Mary Anthes - SVP of Corporate Relations Irwin Simon - Founder, Chairman, President and CEO John Carroll - EVP and CEO, Hain Celestial North America Steve Smith - EVP and CFO Denise Faltischek - EVP General Council and CCO.

Bill Chappell - SunTrust Fred Wideman - Citi Evan Morris - Bank of America Amit Sharma - BMO Sean Naughton - Piper Jaffray Andrew Lazar - Barclays Ken Goldman - JPMorgan Andrew Wolf - BB&T David Palmer - RBC Rupesh Parikh - Oppenheimer John Baumgartner - Well Fargo.

Good day, ladies and gentlemen, and welcome to The Hain Celestial’s Second Quarter Fiscal Year 2015 Conference Call. At this time, all participants are in a listen only mode. Later we will conduct the question-and-answer session and instructions will follow at that time (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to introduce your host for today’s conference, Mary Anthes, Senior Vice President of Corporate Relations..

Thank you, Amanda. Good morning everyone and thank you for joining us today. Welcome to Hain Celestial's second quarter fiscal year 2015 earnings call.

Irwin Simon, our Founder, Chairman, President and Chief Executive Officer; John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial North America; Steve Smith, Executive Vice President and Chief Financial Officer; and Denise Faltischek, Executive Vice President General Council and Chief Compliance Officer, as well as several members of Hain Celestial's management team are with us today to discuss our results.

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 what is described in these forward-looking statements and some of the factors which may cause results to differ are listed in our publicly filed documents, including our 2014 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. This conference call is being webcast and an archive of the webcast will be available on our website under Investor Relations.

Our call will be brief, so please limit yourself to one 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.

Irwin?.

Thank you, Mary and good morning everyone. I hope everybody had an opportunity to review our second quarter fiscal 2015 press release that went out this morning. Hain's diversified portfolio of organic and natural brands continues to generate solid growth worldwide across various sales channels in this quarter, in the past quarter.

Even though in calendar year 2014 we have product withdrawal from MaraNatha our first major product we draw till the business was disrupted by a fire our first major fire and those of who you don’t know I had an accident, tore a ligament of my knee and had knee surgery in January.

So things happened in [three] now with all that behind us only look for good things in the near future.

But even with a few challenges in the quarter, which we believe are all transient in nature, we are still able to stay focused and capitalize on our growth opportunities, which show the strength of Hain, our team, our brands our diversified customer base and how well positioned we are in the healthy living category.

We have demonstrated our ability to deliver despite all these obstacles. Looking ahead I am pleased with the outlook for calendar year 2015, more and more consumers are aware of health and wellness category and they continue to grow rapidly with a robust outlook for years and years to come.

The demand for healthy better for you products help us generate record net sales up over 31% overcoming foreign currency headwinds as a strength of the U.S. dollar impacted our international results. Today 40% of our sales are from our international operations.

Both net sales and adjusted earnings were up solid double-digits for the 17th consecutive quarter. Sales in local currency were up in every segment of our business, adjusted gross margin was up in every segment of our business versus last year excluding the HPP gross margin, our margin was 27.2%.

SG&A was 12.3%, a 180 points improvement due to our ability to successfully integrate acquisition by leveraging our infrastructure of distribution systems and watching our costs. Excluding FX, our brands achieved high single-digit organic growth, excluding the impact of MaraNatha.

We’re still building back distribution of MaraNatha which John will talk about later. We had strong results in the U.S. at Hain Pure Protein UK, Europe, Canada and our joint venture in Asia. Acquisitions added $153 million in sales which included growth from these acquisitions under our ownership, including expansion into new customers, new countries.

Our categories are on track with millennials, we're driving growth in the natural organic specialty channel, placing more emphasis on quality and what ingredients are in their food, and what ingredients are in their food, they consume -- with a preference for fresh organic natural and farm to table products.

In the latest Nielsen AOC scan our data for the period ending January 17th one Wall Street firm sited, double-digit growth year-over-year before 12 and 52 week periods for the various pre-farm categories. Shoppers are paying more and more attention to what is not in their food, which is gaining traction with both customers and retailers.

The data site’s organic, no added or artificial trans fats, natural, gluten free, GMO free, no artificial preservatives, hormone antibiotic free, high fructose corn sweeter free. We make products with all these attributes under the Hain banner. We feel more optimistic about Hain today than ever before, we are in the right categories.

We have brand offers in 10 of the top 15 highest penetration categories across organic and natural, 99% of our food products don't contain GMOs, over 500 of our products have been verified and nearly 650 are rolled in the non-GMO project. We also had over 500 gluten free products today. And Hain Celestial U.S.

alone over 50% of our products were certified organic by USDA as of the calendar year. And by the way if you are certified organic you are also GMO free.

Lima and Danival brands in Europe are organic brands and we market better for your healthier version of the products that the UK market has enjoyed for many, many years to help consumers make more helpful choices to fill their fiber based food and vegetable government regulations, all these products are non-GMO.

Consumers are increasingly seeking healthier better from new products, including non-GMO products. Many of you saw Saturday's New York Times business section about consumer preferences for non-GMO products and willing to pay higher prices with TERRA CHIPS featured in that non-GMO article.

Consumers taste are shifting, views on health and wellness are evolving and consumers as I said before are willing to pay for them. In yesterday's Wall Street Journal sites more information on U.S. consumers thinking more and more in non-GMO foods increased in retail sales at 15% among the fastest growing U.S.

foods segment as well as Midwest farmers who have recently begun moving away from biotech seeds. As I said before Hain's being one of the first to capitalize on these opportunities.

Over the years our products and our brands have even been more compelling today than ever before as we add distribution across channels and have major focus on food service and convenience stores which we talked about.

You have heard me, John and now our team say before where there is a cash register, electronic register, we want to sell our products. Consumers increasingly want food options that are better for you and we have the options for them.

Consistently, organic growth can be hard to find in most consumer packaged goods companies today and Hain continues to deliver with our mission to be the leading manufacturer of organic natural better for you products around the world, and this has been our mission since the company was founded in early 1993.

And growth is coming from across product categories across sales channels where no single customer represents more than 13% of our net sales.

This speaks not only to the strength of our brands that we’ve acquired but equally important to the strength of our brand investment and building global brands with a global team and a global distribution network around the world.

Today our products are available as whole foods, sprouts at many, many natural food stores along with many grocery stores, mass market club stores, convenient stores, food stores, omni-channel or ecommerce marketplace providing consumers with a seamless shopping experience of bricks and clicks where our expanded dedicated team is working to support our brands and increasing focus for growth among us various retailers.

Our strategic acquisitions have enabled us to have fully branded products operating across isles, categories, channels and countries and our organic natural and better for you products offerings are growing in over 65 countries around the world today.

And through Tilda with our new relationships we've opened the new office in India, also we are expanding through the Middle East which now will carry a lot more Hain products. Looking at the second quarter in more detail, our brand performance was strong with a broad based increase.

We had 20 brands up double digits in local currency in the quarter, four brands up mid-to-high single digits in local currency.

In the U.S., and John will talk about this later, our latest 12-week Nielsen AOC Plus and that includes convenience to our consumption growth ex-MaraNatha was up 8% while the channel was only up 2.7 four weeks at 9.4 versus 2.84 conventional and for 52 weeks up close to 10% while the channel is up 1.9% that is great growth.

Now focus on the key drivers that led to our strong sales performance I’ll let John talk about the U.S. business performance in greater detail. As I mentioned organic growth was up high single digits excluding the impact of MaraNatha.

We expect our MaraNatha sales will be impacted alone by approximately 25 million to 30 million in our fiscal 2015 alone in our second quarter our sales were impacted by over $30 million [ex-any] growth versus last year.

These results combined with our operating leverage drove our second quarter adjusted earnings of $0.54 versus $0.43 in the second quarter last year up 26%. We effectively and that assumption we continuously talk about how we manage our SG&A to report a 31% increase in adjusted operating income to $87.4 million versus $66.9 million.

We effectively manage our cost acquisition integration and productivity initiatives. In the UK, segment’s net sales including over 50 million from Tilda were up high single digits in local currency in a challenging retail environment.

Even with the warm fall season in the UK overall our soup business was up 7% that is New Covent Garden and our Cully & Sully. Our New Covent Garden up 3% our Cully & Sully up 8%. As of January New Covent Garden was up low double digits outpacing the category. Our Hartley's grocery business was up 11%.

We’re finally starting to hit our strides for Project Castle with a $25 million run rate. We expect going into fiscal 2016, we’ll on a $35 million run rate and profitability will hit in 2016. Our UK teams have taken over the sales and marketing and distribution of our planned phase non-dairy products.

Today, we have a strong line up with our oat meal coconut milk our Rice-based planned products which are made in our European facility. We expect some big growth big opportunities in that category and we look to enter into the refrigerator part of that category.

We’ve introduced our non-dairy ice-cream our Dream products and with great acceptance in Waitrose and other retailers in the UK. Ella’s Kitchen which John again will talk about continues to be the number one selling baby food in the UK.

Tilda performed well but without full production capabilities, we expect our sales will be impacted by approximately 5 million to 10 million in 2015. We expect the major production line to be up and running in our fourth quarter and the plant should be fully operational later this year.

In the in turn, we’re relying on co-factories that we work closely with. Back in November when we had our earnings call five days before that is when we found that above the fire.

The majority of the fire was smoke and water damage which affected lot of our equipment and we would not take any risk in running the plant where there was any smoke or fire damage. With that we are in the midst of replacing almost all the equipment in the plant.

We are fully insured and actually fully ensured for loss of sales, loss of promotions, replacement on equipment, so ultimately we’ll have a brand new plant which we expect a lot of efficiencies and a lot of good yield coming out once the Tilda plant is up and running.

This week Rajnish Ohri, Managing Direct of India Operations, who is responsible for building our Tilda and Hain brands in India has joined us as our new General Manager and we really excited about Tilda expanding outside the U.S. in the ethnic market later this year we expect to see Tilda in the U.S. being sold in major club and major retailers.

Right now we’re not about to name those but we expect this by the end of our fiscal year that we’ll see a lot more of Tilda in the U.S.

We’re also expecting to see a lot more Tilda other than sold in Loblaw where it is today through Canada and there is two major retailers that will be carrying Tilda in Europe where today it’s mostly sold within the ethnic market. The UK grocery market is changing and evolving.

Our focus on building our brands and bringing more and more health and wellness products to that market which our retailers are telling us, they want. Hain Celestial Canada under the rest of the world segment performed well up double digits in local currency led by Sensible Portions, Terra, Imagine, Greek Gods and Celestial Seasonings.

Also in the rest of the world our Hain Celestial Europe net sales increased double digit currency. Our Lima, Natumi, Danival, Dream and Celestial Seasonings brands have grown strong. This excludes our brand law and other private label businesses that we discontinue or sold off.

Hain Pure Protein which we acquired in July had strong quarterly sales, up double digits. We’ve entered into new and expanded supply agreements with panera bread to provide them with Plainville Farms turkeys and expand BluePrint trial for January and expand BluePrint in over 100 Panera stores.

Hain Pure Protein also developed into [Chipotle] stores and Rodi Restaurants. Hain Pure Protein also secured listings for BluePrint and shopped a FreeBird customer and till the Basmati rice at Café Spice Chefs' Warehouse now offers for Tilda their food service growth distribution restaurant.

These were some of the synergies that we talked about, when we acquired Hain Pure Protein to expand our food service business within Hain.

With the support of Hain Pure Protein, we have a great Thanks Giving we sold over 1.5 million organic and antibiotic free turkeys and lately after the big gain this past weekend we sold millions of individual antibiotic free chicken.

Speaking the big gain I hope you saw our Snacks press release all the great non-GMO snacks we have offered from Garden of Eatin, Sensible Portions, Terra and Burritos. Rudi’s and you can see in our consumption numbers, we sold the lot of snacks this past Sunday. I am excited to say that 711 will be listing our Sensible Portions snacks this spring.

As for Hutchison, our Hain Organic joint venture in China we are starting to ship more instant formula into that market. We will continue to build our infrastructure for future growth and additional investment of CapEx to support the growth.

In addition, we have a global procurement team at technical service group to ensure product safety and quality at our 30 plants around the world. As a company that is deeply committed to the safety and quality of our products we have learned a lot in the connection of our nut butter recall.

Our global technical service team now reports and also check our General Counsel and chief Compliance Officer. We have taken this opportunity to upgrade our processes and procedures on a global basis. Productivity remains a strategic initiative for Hain and for fiscal 2015, we believe we can achieve at least $55 million in worldwide productivity.

For Q2, we’ve had over $11 million of productivity. The third quarter and fourth quarter are a big quarters that we achieve productivity. Our balance sheet remained strong as does our ability to generate cash. During the quarter, we completed a stock split in the form of a dividend after the close of business on 12, 29.

Our business was strong in January and with the coal temperatures, winter snowstorms we are prepared for and I hope consumers are too by stocking up on tea, soup, snacks and many other Hain products. We love cold weather and we love snowstorms. We believe we are well positioned for another record second half in future growth in long-term.

Our executive team remains committed to increase in shareholder returns our balance sheet provides us with the financial flexibility for us to pursue strategic M&A activities on a global basis. We are focused on strategic acquisitions and being disciplined in our approach to acquisition is a part of our DNA.

There are plenty of acquisitions to look at, while I can’t guarantee will do any. We are evaluating many at this time. In summary, we had a great half of fiscal 2015, while not challenge of course. And I look forward to the next two quarters. With that I will turn it over to John. .

Thank you Irwin, good morning everyone. Q2 was a very strong quarter for Hain Celestial U.S. Let me just go through a few key highlights in the quarter which included Q2 adjusted net sales of $359.3 million which was up 10% versus year-ago. If we look at Q2 adjusted net sales ex-MaraNatha the U.S. was up 14% versus year-ago.

Importantly, we had strong Q2 organic growth of 8% which is consistent with what our Q1 organic increase was. Our latest 12-week Nielsen AOC consumption ex-MaraNatha was 8% which represented an acceleration in our trend, in fact continuing the acceleration our latest four week number was 9.4% ex-MaraNatha.

Our growth was achieved even as we lapsed strong year-ago comp and resulting in a two year stack consumption gain ex-MaraNatha of 17%. And the results were driven across the portfolio with strong gains including 14 brands of double-digit or high single-digit increase.

Our Q2 adjusted operating income increased to $63.1 million up 11% versus year-ago, and our Q2 operating income margin was 17.6% up 20 bps versus year-ago. This reflected productivity savings and increased leverage of our SG&A platform.

Now as I have on previous calls I want to review the five key factors that make us optimistic about our balance of the year outlook. These factors are consumption trends, distribution growth, productivity, innovation and our most recent acquisitions performance.

I will take you through quick review of these five factors and then segway into a MaraNatha update. Starting with the first key factor which is our continued consumption growth. Q2 was our 20 consecutive quarter of strong U.S. consumption trend. That’s five complete years strong U.S. consumption trend.

We drove growth across our brand portfolio and across all key AOC channels despite going in strong year-ago comp.

And as Irwin mentioned speaking of a cross across the Atlantic Ocean our Ella's Kitchen baby food was the number one baby food brand in the UK and that’s both organic and conventional number one for the third consecutive 12 week period, driven by double-digit consumption and double-digit distribution growth.

In fact based on our most recent 12-week period Ella's Kitchen has now been the number one baby food brand in the latest 52 week period as well. Our second key factor is our distribution growth; our top 13 brands ex MaraNatha which account for over 80% of our AOC sales saw a distribution gain of 3% in Q2 versus year ago.

This number jumps to 4% plus if we include Ella's UK distribution gain. These results were achieved despite lapping huge distribution increases a year ago at Wal-Mart on Ella's Kitchen, Greek Gods and Sensible Portion. As you can see, we continue to fill in the distribution wide space on key brands and our key customers.

The third factor fueling our optimism is our productivity program. Now I am sure you have heard about the recent pricing pull back for conventional commodities but costs for almond, egg whites, butter fats, organic coconuts and organic wheat flour all of which are leafing commodities for Hain Celestial U.S. were up significantly in Q2 versus year ago.

The key to offsetting these cost increases in Q2 was primarily our productivity program, our Q2 productivity savings were over $8 million, Jim Meyers and his team continued to realize significant productivity gains from initiatives such as increased internal baby food pouch production, increased plant efficiencies at our snacks and personal care factories and reduced packaging costs.

The fourth key factor is our strong innovation line up. We're going to introduce 75 plus new exciting products at the upcoming Expo West in March. And now let me give you a couple of key products highlights on what we're launching. So out of Celestial you're going to see new Celestial ready to drink Chai Tea Latte.

These are bold flavored Barista quality beverages that are brimming with the goodness of real brewed tea. On our Sensible Portions line which has been red hot, you'll see us introduce great casing puff snacks made with real vegetables and all natural ingredients with still 30% less fat than the leading potato chips.

On BluePrint we're going to introduce new charred basal colored green fresh juice. This is a nutritional powerhouse juice with a great complement to our best-selling green juice.

Out of the Dream brand you'll see new Dream brand coconut bites, these are delicious plant based non-GMO frozen novelty made from real coconut and coated in rich thick chocolate. This treat is both lactose and gluten free. And finally over in personal care, we’re going to introduce new Alba Botanica fast fix duty treatment.

This is a quick solution for common problems like puffy eyes, pimples, under eye circle and believe it or not thin lips.

These great new Hain products have been very well received by key retailers in fact several key leading retailers have already said they're going to put these products on shelf and will be featured along with many other terrific new products at the Expo West. Hope to see you there.

Our fifth key factor driving our optimism is the performance of our latest acquisition, Rudi's Organic Bakery. The Rudy's business delivered strong Q2 top and bottom line growth. Rudi's Q2 AOC consumption was up 15% despite comping a strong year ago promotional period when it was run by other ownership.

Rudi's consumption growth was driven primarily by increased distribution highlighted by recent gains at Ahold, Wegman's, Wakefern and Harris Teeter. Our Rudi's Q2 margins improved by over 100 basis points led by better production throughout and increased productivity at our Boulder Bakery.

And as I have mentioned on previous calls we have got a tremendous Rudi's innovation queue. we'll be introducing new Rudi's products at Expo West led by our new Rudi's gluten free garlic and cheese toast.

So based on what we're seeing in the second quarter and what we've been seeing all along and you can see why we're so enthusiastic about Rudi's Organic Bakery. Finally, a quick update on our MaraNatha nut butters. Our business is coming back as we're regaining distribution, consumption and brand share particularly on our core roasted almond line.

By way background MaraNatha has three product line, first is our core roasted almond butter, which accounts for 80% of our AOC sale. Second is our peanut butter, which accounts for 15% of our AOC sales. And third is our raw almond butter which accounts for the remaining 5% of our AOC sales.

Now we began shipping roasted almond butter that's the 80% of the business in late September. In the most recent AOC period we've regained all but 2% of our roasted almond butter distribution and 1% of our roasted almond butter consumption.

Most importantly and this is a really key point, we've regained our AOC share leadership of the almond butter category with over 40% share of the category, again we’re now again the number one almond butter brand in the category.

This is very significant as it tells us that the brand is very, very healthy from a consumer's perspective as well as the retailer perspective despite the withdrawal. We're currently executing our first MaraNatha roasted almost butter promotions since the withdrawal. This promotion is being executed in February, March and April at many key retailers.

In regard to the MaraNatha peanut and raw almond butters which as I said before accounts only 20% of the AOC business, we just began shipping these lines in the last week of December but we started this at the very last week of December prior to that we focused on production of the roast and almond line to meet demand and build inventory to support our second half promotion.

Now we’re going to spend Q3 rebuilding our peanut and raw almond butter distribution while we promote the roasted almond butter. And we expect that MaraNatha nut butter business will be very well positioned both on retailer shell as well as in consumer’s mind as we enter into FY16. So to close Q2 was a really strong quarter for Hain Celestial U.S.

highlights included 10% adjusted top line growth, 8% organic growth which was consistent with what we saw in Q1 and our latest 12-week AOC consumption growth of 8% ex-MaraNatha. We also delivered an 11% gain in operating income and a 20 basis point increase in our operating income margin.

And look we are optimistic about our go forward prospects given our strong consumption trend including the acceleration that we see in the most recent four weeks, our growing AOC distribution, our deep innovation queue, our productivity initiative, our Rudi’s Organic Bakery acquisition and our resurgent MaraNatha nut butters business.

So with that I’ll turn the call over to Steve Smith..

One, 7.3 or $4.5 million net of tax related to the voluntary nut butter recall.

While we may continue to incur charges in future periods we do not expect such amounts to be material and we continue to actively work with our insurance carriers to settle our claims; Second, startup cost of $3.3 million pretax related to Project Castle, our chilled-desserts facility in the UK.

We continue to see momentum in this business and we expect that by the end of this fiscal year the facility will be ramped up and out of its startup phase; Three, $1.8 million pretax of acquisition related fees, expenses and restructuring costs and we also had $2.6 million pretax of unrealized non-cash foreign exchange losses primarily on inter-company balances.

Gross margin on an adjusted basis was 25.3% excluding our HPPC acquisition adjusted gross margin would have been 183 basis points higher at 27.2%. As Erwin mentioned each of our segments show gross margin expansion versus the same period last year on a non-GAAP basis.

But as a reminder, the UK is a bigger segment this year that also impacts our gross margin. SG&A expense for the quarter on an adjusted basis and excluding amortization of acquired intangibles was 12.3% of net sales, a 170 basis point improvement as compared to 14% last year.

Total SG&A expense on an adjusted basis was 12.9%, a 180 basis point improvement compared to 14.7% last year. The rate of spend decline in the quarter primarily from managing our costs, leveraging our infrastructure with the impact of our acquisitions mainly from the HPP acquisition and as we achieve strong operating leverage on higher sales volumes.

As a result, adjusted operating margin was essentially flat to prior year 12.5% despite the HPPC acquisition. This demonstrates our ability to manage our costs and spend levels even with some of the near term challenges in our business. Excluding the acquisition of HPPC on an adjusted basis operating margin would have been 12.9%.

Operating income on a GAAP basis for the second quarter was 10.6% of net sales. On a GAAP basis, our effective income tax rate was 32.1% our adjusted effective income tax rate for the quarter was 32%, slightly favorable to last year. For the full year our adjusted effective income tax rate is expected to be in the 32% range.

Our balance sheet continues to be strong, our working capital was $476 million for the current ratio of 2.1 at December 31. Stockholder’s equity was $1.621 billion debt as a percentage of equity was 54%, debt-to-total capitalization was 35.1%.

Net debt at the end of December was $740 million and at the end of December our cash balance was $135 million increasing $68 million from the same period last year. We generated almost $52 million of operating cash flow in the current quarter as compared to 19.9 million for the prior year period.

The increase is principally the result of working capital changes. Capital expenditures for the quarter were $12.5 million and operating free cash flow was 39.2 million for the quarter. Our cash conversion cycle was 62 days for the quarter.

The effect of the seasonal build until the inventory has started to moderate as our cash conversion cycle is down three days in the first quarter. Excluding acquisitions our cash conversion cycle is flat for last year, despite plan investments and building up our MaraNatha and nut butter product inventory as we restart the brand.

We have refinanced our credit facility with our existing lenders in December increasing our facility by a $150 million to $1 billion and we also have the ability to access another $350 million of credit under certain conditions. This refinancing provides us with additional flexibility to meet our working capital and acquisition capital requirements.

We also push the maturity of facility out over two years to December 2019 and we see favorable lower pricing on the pricing grid. At the end of December our two-fold on stock split in the form of 100% dividend became effective.

Our weighted average shares outstanding at the end of December was 103.2 million shares as compared to 98.4 million shares in the prior year as adjusted for the stock split. The increase in weighted average shares outstanding is primarily from stock issued in connection with acquisitions and stock issued pursuant incentive compensation plans.

The impact of the increase in weighted average shares outstanding was $0.02 in the current quarter. Since we established guidance in August the U.S. dollar has strengthened significantly as compared to our other primary currencies.

Pound sterling the Canadian dollar and the euro, this has and is expected continue to adversely affect our net sales and to a lesser extent earnings per share. In addition, while most parts of our business continue to perform well we do have some short-term challenges, primarily on our nut butter and Tilda businesses.

The effect of foreign currencies expected to adversely affect our annual net sales by approximately $70 million while short-term challenges primarily from the nut butter recall and Tilda business are expected affect net sales by additional $20 million combined. And this effect has been since the end of the first quarter.

As a result, our guidance for net sales for the full fiscal year 2015 is now in the range of $2.650 billion to $2.675 billion.

This is on an adjusted basis, with respect to the cadence of our second half we anticipate net sales will be slightly higher in the fourth quarter as compared to the third quarter while 40% to 45% of our earnings are anticipated to be in the third quarter with the balance in the fourth quarter.

We anticipate earnings per diluted share will be in the range of the $1.85 to $1.89 for the full year and as a reminder this is on a post stock split basis.

With respect to other explanations underlying our guidance we now expect adjusted gross margin to be in the 25.3% range for the full year and excluding the HPPC acquisition to still be in the 27% to 27.2% range. Excluding the HPPC SG&A expenses still expected to be in the 15% to 15.1% range and including HPPC in the range of 13.7% to 13.9%.

Full year operating margin excluding HPPC is still anticipated to be 12% to 12.2%. These amounts are all on an adjusted basis. Share count for the full year is estimated at 103.2 million shares, interest expenses is estimated to be in the $25 million to $26 million range, and capital expenditures are estimated at $45 million.

As indicated in our press release our estimates do not include any results of discontinued operations, acquisition related expenses, integration and restructuring charges, start-up cost unrealized currency gains or losses, results for litigation settlement or other non-recurring one-time items such as recall withdrawal impacts or future acquisition activity.

The currency is based on current rates. And at this point I will turn it back to Irwin. .

Thank you Steve. With that Mary we can go ahead and open up for questions..

Operator we're all ready to open it up for question. Thank you, Steve..

Thank you. [Operator Instructions]. Our first question comes from Bill Chappell with SunTrust. Your line is open..

Just looking at the EPS guidance for the year and kind of narrowed by about $0.05 to $0.06 on top end, I guess post-split. Can you tell us, I mean is that all currency -- is it currency Tilda and higher commodity costs, maybe a breakout as we're looking going forward..

Bill the majority, I'll come back and say it's all currency and basically what I said before the team has done a good job on managing costs, the team has done a good job on mix and in managing through this. So majority of it is absolutely currency..

And then flipping to….

And I think Bill just to go back and show when you come back on a 100 million or 90 million and just adjusting EPS by $0.02 $0.03 it shows the strength within our diversified portfolio and our customer base just on that..

As I look at the UK, I guess two things there on the soup business I understand that was up but it had fairly easy comparisons. Can you talk like kind of the health the season, do you feel like this is still a good growth category over the next few years, now that you've owned it for a couple of years on Tilda.

Is there any change the guidance from the fire I didn't quite catch that or sales are still in there from the insurance recovery..

So just let me talk about soup, we had the UK team in here last week. I am probably more excited about the soup business in the UK than I ever have been. We have three soup businesses in the UK, we have New Covent Garden, we have Cully & Sully and then we have own label which is private label.

And one of the things that we’re seeing is the overall soup business Ambient Soup which is the biggest part of the soup business which is Heinz canned [Baxter] is way down. So big opportunity to really dive into that category.

The other thing is as you look at the soup category and a big focus on the UK market has been own label, where Tesco and Sainsbury has focused on their own label, they have not grown the category. So it's our job to go in there and say why it's important to have more facings of our New Covent Garden brand.

On the other hand one of the things is Cully & Sully is different packaging, it's a pod instead of the container. One of the things that we're going to look to go into is in beans, in soup meals, et cetera.

In the UK, they do not sell soup [indiscernible], so we have two plans in the UK and we think the New Covent Garden brand is a very, very strong brand. So big focus on soup, big margin business and like I said we have three businesses in UK. We're also a big provider of soup to [Fretemage] and other food servers accounts in the UK.

So what I will say is there big drive on soup business and to grow that business and a big focus from us with our three different categories.

One of the big things that we have for a lot of retailers have come to us and we have two factories to produce other peoples labels or to produce private labels is just something we didn't want to focus on, but we'll look at that if we can get the growth from our own label within Sainsbury and Tesco.

In regards to Tilda, we adjusted our Tilda number between $5 million and $10 million just to be on the safe side. And not that one of the problems with us going to a third party it's just timing and selection of product. And that's what it is when you gone to a third party that we can't forecast to make our products to what our customers want.

So in the second quarter we've had some interruption, the timing the cold packers just because of fire. And with that we think we'll have our line four which is our big line up and going by the end of March, early April that will help us substantially here..

Our next question comes from Scott Mushkin with Wolfe Research. Your line is open..

Irwin this is actually Mike in for Scott. On the bigger picture on margin question with respect to the UK, this quarter it looked like it came in a bit year-over-year but kind of thinking about the drivers of the UK margin this year and over the next few years.

And what's in place and where do you think this margin can go over time with the right scale?.

I think there is couple of things. Number one is growing the soup business which is a major margin business for us. You heard us talk about our Project Castle gaining to a £35 million run rate and getting to profitability and then some.

And with that some of the additional mix on Tilda and selling more Tilda blue part of Tilda was in the food service and goes into the ethnic market. But just again is that’s where the big drivers are going to come on are gross margin.

The other one is driving more and more part leased products which we’re in the midst of installing more equipment to be able to keep up with some of the pod that we volume shortfall there and that’s continually. The other big thing on the SG&A line is ultimately integrating some of the backrooms.

Another big thing is we just took over our Dream business, our non-dairy business and we look for that to be a big growth vehicle for us and a great margin business for us within the UK.

But what I can sit here and say is over the last two weeks we had both the Tilda team the full UK team in there and we really got a good plan in place how to grow on the back half both for Tilda both UK, Europe, Middle East, India, U.S., Canada but more important what we’re going to do with New Covent Garden, Cully & Sully grow both in the UK and the Irish market how we’re going to grow our food business our soup business and our castle business.

And you heard me say before our Grocery business our Hartley business is up 11%. What we’re looking for is more growth out of our nut butter business our Sun-Pat business and we look to get into more and more Grocery product lines whether it’s Celestial Seasonings snacks within the UK..

That’s really helpful and I appreciate that.

And then lastly just now that you had about 40% mix with sales internationally how are you guys thinking about that mix of business over time and where would you like that to be as you think about future acquisitions and growth?.

I think while we said our like 55% in the U.S., 45% outside the U.S. listen I think right now with currency where it is buying Smart in Europe would make sense for us today buying Smart in the UK where we’re also sitting with lots of cash will they expense for us today strategic acquisitions.

We have the infrastructure there and to integrate them there is a lot of opportunities. And what we’ve seen with good double digit growth in Europe coming out of Lima, Danival our Dream business I mean they have been great acquisitions for us in Europe.

And our European business is only 100 million euros today we want to get that bigger I mean we’re installing in a lot of countries we need to get a bigger base because a lot of those products today only 50% of our products sold in Europe are only sold in natural food stores..

Okay. And….

We’re seeing acquisitions and opportunities presented to us for Asia, South Africa, Australia, so there is a lot of stuff and there is nothing we’re going out there to do it but we’re seeing a lot of global acquisitions coming our way out there. And we’re going to look at what make sense for us..

Our next question comes from Greg Badishkanian with Citi. Your line is open..

Good morning. This is actually Fred Wideman on for Greg again. Just a quick question on Tilda, the fire is not impacting the U.S. expansion at all.

Is it?.

No. And listen a bit because we just again we got to make sure we have risen for UK and the rest of the world. But the plan was to win through the U.S. in the fourth quarter anyway. But is its impacting it it’s not by a lot as by maybe a month or so..

Okay, great. And then could you guys just quantify your exposure for each of your major foreign currencies? I think you said both big three buckets are but any more color would be great..

When you exposure I am not exactly sure what you mean?.

Just sort of a breakdown percentage of revenues..

Well so the UK is about 30% of our total business and Canada and Europe are about 5% each..

Okay, great. And then just for HPP quickly.

Did you guys see any impact from Chipotle’s decision to suspend one of its pork suppliers in the quarter?.

If anything impact on the positives because they’re….

Right, yes that’s….

I mean Chipotle is one of our key customers and one of our key suppliers here in the North East. Nothing significantly to stand out but the strong demand anyway from Chipotle..

Our next question comes from Evan Morris with Bank of America. Your line is now open..

Couple of questions just on organic growth you highlighted for the quarter we have seen some acceleration I guess in the recent quad [ph] weeks.

Can you give us a sense of sort of where the run rate is now on organic growth and what your expectations are for the back half of the year?.

So, we are saying high single-digit and we continue and expect that to continue into the back half of the year, Evan. .

Okay, and just on the SG&A leverage, you continue to -- it’s very impressive, I am just wondering how much additional operating leverage you have on the SG&A line, how this going in talk little bit about some of the key buckets and key areas we still have opportunity?.

I will talk about few and again, I want to be careful here because more I give you the more you bake in to my number. But, as we look to integrate plants and we are doing some things right now with blueprint we are doing some things with our other plants and we are definitely seeing the efficiencies.

And you come back where we took a Westchester facility and we put baby food lines in there and we put some other product lines and we will put our juice line in there, you are seeing effects of that where we have taken our sensible portion plan and moved it to Lancaster and built the new facility we are seeing the effects of that.

The effects of what we have able to do at the Rudi’s plant and the efficiencies they have been able to get out there, plus we acquire Rudi’s last May we closed our offices and moved to bear moved that into the our back room. Today in the U.S.

all backrooms are integrated within the Hain headquarters here and like success all the operations procurement purchasing basically are all integrated here.

So a lot of G&A savings from integration lot of efficiencies and we are also have been looking at where it make sense to outsource even some of our groups within like success and get some efficiencies.

So that’s number one, number two is what makes sense then with Canada, Canada is run today as a whole separate entity, what makes sense to integrate Canada is closer than most of our other states, so what makes sense from Canada now as a reports into John to integrate even though sales and marketing we run separately about what makes sense from an operation what makes sense from a backroom to integrate there.

So there is opportunity is there. The UK today we have the business, our Hain Daniels our grocery business and Ella’s business, and they are all running a separate businesses today. So, I will leave that to your imagination and then there is Hain Europe that ultimately could be integrated.

So there is multiple opportunities, the big thing too is procurement as we take $55 million, $60 million of productivity and that’s each year a new $55 million $60 million. So getting 1% on margin has tremendous leverage in savings for us, also. So there is a lot of SG&A opportunity.

And you know what we are ultimately going to do other acquisitions and we hope to integrate them. As we look at our corporate spend today and how do we ultimately take a more and more from the corporate standpoint. So there is a lot of SG&A savings and there is a lot of gross margin opportunities for us to continue with that. .

Great, thank you. .

Thank you. And we are minors we look forward, trust me. .

Thank you. Our next question comes from Amit Sharma with BMO. Your line is open. .

A quick question for Steve. Steve have you given commodity inflation outlook, you talked about commodity is a little bit inflationary, John talked about it.

What is the inflationary outlook for the full year?.

We are expecting -- with the exception of butter fat, in terms of the key commodities that are driving inflation, we are expecting they are going to continue the coconut, the wheat, the almonds, the egg whites. So we called second quarter inflation at 3.5%.

And so we are expecting a slight moderation of that because of the butter fat, but basically somewhere between 2.5 point to 3 point. .

And beginning of the year in August we expected inflation to be about 3% to 4% for the full year. So that’s maybe on a low end of that, but we were pretty accurate back in August..

And Steve there is follow-up to the previous question on SG&A leverage.

I mean the first half of leverage is running ahead of your full year target, are we looking for a bit of a slowdown in the back half?.

It was running ahead of the original target, for couple of reasons, one top-line is -- with the top-line down and HPPC as a bigger percentage of the total pi we are getting additional leverage on HPPC. That’s really what’s going on. .

Okay, that makes sense. And then Irwin, if we look at your portfolio in U.S. and the snack portfolio really stands out in terms of how strongly its growing and what kind of sales uptake that we have seen.

And we have talked about in the past about the packaging and innovation that, can you talk about that a little bit what’s driving that? And as you look at the rest of the portfolio what are the brands can you see or identify to have similar potential or a real meaning for acceleration on [indiscernible] trends..

And again it's not only in the U.S. it's around the world. I think our snack category has tremendous growth because consumers and it goes back to show you Amit, consumers want healthy and healthy snacks.

I think transforming some of our snacks into other eating opportunities whether it's far whether it's on the go stop et cetera, there is opportunities in our snack category and carrying our brands over to that and I'll leave it at that. I think our Greek yogurt business continues to grow high double-digits from a standpoint, our baby business.

Yes Ella's had a bit of slowdown at Wal-Mart but any reason countless for a second on the side or anything our baby business our formula of business, our grocery business, our refrigerated frozen business, and that's one of our biggest business today. Our plant based non-dairy product business big opportunity for us and big category.

Our whole condiments category with oils, mayonnaise, ketchups and mustards big opportunities for us will continue to grow. Our BluePrint and this stay tuned to what's going on with BluePrint a lot happening in the BluePrint category and we're pretty excited about BluePrint.

Rudi's gluten free, we today one of the big things and you heard John talk about, it was to get our Rudi's Bakery fixed and really to focus on Rudi's and get the efficiencies there. And we have restaurants, we have retailers all calling us for more and more Rudi's, just making sure we can supply it and roll it out. And last but not least, listen.

You heard what I said before. In the quarter, we had to overlap from last year $13 million of no MaraNatha sales plus growth. And we were able to do that. So getting MaraNatha back in stock, we did not ship peanut butter and raw cashew until the last week or so in December. So just overcoming MaraNatha and getting that back.

Listen I think the fresh category on protein, what I am seeing there on protein, what I am seeing there on Hain Pure Protein both on branded, were the opportunity for the process and deli and stuff like that; fresh meals, fresh soup, tremendous opportunity for us.

The consumers backing away from the frozen category want less and less frozen means today, want fresh prepared foods, want less and less cans today, want fresh prepared foods, want less and less milk today, want more and more plant based products.

So we're in the categories and we're absolutely seeing that and I think our portfolio and the opportunities for us tremendous in so many innovations and new products and you'll see this at Expo. And just wanted rice, Tilda, again whole grain, gluten free, low glycemic index, and with the ethnic flair to it.

I see a big opportunity in the whole ethnic market and stay tuned for some focuses there from us..

Matt this is John, I can't believe I am adding on to what Irwin already said. But one category that we're very high on is personal care. You look at the numbers on what we're seeing in growth, this is a category that has really struck a chord with consumers now.

And then the other one I would add, two others I would add with the spectrum especially in the whole healthy fats area. And then last but not least we're starting to see some nice momentum on Celestial on both the bag side as well as the strong reception we're getting on the ready to drink products that we're introducing..

And just on our personal care, that's a good point John. We had many people reach out to us, we established the personal care product the categories because they know that is where the growth is and absolutely not, because we see so much growth in that category.

And if you're concerned about what should we -- how about what should you put on your body and what you wear. So opportunities are tremendous..

Our next question comes from Sean Naughton with Piper Jaffray. Your line is open..

Private label, we're starting to see a little bit more of that, and kind of the organic and better for you products, at least kind of the mass and club, a little bit additional, which is clearly a validation of your strategic focus in the category.

But can you talk about how you navigate this dynamic in the marketplace and maybe you remind us how much of your business that you're kind of doing on this area at that point..

So Sean I'll touch on it, John jump in here anytime. Listen, I've seen private label on this business since starting Hain has been around. And Kroger has done a great job on private label, whole foods has done a great job on private label and other retailers have to. Being one of the largest procure of natural organic GMO free products today.

And we know where the difficulty is in supply and we do this every day. They're going to run into some of those challenges too. And yes there is going to be the ability to do me too products and everyday products.

But with that from our standpoint what’s next GOC, what’s next flak seed, what the next plant based meal what’s the next snack we have 30 plants of our own today so we’re focused on our own plans and working with co-packers when we do work with co-packers we’re the one sourcing the product and the packaging. So it’s something that out there.

It’s probably 18% to 20% of sales in the U.S., less than 3% of our sales is private label. In the UK it’s different because the UK is a different market from that.

But it shows just the strength of the category and what I will tell you is many of those private label, many of those retailers that want to get in the private label do come to us and ask us to do it and it’s I mean the answer is no because we want enough supply for ourselves instead of going out and doing private label..

Okay, that’s helpful. And then just quick follow up as to some that the distribution gains obviously nice work there, sales for you guys. But is there anything can you talk about some of the stacks areas that you’re seeing in the U.S.

for you for distribution gains and are you getting is there any difference in the traction that you’re getting in some of those channel?.

I’ll talk on that to I think number one as you’re seeing is Whole Foods plants up 50 new stores and over the next week what they plan to open in New York and et cetera so just Whole Foods and Sprouts with their store openings is great traction to us in those retailers and then John you heard us talk before about 7/11 with Sensible portions which will be a big win for us.

And we have multiple other retailers and fast food restaurants that are approaching us for different types of snacks and other products it’s just supply and demand and how we do it.

But John do you want to talk about?.

I guess what I would add is some hot categories for us. Obviously we’re seeing in the UK really strong distribution gains on Ella’s Kitchen. In the U.S. we continuing to see strong gains on snacks we’re seeing double digit gains in terms of distribution on Rudi’s. Spectrum continues to be a rapidly increasing area from a distribution perspective.

And Greek Gods continues to drive distribution, Greek Gods has grown at a double digit CAGR from a top line perspective. We’re going on our fifth year and it continues to have some really spectacular distribution gains some of which I look forward to telling you guys in the next quarter when they actually show up on the shelf.

So look we have Irwin said a broad array of channels that we’re seeing distribution gains as well as across the portfolio on our key brands..

Thank you. Our next question comes from Andrew Lazar with Barclays. Your line is open..

Just two things from me, first would be I just want to make sure I fully understand little bit of a shift with I guess the fiscal 3Q expectations on EPS coming down a bit more versus where the street had been. I guess you still have some of the impact as you talk about from Tilda and MaraNatha but I guess to a lesser extent than the 2Q.

Inflation maybe the bit more modest you have improved performance from higher margins soup and cheese business and still strong productivity and I know that that’s the still headwind but I would assume that’s kind of a case in the fourth quarter as well.

So I just want to make sure I just fully understand the shift from third quarter to 4Q from an EPS standpoint?.

A big thing is productivity a big part of our productivity comes in the back half so that’s a lot of it. And just continuing savings growth and mix is what helps our back half..

I assume you say back half you mean specifically fiscal 4Q versus 3Q?.

Well, fiscal -- yes exactly, 3 and 4 but fiscal 4 versus 3..

Okay, got it. Because the change I think relative to where at least consensus estimates were for the 3Q specifically come down quite a bit and shift into the fourth quarter more aggressively. I really just want to get a better sense for that.

So you’re saying it’s primarily productivity and when that kind of really kicked in for the most part?.

Well, that’s the big part of the productivity we’re looking for $55 million and so far it’s 11 plus million, so we got to get in the back. And the fourth quarter is the big one..

Okay, and then thinking more broadly I think one of the key reasons for buying the Premier brands in the UK while back was gaining scale right in the UK with retail customers to really allow you to openly get in a lot of your faster growth natural organic products from a state into the UK market.

And I am assuming that’s kind of lost touch maybe a little bit with that how that’s gone? Can you give us an update on maybe where you’ve seen some specific impacts from gaining that scale if you will?.

So good question the UK team has taken over our non-dairy plant based business now in the UK selling that through -- it was going through a distributor before where margins were lower they were not focused on the growth. So they’ve taken over all the Imagine non-dairy business.

They’ve also taken over at a Europe Lima and Danival business to sell into UK market. They have also taken over frozen non-dairy dessert Andrew. At the same time they are looking and working on tea, and snacks.

Now we have also launched through this grocery team a brand called Yum which is a free from gluten free, dairy-free et cetera and it’s a lot of our product lines that we sale here, but it’s under the Yum brand that we are selling in the UK.

So since we bought this it’s our non-dairy business, it’s our frozen dessert business, it is Celestial Seasonings it is our snack business and it is the Danival and Lima brands that they are focused on right now. .

Would you say that’s come along as quickly, more quickly than you would have imagined when you brought the Premier. I mean has it validated that may you using for buying the Premier assets or do you need even more scale in the UK to really accelerate. .

Well I think the big thing is I come back there is a chicken and egg things. We have improved the growth, you heard what I say before Hartley's grow 11%.

So if they come back and take our Sun-Pat peanut butter and we are doing a lot of good things with Sun-Pat we are going to bring MaraNatha there next and one of the reasons we didn’t bring MaraNatha down weather versus slowdown is because what we are doing there in almond butters et cetera.

So with that we have improved the profitability tremendously on the Premier business getting lots of efficiencies that are there, and where is the combination of our Primer business along Tilda which are both grocery business and we are is there some sense, makes sense of Ella’s business et cetera.

So there is a lot of opportunities there, have we done them all yet, no, but are they in our sight.

The other thing is from a grocery business Andrew we were really selling going pub stores before there is other retailers, we have expanded into [Fretemage] selling food service selling, selling food service packs of jams and pea-nut butters in that, where we weren’t selling -- they weren’t selling that before but going to the Hain Daniels operations.

.

Our next question comes from Ken Goldman with JPMorgan. Your line is now open. .

Just one quick question because I know we are running a little long. Regarding frozen, we are seeing a lot of changes in that aisle today really shifting from some of the more staid entrees to some items with I guess more of a health benefit. And the Journal had an article today about frozen fruit growing fast.

So is there an opportunity for Hain to play a little bit bigger in this space? Irwin, you talked down frozen in general this morning versus prepared fresh and clearly that has been the right move and strategy for a while and I think it still will be.

But are there some changes happening in frozen that maybe you can benefit from that don't seem as obvious to us right now?.

Listen we are strong in frozen today, and we sale a lot of frozen pastas and that more to mainstream more to Wal-Marts and more to areas like that. We also have a very strong frozen kid’s meals under the Earth's Best name, frozen waffles, frozen pancakes.

Listen our research tells us retailers -- and we talk to retailers Ken about them as a size of the frozen section they are making smaller frozen section, we have done a lot with frozen desserts on our non-dairy ice creams et cetera, but we got our frozen Ethnic meals out there under our Indian dishes and we have not seen great success with them.

So and also we follow frozen around the world, if you want to look for the frozen food category in the UK that the fact of the store that we are food are merchandised.

I think listen, innovation is something there is an opportunity on frozen, but everything what we are seeing today is here, fresh, fresh, fresh because we are all on the go and the only thing is help today in frozen meals is the sodium level and what else is in it to keep it for six months or 12 months.

And there is lot out there in competition in frozen we just think there is big opportunity in the fresh category. Ken we have the ability because we have our own frozen plant to do things if we ultimately see that. .

Okay, that’s helpful. Thank you very much. .

And the only thing is in frozen I am being reminded by my finance people lot smaller margins in the frozen category today too. .

Your next question comes from Andrew Wolf with BB&T. Your line is open. .

Hi, good morning, thanks. I will also try to keep it fairly brief. In the U.S. the convenient store market looks like a pretty big win with 7-Eleven so is that for just the U.S. I mean there are 8,000 stores they also have a huge presence in Japan and Asia. .

Andrew this is John. The U.S. win is two Sensible Portions SKUs at 4,000 7-Eleven stores. So that’s a huge step forward for us. We have very little presence there and we look at it and we think with 7/11 as our base there are several other chains that we can go chase after with Sensible Portion, because that's a great item for that channel..

That was going to be my follow up.

So are there other distributors or chains chasing this yet or do you think this is sort of the launching pad?.

I think first of all we're chasing them and we've got a great story on it and then when they see with our competitor across the street has it, they're going to want it as well..

And Andy I have been to Japan met with the 7/11 people, they’re also looking for healthier snack in Asia. And it's just a matter of us putting up a factory there to do it and that's what it is and that's what's been proposed to us..

Sticking with the US and kind of a tag on to Ken's question. Obviously fresh is where it is at here.

What is Hain's view on perhaps investing in using its expertise, but I would assume some investment as well, in going after the chilled soup market, which just observationally walking around stores you can see there is, versus just a few years ago, a lot more product in chilled soup.

Obviously you have a great offering in ambient, but do you think that could be a complementary business line for Hain in the US?.

Yes potentially it could be, as a matter of fact we will be at Expo West and we'll be showing some imagine refrigerated soup products and getting a gauge of what the interest level is to bring them in for the next season..

And stay tuned for BluePrint and soups too Andy, it can cleanse with juice you can cleanse with soups. So stay tuned with BluePrint soup. What's going on and what soup as John said. And listen if you come back and look at it, no different what I said it with UK and decline of can soups.

I mean we're seeing that and again our feedback from our consumers is when you go to a soup bar and you have someone standing over whether sneezing over et cetera. They want to buy fresh soup with a shelf life on it more than three days. We have lot of experience in HPP, and HPP could give us anywhere from 25 to 30 to 40 days on soup.

And we're doing that today with BluePrint we're doing that with some of our deli products today. So we're looking at it. It's easy for us to get in the soup business but with a three four day shelf life on it it's not worth it. So extending the shelf life and being able to have the quality and integrity of the product..

Our next question comes from David Palmer with RBC. Your line is open..

Just a quick follow up on U.S. organic growth. We're modeling almost $20 million contribution from Rudi's this quarter which would have been the mid-single-digit lift to sales. And with that we're having a hard time building up to the 8% organic growth you mentioned.

Is there any help you can offer with that?.

The way we always measure organic growth is we take the existing businesses and the growth that we drive and for that in the quarter and we take only the gains that we drive on acquisitions. So the only acquisition we have in the U.S.

this year is the Rudi's, and I believe we drove about $2 million in growth this quarter on Rudi's that wasn't there prior to that..

And David again that is ex MaraNatha, so maybe that's where you get caught off..

I think those are probably the two explanations. And just a follow up on your M&A strategy, your purchases in recent years have leaned a little bit towards the UK international side. And it seems like going back further, you go back four or five years, the subsequent growth you have had from acquired U.S.

brand seems to have been greater than the growth you've had on a multi-year basis from the international UK acquisitions. Do you see it that way, I mean if you're sort of grading the growth rates in the out years from your acquisition.

Do you see more of a reason to go back to domestic with the acquisitions and how do you see your buyers going forward?.

On that question, part of acquisitions outside the U.S.

are done for strategic reasons, you asked for the question from Andrew Lazar about buying grocery business and the base growth in that grocery business -- the base that will allow us to bring other brands and out the infrastructure in place and you heard us talk about Hartley's growing at 11% bringing our non-dairy business in.

so part of the growth number you have to focus in, growth we're getting from other product lines and other categories and what we've been able to do. My feeling always has been just a walk into our market place, if we walk into UK and say here we're with Earth’s Best, we want to be in the baby products.

There is Cow and Gate, there is Hain’s there was Plus, there was four others there before so the retailers with us to give us all this money but you’re dealing with private label brand that was the number one baby food in the UK.

So, first of all David part of the strategy is to get into that marketplace and buy the strong one or two brand where you have local management, local brand and bringing our other brands alongside of it. So it’s just part of that and you got to look at it what’s the growth we got in our other brands.

I come back and look and say yes I mean UK is a bigger market as you step back today our base business Whole Foods and Sprouts and they’re going to open up the 1,000 stores and a big focus on that natural organic focusing on the U.S. is something we’d love to continue to do and do future acquisitions here.

In the UK especially 55% of sales today come from branded, 45% come -- 55% branded, 45% come from own label, so you’re competing with Tesco’s brand, the Sainsbury’s brand, Waitrose brand where in the U.S. private label today and maybe in the natural organic category its smaller but it’s only 18% of sales.

So focus wise we’d like to do acquisitions here but if they’re good strategic acquisitions we would look to do them in the UK and Europe if we’re going to do a transformational acquisition it’s not going to be outside the U.S. if that’s your question..

Got it, thank you very much..

But on the other hand David in 27, our 27 times revenues our 9 times revenue for acquisitions is not in our palette either..

Thank you. Our next question comes from Rupesh Parikh with Oppenheimer. Your line is open..

So, Steve, I wanted to ask just a little -- get a little more color on operating margin. Maybe if you can help me understand maybe the operating margin cadence in Q3 and Q4.

Based on your commentary it seems like maybe Q4 we could expect more improvement than Q3?.

Yes, that’s true..

Okay, is that mainly driven by the productivity initiatives or is there anything else unique we should be considering?.

It’s productivity and it’s just mix on Tilda which is a bigger there is [Ramadan] and shipments like that that would be a big part of it..

I mean in order to drive the increased profitability in Q4 it’s going to come from a combination of productivity and also some leverage on SG&A..

Okay. And then, Irwin, maybe a question for you. As we sit here today it seems as if the consumer environment continues to improve, better jobs growth in the US, lower gas prices.

As you look at your portfolio are you seeing any trade up within your portfolio? Have you thought beyond going trade up to natural and organic?.

So wait, are we seeing trade up?.

Yes, as the consumer….

Okay. Listen I don’t think we’ve seen it totally yet but in speaking to our retailers and seeing the demand and where am I seeing it.

Listen what we’re seeing today in AOC and consumption growth and this is our AOC consumption growth is across mass market grocery so we have to be seeing some of the effect which again what they’re going to the stores more often and I think having more disposal link up..

Okay, thank you..

Rupesh, it’s Steve again. One of the things that we had mentioned back in August and again in November was that within SG&A there is an element discretionary spend that can shift around between quarters. And then as we are closer to each of the quarters we would finalize those numbers.

So what we’re giving out in terms of guidance for the back half of the year now reflects that..

(Operator Instructions) Our next question comes from John Baumgartner with Well Fargo. Your line is open..

Just wanted to touch on the gross margin here. And I guess specifically what you are seeing there in terms of any drag from promotion.

Has there been any reduction in pressure versus the last few quarters and how should we think about that going forward in the back half?.

Actually as we look at it right now this is the first quarter in the last four where we have not been the impact of moving promotion dollars from below the line to above the line and we’ve seen no absolute increase in our promotion spending for the U.S. on a year-on-year basis..

Okay, and the drag for the back half should be more or less neutral as you see it right now?.

That’s what we’re calling at this point, yes. .

Okay, thank you..

Sure. Okay, I want to thank everybody for their time today. Our call has gone on a little longer than we expected because there were a lot of questions and hopefully we’ve been able to give you a lot of answers.

What I want to come back and say even with our currency headwind, we have been able to go ahead a mitigate a lot of that, and with that just being off a few pennies but with that and are having a fire and having a withdrawal these are just extraordinary things that happen within a year, and it shows you how Hain is a diversified portfolio, how we are diversified around the world and how we been there and deal with all these.

I look forward to telling you a lot more about Hain, but this is the first time that we will be appearing in Cagney and probably about 14 years Andrew convinced us to go and it was a good convince.

So I may be still on crutches, but I look forward be at Cagney and talking about all the great things still happening at Hain and to be able to show some of our new products there.

And I invite those that would like to come to our expo in Anaheim in March where we will be debuting all new products and actually this show has become one of the top shows in the world.

it’s like the boat show the cart show the innovation last year well over 100 plus thousands people attended, we will be hosting an analyst meeting at that show, so check with Merry and get your invitation and your tickets early because you will be pretty busy.

In closing what I want to say is number one, I want to thanks the Hain team around the world because I got to tell you it just everyday it shows whether there is a snowstorm whether the withdrawal whether there is a fire, it’s 24*7 that everybody here is entrenched to deal with and move along.

And personally whether it was my accident that everybody here is to pick up the pieces and pull along and I got to tell you I am so lucky to get to work with such a great team, dedicated team and most important such a smart team within Hain today which absolutely shows within our results.

In regards to our brands our categories, do we get everything right? No, we make mistakes along the way we are human, but I got to tell you when you come back and look and trust me I am the hardest on myself the hardest on our team and what we are able to do out there, with the challenges in front of us and in tough economy tough market, what we are able to achieve what we are able to accomplish, what we are able to put out there.

And again we are sourcing some of the toughest ingredients, toughest products. We introduced infants and toddlers to their first food. And think about GMO think about natural organic gluten free.

I mean we have been talking about these for years and years and years so just to think how we have in the forefront and what we will be out with in near future.

It reminded me with the BMW commercial with Bryan Gumbel and Katie Couric talking about what the internet was and what dot com was and what an email was, and you comeback and that was fact in 1993, ’94 if you comeback in ’93 and ’94 when we were talking about Organic GMO-free and Natural and people would call up and say what is that, but the hedge start that we have had the relevance and important is today, and I got to tell you those are that are still on the phone talk to your millennials that live with you, or talk to your children and ask them what they are buying what they know about and see where Hain is positioned.

So with that stay worm, we have got lots of snowstorms coming up, so by launch of our products look forward to those in Cagney look forward to those in Anaheim and I look forward to coming back and telling you about the great things at our next earnings call which trust me will be sooner than I know and we will see all then.

So stay healthy during the winter season and drink lots of our products. Thank you. .

Ladies and gentlemen thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day..