News Release
| P&G Fiscal Year and Fourth Quarter EPS Exceed Expectations |
 |
CINCINNATI, Aug. 5, 2009, 2009 /PRNewswire-FirstCall via COMTEX/ -- The Procter & Gamble Company (NYSE:PG) announced diluted net earnings per share for the fiscal year ending June 30, 2009 of $4.26, up 17 percent and exceeding the Company's guidance range of $4.20 to $4.25. Core EPS, which excludes the current year impact from the sale of the Folgers business and certain tax adjustments in the prior fiscal year, increased eight percent versus fiscal 2008. For the April - June quarter, diluted net earnings per share were $0.80, above the Company's guidance range of $0.74 to $0.79 for the quarter. "In fiscal 2009 and particularly in the fourth quarter, P&G faced one of the most difficult macroeconomic environments in decades," said Chairman of the Board A.G. Lafley. "We made choices to focus on cash and cost discipline, maintain investments in long-term growth opportunities and to protect the structural economics of our businesses around the world. We delivered strong free cash flow - the financial lifeblood of the business - while also delivering organic sales and earnings-per-share results that balanced short-term returns and long-term investments." "In fiscal 2010, we will accelerate investments in innovation, portfolio expansion and consumer value to grow our core business and to serve more consumers in both developed and developing markets," said Chief Executive Officer Bob McDonald. "We will also continue to drive simplification efforts and leverage P&G's scale to increase productivity, improve execution and lower costs. All of these investments are focused on strengthening the capabilities required to improve more lives more completely in more parts of the world and deliver sustainable long-term growth." Fiscal Year Executive Summary
Fiscal Year Discussion Net sales decreased three percent to $79.0 billion for fiscal 2009 driven by unfavorable foreign exchange impacts of four percent as the U.S. dollar strengthened against key foreign currencies. Organic sales increased two percent primarily due to price increases taken across all segments which added five percent to net sales. Product mix reduced net sales by one percent. Unit volume declined three percent as the global economic downturn, credit crisis and price increases contributed to market size declines and trade inventory reductions. Organic volume, which excludes the impact of acquisitions and divestitures, was down two percent for the fiscal year. Operating margin was in line with the prior year including approximately 50 basis points of incremental Folgers-related restructuring charges and approximately 250 basis points of net incremental commodity and energy cost increases. Gross margin declined 80 basis points to 50.8 percent of net sales in 2009 due mainly to higher commodity and energy costs and unfavorable foreign exchange impacts, partially offset by price increases and manufacturing cost savings. Total selling, general and administrative expenses (SG&A) decreased six percent during the fiscal year to $24.0 billion driven primarily by foreign currency impacts and cost reduction efforts. SG&A as a percentage of net sales was down 80 basis points primarily due to lower marketing costs and the impact of foreign currency transaction gains on working capital balances caused by strengthening of the U.S. dollar. Diluted net earnings per share increased 17 percent during the fiscal year to $4.26. The increase was due mainly to the gain on the sale of the Folgers business. Net earnings from continuing operations declined four percent driven by unfavorable foreign exchange, higher commodity costs, lower unit volume and a higher tax rate. These impacts were mostly offset by price increases, manufacturing cost savings and marketing spending efficiencies. The tax rate on continuing operations increased mainly due to significant tax benefits in the base period related to adjustments to tax reserves. Core EPS grew eight percent in fiscal 2009. Operating cash flow was $14.9 billion for the fiscal year. Free cash flow was 102 percent of net earnings excluding the gain on the Folgers sale and $11.7 billion for the year. Capital expenditures were 4.1 percent of net sales as the Company continued to invest in new manufacturing facilities. The Company repurchased over $6 billion of P&G stock in fiscal 2009 and $16.3 billion since the inception of the previously announced three-year share repurchase program. Fiscal Year Business Segment Discussion Beauty GBU
Health & Well-Being GBU
Household Care GBU
April - June Quarter Discussion Net sales for the quarter decreased 11 percent to $18.7 billion. Unfavorable foreign exchange reduced net sales by nine percent due to the strengthening of the U.S. dollar against key foreign currencies. Volume declined five percent including a negative one percent impact from divestitures. Organic volume declined four percent driven primarily by significant pricing taken in developing regions to offset the transaction impact of foreign exchange, market contractions mainly in discretionary categories and some share loss in developed regions following price increases. Price increases added five percent to net sales and product mix had a negative two percent impact on net sales. Organic sales declined one percent for the quarter. Operating margin increased 120 basis points, which included 80 basis points of incremental restructuring charges related to the Folgers transaction. The increase in operating margin was primarily due to higher gross margin and lower SG&A as a percentage of net sales. Gross margin increased 90 basis points driven by the full impact of price increases as the impact of higher commodity costs moderated versus prior quarters. SG&A as a percentage of net sales was down 30 basis points primarily due to a reduction in marketing costs including lower media rates. Diluted net earnings per share were $0.80, a decrease of 13 percent versus the prior year period. Core earnings per share increased six percent. Net earnings decreased 18 percent for the quarter to $2.5 billion mainly due to lower net sales and a higher effective tax rate, partially offset by improved operating margin. The tax rate increase resulted primarily from significant adjustments to tax reserves in the base period. July - September 2009 Quarter Guidance For the July - September quarter, P&G expects organic sales growth of zero to negative three percent. Foreign exchange is expected to reduce net sales by about seven percent resulting in net sales down seven to 10 percent versus the prior year. Earnings per share from continuing operations are expected to be $0.95 to $1.00. While P&G does expect some non-operating gains as a result of ongoing portfolio optimization in the July - September quarter, the earnings growth rate will be negatively impacted by the comparison to a base period that included several divestiture gains. Fiscal Year 2010 Guidance For fiscal year 2010, P&G confirmed previous guidance for organic sales growth of one to three percent. Foreign exchange is expected to reduce net sales by zero to one percent, which is modest improvement versus previous guidance of a two to three percent negative impact. P&G reiterated its earnings per share guidance of $3.65 to $3.80 from continuing operations and plans to re-invest the benefit of improved foreign exchange into long-term growth. Forward-Looking Statements All statements, other than statements of historical fact included in this release, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on financial data, market assumptions and business plans available only as of the time the statements are made, which may become out of date or incomplete. We assume no obligation to update any forward-looking statement as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations. In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) the ability to achieve business plans, including growing existing sales and volume profitably despite high levels of competitive activity, especially with respect to the product categories and geographical markets (including developing markets) in which the Company has chosen to focus; (2) the ability to successfully manage ongoing acquisition and divestiture activities to achieve the cost and growth synergies in accordance with the stated goals of these transactions without impacting the delivery of base business objectives; (3) the ability to successfully manage ongoing organizational changes designed to support our growth strategies, while successfully identifying, developing and retaining key employees; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain key manufacturing and supply sources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory, tax and legal requirements and matters (including product liability, patent, intellectual property, competition law matters, and tax policy), and to resolve pending matters within current estimates; (7) the ability to successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead areas, including the Company's outsourcing projects; (8) the ability to successfully manage currency (including currency issues in volatile countries, such as Venezuela, China and India), debt, interest rate and commodity cost exposures and significant credit or liquidity issues; (9) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's significant geographical markets, as well as any political and/or economic uncertainty and disruptions due to a global or regional credit crisis or terrorist and other hostile activities; (10) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (11) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (12) the ability to successfully manage increases in the prices of raw materials used to make the Company's products; (13) the ability to stay close to consumers in an era of increased media fragmentation; (14) the ability to stay on the leading edge of innovation and maintain a positive reputation on our brands; and 15) the ability to rely on and maintain key information technology systems. 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 Three billion times a day, P&G brands touch the lives of people around the world. The company has one of the strongest portfolios of trusted, quality, leadership brands, including Pampers(R), Tide(R), Ariel(R), Always(R), Whisper(R), Pantene(R), Mach3(R), Bounty(R), Dawn(R), Gain(R), Pringles(R), Charmin(R), Downy(R), Lenor(R), Iams(R), Crest(R), Oral-B(R), Actonel(R), Duracell(R), Olay(R), Head & Shoulders(R), Wella(R), Gillette(R), Braun(R) and Fusion(R). The P&G community includes approximately 135,000 employees working in over 80 countries worldwide. Please visit http://www.pg.com for the latest news and in-depth information about P&G and its brands. 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. The reconciliation of reported sales growth to organic sales for the fiscal year and April - June quarter is as follows:
FY 2009 Net Foreign Acquisition/ Organic
Sales Exchange Divestiture Sales
Growth Impact Impact Growth
------ -------- ------------ -------
Beauty -4% 4% 1% 1%
Grooming -9% 6% 1% -2%
Health Care -7% 5% 1% -1%
Snacks and Pet
Care -3% 4% 0% 1%
Fabric Care and
Home Care -2% 5% 0% 3%
Baby Care and
Family Care 1% 4% 2% 7%
------------- --- --- --- ---
Total P&G -3% 4% 1% 2%
--------- --- --- --- ---
Total P&G (Apr - Jun '09) -11% 9% 1% -1%
------------------------ --- --- --- ---
Core EPS: This is a measure of the Company's earnings per share excluding the net tax benefits from a number of significant adjustments to tax reserves during fiscal year 2008 and the net impact from the sale of the Folgers business. The net impact from the sale of the Folgers business includes the results of the Folgers business and the gain on the sale of the Folgers business, both reflected in discontinued operations, and incremental restructuring charges incurred to offset the dilutive impact of the Folgers divestiture. These incremental restructuring charges represent restructuring costs incurred beyond the level expensed during the base period which were consistent with the Company's ongoing restructuring plans. We do not view these items to be part of our sustainable results. We believe the core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. The table below provides a reconciliation of reported diluted net earnings per share to core earnings per share:
AMJ 08 AMJ 09 FY 2008 FY 2009
------ ------ ------- -------
Diluted Net Earnings $0.92 $0.80 $3.64 $4.26
Folgers Results and Gain
on the Folgers
Transaction ($0.02) - ($0.08) ($0.68)
------ - ------- ------
Diluted Net Earnings -
Continuing Operations
Per Share $0.90 $0.80 $3.56 $3.58
Significant Adjustments
to Tax Reserves ($0.12) - ($0.14) -
Incremental
Folgers-related
Restructuring Charges - $0.04 - $0.09
Rounding Impacts - ($0.01) ($0.01)
----- ----- ----- -----
Core EPS $0.78 $0.83 $3.41 $3.67
===== ===== ===== =====
Core EPS Growth 6% 8%
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 in determining the amount of cash available for dividends and discretionary investment. Free cash flow is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. Free Cash Flow Productivity: Free cash flow productivity is defined as the ratio of free cash flow to net earnings. The Company's long-term target is to generate free cash at or above 90 percent of net earnings. Free cash flow is also one of the measures used to evaluate senior management. Given the significant size of the gain on the Folgers sale and our belief that this is not part of our sustainable business, we have excluded the gain from our calculation. We believe this provides a better perspective of our underlying liquidity trends. The reconciliation of free cash flow and free cash flow productivity is provided below (amounts in millions):
Net Free
Earnings Cash
Operating Free Excluding Flow
Cash Capital Cash Net Folgers Folgers Produc-
Flow Spending Flow Earnings Gain Gain tivity
--------- -------- ------ -------- ------ -------- ------
FY 2009 $14,919 ($3,238) $11,681 $13,436 $2,011 $11,425 102%
--------- -------- ------ -------- ------ -------- ------
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
AMJ QUARTER FYTD
----------- ----
AMJ 09 AMJ 08 % CHG 6/30/2009 6/30/2008 % CHG
------ ------ ----- --------- --------- -----
NET SALES $18,662 $20,885 (11)% $79,029 $81,748 (3)%
COST OF
PRODUCTS
SOLD 9,267 10,572 (12)% 38,898 39,536 (2)%
----- ------ ------ ------
GROSS MARGIN 9,395 10,313 (9)% 40,131 42,212 (5)%
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSE 5,822 6,577 (11)% 24,008 25,575 (6)%
----- ----- ------ ------
OPERATING INCOME 3,573 3,736 (4)% 16,123 16,637 (3)%
TOTAL INTEREST
EXPENSE 329 355 1,358 1,467
OTHER NON-OPERATING
INCOME, NET 40 66 560 462
--- --- --- ---
EARNINGS FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES 3,284 3,447 (5)% 15,325 15,632 (2)%
INCOME TAXES 813 497 4,032 3,834
NET EARNINGS FROM
CONTINUING
OPERATIONS 2,471 2,950 (16)% 11,293 11,798 (4)%
----- ----- ------ ------
NET EARNINGS FROM
DISCONTINUED
OPERATIONS 0 66 (100)% 2,143 277 674%
--- --- ----- ---
NET EARNINGS 2,471 3,016 (18)% 13,436 12,075 11%
===== ===== ====== ======
EFFECTIVE TAX RATE
FROM CONTINUING
OPERATIONS 24.8% 14.4% 26.3% 24.5%
PER COMMON SHARE:
BASIC NET
EARNINGS -
CONTINUING
OPERATIONS $0.83 $0.95 $3.76 $3.77
BASIC NET
EARNINGS -
DISCONTINUED
OPERATIONS $- $0.02 $0.73 $0.09
----- -----
BASIC NET EARNINGS $0.83 $0.97 $4.49 $3.86
----- -----
DILUTED NET
EARNINGS -
CONTINUING
OPERATIONS $0.80 $0.90 (11)% $3.58 $3.56 1%
DILUTED NET
EARNINGS -
DISCONTINUED
OPERATIONS $- $0.02 $0.68 $0.08
--- ----- ----- -----
DILUTED NET
EARNINGS $0.80 $0.92 (13)% $4.26 $3.64 17%
DIVIDENDS $0.44 $0.40 10% $1.64 $1.45 13%
AVERAGE DILUTED
SHARES
OUTSTANDING 3,096.7 3,270.1 3,154.1 3,316.8
COMPARISONS AS A Basis Basis
% OF NET SALES Pt Chg Pt Chg
----------------
COST OF PRODUCTS
SOLD 49.7% 50.6% (90) 49.2% 48.4% 80
GROSS MARGIN 50.3% 49.4% 90 50.8% 51.6% (80)
SELLING, GENERAL
& ADMINISTRATIVE
EXPENSE 31.2% 31.5% (30) 30.4% 31.2% (80)
OPERATING MARGIN 19.1% 17.9% 120 20.4% 20.4% -
EARNINGS FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES 17.6% 16.5% 110 19.4% 19.1% 30
NET EARNINGS FROM
CONTINUING
OPERATIONS 13.2% 14.1% (90) 14.3% 14.4% (10)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Cash Flows Information
Twelve Months Ended June 30
---------------------------
2009 2008
---- ----
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD $3,313 $5,354
OPERATING ACTIVITIES
NET EARNINGS 13,436 12,075
DEPRECIATION AND AMORTIZATION 3,082 3,166
SHARE-BASED COMPENSATION EXPENSE 516 555
DEFERRED INCOME TAXES 596 1,214
GAIN ON SALE OF BUSINESSES (2,377) (284)
CHANGES IN:
ACCOUNTS RECEIVABLE 415 432
INVENTORIES 721 (1,050)
ACCOUNTS PAYABLE, ACCRUED AND OTHER
LIABILITIES (742) 297
OTHER OPERATING ASSETS & LIABILITIES (758) (1,270)
OTHER 30 (127)
--- ----
TOTAL OPERATING ACTIVITIES 14,919 15,008
------ ------
INVESTING ACTIVITIES
CAPITAL EXPENDITURES (3,238) (3,046)
PROCEEDS FROM ASSET SALES 1,087 928
ACQUISITIONS, NET OF CASH ACQUIRED (368) (381)
CHANGE IN INVESTMENTS 166 (50)
--- ---
TOTAL INVESTING ACTIVITIES (2,353) (2,549)
------ ------
FINANCING ACTIVITIES
DIVIDENDS TO SHAREHOLDERS (5,044) (4,655)
CHANGE IN SHORT-TERM DEBT (2,420) 2,650
ADDITIONS TO LONG-TERM DEBT 4,926 7,088
REDUCTIONS OF LONG-TERM DEBT (2,587) (11,747)
TREASURY STOCK PURCHASES (6,370) (10,047)
IMPACT OF STOCK OPTIONS AND OTHER 681 1,867
--- -----
TOTAL FINANCING ACTIVITIES (10,814) (14,844)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (284) 344
---- ---
CHANGE IN CASH AND CASH EQUIVALENTS 1,468 (2,041)
----- ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,781 $3,313
====== ======
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Balance Sheet Information
June 30, 2009 June 30, 2008
------------- -------------
CASH AND CASH EQUIVALENTS $4,781 $3,313
ACCOUNTS RECEIVABLE 5,836 6,761
TOTAL INVENTORIES 6,880 8,416
OTHER 4,408 6,025
----- -----
TOTAL CURRENT ASSETS 21,905 24,515
NET PROPERTY, PLANT AND EQUIPMENT 19,462 20,640
NET GOODWILL AND OTHER INTANGIBLE ASSETS 89,118 94,000
OTHER NON-CURRENT ASSETS 4,348 4,837
----- -----
TOTAL ASSETS $134,833 $143,992
======== ========
ACCOUNTS PAYABLE $5,980 $6,775
ACCRUED AND OTHER LIABILITIES 8,601 11,099
DEBT DUE WITHIN ONE YEAR 16,320 13,084
------ ------
TOTAL CURRENT LIABILITIES 30,901 30,958
LONG-TERM DEBT 20,652 23,581
OTHER 20,181 19,959
------ ------
TOTAL LIABILITIES 71,734 74,498
------ ------
TOTAL SHAREHOLDERS' EQUITY 63,099 69,494
------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $134,833 $143,992
======== ========
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information
Three Months Ended June 30, 2009
--------------------------------
Earnings From
Continuing Net Earnings
% Change Operations % Change From %Change
Versus Before Versus Continuing Versus
Net Sales Year Ago Income Taxes Year Ago Operations Year Ago
--------- -------- ------------ -------- ---------- --------
Beauty GBU
Beauty $4,422 -12% $662 -11% $475 -17%
Grooming 1,741 -17% 428 -20% 292 -26%
Health and
Well-Being GBU
Health Care 3,162 -12% 867 13% 567 8%
Snacks and
Pet Care 752 -13% 102 -19% 65 -23%
Household
Care GBU
Fabric Care
and Home
Care 5,525 -9% 1,244 0% 822 -2%
Baby Care
and Family
Care 3,409 -5% 662 5% 415 1%
Total Business
Segments 19,011 -10% 3,965 -2% 2,636 -7%
Corporate (349) N/A (681) N/A (165) N/A
---- --- ---- --- ---- ---
Total Company 18,662 -11% 3,284 -5% 2,471 -16%
Twelve Months Ended June 30, 2009
---------------------------------
Earnings From
Continuing Net Earnings
% Change Operations % Change From %Change
Versus Before Versus Continuing Versus
Net Sales Year Ago Income Taxes Year Ago Operations Year Ago
--------- -------- ------------ -------- ---------- --------
Beauty GBU
Beauty $18,789 -4% $3,367 -5% $2,531 -7%
Grooming 7,543 -9% 2,091 -9% 1,492 -11%
Health and
Well-Being GBU
Health Care 13,623 -7% 3,685 -2% 2,435 -3%
Snacks and
Pet Care 3,114 -3% 388 -5% 234 -10%
Household
Care GBU
Fabric Care
and Home
Care 23,186 -2% 4,663 -8% 3,032 -11%
Baby Care
and Family
Care 14,103 1% 2,827 5% 1,770 2%
Total Business
Segments 80,358 -3% 17,021 -4% 11,494 -7%
Corporate (1,329) N/A (1,696) N/A (201) N/A
------ --- ------ --- ---- ---
Total Company 79,029 -3% 15,325 -2% 11,293 -4%
APRIL - JUNE NET SALES INFORMATION
(Percent Change vs. Year Ago) *
Volume Volume
With Without Net
Acquisitions/ Acquisitions/ Foreign Sales
Divestitures Divestitures Exchange Price Mix/Other Growth
------------ ------------ -------- ----- --------- ------
Beauty GBU
Beauty -5% -4% -9% 3% -1% -12%
Grooming -7% -7% -13% 7% -4% -17%
Health and
Well-Being GBU
Health Care -6% -5% -9% 4% -1% -12%
Snacks
and Pet
Care -15% -15% -6% 8% 0% -13%
Household
Care GBU
Fabric Care
and Home
Care -4% -4% -10% 8% -3% -9%
Baby Care
and Family
Care 0% 0% -9% 4% 0% -5%
Total Company -5% -4% -9% 5% -2% -11%
FISCAL YEAR 2009/2008 NET SALES INFORMATION
(Percent Change vs. Year Ago) *
Volume Volume
With Without Net
Acquisitions/ Acquisitions/ Foreign Sales
Divestitures Divestitures Exchange Price Mix/Other Growth
------------ ------------ -------- ----- --------- ------
Beauty GBU
Beauty -2% -1% -4% 2% 0% -4%
Grooming -6% -5% -6% 5% -2% -9%
Health and
Well-Being GBU
Health Care -4% -3% -5% 4% -2% -7%
Snacks and
Pet Care -6% -6% -4% 9% -2% -3%
Household Care
GBU
Fabric Care
and Home
Care -3% -3% -5% 6% 0% -2%
Baby Care
and Family
Care 1% 2% -4% 5% -1% 1%
Total Company -3% -2% -4% 5% -1% -3%
* These sales percentage changes are approximations based on
quantitative formulas that are consistently applied.
SOURCE The Procter & Gamble Company |
Touching lives, improving life. P&G™