01—Abstract
Summary
Summary of the 10-Q filed April 29, 2011. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble (PG) reported its third-quarter results for the period ending March 31, 2011, showcasing solid top-line growth driven by volume increases across its diverse portfolio.
Net sales rose 5%a year-over-year for the quarter and 3% for the nine-month period, reflecting strong consumer demand globally, particularly in developing regions. Despite facing increased commodity costs and higher SG&A expenses, the company managed to improve its effective tax rate significantly, leading to an 11% increase in net earnings from continuing operations for the quarter and a 6% increase for the nine months. While the divestiture of the global pharmaceuticals business in the prior year impacted overall net earnings figures, the core business demonstrated resilience.
Diluted earnings per share (EPS) from continuing operations saw a healthy increase, outpacing net earnings growth due to effective share repurchase programs. The company maintained a strong focus on returning capital to shareholders through dividends and share buybacks, underscoring a commitment to shareholder value. Investors should note the ongoing efforts in cost management and strategic divestitures/acquisitions, such as the planned merger of the Snacks business with Diamond Foods, as key indicators of future strategic direction.
02—Key points
Key Highlights
- Net sales increased 5% to $20.2 billion for the three months ended March 31, 2011, driven by 5% unit volume growth across all geographic regions.
- Net earnings from continuing operations rose 11% to $2.9 billion for the quarter, primarily due to a significant decrease in the effective tax rate from 31.3% to 21.1%.
- Diluted EPS from continuing operations increased 16% to $0.96 for the quarter, outpacing net earnings growth due to share repurchase activity.
- For the nine months ended March 31, 2011, net sales grew 3% to $61.7 billion, with organic sales up 4%, indicating consistent underlying business performance.
- The company repurchased $4.5 billion of treasury stock and paid $4.2 billion in dividends during the nine-month period, demonstrating a commitment to returning capital to shareholders.
- A significant reserve of $606 million was established for potential fines related to ongoing investigations into competition law violations in Europe.
- P&G announced plans to divest its Snacks business through a merger with Diamond Foods, Inc., subject to regulatory approval.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2011, Procter & Gamble Co kept $0.14.
- Revenue$19.89B100.0%
- Cost of revenue−$9.79B49.2%
- Gross profit$10.10B50.8%
- Operating costs−$6.40B32.2%
- Operating income$3.71B18.6%
- Interest, other & tax−$832.0M4.2%
- Net income$2.87B14.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2011filed April 29, 2011Financial Statements
Q3 FY2011 against Q3 FY2010
| Line item | Q3 FY2011Q3 FY2010 | Change |
|---|---|---|
| Revenue | $19.89B$19.18B | +3.7% |
| Cost of Revenue | $9.79B$9.22B | +6.1% |
| Gross Profit | $10.10B$9.95B | +1.5% |
| SG&A Expenses | $6.40B$5.99B | +6.9% |
| Operating Income | $3.71B$3.97B | −6.6% |
| Interest Expense | $202.00M$223.00M | −9.4% |
| Net Income | $2.87B$2.58B | +11.1% |
| EPS (Basic) | $1.01$0.88 | +14.8% |
| EPS (Diluted) | $0.96$0.83 | +15.7% |
| Shares Outstanding (Diluted) | 3.00B3.10B | −3.4% |
05—Questions
Frequently Asked Questions
What was the primary driver for the increase in net earnings from continuing operations?
The primary driver for the increase in net earnings from continuing operations was a significant reduction in the effective tax rate. The rate decreased from 31.3% in the prior year period to 21.1% in the current quarter, largely due to discrete tax adjustments and a more favorable geographic mix of earnings.
How did the company's volume and organic sales perform?
The company demonstrated strong volume growth, with a 5% increase for the quarter and 6% for the nine-month period. Organic sales, which exclude acquisitions, divestitures, and foreign exchange impacts, grew 4% for both the quarter and the nine-month period, indicating healthy underlying demand for P&G's products.
What are the implications of the ongoing European competition law investigations?
Procter & Gamble has established a reserve of $606 million as of March 31, 2011, to cover potential fines related to ongoing investigations into competition law violations in Europe. While some decisions have been made, the ultimate resolution of remaining matters could materially impact the income statement and cash flows, and the company is cooperating with authorities.
What is the company doing to return capital to shareholders?
The company continues to focus on returning capital to shareholders. In the nine months ended March 31, 2011, P&G purchased $4.5 billion of treasury stock and paid $4.2 billion in dividends. The company expects to repurchase a total of $6-8 billion of treasury stock for the fiscal year 2011.
06—Continue