Frozen-treat maker swings to loss in second quarter

The firm's shares took a severe beating last July after CoolBrands' loss of the Weight Watchers licence was capped by a legal scuffle. They never recovered from a punishing slide from around $23 (Canadian) to a low of $6.39 in November.

The Toronto Star
April 15, 2005

Frozen-treat maker swings to loss in second quarter
In Focus

A sputtering low-carb fad and the end of a licensing deal with Weight Watchers have carved a big chunk out of CoolBrands International Inc.'s bottom line, the frozen-treat maker said yesterday as it swung to a second-quarter loss of $3.97 million (U.S.).

Management moved quickly into damage-control mode.

"We'll continue to supply the same determination that has characterized our efforts over the past four years, to restore shareholder value to absolutely its maximum value by whatever means are available to us," said CEO David Stein.

"Our second-quarter results clearly reflect the Number 1 challenge facing our business coming out of fiscal 2004, and that is to replace revenues on brands that are either going away, like Weight Watchers Smart Ones, or suffering significant year-on-year declines, like Atkins and like our super-premium pints."

The loss for the three months ended Feb. 28 amounted to 7 cents (U.S.) a share diluted and contrasted with a profit of $9.47 million or 17 cents per share a year earlier. (The company reports in U.S. currency.) Sales revenue declined to $80.6 million from $95.2 million.

The big damage was done by writedowns totalling $6.2 million, mainly related to the Toronto-based firm's split from the Weight Watchers Smart Ones brand.

The firm's shares took a severe beating last July after CoolBrands' loss of the Weight Watchers licence was capped by a legal scuffle. They never recovered from a punishing slide from around $23 (Canadian) to a low of $6.39 in November.

Earnings spiralled down as the low-carb and low-fat boom, to which CoolBrands had pinned much hope as sales surged early last year, began to fade.

"During 2004 and continuing on into 2005, the ice cream industry has clearly been undergoing significant challenges that have adversely affected the ability of ice cream companies to make profit," Stein said.

The firm has seen a contraction in sales at both ends of the healthy eating spectrum, he said, with revenues in decline for the low-fat and low-carb segments and for premium ice creams in a competitive market. But CoolBrands — until now — has stayed ahead of its competitors in the profit department, Stein noted.

The company began to see encouraging sales of the new No Pudge products and continued to secure shelf authorizations for other new products under the Crayola, Snapple, Care Bears, Justice League and Dogsters brands, Stein said.

CoolBrands competes in the fast-growing "Better-for-You" ice cream category with offerings such as fat-free, non-dairy Whole Fruit Sorbet and Atkins Endulge controlled carbohydrate super premium ice cream.

Stein declined to give any earnings guidance for 2005 until more sales figures come in, "other than directionally to say that we're more inclined to think that we're profitable for the year than that we're not."

CoolBrands plans to diversify its brand portfolio and enter new dairy segments, such as fresh yogurt, he said.
Other CoolBrands products include the brands Eskimo Pie, Chipwich, Yoplait and Welch's.

Canadian Press


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