01—Abstract
Summary
Summary of the 10-K filed August 6, 2019. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's (PG) 2019 10-K filing highlights a challenging year primarily impacted by a significant $8.3 billiona goodwill and intangible asset impairment charge related to its Shave Care business.
This charge led to a substantial decrease in reported net earnings and diluted EPS. Despite this, the company demonstrated resilience with a 5% organic sales increase driven by a 2% rise in organic volume across its segments, with notable strength in Beauty and Fabric & Home Care. Operationally, P&G continued its focus on productivity improvements, evident in its strong Adjusted Free Cash Flow (AFF) of $12.1 billionb and robust AFF productivity of 105%.
The company also returned significant capital to shareholders through dividends, increasing the payout by 4%c for the 63rd consecutive year, and share repurchases. Strategic acquisitions, like the Merck KGaA OTC healthcare business, were completed, while organizational changes were implemented to drive future growth. Investors should note the company's ongoing efforts to streamline its portfolio and focus on core, high-performing brands.
02—Key points
Key Highlights
- Significant $8.3 billion goodwill and intangible asset impairment charge in the Shave Care segment negatively impacted reported net earnings and EPS.
- Organic sales grew 5% driven by a 2% increase in organic volume, with Beauty and Fabric & Home Care segments showing mid-to-high single-digit organic sales growth.
- Adjusted Free Cash Flow (AFF) was $12.1 billion, with AFF productivity at a strong 105%, indicating effective cash generation.
- The company continued its commitment to shareholder returns by increasing its dividend by 4% for the 63rd consecutive year and repurchasing $5 billion in shares.
- Acquired the Merck KGaA OTC healthcare business for $3.7 billion to strengthen its Health Care segment.
- Implemented organizational design changes effective July 1, 2019, reorganizing into six Sector Business Units (SBUs) to drive future growth.
- Walmart remains the largest customer, accounting for approximately 15% of total sales, with no other single customer exceeding 10%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Procter & Gamble Co kept $0.06.
- Revenue$67.68B100.0%
- Cost of revenue−$34.77B51.4%
- Gross profit$32.92B48.6%
- Operating costs−$27.43B40.5%
- Operating income$5.49B8.1%
- Interest, other & tax−$1.59B2.3%
- Net income$3.90B5.8%
Where FY2019 revenue went
$67.68B- Cost of revenue: $34.77B, 51% of revenue
- SG&A: $19.08B, 28% of revenue
- Net income: $3.90B, 5.8% of revenue
- R&D: $1.90B, 2.8% of revenue
- Other operating costs: $6.45B, 9.5% of revenue
- Interest, other & tax: $1.59B, 2.3% of revenue
Kept 5.8% as net incomeNet income $3.90B · 5.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 6, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $67.68B$66.83B | +1.3% |
| Cost of Revenue | $34.77B$34.43B | +1.0% |
| Gross Profit | $32.92B$32.40B | +1.6% |
| R&D Expenses | $1.90B$1.90B | 0.0% |
| SG&A Expenses | $19.08B$19.04B | +0.2% |
| Operating Income | $5.49B$13.36B | −58.9% |
| Interest Expense | $509.00M$506.00M | +0.6% |
| Net Income | $3.90B$9.75B | −60.0% |
| EPS (Basic) | $1.45$3.75 | −61.3% |
| EPS (Diluted) | $1.43$3.67 | −61.0% |
| Shares Outstanding (Basic) | 2.50B2.53B | −1.0% |
| Shares Outstanding (Diluted) | 2.54B2.66B | −4.4% |
05—Questions
Frequently Asked Questions
What caused the significant decrease in reported net earnings for fiscal year 2019?
The primary driver for the decrease in reported net earnings was an $8.3 billion non-cash impairment charge related to goodwill and indefinite-lived intangible assets in the Shave Care segment, specifically impacting the Gillette brand.
How did the company's organic sales perform in fiscal year 2019?
Procter & Gamble reported a 5% increase in organic sales, driven by a 2% increase in organic volume. Key segments like Beauty and Fabric & Home Care showed particularly strong performance with mid-to-high single-digit organic sales growth.
What is the company's stance on returning capital to shareholders?
P&G continues to prioritize shareholder returns. In fiscal year 2019, the company increased its dividend by 4% for the 63rd consecutive year and repurchased approximately $5 billion of its own stock, demonstrating a consistent commitment to capital allocation.
Did the company make any significant acquisitions or divestitures during the year?
Yes, P&G completed the acquisition of Merck KGaA's OTC healthcare business for $3.7 billion, aiming to bolster its Health Care segment. The company also dissolved its PGT Healthcare partnership.
06—Continue