The Procter & Gamble Company (NYSE:PG) reported fiscal year
2015 currency neutral core earnings per share growth of 11% versus
the prior year. Core earnings per share were $4.02, a decrease of
two percent. Diluted net earnings per share were $2.44, including a
one-time charge of $2.1 billion, or $0.71 per share, for a change
in the method of accounting for its Venezuelan operations from
consolidation to the cost method, discussed later in this press
release. Organic sales grew one percent as a two percent pricing
benefit more than offset a one percent reduction in shipment
volume. Net sales were $76.3 billion, a decrease of five percent
versus the prior year, including a negative six percentage point
impact from foreign exchange.
For the April - June 2015 quarter, core earnings per share were
$1.00, an increase of eight percent versus the prior year period.
Core EPS results included a $0.09 per share benefit versus the
prior year from non-operating income, primarily minor brand
divestiture gains. Excluding the impact of foreign exchange,
currency-neutral core earnings per share increased 22%. Diluted net
earnings per share were $0.18 including the one-time Venezuela
charge of $0.71 per share and non-core restructuring costs of $0.07
per share. Organic sales were unchanged for the quarter as a three
percentage point benefit from pricing and mix was offset by lower
shipment volume. Net sales were $17.8 billion, a decrease of nine
percent versus the prior year period driven by a negative nine
percentage point impact from foreign exchange.
“In fiscal 2015, P&G delivered strong, double-digit constant
currency core EPS growth and very good free cash flow productivity
of over 100% on modest organic sales growth,” said Chairman,
President, and Chief Executive Officer A.G. Lafley. “We made
significant productivity gains and have largely executed the
reshaping of our business portfolio. Going forward, our objective
is to deliver balanced results across the three main drivers of
operating total shareholder return - sales growth, operating profit
margin expansion and free cash flow generation. We expect continued
strong cost savings and free cash flow productivity, and we are
investing behind product innovation to support an improvement in
top-line growth.”
Fiscal Year Discussion
In fiscal year 2015 net sales decreased five percent to $76.3
billion, including a negative six percentage point impact from
foreign exchange. Organic sales grew one percent. Organic sales
were above year ago levels in four of five business segments.
Volume declined one percent. Pricing increased sales by two percent
with higher pricing in all five business segments.
Foreign
Net
Organic
Organic
Fiscal 2015 Net
Sales Drivers
Volume
Exchange
Price
Mix
Other*
Sales
Volume
Sales
Beauty, Hair and Personal Care (4)% (5)% 2% 0% 0% (7)% (3)% (1)%
Grooming (3)% (8)% 4% 0% 0% (7)% (3)% 1% Health Care (1)% (5)% 2%
3% 0% (1)% (1)% 4% Fabric Care and Home Care 1% (6)% 1% 0% (1)%
(5)% 1% 2% Baby, Feminine and Family Care (1)% (6)%
2% 2% 0% (3)%
(1)% 3%
Total P&G
(1)% (6)% 2% 0%
0% (5)%
(1)% 1%
* Other includes the sales mix impact of
acquisitions/divestitures and rounding impacts necessary to
reconcile volume to net sales.
- Beauty, Hair and Personal Care segment
organic sales declined one percent as pricing benefits only
partially offset lower volume. Innovation-driven sales growth in
Cosmetics and Salon Professional was offset by a sales decline in
Skin and Personal Care due to competition and decreased sales in
Prestige due to lower levels of innovation. Hair Care organic sales
were unchanged as modest growth from pricing in developing markets
was offset by lower volume in developing regions due to competitive
activity.
- Grooming segment organic sales
increased one percent due to higher pricing and innovation on
Blades & Razors and Appliances, which was partially offset by
lower volume mainly due to a combination of continued decline in
consumer shaving incidents and customer inventory reductions.
- Health Care segment organic sales
increased four percent due to favorable mix and pricing in both
Oral Care and Personal Health Care, more than offsetting lower
volume due to competitive activity.
- Fabric Care and Home Care segment
organic sales increased two percent with growth across each
business. Fabric Care sales grew behind volume increases from
product innovation and pricing while Home Care sales benefited from
favorable product mix. Sales also increased in P&G Professional
due to higher volume from increased distribution.
- Baby, Feminine and Family Care segment
organic sales increased three percent driven by pricing, mainly in
Baby Care and Feminine Care, positive product mix from Baby Care
premium products and the Feminine Care adult incontinence launch,
and favorable geographic mix in all businesses. These gains were
slightly offset by a modest decline in Family Care from reduced
distribution in Latin America and reduced pricing in North
America.
Core earnings per share were $4.02, a decrease of two percent
versus the prior year. This excludes losses from discontinued
operations driven by non-cash impairment charges related to the
batteries business, the Venezuela charge, non-core restructuring
charges, charges for European legal matters and balance sheet
devaluation charges resulting from foreign exchange policy changes
in Venezuela prior to the change in accounting. Excluding the
impact of foreign exchange, currency-neutral core earnings per
share increased 11% for the year. Diluted net earnings per share
from continuing operations decreased 21% to $3.06 including the
one-time $0.71 per share impact from the Venezuela charge. Diluted
net earnings per share were $2.44, a decrease of 39% versus the
prior year including the Venezuela charge and a $0.62 per share
loss from discontinued operations.
Reported gross margin decreased 10 basis points, including 30
basis points of non-core restructuring charges. Core gross margin
improved 30 basis points, including 40 basis points of negative
foreign exchange impacts. On a currency-neutral basis, core gross
margin increased 80 basis points, driven by 200 basis points of
productivity cost savings and a 90 basis point benefit from
pricing, which more than offset headwinds from 140 basis points of
mix, 40 basis points from innovation and capacity investments and
20 basis points from higher commodity costs.
Selling, general and administrative expense (SG&A) increased
10 basis points on a reported basis versus the prior year,
including a 30 basis point net benefit from a year-on-year decline
in non-core Venezuelan balance sheet re-measurement charges, which
was partially offset by a 10 basis point increase in non-core
restructuring charges. Core SG&A as a percentage of sales
increased 30 basis points, including 90 basis points of foreign
exchange impacts. On a currency-neutral basis, core SG&A
decreased 60 basis points versus the prior year driven by 130 basis
points of productivity savings from overhead and marketing costs,
which were partially offset by 70 basis points of organization
capability investments and other operating items.
Reported operating profit margin decreased 280 basis points
driven by the impact of the non-core Venezuela charge. Core
operating profit margin was unchanged versus the prior year,
including 130 basis points of foreign exchange impacts. On a
currency-neutral basis, core operating profit margin increased 130
basis points, including 330 basis points of productivity cost
savings.
Operating cash flow was $14.6 billion for the year. Adjusted
free cash flow productivity was 102%. The Company repurchased $4.6
billion of common stock and returned $7.3 billion of cash to
shareholders as dividends. P&G announced an increase to the
quarterly dividend in April, making this the 59th consecutive year
of dividend increases.
Venezuela
P&G announced its decision to stop consolidating the results
of its local Venezuelan operations in its GAAP financial
statements. The Company said it remains committed to serving
Venezuelan consumers with its market leading brands and product
innovations to grow the business. P&G said this change in
accounting treatment does not directly affect the local operations
of its Venezuelan subsidiaries.
The change in accounting treatment reflects the Company’s
inability to convert currency or pay dividends. Therefore,
effective June 30, 2015, the Company stopped consolidating its
Venezuelan subsidiaries and began accounting for its investment in
those subsidiaries using the cost method of accounting.
As a result of this change in accounting, P&G has taken a
one-time, non-core charge of $2.1 billion, or $0.71 per share,
which had no corresponding tax benefit, in its April - June 2015
quarter results to remove all assets and liabilities of its
Venezuelan operations from its balance sheet. In future periods,
the Company’s financial results will be reported using the cost
method of accounting and will include sales of finished products
shipped to the country. Accordingly, beginning with the July -
September 2015 reporting period, P&G will exclude the operating
results of its local Venezuelan subsidiaries from its Consolidated
Financial Statements. Any future dividends from the Company’s
Venezuelan subsidiaries will be recorded as operating income upon
receipt of the cash.
Fiscal Year 2016 Guidance
P&G clarified that its guidance for fiscal year 2016 is
relative to fiscal 2015 results after estimated restatements to
report the earnings from the Beauty categories it plans to exit as
discontinued operations. P&G announced the planned exit of
several Beauty categories on July 9, 2015. P&G said it expects
fiscal year 2015 core EPS, which is based on earnings from
continuing operations, to be restated from the $4.02 level reported
above to approximately $3.77 per share. There is no change in
all-in GAAP reported results. The Company said it plans to furnish
an informational 8-K in September 2015 to provide more details of
the restatement impacts on its financial results.
P&G said it is projecting organic sales to be in-line to up
low-single digits versus fiscal 2015. Foreign exchange is expected
to be a four to five percentage point headwind on all-in sales
growth. As a result, the Company expects all-in sales to be down
low-to-mid single digits versus fiscal 2015 results.
The Company said it expects core earnings per share to be
slightly below to up mid-single digits versus fiscal 2015 restated
core EPS of $3.77. Strong operating profit growth is expected to be
largely offset by a six to seven percentage point core EPS growth
headwind from lower non-operating income and a higher core
effective tax rate. P&G noted that foreign exchange is
estimated to be a three to four percent negative impact on core EPS
growth, with the vast majority of this impact affecting the
first-half of fiscal 2016.
Including the impacts of non-core restructuring costs and
discontinued operations, P&G said it expects all-in GAAP EPS to
be up 53% to 63% versus fiscal year 2015 all-in GAAP EPS of
$2.44.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Selected Financial Information GAAP
CORE (NON-GAAP)* Twelve Months Ended June 30 Twelve Months
Ended June 30 2015 2014 % Chg 2015 2014
% Chg NET SALES $ 76,279 $ 80,510 (5 )% $ 76,279
$ 80,510 (5 )% COST OF PRODUCTS SOLD 38,876 41,010 (5
)% 38,343 40,705 (6 )% GROSS PROFIT 37,403 39,500 (5 )% 37,936
39,805 (5 )% SELLING, GENERAL & ADMINISTRATIVE EXPENSE 23,585
24,760 (5 )% 23,228 24,227 (4 )% VENEZUELA CHARGE 2,028 — — % — — —
% OPERATING INCOME 11,790 14,740 (20 )% 14,708 15,528 (5 )% DILUTED
NET EPS FROM CONTINUING OPERATIONS** $ 3.06 $ 3.86 (21 )% $ 4.02 $
4.09 (2 )% TAX RATE 24.6 % 21.1 % 20.9 % 20.6 %
COMPARISONS AS A
% OF NET SALES
Basis PtChange
Basis PtChange
GROSS MARGIN 49.0 % 49.1 % (10 ) 49.7 % 49.4 % 30 SELLING, GENERAL
& ADMINISTRATIVE EXPENSE 30.9 % 30.8 % 10 30.5 % 30.2 % 30
OPERATING MARGIN 15.5 % 18.3 % (280 ) 19.3 % 19.3 % —
CASH FLOW (TWELVE
MONTHS ENDED JUNE 30) - SOURCE/(USE)
2015 2014 OPERATING CASH FLOW $ 14,608 $ 13,958 FREE CASH
FLOW 10,872 10,110 DIVIDENDS (7,287 ) (6,911 ) SHARE REPURCHASE
(4,604 ) (6,005 ) * Core excludes incremental restructuring
charges, certain legal reserves, devaluation impacts from Venezuela
and the Venezuela charge. ** Diluted net earnings per common share
are calculated on net earnings attributable to Procter &
Gamble.
THE PROCTER & GAMBLE COMPANY AND
SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Selected Financial Information GAAP CORE
(NON-GAAP)* Three Months Ended June 30 Three Months Ended
June 30 2015 2014 % Chg 2015 2014 % Chg
NET SALES $ 17,790 $ 19,596 (9 )% $ 17,790 $
19,596 (9 )% COST OF PRODUCTS SOLD 9,257 10,288 (10 )% 9,056
10,188 (11 )% GROSS PROFIT 8,533 9,308 (8 )% 8,734 9,408 (7 )%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 5,575 6,146 (9 )%
5,511 6,047 (9 )% VENEZUELA CHARGE 2,028 — — % — — — % OPERATING
INCOME 930 3,162 (71 )% 3,223 3,361 (4 )% DILUTED NET EPS FROM
CONTINUING OPERATIONS** $ 0.22 $ 0.87 (75 )% $ 1.00 $ 0.93 8 % TAX
RATE 49.6 % 18.8 % 19.1 % 18.7 %
COMPARISONS AS A
% OF NET SALES
Basis PtChange
Basis PtChange
GROSS MARGIN 48.0 % 47.5 % 50 49.1 % 48 % 110 SELLING, GENERAL
& ADMINISTRATIVE EXPENSE 31.3 % 31.4 % (10 ) 31.0 % 30.9 % 10
OPERATING MARGIN 5.2 % 16.1 % (1,090 ) 18.1 % 17.2 % 90
CASH FLOW (TWELVE
MONTHS ENDED JUNE 30) - SOURCE/(USE)
2015 2014 OPERATING CASH FLOW $ 14,608 $ 13,958 FREE CASH
FLOW 10,872 10,110 DIVIDENDS (7,287 ) (6,911 ) SHARE REPURCHASE
(4,604 ) (6,005 ) * Core excludes incremental restructuring
charges, certain legal reserves, devaluation impacts from Venezuela
and the Venezuela charge. ** Diluted net earnings per common share
are calculated on net earnings attributable to Procter &
Gamble.
Forward-Looking Statements
Certain statements in this release or presentation, other than
purely historical information, including estimates, projections,
statements relating to our business plans, objectives and expected
operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements generally
are identified by the words "believe," "project," "anticipate,"
"estimate," "expect," "intend," "strategy," "future,"
"opportunity," "plan," "may," "should," "will," "would," "will be,"
"will continue," "will likely result," and similar expressions.
Forward-looking statements are based on current expectations and
assumptions, which are subject to risks and uncertainties that may
cause results to differ materially from those expressed or implied
in the forward-looking statements. We undertake no obligation to
update or revise publicly any forward-looking statements, whether
because of new information, future events or otherwise.
Risks and uncertainties to which our forward-looking statements
are subject include, without limitation: (1) the ability to
successfully manage global financial, operational and manufacturing
risks, including, among others, (a) an increasingly volatile
economic environment, with potentially significant disruptions and
reduced market growth rates, (b) foreign currency fluctuations, (c)
significant credit or liquidity issues, (d) debt, currency exposure
and repatriation issues in countries with currency exchange, import
authorization or pricing controls (such as Venezuela, Argentina,
China, India and Egypt), (e) maintaining key manufacturing and
supply sources (including sole supplier and sole manufacturing
plant arrangements), and (f) managing disruption of business due to
factors outside of our control, such as natural disasters and acts
of war or terrorism; (2) the ability to successfully manage cost
fluctuations and pressures, including commodity prices, raw
materials, labor costs, energy costs and pension and health care
costs, and achieve cost savings described in our announced
productivity plan; (3) the ability to stay on the leading edge of
innovation, obtain necessary intellectual property protections and
successfully respond to technological advances attained by, and
patents granted to, competitors; (4) the ability to compete with
our local and global competitors by successfully responding to
competitive factors, including prices, promotional incentives and
trade terms for products; (5) the ability to manage and maintain
key customer relationships; (6) the ability to protect our
reputation and brand equity by successfully managing real or
perceived issues, including concerns about safety, quality,
efficacy or similar matters that may arise; (7) the ability to
successfully manage the financial, legal, reputational and
operational risk associated with third party relationships, such as
our suppliers, contractors and external business partners; (8) the
ability to rely on and maintain key information technology systems
and networks (including Company and third-party systems and
networks) and maintain the security and functionality of such
systems and networks and the data contained therein; (9) the
ability to successfully manage regulatory, tax and legal
requirements and matters (including, without limitation, product
liability, intellectual property, price controls, import
restrictions, accounting standards and environmental and tax
policy) and to resolve pending matters within current estimates;
(10) the ability to successfully manage our portfolio optimization
strategy, as well as ongoing acquisition, divestiture and joint
venture activities, to achieve the Company's overall business
strategy, without impacting the delivery of base business
objectives; (11) the ability to successfully achieve productivity
improvements and manage ongoing organizational changes, while
successfully identifying, developing and retaining particularly key
employees, especially in key growth markets where the availability
of skilled or experienced employees may be limited; and (12) the
ability to generate sufficient income and cash flow to allow the
Company to effect the expected share repurchases and dividend
payments. For additional information concerning factors that could
cause actual results to materially differ from those projected
herein, please refer to our most recent 10-K, 10-Q and 8-K
reports.
About Procter & Gamble
P&G serves consumers around the world with one of the
strongest portfolios of trusted, quality, leadership brands,
including Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®,
Dawn®, Downy®, Fairy®, Febreze®, Gain®, Gillette®, Head &
Shoulders®, Lenor®, Olay®, Oral-B®, Pampers®, Pantene®, SK-II®,
Tide®, Vicks®, and Whisper®. The P&G community includes
operations in approximately 70 countries worldwide.
Please visit http://www.pg.com for the latest news and
information about P&G and its brands.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Consolidated Earnings Information
Three Months Ended June 30 Twelve Months Ended
June 30 2015 2014 % Chg
2015 2014 % Chg NET SALES
$ 17,790 $ 19,596 (9 )% $ 76,279 $ 80,510 (5 )% COST OF PRODUCTS
SOLD 9,257 10,288 (10 )% 38,876 41,010
(5 )%
GROSS PROFIT 8,533 9,308 (8 )% 37,403 39,500 (5 )%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 5,575 6,146 (9 )%
23,585 24,760 (5 )% VENEZUELA CHARGE 2,028 — 2,028
OPERATING INCOME 930 3,162 (71 )% 11,790
14,740 (20 )% INTEREST EXPENSE 147 179 (18 )% 626 710 (12 )%
INTEREST INCOME 48 28 71 % 151 101 50 % OTHER NON-OPERATING INCOME,
NET 438 138 217 % 531 206 158 %
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
1,269 3,149 (60 )% 11,846 14,337 (17 )% INCOME TAXES ON CONTINUING
OPERATIONS 629 593 6 % 2,916 3,019 (3
)%
NET EARNINGS FROM CONTINUING OPERATIONS 640 2,556
(75 )% 8,930 11,318 (21 )%
NET
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS (102 ) 64
(259 )% (1,786 ) 467 (482 )%
NET EARNINGS 538 2,620
(79 )% 7,144 11,785 (39 )% LESS: NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS 17 41 (59 )% 108 142
(24 )%
NET EARNINGS ATTRIBUTABLE TO PROCTER &
GAMBLE $ 521 $ 2,579 (80 )% $ 7,036 $
11,643 (40 )% EFFECTIVE TAX RATE 49.6 % 18.8 % 24.6 %
21.1 %
NET EARNINGS PER COMMON SHARE*: EARNINGS FROM
CONTINUING OPERATIONS $ 0.21 $ 0.90 (77 )% $ 3.16 $ 4.03 (22 )%
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS $ (0.04 ) $ 0.02 (300
)% $ (0.66 ) $ 0.16 (513 )% BASIC NET EARNINGS PER COMMON SHARE $
0.17 $ 0.92 (82 )% $ 2.50 $ 4.19 (40 )%
DILUTED NET EARNINGS PER
COMMON SHARE*: EARNINGS FROM CONTINUING OPERATIONS $ 0.22 $
0.87 (75 )% $ 3.06 $ 3.86 (21 )% EARNINGS/(LOSS) FROM DISCONTINUED
OPERATIONS $ (0.04 ) $ 0.02 (300 )% $ (0.62 ) $ 0.15 (513 )%
DILUTED NET EARNINGS PER COMMON SHARE $ 0.18 $ 0.89 (80 )% $ 2.44 $
4.01 (39 )% DIVIDENDS PER COMMON SHARE $ 0.663 $ 0.643 3 % $ 2.590
$ 2.450 6 % DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
2,878.5 2,891.9 2,883.6 2,904.7
COMPARISONS AS A % OF NET
SALES
Basis PtChange
Basis PtChange
GROSS MARGIN 48.0% 47.5% 50 49.0% 49.1% (10) SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 31.3% 31.4% (10) 30.9% 30.8% 10 VENEZUELA
CHARGE 11.4% —% 1,140 2.7% —% 270 OPERATING MARGIN 5.2% 16.1%
(1,090) 15.5% 18.3% (280) EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 7.1% 16.1% (900) 15.5% 17.8% (230) NET EARNINGS
FROM CONTINUING OPERATIONS 3.6% 13.0% (940) 11.7% 14.1% (240) NET
EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE 2.9% 13.2% (1,030)
9.2% 14.5% (530)
* Diluted net earnings per common share are calculated on net
earnings attributable to Procter & Gamble.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Consolidated Earnings Information Three
Months Ended June 30, 2015 Earnings/(Loss)
from Continuing Net %
Change Operations % Change Earnings/(Loss)
% Change Versus Before Income Versus
from Continuing Versus Net Sales
Year Ago Taxes Year Ago
Operations Year Ago Beauty, Hair and Personal
Care $ 4,144 (10 )% $ 670 1 % $ 495 (1 )% Grooming 1,692 (18 )% 437
(32 )% 321 (34 )% Health Care 1,705 (6 )% 265 (9 )% 173 (1 )%
Fabric Care and Home Care 5,321 (7 )% 960 (1 )% 616 — % Baby,
Feminine and Family Care 4,818 (7 )% 987 (7 )% 662 (9 )% Corporate
110 (38 )% (2,050 ) 325 % (1,627
) (3,005 )%
Total Company $
17,790 (9 )% $
1,269 (60 )% $
640 (75 )%
Three Months Ended June 30, 2015 (Percent Change vs. Year
Ago)* Volume
Volume with Excluding Acquisitions
Acquisitions & & Foreign Net
Sales Divestitures Divestitures
Exchange Price Mix
Other** Growth Beauty, Hair and Personal Care
(6)% (5)% (8)% 5% (1)% —% (10)% Grooming (7)% (7)% (11)% 4% (4)% —%
(18)% Health Care (3)% (3)% (10)% 4% 3% —% (6)% Fabric Care and
Home Care 1% 1% (9)% 2% —% (1)% (7)% Baby, Feminine and Family Care
(4)% (4)% (8)% 3% 2% —%
(7)%
Total Company (3)% (3)%
(9)% 3% —% —%
(9)% Twelve Months Ended June 30,
2015 Earnings/(Loss)
from Continuing Net % Change Operations
% Change Earnings/(Loss) % Change
Versus Before Income Versus from
Continuing Versus Net Sales Year
Ago Taxes Year Ago
Operations Year Ago Beauty, Hair and Personal
Care $ 18,135 (7 )% $ 3,379 (4 )% $ 2,584 (6 )% Grooming 7,441 (7
)% 2,374 (8 )% 1,787 (9 )% Health Care 7,713 (1 )% 1,700 6 % 1,167
8 % Fabric Care and Home Care 22,277 (5 )% 4,061 (5 )% 2,635 (5 )%
Baby, Feminine and Family Care 20,247 (3 )% 4,317 — % 2,938 — %
Corporate 466 (37 )% (3,985 ) 104 %
(2,181 ) 1,191 %
Total Company $
76,279 (5 )% $
11,846 (17 )% $
8,930 (21 )%
Twelve Months Ended June 30, 2015 (Percent Change vs.
Year Ago)* Volume
Volume with Excluding Acquisitions
Acquisitions & & Foreign Net
Sales Divestitures Divestitures
Exchange Price Mix
Other** Growth Beauty, Hair and Personal Care
(4)% (3)% (5)% 2% —% —% (7)% Grooming (3)% (3)% (8)% 4% —% —% (7)%
Health Care (1)% (1)% (5)% 2% 3% —% (1)% Fabric Care and Home Care
1% 1% (6)% 1% —% (1)% (5)% Baby, Feminine and Family Care (1)%
(1)% (6)% 2% 2% —% (3)%
Total Company (1)% (1)%
(6)% 2% —% —%
(5)%
* Sales percentage changes are approximations based on
quantitative formulas that are consistently applied.
** Other includes the sales mix impact of
acquisitions/divestitures and rounding impacts necessary to
reconcile volume to net sales.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Consolidated Statements of Cash Flows
Twelve Months Ended June 30 2015 2014
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 8,558 $
5,947
OPERATING ACTIVITIES NET EARNINGS 7,144 11,785
DEPRECIATION AND AMORTIZATION 3,134 3,141 SHARE BASED COMPENSATION
EXPENSE 337 360 DEFERRED INCOME TAXES (803 ) (44 ) GAIN ON SALE OF
BUSINESSES (766 ) (154 ) VENEZUELA CHARGE 2,028 — GOODWILL AND
INDEFINITE-LIVED INTANGIBLE ASSET IMPAIRMENT CHARGES 2,174 —
CHANGES IN: ACCOUNTS RECEIVABLE 349 87 INVENTORIES 313 8 ACCOUNTS
PAYABLE, ACCRUED AND OTHER LIABILITIES 928 1 OTHER OPERATING ASSETS
& LIABILITIES (976 ) (1,557 ) OTHER 746 331
TOTAL OPERATING ACTIVITIES 14,608 13,958
INVESTING ACTIVITIES CAPITAL EXPENDITURES (3,736 ) (3,848 )
PROCEEDS FROM ASSET SALES 4,497 570 CASH RELATED TO VENEZUELA
OPERATIONS (908 ) — ACQUISITIONS, NET OF CASH ACQUIRED (137 ) (24 )
PURCHASES OF SHORT-TERM INVESTMENTS (3,647 ) (568 ) PROCEEDS FROM
SALES OF SHORT-TERM INVESTMENTS 1,203 24 CHANGE IN OTHER
INVESTMENTS (163 ) (261 )
TOTAL INVESTING ACTIVITIES (2,891
) (4,107 )
FINANCING ACTIVITIES DIVIDENDS TO SHAREHOLDERS
(7,287 ) (6,911 ) CHANGE IN SHORT-TERM DEBT (2,580 ) 3,304
ADDITIONS TO LONG-TERM DEBT 2,138 4,334 REDUCTION OF LONG-TERM DEBT
(3,512 ) (4,095 ) TREASURY STOCK PURCHASES (4,604 ) (6,005 ) IMPACT
OF STOCK OPTIONS AND OTHER 2,826 2,094
TOTAL
FINANCING ACTIVITIES (13,019 ) (7,279 )
EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS (411 ) 39
CHANGE IN CASH AND CASH EQUIVALENTS (1,713 ) 2,611
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,845 $
8,558
THE PROCTER & GAMBLE COMPANY AND
SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Condensed Consolidated Balance Sheet
June 30, 2015 June 30, 2014 CASH
AND CASH EQUIVALENTS $ 6,845 $ 8,558 AVAILABLE-FOR-SALE INVESTMENTS
SECURITIES 4,767 2,128 ACCOUNTS RECEIVABLE, NET 4,861 6,386
INVENTORIES 5,454 6,759 ASSETS HELD FOR SALE 3,510 2,849 OTHER
4,209 4,937
TOTAL CURRENT ASSETS 29,646 31,617
PROPERTY, PLANT AND EQUIPMENT, NET 20,268 22,304 GOODWILL AND OTHER
INTANGIBLE ASSETS, NET 74,145 84,547 OTHER NON-CURRENT ASSETS 5,436
5,798
TOTAL ASSETS $ 129,495 $ 144,266
ACCOUNTS PAYABLE $ 8,257 $ 8,461 ACCRUED EXPENSES AND OTHER
LIABILITIES 8,325 8,999 LIABILITIES HELD FOR SALE 1,187 660 DEBT
DUE WITHIN ONE YEAR 12,021 15,606
TOTAL CURRENT
LIABILITIES 29,790 33,726 LONG-TERM DEBT 18,329 19,811 OTHER
18,326 20,753
TOTAL LIABILITIES 66,445 74,290
TOTAL SHAREHOLDERS' EQUITY 63,050 69,976
TOTAL
LIABILITIES & SHAREHOLDERS' EQUITY $ 129,495 $
144,266
The Procter & Gamble Company
Exhibit 1: Non-GAAP Measures
In accordance with the SEC's Regulation G, the following
provides definitions of the non-GAAP measures used in the earnings
release and the reconciliation to the most closely related GAAP
measure.
Organic Sales Growth: Organic sales
growth is a non-GAAP measure of sales growth excluding the impacts
of acquisitions, divestitures and foreign exchange from
year-over-year comparisons. We believe this provides investors with
a more complete understanding of underlying sales trends by
providing sales growth on a consistent basis. Organic sales is also
one of the measures used to evaluate senior management and is a
factor in determining their at-risk compensation.
The reconciliation of reported sales growth to organic sales is
as follows:
Net Foreign Acquisition/
Organic Sales Exchange
Divestiture Sales Twelve Months Ended June 30
Growth Impact Impact* Growth Beauty,
Hair and Personal Care (7)% 5% 0% (1)% Grooming (7)% 8% 0% 1%
Health Care (1)% 5% 0% 4% Fabric Care and Home Care (5)% 6% 1% 2%
Baby, Feminine and Family Care (3)% 6% (1)%
3%
Total P&G (5)% 6%
0% 1% Foreign
Exchange Acquisition/ Organic Sales
Total P&G Net Sales Growth Impact
Divestiture Impact* Growth FY 2016 (Estimate) Down
low-to-mid single digits Approximately 5% —% In line to up low
single digits
* Acquisition/Divestiture Impact includes volume and mix impacts
of acquired and divested businesses, as well as rounding impacts
necessary to reconcile net sales to organic sales.
The core earnings measures included in the following
reconciliation tables refer to the equivalent GAAP measures
adjusted as applicable for the following items:
- charge in 2015 related to the change in
accounting for our Venezuelan subsidiaries
- charges in both years for incremental
restructuring due to increased focus on productivity and cost
savings,
- charges in both years for balance sheet
impacts from the devaluation of the foreign currency exchange rate
in Venezuela and
- charges in both years for certain
European legal matters.
We do not view these items to be part of our sustainable
results. We believe that these Core measures provide an important
perspective of underlying business trends and results and provide a
more comparable measure of year-on-year earnings per share growth.
Core EPS is also one of the measures used to evaluate senior
management and is a factor in determining their at-risk
compensation.
Core EPS and Currency-neutral Core
EPS: Core EPS is a measure of the Company's diluted net
earnings per share from continuing operations adjusted as indicated
below.
Currency-neutral Core EPS is a measure of the Company's Core EPS
excluding the incremental current year impact of foreign exchange.
We believe the currency-neutral Core EPS measure provides a more
comparable view of year-on-year earnings per share growth. The
table below provides a reconciliation of diluted net earnings per
share to Core EPS and Core EPS to Currency-neutral Core EPS:
AMJ 15 AMJ 14 FY 15
FY 14 Diluted Net Earnings Per Share
$0.18 $0.89 $2.44 $4.01 Earnings from
Discontinued Operations $0.04 ($0.02) $0.62 ($0.16) Non-Controlling
Interest from Discontinued Operations $— $— $— $0.01
Earnings
from Continuing Operations $0.22 $0.87
$3.06 $3.86 Incremental Restructuring Charges $0.07
$0.04 $0.20 $0.12 Venezuela Balance Sheet Remeasurement and
Devaluation Impacts $— $— $0.04 $0.09 Charges for European Legal
Matters ($0.01) $0.02 $0.01 $0.02 Venezuela Charge $0.71 $— $0.71
$— Rounding Impacts $0.01 $— $— $—
Core EPS $1.00
$0.93 $4.02 $4.09 Percentage Change vs. Prior
Period 8% (2)% Currency Impact to Earnings $0.13 $0.53
Currency-neutral Core EPS $1.13 $4.55
Percentage Change vs. Prior Period 22% 11%
Note – All reconciling items are presented net of tax. Tax
effects are calculated consistent with the nature of the underlying
transaction.
Impact of Incremental Total
P&G Diluted EPS Growth Non-Core Items*
Core Growth EPS FY 2016 (Estimate) 53% to 63% (48)% to (64)%
Down slightly to up mid-single digits
* Includes absence of significant one-time items (e.g. Venezuela
charge, Batteries impairments).
Core Operating Profit Margin: This
is a measure of the Company's operating margin adjusted for items
as indicated below.
AMJ 15 AMJ 14 FY 15
FY 14 Operating Profit Margin 5.2%
16.1% 15.5% 18.3% Incremental Restructuring
1.5% 0.7% 0.9% 0.5% Venezuela Charge 11.4% —% 2.7% —% Venezuela
Balance Sheet Revaluation and Devaluation —% —% 0.2% 0.4% Charges
for European Legal Matters (0.1)% 0.3% —% 0.1% Rounding 0.1% 0.1%
—% —%
Core Operating Profit Margin 18.1% 17.2%
19.3% 19.3% Basis Point Change 90 —
Core Gross Margin: This is a
measure of the Company's gross margin adjusted for items as
indicated below.
AMJ 15 AMJ 14 FY 15
FY 14 Gross Margin 48.0% 47.5%
49.0% 49.1% Incremental Restructuring 1.1% 0.5% 0.7%
0.4% Rounding (0.1)%
Core Gross Margin
49.1% 48.0% 49.7% 49.4% Basis Point
Change 110 30
Core Selling, General and Administrative
Expense (SG&A) as a percentage of sales: This is a
measure of the Company's SG&A as a percentage of sales adjusted
for items as indicated below.
AMJ 15 AMJ 14 FY 15
FY 14 SG&A as a % of NOS 31.3%
31.4% 30.9% 30.8% Incremental Restructuring
(0.4)% (0.2)% (0.3)% (0.2)% Venezuela Balance Sheet Revaluation and
Devaluation —% —% (0.2)% (0.4)% Charges for European Legal Matters
0.1% (0.3)% —% (0.1)% Rounding 0.1% 0.1%
Core
SG&A as a % of NOS 31.0% 30.9% 30.5%
30.2% Basis Point Change 10 30
Core Tax Rate: This is a measure of
the Company's tax rate on continuing operations adjusted for items
as indicated below.
AMJ 15 AMJ 14 FY 15
FY 14 Effective Tax Rate 49.6%
18.8% 24.6% 21.1% Incremental Restructuring
0.5% 0.2% 0.1% (0.1)% Charges for European Legal Matters 0.1%
(0.3)% —% (0.1)% Venezuela Balance Sheet Revaluation and
Devaluation —% —% 0.1% (0.3)% Venezuela Charge (31.2)% —% (3.8)% —%
Rounding 0.1% —% (0.1)% —%
Core Tax Rate 19.1%
18.7% 20.9% 20.6% Basis Point Change 40 30
Adjusted free cash flow: Adjusted
free cash flow is defined as operating cash flow less capital
spending excluding tax payments for the Pet divestiture. We view
adjusted free cash flow as an important measure because it is one
factor used in determining the amount of cash available for
dividends and discretionary investment. The reconciliation of
adjusted free cash flow is provided below (amounts in
millions):
Operating Capital Free Cash
Cash Tax Payment Adjusted Free
Cash Flow Spending Flow
- Pet Sale Cash Flow FY 2015 $14,608
$(3,736) $10,872 $729 $11,601
Adjusted free cash flow
productivity: Adjusted free cash flow productivity is
defined as the ratio of adjusted free cash flow to net earnings
excluding impairment charges on the Batteries business and the
Venezuela charge. The Company's long-term target is to generate
annual free cash flow at or above 90 percent of net earnings.
Adjusted free cash flow productivity is also a measure used to
evaluate senior management and is a factor in determining their
at-risk compensation. The reconciliation of adjusted free cash flow
productivity is provided below:
Net Earnings Adjusted
Impairment Excl. Impairment Adjusted Free
Cash Net & Venezuela & Venezuela
Free Cash Flow Flow Earnings
Charges Charges
Productivity FY 2015 $11,601 $7,144 $4,187
$11,331 102%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150730005677/en/
P&G Media
Contacts:Paul Fox, 513-983-3465Jennifer Corso,
513-983-2570orP&G Investor Relations
Contact:John Chevalier, 513-983-9974
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