10-QPeriod: Q3 FY2010

PROCTER & GAMBLE Co Quarterly Report for Q3 Ended Mar 31, 2010

Filed April 30, 2010For Securities:PG

Summary

Procter & Gamble Co. reported solid results for the nine months ended March 31, 2010, demonstrating resilience in a challenging economic environment. Net sales saw a 2% increase to $60.0 billion, driven by a 3% rise in unit volume, indicating sustained consumer demand for its essential consumer goods. The company's strategic focus on core brands and product innovation appears to be paying off, with organic sales growing by 3%. While net earnings from continuing operations rose 5% to $8.8 billion, overall net earnings saw a 4% decrease to $10.6 billion, largely due to lower gains from discontinued operations compared to the prior year, primarily from the divestiture of the pharmaceuticals business. Diluted Earnings Per Share (EPS) from continuing operations saw a healthy 7% increase to $2.82, while Core EPS, which excludes certain charges, grew 10% to $2.96, highlighting the underlying strength of the core business. The company also generated substantial operating cash flow of $12.8 billion and free cash flow of $10.8 billion, underscoring its robust financial health and ability to return value to shareholders.

Financial Highlights

50 data points
Beta

Revenue

$19.18B

51.9% Gross Margin

Net Income

$2.58B

13.5% Net Margin

EPS (Diluted)

$0.83

Total Assets

$132.99B

Cash & Equivalents

$4.90B

Free Cash Flow

$4.20B

Financial Statements
Beta
Revenue$19.18B
Cost of Revenue$9.22B
Gross Profit$9.95B
SG&A Expenses$5.99B
Operating Income$3.97B
Interest Expense$223.00M
Net Income$2.58B
EPS (Basic)$0.88
EPS (Diluted)$0.83
Shares Outstanding (Diluted)3.10B

Key Highlights

  • 1Net sales increased 2% to $60.0 billion for the nine months ended March 31, 2010, supported by a 3% increase in unit volume.
  • 2Net earnings from continuing operations rose 5% to $8.8 billion, driven by sales growth and margin expansion.
  • 3Diluted EPS from continuing operations grew 7% to $2.82, and Core EPS increased 10% to $2.96.
  • 4Operating cash flow increased significantly by 29% to $12.8 billion for the nine-month period.
  • 5Free cash flow was strong at $10.8 billion for the nine-month period, with productivity at 102% of net earnings.
  • 6The company continues to manage its portfolio, with the divestiture of the global pharmaceuticals business completed in October 2009.
  • 7Despite an increase in SG&A expenses as a percentage of net sales due to marketing investments and other operating expenses, gross margins saw improvement driven by cost savings and lower commodity costs.

Frequently Asked Questions

Sales growth was primarily driven by a 3% increase in unit volume across various segments, particularly in Household Care, Fabric Care, Home Care, Baby Care, and Family Care. This indicates sustained consumer demand for Procter & Gamble's core products.

The overall net earnings decreased by 4% due to a significant reduction in net earnings from discontinued operations compared to the prior year. This was primarily because the prior year included a large gain from the divestiture of the Folgers coffee business, while the current period's discontinued operations gain was mainly from the sale of the pharmaceuticals business, which was smaller.

The company improved its gross margin by 310 basis points due to manufacturing cost savings and lower commodity/energy costs. However, Selling, General & Administrative (SG&A) expenses increased as a percentage of net sales, mainly due to higher marketing investments and other operating expenses, including charges related to potential competition law fines and Venezuelan currency issues.

Procter & Gamble demonstrated strong financial health with robust operating and free cash flow generation. The company has substantial liquidity, supported by ongoing cash generation from operations and access to credit facilities, enabling it to manage debt and fund shareholder returns.