Mary Celeste Anthes - Senior Vice President of Corporate Relations Irwin David Simon - Founder, Chairman, Chief Executive Officer and President Rob Burnett - Chief Executive Officer of Hain Daniels John Carroll - Executive Vice President and Chief Executive Officer of Hain Celestial United States Ira J. Lamel - Chief Financial Officer and Executive Vice President

Kenneth Goldman - JP Morgan Chase & Co, Research Division Amit Sharma - BMO Capital Markets U.S. William B.

Chappell - SunTrust Robinson Humphrey, Inc., Research Division Rob Young - Wm Smith & Co. Thilo Wrede - Jefferies & Company, Inc., Research Division Andrew P.

Wolf - BB&T Capital Markets, Research Division

Thank you, Lashonda. Good afternoon, and thank you, all for joining us today.

Welcome to the review of our third quarter fiscal year 2013 results and the announcement of our acquisition of the Ella's Kitchen brand. We have several members of our management team here today to discuss our results: Irwin Simon, our Founder, President and Chief Executive Officer; Rob Burnett, Chief Executive Officer, Hain Daniels; John Carroll, Executive Vice President, Chief Financial Officer, Hain Celestial U.S.; Ira Lamel, Executive Vice President and Chief Financial Officer; and Paul Lindley, Founder and CEO of Ella's.

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.com, under Investor Relations.

[Operator Instructions] Now let me turn the call over to Irwin Simon, our Founder, President and CEO. Irwin?

Thank you, Mary, and good afternoon, everybody. And I hope everybody's had an opportunity to go through our 2 press release.

You're joining us today from our new worldwide headquarters in Lake Success, which will allow us to expand and grow and consolidate our backroom functions on R&D, QC and technical and allow us to attract and retain a lot of first-class talent. Today, I'll briefly review our exciting third quarter results, our outlook for the future and talk about the exciting acquisition of Ella's that will allow us to create a global presence to feed infants, toddlers and kids, something very close to my heart.

As you are aware, obesity is one of the greatest health issues that faces children today. We are extremely proud of our third quarter fiscal 2013 results.

Sales remained strong and continue to be -- remain strong in April in all channels. Largest sales quarter in the company's history with $456.1 million, up 21.4%, and our ninth consecutive quarter of double-digit adjusted EPS growth.

Hain Celestial, and John will talk about it later, is up double digits, excluding Rosetto and Ethnic Gourmet frozen foods, which we intend to have deployed and now intend to divest in the up and coming quarters. Lower sales than expected in the U.K., which resulted from some jam and soup promotions, plus some foreign currency headwinds on sales and Rob will talk about that later, but Rob has a lot to talk about in regards to some new soup distribution and new products that will be launched in the U.K.

Our record sales, combined with improvement in gross margin, SG&A expense leverage enabled us to report GAAP earnings from continuing operations up 61% to $0.87 from diluted shares. And that included a $0.28 tax benefit, and adjusted earnings up 28.5% to $0.72 per diluted shares.

Our gross margins with all our headwinds on commodities, which we've talked about, 28.1% up 28 basis points. We've managed our SG&A, which shows how we've integrated the acquisition and how we've managed our cost down 1%, 15.5%.

Our operating income adjusted $57.6 million or -- up 12.6%, up 142 basis points. Our consumption numbers, measured by Nielsen, was up a strong 9.1% in the latest 4-week period and up 22% on a 2-year stack basis.

Natural organic products sales are helping to drive growth in the AOC. The total channel grew 2.5% in the latest 4 weeks with natural organic products outpacing that growth at 9.8%.

Conventional products are only growing at 2.2%. We believe there's a massive opportunity to expand our sales and distribution of our products within the natural organic industry.

For the last 52-week period, only 26% of consumers used natural organic purchases were Hain. We have a lot of room to grow and a lot of distribution opportunities with a 98% of consumers out there that are buying natural organic products.

In the U.K., we remain focused on our strategy to drive higher margins and brand growth. The integration of ambient grocery products and the elimination of certain unprofitable private label sales we previously discussed, we saw our sales today become a branded sale of 58% of our product sales, and we will continue to look at distribution, we will continue to look at eliminating unprofitable private label sales.

We've now on Hartley's, Sun-Pat, Gale's, Robertson's and Rosie's [ph] for 6 months. I feel really good about the acquisition, and Rob will tell you about the excitement and the new products around those brands.

It was a tough year for us in soup and much tougher than we planned, which Rob will tell us what -- some of the new things are coming and some of the new distribution. In the rest of the world, they contribute to our growth, too.

Canada was up 11% and with all of the challenges in Europe, we were up 3%, with good growth coming from Lima, Danival and our Rice Dream brands. With many other food companies experienced declines, it's great to see growth still happening for us in Europe.

Our brand performance in the quarter was tremendous. We had 14 brands grow double digits.

We had 6 brands grow in the mid- to high-single digits. Today, we have 8 brands that are $100 million plus.

These brands are positioned to grow to $200 million to $300 million. We have 6 brands that are over $40 million in sales, and we believe we can grow close to $100 million of these brands.

So it's like having a professional team that's ready to win the Stanley Cup and then the minor-league to bring players up to fill in for those brands as they hit those $200 million to $300 million levels. We drove tremendous growth in our recently acquired BluePrint brand, with great growth, great distribution and juicing is a hot category today and with retail distribution available for us, continue to watch out for BluePrint.

In Anaheim, in March, we introduced over 100 new products that will start to ship in June, as well as numerous new products in Canada and the U.K. in Europe.

Today, I am excited to announce the acquisition of Ella's Kitchen. In 1996, when I had my first child, I wanted to change the way the world eats for children.

That inspired myself to go out and buy Earth's Best, which at that time was a $14 million business. Paul Lindley, the founder of Ella's Kitchen and Ella's dad of course, named after his daughter, had very much the same vision on the other side of the pond.

In 2006, Paul started Ella's Kitchen and has become one of the fastest-growing and as I referred to, one of the hippest brands in the U.K. today in the organic food industry, with great sales in U.K., Sweden and Norway and the U.S., with a range of over 80 premium organic products.

With Paul's vision of Ella's Kitchen and Hain Celestial's vision of Earth's Best, we will create a Global Infant Toddler & Kids business, that Paul, myself and John and the teams together will work on, changing the way kids eat around the world. And I got to tell you, we are really excited about that.

Welcome, Paul, and as I said before, he is on this call today. Paul will run this division and work with Hain on this side and have the opportunity to work with Rob and their manufacturing on the other side.

Paul will report into John and have responsibility for the brands. With our manufacturing facilities in the U.K., with soups, meals and a lot of other products, we have the ability to make a lot of other Ella's products.

Ella's Kitchen is positioned for a significant growth as we see opportunities to expand in Europe. There is no Ella's sold within Europe today.

We're pleased to have the opportunity to complement the phenomenal job our Earth's Best team has done on the Earth's Best brand and taking a lot of that intel to the Ella's brand and vice versa on the Earth's Best brand. We plan to grow Ella's Kitchen by leveraging our existing distribution platform and expanding it with a lot of other Hain products.

As I said on previous calls, we plan to invest in our infrastructure to support our growth. This year, we built 2 new plants and retrofitted 3.

We'll continue to invest to support our growth and avoid having [indiscernible] stocks and plenty of capacity to grow, which is key to demand and the consumption of natural organic industry. We continue to be optimistic about the natural organic industry.

Along with whole foods and others, we support the mandatory labeling of products for GMOs. We have over 2,000 organic products, and 99% of our products are made from non-GMO ingredients.

This will be big, stay tuned, and very few other companies are positioned like ours in regards to GMO-free products. When you look at the entire food industry, our products are up over 3x in AOC channels -- AOC channels and what conventional brands are.

Natural organic is growing. It's a major part of the growth within the food industry today as consumers convert to more and more healthy foods and healthy lifestyles.

We believe these trends will continue to grow and will continue to help our long-term growth of our Hain business. I will now turn the call over to Rob Burnett, who will talk about the U.K.

Thanks a lot, Irwin, and good afternoon, everyone. Sales in the U.K.

for Q3 were just over $121 million, up 78% on last year. And operating income, $8.8 million, up 43% last year.

Now we had turnover in the quarter of 2, 3 month of sales from our ambient grocery brand business acquired at the end of October. Four of our brands delivered very high double-digit growth in Q3, partly because airports were up 17%, Cully & Sully fresh soup from Ireland was up 15%, [indiscernible] desserts were up a fantastic 62%.

And Linda McCartney meat-free was up 44%, 11% ahead of the frozen channel and with $1.5 million of brand-new sales coming from our chilled range just launched which helped propel the brand's growth of over 44%. We do have advised and Irwin mentioned some underperformances in the quarter, costing us around $10 million in sales.

New Covent Garden soup was affected by 2 key customers reducing promotional slots as they to hold on to margin, Hartley's jam and marmalade activity was canceled by our largest customer as we negotiated the trading grounds agreement and that has subsequently been settled and are off to a great start in Q4 with that customer. And Gale's honey, where we lost some distribution due to some service issues and some [indiscernible] activity.

So these 3 brands costed around about $10 million. There were some strong performances from our private label business and just to remind everyone, over 50% -- 51% of all food sales in the U.K.

come from private label. Our food category, which is predominantly private label, was up 17% overall.

Our private label soup business was up 20%. And our chilled desserts business, up 13%.

We, of course, in the U.K. have a slightly more branded ratio than in label, with the acquisition of Hartley's business, we're up around, as Irwin mentioned, 58% of U.K.

sales are branded; 42%, private label. As we trailed in the Q2 earnings, the private label frozen desserts and private label meat-free, we did embark on a discontinuation program, which meant they were down 13% [ph] and 36% in the quarter.

We've taken a very strong line here to root out unprofitable line and make way for new growth. We launched over 165 products in the third quarter.

Of note, in the brand area was a range of ready meals and introduction of a new desserts category for Cully & Sully in Ireland. We started a brand of [indiscernible] of fruit salad with a business called Flowette [ph] and we introduced the Linda McCartney brand for the first time in Australia, with high hopes for that business overall.

Now over 100 of these, 165 products, came at the introduction of our new superior food business, which replaced [indiscernible] in our [indiscernible] facility. I'll talk a little bit more about that in a minute.

Just to update everyone on the synergy that comes from the Daniels and [indiscernible] acquisition, although I'll just briefly mention, we're really pleased with Linda McCartney meat-free channel. It delivered over $1.5 million in the third quarter, off to a very promising start and we'll be adding new segment product for this range in the fall.

Greek Gods smaller parts will be launched in [indiscernible] towards the end of Q4, as we found that the larger format has somewhat limited trial and we have high hopes of the smaller part will continue the great start we've had with Greek Gods. As I mentioned, over 100 new food products were launched and we [indiscernible] over 2 million pounds of food sales in the region [ph] in this quarter.

I'm very pleased with the commitment and application showed from every one of the sites in taking on this very significant change process. It's only 6 to 8 weeks ago when the site was making [indiscernible].

And we've already won 2 new customers in the shop for you to thank [ph] and so it's a great start to the transition. The soup team won a very important newer [ph] label contract with Sainsbury's, worth approximately $3 million in the full year.

This will commence in September and it cements our position into this key customer. Project Castle, which you heard me talked about before, this is the customer-exclusive new desserts facility in Fakenham, continues to progress on target towards a launch at the end of this month in May.

Plant commissioning was over finished and product trialing is well underway. We've got a real terrific response from local people in terms of recruitment.

We plan to introduce over 100 new products in this facility and start with launches between May, of this month, and February 2014. We expect the business to deliver $45 million of new sales in the full year, which would be fiscal year 2015.

And really interesting is and really exciting project, we commenced the trial with a global coffee shop chain for a range of 12 fresh and natural juices, smoothies and functional drinks, which we expect could lead to a significant new business in the U.K. and possibly here.

The trial has been very successful to date and we expect to roll out to all of these coffee -- all of this business -- coffee shops over 600 stores in June in 2 months' time. Moving onto the integration of our Premier Foods grocery business unit that we acquired in October.

As we have significant number of exciting projects underway here and this businesses is really shaping up to be a great acquisition and a fantastic platform for us to grow our grocery business in the U.K. The commercial team is now almost complete and are up and running in a brand-new office location, not quite to the standards of [indiscernible], well, almost, right next to our [indiscernible] and both the Hartley's jam and jelly brand and Sun-Pat peanut butter brand will be relaunched later this year with new packaging design, [indiscernible] innovation and we've really been encouraged by the consumer research behind it, which has been very cost driven, very supportive in the development of both brands.

Hartley's new product development will focus on a healthier theme with the launch of a one fruit portion jelly, which is one of your 5-a-day which is a key health driver in the U.K., we'll be reduced -- we'll be launching brand into reduced sugar jam on the for the very first time and we'll launching honey jam, which is jam sweetened by honey. And so the real focus for Hartley's is on a healthier food.

Sun-Pat. Sun-Pat has lots exciting stuff coming from June and July onwards, we're using the, obviously, experience of our U.S.

business to bring exciting new products to the U.K., including cashew, almond and chocolate peanut butter, lots of great new stuff with Sun-Pat. I briefly touched on earlier that Q2 saw the resolution of trading plan negotiation with our largest customer, which has been impacting sales negatively due to a lack of promotional activity, we've now agreed to a strong trading plan with this customer, and we're already showing dividend with March being far the strongest month to date for this customer.

We also won back a private label jam contract previously lost by the previous owner, [indiscernible]. This starts in August, and should be worth over $3 million in sales in the next fiscal.

And we hope to add another new private label contract in time for first half of FY '14. And finally, preparation work is well underway with our launch into gluten-free from this grocery business unit and utilizing all the groups' assets and we are well underway for a Q1 launch.

So in summary, despite some tough trading conditions in the U.K., we saw some really strong performances from the leading brands and categories, and we have a great number of initiatives underway to support underperforming brands back to growth. We are very bullish on organic growth prospects crystallizing in the next few weeks and months.

Now I'll take you through a little bit of this in each of our division. The grocery unit integration is largely complete and we have a number of exciting entity projects in the pipeline to fuel growth led by Hartley's in some parts, marketing those in jam, jelly and peanut butter.

Our food-to-go and desserts business unit have been a very important launch of Project Castle this month to be delivered in Q4, which in time will deliver significant new sales for the group and we also have various initiatives underway in our drinks category including the expected rollout of the global coffee shop business in the U.K. and the launch of BluePrint products later in the year.

And finally, the soup and meat-free business unit have just won an important new private label soup contract for a key customer and are focusing on a very exciting plan to return New Covent Garden soup to growth. This plan has quality upgrades, a new soup, super healthy range, a market first in packaging innovation and this is key.

We truly expect to have won back all last year's lost distribution ready for this fall's [indiscernible] start. In addition, the team has a current spring board of high-growth in Linda McCartney meat-free to expand on in chilled, frozen and export markets.

And the recent horse meat scandal in the U.K. has been a real nice stimulus for the vegetarian and meat-free categories.

So lots and lots of high-growth prospect in play. With that, I'll hand you over to John.

Thanks, Rob. Good afternoon.

Q3 was a really strong quarter for Hain Celestial U.S. Key highlights from the quarter included Q3 net sales of $277.6 million, up 9.3% when adjusted for the transfer of Costco Canada Sensible Portions sales to our Canadian operation.

Importantly, our net sales growth X Rosetto and Ethnic Gourmet, the 2 brands Irwin mentioned that we're going to divest, was a robust 11.1%. Our latest 12-week Nielsen all outlets combined consumption growth was 8.2%, which is almost 4x higher than the AOC total channel growth.

And our consumption growth X Rosetto and Ethnic Gourmet was up over 10%. Our growth was achieved even as we lapped double-digit Q3 year-ago comps, resulting, as Irwin mentioned, in a 2-year stack consumption growth of over 22%.

And these results were driven by gains across the portfolio, including 17 brands with double-digit or high single-digit increases. Also, in Q3, our gross profit margin was up over 200 bps as we were able to offset $6 million in inflation with improved mix, productivity savings and increased trade spending efficiency.

And our Q3 U.S. operating income was $51.3 million or 18.5% of net sales, up 30% or 300 bps, respectively, versus year ago.

Finally, our U.S. cash conversion cycle was down 3 days despite increasing inventory by $5 million versus the previous quarter to improve customer service levels.

We offset this inventory increase with higher sales, along with improved payables and receivables while at the same time, increasing our grocery and snack service levels by over 300 bps. Now the U.S.

business model has consistently delivered against 4 key financial objectives. We target mid to high single-digit top line growth, margin improvement of 50 to 100 bps, double-digit operating income growth and increased operating cash efficiency.

And as we look at Q4 and beyond, we continue to be optimistic about the U.S. business despite tough comps and some commodity headwinds.

We continue to see strong momentum across the business and believe it's sustainable on, and you've heard me say this before, 5 key factors. The first factor, we continue to see strong U.S.

consumption momentum. Q3 was our 13th conservative quarter of strong consumption growth.

Our year-ago comp growth was a double-digit quarter and we still drove strong consumption gains. And remember, our business is not a 1-, 2- or 3-brand portfolio, we have 20-plus brands and still drove consumption growth almost 4x the category average.

Now we feel confident our consumption growth will continue given our second factor, which is our AOC distribution growth. Q3 AOC distribution was again up 5% versus year ago.

This continued the acceleration of our distribution growth that we first saw in Q2 as we continue to fill distribution whitespace at key customers and on key brands. Now last quarter, I talked to you about some key customers that we got new distribution.

I'm going talk to you about some brands that we're continuing to get new distribution on, including Earth's Best, Imagine, Dream, Greek Gods, Celestial Seasonings, Alba, Spectrum, MaraNatha and Health Valley. Our third factor behind our optimism is our strong innovation results.

Our year-to-date new product sales are up 50% versus year ago. And last year's new product sales was a very strong comp, because if you recall, we had over $20 million in new Earth's Best pouch sales last year.

We're seeing strong innovation results across all our businesses. I'll just give you a couple of great new products.

For example, Earth's Best sensitive baby formula, has been a great hit for us. Alba's Good & Clean detoxifying cleansers have been great for us.

Celestial Seasonings' Sleepytime Kids and Sleepytime Peach, again, 3 really strong -- 4 really strong new products that have been helping us drive this great year-on-year increase. And we think is going to continue given that we've just launched 100 new products at our last quarter's Expo West, and they're going to keep the momentum going in this area.

Now our fourth reason why we're optimistic is our proven productivity process. I mentioned on the last call, we are encountering some commodity headwinds.

I mean, almond, chia and dairy pricing was up significantly in Q3 versus a year ago. Now we've announced prices on these products, but these price increases yielded no relief in Q3.

The key to offsetting these cost increases was leveraging our proven productivity function for additional savings. Year-to-date productivity savings were over $18 million or over 50% higher than they were at this point a year ago.

And look, we've talked about some of the key initiatives. For example, the internal production of Earth's Best pouches, the increased throughput we're seeing at Terra, Personal Care and MaraNatha facilities and our new distribution network optimization.

But importantly, we're also implementing a new set of productivity initiatives, including our new more efficient Sensible Portions plan to deliver savings to help us offset Q4 and FY '14 cost increases. The final reason for our optimism is our BluePrint acquisition.

Q3 saw strong BluePrint sales momentum driven by increased distribution across Whole Foods Market. The BluePrint team has now got and implemented an aggressive innovation program, so we can introduce some more new delicious fresh pressed juices at this customer.

At the same time, they're working with the Hain Celestial U.S. team to drive distribution expansion and significant productivity savings.

This is an exciting business that will be a strong contributor to our FY '14 growth. So to close, Q3 was a strong quarter for Hain Celestial U.S.

highlighted by 9.3% top line growth, strong AOC consumption growth, including a 2 year 22% comp, margin expansion of over 200 bps and 30% operating income increase. And we continue to be very optimistic about our go-forward prospects given our consumption trends, our new product pipeline, our growing distribution base, our productivity and our BluePrint and now, our Ella's Kitchen acquisition.

Now I'll turn the call over to Ira Lamel.

Thanks, John. Good afternoon, everyone.

I'm going to take you through some of the financial highlights for the third quarter. Income from continuing operations in the third quarter this year was up 68.5% to $41.8 million compared to $24.8 million in last year's third quarter.

We earned $0.87 per diluted share from continuing operations on a GAAP basis this year, an increase of 61.1% compared to the $0.54 per diluted share in last year's quarter. Adjusted income from continuing operations was $34.3 million this year compared to $25.7 million last year, improving by 33.8%.

Adjusted earnings from continuing operations was $0.72 per diluted share compared to $0.56 in last year's quarter, improving by 28.6%. Our adjustments to net earnings are from acquisition-related fees and expenses, including integration and restructuring charges we've incurred of $4.3 million and accrual for litigation in the quarter of approximately $2 million and the factory start-up in our new German nondairy facility of $600,000.

We also adjusted for net unrealized foreign currency losses of approximately $1.9 million, principally on the conversion of British pounds related to the finance cost of the U.K. acquisition.

Our tax provision in the quarter this year was reduced by a $13.2 million tax benefit, arising from a worthless stock deduction, and we've adjusted for that as well. Gross profit in the third quarter on a GAAP basis was 27.7% this year compared to 27.9% last year.

Gross profit on an adjusted basis was 28.1% compared to 27.9% last year, an improvement of 20 basis points, mainly driven by production efficiencies, improved service levels and the elimination of low margin SKUs. This improved gross profit on an adjusted basis was achieved in the face of input cost inflation amounting to approximately 3.7% in the third quarter this year measured against the third quarter last year.

And this rise in inflation came in large measure from the commodities that John talked about earlier. Our SG&A for the quarter, excluding acquisition-related expenses, integration costs and the litigation accrual, was 15.5% of net sales compared to 16.6% in last year's third quarter.

The 110 basis point improvement comes from our focus on leveraging our G&A spend across all of our segments, adding sales from organic growth, as well as from our recent acquisitions. Operating income for the quarter was $51.1 million or 11.2% of net sales on a GAAP basis compared to $41.6 million last year or 11.1% of net sales.

On an adjusted basis, operating income was 12.6% of sales at $57.6 million this year, increasing 36.7% from last year's $42.2 million or 11.2%. Our effective income tax rate from continuing operations was 3.7% for the third quarter this year compared to 33.8% last year.

This low tax rate in the quarter came from the benefit of the worthless stock deduction I mentioned earlier. Our adjusted effective income tax rate from continuing operations was 34.3% of pretax income for the third quarter this year compared to 32.8% last year.

Although the current adjusted quarterly effective tax rate is above our annual expectations, our adjusted tax rate year-to-date is 33.8%, which tracks our expectation of 34% for the full year. Our balance sheet continues to be a strong one.

Working capital was $297.1 million with a current ratio of 2.2:1 at March 31. Our stockholders' equity is $1.1 billion.

Our debt as a percentage of equity is 56.9% and debt to total capital capitalization is now 36.3%. Total debt at the end of the third quarter was $634.7 million.

Debt declined from last quarter by $5.8 million, even though we spent $24.1 million in the quarter of capital for factory expansions and the leasehold improvements, furniture and fixtures for our new corporate headquarters in Lake Success. For the trailing 12 months through March 31, operating free cash flow was $55.6 million this year versus $79.3 million for the prior year's 12-month period.

The decline is principally the result of the previously mentioned major capital projects during the 12-month period. We expended $40 million more on CapEx in the latest 12-month period this year versus last year.

And as we've been reporting in prior quarterly calls, this increase in capital expenditures was expected. Cash conversion year-over-year is down 2 days to 64.

Days sales outstanding was 45, improving by 2 days. Our inventory days are 66, increasing by 4, as we focus on improving our customer service levels on certain U.S.

brands, as John mentioned. And our payables are 47 days, improving by 4 days.

We are updating our previous sales guidance today to reflect our 9-month actual results and to reflect the Ella's acquisition. We now anticipate our full fiscal year 2013 sales to come in the range of $1,727,000,000 to $1,734,000,000.

Our earnings guidance is now $2.43 to $2.47 per share. These estimates are provided on a non-GAAP basis.

And at this point, we'll open up the call to questions.

Irwin, I'm a little confused perhaps and maybe you can help me understand why the top line was lowered pretty substantially. You're adding Ella's to that, so you're suggesting perhaps that the organic number is coming down even more.

Is it because you're taking out that SKU rationalization or you're including that SKU rationalization in Europe -- in the U.K. rather, that you weren't necessary last quarter or did the business in the U.K.

just worsen a lot more than what you thought?

No, no, no. A couple of things.

Number one -- I'll let Ira take you through.

Yes, Ken, the guidance we gave at the second quarter would have implied a certain level of sales for the back half of the year. And as we now look at our experience through the third quarter and looking at the whole back half, we've adjusted to reflect that experience in the third quarter.

In the third quarter, we had about a $3 million, $3.5 million foreign currency reduction in sales from the date that we gave guidance. So the exchange rates changed on us, and it impacted us negatively.

We're projecting those exchange rates will stay where they are today, which impacts the fourth quarter by about $4 million as well. You take those 2 items, and we just had a $7 million effect on what our back half of the year expectations were.

We also had promotions that were anticipated for the back half which will not come through. That cost us about $10 million in volume.

And our Ethnic Gourmet and Rosetto businesses have underperformed and had a further decline from where they were and from where our expectations were for the back half, and that's about a $6 million impact on our total guidance. So we've really effectively adjusted by about 23-or-so million dollars going downward, and then we took Ella's and our expectations for Ella's for the last 2 months of our fiscal year and we added that in and our expectations there are circa $10 million.

You got it? Ken, do you have it?

Okay. I do have it.

It's fair to say it's a little disappointing, though, right? I mean, you have the Ethnic Gourmet and the Rosetto certainly didn't do as well as you'd hoped.

You have -- currency is not your fault, but there's a couple of things maybe that worked against you that -- in the promotional side, right, that you didn't expect would happen. So I think it's fair to say that the U.S.

did fair, but the U.K., maybe, did a little worse than what you thought and some of your, maybe, discontinued ops did a little worse than you though also, right? I mean, I'm not trying to be too negative, it's just...

Ken, just to come back. The U.S.

was up 11% and I think, as we've said before, we deemphasized Rosetto and Ethnic Gourmet as we were selling the business. And in regards to the U.K., in regards to Hartley's and our soup business, there was some promotions that didn't happen, that is about a GBP 7 million, GBP 6 million issue over there, and then in the back half, it's 6 million to 7 million on currency.

I mean, it's not it didn't perform, it's 2 or 3 things in regards to promotions and businesses we deemphasized. And they're currency that we when we gave guidance in February, the pound was at $1.60 and ended up at $1.51.

I mean, Ken, we're still on 9% to 11% organic growth, and we still got 9% consumption growth. I don't know what's too disappointing out there and as I said before, in regards to AOC, where conventional food companies are at 2% and at the stack at 22%, I'm not understanding disappointing.

I mean, we didn't get 2 promotions. Those promotions will come back.

Do you get them all? That happens sometimes.

It was with Tesco and they got canceled for some certain reasons.

Ken, if you go back and you look at the guidance that we provided earlier in the year and then you adjust for what we told the Street we were going to expect to have happen, and you look at last year's fourth quarter sales, if you roll all those numbers through, you will see that embedded in our current updated guidance is 9% to 11% organic growth. So I'm very comfortable with where we're at and...

Ken, just on an earlier note, in regards to the U.S., our U.S. business, excluding the Ethnic and Rosetto, I mean, you were looking for 10.5%.

John was up over 11% growth within the U.S. I'm not sure that's disappointing.

Well, it's not a big deal. It's more semantics and everything.

I just wanted to really understand why you were taking the numbers down and you did clarify that for me.

As we said, there's currency, we're divesting the business that we've talked about that has hurt us in AOC, that we're just not focused on anymore. And as Rob said, there was 2 promotions on Hartley's jam and soup that really didn't happen, that cost some GBP 6 million to GBP 7 million in sales.

We look forward -- I said April sales are pretty strong. And in the quarter, about $10 million of Ella's we have it for 2 months, so we're expecting some good strong growth in the fourth quarter.

Just one quick follow-up, and I'm sorry for hogging the call a bit, but that 11% number, it's not exactly like-for-like with the 9.4% number you gave last quarter. If we were to like-for-like that, what would that number have been, right?

If we were to include Ethnic Gourmet and Rosetto, what would that organic number have been?

Actually, that is -- the 9.4% includes Ethnic and Rosetto.

Right. But the 11% this quarter doesn't, right?

No, no. Ken, remember what I said was -- and actually, let me pull this here.

Our net sales were up 9.3% when adjusted for the transfer of Costco Canada. That's all in.

And then when you take out Rosetto and Ethnic, it's 11.1%.

Which quarter are we talking here, second or third?

Third.

Third.

Third. Okay, perfect.

So we're reporting third, Ken.

No, no. But I was -- the 9.4% came in the second quarter as well.

There's too many 9.4s.

Right, right, right. Ken, so to your point, it is -- we're very consistent, 9.4% last quarter, 9.3% this quarter.

Irwin, can you talk about the rationale for acquiring Ella's? I mean we have a very strong brand in Earth's Best and that's what I would have expected you to use as a platform to grow internationally.

Can you talk about the thinking behind acquiring Ella's?

So number one is Ella's today is one of the #1 organic food companies in the U.K., Sweden and Norway. And we felt taking Earth's Best and trying to grow it into the U.K., with Ella's hip plum, Hain is already there, would take us a lot of dollars and a lot of time to do it.

And we think, from an innovation standpoint and taking a lot of the intel of Earth's Best that we have, that we could really grow out a global infant, toddler feeding business here. The other thing is, for a premium brand in the U.S., along with Earth's Best, big opportunity in the U.S.

for a premium brand. And you got to remember, the other thing is, I mean, is Ella's does not sell jars.

So this will help Earth's Best go into Europe and the U.K. with jars.

This will help Earth's Best to go in the U.K. and Europe either with baby formula and nappies, as they are referred to in the U.K., or diapers.

Today, we have a very successful frozen business. So we felt great category infant, toddler feeding and Ella's would springboard us to really get us in a much bigger way in a faster period.

And a nice complement in the U.S.

And a very nice complement, as John is saying, in the U.S. in regards to a premium organic baby product, and Ella's distribution complements Earth's Best.

Very little overlap.

Very little overlap where it's -- it's biggest customer today is Target and a lot of distribution within grocery in the mainstream mile of Kroger and other retailers out there.

On that arena, as you expand Ella's into traditional channels beyond Target, would some of the shelf space, cannibalization with Earth's Best, should we expect that? Or are these 2 going to...

So first of all, there's 3 other organic baby food companies out there.

Pouch.

In the pouch business. So we think there's opportunity to take space away from them.

And we think there's, as we grow our business, there's certain places that Earth's Best can't go, Ella's can and vice versa and there are certain product lines. Again, Ella's does not do jars and we will not take Ella's into jars.

Also, there's very little overlap on flavors between Ella's and Earth's Best in the U.S., so they're serving a different need.

And there's a lot of innovation that Ella's has done that can quickly bring to Earth's Best in regards to help Earth's Best with some of its innovations. But combined together, we'll have close to $275 million infant, toddler feeding business that we think is a great growth business on a global basis.

I mean, Ella's has looked at Australia, Ella's has looked at Russia, Sweden, Norway, has not sold anything into Europe yet and with our infrastructure in Europe, we can ultimately help get it here. The other thing is, there's a lot of synergies of purchasing procurement here that will help both brands.

All right. And if I may ask a quick follow-up on U.K., Rob, can you please talk about the growth trend for your branded and private label portfolio?

Yes. It's obviously, brand, so it's different for each one.

But I think the key underperformer has been soup, and I think I alluded to in the call that we fully expect all our lost distribution [indiscernible] very strong [indiscernible] with a very good meetings with a number of customers. And desserts is the star performer, high double-digit growth throughout the business, along with the meat-free business.

And I think the meat-free business has benefited from the, I don't know if you know about the horse meat scandal that's been in the U.K. So both ourselves and Quorn, the other leading meat-free people [indiscernible] have been doing very well.

And I mentioned, our meat-free business is up over 44% in the quarter, including the successful launch of our new initiative into the chilled meat-free. So I think you're seeing very similar trends in the U.K.

to the U.S. and that people are heading for healthier categories.

Our soup business in Ireland is doing very well, double digit. And in Hartley's, [indiscernible] the grocery brands we bought, the fruit dessert business, up 17% and it's doing very well.

And we think a lot of opportunity that could move up even healthier, as I mentioned. We've got a big summer launch with the one fruit portion part [ph], which -- there are a lot activities in the U.K.

and from the government, promoting more and more too the 5-a-day, and this will be the first time Hartley's has been able to register one of their 5-a-day [indiscernible]. So fruit, vegetables and meat-free products are the highest growth areas right now in the U.K.

And Amit, just one other thing to add to that. I mean, along with Ella's, we get Paul and his team that has created a great brand within Ella's and a great business.

And the combination of the Hain team and Earth's Best in the U.S. and the Ella's team, there is such a big opportunity to grow this category.

Everybody said before, one of the biggest opportunity is changing the way infant, toddlers and kids eat. And pouches today are one of the fastest-growing items within the grocery store.

I just wanted to do a quick look back on Premier, and 8 months ago, when you had talked about it, when you announced it was -- it had $250 million in kind of trailing sales and it was expected to be $0.25 accretive in fiscal '13. With kind of the puts and takes on Premier in terms of walking away from some business and what have you, what's the right number in terms of kind of a revenue run rate we should be looking at?

And then also, on accretion, I mean, do you think you'll still end up with that kind of $0.25 in this fiscal year?

So on the accretion, definitely on the $0.25. On the sales, as we've eliminated so far, and there was currency there, it was 250, I think it's about a $200 million overall run rate, I don't...

The overall run rate is more than $200 million. We originally anticipated about $180 million of sales in the 8 months of our ownership during this year.

We then took that down because we did our post ownership revenue and eliminated about $20 million, $25 million of sales. And we've tracked to that.

We'll then get some of our own initiative, on our own initiative organic growth out of the remainder of the business. So we're confident that's going to be hitting the numbers that we originally said it would hit on an annualized basis going forward.

The sales reduction that we've taken this year is kind of a one-time sales reduction and the SKUs eliminated are not SKUs that were providing any real profitability to the business, which is why we've maintained the $0.25 earnings power in the 8 months.

And Bill, you've heard what Rob said before. I mean, this brand has had no marketing, no new products, lost a lot of private label business over the last couple of years.

And Premier were just running it for cash, where we never got price increases and walked away. So number one, there's -- it's a British brand, British retailers are focused on British brands today after this whole horsemeat scandal.

It's a well-known brand. We've cleaned up the brand in regards to ingredients, a lot of new stuff coming out.

We got a lot more efficiencies and plans. So to date, we're very, very, very happy with the acquisition and we have hit the $0.25 on earnings per share here.

Okay. And then switching to Ella's, I mean, I understand the terms weren't disclosed.

But can you give us some kind of color in terms of maybe are margins similar to corporate average? And is the accretion number you're expecting including or excluding any synergies, or are there potential kind of cost synergy opportunity?

So we have said, what, about $0.06 to $0.08 on...

$0.05 to $0.08 is what we anticipate for fiscal year '14. We have included in that a low amount of synergy achievement for the first year.

We expect that $0.05 to $0.08 in the second year to grow by another $0.03 or $0.04. It all is dependent certainly on the synergy burn in, if you will.

And Bill, we -- there's tremendous synergies. There's some ingredients bought out, there's pouches bought out, there's commitments in plants.

But over the next year, as we bring the manufacturing together and look at bringing potentially some of the manufacturing into the Premier plants, where we put pouch lines, we have a pouch line in the South of France [ph] of our own, but just the procurement on a global basis to help with supply on a global basis, we feel there's tremendous synergies here on manufacturing, procurement, packaging.

We also think there's revenue synergies, which are going to be important on this business so that we continue to drive about Earth's Best and Ella's aggressively on the top line. And then if you look at the -- our U.S.

history in terms of getting synergies, we'll get them. We got them out of MaraNatha, we got them on Sensible, we'll get those as well.

I mean, this brand is one of the fastest-growing brands in the U.K. today.

And in terms of margins, are they company average at least?

Yes.

Yes. And they're largely consistent with our company average.

Okay. And then last one on that is, what's the breakout, as for modeling purposes on revenue?

Is it all mainly in the U.K. business, or is it 50-50 or how should that...

It's mainly U.K., Sweden and Norway.

So most of -- 80% of the revenue should be in the U.K. division?

Yes, yes.

Operator, can you go to the next question, then?

Irwin, you mentioned the outlook for GMO labeling. Obviously, Whole Foods talked about it and Expo West, say that they're talking about it.

There seems to be something moving in Congress now. What's your concern that mainstream package food companies will have to start sourcing GMO-free as well and that the supply chain just won't be there to support that over the next 5 years, and that therefore, your cost will get out of hand?

Well, number one, we're there. As you heard me say before, 99% of our products are GMO-free today.

So as I said, we are much further down the road than any other company out there. And in regards to GMOs, I mean if you're organic today, it has to be GMO.

I think one of the big things is, the conventional food companies are going to fight this because they don't want to become GMO, they don't want the additional cost, and from a sourcing standpoint. But I think this is ultimately going to become a part of the food chain.

The consumers are educated more and more. And when we, today, go through the GMO, verify it and put it on our packaging, we are seeing double-digit increase.

And Irwin, my question wasn't some much whether you're there or not. My concern is more that if this becomes more than just a Whole Foods initiative and this becomes really mandatory for your mainstream peers as well, that the cost, even though you have the supply relationships, the cost will just get out of hand because the demand will skyrocket and the supply just isn't there.

Thilo, this is John. Coming from conventional CPG, but they're going to fight this hard because it will be a big impact on their economics, not simply the acquisition of the oils, but also the management of it within their plants.

So look, there's -- I think there's a pretty good runway before they're coming. And then once they come, there'll be some economic impact, but we've already absorbed a pretty good chunk of that and I think at that point, supply and demand will have leveled out so that it will not be a huge increase beyond that.

And the other thing is, I don't know if it's going to be legislated, but it's like in the U.K. today or Europe.

If it contains GMOs, they're going to have to say on it, it contains GMOs. Will the consumer buy it or not, it's going to be a different thing.

So I come back and I say this here, I mean, to sell in Whole Foods in the next 5 years, you need to be GMO free. I mean, we'll be there sooner than 5 years and be ready for that.

And as we move more into more and more organic products, we'll be there for that. The conventional companies are not going to be buying organic ingredients.

And from that standpoint, we're not worried. And that's one of the things about Hain today is, as we build Hain as a global company, the sourcing now that we are able to have out there and sourcing in so many different countries in North America, South America, Asia, all over the world, and where we're manufacturing.

And one other thing is, we have some long-term relationships with farmers out there that have been growing for us a long time. I don't think they're running to Pepsi right away.

There is some loyalty absolutely out there. And the other thing is, what's going to happen is, as demand grows, you're going to see a lot more farmers moving towards GMO.

But this will be, I think, the biggest change, the biggest evolution within the food industry. And the good news is, we're there today.

Thilo, it's Ira. I think one of the things that has to be factored into what could happen here is that as the big CPG companies, if this legislation passes, have to move to GMO-free.

Their cost structure is going to increase. It's going to cost them more in order to buy all the ingredients and become GMO-free.

We've already got that embedded in our cost structure. They're going to have to raise their prices on the shelfs in order to absorb those costs.

And the price differential between their products today and our products -- or their products in the future and our products will shrink. And therefore, we will actually be more competitive in price than we are today against the conventional product.

I mean, I'm anticipating that as a possibility and what will help in our business going forward.

I wanted to ask back to the U.K. and the lower margins, your sequentially and year-over-year.

I heard it was mainly soup a couple of times, so, but I also wanted to ask, Rob or anyone else, is there -- -- beside the mix issue, you're getting out of products, was there any just pure inventory write-down that went through the P&L that's sort of a one-timer, and or, Rob, I think, mentioned 165 new products. Was there some big, not onetime, but rather large costs, whether it's slotting or what have you to support that much new product launch all at once, especially at Premier which hasn't seen much of that.

And sort the flip side of that is, maybe Rob or whomever answers this, could build a bridge to how the margins reaccelerate going forward.

Andy, it's Ira. There were no inventory write-downs in the quarter of any note.

One of the things you've got going on there, which impacts upon the GAAP disclosure of the margins or operating margins in each of the segments is there are no adjustments applied to those. So the costs that have been incurred in the U.K.

that are not capitalizable in the various projects that are going on related to capital expenditures, the duplication of costs, if you will, that is currently going on with regard to having Premier foods operate the transition services agreement while we're building out our own G&A back office infrastructure, while we're bringing our existing computer platform in England to the Histon site, the Premier site that we have acquired. All of those costs are impacting the operating margin that you're seeing in that disclosure.

And Ira, you haven't called them out as part of adjusted EBITDA, and those are in the adjusted EBITDA?

They are -- they have been called out, some of them, in the adjustments. However, when you see the segment operating margin, GAAP.

That's GAAP. So you're not seeing the equivalent adjusted basis.

But we could add back the adjustments to the U.K., it sounds like?

If fact, you can add back many of the adjustments.

Get to a more normalized margin for the U.K.

That's correct.

Andy, also this quarter, we've spent about $1.3 million, $1.5 million additionally on TV advertising for this quarter. And we also did some additional promotions with a couple other retailers.

As you're well aware, we're at a Sainsbury and part of it was to promote it, and some of those promotions didn't happen and some we just never got the performance for. So we spent some higher dollars there and we spent some TV advertising this year, about $1.3 million, $1.5 million on a TV commercial.

Okay. So is it fair to say -- I mean, you didn't lower your profit expectation, you actually raised it.

And I think the guidance, I think, is for Ella's to be neutral this year, right?

Well, it's only 2 months.

It doesn't sound like the U.K. had a profit impact, which -- and if the biggest part of the U.K., I mean, was the soup this quarter, and the soups -- the soup was planned for, so it sounds like a lot of this was in the plan, that's what I'm saying.

It doesn't sound like there's anything -- it may not have been a good quarter in the U.K., but it doesn't sound like it was way off plan, am I getting that right?

Well, it was not a great quarter because of soup and soup is 50% margin. And with that, I can sit here today and say there's a lot of things that have happened since the end of the third quarter in regards to new distribution that has been picked up that will help our soup business tremendously.

You heard Rob say about picking up some other new soup business with some other retailers in private label, some -- also new healthier soup products. The guys in the U.K.

were busy with integrating Hartley's, and we had a couple of missteps on soup. And I think we've really recovered from them.

And I spent some time with, on the phone with Rob today and there's some real good things coming from soup. Listen, in the U.K., we acquired the Hartley's business.

We're in the midst of doing a major project with Project Castle, which the retailer were doing it will make us the 10th largest supplier for that retailer. We launched Linda McCartney fresh.

We saw some great things happening because of the horsemeat scare. We've got rid of a lot of unprofitable business and we'll continue to look at that.

When we acquired Daniels, it was 60% private label, 40% branded. In the U.K., 55% of sales are branded, 45% are private label.

Today, we're 58% branded, 42% private label, and that does not include bringing Ella's into it now, which should take us over 62%, 63%. So we're -- it's been challenging in the U.K.

And the market in the U.K. is not, as a market, hitting the ball out of the park, but you got 2 retailers in Tesco and Sainsbury that you got to be doing business with.

Waitrose, Morrisons and Asda are great customers. But Waitrose -- but Asda -- but Tesco and Sainsbury are the 2 you got to be doing business with.

And you heard what I said about one, and there's a lot of distribution coming from the other one.

But just to clarify, I mean, soup, you held the line with Tesco on certain things and they've come back to the table, is that the bottom line of that?

If you're reading the tea leaves right, you're probably right.

Which is fine. And so -- and the impact of not having Tesco this quarter it sounded like it still was the biggest de-leveraging point of the U.K.?

It absolutely was and also, a couple of promotions that didn't work, that didn't happen, was the other piece.

Okay. You said 2, so 1 got canceled by Tesco and 1 didn't work or some combination there?

One got canceled by Tesco and 1 didn't happen with Sainsbury.

Okay, got you. And is that because of economic conditions or just sort of some random thing that happened with whoever was at the retailer managing the program?

One because of random that the retailer decided. And the other didn't happen because there was a little bit of holdup on some things, and just the timing didn't happen because we didn't come to an agreement and it was too late to call the promotion off.

Thank you very much, everybody, for the call this afternoon. Number one, in closing, we've had a good quarter.

And is everything perfect? No.

And is anything -- is everything perfect in everybody's life and every company? Absolutely not.

But in regards to our U.S. business, John and team are really hitting the ball out of the park and considering, and here's what I said before, conventional consumption is up 2%.

And I will tell you, we've seen some great growth in all channels in the month of April. In regards to the U.K., yes, we've had some challenges throughout the year, but we've had a lot happening.

Our U.K. business, over 2 years, has gone from a 0 base business to close to a $500 million business and there's a lot of integration in regards to building onto our Fakenham facility, retrofitting our Luton facility and also upgrading some of the manufacturing, divesting our ICL business, divesting our sandwich business and building an infrastructure around there, and Rob has done that with 3 people that he have brought in to run these businesses.

Going forward, if reading the tea leaves right, Tesco, in regards to soup, will be back, a lot of good things within meat-free, a lot of good things within the juice business and you'll see BluePrint come into that portfolio. So with the U.K., a lot of good things happening.

In Europe, in June, we'll open up our new nondairy facility and we're still up 3%, Canada is still up 10%. So good growth out there and a lot of exciting things.

In regards to brands, very excited to bring Ella's on. And you've heard what I said.

We have 9 brands that are $100 million and plus. Ella's, BluePrint and Greek Gods when we acquired it, Sensible Portions when we acquired it.

And Earth's Best were $14 million brands. When we acquired Greek Gods, it was a 12-plus million dollar brand and it's pretty close to $100 million size today.

Sensible Portions was $56 million, it's well over $100 million today. So BluePrint, the whole juicing category is exciting.

And I got to tell you, it's the distribution that we need to get and we'll have to make some investments into our manufacturing facilities to ensure that we can supply them. So from that standpoint, we have a lot of great brands and I want to welcome Paul to the team and helping us take our infant, toddler food business to a whole new level.

In regards to people, we do a lot. We procure a lot.

We manufacture a lot. We deal with commodity cost.

We deal with co-packers and I must tell you this here, we just have a phenomenal, phenomenal team around the world within the Hain food group. In regards to our strategy, healthy eating is not a fad, not a trend.

We, today, have been only purchased by 25% of the households in the United States. There is 75% more, 3x, 4x of households that can still buy our products.

And we know that will happen. And with that, as John talked about his new distribution, as Rob talked about with his new distribution and the rest of the country from that standpoint.

So thank you very much for your time this afternoon and look forward to speaking to you at a conference later. Thank you.