The Hain Celestial Group, Inc. (HAIN), which distributes, markets and sells various natural and organic foods as well as personal care products, recently, posted third-quarter 2010 results that fell short of the Zacks expectations.

The quarterly earnings of 28 cents missed the Zacks Consensus Estimate by a penny, and fell 9.7% from 31 cents delivered in the prior-year quarter. On a reported basis Incorporatedluding one-time items, earnings came in at 6 cents a share compared to a loss of $1.01 posted in the year-ago quarter.

Quarterly Performance

Revenue for the quarter tumbled 5.3% to $222.1 million from $234.6 million delivered in the prior-year quarter. The quarterly revenue was hurt by inventory de-stocking by two major distributors and the reduction in the supply of fresh sandwiches to Marks and Spencer in the United Kingdom, but was favorably impacted by foreign currency movements.

The prior-year quarter revenue excludes $30.3 million of sales related to Hain Pure Protein (HPP). Including HPP sales, revenue for the quarter fell 16.2% year-over-year. Management hinted at improving consumption trends and a stable cost environment.

Effective Jun 30, 2009, Hain has not been incorporating HPP’s results due to the reduction in the company’s ownership interest to 48.7% from 50.1%. Hain Celestial hinted that HPP will sell its Kosher Valley brand.

The company also notified its deal to acquire the assets and business of World Gourmet Marketing, a New Jersey-based food manufacturer.

Acquisitions have been a key part of Hain Celestial’s strategy to build market share. Acquisitions have not only enhanced its geographical presence but have also provided opportunities to cross-sell products in the U.S. , Canadian, and European markets.

Cost of sales dropped 21.6% to $160.6 million. Consequently, gross profit rose 2.5% to $61.5 million, whereas gross margin for the quarter expanded 510 basis points to 27.7%. However, after adjusting the year-ago quarter’s gross profit results for HPP, gross margin for the quarter under review increased 24 basis points.

Financial Aspects

Hain Celestial generated free cash flow of $59.4 million in the trailing 12-month period. The company’s balance sheet remains healthy, with debt being 30.7% of shareholders’ equity of $734.3 million. During the quarter, the company lowered its debt by $10 million. The company ended the quarter with cash and cash equivalents of $41 million and long-term debt of $225.1 million.

Guidance

Hain Celestial expects fiscal year 2010 earnings in the range of $1.03 to $1.06 per share, and revenue between $915 million and $925 million.

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