10-QPeriod: Q3 FY2012

PROCTER & GAMBLE Co Quarterly Report for Q3 Ended Mar 31, 2012

Filed April 27, 2012For Securities:PG

Summary

Procter & Gamble's (PG) Q3 FY12 filing shows a mixed financial performance. While net sales saw a modest increase driven by price hikes and growth in developing markets, net earnings experienced a significant decline. This decrease was primarily attributed to substantial goodwill and intangible asset impairment charges totaling $1.6 billion, largely affecting the Appliances and Salon Professional businesses, as well as incremental restructuring costs associated with a new productivity and cost savings plan. Despite these headwinds, the company continues to generate strong operating cash flow and maintain a healthy free cash flow productivity of 92%. The company is actively managing its portfolio, evidenced by the agreement to divest its global snacks business. Investors should note the impact of rising commodity costs on gross margins and the company's ongoing efforts to offset these pressures through pricing and cost-saving initiatives.

Financial Highlights

51 data points
Beta

Revenue

$20.19B

49.3% Gross Margin

Net Income

$2.41B

11.9% Net Margin

EPS (Diluted)

$0.82

Total Assets

$134.60B

Cash & Equivalents

$3.99B

Free Cash Flow

$2.93B

Financial Statements
Beta
Revenue$20.19B
Cost of Revenue$10.24B
Gross Profit$9.96B
SG&A Expenses$6.64B
Operating Income$3.30B
Interest Expense$179.00M
Net Income$2.41B
EPS (Basic)$0.85
EPS (Diluted)$0.82
Shares Outstanding (Diluted)2.94B

Key Highlights

  • 1Net sales increased by 2% for the quarter and 5% year-to-date, driven by price increases and growth in developing regions, though unit volume growth was modest.
  • 2Net earnings attributable to Procter & Gamble decreased significantly by 16% for the quarter and 23% year-to-date.
  • 3The company recorded substantial goodwill and intangible asset impairment charges of $1.6 billion, primarily impacting the Appliances and Salon Professional businesses.
  • 4A new productivity and cost savings plan was announced, expecting to incur approximately $3.5 billion in restructuring costs over four years.
  • 5Operating cash flow remained robust at $9.3 billion for the nine months ended March 31, 2012, with a free cash flow productivity of 92%.
  • 6The agreement to divest the global snacks business to The Kellogg Company for $2.7 billion was announced, with the business reported as discontinued operations.
  • 7Gross margin contracted by 150 basis points for the quarter and 190 basis points year-to-date, primarily due to higher commodity and energy costs.

Frequently Asked Questions

The significant decrease in net earnings is primarily due to substantial goodwill and intangible asset impairment charges of $1.6 billion, largely related to the Appliances and Salon Professional businesses. Incremental restructuring charges from a new productivity and cost savings plan also contributed to the decline.

Procter & Gamble is offsetting rising commodity and energy costs through price increases across its business segments and regions, as well as implementing manufacturing cost savings and productivity improvements. However, these efforts have not fully mitigated the impact on gross margins, which have contracted.

The snacks business is now reported as discontinued operations, and its sales and earnings are excluded from the company's continuing operations. This strategic move aims to streamline the company's portfolio. The balance sheet positions of the snacks business are presented as assets held for sale.

The company faces ongoing challenges from a dynamic global economic environment, competitive pressures, and cost fluctuations. While net sales show some growth, the company is focused on managing these factors through pricing, cost savings initiatives, innovation, and portfolio management, as evidenced by the announced restructuring plan and the snacks business divestiture.