Soft drink maker PepsiAmericas, Inc. (PAS) Tuesday reported a plunge in second quarter profit, hurt mainly by various non-comparable items related to the deconsolidation of the Caribbean operation. Adjusted results, however, came in above estimates. Citing strong first half results, the company said it expects full year earnings higher than its previous estimates.
For the second quarter, the Minneapolis, Minnesota-based company's quarterly net income attributable to PepsiAmericas plunged to $61.4 million or $0.50 per share from $90.8 million or $0.72 per share in the same quarter a year ago. Net income was $61.4 million, compared to $90.8 million in the prior-year quarter.
Quarterly results included charges amounting to $8.1 million, compared to $0.1 million in the comparable quarter a year ago. Profit for the quarter also included various non-comparable items which in total decreased net income by $29.6 million or earnings per share by $0.24. Results were also negatively impacted by foreign currency movements, reducing net income by $34.4 million and earnings by $0.28 per share.
Non-comparable results reflect a $0.19 earnings per share impact from the accelerated recognition of cumulative currency translation and pension adjustments per SFAS No. 160, related to the deconsolidation of the Caribbean operation. PepsiAmericas then formed a strategic joint venture to combine the Caribbean bottling operations, excluding the Bahamas, with The Central America Beverage.
On an adjusted basis, earnings per share were $0.74 for the quarter, compared with $0.72 recorded in the same quarter last year.
On average, eight analysts polled by Thomson Reuters expected earnings of $0.68 per share for the quarter. Analysts' estimate typically excludes one-time items.
Net sales dropped to $1.26 billion from $1.34 billion in the year-ago quarter, missing Street estimates of $1.29 billion. Net sales in the U.S. increased 5% to $963.1 million reflecting strong pricing.
Operating income was $158.8 million, compared to $165.5 million in the same quarter last year. Carbonated soft drink volume increased 3% led by increases in Pepsi, Mountain Dew and the addition of Crush. Non-carbonated soft drinks decreased approximately 12%. Net pricing grew 4.8%, primarily reflecting rate increases to cover higher raw material costs which drove cost of goods sold per unit up by 4.1%.
For the six-month period, net income attributable to PepsiAmericas were $83.1 million or $0.67 per share, down from $115.5 million or $0.90 per share in the prior-year quarter. Net income declined to $85.1 million from $121.2 million in the year-earlier period. Net sales dropped to $2.32 billion from $2.44 billion in the same period a year ago.
Citing strong first half results, the company also said it is raising its full year 2009 adjusted earnings outlook to a range of $1.87 to $1.94 per share, from the prior range of $1.83 to $1.90 per share.
Full year revenue, however, is expected to be lowered by 2.5 percentage points due to the deconsolidation of the Caribbean related to the strategic joint venture with CABCORP. The deconsolidation is also expected to reduce SD&A by approximately 2 percentage points and operating profits by approximately 1.5 percentage points.
The company also said its share in the earnings of the joint venture will be recorded in "Equity in net earnings of non consolidated companies" on the income statement.
Including the impact of foreign currency, based on recent exchange rates, the company continues to expect adjusted operating profit declines at the low end of the previously guided 4 to 5% range, despite the 1.5 percentage point negative Caribbean impact. These 2009 forecasts are based on a 52 week comparable basis. Analysts expect the company to earn $1.88 per share, on revenues of $4.76 billion.
PAS is currently trading at $27.01, up $0.48 or 1.81%, on a volume of 0.54 million shares.
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