P&G Delivers Second Quarter Organic Sales up 3%, Core EPS of $1.21; Confirms Sales and Earnings Outlook for Fiscal Year Business Wire CINCINNATI -- January 24, 2014 The Procter & Gamble Company (NYSE:PG) reported second quarter fiscal year 2014 net sales of $22.3 billion, unchanged versus the prior year period, including a negative three percentage point impact from foreign exchange. Organic sales grew three percent. Diluted net earnings per share were $1.18, a decrease of 15 percent versus a base period that included a $0.21 per share holding gain resulting from P&G’s purchase of the balance of its Baby Care and Feminine Care joint venture in Iberia. Core earnings per share were $1.21, a decrease of one percent versus the prior year. On a currency-neutral basis, core earnings per share increased eight percent for the quarter. “P&G’s second quarter results came in as we expected,” said Chairman, President, and Chief Executive Officer A.G. Lafley. “We’re on-track to deliver our objectives of 3-4% organic sales growth and 5-7% core EPS growth for the fiscal year. We expect strong earnings growth in the second half of the fiscal year driven by solid top-line growth, moderating headwinds from foreign exchange, and productivity savings that build throughout the year.” October – December Quarter Discussion Net sales were unchanged versus the prior year at $22.3 billion in the October – December quarter, including a negative three percentage point impact from foreign exchange. Organic sales grew three percent. Organic sales were at or ahead of prior year levels in each reporting segment. Volume grew three percent. Pricing increased sales by one percent, and unfavorable geographic and product mix decreased sales by one percent. Foreign Net Organic Organic Volume Exchange Price Mix Sales Volume Sales Beauty 1% -2% 0% -1% -2% 1% 0% Grooming 2% -3% 3% -2% 0% 2% 3% Health 6% -1% 2% -3% 4% 6% 5% Care Fabric Care and 5% -3% 0% -1% 1% 5% 4% Home Care Baby, Feminine and 3% -2% 0% 0% 1% 3% 3% Family Care Total 3% -3% 1% -1% 0% 3% 3% P&G *Beauty segment organic sales were unchanged. Gains from market growth and innovation in Prestige, Hair Care, Deodorants, and Personal Cleansing, were offset by geographic and product mix and a decrease in Skin Care sales. *Grooming segment organic sales increased three percent as higher pricing and innovation on Blades & Razors and Appliances were partially offset by market contraction in developed regions and geographic and product mix. *Health Care segment organic sales grew five percent due to increases in Oral Care and Personal Health Care from innovation which were partially offset by a decrease in Pet Care behind the continuing impacts from the product recalls in the previous fiscal year for Natura. *Fabric Care and Home Care segment organic sales increased four percent with growth in Fabric Care and Home Care due to innovation and market expansion in developing regions. Personal Power sales decreased due to shipments in the prior year which included the impact of Superstorm Sandy. *Baby, Feminine and Family Care segment organic sales increased three percent behind product innovation and Baby Care market growth in the developing regions. Core earnings per share, which exclude non-core restructuring charges, were $1.21, a decrease of one percent versus the prior year. Foreign exchange reduced earnings by $0.11 per share. Core earnings per share were up eight percent on a currency-neutral basis. Second quarter earnings per share growth was also impacted by a gain of $0.07 per share, or six percent, in the base period from the divestiture of the Italy bleach business. Diluted net earnings per share were $1.18, a decrease of 15 percent versus the prior year. Core operating profit margin decreased 10 basis points driven by a lower gross margin, partially offset by a reduction in core selling, general and administrative (SG&A) expense as a percentage of net sales. Gross margin decreased 90 basis points due to 130 basis points of geographic and product mix, 90 basis points from foreign exchange, and higher commodity costs, which were partially offset by manufacturing savings of 130 basis points, volume leverage and pricing. Core SG&A as a percentage of sales decreased 80 basis points driven by 100 basis points from marketing and overhead productivity savings. These benefits were partially offset by significant foreign exchange impacts and targeted capability investments. Reported operating profit margin increased 10 basis points, including lower year-on-year restructuring investments. Operating cash flow was $3.3 billion for the second quarter. The Company repurchased $1.5 billion of common stock and returned $1.7 billion of cash to shareholders as dividends. Fiscal Year 2014 Guidance P&G reiterated fiscal year 2014 guidance. The Company continues to expect organic sales growth of three percent to four percent. All-in sales growth is estimated in the range of one percent to two percent, including a negative foreign exchange impact of approximately two percent. Core earnings per share are expected to grow five percent to seven percent for the fiscal year, and reported earnings per share are expected to grow in the range of seven percent to nine percent. The Company expects strong earnings growth in the second half of its fiscal year driven by solid top-line growth, moderating headwinds from foreign exchange, and productivity savings that build throughout the fiscal year. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts) Selected Financial Information GAAP CORE (NON-GAAP)* Three Months Ended December Three Months Ended 31 December 31 2013 2012 % 2013 2012 % Change Change COST OF PRODUCTS $11,130 $10,880 2% $11,077 $10,826 2% SOLD GROSS PROFIT 11,150 11,295 -1% 11,203 11,349 -1% SELLING, GENERAL & ADMINISTRATIVE 6,598 6,803 -3% 6,552 6,702 -2% EXPENSE OPERATING INCOME 4,552 4,492 1% 4,651 4,647 0% DILUTED NET EPS FROM CONTINUING $1.18 $1.39 -15% $1.21 $1.22 -1% OPERATIONS EFFECTIVE TAX 21.6 % 21.9 % N/A 21.5 % 24.4 % N/A RATE Basis Basis Pt Pt COMPARISONS AS A Chg Chg % OF NET SALES GROSS MARGIN 50.0 % 50.9 % (90) 50.3 % 51.2 % (90) SELLING, GENERAL & ADMINISTRATIVE 29.6 % 30.6 % (100) 29.4 % 30.2 % (80) EXPENSE OPERATING MARGIN 20.4 % 20.3 % 10 20.9 % 21.0 % (10) CASH FLOW (THREE MONTHS ENDED DECEMBER 31) - SOURCE/(USE) OPERATING CASH 3,299 FLOW FREE CASH FLOW 2,361 DIVIDENDS (1,701) SHARE REPURCHASE (1,502) *Core excludes incremental restructuring charges, European legal matters and gain on buyout of Iberian joint venture. 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,” “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 expectation and assumptions that are subject to risks and uncertainties which may cause results to differ materially from 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: (1) the ability to achieve business plans, including growing existing sales and volume profitably and maintaining and improving margins and market share, despite high levels of competitive activity, an increasingly volatile economic environment, lower than expected market growth rates, especially with respect to the product categories and geographical markets (including developing markets) in which the Company has chosen to focus, and/or increasing competition from mid- and lower tier value products in both developed and developing markets; (2) the ability to successfully manage ongoing acquisition, divestiture and joint venture 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 and achieve productivity improvements designed to support our growth strategies, 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; (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, but not limited to, product liability, patent, intellectual property, price controls, import restrictions, environmental and tax policy) and to resolve pending matters within current estimates; (7) the ability to resolve the pending competition law inquiries in Europe within current estimates; (8) the ability to successfully implement, achieve and sustain cost improvement plans and efficiencies in manufacturing and overhead areas, including the Company's outsourcing projects; (9) the ability to successfully manage volatility in foreign exchange rates, as well as our debt and currency exposure (especially in certain countries with currency exchange, import authorization or pricing controls, such as Venezuela, Argentina, China, India and Egypt); (10) the ability to maintain our current credit rating and to manage fluctuations in interest rate, increases in pension and healthcare expense, and any significant credit or liquidity issues; (11) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's significant geographical markets, due to a wide variety of factors, including but not limited to, terrorist and other hostile activities, natural disasters and/or disruptions to credit markets, resulting from a global, regional or national credit crisis; (12) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (13) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (14) the ability to successfully manage increases in the prices of commodities, raw materials and energy, including the ability to offset these increases through pricing actions; (15) the ability to develop effective sales, advertising and marketing programs; (16) the ability to stay on the leading edge of innovation, maintain the positive reputation of our brands and ensure trademark protection; and (17) the ability to rely on and maintain key information technology systems and networks (including Company and third-party systems and networks), the security over such systems and networks, and the data contained therein. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports. About Procter & Gamble P&G serves approximately 4.8billion people around the world with its brands. The Company has one of the strongest portfolios of trusted, quality, leadership brands, including Ace®, Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®, Dawn®, Downy®, Duracell®, Fairy®, Febreze®, Fusion®, Gain®, Gillette®, Head & Shoulders®, Iams®, Lenor®, Mach3®, Olay®, Oral-B®, Pampers®, Pantene®, Prestobarba®, SK-II®, Tide®, Vicks®, Wella® and Whisper®.The P&G community includes operations in approximately70countries worldwide. Please visithttp://www.pg.comfor 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. Organic sales is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The reconciliation of reported sales growth to organic sales is as follows: October – December (OND) 2013 Net Foreign Acquisition/ Organic Sales Exchange Divestiture Sales Growth Impact Impact* Growth Beauty -2% 2% 0% 0% Grooming 0% 3% 0% 3% Health Care 4% 1% 0% 5% Fabric Care and Home 1% 3% 0% 4% Care Baby, Feminine and 1% 2% 0% 3% Family Care Total P&G 0% 3% 0% 3% Net Foreign Acquisition/ Organic Sales Exchange Divestiture Sales Total P&G Growth Impact Impact* Growth FY 2014 (Estimate) 1% to 2% 2% 0% 3% to 4% *Acquisition/Divestiture Impact includes volume and mix impacts of acquired and divested businesses, as well as rounding impacts necessary to reconcile net sales to organic sales. Core EPS: This is a measure of the Company’s diluted net earnings per share excluding charges in both years for incremental restructuring due to increased focus on productivity and cost savings and the prior year gain on the buyout of the Iberian joint venture. 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. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The table below provides a reconciliation of diluted net earnings per share to Core EPS: OND 13 OND 12 Diluted Net Earnings Per Share $1.18 $1.39 Gain on buyout of Iberian JV - ($0.21) Incremental restructuring $0.03 $0.05 Rounding impacts - ($0.01) Core EPS $1.21 $1.22 Core EPS Growth -1% Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. Currency-neutral Core EPS: This is a measure of the Company’s Core EPS excluding the impact of foreign exchange. We believe the currency-neutral Core EPS measure provides a more comparable view of year-on-year earnings per share growth. OND 13 Diluted Net Earnings Per Share Decline -15% Gain on buyout of Iberian joint venture of $0.21 15% Incremental restructuring of ($0.02) -1% Core EPS Growth -1% Foreign exchange impact of $0.11 9% Currency-neutral Core EPS Growth 8% Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. Core Operating Profit Margin: This is a measure of the Company’s Operating Margin adjusted for the current and prior year charges related to incremental restructuring due to increased focus on productivity and cost savings: OND 13 OND 12 Operating Profit Margin 20.4% 20.3% Incremental restructuring 0.4% 0.7% Rounding impacts 0.1% - Core Operating Profit Margin 20.9% 21.0% Basis point change -10 Core Selling, General and Administration Expense (SG&A) as a percentage of sales: This is a measure of the Company’s SG&A as a percentage of sales adjusted for the current and prior year charges related to incremental restructuring due to increased focus on productivity and cost savings: OND 13 OND 12 SG&A as a percentage of sales 29.6% 30.6% Incremental restructuring (0.2%) (0.5%) Rounding impacts - 0.1% Core SG&A as a percentage of sales 29.4% 30.2% Basis point change -80 Core Effective Tax Rate: This is a measure of the Company’s effective tax rate adjusted for current and prior year charges for incremental restructuring and the prior year holding gain on the buyout of our Iberian joint venture partner. The table below provides a reconciliation of the effective tax rate to the Core effective tax rate: OND 13 OND 12 Effective Tax Rate 21.6% 21.9% Tax impact of incremental restructuring (0.1%) (0.3%) Tax impact of gain on buyout of Iberian JV - 2.8% Core Effective Tax Rate 21.5% 24.4% 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. The reconciliation of free cash flow is provided below (amounts in millions): Operating Free Cash Cash Flow Capital Spending Flow OND 2013 $3,299 ($938) $2,361 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts) Consolidated Earnings Information Three Months Ended December Six Months Ended December 31 31 2013 2012 % CHG 2013 2012 % CHG NET SALES $ 22,280 $ 22,175 0 % $ 43,485 $ 42,914 1 % COST OF 11,130 10,880 2 % 21,940 21,230 3 % PRODUCTS SOLD GROSS PROFIT 11,150 11,295 (1)% 21,545 21,684 (1)% SELLING, GENERAL AND 6,598 6,803 (3)% 12,842 13,241 (3)% ADMINISTRATIVE EXPENSE OPERATING 4,552 4,492 1 % 8,703 8,443 3 % INCOME INTEREST 187 169 11 % 352 341 3 % EXPENSE INTEREST 23 19 21 % 44 38 16 % INCOME OTHER NON-OPERATING 43 876 (95)% 48 904 (95)% INCOME, NET EARNINGS BEFORE INCOME 4,431 5,218 (15)% 8,443 9,044 (7)% TAXES INCOME TAXES 959 1,142 (16)% 1,914 2,115 (10)% NET EARNINGS 3,472 4,076 (15)% 6,529 6,929 (6)% LESS: NET EARNINGS ATTRIBUTABLE 44 19 132 % 74 58 28 % TO NONCONTROLLING INTERESTS NET EARNINGS ATTRIBUTABLE $ 3,428 $ 4,057 (16)% $ 6,455 $ 6,871 (6)% TO PROCTER & GAMBLE EFFECTIVE TAX 21.6 % 21.9 % 22.7 % 23.4 % RATE NET EARNINGS PER COMMON SHARE: BASIC NET EARNINGS PER $ 1.24 $ 1.46 (15)% $ 2.32 $ 2.46 (6)% COMMON SHARE DILUTED NET EARNINGS PER $ 1.18 $ 1.39 (15)% $ 2.21 $ 2.35 (6)% COMMON SHARE DIVIDENDS PER $ 0.602 $ 0.562 7 % $ 1.203 $ 1.124 7 % COMMON SHARE DILUTED WEIGHTED AVERAGE COMMON 2,908.5 2,919.1 2,916.4 2,926.1 SHARES OUTSTANDING Basis Pt Basis Pt COMPARISONS AS A Chg Chg % OF NET SALES GROSS MARGIN 50.0 % 50.9 % (90) 49.5 % 50.5 % (100) SELLING, GENERAL AND 29.6 % 30.6 % (100) 29.5 % 30.8 % (130) ADMINISTRATIVE EXPENSE OPERATING 20.4 % 20.3 % 10 20.0 % 19.7 % 30 MARGIN EARNINGS BEFORE INCOME 19.9 % 23.5 % (360) 19.4 % 21.1 % (170) TAXES NET EARNINGS 15.6 % 18.4 % (280) 15.0 % 16.1 % (110) NET EARNINGS ATTRIBUTABLE 15.4 % 18.3 % (290) 14.8 % 16.0 % (120) TO PROCTER & GAMBLE THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Earnings Information Three Months Ended December 31, 2013 % Change % % Change Change Versus Earnings Versus Versus Before Net Sales Year Ago Income Year Net Year Taxes Ago Earnings Ago Beauty $ 5,284 -2% $ 1,160 2% $ 927 6% Grooming 2,118 0% 730 5% 553 7% Health 2,574 4% 536 7% 377 8% Care Fabric Care and 6,851 1% 1,344 0% 877 0% Home Care Baby, Feminine and 5,603 1% 1,142 -6% 765 -4% Family Care Corporate (150) N/A (481) N/A (27) N/A Total 22,280 0% 4,431 -15% 3,472 -15% Company Net Sales Change Drivers 2013 vs. 2012 (Three Months Ended December 31) (Percent Change vs. Year Ago)* Volume Volume with excluding Acquisitions Acquisitions Net & & Sales Divestitures Divestitures Foreign Price Mix Other Growth Exchange Beauty 1% 1% -2% 0% -1% 0% -2% Grooming 2% 2% -3% 3% -2% 0% 0% Health 6% 6% -1% 2% -3% 0% 4% Care Fabric Care and 5% 5% -3% 0% -1% 0% 1% Home Care Baby, Feminine and 3% 3% -2% 0% 0% 0% 1% Family Care Total 3% 3% -3% 1% -1% 0% 0% Company Six Months Ended December 31, 2013 % Change % % Change Change Versus Earnings Versus Versus Before Net Sales Year Ago Income Year Net Year Taxes Ago Earnings Ago Beauty $ 10,187 -2% $ 2,069 4% $ 1,617 5% Grooming 4,074 -1% 1,331 0% 1,006 2% Health 4,880 2% 934 -5% 644 -4% Care Fabric Care and 13,551 2% 2,642 -1% 1,734 -1% Home Care Baby, Feminine and 11,106 3% 2,263 -3% 1,490 -2% Family Care Corporate (313) N/A (796) N/A 38 N/A Total 43,485 1% 8,443 -7% 6,529 -6% Company Net Sales Change Drivers 2013 vs. 2012 (Six Months Ended December 31) (Percent Change vs. Year Ago)* Volume Volume with excluding Acquisitions Acquisitions Net & & Sales Divestitures Divestitures Foreign Price Mix Other Growth Exchange Beauty 1% 2% -2% 0% -1% 0% -2% Grooming 1% 1% -2% 2% -1% -1% -1% Health 2% 2% -1% 2% -1% 0% 2% Care Fabric Care and 6% 6% -3% -1% 0% 0% 2% Home Care Baby, Feminine and 5% 5% -2% 0% 0% 0% 3% Family Care Total 4% 4% -2% 0% -1% 0% 1% Company * Sales percentage changes are approximations based on quantitative formulas that are consistently applied. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Consolidated Statements of Cash Flows Six Months Ended December 31 2013 2012 CASH AND CASH EQUIVALENTS, BEGINNING OF $5,947 $4,436 PERIOD OPERATING ACTIVITIES NET EARNINGS 6,529 6,929 DEPRECIATION AND AMORTIZATION 1,526 1,448 SHARE BASED COMPENSATION EXPENSE 153 154 DEFERRED INCOME TAXES (126) 18 GAIN ON PURCHASE/SALE OF BUSINESSES (5) (902) CHANGES IN: ACCOUNTS RECEIVABLE (376) (914) INVENTORIES (446) (324) ACCOUNTS PAYABLE, ACCRUED AND OTHER (1,191) (288) LIABILITIES OTHER OPERATING ASSETS & LIABILITIES (859) 556 OTHER 138 (58) TOTAL OPERATING ACTIVITIES 5,343 6,619 INVESTING ACTIVITIES CAPITAL EXPENDITURES (1,663) (1,529) PROCEEDS FROM ASSET SALES 15 474 ACQUISITIONS, NET OF CASH ACQUIRED 1 (1,123) CHANGE IN OTHER INVESTMENTS (149) (179) TOTAL INVESTING ACTIVITIES (1,796) (2,357) FINANCING ACTIVITIES DIVIDENDS TO SHAREHOLDERS (3,409) (3,206) CHANGE IN SHORT-TERM DEBT (429) 4,972 ADDITIONS TO LONG-TERM DEBT 4,271 2,239 REDUCTION OF LONG-TERM DEBT (3) (3,749) TREASURY STOCK PURCHASES (4,004) (3,984) IMPACT OF STOCK OPTIONS AND OTHER 937 1,662 TOTAL FINANCING ACTIVITIES (2,637) (2,066) EFFECT OF EXCHANGE RATE CHANGES ON CASH 72 11 AND CASH EQUIVALENTS CHANGE IN CASH AND CASH EQUIVALENTS 982 2,207 CASH AND CASH EQUIVALENTS, END OF PERIOD $6,929 $6,643 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions) Condensed Consolidated Balance Sheet December 31, 2013 June 30, 2013 CASH AND CASH EQUIVALENTS $6,929 $5,947 AVAILABLE-FOR-SALE INVESTMENT SECURITIES 1,574 - ACCOUNTS RECEIVABLE 6,911 6,508 TOTAL INVENTORIES 7,379 6,909 OTHER 4,674 4,626 TOTAL CURRENT ASSETS 27,467 23,990 PROPERTY, PLANT AND EQUIPMENT, NET 22,152 21,666 GOODWILL, TRADEMARKS AND OTHER INTANGIBLE 87,888 86,760 ASSETS, NET OTHER NONCURRENT ASSETS 5,420 6,847 TOTAL ASSETS $142,927 $139,263 ACCOUNTS PAYABLE $7,156 $8,777 ACCRUED AND OTHER LIABILITIES 9,480 8,828 DEBT DUE WITHIN ONE YEAR 14,091 12,432 TOTAL CURRENT LIABILITIES 30,727 30,037 LONG-TERM DEBT 21,517 19,111 OTHER 20,545 21,406 TOTAL LIABILITIES 72,789 70,554 TOTAL SHAREHOLDERS' EQUITY 70,138 68,709 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $142,927 $139,263 Contact: P&G Media Contacts: Paul Fox, 513-983-3465 Jennifer Chelune, 513-983-2570 or P&G Investor Relations Contact: John Chevalier, 513-983-9974
P&G Delivers Second Quarter Organic Sales up 3%, Core EPS of $1.21; Confirms Sales and Earnings Outlook for Fiscal Year
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