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The Hain Celestial Group, Inc. (HAIN)

Q4 2012 Earnings Call

August 22, 2012 04:30 pm ET


Mary Anthes - IR

Irwin Simon - Founder, President and Chief Executive Officer and Chairman of the Board

Ira Lamel - Executive Vice President and Chief Financial Officer

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

Rob Burnett - Chief Executive Officer, Hain Daniels


Greg Badishkanian - Citigroup

Scott Mushkin - Jefferies

Ed Aaron - RBC Capital Markets

Andrew Wolf - BB&T Capital Markets

Sarah Miller - SunTrust

Andrew Lazar - Barclays

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Good afternoon. My name is Stephaney, and I will be your conference operator today. At this time, I would like to welcome everyone to The Hain Celestial Fourth Quarter Fiscal Year 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will a question-and-answer session. (Operator Instructions) Thank you.

I will now turn the conference over to Mary Anthes. Please go ahead.

Mary Anthes

Thank you, Stephaney. Good afternoon and thank you all for joining us today, and welcome to the review of our fourth quarter and fiscal year 2012 results.

We are pleased to 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 in person, Rob Burnett, Chief Executive Officer, Hain Daniels Group from the U.K.

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 2011 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 under Investor Relations. Our call will be limited to approximately an 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, our Founder, President and Chief Executive Officer. Irwin?

Irwin Simon

Thank you, Mary, and good afternoon everybody. I hope you've had the opportunity to see the two releases that we released at 4 O'clock this afternoon. Well, first of all, it's our biggest year ever and it's our biggest net income and operating income year ever, and with great pleasure, I will take you through Q4 and our fiscal '12 numbers.

Our sales for the quarter $350.7 million versus $286.8 million which is up 22.3%, not included in our numbers is $23 million of discontinued operations which were ICL and our sandwich business. In regard for our full year, $1,378,247 not included in that number is $74 million versus $1,217,207 a year ago, up 24.3%.

Our gross margin in the quarter, if you take away our acquisition of Daniels and Europe's Best was basically flat and what a great accomplishment both, for the quarter and the year, 28.2 for the quarter and 28.8 versus 28.8 for the year considering all the input costs, considering our commodities and fuels and we were able to achieve a flat year-over-year on the quarters and year, excluding the lower acquisitions of gross margins which we talked about for the quarter, 26.6 versus 28.4 and actually for the year 27.8 versus 28.9.

Our operating income, which you heard me say, our biggest ever or biggest income producing year. For the quarter, 36.2 versus 28.6, and that's 26.6% versus a year ago, and for the full year $144.9 million, I guess we can round that to $145 million versus $111.5 million versus year ago, up 30% on operating income, so some great accomplishments on our operating income and our gross margin.

Our EBITDA for the quarter $45.6 million versus $35.5million, up 28.4% and our EBITDA for the year $179.1 million versus $141.9 million, up 26.2%, so again great accomplishments on our EBITDA.

Our adjusted EPS for the quarter $0.47 versus $0.36, up 30.6%, and for the full year $1.86 versus $1.43 up 30.1%, so some great growth. Our operating free cash $101.5 million versus $47.2 million, so we doubled our operating free cash, so let's go back and look at the year.

Fiscal '12 was a great year with many challenges up there from the commodities, from the economy, but again eating healthy has continued to be on the top of consumers' list. Our sales growth 24%, operating income growth 30%, earnings per share of 30%, productivity worldwide over $25 million, we're able to take pricing throughout the year for about 2%. Our market cap grew over $1 billion.

We reduced debt $90 million up to today and that's including with the Daniels acquisition. We went ahead last year with an acquisition of Daniels which was a great acquisition for us in the U.K. It was on trend. It was fresh soup, fresh juice, fresh fruit, fresh desserts, hot eating desserts, and still a lot of those things we will still bring to the U.S., especially our fresh soup and some of the fresh juice. With juicing become a big part of consumers' lives today, we see tremendous opportunities there, but it really allowed us to put a real foothold into the U.K. and we'll talk more about the U.K. and its acquisition in my presentation and Rob's in a little while.

We did a great acquisition in Canada in October with the Europe's Best. It gave the Canadian Group a good solid business in the fruit veg area, and with some great growth and it's really helped our business there.

Cully & Sully, which is a fresh soup, fresh meals business based in Ireland, gave us a foothold in Ireland and gave us some innovation to bring into the U.K. and with some new packaging and we're pretty excited about that.

New products, and I've always said this, new products are the lifeblood of any company and of course of ours. We introduced over $60 million of products and over 100 new products this year, so our pipeline of new products and innovation continues to be strong.

Hain Pure Protein, which we own 49%, the protein business which shows you consumers are eating antibiotic-free organic chicken and turkey. With Pink Slime that happened out there, consumers move more and more, eating more turkey and more chicken. Our sales were up 13%. Our pre-tax income was up 51%, and we continue to see great growth in that category.

As I talked on our last call, we would look at always to evaluate some of our assets, some of our businesses, and with the acquisition of Daniels and to reposition the U.K. we decided in our last call which we announced that we were going to divest our ICL business, which was a private label of ready-to-eat meals business which we felt just we couldn't take it to the next level. It was not a branded business and we decided to divest it. We have closed on that deal. We have sold it to Greencore and we feel good about that.

At the same time, we talked about our sandwich business. Some of it was branded with Daily Bread and some of it was private label, we have decided to divest that business, we have found a strategic buyer, we have entered into as a term, we expect to close some time in September and it is accretive to earnings and it is just not our strategy now that all that we have going on in the U.K.

The U.S. has integrated Sensible Portions, saw good growth in that business, cleaned up the portfolio and right are on trend for healthy snacks, for kid snacks and we continue to see that and we have tremendous growth opportunities in grocery which John will talk about.

Greek Gods which we acquired two years ago in July and the Greek yogurt category has grown tremendously. Today, Greek Gods has about 30%, 33% ACV with tremendous growth both, U.S., Canada, Europe and U.K., and we are pretty excited about that and the opportunities there.

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