The Hain Celestial Group, Inc. (HAIN) Q4 2009 Earnings Report, Transcript and Summary

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

I am pleased to be with you today to introduce our fourth quarter fiscal year 2009 Earnings Call discussion of our financial results, which were issued earlier today. We have several members of our Management team here today to discuss our results, Irwin Simon, President and Chief Executive Officer; Ira Lamel, Executive Vice President and Chief Financial Officer; John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial, US. Our discussion today will include forward-looking statements, which are current as of today's date. We do not undertake any obligation to update forward-looking statements, either as a result of new information, future events, or otherwise. Our actual results may differ materially from those projected and some of the factors, which may cause results to differ, are listed in our publicly filed documents, including our 2008 Form 10-K filed with the SEC. This conference call is being webcast and archive of the webcast will be available on our website at www.hain-celestial.com under Investor Relations. Our call will be limited to approximately one hour. So please limit yourself to one question and a follow-up question. If time allows, we will take additional questions, and Management will be available after the call for further discussion. Now, let me turn the call over to Irwin Simon, our President and Chief Executive Officer.

I hope everybody has had an opportunity to read our release. Ira will take you through our release in a few minutes, with our adjustments and with and without chicken, but let me just talk about a couple of things and then I will turn it over to John. '09 what a tough year it is, and actually I am quite happy its over, but still all in all we've had some great things happen. Hain continues to grow topline even in these tough times. Our free cash increased $28 million to $33 million. We reduced our debt by over $47 million and what a strong balance sheet we have. Our gross margin in the fourth quarter was up 1.56 Bps and our earnings per share $0.28, with a $0.04 loss included from frozen. John will talk about all the good growth going on in his division, in grocery, non-dairy, Celestial and what's happening to Earth's Best. I will then take you back and go through Europe, about our turnaround program in Europe, our growth in Canada and what I see happening on Hain Pure Protein and the turnaround there, and our outlook for fiscal '10, acquisitions and strategic alliance. So, let me now turn it over to Ira.

Our adjusted earnings came in at $0.28 per share in the fourth quarter and $1.24 adjusted for the full fiscal year. These earnings include a $0.04 loss per share in the quarter and $0.18 loss per share for the full year coming from Hain Pure Protein. Reported sales for the fourth quarter this year totaled $262.7 million, with sales negatively impacted by $10.7 million due to changes in currency rates this year's fourth quarter compared to last year's. For the full fiscal year, sales totaled $1,135.3 million after the negative impact of $35.6 million from currency changes. On a constant currency basis, sales for the year grew by 10.8% year-over-year. As our press release today points out, our focus on cash generation in recent quarters gave us strong results this quarter, and just to clarify what Irwin said earlier, we generated $28 million of operating free cash flow in the fourth quarter, which is an improvement of $33.2 million over the prior year's fourth quarter. This allowed us to pay down debt by $30.2 million in the quarter. For the full year, we paid down $47.2 million in debt, reducing the total outstanding to $258 million, of which $150 million is represented by non-amortizing fixed rate 5.9% rate notes due in 2016. We continue to have sound financing in the face of market conditions today. We saw a strong result from our focus on gross margin expansion. Our adjusted gross margins without Hain Pure Protein improved by 156 basis points in this year's fourth quarter as compared to last year's fourth quarter. This improvement came from the strength of our US operations where the benefits of our pricing actions early in the year, our productivity initiatives and reduced diesel prices, all combined to increase the margin results. While we have…

Thank you, Ira. Good afternoon. Hain Celestial US delivered strong Q4 organic operating results in a very challenging economic environment. Let’s take a look at our Q4 highlights, and we’re going to start with top line. US Q4 organic sales were flat versus year ago. However, several core categories experienced strong growth, including tea, where Celestial Seasonings sales driven by solid consumption gains were up double-digits versus year ago. Also, infant and toddler care, where Earth’s Best sales were up double-digits despite going against a strong Q4 a year ago, which included pipeline sale for the target national expansion. And nut butters, where our new inspired business drove double-digit growth across our category. Other US core categories experiencing Q4 gains included dry grocery, non-dairy beverages, and frozen, all of which experienced single-digit growth. These gains offset declines in personal care, snacks, and refrigerates. Now turning to gross margin, US Q4 gross margin was up versus year ago, and was the key driver behind the overall company gross margin improvement. The US gain was driven by personal care and grocery, which offset a slight Celestial Seasonings decline. Celestial Seasonings' gross margin decline was due to a support spending shift from advertising to couponing, which we have noticed since the Q1 earnings call. Normalized for that shift Celestial's gross margin would have been up versus a year ago. Now key drivers behind the US gross margin improvement were, full reflection of the July price increase, improved fuel and commodity cost, personal care SKU rationalization and warehouse consolidation and productivity savings of over $ 2 million. Moving further down the P&L and looking at SG&A, US Q4 SG&A was down significantly across all three units. That includes grocery, Celestial and personal care. The improvement was driven by consolidation of the personal care Petaluma…

As we started off the year and we saw a lot of the challenges and headwinds in front of us beginning in October, November, we focused on cost reduction and a reduction in force which we eliminated about $15 million in costs on an annualized basis. Our groups across the country went into major productivity mode and we removed about another $15 million of costs. As you step back and you look back, it's been a long year, it almost feels like its two years rolled into one, but you had a sales slow down by consumers, you had tremendous inventory coming down by both distributors and retailers, you had chain drug sales fall off and you had a lot of private label coming into the category. What did we do? We consolidated the Petaluma into Melville, which helped us with two margin points on the personal care. We executed real wells SKU rationalization, which we will continue to do. And with that, we grew our diaper business, which we acquired almost two Decembers ago, we doubled that business. You heard John say about nSpire business, was up over 16%. And if you come back and look at our brands, Earth's Best, when we acquired Earth's Best was approximately $14 million business. We've expanded that into frozen, we expanded that into personal care diapers formula. And brand combined was up over 34% for the year, and that is something that’s just exceptional to achieve. You heard John talk about Gluten-Free, as a total company today, we have well over 330 Gluten-Free products. And Gluten-Free happens to be one of the fastest growing category and there is just a staggering number out there, with everyday that someone is diagnosed with Celiac disease. John talked to you about Celestial, what a great…

(Operator Instructions) Our first question is from the Greg Badishkanian from Citigroup.

On the sales front, excluding currency sales were down sort of low single digit. I am wondering are there any adjustments there, no acquisition, is there anything we should consider for that?

Well in that the number besides currency, there is some private label business that we didn't do this year versus last year in the UK and then there were SKU rationalization and personal care rationalization. The big thing is the major SKU rationalization of product lines and a major co-pack agreement we had in the UK that we didn't have this year Greg.

So I am assuming you will probably positive excluding that?

I'll let you say it.

Then moving to POS. Obviously, we have seen a lot of destocking, particularly at the retail and distributor level. So how much of that went on during your fourth fiscal quarter and would you say that retail sales were higher than your sales to retailers and distributors?

Greg, I think in the fourth quarter we didn't see like we saw in the second and third. Actually, we did see a couple of major mass markets take out about half a week. I have John and Adam here nodding their heads. So it was more direct customers not distributors. So I would say about a half a week came out as major retailers. The significant came out in the second and third quarter for us. Again in some of the statistics we are seeing is consumers going to the super market a lot more often and pantry deloading, but we are seeing not consumption [max] in some of our shipments here.

Our next question is from the line of Edward Aaron from RBC Capital Markets.

I guess my question is for John, looking out to 2010. John when I think you said that Europe and the UK were going to be breakeven and that protein is going to make money. John wouldn't that imply your business will be lower in 2010 than 2009?

No. In a word, no.

So you got it. You're not his boss Ed.

If there is an opportunity to sign up for that I might, but …

Well, can you help me understand the math on how it could be up and still get into your guidance range, because the UK was of course a decent amount of money in sort of protein this year. So I am just trying to understand how the math works there?

Well, one of the things you have to take a look at I think is the adjusted schedules that we have. And I think if you pull out Hain Pure Protein and then look at us without it, you're going to see that all the businesses will be improving in the next year. There's different growth rates among the different businesses that we have, the different reporting units that we have. Some of them are lower than the 4% to 6% that we've guided to for the full year. Some of them are higher. And depending upon where those ups and downs are if you will, you get quite a wide skewing of what results fall to the bottom line. So, I don't think that you can simply draw the conclusion that if we think that Europe is going to be at breakeven that John's businesses or the US businesses are going to be down overall, I don't think that's the path that we're taking at all.

Our next question is from the line of John Heinbockel from Goldman Sachs.

Well, I want to drill down on a couple of things. If you look at the 4% to 6% target that you guys have, how much inflation is built into that and what have you assumed for currency and I guess is that 4% to 6% backend loaded. Do you think it will be stronger in the second half?

John number one there is nothing in there for pricing or inflation. The reason its back-end loaded that is our biggest quarters, our October, November, December quarter and actually as we you know in the beginning of last year we had strong first half. So as we overlap some of those comps and we had lower comps in the second half, so that's something that we have in front of us. And regards to currency Ira?

We adjusted our rates towards the end of last week, so they are very current rates that we've used in our projections and of course, if those rates change then certainly …

So it's current rates?

Yes. Current rates. The other thing that I'll point out is that we've for the first time done some currency hedging up in Canada, because our Canadian business buys a lot of its ingredient from sources in the United States. So, we've allowed them to go ahead and hedge against the US dollar. So we should be pretty safe and be able to predict well what will happen between Canada and the United States on currencies.

Currency should be a benefit next year. We don't how much, but it certainly won't be a drag, it could be a benefit.

Well John I love to hear your certainty, but we'll see what happens as we go forward. I don’t think, any of us really know what currencies will be in January or February or March, but we will see when we get there.

Then secondly, if you are looking at a 9% EBIT margin, which no long includes Pure Protein. You look back historically and you have sort of been in that range give or take. Is the thought that, that's about as far as it can go or given the cost work that you've done, the consolidations you've done, this business X the Protein should be a double-digit EBIT margin business at some point?

Absolutely, you heard me say couple of things, John. We've done numerous price rollbacks here. We've built-in spending a lot more money on advertising. We think growing 4% to 6%, in these times yes, but as times return to normal times, we think there is opportunities for additional growth. And then last but not least, as we consolidate and get the benefits from all our businesses, and at the same time, ultimately as commodity prices come down even more, and looking to get some of the benefits from commodity price and fuel prices throughout the year. We see opportunities there.

One of the other things I think is important to point out when you talk about the spread of income across, the company is that, this years guidance and I hope I was clear. We are treating stock compensation as an expense. So, when you look at next years results, it will be with that stock compensation deducted, we won't be reporting it as an add back in any fashion. So, we had $7.2 million of stock compensation during fiscal '09. And it’s the last year that we're going to treat that as an add-back.

Our next question is from the line of Scott Mushkin from Jefferies & Company. Scott Mushkin - Jefferies & Company: Actually I am walking into the Whole Food in Long Beach as I'm doing a little store tour here.

Hain Celestial products, Scott. Scott Mushkin - Jefferies & Company: Actually, you guys look pretty good out here. I saw it on the shelves in a lot of the retailers. Two questions, one actually has to do is what I have been seeing, is Garden of Eatin' products. It looks like you have a lot of new products. I saw some baked chips on the shelves. If you could specifically talk about Garden of Eatin' in the snacks, is Garden of Eatin' significant outperforming Terra and maybe give us some more color onto the new products you got going there.

Garden of Eatin' was significant outperforming Terra. Terra started to come back Scott, but Garden of Eatin' is a very strong performer. It was up almost double-digits in FY'09 for us and we’ve got Maureen here. Maureen you want to add the color?

We recently introduced the bakes for multigrain, which is doing exceptionally well and also veggie chips.

So baked, multigrain and veggie chips are our three new launches this year against Garden of Eatin'. Scott Mushkin - Jefferies & Company: Do you guys have any idea of what percentage of the snack category you have in Whole Food. I mean seems like it would be 40% of your product on the shelves, is how do you think about accurate, you have any idea?

I think that would be an estimate because you know it's not reported with the entire category.

If you take Terra, Garden, Little Bear/Bearitos, Boston Popcorn we should have at least that and if we don’t, Adam is shaking his head, we better have it. Scott Mushkin - Jefferies & Company: Then with the baby oil and baby food, you guys have at least 70% share in the natural organic baby food. Is that right?

I think we should be higher. We do see some other ones out there and that's what continues to make sure that no one else enters that category with Earth's Best. The big thing is we are now getting over 5 million hits a month on Earth's Best website, which shows you the strength of that brand. Scott Mushkin - Jefferies & Company: I actually missed what you said about acquisitions later this year. I heard something about it, but I missed it out, can you maybe briefly go over your thought process as you look, I mean what categories you would like to acquire?

You didn't hear the big announcement I made Scott. What I said on acquisitions? I said, with our balance sheet where it is and really feeling we have our house in order after fiscal '09 and looking into fiscal '010. We're ready to do acquisitions that are strategic in categories that we can grow. What we want do is, you've seen John talked about nSpired nut butters. It's in the grocery aisle. The business grew for us over 16%. When we acquired Spectrum, we've taken that business and we've doubled it and it's grown nicely onto a $10 million EBITDA business. So, we're going to continue to focus on good grocery categories where we're not today and we can grow. We're not going to be all over the store, we're not going to just to a cluster of acquisitions. If we can find something in the snack category that we can add value to and help us grow we will. So, basically, it's got to complement what we're currently are today and they got to be strategic, got to be accretive and that's the type of acquisitions we're looking at Scott. Scott Mushkin - Jefferies & Company: Finally, how about divestitures, I know you haven't talked much about that in the past, but is there any categories that when you look at you get core competencies and say hey, those don't really line up very well?

I think, we started to do it with protein and not from a divestiture standpoint as not have majority, but from a category standpoint, if we're going to sell something, we would sell and get out of that category altogether, and not just sell a brand. So if we were to do something, we go across multiple category. So it's difficult to do but if it made sense for us and we're continuously stepping back in sort of saying, how do we have difference and uniqueness for natural? How do we have difference and uniqueness for mass? How do we have different and uniqueness for grocery? How do we separate some of our brands? As I said before, yes we have multiple brands, 15 brands approximately make up 80% of our sales, but in the Whole Food you will see 1,400 to 1,700 of our SKUs, and in traditional grocery, you may see 400 to 600, in a mass market you may only see a 100. So, we have different brands going into different channels and that's something that we continuously focus on. If they can't be profitable, we can't grow them, we shouldn't keep them.

Our next question is from the line of Andrew Wolf from BB&T Capital Markets. Andrew Wolf - BB&T Capital Markets: I think you said there was 60% plus increase in the coupon redemptions?

It's almost probably 100%. It is almost double.

64% quarter-over-quarter. Andrew Wolf - BB&T Capital Markets: That's a topline deduction. Can you actually give us a dollar value, this year and the last or swing or something along that line?

We'll just stay with the 64% increase in coupon. Andrew Wolf - BB&T Capital Markets: You think its competitive thing; you don't want to give out your coupon rate?

No. Andrew Wolf - BB&T Capital Markets: All right, it’s fair enough. I could assume it's a pretty large number. Well, I will just use an industry average. Just for John, on the flat consumption trend you saw for the business units in the US. I think was that consumption or factory shipments?

Factory shipments, factory sales. Andrew Wolf - BB&T Capital Markets: Could you talk a little about, overall consumption? Was it similar to that and across the brands and, you know, how you think Hain Celestial in the US is doing compared to competitors or overall categories?

The consumption is in line with the shipments, maybe outpacing it a tad. Look, we’re seeing, as I said to you, natural and organic growth trends have actually declined, the trends have declined about 10 points since November. So, as we look at it, given that we’re eking out some growth in consumption, we’re actually trending better than most of the players in the category.

Our next question is from the line of Andrew Lazar from Barclays Capital.

I want to come back to your comments around distribution gains going forward. So I know it’s something that you’ve talked about before, sort of ongoing, and I’m trying to get a sense, if there are certain examples of things that maybe you are going to be doing differently going forward to sort of get those distribution gains, and is now the right time in other words, are retailers really thinking now along the same lines as, we’ve got to increase our kind of better for you, you know sort of options from a distribution standpoint?

Well, number one, Andrew, we have the sales infrastructure, the personnel to go ahead and our growth on Earth's Best, our growth on tea, our growth on non-dairy is not coming today from your traditional grocery. It's coming from other channels as consumers go to other channels. So number one what are we doing differently? We have the infrastructure, we have the distribution think and we got consumer demand. So that's number one. And not to talk about there is one retailer in particular that's become or two years ago, three years ago we never did business with, it's our [larger] best customer today. And they are looking as they see the success of those products, they are looking for additional products that are health and wellness in those. And I go back and say that’s here. Price and value are important. The other things that's happened, a lot of the bigger consumer package food companies were in there before with a lot of their products and they have left the natural category, the organic category, which gives us opportunities.

Okay and then with respect to excluding currency in the quarter, the sort of whatever it is low single-digit sort of top line decline year-over-year. I am trying to get a sense, you mean directionally where sort of volume versus pricing came in, in terms of making up that organic sales decline. If you can give us events directionally kind of where volumes were and where pricing was. Plus how we got there?

We got better benefits from pricing. If you remember back in August, September we put in a fairly significant price increase that matured in the fourth quarter. So we don't see pricing from that particular implementation helping us in fiscal '09 any more than it has in the fourth quarter of last year and fiscal '10 anymore than it has in fiscal year '09 fourth quarter. And the volumes were slightly down, not anything that was really substantial but a little bit down.

And the big effects mostly on volume came out of the UK business between discontinuing co-packing for Hain contract that we had loss of business with M&S, major SKU rationalization on our Haldane acquisition and that hit us with currency and product. So that's where the majority of it came from. We saw good growth in our US operations, good growth, mid-growth in our Canadian operations, so it mostly came out of Europe.

Our next question comes from the line of Michael Picken from Cleveland Research.

Hi good afternoon I'm calling in on behalf of Christine. Couple of questions. Just following up in terms of what you said about kind of where the distributors are with their inventory levels, unify I guess their inventories had increased a little bit over the last quarter. I am just sort of wondering kind of if you've seen any signs if they are going to try to move that down a little bit more or are they sort of through their de-loading. Just wanted to get a little more color around that?

I think in discussions with them, they are pretty well through it, but I am not totally sure. But, we did not see anything in the quarter in regards to distributors de-loading. There was more from the retailer side, continue to do that.

Okay. Great. And then if you could just talk a little bit more about Celestial and some of the progress. What do you think is really, I mean you talked about the couponing, but I mean, is it really that just said Celestial is considered a good value brand or could you talk a little bit more about some of the things that you've done really to turn that business around?

I think the key on Celestial, this is John, was to go back and focus on our core tea and we did it by focusing on where we're strongest, which is our herbal tea. What we saw was that our herbal tea has grown in high single-digits this year in terms of consumption. That's where we're going to build off up. With our SKU rationalization we're going to get out of the products that are not base tea and we're going to continue to drive against our herbal tea. We are going to relaunch our entire green tea piece. We're also going to get into the wellness tea side of the business in a bigger way. Those are the things that have driven us so far and the things that will drive us going forward. It's a great opportunity for us.

Just to add to that, I think the big thing is, where before what was driving the growth in tea and probably driving some of our loss of share, you saw a lot of these higher end teas out there anywhere from $7 to $8 and $9, and you're seeing them sitting on the shelf today, the pyramid bags and some of these higher end teas. Consumers are not spending that kind of money on tea. The average consumer has six boxes of tea in their pantry and they are not spending $7, $8, $9 box of tea and they are coming back for a traditional tea and buying Celestial.

Our next question is from the line of Jason English from JPMorgan.

Couple of quick questions for you. One on the personal care business, I believe this is the first quarter where you had converted from brokerage units in-house. Can you update us on how that's going, whether or not it's resulted in any sort of distribution upside? And also whether or not it had any topline impact just moving from a commission based structure to in-house?

Jason, we did effective May 1. So it's actually too early to really get a good read on it.

Was there an impact on the topline?

No. Not from that, at all.

Some of your comments were focused John on your prioritization within the portfolio, focusing on investment. You didn’t mention much on Earth's Best, what are you guys doing on Earth's Best to keep the growth momentum going this upcoming year?

What aren’t we doing on Earth's Best? The key in Earth's Best is, we're continuing to drive new distribution and innovation against jarred baby food, but also we know that Earth's Best brand can travel to new categories, because mothers want the qualities of Earth's Best product across several different categories. So, as Irwin mentioned, frozen has grown, it was 74% for us in the last year on Earth's Best frozen line. Diapers more than doubled. So, it’s a matter of driving the core and formula. Formula almost doubled as well. So, it’s a matter of driving the core baby food business, but also standing out and finding those categories that think that the Earth's Best brand name brings some real value and quality to and expanding into them. Don’t worry, it is the number one focus of our grocery unit.

Our next question is from the line Edward Aaron from RBC Capital Markets.

You guys have mentioned on the balance sheet this quarter and just trying to get a sense of where the drive down came from on inventory? Then secondly, we're almost two months through the September quarter, Irwin I know you mentioned that sales trends where, you used the word stable. I was hoping if you can maybe elaborate on that and just tell us whether you think that, the sales growth will be positive in the quarter?

Well, on the inventory, if you're just looking at the balance sheet. The ending balance sheet at June 30, '09, no longer has Hain Pure Protein inventory in it. So, the big decline that you see year-over-year was in part the result of that. On top of that, we gone through trying to reduce inventories. We’ve had and aggressive program of doing that and I think inventories have come down pretty much across the board. Cash generation, there was about $22 million brought into cash that came out of working capital during the period. None of that is impacted by this deconsolidation of Hain Pure Protein. That’s a separate transaction. So, I think it's just good focus. We do weekly calls here now which we did a couple of years ago and we've brought them back where we are focused with every division and unit on its cash conversion and generating cash and we’ve just managed it much more closely. That started back in November when the credit crunch started and we just want to stick to our metal.

You asked me about sales, I think what's important is we're seeing it consistent and again one of our largest customers, who saw negative comps throughout the year, we overcame that. What we’re not seeing is that major drop off that we saw from Thanksgiving on, but we’re seeing good solid consistent sales and with that you have to work at it and that’s something that we're continuously doing. We have some tough comps in front of us, but we feel that there are some good opportunities out there for us to gain distribution. Right Adam.

Ira you mentioned in your prepared remarks that the first half of the year is not going to be representative of the full year. I think I missed the reasoning behind that. Could you just elaborate there and how much different the second half should be than the first half?

We have some traditional seasonality, even though Celestial Seasonings has dropped as a percentage of our total sales. It still gets its major sales part of the year, coming in the second and the third quarter. So we're going to see the impacts of that. The other thing that we're going to see is that last year you saw an increase in sales out of Hain Pure Protein in Q2, because of the Thanksgiving and other holidays. That will no longer be in our sales. So we won't see that happening. So it's kind of not going to represent necessarily what we've seen in the past. The other thing that's going to happen in the UK with the phase out of sandwiches to that major retailer we talk about is those sales are going to decline prior to a building up all the new business that's been obtained for the UK and Europe. So there may be some slow start to that business coming in. We should get to the second half of the year and have that business in place and producing sales so that will play well for us in that second half.

Our next question comes from the line of Andrew Wolf from BB&T Capital Markets. Andrew Wolf - BB&T Capital Markets: Hi. Just a follow-up, Ira if I could on the guidance, your website doesn't yet have some of the details. But is the $2 million restructuring at the Daily Bread or the integration there, is that excluded from the earnings per share guidance, of 119 to 128?

No, it's included, meaning we've already treated it as an expense. We will not be adding it back. Andrew Wolf - BB&T Capital Markets: Okay. So is this 119 to 128 essentially a gap.

Yes. Andrew Wolf - BB&T Capital Markets: Okay. That's great to hear. Are you contemplating any other charges within that 119 to 128 that we should know?

No, Andrew. It's interesting in the sense that we've evolved to the point where we're now going to deduct stock compensation that's included in the guidance. It's on a GAAP basis. We know that we have these charges coming through with the Daily Bread consolidation. We're certainly going to call them out when we release earnings in the period that it takes place. It should be done by Q1, but it's possible, it will slip a bit into Q2. We will call out what those charges are when they actually happen. But we can't guarantee, I don't think any company can, that there are never going to be adjustments from GAAP and add-backs, because there are events that happened that are just not foreseen. Andrew Wolf - BB&T Capital Markets: That's fine, but as you said it now and obviously that's fine. But as things are set now, there is $2 million of costs in that 119, I just wanted to know that?

That’s [true]. Andrew Wolf - BB&T Capital Markets: And you might have said this already, I just apologize if I'm making you repeat yourself, what is this years contemplated options expense, either in dollars or earnings per share?

Right now we're planning on $7 million to $10 million. It was $7 million in the past year, it will go up a little bit.

The next question is from the line of John Heinbockel from Goldman Sachs.

Quick question, how concerned are you guys at all about the recent run up in commodity cost, both agricultural and energy and where that may go? And what you can do to mitigate that?

The good news is John, when you come back and look corn and soybean, I mean, they are much lower today than they were a year ago. So, I think we have built in for our pricing, basically where they are, if they go back to last year’s high then we’re all going to have some challenges out there. But I think we’re okay, and I think one of the important things is, where before we never saw commodities move the way we did before, or never saw fuel prices. I mean it’s something that’s a weekly event and then we look at it. And you know our group has done an incredible job in regards to [sourcing], and out there buying out and protecting ourselves. So, I’m okay, but in this crazy world, we never know what’s going to happen.

You never rolled back your pricing and you’re not going to, I guess it’s not a risk that you have to take pricing again?

Right. We have not rolled back pricing.

Okay. Thanks.

Okay. With that, that being the last question, I want to thank everybody for their time. I know we’ve told you a lot, and I’m glad ’09 is behind us and a lot has happened in ’09, but I must tell you with that we’ve come out of ’09 with good top line growth. You saw what we showed you in regards to fourth quarter. Our margins were up 156 bips. We paid down debt. Our free cash was up $28 million. We reduced our inventories. We grew quite a bit of the categories and brands in our US operations. We took a strategic view and strategic positioning on our Protein business and I’ll look for anticipated turnaround there next year. And what a difference it’s going to make in a year within the UK. So with that, I’m happy we’re into fiscal ’10, and I look forward to speaking to you at one of our conferences up and coming or in our next earning call and give you an update what we are doing. Enjoy the rest of your summer and we will speak to you soon. Thank you.

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