Q4 ’20:
Net Sales +4%; Organic Sales +6%; Diluted Net
EPS $1.07, +$3.19; Core EPS $1.16, +5%
FY ’20:
Net Sales +5%; Organic Sales +6%; Diluted Net
EPS $4.96, +247%; Core EPS $5.12, +13%
The Procter & Gamble Company (NYSE:PG) reported fiscal year
2020 net sales of $71 billion, an increase of five percent versus
the prior year. Excluding the impacts of foreign exchange,
acquisitions and divestitures, organic sales increased six percent,
driven by a four percent increase in organic volume. Diluted net
earnings per share were $4.96, an increase of 247% versus the prior
year, due primarily to the non-cash impairment charge for the
Gillette Shave Care business in the base year. Core earnings per
share increased 13% to $5.12. The Company generated $17.4 billion
of operating cash flow in fiscal 2020 with adjusted free cash flow
productivity of 114%. The Company returned $15.2 billion of value
to shareholders in fiscal 2020 through $7.8 billion in dividend
payments and $7.4 billion of share repurchases.
The Company reported fourth quarter fiscal year 2020 net sales
of $17.7 billion, an increase of four percent versus the prior
year. Excluding the impacts of foreign exchange, acquisitions and
divestitures, organic sales increased six percent, driven by a
three percent increase in organic volume. Diluted net earnings per
share were $1.07, an increase of $3.19 versus the prior year, due
primarily to the impairment charge for the Gillette Shave Care
business in the base year. Core earnings per share increased five
percent to $1.16. Operating cash flow was $4.8 billion for the
quarter. Adjusted free cash flow productivity was 161%.
“We are prioritizing employee health and safety, maximizing
availability of P&G products, which play an essential role in
meeting the daily health, hygiene and cleaning needs of consumers
around the world, and helping society meet the challenges of the
COVID crisis. We expect to grow through this crisis and come out
even stronger on the other side,” said David Taylor, Chairman,
President and Chief Executive Officer. “We delivered strong,
balanced sales and profit results in fiscal 2020, both pre-COVID
and through the balance of the year, meeting or exceeding each of
our going-in targets, demonstrating the commitment and agility of
P&G people and the robustness of our strategy.”
April - June 2020 Quarter Discussion
Net sales in the fourth quarter of fiscal year 2020 were $17.7
billion, an increase of four percent versus the prior year.
Unfavorable foreign exchange negatively impacted sales by three
percentage points for the quarter. Excluding the impacts of foreign
exchange, acquisitions and divestitures, organic sales increased
six percent driven primarily by a three percent increase in organic
shipment volume. The volume increase was driven by strong
innovation programs and increased consumer demand for household
cleaning, personal health and cleansing products, particularly in
North America and China, related to the COVID-19 pandemic. These
increases were partially offset by volume decreases in other
regions and certain categories primarily due to the disruption of
consumer access to retail markets caused by the pandemic. Increased
pricing contributed two percent to net sales. Positive mix impact
was a one percent help to organic sales due to the disproportionate
growth of North America and China regions and the Home Care and
Personal Health Care categories, which have higher than company
average selling prices.
April - June
2020
Volume
Foreign
Exchange
Price
Mix
Other (2)
Net
Sales
Organic
Volume
Organic
Sales
Net Sales
Drivers (1)
Beauty
2%
(4)%
2%
—%
—%
—%
2%
3%
Grooming
(4)%
(4)%
2%
1%
—%
(5)%
(4)%
(1)%
Health Care
(1)%
(3)%
1%
2%
—%
(1)%
(1)%
2%
Fabric & Home Care
8%
(3)%
2%
4%
—%
11%
8%
14%
Baby, Feminine & Family Care
1%
(2)%
3%
1%
—%
3%
1%
5%
Total P&G
3%
(3)%
2%
1%
1%
4%
3%
6%
(1)
Net sales percentage changes are
approximations based on quantitative formulas that are consistently
applied.
(2)
Other includes the sales mix
impact from acquisitions and divestitures and rounding impacts
necessary to reconcile volume to net sales.
- Beauty segment organic sales increased three percent versus
year ago. Skin and Personal Care organic sales decreased low single
digits primarily driven by negative product mix due to double
digits decline of the super-premium SK-II brand driven by pandemic
related travel disruptions. This was partially offset by increased
volume in Personal Cleansing due to innovation and increased
consumer demand for cleansing and degerming products. Hair Care
organic sales increased high single digits driven by strong
innovation and retail execution in North America and China,
increased pricing due in part to a reduction in promotional
activity and retailer inventory restocking.
- Grooming segment organic sales decreased one percent versus
year ago. Shave Care organic sales decreased mid-single digits
driven by volume decreases due to the pandemic related reduction in
shaving frequency in certain markets. Appliances organic sales
increased double digits due to innovation and increased demand for
at-home shaving and styling products due to temporary pandemic
related movement restrictions.
- Health Care segment organic sales increased two percent for the
quarter. Oral Care organic sales decreased low single digits
primarily due to reduced volumes in certain regions due to
temporary retail outlet closures, including electronics stores and
dentist offices, partially offset by positive mix impact due to the
relatively higher growth of premium products. Personal Health Care
organic sales increased double digits due to increased consumer
demand, retailer inventory increases in certain markets, product
innovation and increased marketing investments. Geographic mix was
a positive contributor to sales driven by strong growth in North
America relative to volume decreases in certain markets in IMEA and
Latin America due to pandemic related retail outlet closures and
movement restrictions.
- Fabric and Home Care segment organic sales increased 14% for
the quarter. Fabric Care organic sales increased high single digits
driven by strong consumer demand, positive product mix and a
partial rebuild of retailer inventories in North America and China.
This growth was partially offset by volume decreases in Europe,
Asia Pacific and IMEA due primarily to the pandemic related retail
outlet closures, movement restrictions and consumer pantry
destocking. Home Care organic sales increased more than 30% driven
by the increased consumer demand for home cleaning and dish washing
products, innovation, positive product and geographic mix and
higher net pricing due mainly to reduced promotional activity.
- Baby, Feminine and Family Care segment organic sales increased
five percent versus year ago. Baby Care organic sales decreased
high single digits due to pandemic related consumer pantry
destocking and consumption decreases, primarily in emerging
markets, which were partially offset by volume growth in North
America, positive product mix and currency devaluation related
price increases. Feminine Care organic sales increased mid-single
digits driven primarily by positive product mix and strong growth
in North America driven by innovation and retailer inventory
replenishment following the reduction of retailer inventory in the
previous quarter. This growth was partially offset by reduced
volumes in certain regions due to pandemic related consumer access
restrictions and consumer pantry destocking. Family Care organic
sales increased more than 20% driven by increased consumer demand
and higher net pricing due to reduced promotional activity.
Diluted net earnings per share were $1.07 for the quarter, an
increase of $3.19 versus the prior year, driven primarily by the
base period Gillette Shave Care business impairment charge. Core
earnings per share were $1.16, a five percent increase versus the
prior year, driven by the net sales increase and an increase in
operating margin. Currency-neutral core EPS increased 11%.
Reported gross margin increased 180 basis points, including a 30
basis-point hurt from higher non-core restructuring charges versus
the prior year. Core gross margin increased 210 basis points versus
the prior year, including 40 basis points of negative foreign
exchange impacts. On a currency-neutral basis, core gross margin
increased 250 basis points driven by 210 basis points of gross
productivity savings, 160 basis points from commodity cost
decreases and 100 basis points of pricing benefit. These
improvements were partially offset by 120 basis points of
unfavorable product mix, 50 basis points of manufacturing and
logistics cost increases due to the COVID-19 pandemic and 50 basis
points of reinvestments and other impacts.
Selling, general and administrative expense (SG&A) as a
percentage of sales increased 50 basis points on a reported basis
versus the prior year, including approximately 10 basis points help
from a year-on-year reduction in non-core restructuring charges.
Core SG&A as a percentage of sales increased 70 basis points
versus the prior year, including approximately 20 basis points of
negative foreign exchange impacts. On a currency-neutral basis,
core SG&A as a percentage of sales increased 50 basis points
driven by 270 basis points of increased marketing investments, a
100 basis-point base period gain on the sale of real estate and 100
basis points of wage inflation, increased incentive compensation
and other impacts. These increases were partially offset by 190
basis points of cost leverage benefit from increased sales and 230
basis points of savings from overhead and marketing expenses.
Reported operating profit margin increased 5,010 basis points
versus the base period primarily due to the base period Gillette
Shave Care business impairment charge. Excluding this charge and
approximately 10 basis points hurt from higher non-core
restructuring charges, core operating margin increased 140 basis
points including approximately 50 basis points of negative foreign
exchange impacts. On a currency-neutral basis, core operating
margin increased 190 basis points, including total productivity
cost savings of 440 basis points.
Fiscal Year 2020 Results
Fiscal year 2020 net sales were $71 billion, an increase of five
percent versus the previous year. Excluding the impact of foreign
exchange, acquisitions and divestitures, organic sales increased
six percent, driven by a four percent increase in organic volume.
Diluted net earnings per share were $4.96, an increase of 247%
versus the prior year primarily due to the base period Gillette
Shave Care business impairment charge. Core earnings per share were
$5.12, an increase of 13% versus the prior year, driven by the net
sales increase, an increase in core operating profit margin and a
reduction in the core effective tax rate. Currency-neutral core EPS
increased 17%.
Fiscal Year 2021 Guidance
The Company expects fiscal 2021 all-in sales growth in the range
of one to three percent versus the prior fiscal year. This includes
an estimated one percent negative impact from foreign exchange. The
Company is targeting organic sales growth in the range of two to
four percent.
P&G expects fiscal 2021 GAAP diluted net earnings per share
growth in the range of six to ten percent versus fiscal 2020 GAAP
EPS of $4.96. Core earnings per share growth for fiscal 2021 is
expected to be in the range of three to seven percent versus fiscal
2020 core EPS of $5.12. The Company said its current outlook
expects a $300 million after-tax headwind from foreign exchange
impacts will be largely offset by a $275 million after-tax benefit
from lower commodity costs.
The Company said it estimates the combined impacts of higher
interest expense and lower interest income will be a $150 million
after-tax earnings headwind in fiscal 2021.
P&G said it expects an effective tax rate in the range of
18% to 19% in fiscal 2021.
Capital spending is estimated to be in the range of 4% to 5% of
fiscal 2021 net sales.
The Company is not able to reconcile its forward-looking
non-GAAP cash flow measure without unreasonable efforts because the
Company cannot predict the timing and amounts of discrete cash
items, such as acquisitions, divestitures, or impairments, which
could significantly impact GAAP results.
P&G is targeting adjusted free cash flow productivity of 90%
and expects to pay approximately $8 billion in dividends and
repurchase $6 billion to $8 billion of common shares in fiscal
2021.
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,” “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, except to
the extent required by law.
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 reduced market
growth rates, and to generate sufficient income and cash flow to
allow the Company to affect the expected share repurchases and
dividend payments; (3) the ability to manage disruptions in credit
markets or changes to our credit rating; (4) the ability to
maintain key manufacturing and supply arrangements (including
execution of supply chain optimizations and sole supplier and sole
manufacturing plant arrangements) and to manage disruption of
business due to factors outside of our control, such as natural
disasters, acts of war or terrorism, or disease outbreaks; (5) the
ability to successfully manage cost fluctuations and pressures,
including prices of commodities and raw materials, and costs of
labor, transportation, energy, pension and healthcare; (6) the
ability to stay on the leading edge of innovation, obtain necessary
intellectual property protections and successfully respond to
changing consumer habits and technological advances attained by,
and patents granted to, competitors; (7) the ability to compete
with our local and global competitors in new and existing sales
channels, including by successfully responding to competitive
factors such as prices, promotional incentives and trade terms for
products; (8) the ability to manage and maintain key customer
relationships; (9) the ability to protect our reputation and brand
equity by successfully managing real or perceived issues, including
concerns about safety, quality, ingredients, efficacy or similar
matters that may arise; (10) the ability to successfully manage the
financial, legal, reputational and operational risk associated with
third-party relationships, such as our suppliers, contract
manufacturers, distributors, contractors and external business
partners; (11) the ability to rely on and maintain key company and
third party information and operational technology systems,
networks and services, and maintain the security and functionality
of such systems, networks and services and the data contained
therein; (12) the ability to successfully manage uncertainties
related to changing political conditions (including the United
Kingdom’s exit from the European Union) and potential implications
such as exchange rate fluctuations and market contraction; (13) the
ability to successfully manage regulatory and legal requirements
and matters (including, without limitation, those laws and
regulations involving product liability, product and packaging
composition, intellectual property, labor and employment,
antitrust, data protection, tax, environmental, and accounting and
financial reporting) and to resolve pending matters within current
estimates; (14) the ability to manage changes in applicable tax
laws and regulations including maintaining our intended tax
treatment of divestiture transactions; (15) the ability to
successfully manage our ongoing acquisition, divestiture and joint
venture activities, in each case to achieve the Company’s overall
business strategy and financial objectives, without impacting the
delivery of base business objectives; (16) the ability to
successfully achieve productivity improvements and cost savings and
manage ongoing organizational changes, while successfully
identifying, developing and retaining key employees, including in
key growth markets where the availability of skilled or experienced
employees may be limited; and (17) the ability to successfully
manage the demand, supply, and operational challenges associated
with a disease outbreak, including epidemics, pandemics, or similar
widespread public health concerns (including the novel coronavirus,
COVID-19, outbreak). For additional information concerning factors
that could cause actual results and events to differ materially
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
2020
2019
% Chg
2020
2019
% Chg
NET SALES
$
17,698
$
17,094
4%
$
70,950
$
67,684
5%
Cost of products sold
8,942
8,938
—%
35,250
34,768
1%
GROSS PROFIT
8,756
8,156
7%
35,700
32,916
8%
Selling, general and administrative
expense
5,275
5,003
5%
19,994
19,084
5%
Goodwill and indefinite-lived intangibles
impairment charges
—
8,345
—
8,345
OPERATING INCOME/(LOSS)
3,481
(5,192
)
N/A
15,706
5,487
186%
Interest expense
(157
)
(111
)
41%
(465
)
(509
)
(9)%
Interest income
22
52
(58)%
155
220
(30)%
Other non-operating income, net
115
186
(38)%
438
871
(50)%
EARNINGS/(LOSS) BEFORE INCOME
TAXES
3,461
(5,065
)
N/A
15,834
6,069
161%
Income taxes
675
172
292%
2,731
2,103
30%
NET EARNINGS/(LOSS)
2,786
(5,237
)
N/A
13,103
3,966
230%
Less: Net earnings/(loss) attributable to
noncontrolling interests
(14
)
4
N/A
76
69
10%
NET EARNINGS/(LOSS) ATTRIBUTABLE TO
PROCTER & GAMBLE (1)
$
2,800
$
(5,241
)
N/A
$
13,027
$
3,897
234%
EFFECTIVE TAX RATE
19.5
%
(3.4
)%
17.2
%
34.7
%
NET EARNINGS PER COMMON SHARE:
(2)
Basic
$
1.10
$
(2.12
)
N/A
$
5.13
$
1.45
254%
Diluted
$
1.07
$
(2.12
)
N/A
$
4.96
$
1.43
247%
DIVIDENDS PER COMMON SHARE
$
0.7907
$
0.7459
6%
$
3.0284
$
2.8975
5%
Diluted Weighted Average Common Shares
Outstanding
2,612.1
2,509.6
2,625.8
2,539.5
COMPARISONS AS A % OF NET SALES
Basis Pt Change
Basis Pt Change
Gross margin
49.5
%
47.7
%
180
50.3
%
48.6
%
170
Selling, general and administrative
expense
29.8
%
29.3
%
50
28.2
%
28.2
%
—
Operating margin
19.7
%
(30.4
)%
5,010
22.1
%
8.1
%
1,400
Earnings/(loss) before income taxes
19.6
%
(29.6
)%
4,920
22.3
%
9.0
%
1,330
Net earnings/(loss)
15.7
%
(30.6
)%
4,630
18.5
%
5.9
%
1,260
Net earnings/(loss) attributable to
Procter & Gamble
15.8
%
(30.7
)%
4,650
18.4
%
5.8
%
1,260
(1)
Net earnings attributable to
Procter & Gamble for the three and twelve months ended June 30,
2019 were negatively impacted by the impairment charges of $8.3
billion related to Shave Care goodwill and Gillette
indefinite-lived intangible assets.
(2)
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 Except Per
Share Amounts)
Consolidated Earnings
Information
Three Months Ended June 30,
2020
Net Sales
% Change
Versus Year
Ago
Earnings/(Loss)
Before
Income Taxes
% Change
Versus Year
Ago
Net Earnings/
(Loss)
% Change
Versus Year
Ago
Beauty
$3,176
—%
$720
3%
$569
3%
Grooming
1,510
(5)%
388
(33)%
311
(33)%
Health Care
2,015
(1)%
361
(13)%
272
(12)%
Fabric & Home Care
6,290
11%
1,539
27%
1,194
28%
Baby, Feminine & Family Care
4,618
3%
1,194
33%
913
34%
Corporate
89
(23)%
(741)
N/A
(473)
N/A
Total Company
$17,698
4%
$3,461
N/A
$2,786
N/A
Three Months Ended June 30,
2020
(Percent Change vs. Year Ago)
(1)
Volume with
Acquisitions &
Divestitures
Volume Excluding
Acquisitions &
Divestitures
Foreign
Exchange
Price
Mix
Other (2)
Net Sales
Growth
Beauty
2%
2%
(4)%
2%
—%
—%
—%
Grooming
(4)%
(4)%
(4)%
2%
1%
—%
(5)%
Health Care
(1)%
(1)%
(3)%
1%
2%
—%
(1)%
Fabric & Home Care
8%
8%
(3)%
2%
4%
—%
11%
Baby, Feminine & Family Care
1%
1%
(2)%
3%
1%
—%
3%
Total Company
3%
3%
(3)%
2%
1%
1%
4%
Twelve Months Ended June 30,
2020
Net Sales
% Change
Versus Year
Ago
Earnings/(Loss)
Before
Income Taxes
% Change
Versus Year
Ago
Net Earnings/
(Loss)
% Change
Versus Year
Ago
Beauty
$13,359
4%
$3,437
5%
$2,737
4%
Grooming
6,069
(2)%
1,613
(9)%
1,329
(13)%
Health Care
9,028
10%
2,156
9%
1,652
9%
Fabric & Home Care
23,735
7%
5,426
18%
4,154
18%
Baby, Feminine & Family Care
18,364
3%
4,534
26%
3,465
27%
Corporate
395
(18)%
(1,332)
N/A
(234)
N/A
Total Company
$70,950
5%
$15,834
161%
$13,103
230%
Twelve Months Ended June 30,
2020
(Percent Change vs. Year Ago)
(1)
Volume with
Acquisitions &
Divestitures
Volume Excluding
Acquisitions &
Divestitures
Foreign
Exchange
Price
Mix
Other (2)
Net Sales
Growth
Beauty
3%
2%
(2)%
2%
1%
—%
4%
Grooming
(1)%
(1)%
(3)%
2%
—%
—%
(2)%
Health Care
10%
5%
(2)%
1%
1%
—%
10%
Fabric & Home Care
6%
7%
(1)%
1%
1%
—%
7%
Baby, Feminine & Family Care
3%
3%
(2)%
1%
1%
—%
3%
Total Company
4%
4%
(2)%
1%
1%
1%
5%
(1)
Net sales percentage changes are
approximations based on quantitative formulas that are consistently
applied.
(2)
Other includes the sales mix
impact from acquisitions and 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
2020
2019
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, BEGINNING OF YEAR
$
4,239
$
2,569
OPERATING ACTIVITIES
Net earnings
13,103
3,966
Depreciation and amortization
3,013
2,824
Share-based compensation expense
558
515
Deferred income taxes
(596
)
(411
)
Loss/(gain) on sale of assets
7
(678
)
Goodwill and indefinite-lived intangible
impairment charges
—
8,345
Change in accounts receivable
634
(276
)
Change in inventories
(637
)
(239
)
Change in accounts payable, accrued and
other liabilities
1,923
1,856
Change in other operating assets and
liabilities
(710
)
(973
)
Other
108
313
TOTAL OPERATING ACTIVITIES
17,403
15,242
INVESTING ACTIVITIES
Capital expenditures
(3,073
)
(3,347
)
Proceeds from asset sales
30
394
Acquisitions, net of cash acquired
(58
)
(3,945
)
Purchases of short-term investments
—
(158
)
Proceeds from sales and maturities of
investment securities
6,151
3,628
Change in other investments
(5
)
(62
)
TOTAL INVESTING ACTIVITIES
3,045
(3,490
)
FINANCING ACTIVITIES
Dividends to shareholders
(7,789
)
(7,498
)
Increases/(reductions) in short-term
debt
2,345
(2,215
)
Additions to long-term debt
4,951
2,367
Reductions of long-term debt
(2,447
)
(969
)
Treasury stock purchases
(7,405
)
(5,003
)
Impact of stock options and other
1,978
3,324
TOTAL FINANCING ACTIVITIES
(8,367
)
(9,994
)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(139
)
(88
)
CHANGE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
11,942
1,670
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, END OF YEAR
$
16,181
$
4,239
THE PROCTER & GAMBLE
COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per
Share Amounts)
Condensed Consolidated Balance
Sheets
June 30, 2020
June 30, 2019
Cash and cash equivalents
$
16,181
$
4,239
Available-for-sale investment
securities
—
6,048
Accounts receivable
4,178
4,951
Inventories
5,498
5,017
Prepaid expenses and other current
assets
2,130
2,218
TOTAL CURRENT ASSETS
27,987
22,473
PROPERTY, PLANT AND EQUIPMENT,
NET
20,692
21,271
GOODWILL
39,901
40,273
TRADEMARKS AND OTHER INTANGIBLE ASSETS,
NET
23,792
24,215
OTHER NONCURRENT ASSETS
8,328
6,863
TOTAL ASSETS
$
120,700
$
115,095
Accounts payable
$
12,071
$
11,260
Accrued and other liabilities
9,722
9,054
Debt due within one year
11,183
9,697
TOTAL CURRENT LIABILITIES
32,976
30,011
LONG-TERM DEBT
23,537
20,395
DEFERRED INCOME TAXES
6,199
6,899
OTHER NONCURRENT LIABILITIES
11,110
10,211
TOTAL LIABILITIES
73,822
67,516
TOTAL SHAREHOLDERS' EQUITY
46,878
47,579
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
120,700
$
115,095
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 Procter &
Gamble's July 30, 2020 earnings release and the reconciliation to
the most closely related GAAP measure. We believe that these
measures provide useful perspective on underlying business trends
(i.e., trends excluding non-recurring or unusual items) and results
and provide a supplemental measure of year-on-year results. The
non-GAAP measures described below are used by management in making
operating decisions, allocating financial resources and for
business strategy purposes. These measures may be useful to
investors as they provide supplemental information about business
performance and provide investors a view of our business results
through the eyes of management. 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 our business results. 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:
Incremental Restructuring: The
Company has had and continues to have an ongoing level of
restructuring activities. Such activities have resulted in ongoing
annual restructuring related charges of approximately $250 - $500
million before tax. In 2012, the Company began a $10 billion
strategic productivity and cost savings initiative that included
incremental restructuring activities. In 2017, we communicated
details of an additional multi-year productivity and cost savings
plan. This results in incremental restructuring charges to
accelerate productivity efforts and cost savings. The adjustment to
Core earnings includes only the restructuring costs above what we
believe are the normal recurring level of restructuring costs.
Gain on Dissolution of the PGT Healthcare
Partnership: The Company dissolved our PGT Healthcare
partnership, a venture between the Company and Teva Pharmaceuticals
Industries, Ltd (Teva) in the OTC consumer healthcare business,
during the year ended June 30, 2019. The transaction was accounted
for as a sale of the Teva portion of the PGT business; the Company
recognized an after-tax gain on the dissolution of $353
million.
Shave Care Impairment: In the
fourth quarter of fiscal 2019, the Company recognized a non-cash
after-tax impairment charge of $8.0 billion ($8.3 billion before
tax) related to the Shave Care reporting unit and the Gillette
indefinite-lived intangible asset. This was comprised of a before
and after-tax impairment charge of $6.8 billion related to goodwill
and an after-tax impairment charge of $1.2 billion ($1.6 billion
before tax) related to the Gillette indefinite-lived intangible
asset.
Anti-Dilutive Impacts: The Shave
Care impairment charges caused preferred shares that are normally
dilutive (and hence, normally assumed converted for purposes of
determining diluted earnings per share) to be anti-dilutive.
Accordingly, for U.S. GAAP the preferred shares were not assumed to
be converted into common shares for diluted earnings per share and
the related dividends paid to the preferred shareholders were
deducted from net income to calculate net earnings available to
common shareholders. As a result of the non-GAAP Shave Care
impairment adjustment, these instruments are dilutive for non-GAAP
core earnings per share.
We do not view the above items to be part of our sustainable
results and their exclusion from Core earnings measures provides a
more comparable measure of year-on-year results. These items are
also excluded when evaluating senior management in determining
their at-risk compensation.
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. Management believes this measure
provides investors with a supplemental understanding of underlying
sales trends by providing sales growth on a consistent basis.
Core operating profit margin*: Core
operating profit margin is a measure of the Company's operating
margin adjusted for items as indicated. Management believes this
non-GAAP measure provides a supplemental perspective to the
Company’s operating efficiency over time.
Core gross margin: Core gross
margin is a measure of the Company's gross margin adjusted for
items as indicated. Management believes this non-GAAP measure
provides a supplemental perspective to the Company’s operating
efficiency over time.
Core selling, general and administrative
(SG&A) expense as a percentage of net sales: Core
SG&A expense as a percentage of net sales is a measure of the
Company's selling, general and administrative expenses adjusted for
items as indicated. Management believes this non-GAAP measure
provides a supplemental perspective to the Company's operating
efficiency over time.
Core EPS and currency-neutral Core
EPS*: Core earnings per share, or Core EPS, is a measure of
the Company's diluted net earnings per share 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.
Management views these non-GAAP measures as a useful supplemental
measure of Company performance over time.
Adjusted free cash flow: Adjusted
free cash flow is defined as operating cash flow less capital
spending, tax payments relating to the Merck consumer OTC
Healthcare acquisition and the payment of the transitional tax
resulting from the comprehensive U.S. legislation commonly referred
to as the Tax Cuts and Jobs Act in December 2017 (the "U.S. Tax
Act"). Adjusted free cash flow represents the cash that the Company
is able to generate after taking into account planned maintenance
and asset expansion. Management views adjusted free cash flow as an
important measure because it is one factor used in determining the
amount of cash available for dividends, share repurchases,
acquisitions and other discretionary investments.
Adjusted free cash flow
productivity*: Adjusted free cash flow productivity is
defined as the ratio of adjusted free cash flow to net earnings. We
view adjusted free cash flow productivity as a useful measure to
help investors understand P&G’s ability to generate cash.
Adjusted free cash flow productivity is used by management in
making operating decisions, in allocating financial resources and
for budget planning purposes. This measure is used in assessing the
achievement of management goals for at-risk compensation. The
Company's long-term target is to generate annual adjusted free cash
flow productivity at or above 90%.
* Measure is used to evaluate senior management and is a factor
in determining their at-risk compensation.
THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Three Months Ended June 30,
2020
AS REPORTED
(GAAP)
INCREMENTAL
RESTRUCTURING
ROUNDING
NON-GAAP (CORE)
COST OF PRODUCTS SOLD
8,942
(246
)
—
8,696
GROSS PROFIT
8,756
246
—
9,002
GROSS MARGIN
49.5
%
1.4
%
—
%
50.9
%
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSE
5,275
8
1
5,284
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE AS A % OF NET SALES
29.8
%
—
%
0.1
%
29.9
%
OPERATING INCOME
3,481
238
(1
)
3,718
OPERATING PROFIT MARGIN
19.7
%
1.3
%
—
%
21.0
%
NET EARNINGS ATTRIBUTABLE TO
P&G
2,800
226
—
3,026
Core EPS
DILUTED NET EARNINGS PER COMMON SHARE
(1)
1.07
0.09
—
1.16
CURRENCY IMPACT TO CORE
EARNINGS
0.06
CURRENCY-NEUTRAL CORE EPS
1.22
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
2,612.1
COMMON STOCK OUTSTANDING AS OF JUNE 30,
2020
2,479.7
(1)
Diluted net earnings per share
are calculated on Net earnings attributable to Procter &
Gamble.
CHANGE VERSUS YEAR AGO
CORE GROSS MARGIN
210
BPS
CORE SELLING GENERAL & ADMINISTRATIVE
EXPENSE AS A % OF NET SALES
70
BPS
CORE OPERATING PROFIT MARGIN
140
BPS
CORE EPS
5
%
CURRENCY-NEUTRAL CORE EPS
11
%
THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Three Months Ended June 30,
2019
AS REPORTED
(GAAP)
ANTI-DILUTIVE
IMPACTS
INCREMENTAL
RESTRUCTURING
SHAVE CARE
IMPAIRMENT
ROUNDING
NON-GAAP
(CORE)
COST OF PRODUCTS SOLD
8,938
—
(192
)
—
—
8,746
GROSS PROFIT
8,156
—
192
—
—
8,348
GROSS MARGIN
47.7
%
—
%
1.1
%
—
%
—
%
48.8
%
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSE
5,003
—
(5
)
—
—
4,998
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE AS A % OF NET SALES
29.3
%
—
%
—
%
—
%
(0.1
)%
29.2
%
OPERATING INCOME
(5,192
)
—
197
8,345
—
3,350
OPERATING PROFIT MARGIN
(30.4
)%
—
%
1.1
%
48.8
%
0.1
%
19.6
%
NET EARNINGS ATTRIBUTABLE TO
P&G
(5,241
)
—
164
7,978
—
2,901
Core EPS:
Diluted Net Earnings attributable to
common shareholders (1)
(5,308
)
67
164
7,978
—
2,901
Diluted Weighted Average Common Shares
Outstanding (1)
2,509.6
136.3
2,645.9
DILUTED NET EARNINGS PER COMMON
SHARE
(2.12
)
0.14
0.06
3.02
—
1.10
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
2,509.6
(1)
The reduction in net earnings
from the Shave Care impairment charge caused the preferred shares
outstanding to be anti-dilutive. Accordingly, for U.S. GAAP, the
preferred shares were not assumed to be converted into common
shares for diluted earnings per share and the related dividends
paid to the preferred shareholders were deducted from net income to
calculate earnings available to common shareholders. Excluding the
impairment charge results in higher non-GAAP earnings, which causes
the preferred shares to be dilutive. The adjustments in this row
are made to reflect the dilutive preferred share impact resulting
from the Shave Care impairment adjustment. Weighted average shares
also add back share-based equity awards that were anti-dilutive for
U.S. GAAP purposes as a result of the Shave Care impairment.
THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Twelve Months Ended June 30,
2020
AS REPORTED (GAAP)
INCREMENTAL
RESTRUCTURING
ROUNDING
NON-GAAP (CORE)
COST OF PRODUCTS SOLD
35,250
(519
)
—
34,731
GROSS PROFIT
35,700
519
—
36,219
GROSS MARGIN
50.3
%
0.7
%
—
%
51.0
%
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSE
19,994
81
1
20,076
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE AS A % OF NET SALES
28.2
%
0.1
%
—
%
28.3
%
OPERATING INCOME
15,706
438
(1
)
16,143
OPERATING PROFIT MARGIN
22.1
%
0.6
%
0.1
%
22.8
%
NET EARNINGS ATTRIBUTABLE TO
P&G
13,027
415
—
13,442
Core EPS:
DILUTED NET EARNINGS PER COMMON SHARE
(1)
4.96
0.16
—
5.12
CURRENCY IMPACT TO CORE
EARNINGS
0.15
CURRENCY-NEUTRAL CORE EPS
5.27
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
2,625.8
COMMON STOCK OUTSTANDING AS OF JUNE 30,
2019
2,479.7
(1)
Diluted net earnings per share
are calculated on Net earnings attributable to Procter &
Gamble.
CHANGE VERSUS YEAR AGO
CORE EPS
13
%
CURRENCY NEUTRAL CORE EPS
17
%
THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Twelve Months Ended June 30,
2019
AS
REPORTED
(GAAP)
ANTI-
DILUTIVE
IMPACTS
INCREMENTAL
RESTRUCTURING
SHAVE CARE
IMPAIRMENT
GAIN ON
DISSOLUTION
OF PGT
PARTNERSHIP
ROUNDING
NON-
GAAP
(CORE)
COST OF PRODUCTS SOLD
34,768
—
(426
)
—
—
—
34,342
GROSS PROFIT
32,916
—
426
—
—
—
33,342
GROSS MARGIN
48.6
%
—
%
0.6
%
—
%
—
%
0.1
%
49.3
%
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSE
19,084
—
23
—
—
(1
)
19,106
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE AS A % OF NET SALES
28.2
%
—
%
—
%
—
%
—
%
—
%
28.2
%
OPERATING INCOME
5,487
—
403
8,345
—
1
14,236
OPERATING PROFIT MARGIN
8.1
%
—
%
0.6
%
12.3
%
—
%
—
%
21.0
%
NET EARNINGS ATTRIBUTABLE TO
P&G
3,897
—
354
7,978
(353
)
1
11,877
Core EPS:
Diluted Net Earnings attributable to
common shareholders (1)
3,634
263
354
7,978
(353
)
1
11,877
Diluted Weighted Average Common Shares
Outstanding (1)
2,539.5
90.2
2,629.7
DILUTED NET EARNINGS PER COMMON
SHARE
1.43
0.06
0.13
3.03
(0.13
)
—
4.52
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
2,539.5
(1)
The reduction in net earnings
from the current period charge for the Shave Care impairment caused
the preferred shares outstanding to be anti-dilutive. Accordingly,
for U.S. GAAP, the preferred shares were not assumed to be
converted into common shares for diluted earnings per share and the
related dividends paid to the preferred shareholders were deducted
from net income to calculate earnings available to common
shareholders. Excluding the impairment charge results in higher
non-GAAP earnings, which causes the preferred shares to be
dilutive. The adjustments in this row are made to reflect the
dilutive preferred share impact resulting from the Shave Care
impairment adjustment.
Organic sales growth:
The reconciliation of reported sales growth to organic sales is
as follows:
April - June
2020
Net
Sales
Growth
Foreign
Exchange
Impact
Acquisition &
Divestiture
Impact/Other*
Organic
Sales
Growth
Beauty
—%
4%
(1)%
3%
Grooming
(5)%
4%
—%
(1)%
Health Care
(1)%
3%
—%
2%
Fabric & Home Care
11%
3%
—%
14%
Baby, Feminine & Family Care
3%
2%
—%
5%
Total Company
4%
3%
(1)%
6%
FY
2020
Net
Sales
Growth
Foreign
Exchange
Impact
Acquisition &
Divestiture
Impact/Other*
Organic
Sales
Growth
Total Company
5%
2%
(1)%
6%
* Other includes the sales mix impact from
acquisitions and divestitures and rounding impacts necessary to
reconcile volume to net sales.
Total
Company
Net
Sales Growth
Foreign
Exchange Impact
Organic
Sales
Growth
FY 2021 (Estimate)
+1% to +3%
+1%
+2% to +4%
Core EPS:
Total
Company
Diluted
EPS
Growth
Impact
of Change in Non-Core Items*
Core
EPS
Growth
FY 2021 (Estimate)
+6% to +10%
(3)%
+3% to +7%
* Includes impact of incremental non-core
restructuring charges in fiscal 2020.
Adjusted free cash flow (dollars in
millions):
Three
Months Ended June 30, 2020
Operating Cash Flow
Capital
Spending
Adjustments to
Operating Cash Flow (1)
Adjusted
Free Cash Flow
$4,806
$(658)
$328
$4,476
(1)
Adjustments to Operating Cash
Flow relates to tax payments for the Merck OTC Consumer Healthcare
acquisition
Twelve
Months Ended June 30, 2020
Operating Cash Flow
Capital
Spending
Adjustments to
Operating Cash Flow (2)
Adjusted
Free Cash Flow
$17,403
$(3,073)
$543
$14,873
(2)
Adjustments to Operating Cash
Flow relates to tax payments for the Merck OTC Consumer Healthcare
acquisition and the transitional tax resulting from the U.S. Tax
Act.
Adjusted free cash flow productivity
(dollars in millions):
Three
Months Ended June 30, 2020
Adjusted
Free Cash Flow
Net
Earnings
Adjusted
Free Cash Flow
Productivity
$4,476
$2,786
161%
Twelve
Months Ended June 30, 2020
Adjusted
Free Cash Flow
Net
Earnings
Adjusted
Free Cash Flow
Productivity
$14,873
$13,103
114%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005458/en/
P&G Media Contacts:
Damon Jones, +1-513-983-0190 Jennifer Corso, +1-513-983-2570
P&G Investor Relations
Contact: John Chevalier, +1-513-983-9974
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