Skip to content
AnalystLens

PROCTER & GAMBLE Co 8-K Report, Financial Results (Oct 25, 2016)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed October 25, 2016
Period End
October 25, 2016
Security
PG
In the record · 2016–202610-K1210-Q328-K226

PG filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 226 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Apr ’22Apr ’22
  2. Leadership change8-K · Jul ’26Jul ’26

01—Abstract

Summary

Summary of the 8-K filed October 25, 2016. Cited figures are marked; the original filing is the authoritative source.

Procter & Gamble reported first quarter fiscal 2017 results (quarter ended September 30, 2016) with net sales flat at $16.5 billiona versus the prior year.

Excluding a 3% foreign exchange headwind, organic sales rose 3%, with growth in all five segments driven by low-to-mid single digit organic volume gains. Diluted GAAP EPS rose 5% to $0.96b, while core EPS rose 5% to $1.03; currency-neutral core EPS grew 12%. Core operating margin expanded 20 basis points (120 basis points on a currency-neutral basis), driven by productivity savings.

Operating cash flow was $3.0 billionc and free cash flow productivity was 85%, below the company's 90% long-term target. P&G returned $1.9 billion in dividends and repurchased $1 billion of stock during the quarter. The quarter marks the completion of P&G's portfolio transformation, as the divestiture of 41 beauty brands to Coty Inc. closed on October 1, 2016.

Management maintained its fiscal 2017 guidance: organic sales growth of about 2%, all-in sales growth of about 1% (after roughly a one-point drag from FX and divestitures), and mid-single-digit core EPS growth from a fiscal 2016 base of $3.67d. GAAP EPS is expected to rise 45% to 50% from $3.69, reflecting a significant gain on the Coty transaction that will be quantified in the second quarter, offset by about $0.13 per share of early debt retirement charges and about $0.10 per share of non-core restructuring costs.

Investors should weigh the solid organic growth and margin improvement against flat reported sales, the continued FX pressure, and cash conversion that fell short of target. The GAAP guidance is distorted by one-time items, so core EPS is the more meaningful measure of underlying trajectory for the year.

02—Key points

Key Highlights

  1. Net sales flat at $16.5B; organic sales up 3%, with all five segments posting organic growth and a 3% organic volume increase
  2. Diluted GAAP EPS $0.96 (+5%); core EPS $1.03 (+5%), or +12% on a currency-neutral basis
  3. Core operating margin up 20 bps (+120 bps currency-neutral), driven by 270 bps of productivity cost savings
  4. Health Care was the strongest segment with 7% organic sales growth; Beauty grew organic sales 3% led by SK-II
  5. Operating cash flow of $3.0B and free cash flow productivity of 85%, below the 90% long-term target
  6. Beauty Brands divestiture to Coty closed October 1, 2016; the company is refocusing on 10 core categories
  7. FY2017 guidance maintained: ~2% organic sales growth, ~1% all-in sales growth, mid-single-digit core EPS growth; GAAP EPS up 45-50%

03—Questions

Frequently Asked Questions

  1. Why was reported sales flat if organic sales grew 3%?

    Foreign exchange reduced net sales by about 3%, and minor brand divestitures and lost sales in Venezuela also weighed on results. These offset the 3% organic growth, leaving reported net sales unchanged at $16.5 billion.

  2. What is the difference between GAAP EPS and core EPS for this quarter?

    GAAP diluted EPS was $0.96, which included a $0.04 per share loss from discontinued operations (the Beauty Brands business) and $0.03 per share of non-core restructuring costs. Core EPS of $1.03 excludes these items, so it better reflects ongoing operating performance.

  3. What drove the GAAP EPS guidance increase of 45-50% for fiscal 2017?

    The increase is driven by a significant expected gain from the divestiture of 41 beauty brands to Coty, which closed October 1, 2016. The exact gain will be reported in the second quarter. The guidance also includes about $0.13 per share of early debt retirement charges and about $0.10 per share of non-core restructuring costs.

  4. Is P&G generating enough cash flow relative to its earnings?

    Free cash flow productivity was 85% for the quarter, based on $2.3 billion of free cash flow against $2.8 billion of net earnings. This is below the company's long-term target of at least 90%, mainly due to working capital investment in receivables and inventories. Shareholder returns were $2.9 billion in the quarter, including $1.9 billion in dividends and $1 billion in share repurchases.

04—Continue

← View all 8-K filings