01—Abstract
Summary
Summary of the 8-K/A filed March 19, 2002. Cited figures are marked; the original filing is the authoritative source.
On March 19, 2002, Procter & Gamble filed a Form 8-K/A under Regulation FD to furnish a news release updating its third quarter fiscal 2002 (quarter ending March 2002) outlook.
The company said earnings growth for the quarter will exceed prior guidance, driven by strong volume and cost performance. Core earnings per share growth is now expected to reach the double-digit level and exceed Wall Street consensus, measured after adjusting the base period for comparable goodwill and intangible asset accounting. Management, led by CEO A.
G. Lafley, credited more focused business strategies, better consumer value, and improved cost and cash management. Top-line expectations were mixed.
Volume growth is projected at 9 to 10 percent, boosted by the Clairol acquisition and strength in health care and fabric & home care, but only mid-single-digit growth excluding acquisitions and divestitures. Sales excluding foreign exchange are expected to grow in the high single digits, while currency weakness in the euro, Argentine peso, and yen is forecast to cut roughly three percent from reported sales. Operating margins are also expected to beat prior guidance, with improvements across all business units.
For full fiscal 2002, P&G reaffirmed its previously issued guidance rather than raising it. Core EPS growth is expected to exceed last year's rate but remain short of the double-digit long-term target, and organic sales growth is expected to beat last year but fall short of the 4–6 percent long-term goal. Foreign exchange is expected to reduce top-line growth by about two percent.
The outlook also reflects the planned spin-merger of the Jif and Crisco brands into J. M. Smucker, which is expected to dilute EPS in the final fiscal quarter.
02—Key points
Key Highlights
- Q3 fiscal 2002 (March quarter) earnings growth now expected to exceed prior guidance, with core EPS growth at or above double digits and ahead of Wall Street consensus.
- Volume growth expected at 9–10% including the Clairol acquisition; excluding acquisitions and divestitures, volume growth is mid-single digits.
- Sales excluding foreign exchange projected to grow in the high single digits, while FX is expected to reduce reported sales by about 3% due to weakness in the euro, Argentine peso, and yen.
- Operating margins for the quarter expected to beat previous guidance, with strong improvements across all business units.
- Full-year fiscal 2002 guidance reaffirmed, not raised: core EPS growth above last year but below the double-digit long-term target; organic sales growth above last year but below the 4–6% target.
- Full-year FX expected to subtract about 2 percentage points from top-line growth.
- Planned spin-merger of Jif and Crisco brands to J. M. Smucker expected to dilute EPS in the final fiscal quarter.
03—Questions
Frequently Asked Questions
Why did P&G issue this update, and why was it filed as an 8-K/A?
P&G furnished the news release under Regulation FD, which requires public companies to disclose material information broadly rather than selectively. Because the company was updating its earnings outlook ahead of its normal reporting schedule, it filed the release with the SEC so all investors received the information at the same time.
Did P&G raise its full-year fiscal 2002 earnings guidance?
No. The company raised its expectations only for the March 2002 quarter. For fiscal 2002 as a whole, it said it remained comfortable with the previously issued guidance range.
How much of the expected volume growth comes from acquisitions?
A significant portion. Total volume growth is expected to be 9–10%, supported by the Clairol acquisition. Excluding the impact of acquisitions and divestitures, volume growth is forecast at only the mid-single-digit range, indicating that organic volume growth is more modest.
What is the impact of currency movements on P&G's results?
Foreign exchange is a headwind. For the March quarter, it is expected to reduce sales by about 3%, driven by weakness in the euro, Argentine peso, and Japanese yen. For fiscal 2002 overall, FX is expected to reduce top-line growth by about 2%. Management noted that cost reductions and volume gains were still enough to produce stronger earnings growth despite these currency effects.
How will the Jif and Crisco spin-merger affect P&G's earnings?
The planned spin-merger of the Jif and Crisco brands into J. M. Smucker Company is expected to dilute P&G's earnings per share in the final quarter of fiscal 2002. The company's full-year guidance already incorporates this expected dilution.
04—Continue