Net Sales -1%; Organic
Sales +1%; Diluted Net EPS $0.93, -4%; Core EPS $0.96,
+12%
The Procter & Gamble Company (NYSE:PG) reported third
quarter fiscal year 2017 net sales of $15.6 billion, a decrease of
one percent versus the prior year. Organic sales increased one
percent. Organic sales increased in four of five business segments.
Diluted net earnings per share were $0.93, a decrease of four
percent versus the prior year while core earnings per share
increased 12% to $0.96. Currency-neutral core EPS increased 15%
versus the prior year.
Operating cash flow was $3.0 billion for the quarter. Adjusted
free cash flow productivity was 90%. The Company returned $1.8
billion of cash to shareholders as dividends and repurchased $2.0
billion of common stock. Earlier this month, P&G announced an
increase in its quarterly dividend, marking the 61st consecutive
year the Company has increased its dividend. P&G has been
paying a dividend for 127 consecutive years since its incorporation
in 1890.
“The third quarter macro environment was characterized by a
slowdown in market growth, continued geopolitical disruptions and
foreign exchange challenges,” said David Taylor, Chairman,
President and Chief Executive Officer. “Against this backdrop, we
delivered modest organic sales growth and double-digit Core EPS
growth, and we increased the quarterly dividend for the 61st
consecutive year. Looking forward, we are maintaining our organic
sales and Core EPS guidance ranges for the year and increasing our
outlook for adjusted free cash flow productivity.”
January - March Quarter Discussion
Net sales in the third quarter of fiscal year 2017 were $15.6
billion, a decrease of one percent versus prior year, including a
negative two percent impact from foreign exchange. Organic sales
increased one percent driven by a one percent increase in organic
shipment volume. Pricing and mix had no net impact on sales for the
quarter. All-in volume was unchanged including the impacts of minor
brand divestitures.
January - March
2017
Foreign
Organic
Organic
Net Sales
Drivers*
Volume
Exchange
Price
Mix
Other**
Net
Sales
Volume
Sales
Beauty (2)% (1)% 1% —% —% (2)% —% 1% Grooming —% —% (2)% (4)% —%
(6)% —% (6)% Health Care 4% (1)% 1% 1% (1)% 4% 4% 6% Fabric &
Home Care —% (2)% —% —% 1% (1)% 1% 1% Baby, Feminine & Family
Care 1% (1)% —% —% (1)%
(1)% 1% 1%
Total P&G —% (2)%
—% —% 1% (1)%
1%
1%
* Net sales percentage changes are approximations based on
quantitative formulas that are consistently applied.** Other
includes the sales mix impact from acquisitions/divestitures and
rounding impacts necessary to reconcile volume to net sales.
- Beauty segment organic sales increased
one percent versus year ago behind growth in Skin & Personal
Care. Organic sales increased low single digits in Skin &
Personal Care as the continued growth of the super-premium SK-II
skin care brand offset lower volume in retail skin care. Organic
sales in Hair Care were unchanged.
- Grooming segment organic sales
decreased six percent due to lower volume and reduced pricing in
Shave Care. Organic sales decreased high single digits globally in
Shave Care due to competitive impacts in the U.S. Organic sales
were up high single digits in Appliances driven by the continued
success of innovation on Braun male shavers as well as styling
tools.
- Health Care segment organic sales
increased six percent behind higher organic volume in both Oral
Care and Personal Health Care. Product innovation on power
toothbrushes and continued marketing support drove a low
single-digit increase in organic sales in Oral Care while Personal
Health Care was up double digits due to market growth in the U.S.
behind a strong cough & cold season along with increased
pricing outside the U.S.
- Fabric and Home Care segment organic
sales increased one percent versus year ago driven by higher
organic volume in both Fabric Care and Home Care along with
increased pricing in Fabric Care. Home Care organic sales decreased
low single digits as increased volume due to product innovation and
increased customer support was more than offset by unfavorable
geographic mix. Fabric Care organic sales increased low single
digits due to increased organic volume and favorable product mix
from premium forms in developed markets and increased pricing in
developing markets.
- Baby, Feminine and Family Care segment
organic sales increased one percent driven by volume growth in
Family Care and favorable mix in Feminine Care. Baby Care organic
sales decreased low single digits due mainly to competitive
activity. Feminine Care organic sales increased mid-single digits
from favorable product mix due to Always Discrete premium
innovation. Family Care organic sales grew low single digits driven
primarily by product innovation and increased marketing
support.
Diluted net earnings per share were $0.93, a decrease of four
percent versus the prior year. Diluted net earnings per share from
continuing operations were also $0.93, which is an increase of 15%
versus the base period. Current year results included non-core
restructuring charges of $0.03 per share. Core earnings per share,
which exclude non-core restructuring charges, were $0.96, an
increase of 12% versus the prior year. Currency-neutral core
earnings per share increased 15% for the quarter.
Reported gross margin was unchanged, including a 40 basis point
decrease in non-core restructuring charges versus the prior year.
Core gross margin decreased 40 basis points, including 20 basis
points of negative foreign exchange impacts. On a currency-neutral
basis, core gross margin decreased 20 basis points as 210 basis
points of productivity savings were more than offset by 100 basis
points of unfavorable geographic and product mix, 80 basis points
of commodity cost increases and 50 basis points of product
reinvestments and other impacts.
Selling, general and administrative expense (SG&A) as a
percent of sales decreased 40 basis points on a reported basis
versus the prior year, including a 10 basis point net benefit from
a year-on-year decline in non-core charges. Core SG&A as a
percentage of sales decreased 30 basis points versus the prior
year. Savings of 50 basis points from overhead and marketing
productivity and a 110 basis point benefit in other operating
income were partially offset by a 130 basis point impact from
investments in marketing, sales resources, and research and
development.
Reported operating profit margin increased 40 basis points. Core
operating profit margin decreased 10 basis points versus the prior
year, including 20 basis points of foreign exchange impacts. On a
currency-neutral basis, core operating profit margin increased 10
basis points including productivity cost savings of 260 basis
points for the quarter.
Fiscal Year 2017 Guidance
P&G said it is maintaining its guidance for organic sales
growth in the range of two to three percent for fiscal 2017. Fiscal
year to date, the Company is at the low end of this range. The
Company expects the combined headwinds of foreign exchange and
minor brand divestitures to reduce sales growth by two to three
percentage points. As a result, P&G estimates all-in sales to
be down one percent to in-line with the prior fiscal year.
The Company also maintained its expectation for core earnings
per share growth of mid-single digits versus fiscal 2016 Core EPS
of $3.67. All-in GAAP earnings per share are expected to increase
48% to 50% versus fiscal year 2016 GAAP EPS of $3.69. The fiscal
2017 GAAP EPS estimate includes approximately $0.12 per share of
non-core restructuring costs and $0.13 per share of charges related
to early debt retirement that was executed in the second quarter.
Also included in GAAP EPS is the $1.95 gain from the divestiture of
41 Beauty Brands to Coty in a transaction that was completed in the
second quarter.
P&G said it is increasing fiscal year guidance for adjusted
free cash flow productivity from 90% or more to approximately
95%.
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.
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 effect 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 sole
supplier and sole manufacturing plant arrangements) and to manage
disruption of business due to factors outside of our control, such
as natural disasters and acts of war or terrorism; (5) the ability
to successfully manage cost fluctuations and pressures, including
commodity prices, raw materials, labor costs, energy costs and
pension and health care costs; (6) 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; (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, contractors and external business partners;
(11) 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; (12) 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, tax, accounting standards and environmental)
and to resolve pending matters within current estimates; (13) the
ability to manage changes in applicable tax laws and regulations;
(14) the ability to successfully manage our portfolio optimization
strategy, including achieving and maintaining our intended tax
treatment of the related transactions, and 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; (15)
the ability to successfully achieve productivity improvements and
cost savings and manage ongoing organizational changes, while
successfully identifying, developing and retaining particularly key
employees, especially in key growth markets where the availability
of skilled or experienced employees may be limited; and (16) the
ability to manage the uncertain implications of the United
Kingdom’s withdrawal from the European Union. 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 March 31
Nine Months Ended March 31 2017 2016
% Chg 2017 2016
% Chg NET SALES $ 15,605 $ 15,755 (1 )%
$ 48,979 $ 49,197 — % Cost of products sold 7,836 7,915
(1 )% 24,236 24,527 (1 )%
GROSS PROFIT
7,769 7,840 (1 )% 24,743 24,670 — % Selling, general and
administrative expense 4,409 4,522 (2 )% 13,737
13,731 — %
OPERATING INCOME 3,360 3,318 1 %
11,006 10,939 1 % Interest expense 96 146 (34 )% 349 429 (19 )%
Interest income 46 33 39 % 123 135 (9 )% Other non-operating
income/(loss), net 26 21 24 % (450 ) 38 N/A
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
3,336 3,226 3 % 10,330 10,683 (3 )% Income taxes on continuing
operations 780 889 (12 )% 2,338 2,664
(12 )%
NET EARNINGS FROM CONTINUING OPERATIONS 2,556
2,337 9 % 7,992 8,019 — %
NET EARNINGS FROM
DISCONTINUED OPERATIONS — 446 (100 )% 5,217
627 N/A
NET EARNINGS 2,556 2,783
(8 )% 13,209 8,646 53 % Less: Net earnings
attributable to noncontrolling interests 34 33 3 % 98
89 10 %
NET EARNINGS ATTRIBUTABLE TO PROCTER &
GAMBLE $ 2,522 $ 2,750 (8 )% $ 13,111 $
8,557 53 %
EFFECTIVE TAX RATE 23.4 % 27.6 %
22.6 % 24.9 %
BASIC NET EARNINGS PER COMMON
SHARE:*
Earnings from continuing operations $ 0.96 $ 0.83 16 % $ 2.95 $
2.86 3 % Earnings from discontinued operations $ — $ 0.17
(100 )% $ 2.00 $ 0.23 770 %
BASIC NET
EARNINGS PER COMMON SHARE $ 0.96 $ 1.00 (4 )% $
4.95 $ 3.09 60 %
DILUTED NET EARNINGS PER COMMON
SHARE:*
Earnings from continuing operations $ 0.93 $ 0.81 15 % $ 2.87 $
2.78 3 % Earnings from discontinued operations $ — $ 0.16
(100 )% $ 1.89 $ 0.22 759 %
DILUTED NET
EARNINGS PER COMMON SHARE $ 0.93 $ 0.97 (4 )% $
4.76 $ 3.00 59 %
DIVIDENDS PER COMMON SHARE $
0.6695 $ 0.6630 $ 2.0085 $ 1.9890 Diluted weighted average common
shares outstanding 2,705.5 2,835.0 2,755.4 2,855.6
Basis
Pt Basis Pt COMPARISONS AS A % OF NET SALES
Chg Chg Gross Margin 49.8% 49.8% — 50.5% 50.1% 40
Selling, general and administrative expense 28.3% 28.7% (40) 28.0%
27.9% 10 Operating Margin 21.5% 21.1% 40 22.5% 22.2% 30 Earnings
from continuing operations before income taxes 21.4% 20.5% 90 21.1%
21.7% (60) Net earnings from continuing operations 16.4% 14.8% 160
16.3% 16.3% — Net earnings attributable to Procter & Gamble
16.2% 17.5% (130) 26.8% 17.4% 940
* 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, 2017 % Change
Earnings/(Loss) from % Change Net
Earnings/(Loss) % Change Versus Year
Continuing Operations Versus Year from
Continuing Versus Year Net Sales
Ago Before Income Taxes Ago
Operations Ago Beauty $ 2,675 (2 )% $
531 (12 )% $ 396 (14 )% Grooming 1,525 (6 )% 437 (7 )% 333 (6 )%
Health Care 1,841 4 % 470 14 % 310 12 % Fabric & Home Care
4,957 (1 )% 972 (4 )% 599 (8 )% Baby, Feminine & Family Care
4,471 (1 )% 890 (9 )% 555 (12 )% Corporate 136 28 % 36
N/A 363 N/A
Total Company $
15,605 (1 )% $ 3,336
3 % $ 2,556 9
% Three Months Ended March 31, 2017
(Percent Change vs. Year Ago)* Volume with
Volume Excluding
Acquisitions & Acquisitions & Foreign
Net Sales Divestitures Divestitures
Exchange Price Mix
Other** Growth Beauty (2)% —% (1)% 1% —% —%
(2)% Grooming —% —% —% (2)% (4)% —% (6)% Health Care 4% 4% (1)% 1%
1% (1)% 4% Fabric & Home Care —% 1% (2)% —% —% 1% (1)% Baby,
Feminine & Family Care 1% 1% (1)% —%
—% (1)% (1)%
Total Company —%
1% (2)% —%
—% 1% (1)%
Nine Months Ended March 31, 2017 % Change
Earnings/(Loss) from % Change
Net Earnings/(Loss) % Change Versus
Year Continuing Operations Versus Year from
Continuing Versus Year Net Sales
Ago Before Income Taxes Ago
Operations Ago Beauty $ 8,613 (1 )% $
2,028 (8 )% $ 1,528 (8 )% Grooming 4,972 (3 )% 1,580 2 % 1,217 3 %
Health Care 5,774 4 % 1,574 10 % 1,052 6 % Fabric & Home Care
15,529 (1 )% 3,226 (3 )% 2,052 (6 )% Baby, Feminine & Family
Care 13,711 (1 )% 2,973 (5 )% 1,932 (6 )% Corporate 380 17 %
(1,051 ) N/A 211 N/A
Total Company $
48,979 — % $ 10,330
(3 )% $ 7,992 —
% Nine Months Ended March 31, 2017
(Percent Change vs. Year Ago)* Volume with
Volume Excluding
Acquisitions & Acquisitions & Foreign
Net Sales Divestitures Divestitures
Exchange Price Mix
Other** Growth Beauty (2)% 1% (2)% 1% 1% 1%
(1)% Grooming 1% 2% (2)% —% (2)% —% (3)% Health Care 4% 5% (2)% 1%
1% —% 4% Fabric & Home Care 1% 2% (2)% (1)% 1% —% (1)% Baby,
Feminine & Family Care 2% 3% (2)% (1)%
(1)% 1% (1)%
Total Company 1%
2% (2)% —%
—% 1% —%
* Net sales percentage changes are approximations based on
quantitative formulas that are consistently applied.** Other
includes the sales mix impact from 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
Amounts in
millions
2017 2016 CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD $ 7,102 $ 6,836
OPERATING ACTIVITIES
Net earnings 13,209 8,646 Depreciation and amortization 2,100 2,239
Loss on early extinguishment of debt 543 — Share-based compensation
expense 197 216 Deferred income taxes (382 ) (428 ) Loss/(gain) on
sale of assets (5,452 ) 241 Goodwill and intangible asset
impairment charges — 450 Changes in: Accounts receivable (159 )
(129 ) Inventories (145 ) (94 ) Accounts payable, accrued and other
liabilities (1,113 ) (199 ) Other operating assets and liabilities
219 167 Other 48 187
TOTAL OPERATING
ACTIVITIES 9,065 11,296
INVESTING
ACTIVITIES Capital expenditures (2,230 ) (2,023 ) Proceeds from
asset sales 411 114 Acquisitions, net of cash acquired (16 ) (186 )
Purchases of short-term investments (3,369 ) (2,372 ) Proceeds from
sales and maturities of short-term investments 834 1,222
Pre-divestiture addition of restricted cash related to the Beauty
Brands divestiture (874 ) (995 ) Cash transferred at closing
related to the Beauty Brands divestiture (475 ) — Release of
restricted cash upon closing of the Beauty Brands divestiture 1,870
— Cash transferred in Batteries divestiture — (143 ) Change in
other investments 26 —
TOTAL INVESTING
ACTIVITIES (3,823 ) (4,383 )
FINANCING ACTIVITIES
Dividends to shareholders (5,410 ) (5,589 ) Change in short-term
debt 3,556 1,535 Additions to long-term debt 2,641 3,916 Reductions
of long-term debt (5,020 )
(1)
(2,210 ) Treasury stock purchases (4,504 ) (3,504 ) Shares
exchanged in Batteries divestiture — (1,730 ) Impact of stock
options and other 2,398 2,024
TOTAL FINANCING
ACTIVITIES (6,339 ) (5,558 )
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (188 ) (296 )
CHANGE IN CASH
AND CASH EQUIVALENTS (1,285 ) 1,059
CASH AND CASH
EQUIVALENTS, END OF PERIOD $ 5,817 $ 7,895
(1) Includes $543 of costs related to early extinguishment of
debt.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share
Amounts)
Condensed Consolidated Balance Sheets
March 31, 2017 June 30, 2016 Cash and
cash equivalents $ 5,817 $ 7,102 Available-for-sale investment
securities 8,510 6,246 Accounts receivable 4,358 4,373 Inventories
4,754 4,716 Deferred income taxes — 1,507 Prepaid expenses and
other current assets 2,446 2,653 Current assets held for sale —
7,185
TOTAL CURRENT ASSETS 25,885 33,782 Property, plant and
equipment, net 19,219 19,385 Goodwill 43,682 44,350 Trademarks and
other intangible assets, net 24,153 24,527 Other noncurrent assets
5,152 5,092
TOTAL ASSETS $ 118,091 $ 127,136 Accounts
payable $ 8,076 $ 9,325 Accrued and other liabilities 7,225 7,449
Current liabilities held for sale — 2,343 Debt due within one year
13,781 11,653
TOTAL CURRENT LIABILITIES 29,082 30,770
Long-term debt 16,633 18,945 Deferred income taxes 8,644 9,113
Other noncurrent liabilities 9,184 10,325
TOTAL LIABILITIES
63,543 69,153
TOTAL SHAREHOLDERS' EQUITY 54,548 57,983
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 118,091 $
127,136
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 April 26, 2017 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. Beginning in 2012 Procter & Gamble began a
$10 billion strategic productivity and cost savings initiative that
includes incremental restructuring activities. 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.
Charges for certain European legal
matters: Several countries in Europe issued separate
complaints alleging that the Company, along with several other
companies, engaged in violations of competition laws in prior
periods. The Company established Legal Reserves related to these
charges. Management does not view these charges as indicative of
underlying business results.
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 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 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. 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 and excluding tax payments related to the Beauty Brands
divestiture, which are non-recurring and not considered indicative
of underlying cash flow performance. 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 and discretionary investment.
Adjusted free cash flow
productivity: Adjusted free cash flow productivity is
defined as the ratio of adjusted free cash flow to net earnings.
Management views 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, allocating financial resources and for
budget planning purposes. The Company's long-term target is to
generate annual adjusted free cash flow productivity at or above 90
percent.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts
in Millions Except Per Share Amounts) Reconciliation of Non-GAAP
Measures
Three Months Ended March 31, 2017 AS
REPORTED INCREMENTAL
NON-GAAP (GAAP) RESTRUCTURING ROUNDING
(CORE) COST OF PRODUCTS SOLD 7,836 (113 )
1
7,724
GROSS PROFIT 7,769 113 (1 ) 7,881
GROSS MARGIN
49.8 % 0.7 % — % 50.5 %
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSE 4,409 22 (1 ) 4,430
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE AS A % OF NET SALES 28.3 % 0.1 % — %
28.4 %
OPERATING INCOME 3,360 91 — 3,451
OPERATING PROFIT
MARGIN 21.5 % 0.6 % — % 22.1 %
INCOME TAX ON CONTINUING
OPERATIONS 780 21 (1 ) 800
NET EARNINGS ATTRIBUTABLE TO
P&G 2,522 70 — 2,592
EFFECTIVE TAX RATE 23.4 % — % —
% 23.4 %
Core EPS
DILUTED NET EARNINGS PER COMMON SHARE* 0.93
0.03 — 0.96 CURRENCY IMPACT TO
CORE EARNINGS 0.03 CURRENCY-NEUTRAL CORE EPS 0.99
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,705.5
COMMON STOCK OUTSTANDING AS OF MARCH 31, 2017 2,557.6
* Diluted net earnings per share are calculated on Net earnings
attributable to Procter & Gamble.
CHANGE VERSUS YEAR AGO CORE
GROSS MARGIN (40 ) BPS CORE SELLING GENERAL & ADMINISTRATIVE
EXPENSE AS A % OF NET SALES (30 ) BPS CORE OPERATING PROFIT MARGIN
(10 ) BPS CORE EFFECTIVE TAX RATE (380 ) BPS CORE EPS 12 %
CURRENCY-NEUTRAL CORE EPS 15 % THE PROCTER &
GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per
Share Amounts) Reconciliation of Non-GAAP Measures
Three Months
Ended March 31, 2016 CHARGES
FOR AS REPORTED DISCONTINUED
INCREMENTAL EUROPEAN LEGAL NON-GAAP
(GAAP) OPERATIONS RESTRUCTURING MATTERS
ROUNDING (CORE) COST OF PRODUCTS SOLD
7,915 — (174 ) — — 7,741
GROSS PROFIT 7,840 — 174 — — 8,014
GROSS MARGIN 49.8 % — % 1.1 % — % — % 50.9 %
SELLING,
GENERAL, AND ADMINISTRATIVE EXPENSE 4,522 — 14 (13 ) (1 ) 4,522
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET
SALES 28.7 % — % 0.1 % (0.1 )% — % 28.7 %
OPERATING
INCOME 3,318 — 160 13 1 3,492
OPERATING PROFIT MARGIN
21.1 % — % 1.0 % 0.1 % — % 22.2 %
INCOME TAX ON CONTINUING
OPERATIONS 889 — 33 2 (1 ) 923
NET EARNINGS ATTRIBUTABLE TO
P&G 2,750 (445 ) 127 11 — 2,443
EFFECTIVE TAX RATE
27.6 % — % (0.3 )% — % (0.1 )% 27.2 %
Core EPS:
DILUTED NET EARNINGS PER COMMON SHARE* 0.97
(0.16 ) 0.04 — 0.01
0.86
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 2,835.0
* Diluted net earnings per share are calculated on Net earnings
attributable to Procter & Gamble.
Organic
sales growth:
Foreign
Exchange
Acquisition/
Organic
Sales
January - March
2017
Net Sales
Growth
Impact
Divestiture
Impact*
Growth
Beauty (2)% 1% 2% 1% Grooming (6)% —% —% (6)% Health Care 4% 1% 1%
6% Fabric & Home Care (1)% 2% —% 1% Baby, Feminine & Family
Care (1)% 1% 1% 1%
Total P&G
(1)% 2% —%
1%
Combined Foreign
Exchange &
Organic
Sales
Total
P&G
Net Sales
Growth
Acquisition/Divestiture Impact*
Growth
FY 2017 (Estimate) -1% to Flat Approximately 2% to 3%
2% to 3%
* Acquisition/Divestiture Impact includes the mix impacts of
acquisitions and divestitures and rounding impacts necessary to
reconcile net sales to organic sales.
Core
EPS:
Diluted
EPS
Total
P&G
Growth
Impact of
Incremental Non-Core Items*
Core EPS
Growth
FY 2017 Up mid-single (Estimate) Up 48% to 50%
Approximately (44%) digits
* Includes change in discontinued operations (includes gain on
sale of Beauty Brands).
Adjusted
free cash flow (dollar amounts in millions):
Three Months Ended March 31, 2017
Cash Tax Payment
-
Adjusted Free
Cash
Operating Cash
Flow
Capital
Spending
Free Cash
Flow
Beauty
Sale
Flow
$3,040 $(801) $2,239 $74 $2,313
Adjusted
free cash flow productivity (dollar amounts in millions)
:
Three Months Ended March 31, 2017
Adjusted Free
Cash Flow
Net
Earnings
Adjusted Free
Cash Flow Productivity
$2,313 $2,556 90%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170426005661/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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