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

Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division Scott Andrew Mushkin - Wolfe Research, LLC Rupesh D. Parikh - Oppenheimer & Co. Inc., Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division Scott Van Winkle - Canaccord Genuity, Research Division Sean P.

Naughton - Piper Jaffray Companies, Research Division Amit Sharma - BMO Capital Markets Equity Research Andrew Paul Wolf - BB&T Capital Markets, Research Division William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division David Palmer - RBC Capital Markets, LLC, Research Division Mitchell B.

Pinheiro - Imperial Capital, LLC, Research Division John J. Baumgartner - Wells Fargo Securities, LLC, Research Division.

Good day, ladies and gentlemen. Welcome to the Hain Celestial Third Quarter Fiscal Year 2015 Conference Call [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mary Anthes. You may begin..

Good morning, Nicole, and thank you for joining us today, everyone. Welcome to Hain Celestial's Third 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; John Heuer, Chief Customer Officer, Hain Celestial U.S.; and Steve Smith, Executive Vice President and Chief Financial Officer; and several members of our management team are here 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. [Operator Instructions] Now, let me turn the call over to Irwin Simon, our Founder, President and Chief Executive Officer.

Irwin?.

Thank you, Mary, and good morning, everyone. And welcome to our third quarter fiscal 2015 earnings call. I hope you all had a chance to review our press release that was released this morning. We started off the second half of fiscal 2015 with a great bang.

On our last call, I talked about the MaraNatha recall, the Tilda fire and my torn ligaments and surgery. I'm glad to update you on all of these things and all the great things that happened in our third quarter. Our Tilda mainline #4 is back up, running at 85% capacity.

The core MaraNatha business is back in full distribution, as many of you know, as you've heard us talk about, and John will talk about it later. And of course, I'm back walking around, out hugging customers and trying to sell more and more products. In March, a lot of you attended the Anaheim Natural Food Show.

And in 20 years going to the show, I have never seen a show as busy as it was. I have never seen multiple companies, multiple retailers from around the world who wanted more and more natural organic products. At that show, we introduced over 100 new products and some exciting things that will start to launch in May and June and going into next year.

Also in the quarter, we completed 2 great acquisitions that had tremendous opportunities for Hain. And with that, we paid 6.5x to 7.5x EBITDA, adjusted for synergies. We're disciplined on what we pay for acquisitions. And both these acquisitions, as I said, have tremendous opportunities for Hain, which I'll talk about in a minute.

Our team capitalized on Hain's growth opportunity across channels and geographies with our compelling line of organic and natural products. Global demand for healthy better-for-you products help us deliver a record third quarter net sales up over 19%, including the impact of foreign currency fluctuations. The strength of the U.S.

dollar reduced our international results by approximately $26 million. Remember that approximately 40% of our sales today are international. This was Hain's 18th consecutive quarter of double-digit net sales growth. Sales in local currencies were up in every segment of our business.

Excluding the impact of FX, our brands achieved high-single digit organic growth. We continue to build distribution in the quarters in many other places. We had strong results in the U.S. Hain Pure Protein along with the U.K., Europe and Canada in constant currency.

All our acquisitions that we did this year equated out to $100 million in sale, which $17 million of that came from growth under our ownership. We leveraged our distribution network, expanded new customers and new countries. On a like-for-like basis gross margin, excluding Hain Pure Protein, would have been 27.1%.

In the quarter, we did experience certain commodity headwinds in almonds, organic coconut and other ingredients. Our global team has done a great job successfully integrating acquisitions by leveraging our infrastructure, controlling expenses and improving productivity. SG&A, as a percent of net sales, was 13%, 160 basis point improvement.

A big part of our global team also is out there procuring ingredients which are hard to procure, which had our service levels at much higher levels than we've had in any other quarter. Part of our SG&A benefit is from outsourcing, and we'll continue to look at that where we should be outsourcing certain functions within Hain.

Our natural merchandising group is now outsourced, and we're working very closely with advantage sales and marketing. These results including our higher-than-expected tax rate, which Steve will take you through in more detail later, combined to drive our third quarter record adjusted earnings to $0.45 per share.

Having personally hugged, met a lot of our customers in this quarter like Whole Foods, Sprouts, Walmart, Target, Costco, Sainsbury's, Panera and others, just to mention a few, I have never seen so much demand.

So many retailers wanting to bring more and more natural organic products, including our online business of Amazon and many other direct retailers that are looking to get into the natural organic product line.

Although Hain organic and natural brands appeal to all consumers, millennials, in particular, are increasingly more health conscious and are making product choices based on their lifestyle with an emphasis on farm to table, organic, natural, free from ingredients.

Health now has a greater meaning for many in a world with an abundance of information, social ethics and transparency matters. Last week, we launched currently.com [ph], a new lifestyle website for health and wellness-minded millennial parents.

Currently [ph] is a dynamic and engaging online destination for busy parents, caregivers featuring topical articles, recipes review, how to do, not to do, tips to live a healthier lifestyle. One Wall Street firm cited recently that it's not your parents' palate.

Millennials are choosing to eat more and more fresh protein with a clear preference for poultry and less processed food. This is just one example of the tremendous opportunities we have with Hain Pure Protein, including our recent acquisition of Empire Kosher Foods.

Empire offers a full range of kosher, antibiotic, hormone-free, natural, organic chicken and turkey products. Importantly, Empire adds to our farm-to-table product offerings, a growing category that appeals to seeking the Pure Food trends, including our core natural organic consumers.

We had planned to expand this brand, their product line, into fresh deli, into fresh prepared foods and other grocery items. We've also planned to use our current infrastructure of Hain Pure Protein to leverage costs, sales and lots of other production capabilities.

We acquired in Canada, Live Clean brand, which is the leader in health and beauty care products in Canada with over 200 products. We plan to continually roll this out in Canada. And also, we look to roll the Live Clean brand out within the U.S.

We also acquired with this a manufacturing facility, which gives us the ability to manufacture some of the Alba, Avalon, JASON's and Queen Helene products in our Canadian facility.

This acquisition helps with scale of our Canadian operations, which now is over $150 million in net sales and gives us the opportunity to expand more and more of our products into the Canadian market.

Whether consumers looking for personal care packaged foods, baby food, beverage or protein, Hain organic and natural product portfolio captures the growing demand for just not millennials, but their parents, too.

At Hain, as we focus on our mission to provide a healthier way of life, we feel more optimistic about our future growth opportunities today than ever. We're in right categories with right brands and right products. Our strategic acquisitions have enabled us to have fully branded product offerings across vials, categories, channels.

Over the years, we've done over 50 acquisitions. Today, we're in multiple categories, multiple products and multiple countries. Looking at the third quarter in more detail. Our brand performance was strong with broad-based increases. We had 14 brands up double digits in local currency. We had 6 up mid to high-single digits in local currency.

Recent SPIN scan consumer insight for the natural channel places Hain in 13 of the top 20 highest wholesale penetrated natural organic categories with a strong, strong penetration, snacks, tea, yogurt, personal care, leading brands, Sensible Portions, TERRA, Garden of Eatin', Celestial Seasonings, Greek Gods, Garden of Eatin' -- sorry, Queen Helene, MaraNatha and many more of our other brands.

John will talk about our latest Nielsen growth, while positive to note, it represents less than 30% of our worldwide consolidated net sales. MaraNatha is coming back with almond butter distribution having regained its share. We're finally seeing light at the end of the tunnel. Let me tell you, it's been a long tunnel. U.S. growth remained strong.

We're also seeing continued -- we also see us continue to grow in over 65 countries today, including India through distributor relationships and the Middle East. Our product innovation team consistently works to deliver new and exciting products in key categories as we gain shelf space in existing and new areas in the retail stores.

In March, as I said before, we introduced over 100 new products. We rolled out Celestial Seasonings in a whole new packaging and many new products. Now I'll focus on some of the key drivers that led to our strong performance, and let John talk about the U.S. business later. In the U.K.

segment, net sales were up in local currency with the backdrop of a challenging retail environment. We saw good distribution from our soup, grocery, desserts, rice and plant-based milk brands. We've invested in our growth in the U.K.

and will continue to do that with brand building for soups, desserts, ready-to-eat rice and CapEx investments in multiple plants throughout the U.K. and Europe. In constant currency, our New Covent Garden Soup at both Cully & Sully were both up 8.3%, while Sun-Pat business is up 9.4%. 40% of our business in the U.K.

today under Hain Daniels is still private label. Our dessert business with Sainsbury continues to ramp up and has opened up many, many other doors for us with this retailer. I just recently met with Sainsbury in London. And as they asked me, provide us with more and more desserts. As much as you can make, we can sell. Our grocery business was up 4%.

That consisted of our Hartley's spreads business, our nondairy business and some of our other spreads business. Ella's business in the U.K., which is amazing, continues to be the #1 selling baby food and was up 20% in constant currency.

The opportunity for Ella's, not only in the U.S., but to roll out into the Rest of Europe and the Middle East, India and Asia is tremendous. Tilda performed well with fourth lineup, as I mentioned before, and expected -- was expected, ready for Ramadan sales in the fourth quarter. We expect the plant should be fully operational later this year.

Our ready-to-eat products, up 11%. As we roll Tilda out around the world, today, it is now in Loblaws, Walmart Canada. And we have new listings in Albert Heijn in the Netherlands and are in the midst of presenting it in other parts of the country. John will talk about Tilda later on of what we're doing here in the U.S.

Our team is also selling our first containers of TERRA Chips and other products to the Middle East. I'll be in India and Middle East next week as we seek to launch even more and more Hain products throughout those countries.

Hain Celestial Canada under the Rest of the World segment performed well, up 8% in constant currency, led by Sensible Portions, TERRA, Greek Gods, Imagine and Spectrum. The balance of the world in Europe was up 7% in constant currency led by Natumi, TERRA, Celestial Seasonings, Lima, Danival, Robertson and Frank Cooper.

We've also made tremendous headway in expanding our nondairy business throughout Europe and have picked up great distribution in Germany with a major retailer that will roll out in June, July. Hain Pure Protein, which we acquired in late July, had a very, very strong quarter.

It's amazing what's happening in the protein category today, up double digits with record quarters, improved gross margin and EBITDA from a year ago. Hain Pure Protein expanded into Grover Trader Joe's. And we will be rolling out a major deli program in the coming quarters. We've been in the deli business for a long time.

Now we see just tremendous expansion opportunities coming. As many of you have read about Chipotle will shift away from the use of GMO foods. And we believe this is just the beginning across the food service industry for more and more healthier foods and no genetically modified ingredients.

Panera Bread is another example with the New York Times Wall Street Journal reporting just yesterday, their plan to eliminate a variety of artificial ingredients and a source of antibiotic meat. As you're well aware, we've announced our partnership with Panera a few months ago. 99% of our food products don't contain GMOs.

Over 500 of our products have been verified, and over 650 are enrolled in non-GMO project verified, with a lot more to come. We also have over 500 gluten-free products today. So we have the products, we have the brands. We have the manufacturing, we have the distribution. We are ready to go.

We've heard one analyst already talking about the extent of savory snack section in a Chicago 7-Eleven with Sensible Portions and TERRA listings. We'll continue to build out our infrastructure to support the growth with additional investments in CapEx.

During this quarter, we successfully moved the BluePrint plant from Long Island City to our manufacturing facility in Westchester, Pennsylvania. And we invested in a new Harrisburg distribution center.

We've invested in our growth in the U.K, France, building for soup, dessert, ready-to-eat with CapEx investments as well in our plant-based beverages in Europe. Productivity remains a key strategic initiative for Hain. And for the quarter, we generated over $13 million, and we are on track for the $55 million that we've talked about in 2015.

Remember, productivity is mostly back ended in the third and fourth quarter. Our balance sheet remains strong, so does our ability to generate cash. We continue to evaluate our capital structure. At March 31, our bank leverage ratio was 2.55 compared to last year at 2.85.

And with that, we did 3 acquisitions and spent over $100 million on these acquisitions. The environment for M&A remains compelling. And our balance sheet provides us with the opportunity to go out there and do additional acquisitions. We'll continue to focus on generating shareholder returns.

We're also focused, as I've talked about, on return on invested capital. Our return on invested capital for fiscal '15 is in the high-single digits. And we're targeting low-double digits for fiscal 2016. In summary, so far, we've had 3 great quarters.

And 1 month gone in our fourth quarter, it is hard to believe we're coming into the close of our fiscal 2015. So April is off to a great start. Our team has overcome some of the most challenging products, ideas -- challenging items that we've had in 2015. And with that, we finished with a strong, strong quarter.

With that, I'll turn that over to John, and he'll talk about what's happening in the U.S..

Thank you, Irwin. Good morning. Q3 was a very solid quarter for Hain Celestial U.S. Key highlights from the quarter included Q3 net sales of $343.7 million, up 8% versus year ago. If we look at Q3 top line, x MaraNatha and FX impact, U.S. sales were up 11% versus year ago.

And with organic growth of 6%, despite a 70 bps or $3 million increase year-on-year in above-the-line trade spending primarily to secure accelerated distribution gain. Our latest 12-week Nielsen AOC consumption growth, x MaraNatha and Celestial K-Cups, which as you may recall, are marketed by and sold by Green Mountain, was up 8%.

Our growth was achieved even as we lapped a strong 12% year ago comp, resulting in a 2-year stack consumption comp of 21%. These results were driven by strong gains across the U.S. portfolio including 12 brands with double or high-single digit increases. Our Q3 operating income increased to $59 million, up 4% versus year ago.

And our Q3 adjusted operating income margin was 17.2%, down 50 bps versus year ago. This reflected the lower margin structure of Rudi's, which we had mentioned previously. The U.S. operating income margin, x Rudi's, was flat versus year ago as we offset inflation and increased marketing and trade investment with productivity savings and SG&A leverage.

Now as I have on previous calls, I want to review the 5 key factors that continue to make us optimistic about the balance of the year outlook. These 5 factors are consumption trends, distribution growth, productivity, innovation and our Rudi's acquisition performance. Now starting with the first factor, which is our continued consumption growth.

Q3 was our 21st consecutive quarter of strong U.S. consumption trends. Our latest 12-week AOC consumption growth, x MaraNatha and K-Cups, was plus 8%.

Additionally, though, our 12-week AOC consumption sales number of $286 million was up 7% versus the preceding 12-week period and was the highest ever 12-week AOC consumption number the company has ever had. So we are continuing to see strong momentum on our AOC business and against a very, very tough comp.

And against sequential quarters, they get stronger and stronger. We drove growth across the brand portfolio despite going against that 12% comp. And you know what, we're going to ultimately see even stronger results because we're going -- we're working closely with Green Mountain on a plan to restart Celestial Seasonings K-Cup growth in FY '16.

And look, our strong consumption was not just limited to this side of the Atlantic Ocean. Ella's Kitchen, which by the way, is our latest $100 million brand, was the #1 baby food in the U.K. for the fourth consecutive 12-week period. This was driven by double-digit consumption and distribution growth as Irwin mentioned.

Ella's Kitchen has now been the #1 baby food brand in the U.K. And remember, we bought it when it was either #3 or #4. It's the #1 baby food brand in the U.K. for the last year. And we're pretty convinced it's certain to be a favorite of the new royal baby. Our second key factor is our distribution growth.

And I'm going to spend some extra time on this because it's important. Our top 13 brands, x MaraNatha, which accounts for over 80% of our AOC sales, saw a distribution gain of 4% in Q3, a full point higher than our Q2 results. That number jumps to 5%, if we include Ella's Kitchen U.K. distribution gains.

These results were achieved despite lapping huge year ago distribution increases at Walmart on Ella's Kitchen, The Greek Gods and Sensible Portions. And look, we continue to fill in the distribution whitespace on key brands and at key customers.

And what I want to do is give you a few examples of some of the key distribution whitespace wins we've been experiencing. And I want to start with Kroger.

At Kroger, we're going to be adding 21,000 new Hain points of distribution or PODs in the next few months including over 1,000 new PODs each for 8 Celestial Seasonings SKUs, for 2 new Garden of Eatin' SKUs and for our Earth's Best frozen pancakes. We will also be getting an additional 4,800 new PODs across our personal care line.

Take a look at Publix. Publix will be adding 11,000 new Hain PODs, including over 1,000 new PODs each for 8 Earth's Best SKUs and 850 PODs each for 2 new Sensible Portions Puffs SKUs.

Whole Foods will be adding 4,000 new Hain PODs, including over 300 PODs each for new Terra and Garden of Eatin' SKUs, for Dream Frozen Coconut Bites, for 2 new BluePrint SKUs, for Spectrum Coconut Oil and Westbury organic vegetables. Sprouts has also been active.

Sprouts will be adding almost 2,000 new Hain PODs, including 200 new PODs each for 2 TERRA SKUs, 2 Garden of Eatin' SKUs, 3 Earth's Best frozen SKUs and 2 new Celestial Seasonings SKUs.

Target will be adding 26,000 new Hain PODs, including over 11,000 PODs combined on 15 new Ella's Kitchen SKUs, 900 PODs each on 6 Spectrum SKUs, over 1,000 PODs each on 4 new Celestial Seasonings SKUs and over 1,600 PODs each on 2 new Earth's Best formula SKUs.

And finally, Walmart will be adding over 50,000 new Hain PODs, including 4,000 PODs each for 4 new Sensible Portions Puffs SKUs; 7,800 PODs combined for 5 Spectrum Essentials SKUs; 3,800 PODs each for 2 DREAM LATTES SKUs, 1,700 new PODs for MaraNatha distribution expansion, almost 8,000 PODs for Greek Gods expansion.

And finally, 14,000 new PODs combined for 7 new Ella's Kitchen SKUs. So look, these are just a few of our most recent distribution whitespace wins that will be on the shelf in the upcoming months and will position us well for accelerated growth going forward. The third factor fueling our optimism is our productivity program.

Now, despite the recent pricing pullback for conventional commodities, as Irwin mentioned, cost for almonds, egg whites, organic virgin oil and organic wheat flour, which are all leading commodities for Hain Celestial U.S. were up in Q3 versus year ago. Our Q3 productivity savings, however, offset them as we have savings of over $8 million.

And we continue to realize significant productivity gains from, as Irwin talked about, the BluePrint factory rationalization, the Earth's Best and Ella's Kitchen baby food distribution center consolidation, the increased plant efficiencies at our snack factories and reduced packaging costs. The fourth key factor is our strong innovation lineup.

FY '15 new product year-to-date sales are up 55% versus year ago and have already exceeded $40 million this year. We've also introduced over 100 terrific new products at Expo West that have been very well received by key retailers. The fifth key factor driving our optimism is the performance of our organic bakery business of Rudi's.

Rudi's delivered strong single digit Q3 top line growth and double-digit bottom line growth. Rudi's consumption growth was driven primarily by increased distribution, highlighted by recent gains at Sprouts, Wegmans, Wakefern and Harris Teeter, with an upcoming big gain at Safeway coming up in the fourth quarter.

Rudi's Q3 margins improved by over 100 basis points, driven by better production throughput and increased productivity at our Boulder bakery. And we introduced several new products for Rudi's at Expo, led by our new gluten-free garlic and cheese toast. So we just continue to be very enthusiastic about our Rudi's Organic Bakery acquisition.

Finally, 2 quick updates. First, we've been very active on the Tilda front most recently in the U.S. In the last month, we have presented the line at leading customers in the grocery, mass and club channels. Our efforts were slowed a bit previously due to the fire at Tilda's plant.

But we are now active -- aggressively pursuing Tilda distribution opportunities in the U.S. Second, a quick update on MaraNatha nut butters. The business is coming back rapidly as we are regaining distribution, consumption and brand share on our core roasted almond line. This line accounts for 85% plus of our MaraNatha nut butter business.

In the most recent 12-week AOC period, our roasted core almond butter line distribution was up 5% versus year ago. So we not only matched our previous distribution, we've now increased it by 5% with consumption equal to year ago. Importantly, we've regained our AOC share leadership of the almond butter category with a 45% share.

So as I've said previously, we expect the MaraNatha nut butter business will be very well positioned on retailer shelves as we finish FY '15 and enter into FY '16. So to close, Q3 was a really solid quarter for Hain Celestial U.S.

The highlights included 11% top line growth, x MaraNatha and FX, 6% organic growth on top of investing $3 million on above-the-line trade spend and a 12-week adjusted AOC consumption growth of 8%. Q3 also featured our highest ever 12-week AOC consumption dollar sales.

And we delivered a 4% gain in operating income, despite an increased marketing and trade investment.

We're optimistic about our go-forward prospects given our strong consumption trends, our distribution whitespace wins, our innovation, our productivity initiatives, our Rudi's Organic Bakery acquisition, and most importantly, our resurgent MaraNatha nut butter business. With that, I'll turn the call over to Steve Smith..

Thank you, John, and good morning, everyone. I'm going to take you through our third quarter financial results, and then we'll review our guidance. Irwin already commented on our sales numbers, but I'll elaborate a bit more.

Sales growth was driven by increased distribution and consumption as our existing portfolio of brands continue to perform well, plus the acquisitions of Hain Pure Protein, Rudi's, Live Clean and Empire Kosher, which increased our sales by approximately $100 million in the third quarter.

This amount also includes brand growth of $17 million or approximately 20% under our ownership as compared to the reported sales prior to our ownership. Empire is reported as part of our HPP segment; while Live Clean, based in Canada, is in the Rest of the World segment.

During the quarter, net sales were impacted by the unfavorable effect of foreign currencies of $26 million as compared to the prior year. As a result, growth from both our existing portfolio and our acquisitions in constant currency and as a percentage of sales was high-single digits.

Our adjusted earnings were $0.45 per diluted share compared to $0.44 per share in last year's quarter, adjusted for the stock split. We earned $0.32 per diluted share on a GAAP basis in the current year.

Currencies adversely affected our GAAP earnings per share by approximately $0.04 per share and our adjusted earnings per share by approximately $0.01, while a year-to-date true-up of our effective tax rate for $0.01 impacted both GAAP and adjusted earnings per share.

Additionally, both GAAP and adjusted earnings were affected by an increase in the weighted average shares outstanding for $0.01 per share due to stock issued in connection with acquisitions and compensation plans.

In summary, our GAAP earnings were affected by $0.06 per share and adjusted -- and our adjusted earnings were affected by $0.03 per share for these items. Adjusted operating income was $77.5 million this year compared to $72.3 million last year. Operating income on a GAAP basis was $60.2 million compared to $63.6 million in last year's third quarter.

As noted in our press release, current quarter adjustments to income of $19.6 million, of which $10.1 million are noncash charges, while $13.1 million net of tax are from several factors. First, we took a $5.5 million pretax noncash charge for a partial impairment of one of our U.K. soup trademarks.

Although our branded soup net sales were up over 8% in local currency, the accounting rules required us to take this noncash charge. Second, we incurred $5.6 million pretax for acquisition-related fees, expenses, restructuring cost and integration costs. Of this amount, $1 million is noncash.

Third, we recorded $5.1 million pretax in net unrealized noncash foreign currency losses, primarily on intercompany balances. We also had a $2.9 million noncash gain on the 19% of Empire Kosher we owned prior to our acquisition of the remaining 81% this quarter.

Additionally, we incurred start-up costs of $2.5 million pretax related to our chilled desserts facility in the U.K. Gross margin on an adjusted basis was 24.7%. Excluding our HPP segment and the effect of Rudi's not being in our results in last year's third quarter, adjusted gross margin would have been 240 basis points higher at 27.1%.

John already spoke about the impact of MaraNatha on his gross margin in the third quarter. Gross margin was also impacted by mix and increased trade spend both in the U.S. and U.K.

SG&A expense for the quarter on an adjusted basis and excluding amortization of acquired intangible assets was 12.3% of net sales, a 160 basis points improvement as compared to 13.9% last year. Total SG&A expense on an adjusted basis was 13%, a 160 basis point improvement compared to 14.6% last year.

The HPP segment had a 135 basis point favorable impact on our SG&A rate. Additionally, the rate of spend declined in the quarter, primarily from managing our cost and leveraging our infrastructure with the impact of our other acquisitions, as we achieved additional operating leverage on higher sales volumes.

As a result, adjusted gross margin was 11.7%, excluding the HPP segment. On an adjusted basis, operating margin would have been 12.5%. On a GAAP basis, our effective income tax rate was 35.2% this quarter.

Our adjusted effective income tax rate for the quarter was 34.6%, and the true-up in our adjusted effective income tax rate is due to changes in earnings mix from our reported segments. For the full year, our adjusted effective income tax rate is now expected to be approximately 33.2%. Our balance sheet continues to be strong.

At March 31, our cash balance was $100 million. Our working capital was $538 million with a current ratio of 2.6:1 at March 31. Stockholders' equity was $1.63 billion. Our debt as a percentage of equity was 54%. And debt-to-total capitalization was 35.1%. Net debt at the end of March was $779 million.

Through March 31, we generated $70 million of operating cash flow in the current year as compared to $122 million in the comparable prior year period. The decrease is principally from the nut butter recall, working capital requirements on a higher sales base and increased inventory investment. Our cash conversion cycle was 67 days for the quarter.

Normalizing out the effects of acquisitions in each of the last 2 years, our cash conversion cycle is 2 days higher than prior year, primarily driven by increased investment in Earth's Best baby formula products and at MaraNatha, as last year, each of these products had limited availability due to supply constraints.

Capital expenditures for the quarter were $10.5 million and $36.3 million year-to-date. Operating free cash flow was $33.9 million on a year-to-date basis. During the quarter, we completed the acquisitions of Belvedere International, which is primarily the Live Clean brand and Empire for cash consideration of $71.4 million.

The cash was funded by a combination of existing cash on hand and borrowings under our credit facility. In the case of Belvedere, the results of contingent consideration of up to $4 million in Canadian dollars, that can potentially be earned.

Our fully diluted weighted average shares outstanding at the end of March were 103.8 million shares as compared to 101.5 million shares in the prior year, adjusted for the stock split. Turning to fiscal '15 guidance.

As a result of the Belvedere and Empire acquisitions, our guidance for net sales for the full fiscal year 2015 is now in the range of $2.692 billion to $2.7 billion. This is on an adjusted basis. We anticipate earnings per diluted share will be in the range of $1.86 to $1.90 for the full year. And as a reminder, this is on a post-stock split basis.

With respect to our other assumptions underlying our guidance, we now expect gross margin to be approximately 25% for the full year, and excluding the HPP segment, to be approximately 27%. Excluding the HPP segment, SG&A expense is expected to be approximately 14.6%; and including the segment, approximately 13.3%.

Full year operating margin, excluding the HPP segment, is anticipated to be approximately 12.4%. These amounts are all on an adjusted basis. Share count for the full year is estimated at 103.4 million shares. Interest expense is estimated to be approximately $26 million, while CapEx is estimated at approximately $45 million.

As indicated in our press release, our guidance and estimates do not include any results of discontinued operations, acquisition-related expenses, integration and restructuring charges, start-up costs, unrealized currency gains or losses, reserves for litigation, other nonrecurring or onetime items such as recall, withdrawal impacts or future acquisition activity and currencies based on current rates.

And at this point, I'll turn it back to Irwin..

Thank you, Steve. And now we'll open it up for questions..

[Operator Instructions] Our first question comes from the line of Alexia Howard of Bernstein..

So what struck me was that it's great to hear that the retailer demand for products is so high at the moment. But the constraint seems to be how quickly can you build supply and procure ingredients.

So where do you see the biggest constraints on that side? What's a reasonable supply growth rate here? Can you accelerate it given the retailer demand? And if not, would you consider taking pricing up if there is so much demand for the product?.

Well, thank you, Alexia. I think number one, I mean it's not just one ingredient. Our products are made up of multiple ingredients, whether it's -- if we're making snacks, there's oils, there's seasonings, et cetera, but I think you got to come back. And number one, it's not so much organic. It's GMO-free.

And that's where the demand is today in no genetically modified ingredients, as you've heard Chipotle moving towards that. So just a lot of retailers and a lot of restaurants looking to get into those categories. I don't think taking the price up to slow the growth is the answer. What we're currently doing today is building out the infrastructure.

Jim Meiers, 2 weeks ago, had a global productivity meeting, where we had everybody in around the world. And a big part of our plan is where we know where our growth is and out there sourcing additional items. Benjie Brecher, who happens to be in the room, just came back from Honduras. And as we're looking for organic sweet potatoes and for taro chips.

So there is a plan in place to support the growth. But if you have a 4,000 store retailer comes in tomorrow and wants certain items, there's going to be a constraint on that. But I don't believe taking the price up. And I do believe with good planning, we'll be able to supply all the growth that is in demand out there.

Because what's happening also as consumption is declining on other ingredients, more and more farmers, and even though there's a 3-year wait, are converting to more and more other GMO-free organic ingredients..

Great, that's really helpful.

And as a quick follow-up, could I just ask if you foresee any impact from the drought in California going forward?.

Where we see the impact on almond prices and is driving up almond prices, and just from that, we're out there sourcing -- California is the biggest supplier, biggest grower of almonds in the world. But today, we're out there sourcing almonds around the world, whether it's Israel, whether it's Spain and other countries.

So yes, we're seeing -- that's the biggest item or commodity. We're seeing it. But we're out there looking for other sources. And I think that is a great asset that's under -- it's not realized what's in Hain today is we have 81 people in India.

So whether it's coconut, whether it's pomegranate, other -- mango that we're looking for in India today, that we're looking for in the Middle East, whether it's Israel, whether it's Egypt, certain things that we're looking for. So we're sourcing all over the world. And we have teams there that are looking for that to help us with our supply.

It's -- one of -- the good news is demand. The bad news is not -- you just don't go on the spot market. And just one of the other things while you're talking about that is with avian bird flu, which I didn't address, the demand out there for turkey today and chicken, I have never ever seen it. And thank God we have not been affected.

But I saw someone send an email to us yesterday looking for a gigantic amount -- pounds of turkey and said, "Whatever the price is, we'll pay it. Because we need it as an ingredient in a product." So there is definitely some supply issues, I think, at Hain. We've built out an infrastructure over 20 years to support the supply..

Our next question comes from the line of Scott Mushkin of Wolfe Research..

So I guess I want to ask a more strategic question, Irwin. I'm going to have a couple of follow-ups. I mean obviously, the industry's changing. John went through kind of the PODs in some of these mainline retailers.

I guess I was just trying to understand, as Hain becomes more of a company servicing, what I'd like to call, traditional grocery and maybe some of these mass merchants, where does that leave the other part of the business, which has been the traditional part of the business? Whether it be smaller retailers that focus on natural organic, or some of the natural and organic chains.

It seems like when our pricing surveys, your products priced at a better -- priced better at the mainline retailers.

And I was just wondering, strategically, are you going to grow with them and then the other side shrinks a little bit? Or how are you thinking about it?.

So Scott, I've said, you've got a cash register, I want to grow with you no matter how big, how small you are. And I think, again, as I've laid it out many times, here's the great thing within Hain today. There's no one product that represents more than 14%, 15% of our sale. There's no one customer today.

If you walk into a Whole Foods, we have 1,000, 1,500 SKUs in there. If you walk into a Walmart or Target, we have a lot less. So some of the things, as we look at our business today, what are products that are skewed towards, number one, the natural organic retailers or super naturals, and what are products more skewed towards mainstream.

The other big thing is where do we sell organic products today, where do we sell gluten-free products and where do we sell just so-called natural products. The common denominator out there today and where the big, big demand is GMO-free.

That's the big thing today is wanting clean ingredients, and we're one of the few companies out there that can boast almost every one of our products today are clean ingredients.

So the strategy for Hain, going forward, is different SKUs, different product lines going into different retailers and different -- with a different focus on different products, and with that, as you've seen what we've done is this here. There's Ella's and Earth's Best. We're selling it as a category today in instant toddler feeding.

Snacks, as we take Garden of Eatin', Terra Chips, Sensible Portions, Bearitos. We're looking at a snack category. And you go into Whole Foods today, you only find Bearitos exclusive, okay? So we have the ability because of the depth of our product line, the depth of our brands.

We have 32 of our own manufacturing facilities out there and we have over 100 copackers. So there's a certain strategy with Hain that's there today, and we'll continue to develop what products go into each retailer and what makes sense for each retailer because listen, you'll walk into Whole Foods, you don't find Campbell Soup.

You don't find Progresso Soup. You don't find Frito-Lay potato chips, and we then have a bigger opportunity, have a bigger part of that shelf. But on the other hand today, as you walk into Wal-Mart, they want more and more healthier snacks or at Target..

Okay, great. And then if I could follow up a little bit on the deli meat launch in the Tilda U.S., bringing that here to the U.S., I mean, it seems like, given the macro trends, the mainstream, the pure foods trends and your position with a lot of these key retailers, it's kind of almost like a category strategist for them.

I mean, how can we not look at the deli meat launch and the Tilda lunch is maybe fairly meaningful to fiscal '16, and is that right? And if so, what is the -- I mean, can you -- can we kind of think -- could it actually add to growth, like 1% or 2%? I mean, it seems like those should have a lot of -- people should pick them up pretty quickly in my mind..

Well, I'll come back to deli. First of all, you've seen Panera, you've seen Chipotle in regards to nitrate-free. I come back and I say this here.

The consumer is moving more and more towards nitrate-free, and the big thing that we have going for us on the deli side of the business where we will be nitrate-free, antibiotic-free, hormone-free and expand that category.

We have supply, and that's the big thing out there because we process our birds, and we have the ability to turn them into deli products, and I think that's where there's a big opportunity. So deli for us, going into 2016, big opportunity and not -- and also, deli for us is going into certain cheeses and other products.

So we are really excited about the deli category, and have been approached by multiple retailers to expand in that. We've had Plainville deli business out there for a long time, and now we're going to expand the FreeBird deli business. So just stay tuned for that. In regards to Tilda, we're also very excited about Tilda.

Listen, we're coming into Ramadan right now in June, big rice, grains. We're seeing what the ready-to-eat rice is doing around the world today, and you heard of -- talking about how it got listed in Europe. Canada, doing well with it. What we want to make sure before we launch in the U.S.

that we have supply because we do not want to go into all the retailers that are very interested, and Scott, and we can't supply it. And that's -- was 2 things. Number one was the plant fire; and number two was our rice. We were sold out on rice from last year, as we come into new crop, but rice is a big, big opportunity for us in the U.S.

and it will be one of our brands that we will go into mass-market retailers in a big way..

Our next question comes from the line of Rupesh Parikh of Oppenheimer..

I want to ask a little bit more just about the conventional channel, so you called out a number of distribution wins at Wal-Mart, Target and some of the other players. Just wanted to see what you're seeing in the conventional channel in terms of retailer interest outside of maybe Kroger if there's been any changes versus recent quarters..

Yes, this is John. We're actually now seeing beyond Kroger, beyond Publix, a whole second tier of conventional retailers asking for products. John, you -- I think I related this story in a previous call, but John, you were -- went and met with Meyer, and which by the way, Meyer -- 7% of the U.S. shops at Meyer every year.

Met with them out there to help lay out what their natural and organic strategy was going to be going forward. This is an account that we've barely had any interaction with 2 years ago. We were just at the NACDS Show this last week. Hy-Vee in Des Moines, Iowa, wants us to come out and help them establish and drive their natural and organic strategy.

So I think what we're starting to see is we had the early adopters like Kroger and Publix, but we're starting to see a whole second tier of retailers say, "Look, this trend is for real.

It's key for us to attract millennials that we play in this area, and we need some help working our strategy." So I think this is one that's going to keep building upon itself..

And Rupesh, I think what happened -- what has happened here, not I think -- after the Kraft-Heinz merger, I think as retailers stepped back and they said, "Wait now. We're going to put KRAFT Macaroni & Cheese, which we're going to take the food coloring out by 2017." We're going to take Velveeta Cheese, and where is Velveeta Cheese going today.

And as you look at Heinz products, and again, yes, that's a great play from a financial standpoint on synergies in savings, but we want growth, and as our consumers today looking for Oscar Mayer hotdogs or are we going to be able to sell them FreeBird or Plainville hotdogs that have no nitrates and no protein, and that's, again, it's not consumption that's growing.

I think this recent merger between Kraft and Heinz woke a lot of retailers up and sort of said, "Wait now, where is this product line, as we look at this, is the consumer moving to this product line and are sales going to increase with Velveeta cheese?" If not, what are we bringing into the stores that are going to get us growth because everybody is looking for growth out there today.

I mean, a retailer's not looking -- and a retailer's not going to get the benefit of a Heinz-Kraft merger and an EBITDA savings from there. He gets the benefit of a growth number..

Okay. Now maybe if you can, just one more question. In terms of -- so Irwin, you called the -- you've said a lot about positive stuff, just about the GMO-free trends right now.

If you look at some of the other trends out there, like gluten-free, et cetera, are you seeing still momentum in some of those other specialty type trends?.

A, going after the kosher distributor, but also those that don't keep kosher, whether it's halal or whatever that want kosher products. But we feel there's a big opportunity to bring more and more products into the kosher market that are healthier products that are not there today, and the same with the ethnic market from Tilda.

One of the big things is -- at being in the Middle East next week in India is how do we introduce more and more Hain products into that market. So for us, it's natural. It's organic. It's specialty and ethnic are where we're really focused on here, and then of course, the protein and the personal care category..

And our next question comes from the line of Ken Goldman of JPMorgan..

John, thank you for the detail on the organic growth in the business. I do appreciate it. I think it might be useful or for me anyway, and maybe this isn't possible.

I know things can change from time to time, but can we put some of those numbers on an apples-to-apples basis with how they were presented in 2Q? In 2Q, you talked about, I think, organic growth of 4.6%, excluding MaraNatha add-back, and 8% including the add-backs.

If we were just to delineate 3Q the same way, what would those numbers be?.

Can you say that again, Ken?.

Yes. Last quarter, you talked about in the U.S. 8% growth, right, when you add back MaraNatha..

Right..

And if you -- on a true number, I guess, for lack of a better word, if you didn't add back MaraNatha, the organic growth that you guys defined it as was 4.6%. I'm just trying to make sure what those numbers would be in a 3Q basis because some investors are asking kind of how to put that on an apples-to-apples look..

Right, right. I think he was saying margin. [ph].

You gave a 6% number. I just want to make sure what that 6% number was, if I can ask. I guess, that's sort of what I'm going at..

Yes -- no, I understand your point. Basically, what you're seeing is the base is still at about that 4.6%. It's just that we've got less of an add-back for MaraNatha..

Okay, perfect. That's helpful.

So it's basically around 4.6%, and then the 6% and the 8% from last quarter was sort of like-for-like?.

I think with one exception that -- I would argue to you that the 6% is actually more like 7%, given that we did put investment above the lines and above the line trade that cost us about 100 bps..

Okay, that's fair. And then Irwin, changing subjects for my follow-up. There's a lot of change happening in the tea business today. You obviously have a terrific brand with celestial, and I know it has a lot of opportunity ahead of it.

But I look at what you've done with snacks, right, you have a ton of great brands that help customers solve really a variety of problems. I wonder if something similar can't be done with tea.

I guess, what I'm getting at is this, do you need more brands there, right? Do you need more or want more specialty teas that serve different purposes that you can sell in ultimate locations to customers where Celestial may not solve the problem that they have?.

So Ken, number one is -- good question on Celestial. And I think we sell over, from a Celestial standpoint, 1.8 billion tea bags of single tea bags a year that we ultimately sell.

Celestial has -- is the #1 specialty tea in herbal tea, and where is the consumer going today, it's herbal tea, and actually, millennials are drinking more tea today than coffee, okay? At Anaheim, we launched a whole new look on Celestial. And I think you saw the packaging, some big change.

And what was important to keep our current consumers but how do we bring in millennials into the category.

At the same time, Ken, what we've introduced was mates, which are ready-to-drink mates, which a younger consumer in chais are drinking today, matchas, dirty chais, et cetera, and we've also updated our packaging and rolling out in a bigger way our Kombucha brand. So with that, I think we've done a great overhaul on the Celestial Seasonings brand.

It's one of our biggest brands. It's one of our most profitable brands. And let me tell you something, since we've owned Celestial, I've seen anywhere from cough drops to salad dressings to ready-to-drink and all those dollars that I've spent on that, if I would have put towards the brand, the brand, I guarantee, it would have been bigger today.

Consumers know Celestial for tea. We've looked at acquisitions in other tea categories, and just -- there has been nothing out there. And if you come back and think about it, where Twinings today are and where -- other key products. The tea category has been a little sleepy, and we plan to make some changes.

The other big thing is, Ken, which I'll come back and say, there's some changes coming with K-Cups that we're going to focus on, and we think that's a big opportunity for us also. So we have new packaging. We have the lattes that are being launched. We have a new Kombucha, and we see some things happening with K-Cups that give us some opportunities.

If there was an interesting acquisition out there for food service, that's where we would focus on tea in the food service category..

And our next question comes from Scott Van Winkle of Canaccord Genuity..

John, I'm kind of following up on that last question about kind of relative growth between last quarter, the previous quarter and the quarter just reported. If we think about kind of internal growth between those 2 quarters, you talked about distribution gains accelerating from 3% to 4%.

So if I kind of pull those out, the internal growth number, does that mean that the greater distribution gains kind of cause maybe lower velocity and the existing stores where you have distribution or new stores are coming on maybe not at the same velocity rate because you would think with 100 basis point improvement in distribution gains, you'd kind of see the same thing in internal growth..

Scott, I think -- this is in line with things I've said before. You're exactly right. When you start to get new distribution, your velocity rate doesn't immediately go to where it is on places where it's been established longer. So you do see -- you see a little bit of an impact from that, not -- but it's not a huge piece..

And Scott, just on that, when you introduce and roll out, there's a build out here and not -- as you go in there and roll out new products for the sets, different retailers doing different sets at different times, so there's a build-out.

There's also, as you see in the third quarter, in the fourth quarter, some of our Easter promotions and back and forth. So it doesn't always line up perfectly as we roll our products out, and as we also look from quarter to quarter, there may be 2 or 3 weeks that we had last year that we didn't have this year..

Our next question comes from the line of Sean Naughton of Piper Jaffray..

Switching to the gross margin a little bit here. So you mentioned 27.1%, I think, on the adjusted gross margin. That's down about, I think, 40 to 50 basis points from last year in the Q3.

Is that primarily the commodity pressures that were not offset by productivity savings or is there something in terms of the sales mix as you're going to some other channels that impacts that margin as well?.

So Sean, it's 2 things. It is -- so that's on an apples-to-apples basis this year versus last year for the brands that we own. It is, number one, product mix.

Number two, as you heard John say before, trade spending now, that's below the line -- that's above the line that was below the line, and they are the 2 primary things, and there absolutely is -- almonds have gone up dramatically, organic coconuts, so there definitely is some commodity issues in there too..

So it is more product mix-related than channel mix on the gross margin?.

Yes..

Yes..

Okay, okay. And then, I guess, just secondly, on the U.K, I think you talked about this market a little bit that your. [Audio Gap] asking for natural and organic. Obviously, Ella's taking over as the #1 baby food brand in this market.

What is the opportunity here still to cross-sell some of the portfolio over into that market, and potentially even accelerate the growth there that you are seeing in local currency?.

So we're right now looking at MaraNatha bringing over almond butters, and that was part of the plan, but it slowed down when we had our withdrawal. Celestial Seasonings tea, we're planning to do that. We held off until all our new packaging was coming out. We think snacks. We think within the U.K. today, there's not great tortilla chips.

We think there's a great opportunity with Garden of Eatin', and we think there's a great opportunity with Terra Chips both in the U.K. and some of it is shelf life manufacturing over there. So that's -- from that standpoint, our product lines that we think immediately. We sell in the U.K. today Sensible Portions through Costco.

So they're some of things that we would look at selling from the U.S. over there..

Our next question comes from the line of Amit Sharma of BMO Capital Markets..

John, thanks for providing all those POD distribution gains description.

Can you just help us understand or conceptualize what is the context for that? Is that better than what you have done previously in the last 12 months? And then what should we think about from contribution towards organic growth from these distribution gains next year?.

Okay. Yes, look, part of the reason I did call them out is we've actually seen actually quite a big jump there. So it is better than we've seen before. It's not immediate, as I said, in the upcoming months. Most of these are sets that will go from today.

Resets will go from today on to -- some of the Wal-Mart ones won't happen till October, but it's definitely more POD wins than we've had in a while. So I think and I think, what that -- what we'll is, look, there's always been a strong correlation between our distribution and our consumption growth, and I think that it will accelerate our growth.

Remember, we're -- right now, we're going against a 12% comp. And we continue to go through a very -- against very high-double-digit comps right through, I think, to June. But as we move into July, August and that, we'll start to see increased impact from these big POD gains..

Got it. That's great. And then Irwin, you talked about ROIC potentially double digit next year, and then you also talked about pretty compelling M&A opportunities.

Can you talk about that? What are you seeing in the marketplace, what the valuations are and what gets you to double-digit ROIC next year?.

So number one, what gets us to double-digit ROIC is getting -- taking some of these acquisitions, getting the benefit synergies and integrating them, especially in the U.K., and there are things that we're working on. So that's number one.

Number two, in regards to acquisitions, Amit, listen, if you come back, we're not going out there to acquire and pay the 20x multiples and some of the crazy multiples that have been paid out there, and if you come back and look at Live Clean or Empire, and we paid great prices. We've been disciplined and there is so much we can do with these brands.

So today, as I said, we have the infrastructure to sell. We have the infrastructure to procure. We have the infrastructure to manufacture.

So what we're looking for is brands that fit the natural organic category that can fit within all our infrastructure and that we can turn these into high-single-digit, double-digit growth brands, and there's stuff out there. We're not going to overpay, and stay tuned for some of the stuff that we're working on..

Our next question comes from the line of Andrew Wolf of BB&T Capital Markets..

I have a couple, I guess, follow-ups if I could for John.

So on Tilda, I know you can't announce who you're talking to and getting the cart in front of the horse, but the way -- can you just give us a sense of how you're planning things and when you think you're going to start shipping in the U.S., how that plays out over in fiscal '16 and maybe even beyond that? And second related part is how do you size the opportunity in ready-to-heat? How do you think about that longer term, so short term, long term..

Right. Andy, one of the things -- as we've done our homework in the U.S., what we noticed is that the U.S. is lagging behind the Rest of the World in rice quality. I mean, rice is foot-balled a lot in the U.S. and it's not a great product relative to a premium product like Tilda.

So one of our objectives is to de-commoditize basmati rice with the launch of Tilda. Anybody can sell bad rice at a low product -- at a low price. So that's why we were waiting for the factory to come up and -- from back from the fire.

What we hope to do is to identify some, what I'd call, signal customers that we would put our Tilda rice in and across different channels and then other retailers will be watching what happens with them, and we look to drive and establish a more premium rice category with Tilda..

And what we don't want to do, Andy, is just go out there and make noise and make no profit, like others have done. We want to go out there and sell products, build a brand, whether it's going to be organic, and what it's going to be and build a good-sized business in the U.S. around it.

And whether we see the big opportunities with ready-to-heat and if we have to put a facility within one of our facilities, that's where the opportunity is. But the big thing today is getting Tilda expansion throughout the U.K, Europe, Middle East and India because they're big markets for us and getting it right in the U.S. before we launch it..

Okay. It sounds like there's a lot of brand-building in the next, I don't know, 6 months to 1 year? And okay. And the factory itself, I think I remember you saying it's going to be improved from what it was.

Could you just reconfirm that? And just when is the factory going to be up to full throughput or heading there?.

So I was personally there 2 weeks ago. The fourth line which produces somewhere between 80% to 85% of our product, is up and running. We're still using third-party copackers. We have spent with our insurance company and ourselves over GBP 20 million for a new factory, which -- it was equipment that was 25 years old.

So a lot of new packaging equipment product, manufacturing equipment, which will give us a much better efficient plant. The new plant completely in late fall or going into -- in January 2016 should be 100% up and going..

Okay, another follow-up. I think John mentioned trade spending was up $3 million on your new distribution.

Is that an unusual number? Should we kind of think that kind of gained profit or is that sort of -- is there something to net out of that from the year ago to get to what it did in the quarter?.

Yes, it was -- it is unusual in that so many opportunities presented themselves within the period. So we had to make a decision -- look, do we strike or get us out or do we wait and we decided to strike, and that's part of what is behind those PODs that I laid out for you.

And again, it goes back to the category is very, very hot, with retailers across the country as opposed to just a handful of them..

And my real question, I started with the follow-ups, but the one I think is -- just wanted to get to the guidance and the snapback in profitability that is implied in Q4. I think it would be a great outcome for the company and the stock and for investors.

Can you just give us a quick kind of narrative on, I think every segment's going to have to have a nice upturn in sequential profitability and year-over-year profitability, kind of how you see that happening from Q3 to Q4, particularly the U.K., where profitability was down, the U.S., where it was kind of flat, if you adjust for Rudi's? How you see those 2 major segments really turning the Q4 profitability trend back up?.

Well, number one, fourth quarter is one of our biggest quarters, Andy. As we -- from a Tilda standpoint, we come into Ramadan, from Hain Daniels. It's not a soup, but it's fruit and juice. There's additional productivity. As you look at Europe, our business is strong in Europe with our nondairy business.

And John's business, a lot of his new products, a lot of his new distribution starts to roll out into the fourth quarter. So we feel good about our fourth quarter. We've delivered quarters equal to our fourth quarter basically in our second quarter. So we're feeling good. April is gone. A week has gone in May. So we like what we see so far.

Yes, and that's another big piece, productivity, a big part of our fourth quarter..

And it is still at the fourth quarter is going to see the biggest piece of the productivity, and I mean, that would be a big part of the puzzle..

Yes, Andy. Yes. All right, Andy. We want other people to ask questions, too, Andy..

Our next question comes from the line of Bill Chappell of SunTrust..

Just 2 product-specific questions. One, Irwin, I think, you alluded to something on K-Cups, and I just need a little bit more color there.

K-Cup sales for tea has been pretty abysmal over the past 3 months, and probably a drag on the business now for 12, and any color to what gets you excited that, that's actually going to turn in the near future?.

I'd rather not discuss it yet, and I come back and I say this here. I absolutely agree with you on 3 things. Number one, it's been dismal. It's been a drag on Hain's AOC, and if you come back and look at the K-Cup category, its growth tea has not got its share of it. Then if you come back and look who's buying, K-Cup millennials are a big part of that.

We need to be controlling that, and we're in the midst of trying to do some things there to make that a bigger part of Celestial Seasonings build. But yes, you're right, it's not only 12 months. It's actually been 24 months where K-Cups have been a drag on our AOC..

But just to clarify, you think that'll be fixed in the next 6 months?.

Yes..

Okay.

And then just switching just to stake and size, on almond butter, in particular, I mean, with the commodity price increases that are -- now and going forward, I mean, is there concerns that, at some point, you start pricing consumers out of the market? I mean, have we gotten -- or do you feel pretty comfortable that we still have some ceiling -- way-before-it ceiling?.

Bill, this is John. Look, it -- the almond prices just -- still continue to rise. I mean, last week, it was over -- almost 3.45 a pound -- I mean, 4.45 a pound -- sorry, it was 3.30 a year ago.

What we're looking at is different size packages to keep it within the consumers' budget, as well as making sure that whatever trade investment we're making on almond is primarily against price.

Look, retailers don't need to put up displays of almond butter because, quite frankly, the consumers are finding it, no matter where you put it, but they do -- if you're going to have to invest in trade, probably price is the best place to put it..

Bill, I agree with you on that. Listen, we can't control the price of almonds, and it is what it is. And as you heard me say before, I mean, almonds is one of our #1 commodities within Hain that we purchase. But we have our own plants, so we're not at a third-party co-packer. We're also out there looking to source almonds from other areas.

And one thing we're not going to do is ever -- from an integrity quality of product, we're in a glass jar. We're not going to a plastic jar, et cetera, but I am 100% in agreement with you.

Price is important here, and almond butter is almond butter, and what we've seen, which were in the peanut butter business, consumer switching back to peanut butter because of price of almond butter being -- going up there in price..

And our next question comes from the line of David Palmer of RBC Capital Markets..

Celestial, soup, Ella's.

Do you see a kind of a broadening? And how do you see -- how do you see this all playing out in terms of your net growth rates over the next year?.

So David, I don't agree with you. I don't think snacks and yogurt are not carrying all of our growth out there today. Baby, Personal Care, our Spectrum oils are carrying a lot of our growth also. So our growth is across multiple categories. There could be some difference and changes over a 4-week period.

But as I step-back, David, snacks will continue to grow heavy consumption category. And if you look at the size of the snack aisles and the demand for snacks out there, I think snacks will continue to grow with double digits, and we're a big part of it.

Our snack today, if you look at major retailers, whether at Wal-Mart, Target, I mean, we're not really in there in a meaningful way. And just to pick up those 2 retailers, there's almost 6,000 stores of distribution points that would be significant for us. We're in there in some stores.

But as we look for rollout to major -- for national distribution for the things we're doing, we took Sensible Portions, and rolled out a premium type of product just in Wal-Mart, and Sensible Portions alone today will do over $50 million in Wal-Mart as a snack. So the opportunity for snacks for us is tremendous.

The opportunity for us in yogurt, I said it 6 years ago, watch the cereal category because yogurt is going to be the category killer. As you look at consumption of cereals, whether it was Kellogg's, General Mills, across the category, it's moving more and more towards yogurt. Yogurt is just not a breakfast item anymore. It is a lunch item.

It is a snack item. It's an item that we use as a mix, et cetera. Our Greek Gods Yogurt has tremendous amount of runway. We're not a 10 for $10 one. We're a high indulgent, and that's what the consumer looks for today.

But if I look back on our baby category, David, I look back in our Personal Care, some of the things that we're doing with plant-based milks as refrigerated milk category declines, as I look at our Arrowhead Mills, our baking, our -- come back and look at some of our other product lines, I think the growth across multiple categories -- and that's the things you're going to have shifts in categories, but what Hain has is tremendous categories that we will move and shift.

Listen, not a lot of companies could still put these numbers up and have the type of recall that we had on MaraNatha and be able to shift it to other categories..

And our next question comes from the line of Mitch Pinheiro of Imperial Capital..

I'll be quick.

Just -- and I may have missed this, but have you -- did you talk about what your growth rate was in the natural channel?.

Sorry, Mitch. This is John. No, we don't actually -- we don't quote those -- that number. It's in line with what we're seeing. It's slightly lower, what we're seeing in terms of the conventional channel....

Okay.

So are you -- would you characterize Hain as gaining share, maintaining or losing share in natural?.

Again, it's by category, Mitch..

[Operator Instructions] Our next question comes from the line of John Baumgartner of Wells Fargo..

Just wanted to come back to the trade promo spend again, given that I think that headwind was alleviated for the most part back in Q2, but it looks it's still been a drag in 4 of the past 5 quarters now.

So I guess, first off, how much are the string of the increases in promos related to maybe more structural changes in natural and organic in terms of a proliferation of competing brands? And then as these new PODs come into the market, can we expect that $3 million promo spends maybe increased going forward?.

John, this is John Carroll.

What we saw in the -- back to Q2 a year ago was we saw a move on our part to take money away from below the line spending, which was not going directly against price, and moved it above the line to go directly against price, although we did not see it until we ran 4 quarters on that, and then in the previous quarter, which will be Q2 a year ago -- our Q2, the recent one, we did not see it.

This one, though, we made a conscious decision because we had distribution opportunities on a couple of key businesses that we said "Okay, look, we're going to lean in here at this point and do it." So I don't think -- and as you go into more conventional channels, I think our mix of above and below the line spending is about right.

I think our trade spend rate is about right. It's just a matter of what buckets it's in, and I think we will -- the one thing we'll do is, if we see opportunities to drive new distribution, and we can afford to do it, we'll jump at them, but at this point, most of what you see in Q3 was spending intentionally moved to get some new distribution..

Great. Maybe a follow-up just for Irwin. Back on the tea business, it seemed the leap in measured channels, there's been maybe a bit of a consumer shift towards liquid teas in terms of the consumption. And I guess, [indiscernible] more premium teas, which could be in your wheelhouse more or less.

So how are you seeing this trend going from kind of powder to liquid teas, and is there a need to maybe make a larger push into that segment to stabilize the business?.

Well, good question, and the powdered teas, and anything with powder today that you mix is perceived as additive stabilizer chemicals, et cetera. The 3 big moves in tea today and from a ready-to-drink tea, if you go back and look at all the ready-to-drink teas out there, it's all about a price game, and we could easily get in that.

Celestial's been in it, but you don't -- can't make money in it. From tea, bulk tea, herbal teas, wellness teas and K-Cups, I think are the big opportunities. And then if we're going to go into the tea category and ready-to-drink, it's Kombucha, which again, is a big millennial drink and the lattes.

And that's where I see us going and our big thing is how we skew the Celestial Seasonings brand up to a younger consumer, and that's where our new packaging and some of the new products are.

But I think if you come back and look at tea today, we love to steep our own tea from a bulk and we love to -- consumer still love teabags, but herbal tea is where the growth is, and wellness tea, not black teas. All right. Thank you, everybody. It looks like this is our last question for the day.

I know Andy Wolf may have 1 or 2 more, but we'll get him later, but I want to thank everybody for joining us today. Listen, third quarter behind us, up 19%, good growth. And the thing about Hain is you got to look at what our products are today, what our brands are, the categories that we're in and where the consumer is going.

And as I said it before, I have never seen more retailers wanting more and more natural organic products.

And being a 20-year-old company, we've built a great company built on 6,500 employees, 32 plants, close to $3 billion in sales and from a global standpoint, a global sourcing team around the world, which is hard to duplicate today and it's something that we've really put in place to develop Hain for the future.

We continue to invest in CapEx to build plants out to support our infrastructure and growth. And eating healthy, not a fad, not a trend, and it is not going away. In closing, I want to thank our teams around the world that do a great job within Hain. There's a lot that we do. There's a lot that we make happen.

There's a lot of consumers out there that we like to make happy. And we want to, again, thank our shareholders, as we achieve our goals to generate shareholder value, and last, but not least, this is -- Sunday is Mother's Day. Don't forget all those lovely mothers out there.

With that, probably wouldn't get a chance to speak to you throughout the rest of the summer. Have a great safe summer, and look forward to speaking to you in August with our end-of-year and fourth quarter numbers. Thank you. Have a good day..

Ladies and gentlemen, thank you for participating on today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone..