Celsius Holdings expects inventory movements to impact future results

As part of its Q3 earnings announcement, the company stated: “During the quarter, the company recorded $246.7 million in distributor termination costs related to transferring a significant portion of Alani Nu’s distribution to the PepsiCo system in the U.S. and Canada, as well as acquisition and transition costs. PepsiCo has agreed to fund the termination fees associated with moving a significant portion of Alani Nu into the PepsiCo distribution system resulting in a net neutral cash position for the company. While the company’s cash position will not be affected by the termination process, generally accepted accounting principles require the company to record the estimated termination expenses in the income statement, while the payments received from PepsiCo to fund such terminations are required to be recorded on the balance sheet and amortized over the life of the distribution agreement resulting in a timing difference on the income statement… As we transition a large portion of the Alani Nu business into our largest distributor, inventory movements will affect reported results, as the company primarily recognizes revenue upon delivery to its distributor partners and retailers. During this process, former distributors will wind down their inventory and return any remaining products while the new distributor will build Alani Nu inventory in advance of assuming distribution and will likely optimize its warehousing and distribution centers, which may affect sales and inventory levels amongst all of our brands.” Shares of Celsius are down 22% in early traading.