01—Abstract
Summary
Summary of the 8-K filed May 1, 2001. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble reported third-quarter fiscal 2001 results (quarter ended March 31, 2001) that met management's expectations.
Reported net earnings were $893 milliona, or $0.63 per diluted share, up 19% from a year earlier. Core earnings, which exclude a $113 million after-tax Organization 2005 restructuring charge, were $1.01 billion, or $0.71 per diluted share, up 11%. Net sales were $9.51 billion, down 3% as reported but flat excluding a 3% unfavorable currency effect.
Unit volume fell 3%, reflecting lapping major new brand launches in the prior-year period. Price and mix gains offset the volume decline. For the first nine months, core diluted EPS was $2.52b, up 5%, on net sales of $29.66 billion, down 2% reported and roughly flat excluding currency.
Fabric and Home Care and Paper were the main earnings drivers, with Fabric and Home Care net earnings up 23%c on tax benefits, divestiture gains and North American laundry pricing. Health Care earnings fell 10% because of a major investment in the Iams expansion. Food and Beverage earnings rose 34%, helped by global snacks pricing.
Management guided to fourth-quarter (April-June 2001) unit volume of flat to up 2%d and net sales growth in the low single digits excluding exchange, with core EPS growth in line with the range of analyst estimates. The company also disclosed strategic moves: a new global snacks and juices company with Coca-Cola, an expanded Organization 2005 restructuring program, and an intent to explore strategic options for the Crisco and Jif brands. The filing was furnished under Item 5 as a Regulation FD disclosure.
02—Key points
Key Highlights
- Q3 FY2001 reported diluted EPS of $0.63 (up 21% in the earnings-per-share line of the income statement, net earnings up 19%), including a $113M after-tax Organization 2005 charge.
- Core diluted EPS was $0.71, up 11%, with core net earnings of $1.01 billion; core operating margin was 15.3%, roughly flat year over year.
- Quarterly net sales of $9.51B were down 3% as reported but flat excluding a 3% unfavorable FX impact; unit volume declined 3%, while price (+2%) and mix (+1%) contributed to growth ex-FX.
- Nine-month core diluted EPS of $2.52 rose 5%, while reported nine-month EPS of $2.29 included $318M after-tax Organization 2005 charges.
- Fabric and Home Care earnings rose 23% to $348M, and Paper earnings rose 8% to $236M; Beauty Care earnings rose 5% to $243M, and Food and Beverage earnings rose 34% to $67M. Health Care earnings declined 10% to $91M on Iams expansion spending.
- Strategic actions include a new global snacks and juices venture with Coca-Cola, an accelerated and expanded Organization 2005 restructuring program, and an exploration of strategic options for the Crisco and Jif brands.
- Fourth-quarter guidance calls for unit volume of flat to +2% and low-single-digit ex-FX sales growth, with core EPS growth consistent with analyst expectations.
03—Questions
Frequently Asked Questions
How did P&G's core earnings compare with reported earnings this quarter?
Reported net earnings were $893M ($0.63 per diluted share), which included a $113M after-tax Organization 2005 restructuring charge. Excluding that charge, core net earnings were $1.01B ($0.71 per diluted share), up 11% year over year. Investors typically focus on core results to gauge underlying operating performance.
Is P&G's top-line growth healthy?
Not strongly. Reported sales fell 3% to $9.51B, and volume declined 3%, largely because of tough comparisons against major new brand launches a year earlier. Excluding a 3% currency headwind, sales were flat. Price and mix gains (about +3% combined) offset the volume decline, so growth is driven more by pricing than by unit demand.
What is the outlook for the April-June 2001 quarter?
Management expects unit volume to be flat to up 2%, and net sales excluding exchange effects to grow in the low single digits. It also said it is comfortable with the range of analyst estimates for core EPS growth for the quarter.
What do the Coca-Cola venture and the Crisco and Jif review mean for investors?
The new global snacks and juices company with Coca-Cola and the exploration of strategic options for Crisco and Jif signal a portfolio-focus strategy aimed at accelerating growth. Divesting or restructuring lower-growth brands could sharpen the portfolio, though the filing gives no financial terms, timing or valuation for these actions.
Which business segments drove earnings, and which lagged?
Fabric and Home Care (+23% net earnings to $348M) and Food and Beverage (+34% to $67M) led the quarter, aided by tax savings, divestiture gains and pricing. Paper (+8%) and Beauty Care (+5%) grew modestly. Health Care was the laggard, with net earnings down 10% to $91M, reflecting the Iams expansion investment.
04—Continue