01—Abstract
Summary
Summary of the 8-K filed August 7, 2001. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble reported fourth-quarter fiscal 2001 results (quarter ended June 30, 2001) that were a mixed picture on a reported basis but ahead of management's own expectations on a core basis.
Net sales were $9.58 billiona, down 1% from a year earlier, but up 4% excluding a 3% unfavorable foreign exchange impact and a 2% impact from phasing out certain initiatives, primarily Olay Cosmetics. Unit volume grew 3%. P&G reported a net loss of $320 million, or $0.23 per diluted share, because of a $1.16 billion after-tax restructuring charge.
Excluding restructuring, core net earnings rose 8% to $837 millionb, and core diluted EPS rose 9% to $0.60. Core operating earnings were up 12%, driven by overhead cost reductions and favorable pricing and mix. For fiscal 2001 as a whole, net sales were $39.24 billion, down 2% reported and up 2% excluding currency effects on flat unit volume.
Reported net earnings were $2.92 billionc, or $2.07 per diluted share. Core net earnings were $4.40 billion, or $3.12 per share, up 6%, helped by margin actions, gains from divesting non-strategic brands, and lower tax rates. Health Care (Iams, pharmaceuticals, oral care) was the standout segment, with sales up 14% ex-FX.
Beauty Care and Fabric and Home Care improved profitability, while Food and Beverage declined. Management said the restructuring program remains on track, targeting nearly $2 billiond in annual after-tax savings by fiscal 2004. It also raised the quarterly dividend 9% to $1.52 per year, the 46th consecutive annual increase.
For fiscal 2002, management reaffirmed prior guidance: core EPS growth at or above the prior year's rate but still below its double-digit target, and sales growth ex-FX at or above the prior year's rate but below its 4-6% long-term target. Foreign exchange is expected to reduce top-line growth by about 2% at current rates.
The September quarter outlook calls for flat unit volume, slightly positive sales ex-FX, and low-to-mid single-digit EPS growth. Guidance excludes the pending Clairol acquisition, the Coca-Cola venture, the Crisco/Jif divestiture, and goodwill accounting changes, which are expected to add roughly $0.13 per share by reducing goodwill amortization.
02—Key points
Key Highlights
- Q4 net sales of $9.58B were down 1% reported but up 4% excluding a 3% FX headwind and a 2% impact from phasing out initiatives such as Olay Cosmetics; unit volume rose 3%.
- Q4 reported net loss of $320M (-$0.23/share) reflects a $1.16B after-tax restructuring charge; core net earnings rose 8% to $837M and core EPS rose 9% to $0.60.
- Fiscal 2001 core EPS of $3.12 grew 6% on reported net sales of $39.24B (down 2%, up 2% ex-FX) and reported diluted EPS of $2.07.
- Health Care led growth with fiscal 2001 sales up 14% ex-FX on Iams, pharmaceuticals (Actonel reached $150M in global sales), and oral care; Food and Beverage sales fell 8% ex-FX.
- Restructuring program is on track, with expected nearly $2B in annual after-tax savings by fiscal 2004, and capital spending fell to 6.3% of sales.
- Quarterly dividend rises 9% to $1.52 per share annually, effective August 15, 2001, marking the 46th consecutive annual increase.
- Fiscal 2002 guidance reaffirmed: core EPS growth at or above the prior year's rate, sales ex-FX at or above the prior year's, and a September-quarter EPS increase of low-to-mid single digits, with an approximately $0.13/share goodwill accounting benefit excluded.
03—Questions
Frequently Asked Questions
Why did P&G report a net loss in the June 2001 quarter?
The net loss of $320 million, or $0.23 per diluted share, was caused by a $1.16 billion after-tax restructuring charge tied to streamlining the organization and portfolio. Excluding these costs, core net earnings were $837 million, up 8%, and core EPS was $0.60, up 9%.
How did P&G perform on sales and volume in fiscal 2001?
Reported fiscal 2001 net sales were $39.24 billion, down 2%. Excluding foreign exchange, sales rose 2% on flat unit volume. Currency was a headwind of over 3%, and the Q4 quarter showed unit volume growth of 3%, with sales up 4% ex-FX.
What is the outlook for fiscal 2002?
Management expects core EPS growth at or above fiscal 2001's 6% rate, though still below its double-digit target, and sales growth ex-FX at or above the prior year but below its 4-6% long-term target. Currency is expected to reduce sales growth by about 2%. Unit volume is expected to rise in the low single digits. For the September quarter, volume is expected to be about flat and EPS up low-to-mid single digits. These estimates exclude the pending Clairol acquisition, the Coca-Cola venture, the Crisco/Jif divestiture, and goodwill accounting changes.
What savings is the restructuring program expected to deliver?
P&G expects the expanded restructuring program, covering workforce reductions, manufacturing rationalization, and portfolio pruning, to deliver nearly $2 billion in annual after-tax savings by fiscal 2004. Management says costs and savings are tracking to plan.
Is the dividend being increased, and what will the new accounting rules mean for earnings?
Yes. The annual dividend rises 9% to $1.52 per share, effective August 15, 2001, the 46th consecutive year of increases. Adoption of the new business combination and goodwill standards in the July-September quarter is expected to reduce goodwill amortization by about $0.13 per share, though management is still reviewing the requirements.
04—Continue