UPS Boosts Quarterly Profit
United Parcel Service, boosted by growth in both its international and domestic U.S. package markets, reported today a 22-percent rise in quarterly profits, beating Wall Street expectations.
Atlanta-based UPS, the world’s largest package delivery company, earned $702 million, or 60 cents per share, in this year’s third quarter, compared with a profit of $577 million, or 52 cents, in the same period last year.
Analysts on average had expected UPS to earn 58 cents in the third quarter, according to First Call/Thomson Financial, which tracks such forecasts.
UPS’ global volumes, a key measure of financial health in the package delivery industry, averaged 13.5 million pieces a day in the quarter, up 6.2 percent from the same period last year.
UPS averaged volumes of about 1.1 million pieces a day for its entire international service, a 14.9-percent gain from last year. Volumes for the company’s U.S. domestic package business averaged 12.3 million pieces a day, a 5.4-percent rise over the year earlier period.
“I think it was an exceptionally solid quarter,” said Edward Wolfe, analyst with U.S. brokerage Bear Stearns, who noted that UPS’ international and domestic ground volumes were particularly strong in the third quarter.
Wolfe, who has a rating of attractive with a 12-month price target of $64 a share on UPS, said the stock would likely see some buying if U.S. stock markets had a “normal” trading session.
UPS, which has traded at a high of $76-10/16 and a low of $49-8/16 during the past year, closed at $53-1/16 on Wednesday on the New York Stock Exchange.
The package deliverer also said today it was confident it would enjoy a solid fourth quarter, which includes the busy holiday season. Holiday volume is expected to produce a one-day peak exceeding 19 million deliveries, it said.
“We are successfully executing our strategy and growing every segment of our business,” UPS Chairman and Chief Executive Officer Jim Kelly said in a statement accompanying the earnings results.
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Sears Beats the Street
Retail giant Sears Roebuck reported today an 18 percent increase in third-quarter income that beat Wall Street forecasts, as fewer outstanding shares and a good performance from its credit operations boosted results.
Sears, the No. 2 retailer behind Wal-Mart Stores Inc., reported net income in the third quarter rose to $278 million, or 81 cents a diluted share, compared with $236 million, or 62 cents, in the same quarter a year ago.
Third-quarter 1999 earnings included a non-comparable charge of $29 million, or 7 cents per share, for staff reductions and the exit from certain automotive retail markets.
On average, analysts polled by First Call/Thomson Financial had expected the retailer to report a profit of 80 cents a share.
Sears repurchased 6.4 million shares during the quarter.
Total revenues in the quarter climbed to $9.63 billion from $9.20 billion a year ago. The revenue increase was primarily due to improvements in Sears department stores and Sears Canada. Domestic comparable store sales increased 3.5 percent.
“Our credit business contributed very strong growth in operating income,” Alan Lacy, Sears president and chief executive, said in a statement. “We are pleased with the quality of our credit portfolio and our ongoing productivity improvements. Retail results reflect strong sales performance across several important businesses and investments in new retail growth initiatives such as The Great Indoors.”
Consolidated gross margin as a percentage of merchandise sales and services fell to 25.6 percent from 26.5 percent in the third quarter of 1999. Both domestic and international margins declined. The decline in domestic retail margins is due to increased apparel markdowns and a higher mix of hardlines products, Sears said.
Credit operating income increased by about 22 percent to $385 million mostly due to substantial reductions in selling and administrative expense.
Excluding 1999 non-comparable items, retail operating income increased by 2.3 percent to $44 million.
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R.J. Reynolds Earnings Rise 6%
R.J. Reynolds Tobacco Holdings, parent of No. 2 U.S. cigarette maker R.J. Reynolds Tobacco Co., reported today a 6 percent rise in third-quarter profits, just topping analysts’ estimates.
The Winston-Salem, N.C.-based maker of Camel, Doral, Winston and Salem cigarettes said quarterly profits rose to $117 million, or $1.16 per diluted share, from $110 million, or $1.01, in the year-ago period. Analysts polled by First Call/Thomson Financial on average were forecasting earnings of $1.15 per share.
Third-quarter net sales climbed 6 percent to $2.12 billion from $1.99 billion in the year-earlier quarter. Cigarette shipment volume dropped 3.3 percent percent to 24.7 billion units, against an industry decline of 3.5 percent, R.J. Reynolds said.
The company said it sees full year net income rising 6 to 8 percent, to between $390 million and $400 million, resulting in diluted earnings per share between $3.85 and $3.95, an increase of 13 to 16 percent from 1999. Cash net income per diluted share is seen rising 10 to 12 percent to between $7.05 and $7.15 while Reynolds Tobacco shipment volumes are seen down about 1 percent.
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Higher Premiums Help Allstate
Allstate, the U.S. No. 2 car and home insurer, said today third-quarter operating earnings rose a greater-than-expected 34 percent, as increased premiums offset higher loss costs.
The Northbrook, Ill.-based company, second only to giant mutual State Farm in the United States car and home insurance market, said operating earnings, excluding a restructuring charge and capital gains, rose to $537 million, or 72 cents per share, from $401 million, or 51 cents, in the year-earlier quarter.
The results beat analysts’ average forecast of 70 cents per share, according to market research firm First Call/Thomson Financial.
Net profits for the quarter, including a $12 million restructuring charge and $129 million in realized capital gains, rose 31 percent to $644 million, or 87 cents per share, from $490 million, or 62 cents, in the same quarter a year ago. Overall revenues rose 14 percent to $7.45 billion.
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BMY Posts Double-Digit Growth
Pharmaceutical company Bristol-Myers Squibb, which late last month announced a restructuring, reported today a 13 percent rise in third-quarter net profits on strong double-digit sales growth in key drugs.
Bristol-Myers, the No. 3 U.S. drugs maker which produces the Glucophage/Glucovance family of diabetes drugs and cholesterol drug Pravachol, posted net income of $1.24 billion, or 62 cents per share, compared with $1.09 billion, or 54 cents, in the year-ago period. Excluding beauty care and Zimmer operations, which it plans to divest, earnings per share jumped 16 percent to 57 cents from a year-ago profit of 49 cents.
Analysts on average had estimated the company — which said on Sept. 28 it would divest its Clairol beauty products unit and its Zimmer orthopedic device division in the next six to 12 months — would earn 61 cents per share, according to First Call/Thomson Financial.
The company said total pharmaceutical sales for the period rose 12 percent to $3.6 billion, driven by an 18 percent jump in U.S. prescription drug sales. Pravachol sales climbed 16 percent to $446 million, breaking out of a trend in recent quarters of relatively flat growth. Sales of Glucophage rose 25 percent to $435 million, while sales of its Taxol drug for breast cancer rose 11 percent to $417 million.
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EBay Surpasses Estimates
The popular Internet auction site eBay Inc. reported third quarter earnings that surpassed Wall Street expectations.
The San Jose-based company earned $15.2 million, or 5 cents per share, for the three months ended Sept. 30, compared with $1.2 million, or 1 cent per share, in the same period last year.
The earnings consensus of analysts polled by First Call/Thomson Financial was 4 cents per share.
During a conference call with analysts, eBay executives said they expected eBay’s robust growth to continue in the months ahead.
The company said it is comfortable with Wall Street’s expectation for a fourth quarter profit of 6 cents per share and forecast 2001 revenue of $630 million, roughly 50 percent higher than the projected amount for this year.
EBay is promising $3 billion in annual revenues by 2005.
“The best has yet to come,” eBay CEO Meg Whitman told analysts.
In the third quarter, eBay’s revenues totaled $113.4 million, a 94 percent improvement from $58.5 million in the prior year.
Through the first nine months of the year, eBay earned $24.4 million, or 9 cents per share, on revenue of $297.4 million. That compared to a profit of $5.8 million, or 2 cents per share, on revenue of $150.8 million in the comparable 1999 period.
EBay’s growth is being propelled by its steadily growing population of online traders. As of Sept. 30, eBay boasted 18.9 million registered users, up from 16 million as of June 30 and a 146 percent increase from the 7.7 million users signed up for the auction service in September 1999.
The service has become so pervasive that the eBay has become a piece of popular culture, getting almost daily mention in a wide range of media, from specialty publications to prime-time network TV dramas. eBay is now negotiating to broadcast its own TV show.
Perhaps the biggest danger facing eBay is that people will become bored with online auctions, warned Prudential Securities analyst Mark J. Rowen in a recently released report.
“While early indications appear to signal that the online auction format is here to stay, it is possible that in hindsight, we will view it as a passing fad,” Rowen wrote.
Rowen doubts that will happen though. He is recommending that investors buy the stock with a price target of $125.
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Eli Lilly’s Net Income Up 15% Pharmaceutical giant Eli Lilly, whose stock tumbled in August after it lost a patent battle over its antidepressant Prozac, reported today a 15 percent rise in third-quarter net income on strong sales of drugs for schizophrenia, cancer and osteoporosis.
The Indianapolis-based company said net income rose to $778.8 million, or 71 cents per diluted share, excluding a one-time gain.
Analysts on average had predicted Lilly would earn 71 cents per share, according to First Call/Thomson Financial. The company said on Aug. 9 that it expects single-digit earnings growth in 2001 and 2002, primarily because of a court ruling that would trigger expiration of patent protection over Prozac in mid-2001, opening the way to generic competition.
Lilly reported a 9 percent increase in third-quarter revenues, to $2.812 billion, led by sales of the schizophrenia drug Zyprexa, the cancer drug Gemzar, and the osteoporosis drug Evista. Separately, Sepracor said Lilly had terminated a licensing deal involving the drug R-fluoxetine, closely related to the active ingredient in Prozac, and had returned the rights to the product to Sepracor.
Shares of Lilly, which were trading at a year high of $108-15/16 in August before falling 31 percent on a federal judge’s ruling on Prozac, closed at $89-1/4 Wednesday on the New York Stock Exchange. Lilly’s 52-week low is $54.
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Equifax Up 11% on Revenue
Equifax, a provider of consumer credit information, said today third-quarter net income rose 11 percent as revenues from payment services increased.
Equifax reported net income of $64.3 million, or 47 cents per diluted share, compared with $58.1 million, or 42 cents, in the year-earlier period. The results edged ahead of analysts’ average expectations of 46 cents a share, according to market research firm First Call/Thomson Financial.
Total revenues rose 17 percent to $517.9 million. North American payment services revenues rose 11 percent to $194.2 million.
Equifax, which on Oct. 2 said it would spin off its payment services division to shareholders, also said it has sold its collection services businesses in the United States, Canada and England for about $150 million. The company said it will use the net cash proceeds of the deal, about $100 million, to pay down debt.
Equifax said it sold the U.S. unit of Equifax Risk Management Services to Atlanta-based Risk Management Alternatives Parent Inc. IntelliRisk Management Corp., based in Columbus, Ohio, bought the Canadian and British operations, Equifax said. BACK TO TOP
First Union Tops Estimates
First Union, the No. 6 U.S. bank holding company, said today its third-quarter profits rose 6 percent, topping estimates, as it turns around its operations after prior unwieldy acquisitions.
The Charlotte, N.C.-based bank, which has about $260 billion in assets and more than 2,200 branches, earned $852 million, or 86 cents a diluted share in the quarter, compared with $802 million, or 84 cents a share, a year ago. Excluding gains and restructuring charges, the company earned $702 million, or 71 cents a share, in the quarter.
Wall Street had expected the bank to earn 69 cents a share in the quarter, according to First Call/Thomson Financial, which tracks analysts’ consensus earnings forecasts.
First Union is in the midst of a $3 billion restructuring plan, announced at the end of June, to revive revenue growth after troubles integrating a string of acquisitions. Its stock has tumbled about 40 percent from its 52-week high of $44-5/16 hit last November.
Many U.S. regional banks face slower revenue growth after a series of interest rate increases that have put pressure on lending profits. Higher rates make it more costly for banks to borrow to fund loans and sometimes make borrowers default.
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UAL Posts $64 Million Loss
UAL, parent of United Airlines, the world’s largest airline, said today it lost a greater-than-expected $64 million in the third quarter, before one-time items, as flight cancellations, delays and higher costs for jet fuel and wages hurt results.
Chicago-based UAL said the $64 million loss amounted to $1.29 a share, compared with a profit of $359 million, or $2.89 a share, a year earlier. The last time the company lost money was in 1993.
Analysts on average had forecast a loss of 54 cents, according to First Call/Thomson Financial, with estimates ranging from a loss of $1.15 to a loss of 20 cents.
Including a loss on warrants the company owns in Priceline.com, a charge for planned early retirement of four leased aircraft and a loss associated with the early retirement of debt, UAL lost $116 million, or $2.30 a share.
Revenues rose 1.2 percent to $4.91 billion from $4.85 billion a year earlier.
UAL, which has agreed to acquire US Airways Group Inc. for $4.3 billion, had warned twice during the third quarter that its results would fall short of analysts’ earnings forecasts for the second half of the year. Prior to the last warning in September, analysts had expected the company to earn 97 cents a share for the quarter.
UAL said reduced capacity levels to address operational problems will continue to hurt its fourth-quarter performance. Additional costs from its new pilot contract, expected to be ratified this month, and from other labor contracts being negotiated and higher fuel prices, will likely cause it to lose money in the fourth quarter, the company said. BACK TO TOP
E*Trade Profitable in Q4
E*Trade, the No. 2 U.S. Internet broker, posted today a quarterly profit compared to a loss in the year-ago period as it sold investment assets and kept a lid on advertising spending.
The Menlo Park, Calif.-based company, which has 3.3 million customers, reported a net profit of $47.7 million, or 15 cents per share, for the fiscal fourth quarter ended Sept 30. That compared with a net loss of $28.0 million, or a loss of 10 cents per share, in the same period last year. Net revenue rose 76 percent to $340 million.
Excluding merger costs and other items, E*Trade posted a profit of $7.2 million, or 2 cents per share. The operating results beat Wall Street’s lowered expectations calling for the brokerage to break even with zero cents per share. Analysts have cut their profit forecasts for Web brokers because of a decline in the Nasdaq stock market and an estimated 10 percent drop in share trading volumes during the quarter.
E*Trade opened 337,000 new brokerage and banking accounts in the period, similar to the 340,000 accounts it opened a year-ago and the 330,000 it opened in the fiscal third quarter. The company spent $91.8 million on advertising and marketing in the quarter, up a nominal 5 percent from $87.0 million last year, but sharply lower than the $115 million it spent in the fiscal third quarter.
The company said it processed an average of 150,000 trades per day during the period, up 84 percent from 81,000 in the year-ago period but down from 169,000 last quarter. Total customer assets more than doubled to $66 billion from $28 billion a year ago, helped by E*Trade’s purchase of the brokerage accounts of Wit Capital.
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McDonald’s In Line with Estimates
No. 1 restaurant company McDonald’s said today its third-quarter profit rose 1 percent, meeting expectations, as a weakened euro continued to hurt results.
The global fast-food restaurant chain said its net income rose to $548.5 million, or 41 cents a share, from $540.9 million, or 39 cents, in the year-earlier period.
On average, analysts polled by research firm First Call/Thomson Financial had expected earnings of 41 cents a share.
Sales at the company’s systemwide restaurants, which include company-operated and franchised units, rose to $10.512 billion from $9.998 billion in 1999.
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Sluggish Sales Cost Hasbro Hasbro, the No. 2 U.S. toy maker, reported today that its profits fell 84 percent due to sluggish sales and mounting losses in its interactive operations.
Hasbro said net income fell to $13.8 million, or 8 cents a diluted share, compared with $85.2 million, or 43 cents, for the same quarter a year ago.
Analysts lowered their expectations to 7 cents a share for the quarter, according to market research firm First Call/Thomson Financial. Hasbro warned last week that its performance would fall well short of previous estimates largely because of a sharp slowdown in sales of Pokemon and Star Wars products. It also said it was slashing its work force by about 5 percent.
Worldwide net revenues dropped to $1.07 billion from $1.10 billion in the year-ago period.
“Even with challenging comparisons against last year’s record results, I’m not pleased with our third-quarter performance,” Hasbro Chairman Alan Hassenfeld said in a statement.
Hasbro’s most recent outlook for full-year 2000 earnings per share was 40 cents to 50 cents, before $140 million to $170 million in pretax charges.
Hassenfeld said the company was evaluating the fourth quarter before providing a revenue and earnings outlook for 2001.
Earnings in the third-quarter included a pretax loss of $6 million from Internet games operation Games.com. Its interactive division did not live up to already-reduced expectations, and Hasbro said last week it was exploring strategic alternatives for the business.
Pokemon toy demand in the U.S. was soft, but strong internationally, the company said. Revenues from Star Wars toys are expected to be minimal in 2000.
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U.S. Bancorp Meets Estimates
Regional bank U.S. Bancorp said today its third-quarter operating earnings rose 0.5 percent, in line with expectations, as loan volume increased but expenses did too.
Minneapolis-based U.S. Bancorp, which this month announced it was being bought by rival Firstar Corp. in a stock deal worth almost $20 billion, earned $410.9 million, or 55 cents a diluted share, in the third quarter, excluding one-time merger charges and profits from securities sales. That compares with $409 million, or 56 cents a share, in the year-earlier period.
Results met Wall Street forecasts of 55 cents a share, according to market research firm First Call/Thomson Financial.
The bank’s net profits, including $9.6 million in merger charges and one-time securities transactions, rose to $401.3 million, or 54 cents per share, from $396.4 million, also 54 cents per share.
U.S. Bancorp’s provision for loan losses in the third quarter rose 22 percent to $173 million. Net interest income, which includes the profit the bank makes from loans, rose 4.5 percent to $883 million as loan volume continued to grow despite higher interest rates.
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Quaker Oats Q3 Profit Up 16%
Quaker Oats, maker of hot and cold cereals, said today its third-quarter earnings rose 16 percent, beating the average analyst forecast, on continued robust demand for its Gatorade sports drink.
The company also said it expects full-year 2000 earnings per share growth before items in the range of 20 percent or slightly better.
The Chicago-based food company, whose stable of products includes breakfast bars, Rice-A-Roni side dishes and Aunt Jemima pancake mixes and syrup, said earnings rose to $159.2 million, or $1.15 per diluted share, in the quarter. That compares with $137.3 million, or $1.01 a diluted share, excluding unusual items in the same period a year ago.
Analysts on average had expected the company to earn $1.11 a share, according to First Call/Thomson Financial, which tracks earnings data.
Third-quarter net sales rose to $1.48 billion from $1.38 billion a year ago.
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Gillette’s Profits Fall; Names New CEO
Gillette today reported its third-quarter earnings fell 1 percent, meeting Wall Street’s estimates, as currency problems plagued the consumer products giant.
The Boston-based maker of razors and blades, Oral B toothbrushes and Duracell batteries, also said Chairman and Chief Executive Michael Hawley was retiring immediately. Edward Degraan was named acting chief executive and Richard Pivirotto was named non-executive chairman of the board.
Gillette posted third-quarter earnings of $350 million, or 33 cents a share, from continuing operations, compared with earnings of $355 million, or 32 cents per diluted share for the same period in 1999.
Analysts surveyed by First Call/Thomson Financial had estimated Gillette would earn 33 cents a share in the third quarter.
The company has had a string of disappointing earnings reports dating back to 1999, blaming a combination of foreign exchange rates and proper inventory stocking.
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AHP’s Profits Rise 18% Before Charge
American Home Products posted today a steep rise in quarterly operating profits, matching analyst expectations, but the No. 5 U.S. drug maker said it would have to set aside additional funds for its diet drug settlement for which it has already paid billions in the “fen-phen” case.
The Madison, N.J.-based maker of Advil, Robitussin and the oestrogen replacement drug Premarin reported net income of $762 million, or 58 cents per share, in the third quarter vs. a net loss of $2.87 billion, or $2.20 cents, in the year-ago period.
The year-ago loss mainly reflected a $4.75 billion litigation charge for a settlement related to the diet drugs Redux and Pondimin. Excluding this charge from the 1999 third-quarter results, income from continuing operations in the latest quarter increased 18 percent to $762 million from $645 million.
Analysts on average had estimated that the company, whose Wyeth-Ayerst unit will pay the U.S. government $30 million for violations at two plants, would post earnings of 58 cents per share, according to research firm First Call/Thomson Financial.
Looking forward, AHP said it expects additional reserves will be required in the diet drug settlement. It said that though it is still unclear how much that will amount to, AHP expects it to be lower than the $4.75 billion recorded in the 1999 third quarter.
A spokesman for the company declined to specify a range of the amount of reserves that would be used.
Patients typically combined either Pondimin or Redux with another diet suppressant called phentermine to make the “fen-phen” diet cocktail. AHP recalled Pondimin and Redux in 1997 after some of the 6 million Americans who had taken fen-phen developed heart problems, including leaky valves.
Overall net sales increased 13 percent from the same quarter last year.
Worldwide pharmaceutical sales increased 14 percent for the quarter, sparked by higher revenues from recently approved pneumococcal vaccine Prevnar, meningitis treatment Meningitic, arthritis treatment Enbrel and ulcer medicine Protonix. Sales of Effexor XR, for which American Home Products received an expanded indication, also showed strong growth.
Excluding the negative impact of foreign exchange rates, worldwide pharmaceutical sales increased 17 percent for the 2000 third quarter.
Global consumer health care sales increased 7 percent for the quarter, as sales of the Centrum family of vitamin products rose. However, the company experienced a sales slowdown for cold, cough and allergy products, as well as for pain reliever Anacin.
Excluding the effect of weak foreign currencies, worldwide consumer health care sales increased 8 percent for the quarter.
“The double-digit sales and earnings growth through the first three quarters of 2000 have been driven by increased demand for franchise products and enhanced by an impressive number of new products introduced into the marketplace,” said Chairman and Chief Executive Officer John Stafford in a statement. BACK TO TOP
Raytheon Meets Expectations
Raytheon’s third-quarter earnings met Wall Street’s expectations, reversing a loss from the year-ago period, helped by an increase in aircraft deliveries.
For the three months ended Sept. 30, Raytheon earned $105 million, or 31 cents per share, up from a loss of $163 million, or 48 cents per share in the year-ago period.
Earnings from continuing operations were $133 million, or 39 cents per share, in line with a consensus estimate from analysts surveyed by First Call/Thomson Financial.
The Lexington, Mass.-based aerospace and defense company lost $89 million, or 26 cents per share, from continuing operations in the year-ago period, in part due to charges of $464 million, or 84 cents per share.
Revenue rose to $4.16 billion, up from $4.12 billion a year ago.
Sales in most divisions were similar to a year ago. The Electronic Systems division reported sales of $1.9 billion, down from $2.0 billion.
Raytheon Aircraft Company, a division the company is reportedly trying to sell to reduce its debt burden, recorded sales of $749 million, up 6 percent from a year ago due to higher aircraft deliveries.
For the nine months ending Oct. 1, Raytheon recorded net sales of $12.56 billion, down 4 percent from $13.02 billion over the same period last year. Raytheon has a net loss for the first nine months of the year of $23 million, compared with earnings of $332 million in the year-ago period.
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Mattel’s Profits Fall
Mattel, in the midst of a restructuring and under new leadership, said its profit fell 22 percent in the third quarter because of declining sales.
The company said today it earned $174.3 million, or 41 cents per share, from continuing operations in the quarter ended Sept. 30 as compared with profits of $222.2 million, or 52 cents per share in the same period last year.
The results were in line with estimates of analysts surveyed by First Call/Thomson Financial.
Sales increased by 2 percent in the United States, but fell 5 percent in international markets, the company reported. Sales of the company’s two largest brands — Barbie and Fisher-Price — increased during the quarter.
Mattel reported its earnings the day after the sale of its money-losing interactive toy division, The Learning Co.
Mattel took a one-time charge of $441 million as the result of the sale, but said the sale would save it $1 million a day in operating losses.
The company’s disastrous experience with The Learning Co. cost former chief executive Jill Barad her job. Barad was replaced in May by chief executive Robert A. Eckert.
The company also took a restructuring charge of $74 million, or 18 cents per share. Including one-time charges, the company lost $336.8 million, or 79 cents per share, in the quarter.
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The Associated Press and Reuters contributed to this report.