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Procter Gamble Co (PG) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, June 30, 2009

Procter Gamble Co

CIK: 80424 Ticker: PG
pg blue
 
News Release
The Procter & Gamble Company
One P&G Plaza
Cincinnati, OH 45202
 
FOR IMMEDIATE RELEASE
 
P&G FISCAL YEAR AND FOURTH QUARTER EPS EXCEED EXPECTATIONS
 
 
CINCINNATI, Aug. 5, 2009 - The Procter & Gamble Company (NYSE:PG) announced diluted net earnings per share for the fiscal year ending June 30, 2009 of $4.26, up 17 percent and exceeding the Company’s guidance range of $4.20 to $4.25.  Core EPS, which excludes the current year impact from the sale of the Folgers business and certain tax adjustments in the prior fiscal year, increased eight percent versus fiscal 2008.  For the April - June quarter, diluted net earnings per share were $0.80, above the Company’s guidance range of $0.74 to $0.79 for the quarter.
 
“In fiscal 2009 and particularly in the fourth quarter, P&G faced one of the most difficult macroeconomic environments in decades,” said Chairman of the Board A.G. Lafley.  “We made choices to focus on cash and cost discipline, maintain investments in long-term growth opportunities and to protect the structural economics of our businesses around the world.  We delivered strong free cash flow – the financial lifeblood of the business – while also delivering organic sales and earnings-per-share results that balanced short-term returns and long-term investments.”
 
“In fiscal 2010, we will accelerate investments in innovation, portfolio expansion and consumer value to grow our core business and to serve more consumers in both developed and developing markets,” said Chief Executive Officer Bob McDonald.  “We will also continue to drive simplification efforts and leverage P&G’s scale to increase productivity, improve execution and lower costs.  All of these investments are focused on strengthening the capabilities required to improve more lives more completely in more parts of the world and deliver sustainable long-term growth.”
 
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Fiscal Year Executive Summary
 
 
Diluted net earnings per share increased 17 percent for the fiscal year.  Core EPS was up eight percent in fiscal 2009.
 
Operating cash flow was $14.9 billion for the fiscal year.  Free cash flow, which is operating cash flow less capital spending, was $11.7 billion for the year and 102 percent of net earnings excluding the gain on the Folgers sale.
 
Net sales decreased three percent for the fiscal year to $79.0 billion.  Organic sales, which excludes the impacts of acquisitions, divestitures and foreign exchange, grew two percent for the fiscal year.
 
Fiscal Year Discussion
 
Net sales decreased three percent to $79.0 billion for fiscal 2009 driven by unfavorable foreign exchange impacts of four percent as the U.S. dollar strengthened against key foreign currencies.  Organic sales increased two percent primarily due to price increases taken across all segments which added five percent to net sales.  Product mix reduced net sales by one percent.  Unit volume declined three percent as the global economic downturn, credit crisis and price increases contributed to market size declines and trade inventory reductions.  Organic volume, which excludes the impact of acquisitions and divestitures, was down two percent for the fiscal year.
 
Operating margin was in line with the prior year including approximately 50 basis points of incremental Folgers-related restructuring charges and approximately 250 basis points of net incremental commodity and energy cost increases.  Gross margin declined 80 basis points to 50.8 percent of net sales in 2009 due mainly to higher commodity and energy costs and unfavorable foreign exchange impacts, partially offset by price increases and manufacturing cost savings.
 
Total selling, general and administrative expenses (SG&A) decreased six percent during the fiscal year to $24.0 billion driven primarily by foreign currency impacts and cost reduction efforts.  SG&A as a percentage of net sales was down 80 basis points primarily due to lower marketing costs and the impact of foreign currency transaction gains on working capital balances caused by strengthening of the U.S. dollar.
 
Diluted net earnings per share increased 17 percent during the fiscal year to $4.26.  The increase was due mainly to the gain on the sale of the Folgers business.  Net earnings from continuing operations declined four percent driven by unfavorable foreign exchange, higher commodity costs, lower unit volume and a higher tax rate.  These impacts were mostly offset by price increases, manufacturing cost savings and marketing spending efficiencies.  The tax rate on continuing operations increased mainly due to significant tax benefits in the base period related to adjustments to tax reserves.  Core EPS grew eight percent in fiscal 2009.
 
Operating cash flow was $14.9 billion for the fiscal year.  Free cash flow was 102 percent of net earnings excluding the gain on the Folgers sale and $11.7 billion for the year.  Capital expenditures were 4.1 percent of net sales as the Company continued to invest in new manufacturing facilities.
 
The Company repurchased over $6 billion of P&G stock in fiscal 2009 and $16.3 billion since the inception of the previously announced three-year share repurchase program.
 
Fiscal Year Business Segment Discussion
 
Beauty GBU
 
Beauty net sales decreased four percent to $18.8 billion in fiscal 2009 behind unfavorable foreign exchange impacts of four percent.  Organic sales increased one percent behind price increases of two percent, partially offset by an organic volume decline of one percent.  Unit volume declined two percent including a negative one percent impact from divestitures.  Retail Hair Care volume grew low single digits behind Pantene, Head & Shoulders and Rejoice.  Prestige Fragrances volume declined high single digits and Professional Hair Care volume declined mid-single digits mainly due to market contractions and trade inventory reductions during the fiscal year.  Volume in Skin Care declined mid-single digits primarily due to increased competitive promotional activity affecting Olay and the divestiture of Noxzema.  Personal Cleansing volume was down high single digits behind trade inventory reductions, market contractions and divestiture activity.  Net earnings decreased seven percent during the fiscal year to $2.5 billion mainly due to lower net sales, unfavorable foreign exchange, higher commodity costs and a higher tax rate.  These impacts were partially offset by SG&A cost reductions and manufacturing cost savings.
 
 
Grooming net sales declined nine percent for the fiscal year to $7.5 billion.  Organic sales were down two percent versus the prior year mainly due to a sharp decline of the Braun business.  Unfavorable foreign exchange reduced net sales by six percent.  Unit volume declined six percent.  Product mix had a negative two percent impact on net sales as favorable product mix from growth on the premium-priced Gillette Fusion brand was more than offset by a disproportionate decline of Braun, both of which have selling prices above the segment average.  Price increases added five percent to net sales.  Blades and Razors volume declined low single digits primarily due to market contractions in developed regions and trade inventory reductions.  Growth of Gillette Fusion and Venus was more than offset by volume declines in legacy shaving systems.  Global value share of Blades and Razors was up versus the prior year.  Volume in Braun was down double digits due to market contractions, trade inventory reductions and the exits of the U.S. home appliance and Tassimo coffee appliance businesses. Net earnings were down 11 percent versus 2008 to $1.5 billion resulting primarily from lower net sales, unfavorable foreign exchange and a higher tax rate.
 
Health & Well-Being GBU
 
Health Care net sales were down seven percent to $13.6 billion and organic sales were down one percent in fiscal 2009.  Unit volume declined four percent including a negative one percent impact from the divestitures of Thermacare and other minor brands.  Unfavorable foreign exchange and negative product mix reduced net sales by five percent and two percent, respectively.  These impacts were partially offset by positive pricing impacts of four percent.  Personal Health Care volume was down double digits due to the loss of marketplace exclusivity of Prilosec OTC in North America, the impact of a particularly mild cold and flu season on Vicks and the divestiture of Thermacare.  Pharmaceuticals volume decreased high single digits mainly due to minor brand divestitures and increased competition in the osteoporosis category.  Volume in Oral Care and in Feminine Care declined low single digits behind trade inventory reductions and market contractions in the North America and the Central & Eastern Europe, Middle East and Africa regions.  Net earnings declined three percent to $2.4 billion for the fiscal year mainly due to lower net sales, unfavorable foreign exchange and higher commodity costs, partially offset by SG&A cost reductions and divestiture gains.
 
 
Snacks and Pet Care net sales decreased three percent to $3.1 billion for fiscal 2009.   Organic sales grew one percent behind nine percent positive pricing impacts which more than offset a six percent decline in unit volume and two percent negative product mix.  Unfavorable foreign exchange reduced net sales by four percent.  Snacks volume decreased high single digits due to lower merchandising activity, reduced trade inventory levels and a high base period, which included the Rice Infusion, Extreme Flavors, and Stix product launches.  Pet Care executed double-digit price increases resulting in a mid-single digit decline in unit volume.  Net earnings were down 10 percent for the fiscal year to $234 million behind lower net sales, significantly higher commodity costs, unfavorable foreign exchange and a higher tax rate.  These impacts were partially offset by SG&A cost reductions and manufacturing cost savings.
 
Household Care GBU
  
Fabric Care and Home Care net sales were down two percent in fiscal 2009 to $23.2 billion.  Organic sales increased three percent as positive pricing impacts of six percent more than offset a three percent decline in unit volume.  Unfavorable foreign exchange reduced net sales by five percent.  Volume in Fabric Care declined low single digits due to trade inventory reductions and market share declines following price increases.  Lower shipments of Tide and Ariel were partially offset by growth of Gain and Downy.  Home Care volume was down low single digits due mainly to market contractions and trade inventory reductions.  Batteries volume declined high single digits due to market contractions, trade inventory reductions and market share declines from strong competitive activity.  Net earnings declined 11 percent to $3.0 billion primarily due to lower net sales, higher commodity costs, unfavorable foreign exchange impacts and a higher tax rate.  These impacts were partially offset by manufacturing cost savings and SG&A cost reductions.
 
  
Baby Care and Family Care net sales increased one percent for the fiscal year to $14.1 billion on one percent volume growth.  Organic sales grew seven percent behind price increases to help recover higher commodity and energy costs of five percent and organic volume growth of two percent.  Unfavorable foreign exchange reduced net sales by four percent.  Product mix reduced net sales by one percent.  Baby Care volume increased low single digits due to growth of Pampers primarily in developing regions and double-digit growth of Luvs in North America.  Family Care volume was down low single digits due to the Western European Tissue divestiture.  Organic volume for Family Care was up low single digits behind double-digit growth of Charmin Basic and Bounty Basic.  Net earnings were up two percent to $1.8 billion driven by sales growth and manufacturing cost savings, which were partially offset by higher commodity costs, unfavorable foreign exchange and a higher tax rate.
 
April - June Quarter Discussion
 
     Net sales for the quarter decreased 11 percent to $18.7 billion. Unfavorable foreign exchange reduced net sales by nine percent due to the strengthening of the U.S. dollar against key foreign currencies. Volume declined five percent including a negative one percent impact from divestitures. Organic volume declined four percent driven primarily by significant pricing taken in developing regions to offset the transaction impact of foreign exchange, market contractions mainly in discretionary categories and some share loss in developed regions following price increases.  Price increases added five percent to net sales and product mix had a negative two percent impact on net sales.  Organic sales declined one percent for the quarter.
 
Operating margin increased 120 basis points, which included 80 basis points of incremental restructuring charges related to the Folgers transaction.  The increase in operating margin was primarily due to higher gross margin and lower SG&A as a percentage of net sales.  Gross margin increased 90 basis points driven by the full impact of price increases as the impact of higher commodity costs moderated versus prior quarters.  SG&A as a percentage of net sales was down 30 basis points primarily due to a reduction in marketing costs including lower media rates.
 
Diluted net earnings per share were $0.80, a decrease of 13 percent versus the prior year period.  Core earnings per share increased six percent.  Net earnings decreased 18 percent for the quarter to $2.5 billion mainly due to lower net sales and a higher effective tax rate, partially offset by improved operating margin.  The tax rate increase resulted primarily from significant adjustments to tax reserves in the base period.
 
July - September 2009 Quarter Guidance
 
For the July - September quarter, P&G expects organic sales growth of zero to negative three percent.  Foreign exchange is expected to reduce net sales by about seven percent resulting in net sales down seven to 10 percent versus the prior year.  Earnings per share from continuing operations are expected to be $0.95 to $1.00.  While P&G does expect some non-operating gains as a result of ongoing portfolio optimization in the July - September quarter, the earnings growth rate will be negatively impacted by the comparison to a base period that included several divestiture gains.
 
Fiscal Year 2010 Guidance
 
For fiscal year 2010, P&G confirmed previous guidance for organic sales growth of one to three percent.  Foreign exchange is expected to reduce net sales by zero to one percent, which is modest improvement versus previous guidance of a two to three percent negative impact.  P&G reiterated its earnings per share guidance of $3.65 to $3.80 from continuing operations and plans to re-invest the benefit of improved foreign exchange into long-term growth.
 
Forward-Looking Statements
 
    All statements, other than statements of historical fact included in this release, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on financial data, market assumptions and business plans available only as of the time the statements are made, which may become out of date or incomplete.  We assume no obligation to update any forward-looking statement as a result of new information, future events or other factors.  Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations.  In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) the ability to achieve business plans, including growing existing sales and volume profitably despite high levels of competitive activity, especially with respect to the product categories and geographical markets (including developing markets) in which the Company has chosen to focus; (2) the ability to successfully manage ongoing acquisition and divestiture activities to achieve the cost and growth synergies in accordance with the stated goals of these transactions without impacting the delivery of base business objectives; (3) the ability to successfully manage ongoing organizational changes designed to support our growth strategies, while successfully identifying, developing and retaining key employees; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain key manufacturing and supply sources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory, tax and legal requirements and matters (including product liability, patent, intellectual property, competition law matters, and tax policy), and to resolve pending matters within current estimates; (7) the ability to successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead areas, including the Company's outsourcing projects; (8) the ability to successfully manage currency (including currency issues in volatile countries, such as Venezuela, China and India), debt, interest rate and commodity cost exposures and significant credit or liquidity issues; (9) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's significant geographical markets, as well as any political and/or economic uncertainty and disruptions due to a global or regional credit crisis or terrorist and other hostile activities; (10) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (11) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (12) the ability to successfully manage increases in the prices of raw materials used to make the Company's products; (13) the ability to stay close to consumers in an era of increased media fragmentation; (14) the ability to stay on the leading edge of innovation and maintain a positive reputation on our brands; and 15) the ability to rely on and maintain key information technology systems.  For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports.
 
 
About Procter & Gamble
 
Three billion times a day, P&G brands touch the lives of people around the world. The company has one of the strongest portfolios of trusted, quality, leadership brands, including Pampers®, Tide®, Ariel®, Always®, Whisper®, Pantene®, Mach3®, Bounty®, Dawn®, Gain®, Pringles®, Charmin®, Downy®, Lenor®, Iams®, Crest®, Oral-B®, Actonel®, Duracell®, Olay®, Head & Shoulders®, Wella®, Gillette®, Braun® and Fusion®. The P&G community includes approximately 135,000 employees working in over 80 countries worldwide. Please visit http://www.pg.com for the latest news and in-depth information about P&G and its brands.

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P&G Media Contacts:
Paul Fox, 513.983.3465
Jennifer Chelune, 513.983.2570
 
P&G Investor Relations Contacts:
Mark Erceg, 513.983.2414
John Chvalier, 513.983.9974
The Procter & Gamble Company
 

The following information was filed by Procter Gamble Co (PG) on Wednesday, August 5, 2009 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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