Good day, ladies and gentlemen. And welcome to The Hain Celestial Group Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to Mary Anthes, Senior Vice President, Corporate Relations. Ma'am, you may begin. Mary Anthes;Senior Vice President of Corporate Relations: Good morning. Thank you, Shannon. And thank you all for joining us today. We're pleased to finally be reporting Hain Celestial's Fourth Quarter Fiscal Year 2016 and First, Second and Third Quarter Fiscal Year 2017 Earnings Results. Irwin Simon, our Founder, Chairman, President and Chief Executive Officer; Gary Tickle, Chief Executive Officer, Hain Celestial North America; and James Langrock, Senior Vice President, Finance and, as of tomorrow, CFO, have joined us as well as several members of our management team. 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 [ material ] from what is described in these forward-looking statements. And some of the factors [ that ] may cause results to differ are listed in our publicly filed documents, including our Form 10-K filed with the SEC. A reconciliation of GAAP results to non-GAAP financial measures is available in our earnings release, which is posted on our website at www.hain.com under Investor Relations. The conference call is being webcast. And an archive of the webcast and the accompanying presentation will be available on our website under Investor Relations. [Operator Instructions] Now let me turn the call over to Irwin. Irwin Simon;Founder & Chairman: Thank you, Mary, and good morning, everyone, and we appreciate everyone joining us on this call. Man, it's been a while since…

[Operator Instructions] Our first question comes from Andrew Lazar with Barclays.

I guess, I think, per the slides, it looks like you look to reinvest on, perhaps, around 1/2 or little less than 1/2 of the sort of cost savings and productivity over the next 3 years on marketing. And I'm trying to get a sense of what does that sort of marketing include. Is it consumer, trade and all price investments kind of rolled up into one? Or is that primarily just the consumer side? And the reason I ask is because I know that before the accounting review and about a year ago, some of the issues that you were starting to talk a bit about and that you mentioned on the call today was the need to be, in certain categories, perhaps a bit more price competitive, in certain areas, the need to ramp up the consumer spend side of the equation, so trying to get a sense of what that reinvestment incorporates. Irwin Simon;Founder & Chairman: Andrew, I'll let Gary talk about it from the U.S. side, then I'll talk about it from the global side, okay? Gary Tickle;Chief Executive Officer of North America: Thanks, Andrew. Thanks for the question. So the -- to answer your question, first of all, you're correct. As I indicated in my discussion, we certainly have taken some price initiatives already to be more price competitive. But the future plans are predominantly around brand investment for consumer and shopper market activation work. So this is really about building brands, building brand equity, improving our household penetration through that work. So this is really geared towards not price but towards brand and consumer. Irwin Simon;Founder & Chairman: And Andrew, that's the same around the world. It's -- again, we have some great brands around the world. As you heard me talk about, whether it's Ella's being the #1 baby food, whether it's Tilda, whether it's Hartley, it's spending towards the consumer. And in regards to price, a big thing there is how we take out costs is as we consolidate co-packers. We have looked at every formula. We've looked at the cost of manufacturing. We looked at products coming from plant to our warehouse, realigning our distribution systems. So with that, hopefully, we could take a lot of cost out that can be directed back towards the price.

Great. Got it. And then just a quick just follow-up and general one, which is, I guess, some of the questions that I've gotten so far this morning have been while you've had a lot of discrete items that you pointed out that impacted fiscal '17 that hopefully won't obviously repeat in '18, you're obviously still looking for a pretty significant growth, right, in sales and EBITDA in '18. And I guess, the question I'm getting is just, how do we know you're giving yourselves, I guess, enough room to get the business back to where it needs to be for the, call it, medium long-term? And is the -- I guess, is the reinvestment enough in '18 based on what you're hoping to get out of it from an EBITDA standpoint? Irwin Simon;Founder & Chairman: So Andrew, I think a good -- one telling tale is what we're seeing in Q4, and we're seeing some good things in Q4, and so that's #1. We're seeing a good turnaround on our Hain Pure Protein business. We're seeing our fruit yields in the U.K. business. We've got pricing on most of our products in the U.K. Gary has gone through his SKU rationalization and inventory alignment. We've gone through with our Cultivate business, is cleaning up a lot of those businesses. For instance, in BluePrint, we eliminated one SKU of cashew milk, which was a $3 million to $4 million hit for us. So we've replaced it. We've grown the business. So there was a lot of one-offs and -- that added up to a lot of money, and a lot of things happened. But the good news is we're already seeing the actions that have been put in place to recover going into 2018.

Our next question comes from Scott Mushkin with Wolfe Research. Scott Mushkin;Wolfe Research;Analyst: So I wanted to -- and welcome back. So I wanted to get some clarification on the recent U.S. trends. I've kind of missed that a little bit when Gary was going through it. So I was wondering if you guys could just revisit that? Had that -- has that slowed down a little bit? Gary Tickle;Chief Executive Officer of North America: Yes, Scott. So you've seen obviously the broader industry trends. And of course, in MULO+C there's certainly been a slowdown. I mean, some of our unreported channels, we see strength across mass, club where we see better performances. And of course, online is double-digit growth for us. But it's the top 500, obviously, that's our core focus. This is where we know our future is going to be. This is where the consumption trends are definitely stronger. If I look at some of the trends for the key items that are important to us, Imagine Soup is up 33%, 34% in the latest 52. We're really encouraged to see with the work we've done for MaraNatha. Their very recent numbers in the last 4 weeks, we see dollar growth for the first time we've seen in 12 months. The work in snacks, Sensible Portions is in double-digit growth everywhere except for one retailer. And if we look across our broader range for Earth's Best, the baby business is somewhat masked by the fact we've had the pullback for Ella's. But for Earth's Best organic baby food jars and for infant formula, we're seeing strong growth. So we see, net of some of these drags, our top 500 is growing around 4.9% net of SKU rationalization in the latest 52 read. Irwin Simon;Founder & Chairman: And…

Our next question comes from Amit Sharma with BMO. Amit Sharma;BMO Capital;Analyst: Gary, a question on your streamlining of the portfolio and then a couple of related questions on that. So you talked about that a little bit, can you provide a little bit more color around your top 11 brands? What's the strategy going forward on those brands? How are they going to be different than what it has been in the past? And as you talk about $40 million to $50 million incremental spending, what does that bring the spending level to now with that incremental spending as you think about these core brands? Gary Tickle;Chief Executive Officer of North America: Okay, so thanks for the question, Amit. Obviously, for us, the top 11 brands are the critical driver for our future. It really will be brand-dependent. We won't have enough time maybe to go into absolute detail. But clearly, we have an outlined plan for each of those brands as to what is the key objective around engaging the consumer. Some, it's greater awareness. Some, it's more shopper activation work in stores. But -- and some of it's more digital. So there's a broad range which we'll get a chance maybe to talk in more detail about. But we have clear plans for each one of them and how we intend to invest to better engage the consumer and also turn up better in the store for the consumer. To your question around where does that put us in levels, I think it makes us far more competitive with the broader landscape of spend and what we anticipate will be the competitive environment for spend against brands. I mean, it's a significant investment, as you can see, year-on-year. And I still think there's upside for us in…

Our next question comes from Akshay Jagdale with Jefferies. Akshay Jagdale;Jefferies;Equity Analyst: It's been a while, so good to have you back. It's -- I just wanted to ask about the inflection in the EBITDA and the margins. When you look at '17, it's a bit shocking how much the EBITDA has declined, and I think you did a good job with that bridge that you presented. So when you look at the '18 bridge, you have 2 big components there, right? One is the savings from Project Terra, $100 million. I believe they were $70 million in '17, so they're $30 million higher. But a good chunk of that is going to be -- the incrementality is going to be reinvested in marketing. So really, what it comes down to, I think, is your core business growth has to improve very, very significantly. And the way I look at it, half of the problem was U.S., and half of the problem was U.K. and HPP. So can you just -- I mean, I know you gave us a lot of data, we're trying to digest all of that. But coming off a year where you saw a significant decline in margins and EBITDA, what gives you the greatest confidence that things will improve? If you could start with the U.K. business. HPP, I think it was pretty clear that you were saying you were going to see a $30 million increase year-over-year, roughly, and none of that is predicated on commodity prices improving, so that's a strong enough statement. But help us understand U.K., why do you see -- why are you going to see that inflection? And then maybe Gary can talk about what was -- why are the things that you saw in the U.S. one-off? Obviously,…

Our next question comes from John Baumgartner with Wells Fargo.

Irwin, if I'm hearing you correctly, it sounds as though you're more willing to accept lower margins in return for better growth going forward. And I guess, if so, how are you thinking about the role of private label? I mean, is there a case you've made now that private label price points are needed to sustain volume growth for the natural organic industry. Just given how many, the interest levels from middle- and lower-income consumers and now your cost savings allow you to hit those margins better? Or is it your vision that you'll be able to build enough equity in your brands to move forward more as a branded company? How do you think about the balance between brands and private label? Irwin Simon;Founder & Chairman: So number one, brand equity, brand equity, brand equity. And when my twin boys were born, I wanted to call one brand and one equity, so that's how much I believe in brands versus private label. 93% of our business in the U.S. and Canada today is branded business. And I'm a big believer of millennials and consumers will buy brands. In this country, in the U.S., only 18% of sales are branded products. I think there's a place for branded products. And where Hain is, we'll build upon our brand business. But, John, I don't want to be the highest-priced product in the store with no sales. And I think we have to come to a realization factor. Price is important in the natural organic industry; also how do we sell more products? And that is, volume driven is one of the most -- best ways to do it and how are we going to take costs out? So I think working together with our retail partners and that is on manufacturing, on distribution, we're going through and looking at our packaging, our formulations, on how do we get better margins out of our products. So in the U.K., it's a different world, where private label is a much bigger percentage of products. And when you have your own plants and you cover a lot of overhead and absorption of overhead and alongside with shipping. So brands are our key priorities, focusing on brands, focusing on growth, and with that, hopefully, getting the right margin between growth, taking costs out that we did if we weren't going to get the growth.

Our next question comes from Ken Goldman with JPMorgan.

Irwin, just one from me, because I know we're running a little long here. You highlighted your strong presence with Amazon. And I really do appreciate some of the benefits to Hain of the merger that's going to come. But, is there maybe an offset in that Amazon doesn't have a strong private label natural and organic brand, that's about to change? Might there be some pressure on you as Amazon starts to emphasize it's 365 and Whole Foods brands? Or is that really smaller in your view compared to what some of the tailwinds might be? Irwin Simon;Founder & Chairman: Listen, I never ever, ever don't take for granted or don't be serious about their 365 and their private label. On the other hand, Ken, we've been doing this for 23 years. And the barrier to entry and supply of organic is difficult out there from a manufacturing standpoint, from a supply standpoint and continues to be. And again, that is why spending money on our brands and being price competitive -- a consumer is going to buy a brand over private label if you're price competitive and there's something unique about the brand. So what Hain has to do is invest in its brands, have its brands connect to consumers. At the same time, innovation is key to us. We've introduced over 93 new products, got to have continuous supply. And by the way, there is a lot of other retailers that want our products, too. It's not just Amazon and Whole Foods, okay? And I've had multiple, multiple calls from retailers and saying, "Hey, make sure you've got enough product for us." So I think it's important for us to build upon our brands, focus on our brands and sell products. The big thing is, Ken, natural organic foods should not be for the 1%. It should be everybody that wants to buy a food product. And I think the opportunity for Hain here is this year. What Amazon and Whole Foods combination will do is drive more and more awareness to natural organic products. And that's where the big opportunity for us is to pick up a big piece of that conventional market that wants to convert to natural organic. And we see it in baby food on the WIC program. Organic baby food, which is jars, became part of the WIC program. And most of you know what the WIC program is. And what we've seen in our growth in jars, because being on the WIC program shows how everyday consumers want organic baby food not conventional baby food.

Our next question comes from David Palmer with RBC. David Palmer;RBC Capital Markets;Analyst: Just a big-picture question. I'm just trying to think about your long-term growth rate. Clearly, your business has had a tough go in fiscal '17. But if we give you a strong -- the credit for a strong rebound in fiscal '18, your business will still be flattish for a couple of years. The big picture feels like organic and inorganic growth has gotten way more expensive than it used to be. And that the reality is generally the same now as it was or was starting to be a little over a year ago. So beyond a near-term rebound, what are some reasonable long-term target growth rates for Hain if the environment remains as it is? Irwin Simon;Founder & Chairman: So, David, I'm a little confused here because I think, number one, we've talked about 4% to 6% growth in '18. So that's, first of all, what we're looking at from a company standpoint. Secondly, what we've said in regards to organic becoming more expensive, I think I've talked about how we are looking to make organic more and more affordable. And from a standpoint on our growth across the rest of the world, we've seen mid- to high single-digit growth in all our businesses around the world. And as Gary talked about in his North America business, with focusing on his top 500 SKUs. With focusing on taking inventory reductions out there within the trade. He's looking for low to mid-single-digit growth next year in his U.S. business. David Palmer;RBC Capital Markets;Analyst: So you think that, if I were to summarize, that the savings, you can keep these types of savings going such that you can compete with these food companies that are clearly getting more into the business that you've done, which is promoting and getting shelf space but also buying assets that you think that you can maybe have a flywheel going that lasts more than this year such that you could be more competitive. Is that a good summary? Irwin Simon;Founder & Chairman: That is a very good summary.

Our next question comes from Pablo Zuanic with SIG. Pablo Zuanic;Susquehanna Financial Group;Senior Analyst: I have a big-picture question for you, Irwin, and then I'll -- just a brief follow-up. These happened on your watch, right? And when I say these, the earnings restatement, no results for 4 quarters, shipping issues that relate to -- or said to find, and then apparently still ongoing SEC investigation. So on your side, I mean, what is it that you need to do different? I mean, do you need to delegate more? Do you need to focus less on acquisitions? Can you just comment on that, if you can, just more on a personal level? Irwin Simon;Founder & Chairman: So, Pablo, I want to correct you. There is no restatement here. And everything has happened on my watch, so I accept responsibility. So there is absolutely no restatement, no material change to our financials. So I want to make sure we correct you on that. On 2017, it's been a tough year. It really has with -- looking back at our financials, it's been distraction. It's been a distraction of resources. It's been a tough 2017 for every other food company, but that's not what I need to worry about. I need to worry about Hain. But what I can come back and say is, this year, we are a company of good brands, good strategy, great people. And one of the things that happened in 2017, we enhanced our organization. We've made lots of changes. In the meantime, in 2017, Pablo, with all that was going on, we still threw off $148 million of cash. We'll pay back almost $220 million of debt. We've invested over $50-plus million in CapEx. We grew our top line 4%. And with that, we went through…

We have time for one more question. Our next question is from Alexia Howard with Bernstein.

So I guess the biggest question that I'm getting from investors is, is this going to end up being a cycle where pricing needs to continue to come down over time? You've obviously got a lot of brands that are in the health and wellness area, which is great because they're pretty fragmented brand set. And the concern is that when you're up against really big retailers like Walmart, how much pricing power and negotiating leverage do you really have? Or are you going to have to -- in order to keep distribution, are you going to have to continue to take pricing down over time? How do you respond to that question to make us comfortable that it isn't going to end up being a vicious circle downwards? Irwin Simon;Founder & Chairman: So if I step back for a second and look at our brands today, I think if you look at us, whether it's our nut butters, whether it's our snacks, whether it's Earth's Best, I think we do a pretty good job in regards to pricing to some of the bigger companies and do a good job at pricing our product lines out there. I think the good news about Hain is when you say we have a bunch of fragmented brands, not really, the underlying denominator in a lot of these products are organic fruits and vegetables. There's a lot of common denominators of procurement here. A lot of the products are made in the same plants. A lot of the products are shipped on -- out of warehouses on the same trucks. So, yes, there may be fragmentation in -- Earth's Best is maybe not as big as Gerber as a conventional product. But we do have some significant size and scale in a lot…

I'd like to turn the call back over to Irwin Simon. Irwin Simon;Founder & Chairman: Thank you very much, operator. With that being our last question, we expect, over the next few weeks, to get around and see all our shareholders out there and talk to all of you. We expect to be back in August with a major in-depth review of 2017. And our outlook for '18, we'll go into a lot more detail on sales, margin, segment, et cetera, have a lot more for you. As you know, we traditionally give guidance on 2018 in August. We'll give you a lot more. It's been a tough year, it's been, from a personal standpoint, from a team standpoint, I am happy with the news that came out today. I'm happy, as I said, I am with the team that is surrounded by myself to go out -- move this business forward. And if the amount of time that was put into looking back at our numbers is put into our business, just watch out of what we're going to do. So I want to thank, once again, all our employees, and let me tell you something, they deserve a big round of applause because I don't think there's one weekend that most people have not been here, whether it's Father's Day, Mother's Day, Thanksgiving, et cetera, and they deserve a lot. I want to thank our shareholders who have stuck with us, who have supported us, and we will be spending time with you and talking to you about the future of our business. I want to thank our consumers and customers that always buy our products. The important thing is, we feed infants and toddlers their first foods. We feed a lot of food out there that is very important to health and wellness and the future of food. We feel a big part of reducing, whether it's childhood obesity, health and wellness, and we'll continue to be a big part of that. We look forward to talking to you again in August. And most likely, over the next few months, we'll talk to you. Thank you very, very much for your time today, and have a great day. And if you need a list of our products to buy, it is online, and it's available at most retailers across the U.S. and Europe. Thank you.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation and have a wonderful day.