01—Abstract
Summary
Summary of the 10-Q filed October 24, 2014. Cited figures are marked; the original filing is the authoritative source.
Procter & Gamble's (PG) first quarter of fiscal year 2015 (ending September 29, 2014) showed flat net sales of $20.8 billiona, with organic sales up 2%.
While unit volume remained stable, this was driven by growth in Health Care and Fabric/Home Care, offset by declines in Beauty/Personal Care and Grooming. The company experienced a significant decline in net earnings attributable to PG, down 34% to $2.0 billionb. This was largely impacted by a substantial non-cash goodwill and intangible asset impairment charge of $932 million related to the Batteries business, and a $104 million charge from balance sheet remeasurements in Venezuela.
Core net earnings per share, which excludes these charges, showed a modest increase of 2% to $1.07c, indicating underlying operational resilience. Financially, the company generated strong operating cash flow of $3.6 billion and free cash flow of $2.8 billion, with an adjusted free cash flow productivity of 96%. The company continued its portfolio optimization efforts, completing the divestiture of its Pet Care business and announcing plans to exit the Batteries business.
These strategic moves are aimed at focusing on core strengths and improving long-term growth and profitability. Investors should note the significant impact of the impairment charges and foreign currency impacts on reported earnings, while observing the positive trends in core earnings and cash flow generation.
02—Key points
Key Highlights
- Net sales remained flat at $20.8 billion, with organic sales growing 2% driven by pricing and favorable product mix.
- Net earnings attributable to Procter & Gamble decreased significantly by 34% to $2.0 billion, primarily due to a $932 million non-cash impairment charge related to the Batteries business and $104 million in Venezuela remeasurement charges.
- Core net earnings per share (excluding special charges) increased by 2% to $1.07, demonstrating underlying operational strength.
- Operating cash flow was robust at $3.6 billion, and free cash flow was $2.8 billion, with an adjusted free cash flow productivity of 96%.
- The company completed the sale of its Pet Care business and is pursuing an exit from its Batteries business as part of its portfolio optimization strategy.
- Divisional performance was mixed, with Health Care and Baby/Feminine/Family Care showing sales growth, while Fabric Care/Home Care and Beauty/Hair/Personal Care experienced slight declines.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2015, Procter & Gamble Co kept $0.11.
- Revenue$18.77B100.0%
- Cost of revenue−$9.73B51.9%
- Gross profit$9.04B48.1%
- Operating costs−$5.40B28.8%
- Operating income$3.63B19.4%
- Interest, other & tax−$1.64B8.8%
- Net income$1.99B10.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2015filed October 24, 2014Financial Statements
Q1 FY2015 against Q1 FY2014
| Line item | Q1 FY2015Q1 FY2014 | Change |
|---|---|---|
| Revenue | $18.77B$20.17B | −7.0% |
| Cost of Revenue | $9.73B$10.57B | −7.9% |
| Gross Profit | $9.04B$9.60B | −5.9% |
| SG&A Expenses | $5.40B$6.14B | −11.9% |
| Operating Income | $3.63B$3.97B | −8.5% |
| Interest Expense | $170.00M$165.00M | +3.0% |
| Net Income | $1.99B$3.03B | −34.3% |
| EPS (Basic) | $0.71$1.09 | −34.9% |
| EPS (Diluted) | $0.69$1.04 | −33.7% |
| Shares Outstanding (Basic) | 2.71B2.74B | −0.9% |
| Shares Outstanding (Diluted) | 2.89B2.92B | −1.2% |
05—Questions
Frequently Asked Questions
What was the primary reason for the significant drop in net earnings?
The primary reason for the sharp decrease in net earnings was a significant non-cash impairment charge of $932 million related to goodwill and indefinite-lived intangible assets in the Batteries business. Additionally, a $104 million charge from remeasuring balance sheet items in Venezuela contributed to the decline.
How did the company's organic sales perform?
Organic sales, which exclude foreign exchange, acquisitions, and divestitures, increased by 2%. This growth was driven by price increases and a favorable product mix, with notable growth in Health Care and Baby, Feminine, and Family Care segments.
What is the company doing with its portfolio?
Procter & Gamble is actively streamlining its portfolio. This quarter, they completed the divestiture of their Pet Care business and announced plans to exit the Batteries business. These actions are part of a strategy to focus on core brands and businesses.
How is the company's cash flow generation?
The company demonstrated strong cash flow generation, with $3.6 billion in operating cash flow and $2.8 billion in free cash flow. Their adjusted free cash flow productivity was 96%, indicating efficient conversion of earnings into cash.
06—Continue