Organic Sales +1%; Net
Sales -7%; Diluted Net EPS $0.97,+29%;
Core EPS $0.86, -3%;
Currency-Neutral Core EPS Unchanged Versus Prior Year
The Procter & Gamble Company (NYSE:PG) reported third
quarter fiscal year 2016 diluted net earnings per share of $0.97,
an increase of 29%. Core earnings per share were $0.86, a decrease
of three percent, while currency-neutral core earnings per share
were unchanged versus the prior year. Core operating profit margin
increased 300 basis points driven primarily by productivity savings
in gross margin. Net sales were $15.8 billion, a decrease of seven
percent versus the prior year including a five percent negative
impact from foreign exchange, a two percent impact from the
Venezuela deconsolidation and a one percent impact from minor brand
divestitures. Organic sales grew one percent.
Operating cash flow was $3.3 billion for the quarter. Adjusted
free cash flow productivity was 105%. The Company repurchased $1.0
billion of common stock and returned $1.9 billion of cash to
shareholders as dividends. Additionally, the Company acquired $4.2
billion of common stock with the closing of the Duracell
transaction.
“We continue to make progress on the transformations we are
undertaking to return P&G to balanced top and bottom-line
growth and maintain strong cash generation,” said President and
Chief Executive Officer David Taylor. “We achieved a significant
milestone this quarter in the transformation of the product
portfolio with the sale of the Duracell business. We delivered
another strong quarter of productivity improvement and cost
savings, and we increased investments in innovation, advertising
and selling to enhance our long-term prospects for faster,
sustainable top-line growth and value creation.”
January - March Quarter Discussion
Net sales in the third quarter of fiscal year 2016 were $15.8
billion, a seven percent decrease, including a negative five
percentage point impact from foreign exchange and three percentage
point impact from the combination of the Venezuela deconsolidation
and minor brand divestitures. Organic sales increased one percent
on organic shipment volume that was unchanged versus the prior
year. Pricing increased total net sales by one percent. All-in
volume declined two percent due to the Venezuela deconsolidation
and minor brand divestitures.
January - March
2016
Foreign
Organic
Organic
Net Sales
Drivers*
Volume
Exchange
Price
Mix
Other**
Net
Sales
Volume
Sales
Beauty (5)% (5)% 2% —% —% (8)% (1)% 1% Grooming (6)% (7)% 5% (1)%
(1)% (10)% (5)% (1)% Health Care (3)% (5)% 1% —% —% (7)% (2)% (1)%
Fabric Care and Home Care —% (5)% 1% —% —% (4)% 2% 3% Baby,
Feminine and Family Care (2)% (5)% —%
—% (1)% (8)% (1)%
—%
Total P&G (2)%
(5)% 1% —% (1)%
(7)% —%
1%
* Net sales percentage changes are approximations based on
quantitative formulas that are consistently applied.** Other
includes the sales mix impact of acquisitions/divestitures, the
Venezuela deconsolidation and rounding impacts necessary to
reconcile volume to net sales.
Sales in four of the five business segments benefited from price
increases taken with new product innovations and/or to offset the
impact of currency devaluation in markets such as Russia, Brazil
and Mexico. Volume declined in four of the five business segments
due to lower shipments in developing markets, including the impact
of the Venezuela deconsolidation and minor brand divestitures. The
following business segment discussion includes other impacts to
sales growth in addition to those mentioned above:
- Beauty segment organic sales grew one
percent versus year ago as positive impacts from pricing more than
offset lower organic volume. Organic sales increases in Personal
Care and the super-premium SK-II skin care brand were partially
offset by organic sales declines of the Olay brand. Hair Care
organic sales were unchanged as growth on Pantene and Head &
Shoulders was offset by declines on other brands. In the U.S. both
Pantene and Head & Shoulders gained market share.
- Grooming segment organic sales
decreased one percent as growth in international markets was more
than offset by declines in the U.S. The benefits from higher
pricing in Shave Care and Appliances were more than offset by unit
volume declines.
- Health Care segment organic sales
decreased one percent as higher pricing in both Oral Care and
Personal Health Care was more than offset by lower volume primarily
related to a weak cough and cold season.
- Fabric Care and Home Care segment
organic sales increased three percent versus year ago driven by
higher organic volume in developed regions and increased pricing.
Home Care organic sales growth was driven by product innovation and
Fabric Care organic sales grew behind innovation and increased
marketing support.
- Baby, Feminine and Family Care segment
organic sales were unchanged. Baby Care organic sales declined due
to lower volume, mainly from competitive activity. Feminine Care
organic sales increased driven by growth in adult incontinence and
benefits from carryover pricing in developing markets. Family Care
organic sales were unchanged.
Core earnings per share were $0.86, a decrease of three percent
versus the prior year. Excluding the impact of foreign exchange,
currency-neutral core earnings per share were unchanged for the
quarter. Diluted net earnings per share from continuing operations
decreased one percent to $0.81. Diluted net earnings per share were
$0.97, an increase of 29% versus the prior year, driven by impacts
from discontinued operations, primarily from base period impairment
charges related to the Batteries business and a current year gain
on the sale of the business, which closed on February 29, 2016.
Reported gross margin increased 250 basis points. Excluding the
impact of incremental restructuring charges, core gross margin
improved 270 basis points, including 70 basis points of negative
foreign exchange impacts. On a currency-neutral basis, core gross
margin increased 340 basis points, driven by 230 basis points of
productivity cost savings, 130 basis points from lower commodity
costs and a 60 basis point benefit from pricing, partially offset
by unfavorable geographic and product mix and by negative scale
leveraging due to lower volume.
Selling, general and administrative expense (SG&A) as a
percentage of sales decreased 70 basis points on a reported basis
versus the prior year, including a 50 basis point benefit due to
lower restructuring charges. Core SG&A as a percentage of sales
decreased 20 basis points, including a 100 basis point net benefit
from foreign exchange impacts, driven by lower foreign currency
re-measurement charges. On a currency-neutral basis, core SG&A
increased 80 basis points versus the prior year driven by increased
advertising, partially offset by a benefit from overhead spending
reductions due to productivity efforts.
Reported operating profit margin increased 320 basis points and
core operating profit margin was up 300 basis points versus the
prior year, including a net 30 basis points benefit from foreign
exchange impacts, driven by lower foreign currency re-measurement
charges. On a currency-neutral basis, core operating profit margin
increased 270 basis points, including 290 basis points of
productivity cost savings.
Fiscal Year 2016 Guidance
P&G said it is maintaining its outlook for organic sales
growth of in-line to up low-single digits versus fiscal 2015. The
Company expects all-in sales to be down high-single digits in
fiscal 2016, including a negative six to seven percentage point
impact from foreign exchange and a two to three percentage point
drag from the combined impacts of the Venezuela deconsolidation and
minor brand divestitures.
With one quarter remaining in its fiscal year, the Company said
it is tightening its outlook for Core EPS to a range of down three
percent to six percent versus last year’s Core EPS of $3.76.
P&G said it continues to expect constant-currency Core EPS
growth in the mid-single digits. The Company continues to expect
foreign exchange to have about a nine percentage point, or negative
$0.35 per share, impact on Core EPS growth for the year. All-in
GAAP earnings per share are expected to be up in the range of 46%
to 51% versus the prior year.
P&G noted that fourth quarter Core EPS is expected to be
significantly lower than prior year due to a combination of
increased advertising investments, a higher tax rate, headwinds
from foreign exchange and lower non-operating income.
The Company expects to repurchase and exchange shares at a value
of more than $8 billion through a combination of direct share
repurchases and shares that were exchanged in the Duracell
transaction. In addition, P&G expects to pay dividends of more
than $7 billion, for a total of over $15 billion in dividend
payments, share repurchases and share exchanges this fiscal
year.
Forward-Looking Statements
Certain statements in this report, 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,” “expect,”
“anticipate,” “estimate,” “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 risks, including foreign
currency fluctuations, currency exchange or pricing controls and
localized volatility; (2) the ability to successfully manage local,
regional or global economic volatility, including disruptions in
credit markets, reduced market growth rates or changes affecting
our credit rating, and generate sufficient income and cash flow to
allow the Company to effect the expected share repurchases and
dividend payments; (3) the ability to maintain key manufacturing
and supply arrangements (including sole supplier and sole
manufacturing plant arrangements) and manage disruption of business
due to factors outside of our control, such as natural disasters
and acts of war or terrorism; (4) 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; (5) 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; (6) the ability to compete with
our local and global competitors in new and existing sales channels
by successfully responding to competitive factors, including
prices, promotional incentives and trade terms for products; (7)
the ability to manage and maintain key customer relationships; (8)
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;
(9) 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; (10) 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; (11) the ability to successfully manage regulatory and
legal requirements and matters (including, without limitation,
those laws and regulations involving product liability,
intellectual property, antitrust, privacy, accounting standards and
environmental) and to resolve pending matters within current
estimates; (12) the ability to manage changes in applicable tax
laws and regulations; (13) 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; and (14) 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. 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 March 31 Nine Months Ended March 31
2016 2015 % Chg 2016
2015 % Chg NET SALES $ 15,755 $
16,930 (7 )% $ 49,197 $ 54,196 (9 )% COST OF PRODUCTS SOLD 7,915
8,927 (11 )% 24,527 28,219 (13 )%
GROSS PROFIT 7,840 8,003 (2 )% 24,670 25,977 (5 )% SELLING,
GENERAL AND ADMINISTRATIVE EXPENSE 4,522 4,978 (9 )%
13,731 15,740 (13 )%
OPERATING INCOME 3,318
3,025 10 % 10,939 10,237 7 % INTEREST EXPENSE 146 148 (1 )% 429 478
(10 )% INTEREST INCOME 33 38 (13 )% 135 103 31 % OTHER
NON-OPERATING INCOME, NET 21 53 (60 )% 38 85
(55 )%
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES 3,226 2,968 9 % 10,683 9,947 7 % INCOME TAXES ON
CONTINUING OPERATIONS 889 567 57 % 2,664 2,156
24 %
NET EARNINGS FROM CONTINUING OPERATIONS 2,337
2,401 (3 )% 8,019 7,791 3 %
NET
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS 446 (213 )
N/A 627 (1,185 ) N/A
NET EARNINGS 2,783 2,188 27 %
8,646 6,606 31 % LESS: NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING
INTERESTS 33 35 (6 )% 89 91 (2 )%
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE $ 2,750
$ 2,153 28 % $ 8,557 $ 6,515 31 %
EFFECTIVE TAX RATE 27.6 % 19.1 % 24.9 % 21.7 %
BASIC NET EARNINGS PER COMMON SHARE:* EARNINGS FROM
CONTINUING OPERATIONS $ 0.83 $ 0.85 (2 )% $ 2.86 $ 2.77 3 %
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS $ 0.17 $ (0.08 ) N/A $
0.23 $ (0.44 ) N/A BASIC NET EARNINGS PER COMMON SHARE $ 1.00 $
0.77 30 % $ 3.09 $ 2.33 33 %
DILUTED NET EARNINGS PER COMMON
SHARE:* EARNINGS FROM CONTINUING OPERATIONS $ 0.81 $ 0.82 (1 )%
$ 2.78 $ 2.67 4 % EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS $
0.16 $ (0.07 ) N/A $ 0.22 $ (0.41 ) N/A DILUTED NET EARNINGS PER
COMMON SHARE $ 0.97 $ 0.75 29 % $ 3.00 $ 2.26 33 % DIVIDENDS PER
COMMON SHARE $ 0.663 $ 0.644 $ 1.989 $ 1.931 DILUTED WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING 2,835.0 2,882.5 2,855.6 2,885.3
COMPARISONS AS A
% OF NET SALES
Basis PtChg
Basis PtChg
GROSS MARGIN 49.8% 47.3% 250 50.1% 47.9% 220 SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 28.7% 29.4% (70) 27.9% 29.0% (110) OPERATING
MARGIN 21.1% 17.9% 320 22.2% 18.9% 330 EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 20.5% 17.5% 300 21.7% 18.4% 330 NET
EARNINGS FROM CONTINUING OPERATIONS 14.8% 14.2% 60 16.3% 14.4% 190
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE 17.5% 12.7% 480
17.4% 12.0% 540
* Basic net earnings per common share and diluted net earnings
per common share are calculated on net earnings attributable to
Procter & Gamble.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions) Consolidated Earnings
Information Three Months Ended March 31,
2016 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 $ 2,719 (8 )% $ 604
(6 )% $ 458 (5 )% Grooming 1,623 (10 )% 469 (22 )% 356 (22 )%
Health Care 1,773 (7 )% 414 (10 )% 278 (8 )% Fabric Care and Home
Care 5,028 (4 )% 1,014 8 % 652 10 % Baby, Feminine and Family Care
4,506 (8 )% 976 (3 )% 631 (9 )% Corporate 106 N/A (251 ) N/A (38 )
N/A
Total Company $ 15,755 (7 )%
$ 3,226 9 % $
2,337 (3 )% Three
Months Ended March 31, 2016 (Percent Change vs. Year
Ago)* Volume
Volume with Excluding Acquisitions &
Acquisitions & Foreign Net Sales
Divestitures Divestitures
Exchange Price Mix
Other** Growth Beauty (5)% (1)% (5)% 2% —% —%
(8)% Grooming (6)% (5)% (7)% 5% (1)% (1)% (10)% Health Care (3)%
(2)% (5)% 1% —% —% (7)% Fabric Care and Home Care —% 2% (5)% 1% —%
—% (4)% Baby, Feminine and Family Care (2)% (1)% (5)%
—% —% (1)% (8)%
Total Company
(2)% —% (5)% 1%
—% (1)% (7)%
Nine Months Ended March 31, 2016
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 $ 8,723 (10 )% $ 2,200 (4 )% $ 1,667 (3 )% Grooming 5,103
(11 )% 1,547 (20 )% 1,187 (19 )% Health Care 5,547 (8 )% 1,426 (1
)% 990 — % Fabric Care and Home Care 15,626 (8 )% 3,311 7 % 2,172 8
% Baby, Feminine and Family Care 13,874 (10 )% 3,124 (6 )% 2,063 (9
)% Corporate 324 N/A (925 ) N/A (60 ) N/A
Total
Company $ 49,197 (9 )%
$ 10,683 7 % $
8,019 3 % Nine Months
Ended March 31, 2016 (Percent Change vs. Year Ago)*
Volume Volume
with Excluding Acquisitions & Acquisitions
& Foreign Net Sales Divestitures
Divestitures Exchange
Price Mix Other**
Growth Beauty (6)% (3)% (7)% 2% 1% —% (10)% Grooming (4)%
(3)% (11)% 5% (2)% 1% (11)% Health Care (4)% (4)% (7)% 2% 2% (1)%
(8)% Fabric Care and Home Care (1)% —% (7)% 1% —% (1)% (8)% Baby,
Feminine and Family Care (4)% (3)% (7)% 1%
—% —% (10)%
Total Company (4)%
(2)% (7)% 2%
—% —% (9)%
* 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 Nine
Months Ended March 31 2016 2015 CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 6,836 $ 8,558
OPERATING ACTIVITIES NET EARNINGS 8,646 6,606 DEPRECIATION
AND AMORTIZATION 2,239 2,326 SHARE-BASED COMPENSATION EXPENSE 216
231 DEFERRED INCOME TAXES (428 ) (135 ) LOSS/(GAIN) ON SALE OF
BUSINESSES 241 (319 ) GOODWILL AND INTANGIBLE ASSET IMPAIRMENT
CHARGES 450 2,021 CHANGES IN: ACCOUNTS RECEIVABLE (129 ) 308
INVENTORIES (94 ) (190 ) ACCOUNTS PAYABLE, ACCRUED AND OTHER
LIABILITIES (199 ) 146 OTHER OPERATING ASSETS & LIABILITIES 167
(823 ) OTHER 187 449
TOTAL OPERATING
ACTIVITIES 11,296 10,620
INVESTING
ACTIVITIES CAPITAL EXPENDITURES (2,023 ) (2,462 ) PROCEEDS FROM
ASSET SALES 114 3,715 ACQUISITIONS, NET OF CASH ACQUIRED (186 )
(119 ) PURCHASES OF SHORT-TERM INVESTMENTS (2,372 ) (2,897 )
PROCEEDS FROM SALES OF SHORT-TERM INVESTMENTS 1,222 256 CASH
TRANSFERRED IN BATTERIES DIVESTITURE (143 ) — RESTRICTED CASH
RELATED TO BEAUTY BRANDS DIVESTITURE (995 ) — CHANGE IN OTHER
INVESTMENTS — (203 )
TOTAL INVESTING ACTIVITIES
(4,383 ) (1,710 )
FINANCING ACTIVITIES DIVIDENDS TO
SHAREHOLDERS (5,589 ) (5,416 ) CHANGE IN SHORT-TERM DEBT 1,535 (141
) ADDITIONS TO LONG-TERM DEBT 3,916 1,188 REDUCTIONS OF LONG-TERM
DEBT (2,210 ) (2,684 ) TREASURY STOCK PURCHASES (3,504 ) (4,254 )
SHARES EXCHANGED IN BATTERIES DIVESTITURE (1,730 ) — IMPACT OF
STOCK OPTIONS AND OTHER 2,024 2,664
TOTAL
FINANCING ACTIVITIES (5,558 ) (8,643 )
EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS (296 ) (451 )
CHANGE IN CASH AND CASH EQUIVALENTS 1,059 (184 )
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,895 $
8,374
THE PROCTER & GAMBLE COMPANY AND
SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Condensed Consolidated Balance Sheets
March 31, 2016 June 30, 2015 CASH AND
CASH EQUIVALENTS $ 7,895 $ 6,836 AVAILABLE-FOR-SALE INVESTMENTS
SECURITIES 5,924 4,767 ACCOUNTS RECEIVABLE 4,591 4,568 INVENTORIES
4,957 4,979 DEFERRED INCOME TAXES 1,189 1,356 PREPAID EXPENSES AND
OTHER CURRENT ASSETS 2,733 2,708 ASSETS HELD FOR SALE 7,028 4,432
TOTAL CURRENT ASSETS 34,317 29,646 PROPERTY, PLANT AND
EQUIPMENT, NET 19,186 19,655 GOODWILL 44,679 44,622 TRADEMARKS AND
OTHER INTANGIBLE ASSETS, NET 24,629 25,010 NONCURRENT ASSETS HELD
FOR SALE — 5,204 OTHER NONCURRENT ASSETS 4,697 5,358
TOTAL
ASSETS $ 127,508 $ 129,495 ACCOUNTS PAYABLE $ 7,795 $ 8,138
ACCRUED AND OTHER LIABILITIES 7,652 8,091 LIABILITIES HELD FOR SALE
2,229 1,543 DEBT DUE WITHIN ONE YEAR 13,681 12,018
TOTAL CURRENT
LIABILITIES 31,357 29,790 LONG-TERM DEBT 19,134 18,327 DEFERRED
INCOME TAXES 9,161 9,179 NONCURRENT LIABILITIES HELD FOR SALE — 717
OTHER NONCURRENT LIABILITIES 8,003 8,432
TOTAL LIABILITIES
67,655 66,445
TOTAL SHAREHOLDERS' EQUITY 59,853 63,050
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 127,508 $
129,495
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 MD&A
and the reconciliation to the most closely related GAAP measure. We
believe that these measures provide useful perspective of
underlying business results and trends and provide a more
comparable measure of year-on-year results. These measures are also
used to evaluate senior management and are a factor in determining
their at-risk compensation. These non-GAAP measures are not
intended to be considered by the user in place of the related GAAP
measure, but rather as supplemental information to more fully
understand our business results. When a non-GAAP measure is used in
MD&A, we have provided the comparable GAAP measure in the
discussion. These non-GAAP measures may not be the same as similar
measures used by other companies due to possible differences in
method and in the items or events being adjusted.
The Core earnings measures included in the following
reconciliation tables refer to the equivalent GAAP measures
adjusted as applicable for the following items:
- charges for incremental restructuring
due to increased focus on productivity and cost savings, and
- charges for European legal
matters.
We do not view these items to be part of our sustainable
results.
Organic sales growth: Organic sales
growth is a non-GAAP measure of sales growth excluding the impacts
of the Venezuela deconsolidation, 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.
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. Currency-neutral Core EPS is a measure of the Company's
Core EPS excluding the incremental current year impact of foreign
exchange. The tables below provide a reconciliation of diluted net
earnings per share to Core EPS and of Core EPS to currency-neutral
Core EPS.
Core operating profit margin: This
is a measure of the Company's operating margin adjusted for items
as indicated.
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.
Core gross margin: This is a
measure of the Company's gross margin adjusted for items as
indicated.
Core tax rate: This is a measure of
the Company's tax rate on continuing operations adjusted for items
as indicated.
Free cash flow: Free cash flow is
defined as operating cash flow less capital spending. We view 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.
Adjusted free cash flow
productivity: Adjusted free cash flow productivity is
defined as the ratio of free cash flow to net earnings excluding
the gain on the sale of the Batteries business. We view adjusted
free cash flow productivity as an important measure because it is
one factor used in determining the amount of cash available for
dividends and discretionary investment.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts
in Millions Except Per Share Amounts) Selected Financial
Information & Non-GAAP Measures
Three Months Ended
March 31, 2016 CHARGES FOR
AS EUROPEAN REPORTED
DISCONTINUED INCREMENTAL LEGAL NON-GAAP
(GAAP) OPERATIONS RESTRUCTURING MATTERS
ROUNDING (CORE) NET SALES 15,755 — — — —
15,755 COST OF PRODUCTS SOLD 7,915 — (174 ) —
— 7,741
GROSS PROFIT 7,840 — 174 — — 8,014 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSE 4,522
—
14 (13 ) (1 ) 4,522
OPERATING INCOME
3,318 — 160 13 1 3,492
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX 3,226
— 160 13 — 3,399 INCOME TAX ON CONTINUING OPERATIONS 889 —
33 2 (1 ) 923
NET EARNINGS FROM
CONTINUING OPERATIONS 2,337 — 127 11 1 2,476
NET
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS 446 (446 ) — — —
NET EARNINGS ATTRIBUTABLE TO NON-CONTROLLING INTEREST 33
(1 ) — 1 33
NET EARNINGS
ATTRIBUTABLE TO P&G 2,750 (445 ) 127 11
— 2,443
GROSS MARGIN 49.8 % 1.1 % — % — % 50.9
%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET
SALES 28.7 % — % 0.1 % (0.1 )% — % 28.7 %
OPERATING PROFIT
MARGIN 21.1 % — % 1.0 % 0.1 % — % 22.2 %
EFFECTIVE TAX
RATE 27.6 % — % (0.3 )% — % (0.1 )% 27.2 %
Core
EPS: DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING
OPERATIONS* 0.81 — 0.04
— 0.01
0.86
CURRENCY IMPACT TO CORE EARNINGS 0.03 CURRENCY-NEUTRAL CORE EPS
0.89
CHANGE VERSUS
YEAR AGO
CORE GROSS MARGIN 270 BPS CORE SELLING GENERAL &
ADMINISTRATIVE EXPENSE AS A % OF NET SALES (20 ) BPS CORE OPERATING
PROFIT MARGIN 300 BPS CORE EFFECTIVE TAX RATE 800 BPS CORE EPS (3
)% CURRENCY-NEUTRAL CORE EPS — %
* Diluted net earnings per common share from continuing
operations 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 & Non-GAAP Measures
Three Months Ended
March 31, 2015 CHARGES FOR
AS EUROPEAN REPORTED
DISCONTINUED INCREMENTAL LEGAL NON-GAAP
(GAAP) OPERATIONS RESTRUCTURING MATTERS
ROUNDING (CORE) NET SALES 16,930 — — — —
16,930 COST OF PRODUCTS SOLD 8,927 (156 ) —
8,771
GROSS PROFIT 8,003 — 156 — — 8,159 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSE 4,978 (73 ) (5 ) —
4,900
OPERATING INCOME 3,025 — 229
5 — 3,259
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAX 2,968 — 229 5 — 3,202 INCOME TAX
ON CONTINUING OPERATIONS 567 49 (1 )
615
NET EARNINGS FROM CONTINUING OPERATIONS 2,401 —
180 5 1 2,587
NET EARNINGS/(LOSS) FROM DISCONTINUED
OPERATIONS (213 ) 213 — — —
NET EARNINGS ATTRIBUTABLE TO
NON-CONTROLLING INTEREST 35 (1 ) — — 34
NET EARNINGS ATTRIBUTABLE TO P&G 2,153 214
180 5 1 2,553
GROSS MARGIN 47.3
% — % 0.9 % — % 48.2 %
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE AS A % OF NET SALES 29.4 % — % (0.4 )% — % (0.1 )% 28.9
%
OPERATING PROFIT MARGIN 17.9 % — % 1.4 % — % (0.1 )% 19.2
%
EFFECTIVE TAX RATE 19.1 % 0.2 % — % (0.1 )% 19.2 %
Core EPS: DILUTED NET EARNINGS PER COMMON SHARE
FROM CONTINUING OPERATIONS* 0.82
0.06 — 0.01
0.89
* Diluted net earnings per common share from continuing
operations are calculated on net earnings attributable to Procter
& Gamble.
Organic sales growth:
The reconciliation of reported sales growth to organic sales is
as follows:
Foreign
Acquisition/
Net
Sales
Exchange
Divestiture
Organic
Sales
January - March
2016
Growth
Impact
Impact*
Growth
Beauty (8)% 5% 4% 1% Grooming (10)% 7% 2% (1)% Health Care (7)% 5%
1% (1)% Fabric Care and Home Care (4)% 5% 2% 3% Baby, Feminine and
Family Care (8)% 5% 3% —%
Total
P&G (7)% 5% 3%
1%
Foreign
Exchange
Acquisition/
Organic
Sales
Total
P&G
Net Sales
Growth
Impact
Divestiture
Impact*
Growth
FY 2016 (Estimate) Down high single digits 6% to 7 %
2% to 3% In-line to up low single digits
* Acquisition/Divestiture Impact also includes the Venezuela
deconsolidation, the mix impacts of acquisitions and divestitures
and rounding impacts necessary to reconcile net sales to organic
sales.
Core EPS and currency-neutral Core
EPS:
Impact
of
Foreign
Currency-
Diluted
EPS
Incremental
Non-
Core
EPS
Exchange
Neutral
Core
Total
P&G
Growth
Core
Items*
Growth
Impact
EPS
FY 2016 (Estimate) 46% to 51% (52)% to (54)%
(3)% to (6)% 9% Up mid-single digits
* Includes change in discontinued operations (includes Batteries
impairments) and the absence of significant one-time items (e.g.
Venezuela charge).
Free cash flow (dollars in
millions):
Three Months Ended March 31, 2016
Operating Cash
Flow
Capital
Spending
Free Cash
Flow
$3,278 $(800) $2,478
Adjusted free cash flow productivity
(dollars in millions):
Three Months Ended March 31, 2016
Net Earnings
Excluding Gain on
Adjusted Free
Cash
Net
Earnings
Gain on Batteries
Sale
Batteries
Sale
Flow
Productivity
$2,783 $(422) $2,361 105%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426005888/en/
P&G Media
Contacts:Damon Jones, 513-983-0190Jennifer Corso,
513-983-2570orP&G Investor Relations
Contact:John Chevalier, 513-983-9974
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