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PROCTER & GAMBLE Co 8-K Report (Jan 28, 2003)

Reports
Other Events
Filing Date
Filed January 28, 2003
Period End
December 31, 2002
Security
PG
In the record · 2016–202610-K1210-Q328-K226

PG filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 226 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 8-K filed January 28, 2003. Cited figures are marked; the original filing is the authoritative source.

The Procter & Gamble Company's Form 8-K, filed under Regulation FD to accompany its January 28, 2003 earnings release, reports results for the quarter ended December 31, 2002 (fiscal Q2 2003).

Reported net sales rose 6% to $11.01 billiona and reported net earnings rose 15% to $1.49 billion, or $1.06 per diluted share. Excluding restructuring charges, core net earnings grew 10% to $1.59 billion and core diluted EPS grew 10% to $1.13. Unit volume grew 8% (7% excluding acquisitions and divestitures), and core gross margin expanded 140 basis points, with core operating margin up 180 basis points to 21.6%.

Management described the quarter as the fourth consecutive quarter of double-digit core earnings growth. Segment performance was broadly strong. Health Care was the standout, with unit volume up 18%b, sales up 17%, and net earnings up 47%.

Beauty Care posted 14% volume growth and 15% earnings growth, Fabric and Home Care delivered 18% earnings growth on 8% volume growth, and Baby and Family Care earnings rose 21%. Snacks and Beverages was the weak spot, with volume down 1% and sales up only 1%, though earnings grew 15%. Free cash flow before dividends was $1.98 billionc for the quarter (up 29%) and $3.71 billion for the first half (up 48%).

Cash and equivalents rose to $5.1 billion, and shareholders' equity increased to $14.8 billiond. Looking ahead, P&G guided March-quarter volume growth of 6% to 8% and core EPS growth of 11% to 13%, and said full-year sales growth should reach the top of its 4% to 6% target range, with full-year EPS growth of 12% to 13%.

Investors should note that reported results include a $98 million after-tax restructuring charge ($0.07 per share), and that the company cited Latin American currency weakness, competitive intensity, and pricing investments as ongoing risks. Reported growth also benefited from roughly 1 percentage point of favorable foreign exchange on sales.

02—Key points

Key Highlights

  1. Reported net sales up 6% to $11.01B; unit volume up 8% (7% ex-acquisitions/divestitures), with FX adding about 1 point.
  2. Reported diluted EPS of $1.06 (up 14%); core diluted EPS of $1.13 (up 10%), excluding a $0.07 per-share restructuring charge.
  3. Core gross margin expanded 140 bps to 50.8%; core operating margin rose 180 bps to 21.6%.
  4. Health Care was the strongest segment: unit volume up 18%, sales up 17%, net earnings up 47% to $253M.
  5. Free cash flow before dividends was $1.98B for the quarter (+29%) and $3.71B for the first half (+48%).
  6. Guidance: March-quarter core EPS growth of 11% to 13% and full-year EPS growth of 12% to 13%, with sales growth at the top of the 4% to 6% target range.
  7. Snacks and Beverages was the weak point, with volume down 1% and sales up only 1%, though earnings grew 15%.

03—Questions

Frequently Asked Questions

  1. How did P&G perform in the December 2002 quarter?

    P&G reported net sales of $11.01 billion, up 6%, and net earnings of $1.49 billion ($1.06 per diluted share), up 14%. Excluding restructuring charges, core earnings grew 10% to $1.59 billion, or $1.13 per share. Unit volume rose 8%.

  2. What drove the margin improvement?

    Core gross margin expanded 140 basis points, mainly from base business savings, including systemic material cost reductions and volume benefits, along with restructuring program savings and better product mix. Core marketing, research and administration costs fell 40 basis points as a share of sales, helped by overhead reductions, partly offset by higher beauty care marketing spending.

  3. Which business segments performed best and worst?

    Health Care led with 18% volume growth and 47% earnings growth, driven by oral care and pharmaceuticals. Beauty Care grew volume 14% and earnings 15%. Fabric and Home Care earnings rose 18% and Baby and Family Care earnings rose 21%. Snacks and Beverages was weakest, with volume down 1% and sales up 1%, though its earnings still grew 15%.

  4. What is the outlook for the rest of fiscal 2003?

    For the March quarter, P&G expects volume growth of 6% to 8% and core EPS growth of 11% to 13%, despite a difficult comparison. For the full fiscal year, it expects sales growth at the top of its 4% to 6% target range and EPS growth of 12% to 13%.

  5. What risks did management highlight?

    The release flagged intense competition, pricing investments, currency pressure in Latin America, political and economic uncertainty in Latin America, the Middle East, and Korea, the achievement of cost savings from restructuring, and the successful management of regulatory, tax, and legal matters.

04—Continue

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