And I think, there's going to be opportunities from private equity. There's going to be opportunities from smaller companies that are stretched and not financeable or can't get financing. And we think there's also going to be opportunities out there for companies whether they are public with a beaten up equity and there could be some opportunities there. And, so there is going to be opportunities, but today what I can tell you is you we're setting here with a great portfolio of brands and products and that’s where our focus is going to be today and focus on that. And if we build our cash, and just cash will be king.

All right. Thank you.

You're welcome.

Your next question comes from the line of Simeon Gutman with Goldman Sachs.

First question I think for Ira. With regard to the guidance range about 54 to 61, and what is the biggest delta in it low to the high. I mean, first quarter is done, top line was great. The gross margin was under pressure, but now you have some visibility with regard to the back half of the year. You have price increases et cetera. So what can change or what can swing that within that range from this point on?

Well I think rather than talk to what might be one biggest item, I think there are a few items that we look at when we look at our guidance. I mean, clearly, we have to execute on the sales line. We have to execute on the margin line. We have to get productivity improvements out of our operating units and those things are all variable and all subject to, as I use the word execution going forward during the year. We're encouraged with the strength of sales. That certainly is helpful to the reason we feel very comfortable reconfirming full year guidance. We may see fluctuations in the quarters as we go forward from what might be our usual quarterly earnings stream. But, on a full year basis, we feel pretty good about getting to that goal line.

And then I think, Simeon just its Irwin just want to add to that. I think Ira's key point sales continuing strong is a key metric here. Having pricing across all John's business, our Tofu Tempeh à business taking a price increase in Canada. Peter taking some pricing. That we got those in place and we'll start to see the benefit and that's why, what I would say our guidance for the full year is important for us. The other thing on sales, as I said before, what’s important is, there might be categories that slowdown, whether it’s supernatural’s or convenient. But I think as a group, we know where we have to make it up and we are diversified in different brands. So, along the way, I am going to sit and [stand] say, everything is going to go perfect and do we think every category is going to stay on fire and sell? No, but we see some of our other categories released selling and doing some great things, absolutely. And with that, the other thing you heard me say before which is not in our guidance and it's not in there, as we look to cut some other costs around here and you know tighten the belt and whether it's personnel, whether it’s other expenses, we are really going to look at that as no one is certain what’s going to happen in this world. So, I think that’s important for us.

And then just following up on the consolidation or acquisition question, it sounds like you might be averse to those high multiples, and maybe the industry won’t even have those high multiples on the big businesses. But what is the brand power, the leverage that you have from having all of different categories? What does that do for you with regard to taking a sub $50 million brand and potentially having more of those opportunities looking out and even on a better value? What’s your motivation to do that? Maybe you don't want to do a certain number at a certain time. But how exciting does that look over the next 12 months?

Well, number one, that we might pay those high evaluations, there is no such word as ‘might’, we will not, okay? And that’s number one. But number two is, we don't have to go out there and hit the grand slam. I mean, there is nothing wrong, we could doubles and triples here and a proven example of that is Avalon, Alba, Spectrum, MaraNatha SunSpire, just to name a few. They were $50 million businesses and have grown on their way to $100 million businesses and great for us. So, we are not out there looking for the $1 billion opportunity. We are looking for good $1500 million if something $200 million came along it really made since. It’s important for us for categories of [senior net]. These categories were not in categories that can really enhance us with our customers.

Thanks.

You are welcome.

Your next question comes from the line of Scott Van Winkle with Canaccord Adams.

Hi everyone. Quick question. Now we got to the point where at least hopefully commodities have stabilized and this is kind of a follow-up to the last question. Where are we in the process of productivity gains and maybe reformulating products with lower ingredients? I am assuming that you kind of overshoot on one end, you overshoot on the backend. In the next 12 months, are we going to see more productivity gains? Are we going to see more kind of changes in formulations to get better pricing and what does it look like 12 months from now? Are you in a better situation on margins? I am kind of wondering where you are in the process now that the commodities have stabilized?

Scott this is John. I mean, we put productivity as an initiative over the last couple of years and it is one that we focus on everyday. We went from zero to $4 million to $8 million last year. We expect to get more than $10 million in my units and Ira and Irwin were talking about over $15 for the total business. You name it, we are looking at whether we need to downsize the product. We need to look at sourcing ingredients from our other areas and things of that sort. It’s just part of our culture here. So, a year from now, I would expect to see us continue to grow this number aggressively in terms of productivity savings. And if we get back to a stable commodity environment, I would expect us to get back to a position, where we are driving improvement in gross margin quarter-on-quarter. And Scott, I will sit next to the Ellen Deutsch, Chief Growth Officer and she wrote me a note about value engineering and keeping quality and what we have had a major meeting here in New York about three weeks ago, where we had our technical people, R&D people, QC people from all over the world in. And right now, we are going through ingredients and sweeteners and where we are sourcing ingredients from, what we have been limited, what could come from China and what are we looking to replace anything from Asia. We are all over South America. We had rice; a cereal problem with birds [feed] we couldn't get in the US, where we are going to outsource it in South America. The other big thing, Scott which has happened dramatically here there is two big drivers that drove up our costs and that was freight and packaging because of petroleum base and packaging. And there is a major initiative on here in regards to reducing packaging and not having petroleum based and that's a big part too not only from recyclable sustainable. So, that is something that is continuously ongoing. And today, with us producing gluten free and us producing lactose and rice and where our rice comes from are different rice’s and different blends, there is a ton of that happening out there from a product standpoint. So, absolutely, it is a big part, and it's a big way to drive down costs from our business.

Thank you.

You are welcome.

Your next question comes from the line of [Shawn Tesoro] with Blackrock.

Hello everyone. Just a quick question, just kind of reconciling what Irwin said, I am sorry what Ira said in reclaiming $6 million to $7 million of the costs from pricing overtime. This quarter, you offset $10 million in costs with $1 million in pricing, are we kind of in the current quarter one, we are in, are we at half like 50%, because you left kind of 90% out there in the past quarter. And I know, as we get to kind of half too, it should be closer to the parity but I am wondering if you could just help me with that?

Just what Ira said is basically, Shawn, we had hit us in this quarter $7 to $8 million in higher cost. We are able to offset that by $1 million.

Okay.

And what we'll get over the next three quarters, including this quarter is the full benefit of our price increase. Our full price increases never came into place until August 18th and we are able to only benefit $1 million, where from a pricing standpoint we got the cost that hit us all July 1st. And that was the same uncertain tofu product that was the same on grocery-frozen snacks, some of the UK products; also we paid a much higher premium for corn in the first quarter.

And it's not --

Go ahead.

Go ahead.

And on a standalone basis, so if we are just looking at the cost and taking the pricing, how much can pricing offset and then how much is coming from productivity? Because I got to imagine it's all not coming from pricing or you don’t want it all to come from pricing per se?

No. It's not going to all come from pricing. It’s going to be continuing productivity. And just to make sure we get the numbers right, it is $10 million that we saw on the input side as inflation. Irwin, $7 was really the percentage of inflation there. So, it was $10 million in inflation that we saw. We saw about $1 million to $1.5 million come through in the current quarter in productivity improvements. And we saw about $1 million come through in the quarter in pricing on the recently effective August price increase. Now remember, there were other price increases that we put through in earlier quarters, which have now matured and did help in terms of comparing sales this year to sales last year in the like quarter. The million I referred to was only the impact of that most recent price increase that we called out.

Okay. So that number pricing offset is somewhere higher, 3, 4, wherever it be?

Yes that's correct.

Yes, and Shawn just to be very clear, last year we got $12 million, $13 million in productivity as a company. We got about $12 million, $13 million in pricing and the rest came from higher sales and some other costs. We're looking for pretty well the same this year. And, we're looking for additional costs as you heard me talk about before and some other belt tightening just some of the unknowns out there.

Okay. So kind of parity between the pricing and productivity, is what kind of softly --

Yes. Absolutely.

And the productivity plan, you know that has been in play since last year. And, you know I think there is some good opportunities and Jim Meiers who heads it up from a major corporate level and you heard Peter McPhillips talk about take $1.5 million out in to UK and I have been on the phone with Canada some of things we are doing there. So, there is some major initiatives going on here. And that is a big part of our plan.

Okay. Great, thank you Irwin.

Thank you, Shawn.

Your next question comes from the line of Andrew Wolf with BB&T Capital Markets. Andrew Wolf - BB&T Capital Markets: Hi, good afternoon. You mentioned the Nielsen not capturing a lot of the channel.

Yes. Andrew Wolf - BB&T Capital Markets: Is it fair to say we should just take away from that that you are seeing better sales into those companies that don't report? And if that is accurate is it more new distribution or is it more reorders? Since, the archives in the article is saying that organics are slowing using Nielsen info?

So Andy, we are seeing both. You have heard Trader Joe's, Whole Food, Wal-Mart, Independent, [Babies 'R' Us] Costco, all of them, convenience stores, all them are absolutely are not part of Nielsen's okay. So that is number one. Number two the other thing which I mentioned before, you heard me name some major brands, and I have in front of me whether Gerber organics, Smucker's organics some of those or dual organics where we have seen absolutely some falloff in a lot of those organic brands. So it’s a combination of both, but you are seeing some great increase from a Hain side in those accounts that are not covered by Nielsen's. Andrew Wolf - BB&T Capital Markets: So it's more you are taking share as a category maybe actually slowing as Nielsen is reporting is that how you are looking at it? Or I'm just trying to figure out if Costco is a proxy for a non-Nielsen measure channel is growing faster than the Nielsen measured channels?

Well, I would think Costco and some of these other are, mass markets some of these other are absolutely growing faster than Nielsen measured channels. Andrew Wolf - BB&T Capital Markets: Okay. So it sounds like a combination of both you are gaining relative shares, some brands recede and some of these non-measured channels?

Well, I think what's important is our model has changed. Hain Celestial, was always a big player within the natural organic industry which it is. But the consumer is demanding more and more natural organic products and more, more classes of trade. And we are out there servicing with our portfolio more and more natural products. Still today in supernatural’s you’re going to go in there and buy anywhere 14 to 1500 of Hain natural Hain products in lot of supernatural’s or independents. You will not find that many in supermarkets or mass markets, but you’re going to find a lot more stores out there. And the focus of our group is really to grow our business statewide, nationwide and globally. Andrew Wolf - BB&T Capital Markets: Okay. And just wanted to ask you, am I still on?

Yes. Andrew Wolf - BB&T Capital Markets: Okay. Sorry. The earnings, the consensus progression for Q2 and Q3 and Q4 is almost the same, it’s not exactly the same but is 12%, 17% and then 9% in Q4, because of the low tax rate last year. But that’s pretty tight and everything you're saying from my point of view sounds like pretty backend loaded earnings growth including the hedges coming off. Right now you’ve got a pretty aggressive FSIs against the tea businesses moving the product, the FSIs cost you something. It sounds like the UK is still maybe at best in a very early turn or let’s call it an early turner. Would you care to comment on that whether you think the consensus might be a little too smooth and it should be a little more back end loaded?

While I think we have always said that, it should be back end loaded, because of pricing, getting efficiencies of our acquisitions and --

And the anniversarying of input costs.

And the anniversarying of input costs. I think absolutely we've said that, but and that is approved here in the first quarter. And that's why we set guidance for the full year and we focus on that. But I step back today and feel good about how sales are growing. I feel good about where our margins, about our price increase having a good handle on commodity costs. And really haven’t to diversify of our portfolio and brands. Yes, we still got some challenges in the UK and we know, we have to work on it. And you heard from Peter McPhillips knowing what we got to do there. But on the other hand, Andy in six weeks from today half of the year is going to be over. So I mean we are pretty far out there already with plans and execution. So Andrew Wolf - BB&T Capital Markets: Okay. Thanks.

Thank you. I think, this is the last question.

We have time for one final question. Your final question comes from the line of [Bryant Chuckwin] with RBC Capital Markets.

Hey. Thanks for taking my question guys. Ed was unable to get on the call today. Just two quick ones. It seems like the Personal Care, if there is one area of your business that would have a little bit more impact, see some impacts from kind of deteriorating economy it would be there just because people view those as a little bit more of a premium product. I just wanted to kind of get your thoughts on that and whether or not you are even able to kind of see any weakness given that sort of muddling of the situation from the SKU rate?

At this point, we continue to see good solid consumption in Personal Care. We don't see it getting softer yet. As I said, we saw double digit growth in this quarter and October still looks good. We are not seeing a falloff, I understand your concern and it's something we are watching pretty closely. But I think this is where it’s important to be a number one or number two brand, because there is going to be falloff at the fringe this year. And but there are brands like Jason, Avalon and Alba have been core brands in this category for a long time.

And I think Bryant what we see here is we have gone to the trade and sort of looking to remove slower selling SKUs and coming in with faster selling SKUs and taking that space. So I think from that standpoint, that's the benefit and that's why we are seeing. As John said, his margin being up two points, but I think John hit on a good point, which I tried to hit on before. Listen, these tougher economic times, there is some benefit for people here and hopefully it’s smaller brands, weaker brands that can't support their brands go away there is going to be other opportunities in space. And Peter McPhillips and I have been pulled into situations, where potential vendors could go bankrupt and a retailer doesn't want that is there an opportunity for us and can we supply that? So, I think that's something that with a strong portfolio and strong balance sheet, some of the things that we really are focused on ourselves. Listen as I said before in times like this, this is where you need a real tough plan, a great group of people, and brands and what we are seeing here in the natural organic industry, consumers want brands. A question continuously asked to me about private label. We are not seeing anybody hit the ball out of the park so far on private label and trading down the private label. And if anything, we are seeing in some maybe backup and some trouble in some of the private label areas. So, we are seeing that people want brands.

Great. Thank you, guys.

With that, thank you very much. That being our last question, I want to thank everybody for participating in today's call. As you heard me say before, we are definitely not in easy times. And when the going gets tough, the tough get going. But we are just as good at running the company in the [go-go] days as running them in the tough days. And it’s made up of good brands, good people, good strategy and good financial metrics. And as I said, I sit here today with a team that if you want to get war with this team, you are going to war with. And number two, I sit here with some great brands and diversified and absolutely not everything is going to go right, and we are watching some of these brands and just as the last question asked, is the stuff going to falloff from Personal Care? It could and no different than anything else. But we are focused on that and making sure that we are having Adam and his group and (inaudible) other teams out there being in her group are absolutely saying, Hey, we need five points more; we need five points more because if there is a potential falloff. So we are focused all over that. So, drive sales, drive sales. We are making our distributors, our customers work for their trade dollars for performance; it's just not, Here's a gift and that’s something that we are going to do. The other big thing today is spending our consumer dollars. We are spending it back towards the consumer, whether it’s a coupon drop, whether a coupon, whether it’s sense-off at retail. And a further example, we have seen some extraordinary results just on the Celestial Seasoning one dollar off all that drove sales. So, we are really focused on that. And with that, they always say, the last man standing got to eat. So, hopefully, they will continue to eat healthy foods. Everybody have a great Thanksgiving, a great holiday and thank you for listening to our call today.

This concludes today's conference call. You may now disconnect.