Thursday, beverages maker Dr Pepper Snapple Group, Inc. (DPS) reported a loss for the fourth quarter, as it recorded a hefty impairment charge related to goodwill and certain intangible assets. On an adjusted basis, quarterly profit fell 19% on lower net sales that reflected the impact of glaceau and Hansen U.S. product distribution losses. The company also provided fiscal 2009 adjusted earnings forecast, which is lower than fiscal 2008.
The Plano, Texas-based non-alcoholic beverages and soft drinks company, which was the American beverage unit of British confectionery manufacturer Cadbury Plc (CBY, CBRY.L, CDSCF.PK) before it spun off in May 2008, reported a fourth-quarter net loss of $621 million or $2.44 per share, compared to net earnings of $138 million or $0.54 per share in the prior-year period.
The latest quarter results included non-cash impairment charge of $696 million or $2.74 per share related to goodwill and certain intangible assets, owing to the recent deterioration in macroeconomic and market conditions. Restructuring costs of $0.06 per share and transaction and separation costs of $0.01 per share were also included in the results. Meanwhile, prior year-results were benefited by $0.17 per share gain on glaceau termination, partly offset by restructuring costs of $0.10 per share.
Excluding the charge and certain other items, the company earned $0.39 per share for the quarter, down 19% from $0.48 per share in the prior-year period.
On average, five analysts polled by Thomson Reuters expected the company to report earnings of $0.37 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter edged down 1% to $1.376 billion from $1.388 billion in the prior year quarter, while Wall Street analysts expected $1.33 billion. Excluding the impact of glaceau and Hansen U.S. product distribution losses, net sales rose 3% reflecting a 1% rise in sales volume and the ongoing benefit of pricing actions taken earlier in the year.
Segment-wise, Beverage Concentrates sales rose to $353 million from $338 million a year ago, while sales of Finished Goods dropped to $370 million from last year's $388 million. Bottling Group sales in the quarter declined to $742 million from $755 million a year ago, and sales from Mexico and Caribbean operations fell to $103 million from $105 million in 2007.
In the quarter, loss from operations totaled $836 million, compared to income of $273 million in the prior-year period. Segment operating profit increased 4%, reflecting continuing strength in the company's carbonated soft drinks, or CSD, business.
Dr Pepper Snapple noted that its CSD case volume in the quarter contracted only slightly at a time when liquid refreshment beverages declined low single-digits. Weak demand for its premium products, especially Snapple, continued during the fourth quarter and in to 2009, the company added.
In the preceding third quarter, which was the first full quarter for Dr Pepper Snapple as a stand-alone business, the company reported a 31% decline in net income to $106 million or $0.41 per share, hurt by higher one-time costs and 2% drop in net sales to $1.51 billion due to the absence of Glaceau. Excluding glaceau, net sales rose 5% on 1% volume growth and the continuing benefit of pricing actions.
Among peers, bigger rival Coca-Cola Co. (KO) recently reported an 18% decline in its fourth-quarter net income to $995 million or $0.43 per share profit, hurt by higher one-time charges. The beverages giant, which sells Coke, Minute Maid orange juice, Dasani bottled water, VitaminWater, Nestea and other brands, posted net operating revenues of $7.13 billion, down 3% to from a year ago.
Another beverages giant Pepsico, Inc. (PEP) on February 13 reported a decline in its profit for the fourth quarter to $719 million or $0.46 per share from $1.262 billion or $0.77 per share last year, hurt by charges, despite an increase in revenues. The Purchase, New York-based company, which operates through four divisions: Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International and Quaker Foods North America, generated quarterly revenues of $12.729 billion, up from $12.346 billion in the previous-year quarter.
For the fiscal year 2008, Dr Pepper Snapple reported a net loss of $312 million or $1.23 per share, compared to net earnings of $497 million or $1.96 per share in the prior year. Excluding items, adjusted earnings dropped 7% to $1.85 per share from prior year's $1.98 per share. Annual sales edged up to $5.710 billion from $5.695 billion last year. Analysts estimated earnings of $1.82 per share on sales of $5.73 billion for the full year.
While announcing its third-quarter results, Dr Pepper had trimmed its fiscal 2008 earnings forecast to approximately $1.54 to $1.57, or approximately $1.83 to $1.86 excluding certain items, citing deteriorating economic conditions in U.S. and Mexico, the impact of a strengthening U.S. dollar and loss of Hansen Natural product distribution. The company also expected net sales growth of about 1% for the year.
Commenting on the results, Dr Pepper Snapple President and Chief Executive Officer Larry Young stated, With the U.S. economy facing its worst recession in postwar times and rising unemployment rates, consumers have dramatically changed the way they shop. Value, quality, product satisfaction and increased at-home usage are key factors in purchasing decisions. In our first year as a public company, and in what is arguably one of the toughest economic environments on record, we are proud of what we have accomplished so far.
Looking ahead, Young added, Our CSD and value juice momentum continues and, together with expanded distribution of Crush, we're off to a solid start in 2009.
For the fiscal year 2009, Dr Pepper Snapple expects earnings between $1.71 and $1.79 per share, including a net one-time pre-tax gain of $51 million, or $0.12 per share, related to the Hansen contract termination in the U.S. and Mexico, which will be recorded in the first quarter. Excluding this item, the company expects earnings per share of approximately $1.59 to $1.67.
Full-year 2009 net sales are projected to decline 2% to 4%. Excluding the impact of the loss of Hansen product distribution and on a currency neutral basis, the company expects comparable net sales to grow 2% to 4%.
Analysts expect the company to report earnings of $1.62 per share for fiscal 2009, with estimates ranging between $1.56 and $1.66 per share, while sales are projected to be $5.56 billion, which represents a 2.9% drop from last year.
Dr Pepper Snapple added that unfavorable comparisons to prior year are expected to be more prominent in the first half, reflecting the impact of the company's stand-alone financial structure, together with a shift in marketing expenses. In addition, the Easter holiday falls in the second quarter in 2009 compared to the first quarter in 2008.
Further, in 2009, the company expects to make cash contributions of $43 million to its pension and post-retirement benefit plans, and capital spending is expected to be approximately 5% of net sales.
The company added that it remains committed to using its free cash flow to pay down debt and expects to reduce its debt obligations by at least $400 million, prepaying all of 2010 and part of 2011 principal.
DPS closed Wednesday's trading at $15.51, down $0.05, on a volume of 2.56 million shares. For the 52-week period, the company's trading range was $11.83 - $26.85.
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