10-QPeriod: Q3 FY2013

PROCTER & GAMBLE Co Quarterly Report for Q3 Ended Mar 31, 2013

Filed April 24, 2013For Securities:PG

Summary

Procter & Gamble's (PG) Q3 FY13 filing reported consistent net sales year-over-year at $20.6 billion, with a 2% increase driven by a 2% rise in unit volume and modest price increases. The company achieved a 6% increase in net earnings attributable to P&G, reaching $2.57 billion, and a 7% rise in diluted EPS to $0.88. This growth was supported by an expanded gross margin due to manufacturing cost savings and higher pricing, alongside a reduced effective tax rate. However, an after-tax charge of $236 million due to the devaluation of the Venezuelan currency negatively impacted results. Despite challenges like competitive pressures and currency fluctuations, the company maintained strong operating cash flow and is actively managing its portfolio through ongoing restructuring and cost-saving initiatives.

Financial Highlights

52 data points
Beta

Revenue

$20.20B

48.8% Gross Margin

Net Income

$2.57B

12.7% Net Margin

EPS (Diluted)

$0.88

Total Assets

$139.13B

Cash & Equivalents

$5.88B

Free Cash Flow

$2.96B

Financial Statements
Beta
Revenue$20.20B
Cost of Revenue$10.34B
Gross Profit$9.86B
SG&A Expenses$6.85B
Operating Income$3.36B
Interest Expense$163.00M
Net Income$2.57B
EPS (Basic)$0.92
EPS (Diluted)$0.88
Shares Outstanding (Diluted)2.93B

Key Highlights

  • 1Net sales remained stable at $20.6 billion, with organic sales up 2% year-over-year.
  • 2Net earnings attributable to P&G increased by 6% to $2.57 billion, and diluted EPS rose by 7% to $0.88.
  • 3Gross margin improved by 50 basis points to 49.8% due to manufacturing cost savings and higher pricing.
  • 4The effective tax rate on continuing operations decreased to 21.2%, aided by the Venezuelan currency devaluation and U.S. corporate tax law changes.
  • 5The company recorded a $236 million after-tax charge due to the devaluation of the Venezuelan currency, impacting overall profitability.
  • 6Operating cash flow for the nine-month period increased by 13% to $10.5 billion.
  • 7Procter & Gamble is executing a productivity and cost savings plan, incurring $180 million in restructuring charges for the quarter.

Frequently Asked Questions

The devaluation of the Venezuelan currency resulted in a significant after-tax charge of $236 million ($0.08 per share) in the third fiscal quarter. This charge impacted net earnings and diluted earnings per share, though it did not affect the organic sales growth rate. The company expects ongoing impacts and is working to mitigate them through pricing adjustments and operational efficiencies.

For the three months ended March 31, 2013, sales performance varied by segment. Health Care saw an 8% increase, while Baby Care and Family Care grew 3%. Beauty and Grooming experienced slight decreases of 2%. Fabric Care and Home Care sales were flat. Net earnings generally followed sales trends, with Health Care showing a 20% increase and Baby Care and Family Care up 6%, while Fabric Care and Home Care saw a 3% decrease.

Procter & Gamble is progressing with its productivity and cost savings plan, which aims to incur over $3.5 billion in restructuring costs over five years. For the quarter ended March 31, 2013, the company incurred $180 million in restructuring charges, primarily related to employee separations and asset write-downs. The company has surpassed its initial target for non-manufacturing overhead personnel reductions by the end of fiscal 2013.

Core EPS for the three months ended March 31, 2013, was $0.99, an increase of 5% from the prior year, while reported diluted EPS was $0.88, up 7%. The difference is due to adjustments made to exclude certain items not considered part of sustainable results, such as the Venezuelan balance sheet devaluation impact, impairment charges, and incremental restructuring charges. For the nine-month period, core EPS was $3.27 (up 8%), compared to reported diluted EPS of $3.22 (up 33%), with the difference attributed to the Venezuelan charge, a gain on the Iberian JV buyout, and prior year impairment charges.