Did P&G beat expectations in the first quarter of fiscal 2002?

Yes. The company said first quarter results were above consensus expectations, with core earnings per share up 4% to $0.96 and core operating income up 7%, despite a difficult operating environment and a flat top line after currency effects.

Why did reported earnings decline while core earnings grew?

Reported net earnings fell 4% to $1.10 billion because of a $238 million after-tax restructuring charge tied to streamlining the organization and portfolio. Core results exclude restructuring costs in both periods, and the prior-year core comparison also excludes $53 million of goodwill and intangible amortization, which was largely eliminated from July 1, 2001 under new accounting rules.

Is P&G still on track for its fiscal 2002 targets?

Management said it remains comfortable with its prior guidance and the current range of analyst estimates even after including about $0.04 of dilution from the pending Clairol acquisition and the Jif/Crisco transaction with J.M. Smucker. It cited an analyst range of $3.40-$3.50 for fiscal 2002 EPS, adjusted up for the $0.15 goodwill elimination, though it warned that the outlook remains uncertain.

Which business segments are driving growth and which are lagging?

Health Care (driven by oral care, Iams, and pharmaceuticals) and Beauty Care (higher-margin portfolio and lower marketing spend) led earnings growth. Fabric and Home Care was weakest, with sales and earnings declining against a high prior-year base. Baby, Feminine and Family Care and Food and Beverage posted modest to solid earnings gains.

What is the near-term outlook for the December quarter?

P&G expects sales excluding foreign exchange and volume to rise in the low single digits, with a roughly 1% negative currency impact on sales. EPS growth is expected in the low to mid single digits, held back by significantly lower non-operating profit contribution compared with the prior year.

PG 8-K SEC Disclosure — Oct 30, 2001

01—Abstract

Summary

Summary of the 8-K filed October 30, 2001. Cited figures are marked; the original filing is the authoritative source.

Procter & Gamble reported first quarter fiscal 2002 results (quarter ended September 30, 2001) that beat consensus expectations, with core earnings growing 4%^a despite a difficult macro backdrop.

Reported net sales were $9.77 billion^b, essentially flat versus the prior year after a two percent negative currency impact, while core unit volume rose 2% excluding a 1% drag from divestitures. Reported diluted EPS was $0.79, down 4%, due to a $238 million after-tax restructuring charge. Core diluted EPS rose 4% to $0.96, and core operating income grew 7%, helped by lower material costs and accelerating overhead savings that drove operating margin up about 180 basis points on a core basis.

Segment performance was mixed. Health Care (unit volume up 19%^c, net sales up 21% ex-FX, earnings up 73%) and Beauty Care (earnings up 22%) were the standout growth drivers, while Fabric and Home Care was the weak spot, with net sales down 3% ex-FX and earnings down 10% against a high prior-year base. Baby, Feminine and Family Care grew earnings 4%, and Food and Beverage earnings rose 32% on cost savings despite divestitures reducing sales.

Looking ahead, management expects December-quarter sales ex-FX and volume to be up in the low single digits, with EPS growth in the low to mid single digits, though non-operating profit contribution will be significantly lower. Fiscal 2002 guidance was reaffirmed despite about $0.04^d of dilution from the pending Clairol acquisition and the Jif/Crisco spin/merge with J.M.

Smucker, and management referenced an analyst EPS estimate range of $3.40-$3.50 for fiscal 2002 adjusted for goodwill elimination. The company also noted that, based on the press release, it was filing the 8-K under Regulation FD.

02—Key points

Key Highlights

Core diluted EPS rose 4% to $0.96 (from $0.92); reported diluted EPS fell 4% to $0.79 after a $238 million after-tax restructuring charge.
Net sales of $9.77 billion were flat ex-FX, down 2% reported, with a 2% negative currency impact.
Core unit volume grew 2% excluding divestitures; core operating income rose 7%, with core operating margin up about 180 basis points to 21.3%.
Health Care was the top performer: net sales up 21% ex-FX, unit volume up 19%, net earnings up 73% to $140 million.
Fabric and Home Care was the laggard: net sales down 3% ex-FX and net earnings down 10%, against a high prior-year base inflated by pre-price-increase buying in North America laundry.
Management reaffirmed fiscal 2002 guidance despite roughly $0.04 of dilution from the pending Clairol acquisition and Jif/Crisco spin/merge with J.M. Smucker.
December-quarter outlook calls for low single-digit growth in sales (ex-FX) and volume, and low to mid single-digit EPS growth, with lower non-operating income.

03—Questions

Frequently Asked Questions

Did P&G beat expectations in the first quarter of fiscal 2002?
Yes. The company said first quarter results were above consensus expectations, with core earnings per share up 4% to $0.96 and core operating income up 7%, despite a difficult operating environment and a flat top line after currency effects.
Why did reported earnings decline while core earnings grew?
Reported net earnings fell 4% to $1.10 billion because of a $238 million after-tax restructuring charge tied to streamlining the organization and portfolio. Core results exclude restructuring costs in both periods, and the prior-year core comparison also excludes $53 million of goodwill and intangible amortization, which was largely eliminated from July 1, 2001 under new accounting rules.
Is P&G still on track for its fiscal 2002 targets?
Management said it remains comfortable with its prior guidance and the current range of analyst estimates even after including about $0.04 of dilution from the pending Clairol acquisition and the Jif/Crisco transaction with J.M. Smucker. It cited an analyst range of $3.40-$3.50 for fiscal 2002 EPS, adjusted up for the $0.15 goodwill elimination, though it warned that the outlook remains uncertain.
Which business segments are driving growth and which are lagging?
Health Care (driven by oral care, Iams, and pharmaceuticals) and Beauty Care (higher-margin portfolio and lower marketing spend) led earnings growth. Fabric and Home Care was weakest, with sales and earnings declining against a high prior-year base. Baby, Feminine and Family Care and Food and Beverage posted modest to solid earnings gains.
What is the near-term outlook for the December quarter?
P&G expects sales excluding foreign exchange and volume to rise in the low single digits, with a roughly 1% negative currency impact on sales. EPS growth is expected in the low to mid single digits, held back by significantly lower non-operating profit contribution compared with the prior year.

04—Continue

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