News Release
| P&G Reports Strong Sales and EPS Growth -- Improves Fiscal Year Outlook |
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Third Quarter Sales Up 8%, EPS up 17% CINCINNATI, May 1, 2007 /PRNewswire-FirstCall/ -- The Procter & Gamble Company (NYSE: PG) announced strong top and bottom-line growth for the January - March quarter. Net sales were up eight percent to $18.69 billion and earnings per share increased 17 percent to $0.74. The company's results were driven by double-digit sales growth in Fabric & Home Care, Baby & Family Care, and Health Care and high-single digit growth in Beauty and Blades & Razors. Organic sales and organic volume both increased six percent for the quarter as foreign exchange contributed two percent to sales. "Strong results this quarter were driven by the growth of P&G's leading brands, Gillette synergy benefits and continued cost discipline," said Chairman of the Board, President and Chief Executive A.G. Lafley. "Sales growth was at the top-end of our long term target range in a very competitive environment. These results give us confidence to improve our EPS outlook for the fiscal year." Executive Summary
Key Financial Highlights Net sales for the quarter increased eight percent to $18.69 billion behind six percent volume growth. Growth was driven by double-digit volume increases on Tide, Ariel, Downy, Charmin, Head & Shoulders, Olay, Always and Prilosec OTC. Developing regions set the pace geographically with double-digit organic volume growth, while developed regions grew mid-single digits. Pricing contributed one percent to sales growth but was offset by a negative one percent mix impact. Foreign exchange added an additional two percent to sales growth. Organic sales, which exclude the impacts of acquisitions, divestitures and foreign exchange, increased six percent during the quarter. Net earnings increased 14 percent to $2.51 billion behind higher operating profit. Operating profit was up nine percent driven by sales growth and a 10- basis point margin improvement. Diluted net earnings per share increased 17 percent to $0.74. Gross margin was down 10-basis points to 51.6% of net sales during the quarter. Volume growth, price increases, and cost savings projects added over 90-basis points to gross margin. These were partially offset by higher commodity costs, which had a negative impact of roughly 50-basis points. Other items which drove gross margin down approximately 50-basis points included one-time items related to Gillette integration, supply chain restructuring charges and costs for a voluntary pet food recall of some Iams and Eukanuba wet pet foods in March. Selling, general and administrative expenses (SG&A) were 32.0% of net sales, 20-basis points lower than the prior year period. SG&A improved primarily behind overhead cost controls, Gillette synergies and volume scale leverage. Operating cash flow was $4.45 billion driven by strong earnings and a reduction in accounts receivables during the quarter. Accounts receivables improved by over three days during the quarter primarily behind the resolution of Gillette integration impacts and holiday seasonality effects, which resulted in a temporary increase in accounts receivables in the December quarter. Free cash flow as a percentage of net earnings was 147% during the quarter and 97% fiscal year-to-date. Capital expenditures were 4.0% of net sales during the quarter and 3.5% of net sales fiscal year-to-date. The company repurchased $1.3 billion of P&G stock during the quarter as part of the company's ongoing discretionary share repurchases. This brings total share repurchases to $4.1 billion for the year. Business Segment Discussion The following provides perspective on the company's January - March quarter results by business segment. Beauty and Health
Household Care
Gillette GBU
Fiscal Year and April - June Quarter Guidance For the current fiscal year, the company expects to deliver its sixth consecutive year of topline growth at or above its long-term targets. Organic sales are expected to grow by five to six percent. The combination of pricing and product mix is expected to have a neutral to positive one percent impact on sales growth. Foreign exchange is expected to have a positive impact of about two percent. Acquisitions and divestitures are expected to add about four percent to sales growth. Total sales are expected to increase 11 to 12 percent - at the top end of the previous guidance range. The company also improved its earnings per share outlook for the fiscal year due to the strong results in the March quarter. The company now expects earnings per share to be in the range of $3.01 to $3.03, up 14 to 15 percent versus prior year. This includes Gillette dilution, which is expected to be at the low end of the previous $0.12 to $0.18 per share guidance range. Operating margins are expected to improve by about 100-basis points driven primarily by gross margin improvement. The tax rate for fiscal year 2007 is expected to be below 30%, in-line with previous guidance. One-time items associated with the Gillette acquisition are expected to be $0.06 to $0.08 per share, in line with previous guidance. For the April - June quarter, organic sales are expected to grow by five to six percent against a very strong base period in which organic sales were up eight percent. The combination of pricing and product mix is expected to have a neutral to positive one percent impact on sales growth. Foreign exchange is expected to have a positive impact of about one percent. Total sales are expected to increase six to seven percent. The company expects earnings per share to be in the range of $0.64 to $0.66, up 16 to 20 percent versus prior year. Operating margins are expected to be up about 100-basis points driven by both gross margin improvement and SG&A efficiencies. 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 with respect to lower income consumers and 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 execute, manage and integrate key acquisitions and mergers, including (i) the Company's merger with The Gillette Company, and (ii) the Domination and Profit Transfer Agreement with Wella, and to achieve the cost and growth synergies in accordance with the stated goals of these transactions; (3) the ability to manage and maintain key customer relationships; (4) the ability to maintain key manufacturing and supply sources (including sole supplier and plant manufacturing sources); (5) the ability to successfully manage regulatory, tax and legal matters (including product liability, patent, and intellectual property matters as well as those related to the integration of Gillette and its subsidiaries), and to resolve pending matters within current estimates; (6) the ability to successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead areas, including the Company's outsourcing projects; (7) the ability to successfully manage currency (including currency issues in volatile countries), debt, interest rate and commodity cost exposures; (8) 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 terrorist activities; (9) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (10) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (11) the ability to successfully manage increases in the prices of raw materials used to make the Company's products; (12) the ability to stay close to consumers in an era of increased media fragmentation; and (13) the ability to stay on the leading edge of innovation. 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), Pringles(R), Folgers(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), and Braun(R). The P&G community consists of over 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. The company believes 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 in the January - March 2007 quarter: Total P&G
Net Sales Growth 8%
Less: Foreign Exchange Impact -2%
Less: Acquisition/Divestiture Impact 0%
Organic Sales Growth 6%
Free Cash Flow. Free cash flow is defined as operating cash flow less capital spending. Management views 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 and is a factor in determining their at-risk compensation. The reconciliation of free cash flow and free cash flow productivity is provided below ($ millions):
Operating Capital Free Cash Net Free Cash Flow
Cash Flow Spending Flow Earnings Productivity
Jul - Mar '07 $9,853 $(1,996) $7,857 $8,072 97%
Jan - Mar '07 $4,450 $(757) $3,693 $2,512 147%
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Cash Flows Information
Nine Months Ended March 31
2007 2006
BEGINNING CASH 6,693 6,389
OPERATING ACTIVITIES
NET EARNINGS 8,072 6,786
DEPRECIATION AND AMORTIZATION 2,367 1,891
SHARE BASED COMPENSATION EXPENSE 482 400
DEFERRED INCOME TAXES 306 116
CHANGES IN:
ACCOUNTS RECEIVABLE (866) (250)
INVENTORIES (636) (161)
ACCOUNTS PAYABLE, ACCRUED AND
OTHER LIABILITIES (233) (582)
OTHER OPERATING ASSETS &
LIABILITIES 38 (81)
OTHER 323 66
TOTAL OPERATING ACTIVITIES 9,853 8,185
INVESTING ACTIVITIES
CAPITAL EXPENDITURES (1,996) (1,666)
PROCEEDS FROM ASSET SALES 257 352
ACQUISITIONS, NET OF CASH
ACQUIRED (167) 216
CHANGE IN INVESTMENT SECURITIES 725 491
TOTAL INVESTMENT ACTIVITIES (1,181) (607)
FINANCING ACTIVITIES
DIVIDENDS TO SHAREHOLDERS (3,069) (2,645)
CHANGE IN SHORT-TERM DEBT 9,074 (6,009)
ADDITIONS TO LONG TERM DEBT 1,403 17,136
REDUCTION OF LONG TERM DEBT (16,088) (4,367)
IMPACT OF STOCK OPTIONS AND OTHER 1,213 1,119
TREASURY PURCHASES (4,061) (10,596)
TOTAL FINANCING ACTIVITIES (11,528) (5,362)
EXCHANGE EFFECT ON CASH 157 70
CHANGE IN CASH AND CASH EQUIVALENTS (2,699) 2,286
ENDING CASH 3,994 8,675
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Balance Sheet Information
March 31, 2007 June 30, 2006
CASH AND CASH EQUIVALENTS $3,994 $6,693
INVESTMENTS SECURITIES 236 1,133
ACCOUNTS RECEIVABLE 6,757 5,725
TOTAL INVENTORIES 7,091 6,291
OTHER 4,636 4,487
TOTAL CURRENT ASSETS 22,714 24,329
NET PROPERTY, PLANT AND EQUIPMENT 19,178 18,770
NET GOODWILL AND OTHER INTANGIBLE
ASSETS 89,934 89,027
OTHER NON-CURRENT ASSETS 3,869 3,569
TOTAL ASSETS $135,695 $135,695
ACCOUNTS PAYABLE $4,371 $4,910
ACCRUED AND OTHER LIABILITIES 10,777 9,587
TAXES PAYABLE 3,605 3,360
DEBT DUE WITHIN ONE YEAR 12,168 2,128
TOTAL CURRENT LIABILITIES 30,921 19,985
LONG-TERM DEBT 21,257 35,976
OTHER 17,051 16,826
TOTAL LIABILITIES 69,229 72,787
TOTAL SHAREHOLDERS' EQUITY 66,466 62,908
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $135,695 $135,695
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information
Three Months Ended March 31, 2007
%Change Earnings %Change %Change
Versus Before Versus Versus
Year Income Year Net Year
Net Sales Ago Taxes Ago Earnings Ago
BEAUTY $5,620 8% $1,112 7% $805 9%
HEALTH CARE 2,189 10% 529 36% 347 31%
BEAUTY AND HEALTH 7,809 8% 1,641 15% 1,152 15%
FABRIC CARE AND HOME CARE 4,738 12% 1,031 22% 685 21%
BABY CARE AND FAMILY CARE 3,268 10% 606 15% 382 17%
SNACKS, COFFEE AND PET CARE 1,090 0% 191 -5% 116 -3%
HOUSEHOLD CARE 9,096 10% 1,828 16% 1,183 17%
BLADES AND RAZORS 1,284 8% 405 12% 294 11%
DURACELL AND BRAUN 789 3% 29 -62% 18 -67%
GILLETTE GBU 2,073 6% 434 -1% 312 -2%
TOTAL BUSINESS SEGMENT 18,978 9% 3,903 13% 2,647 13%
CORPORATE (284) N/A (367) N/A (135) N/A
TOTAL COMPANY 18,694 8% 3,536 13% 2,512 14%
Nine Months Ended March 31, 2007
%Change Earnings %Change %Change
Versus Before Versus Versus
Year Income Year Net Year
Net Sales Ago Taxes Ago Earnings Ago
BEAUTY $17,107 9% $3,644 11% $2,685 13%
HEALTH CARE 6,771 15% 1,772 25% 1,204 25%
BEAUTY AND HEALTH 23,878 11% 5,416 15% 3,889 17%
FABRIC CARE AND HOME CARE 14,172 11% 3,142 14% 2,112 14%
BABY CARE AND FAMILY CARE 9,486 7% 1,754 13% 1,106 13%
SNACKS, COFFEE AND PET CARE 3,406 4% 567 14% 353 15%
HOUSEHOLD CARE 27,064 8% 5,463 14% 3,571 14%
BLADES AND RAZORS 3,865 65% 1,272 73% 932 74%
DURACELL AND BRAUN 3,112 52% 492 54% 331 51%
GILLETTE GBU 6,977 59% 1,764 67% 1,263 67%
TOTAL BUSINESS SEGMENT 57,919 14% 12,643 20% 8,723 21%
CORPORATE (715) N/A (1,141) N/A (651) N/A
TOTAL COMPANY 57,204 14% 11,502 19% 8,072 19%
JANUARY - MARCH NET SALES INFORMATION
(Percent Change vs. Year Ago) *
Volume Volume
With Without
Acquisi- Acquisi-
tions/ tions/ Net Net
Divest- Divest- Foreign Mix/ Sales Growth
itures itures Exchange Price Other Growth Exc.F/X
BEAUTY AND HEALTH
BEAUTY 3% 4% 3% 1% 1% 8% 5%
HEALTH CARE 6% 6% 2% 1% 1% 10% 8%
HOUSEHOLD CARE
FABRIC CARE AND
HOME CARE 10% 9% 2% 0% 0% 12% 10%
BABY CARE AND
FAMILY CARE 8% 8% 3% 1% -2% 10% 7%
SNACKS, COFFEE AND
PET CARE -2% -2% 1% 3% -2% 0% -1%
GILLETTE GBU
BLADES AND RAZORS 4% 4% 4% 2% -2% 8% 4%
DURACELL AND BRAUN 0% 3% 3% 2% -2% 3% 0%
TOTAL COMPANY 6% 6% 2% 1% -1% 8% 6%
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
JFM QUARTER FYTD
03/31/ 03/31/
JFM 07 JFM 06 %CHG 2007 2006 %CHG
NET SALES $18,694 $17,250 8% $57,204 $50,380 14%
COST OF PRODUCTS SOLD 9,057 8,340 9% 27,210 24,231 12%
GROSS MARGIN 9,637 8,910 8% 29,994 26,149 15%
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE 5,991 5,559 8% 17,945 15,849 13%
OPERATING INCOME 3,646 3,351 9% 12,049 10,300 17%
TOTAL INTEREST EXPENSE 279 301 976 819
OTHER NON-OPERATING
INCOME, NET 169 79 429 221
EARNINGS BEFORE INCOME
TAXES 3,536 3,129 13% 11,502 9,702 19%
INCOME TAXES 1,024 918 3,430 2,916
NET EARNINGS 2,512 2,211 14% 8,072 6,786 19%
EFFECTIVE TAX RATE 29.0% 29.3% 29.8% 30.1%
PER COMMON SHARE:
BASIC NET EARNINGS $0.78 $0.67 16% $2.51 $2.22 13%
DILUTED NET EARNINGS $0.74 $0.63 17% $2.37 $2.10 13%
DIVIDENDS $0.31 $0.28 11% $0.93 $0.84 11%
AVERAGE DILUTED SHARES
OUTSTANDING 3,397.3 3,510.5 3,405.7 3,235.4
COMPARISONS AS A % OF NET Basis Basis
SALES Pt Chg Pt Chg
COST OF PRODUCTS SOLD 48.4% 48.3% 10 47.6% 48.1% (50)
GROSS MARGIN 51.6% 51.7% (10) 52.4% 51.9% 50
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE 32.0% 32.2% (20) 31.4% 31.5% (10)
OPERATING MARGIN 19.5% 19.4% 10 21.1% 20.4% 70
EARNINGS BEFORE INCOME
TAXES 18.9% 18.1% 80 20.1% 19.3% 80
NET EARNINGS 13.4% 12.8% 60 14.1% 13.5% 60
SOURCE The Procter & Gamble Company
CONTACT: P&G Media, Doug Shelton, +1-513-983-7893, cell 513-293-4117, shelton.do@pg.com, or P&G Investor Relations, Chris Peterson, +1-513-983-2414, both of The Procter & Gamble Company 8991 05/01/2007 07:00 EDT http://www.prnewswire.com |
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