Net Sales +3% and Organic
Sales +4%
Diluted EPS $1.40, -12%
and Core EPS $1.84, +16%
MAINTAINS FISCAL YEAR
SALES AND CASH RETURN GUIDANCE
UPDATES GAAP EPS OUTLOOK,
RAISES CORE EPS GROWTH GUIDANCE
The Procter & Gamble Company (NYSE:PG) reported second
quarter fiscal year 2024 net sales of $21.4 billion, an increase of
three percent versus the prior year. Organic sales, which excludes
the impacts of foreign exchange and acquisitions and divestitures,
increased four percent. Diluted net earnings per share were $1.40,
a decrease of 12% versus prior year primarily due to a non-cash
impairment of the carrying value of the Gillette intangible asset.
Core net earnings per share were $1.84, an increase of 16% versus
prior year.
Operating cash flow was $5.1 billion, and net earnings were $3.5
billion for the quarter. Adjusted free cash flow productivity was
95%, which is calculated as operating cash flow excluding capital
spending, as a percentage of net earnings excluding the Gillette
impairment charge. The Company returned $3.3 billion of cash to
shareowners via approximately $2.3 billion of dividend payments and
$1 billion of share repurchases.
Second Quarter ($ billions,
except EPS)
GAAP
2024
2023
% Change
Non-GAAP*
2024
2023
% Change
Net Sales
21.4
20.8
3%
Organic Sales
n/a
n/a
4%
Diluted EPS
1.40
1.59
(12)%
Core EPS
1.84
1.59
16%
*Please refer to Exhibit 1 -
Non-GAAP Measures for the definition and reconciliation of these
measures to the related GAAP measures.
“We delivered strong results in the second quarter, enabling us
to raise our core EPS growth guidance and maintain our top-line
outlook for the fiscal year,” said Jon Moeller, Chairman of the
Board, President and Chief Executive Officer. “We remain committed
to our integrated strategy of a focused product portfolio of daily
use categories where performance drives brand choice, superiority —
across product performance, packaging, brand communication, retail
execution and consumer and customer value — productivity,
constructive disruption and an agile and accountable organization.
The P&G team’s execution of this strategy has enabled us to
build and sustain strong momentum. We have confidence this remains
the right strategy to deliver balanced growth and value
creation.”
October - December Quarter Discussion
Net sales in the second quarter of fiscal year 2024 were $21.4
billion, a three percent increase versus the prior year. Organic
sales, which exclude the impacts of foreign exchange and
acquisitions and divestitures, increased four percent. The organic
sales increase was driven by a four percent increase from higher
pricing, partially offset by a one percent decrease in organic
shipment volumes. Mix had a neutral impact on sales for the
quarter.
October -
December 2023
Volume
Foreign
Exchange
Price
Mix
Other (2)
Net
Sales
Organic
Volume
Organic
Sales
Net Sales
Drivers (1)
Beauty
—%
(1)%
4%
(3)%
1%
1%
(1)%
1%
Grooming
1%
(3)%
7%
1%
—%
6%
1%
9%
Health Care
(3)%
2%
5%
1%
(1)%
4%
(4)%
2%
Fabric & Home Care
—%
—%
4%
1%
—%
5%
1%
6%
Baby, Feminine & Family Care
(2)%
(1)%
4%
1%
—%
2%
(2)%
3%
Total P&G
—%
(1)%
4%
—%
—%
3%
(1)%
4%
(1)
Net sales percentage changes are
approximations based on quantitative formulas that are consistently
applied.
(2)
Other includes the sales mix
impact from acquisitions and divestitures and rounding impacts
necessary to reconcile volume to net sales.
- Beauty segment organic sales increased one percent versus year
ago. Skin and Personal Care organic sales declined mid-single
digits as volume declines and unfavorable mix due to lower sales of
SK-II were partially offset by higher pricing. Hair Care organic
sales increased high single digits driven by increased pricing,
premium product mix and volume growth, primarily in North
America.
- Grooming segment organic sales increased nine percent versus
year ago driven by higher pricing, premium product mix and volume
growth.
- Health Care segment organic sales increased two percent versus
year ago. Oral Care organic sales increased mid-single digits due
to increased pricing and premium product mix, partially offset by
volume declines mainly in Latin America and Asia. Personal Health
Care organic sales declined low single digits as volume declines
and unfavorable mix due to market decline of respiratory products,
were partially offset by increased pricing.
- Fabric and Home Care segment organic sales increased six
percent versus year ago. Fabric Care organic sales increased
mid-single digits due to increased pricing and mix due to growth of
premium forms and fabric enhancers. Home Care organic sales
increased high single digits due to increased pricing, favorable
premium products mix and volume growth from innovation.
- Baby, Feminine and Family Care segment organic sales increased
three percent versus year ago. Baby Care organic sales were
unchanged as increased pricing and favorable product mix were
offset by volume declines. Feminine Care organic sales increased
mid-single digits driven by increased pricing and favorable product
mix, partially offset by pricing-related volume declines in
international markets. Family Care organic sales increased
mid-single digits due primarily to volume growth.
Diluted net earnings per share decreased by 12% to $1.40,
primarily due to the non-cash charge to impair the carrying value
of the Gillette trade name intangible asset and higher non-core
restructuring charges. Core net earnings per share increased by 16%
to $1.84, driven by an increase in net sales and an increase in
core operating margin. Currency-neutral core EPS were up 18% versus
the prior year EPS.
Gross margin for the quarter increased 520 basis points versus
the prior year, 590 basis points on a currency-neutral basis. The
increase was driven by benefits of 240 basis points from gross
productivity savings, 200 basis points of favorable commodity costs
and 190 basis points from increased pricing. These were partially
offset by 40 basis points of product reinvestments and other
impacts.
Reported selling, general and administrative expense (SG&A)
as a percentage of sales increased 130 basis points versus the
prior year. Core selling, general and administrative expense
(SG&A) as a percentage of sales increased 120 basis points
versus year ago and 110 basis points on a currency-neutral basis.
The increase was driven by 290 basis points of reinvestments,
partially offset by 100 basis points of productivity savings and 80
basis points of net sales growth leverage and other impacts.
Reported operating margin for the quarter decreased 230 basis
points due primarily to the current period charge for the
impairment of the Gillette intangible asset. Excluding this
impairment and 10 basis points of non-core restructuring charges,
core operating margin for the quarter increased 400 basis points
versus the prior year, 470 basis points on a currency-neutral
basis. Core operating margin included gross productivity savings of
340 basis points.
Limited Market Portfolio Restructuring
In December 2023, the Company announced a limited market
portfolio restructuring of its business operations, primarily in
certain Enterprise Markets, including Argentina and Nigeria, to
address challenging macroeconomic and fiscal conditions. In
connection with this announcement, the Company said that it expects
to record incremental restructuring charges of $1.0 to 1.5 billion
after tax, including foreign currency translation losses to be
recognized upon the substantial liquidation of operations in the
affected markets. The Company estimates that the large majority of
these charges to be non-cash and anticipates that these
restructuring charges will be recognized in the fiscal years ending
June 30, 2024 and 2025.
Intangible Asset Impairment
During the October-December 2023 quarter, the Company recorded a
$1.3 billion before tax ($1.0 billion after tax) non-cash
impairment charge, on intangible assets acquired as part of the
Company’s 2005 acquisition of The Gillette Company.
The impairment charge arose from a reduction in the estimated
fair value of the Gillette indefinite-lived intangible asset due to
a higher discount rate, weakening of several currencies relative to
the U.S. dollar and the impact of the non-core restructuring
program described above. This impairment charge adjusted the
carrying value of the Gillette indefinite-lived intangible asset to
fair value.
Fiscal Year 2024 Guidance
P&G maintained its guidance range for fiscal 2024 all-in
sales growth to be in the range of two to four percent versus the
prior year. Foreign exchange is expected to be a headwind of
approximately one to two percentage points to all-in sales growth.
The Company also maintained its outlook for organic sales growth in
the range of four to five percent.
P&G adjusted its fiscal 2024 diluted net earnings per share
growth from a range of six to nine percent to a range of -1% to
in-line versus fiscal 2023 EPS of $5.90. This change is due to the
impairment of the Gillette intangible asset value discussed above
and the two-year restructuring program announced by the Company
last month. P&G raised its fiscal 2024 core net earnings per
share growth from a range of six to nine percent to a range of
eight to nine percent versus fiscal 2023 EPS. This outlook equates
to a range of $6.37 to $6.43 per share.
P&G continues to expect unfavorable foreign exchange rates
will be a headwind of approximately $1 billion after tax. The
Company now expects the net impact of interest expense and interest
income to be a headwind of approximately $100 million after tax.
The Company continues to expect tailwinds of approximately $800
million after tax due to favorable commodity costs for fiscal year
2024.
The Company is unable to reconcile its forward-looking non-GAAP
cash flow and tax rate measures without unreasonable efforts given
the unpredictability of the timing and amounts of discrete items,
such as acquisitions, divestitures, or impairments, which could
significantly impact GAAP results.
P&G expects a core effective tax rate of approximately 21%
in fiscal 2024.
Capital spending is estimated to be approximately 4% of fiscal
2024 net sales.
P&G continues to expect adjusted free cash flow productivity
of 90% and expects to pay more than $9 billion in dividends and to
repurchase $5 to $6 billion of common shares in fiscal 2024.
Forward-Looking Statements
Certain statements in this release, other than purely historical
information, including estimates, projections, statements relating
to our business plans, objectives and expected operating results,
and the assumptions upon which those statements are based, are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These forward-looking statements generally are
identified by the words "believe," "project," "expect,"
"anticipate," "estimate," "intend," "strategy," "future,"
"opportunity," "plan," "may," "should," "will," "would," "will be,"
"will continue," "will likely result" and similar expressions.
Forward-looking statements are based on current expectations and
assumptions, which are subject to risks and uncertainties that may
cause results to differ materially from those expressed or implied
in the forward-looking statements. We undertake no obligation to
update or revise publicly any forward-looking statements, whether
because of new information, future events or otherwise, except to
the extent required by law.
Risks and uncertainties to which our forward-looking statements
are subject include, without limitation: (1) the ability to
successfully manage global financial risks, including foreign
currency fluctuations, currency exchange or pricing controls and
localized volatility; (2) the ability to successfully manage local,
regional or global economic volatility, including reduced market
growth rates, and to generate sufficient income and cash flow to
allow the Company to effect the expected share repurchases and
dividend payments; (3) the ability to manage disruptions in credit
markets or to our banking partners or changes to our credit rating;
(4) the ability to maintain key manufacturing and supply
arrangements (including execution of supply chain optimizations and
sole supplier and sole manufacturing plant arrangements) and to
manage disruption of business due to various factors, including
ones outside of our control, such as natural disasters, acts of war
(including the Russia-Ukraine War) or terrorism or disease
outbreaks; (5) the ability to successfully manage cost fluctuations
and pressures, including prices of commodities and raw materials
and costs of labor, transportation, energy, pension and healthcare;
(6) the ability to stay on the leading edge of innovation, obtain
necessary intellectual property protections and successfully
respond to changing consumer habits, evolving digital marketing and
selling platform requirements and technological advances attained
by, and patents granted to, competitors; (7) the ability to compete
with our local and global competitors in new and existing sales
channels, including by successfully responding to competitive
factors such as prices, promotional incentives and trade terms for
products; (8) the ability to manage and maintain key customer
relationships; (9) the ability to protect our reputation and brand
equity by successfully managing real or perceived issues, including
concerns about safety, quality, ingredients, efficacy, packaging
content, supply chain practices or similar matters that may arise;
(10) the ability to successfully manage the financial, legal,
reputational and operational risk associated with third-party
relationships, such as our suppliers, contract manufacturers,
distributors, contractors and external business partners; (11) the
ability to rely on and maintain key company and third-party
information and operational technology systems, networks and
services and maintain the security and functionality of such
systems, networks and services and the data contained therein; (12)
the ability to successfully manage uncertainties related to
changing political and geopolitical conditions and potential
implications such as exchange rate fluctuations and market
contraction; (13) the ability to successfully manage current and
expanding regulatory and legal requirements and matters (including,
without limitation, those laws and regulations involving product
liability, product and packaging composition, intellectual
property, labor and employment, antitrust, privacy and data
protection, tax, the environment, due diligence, risk oversight,
accounting and financial reporting) and to resolve new and pending
matters within current estimates; (14) the ability to manage
changes in applicable tax laws and regulations; (15) the ability to
successfully manage our ongoing acquisition, divestiture and joint
venture activities, in each case to achieve the Company's overall
business strategy and financial objectives, without impacting the
delivery of base business objectives; (16) the ability to
successfully achieve productivity improvements and cost savings and
manage ongoing organizational changes while successfully
identifying, developing and retaining key employees, including in
key growth markets where the availability of skilled or experienced
employees may be limited; (17) the ability to successfully manage
the demand, supply and operational challenges, as well as
governmental responses or mandates, associated with a disease
outbreak, including epidemics, pandemics or similar widespread
public health concerns; (18) the ability to manage the
uncertainties, sanctions and economic effects from the war between
Russia and Ukraine; and (19) the ability to successfully achieve
our ambition of reducing our greenhouse gas emissions and
delivering progress towards our environmental sustainability
priorities. For additional information concerning factors that
could cause actual results and events to differ materially from
those projected herein, please refer to our most recent 10-K, 10-Q
and 8-K reports.
About Procter & Gamble
P&G serves consumers around the world with one of the
strongest portfolios of trusted, quality, leadership brands,
including Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®,
Dawn®, Downy®, Fairy®, Febreze®, Gain®, Gillette®, Head &
Shoulders®, Lenor®, Olay®, Oral-B®, Pampers®, Pantene®, SK-II®,
Tide®, Vicks®, and Whisper®. The P&G community includes
operations in approximately 70 countries worldwide. Please visit
https://www.pg.com for the latest news and information about
P&G and its brands. For other P&G news, visit us at
https://www.pg.com/news.
THE PROCTER & GAMBLE
COMPANY AND SUBSIDIARIES
Consolidated Earnings
Information
Three Months Ended December
31
Amounts in millions except per share
amounts
2023
2022
% Chg
NET SALES
$
21,441
$
20,773
3%
Cost of products sold
10,144
10,897
(7)%
GROSS PROFIT
11,297
9,876
14%
Selling, general and administrative
expense
5,522
5,091
8%
Indefinite-lived intangible asset
impairment charge
1,341
—
OPERATING INCOME
4,433
4,785
(7)%
Interest expense
(248
)
(171
)
45%
Interest income
133
66
102%
Other non-operating income, net
177
155
14%
EARNINGS BEFORE INCOME TAXES
4,496
4,835
(7)%
Income taxes
1,003
876
14%
NET EARNINGS
3,493
3,959
(12)%
Less: Net earnings attributable to
noncontrolling interests
25
26
(4)%
NET EARNINGS ATTRIBUTABLE TO PROCTER
& GAMBLE
$
3,468
$
3,933
(12)%
EFFECTIVE TAX RATE
22.3
%
18.1
%
NET EARNINGS PER COMMON SHARE
(1)
Basic
$
1.44
$
1.63
(12)%
Diluted
$
1.40
$
1.59
(12)%
DIVIDENDS PER COMMON SHARE
$
0.9407
$
0.9133
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
2,468.4
2,481.2
COMPARISONS AS A % OF NET SALES
Basis Pt Chg
Gross profit
52.7
%
47.5
%
520
Selling, general and administrative
expense
25.8
%
24.5
%
130
Operating income
20.7
%
23.0
%
(230)
Earnings before income taxes
21.0
%
23.3
%
(230)
Net earnings
16.3
%
19.1
%
(280)
Net earnings attributable to Procter &
Gamble
16.2
%
18.9
%
(270)
(1)
Basic net earnings per common share and Diluted net earnings per
common share are calculated on Net earnings attributable to Procter
& Gamble.
Certain columns and rows may not
add due to rounding.
THE PROCTER & GAMBLE
COMPANY AND SUBSIDIARIES
Consolidated Earnings
Information
Three Months Ended December
31, 2023
Amounts in millions
Net Sales
% Change
Versus Year
Ago
Earnings/(Loss) Before
Income Taxes
% Change
Versus Year
Ago
Net Earnings/(Loss)
% Change
Versus Year
Ago
Beauty
$
3,849
1%
$
1,112
(3)%
$
868
(5)%
Grooming
1,734
6%
538
8%
440
9%
Health Care
3,172
4%
932
5%
719
5%
Fabric & Home Care
7,415
5%
2,018
31%
1,577
35%
Baby, Feminine & Family Care
5,146
2%
1,437
29%
1,102
30%
Corporate
126
N/A
(1,541
)
N/A
(1,214
)
N/A
Total Company
$
21,441
3%
$
4,496
(7)%
$
3,493
(12)%
Three Months Ended December
31, 2023
Net Sales
Drivers (1)
Volume
Organic
Volume
Foreign
Exchange
Price
Mix
Other (2)
Net Sales
Beauty
—%
(1)%
(1)%
4%
(3)%
1%
1%
Grooming
1%
1%
(3)%
7%
1%
—%
6%
Health Care
(3)%
(4)%
2%
5%
1%
(1)%
4%
Fabric & Home Care
—%
1%
—%
4%
1%
—%
5%
Baby, Feminine & Family Care
(2)%
(2)%
(1)%
4%
1%
—%
2%
Total Company
—%
(1)%
(1)%
4%
—%
—%
3%
(1)
Net sales percentage changes are
approximations based on quantitative formulas that are consistently
applied.
(2)
Other includes the sales mix
impact from acquisitions and divestitures and rounding impacts
necessary to reconcile volume to net sales.
Certain columns and rows may not add due to rounding.
THE PROCTER & GAMBLE
COMPANY AND SUBSIDIARIES
Consolidated Statements of
Cash Flows
Six Months Ended December
31
Amounts in
millions
2023
2022
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, BEGINNING OF PERIOD
$
8,246
$
7,214
OPERATING ACTIVITIES
Net earnings
8,049
7,922
Depreciation and amortization
1,423
1,316
Share-based compensation expense
275
250
Deferred income taxes
(154
)
(398
)
Gain on sale of assets
(3
)
(3
)
Indefinite-lived intangible asset
impairment charge
1,341
—
Changes in:
Accounts receivable
(839
)
(654
)
Inventories
(32
)
(655
)
Accounts payable and accrued and other
liabilities
302
177
Other operating assets and liabilities
(704
)
(535
)
Other
346
224
TOTAL OPERATING ACTIVITIES
10,004
7,644
INVESTING ACTIVITIES
Capital expenditures
(1,742
)
(1,598
)
Proceeds from asset sales
8
8
Acquisitions, net of cash acquired
—
(76
)
Other investing activity
(489
)
344
TOTAL INVESTING ACTIVITIES
(2,224
)
(1,322
)
FINANCING ACTIVITIES
Dividends to shareholders
(4,578
)
(4,486
)
Additions to short-term debt with original
maturities of more than three months
2,798
10,447
Reductions in short-term debt with
original maturities of more than three months
(5,862
)
(3,260
)
Net additions/(reductions) to other
short-term debt
3,740
(1,759
)
Additions to long-term debt
254
—
Reductions in long-term debt
(2,335
)
(1,877
)
Treasury stock purchases
(2,503
)
(6,002
)
Impact of stock options and other
397
437
TOTAL FINANCING ACTIVITIES
(8,087
)
(6,500
)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(49
)
(182
)
CHANGE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
(356
)
(360
)
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, END OF PERIOD
$
7,890
$
6,854
Certain columns and rows may not
add due to rounding.
THE PROCTER & GAMBLE
COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
Amounts in
millions
December 31, 2023
June 30, 2023
Cash and cash equivalents
$
7,890
$
8,246
Accounts receivable
6,334
5,471
Inventories
7,151
7,073
Prepaid expenses and other current
assets
1,736
1,858
TOTAL CURRENT ASSETS
23,111
22,648
Property, plant and equipment, net
22,132
21,909
Goodwill
40,916
40,659
Trademarks and other intangible assets,
net
22,302
23,783
Other noncurrent assets
12,248
11,830
TOTAL ASSETS
$
120,709
$
120,829
Accounts payable
$
14,234
$
14,598
Accrued and other liabilities
11,100
10,929
Debt due within one year
10,616
10,229
TOTAL CURRENT LIABILITIES
35,950
35,756
Long-term debt
23,096
24,378
Deferred income taxes
6,219
6,478
Other noncurrent liabilities
6,614
7,152
TOTAL LIABILITIES
71,880
73,764
TOTAL SHAREHOLDERS' EQUITY
48,829
47,065
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
120,709
$
120,829
Certain columns and rows may not add due
to rounding.
The Procter & Gamble Company
Exhibit 1: Non-GAAP Measures
The following provides definitions of the non-GAAP measures used
in Procter & Gamble's January 23, 2024 earnings release and the
reconciliation to the most closely related GAAP measures. We
believe that these measures provide useful perspective on
underlying business trends (i.e., trends excluding non-recurring or
unusual items) and results and provide a supplemental measure of
period-to-period results. The non-GAAP measures described below are
used by management in making operating decisions, allocating
financial resources and for business strategy purposes. These
measures may be useful to investors, as they provide supplemental
information about business performance and provide investors a view
of our business results through the eyes of management. These
measures are also used to evaluate senior management and are a
factor in determining their at-risk compensation. These non-GAAP
measures are not intended to be considered by the user in place of
the related GAAP measures but rather as supplemental information to
our business results. These non-GAAP measures may not be the same
as similar measures used by other companies due to possible
differences in method and in the items or events being adjusted.
The Company is not able to reconcile its forward-looking non-GAAP
cash flow and tax rate measures because the Company cannot predict
the timing and amounts of discrete items such as acquisition and
divestitures, which could significantly impact GAAP results.
The Core earnings measures included in the following
reconciliation tables refer to the equivalent GAAP measures
adjusted as applicable for the following items:
- Incremental restructuring: The
Company has historically had an ongoing level of restructuring
activities of approximately $250 - $500 million before tax. On
December 5, 2023, the Company announced a limited market portfolio
restructuring of its business operations, primarily in certain
Enterprise Markets, including Argentina and Nigeria. The adjustment
to Core earnings includes the restructuring charges that exceed the
normal, recurring level of restructuring charges.
- Intangible asset impairment: The
Company recognized in the three months ended December 31, 2023, a
non-cash, after-tax impairment charge of $1.0 billion ($1.3 billion
before tax) to adjust the carrying value of the Gillette intangible
asset acquired as part of the Company's 2005 acquisition of The
Gillette Company.
We do not view the above items to be part of our sustainable
results, and their exclusion from core earnings measures provides a
more comparable measure of year-on-year results. These items are
also excluded when evaluating senior management in determining
their at-risk compensation.
Organic sales growth: Organic sales
growth is a non-GAAP measure of sales growth excluding the impacts
of acquisitions and divestitures and foreign exchange from
year-over-year comparisons. We believe this measure provides
investors with a supplemental understanding of underlying sales
trends by providing sales growth on a consistent basis. This
measure is used in assessing the achievement of management goals
for at-risk compensation.
Core EPS and Currency-neutral EPS:
Core earnings per share, or Core EPS, is a measure of diluted net
earnings per common share (diluted EPS) adjusted for items as
indicated. Currency-neutral EPS is a measure of the Company's Core
EPS excluding the incremental current year impact of foreign
exchange. Management views these non-GAAP measures as useful
supplemental measures of Company performance over time.
Core gross margin and Currency-neutral
Core gross margin: Core gross margin is a measure of the
Company's gross margin adjusted for items as indicated.
Currency-neutral Core gross margin is a measure of the Company's
Core gross margin excluding the incremental current year impact of
foreign exchange. Management believes these non-GAAP measures
provide a supplemental perspective to the Company’s operating
efficiency over time.
Core selling, general and administrative
(SG&A) expense as a percentage of sales and Currency-neutral
Core SG&A expense as a percentage of sales: Core
SG&A expense as a percentage of sales is a measure of the
Company's selling, general and administrative expense as a
percentage of net sales adjusted for items as indicated.
Currency-neutral Core SG&A expense as a percentage of sales is
a measure of the Company's Core selling, general and administrative
expense as a percentage of net sales excluding the incremental
current year impact of foreign exchange. Management believes these
non-GAAP measures provides a supplemental perspective to the
Company's operating efficiency over time.
Core operating margin and Currency-neutral
Core operating margin: Core operating margin is a measure of
the Company's operating margin adjusted for items as indicated.
Currency-neutral Core operating margin is a measure of the
Company's Core operating margin excluding the incremental current
year impact of foreign exchange. Management believes these non-GAAP
measures provide a supplemental perspective to the Company’s
operating efficiency over time.
Adjusted free cash flow: Adjusted
free cash flow is defined as operating cash flow less capital
expenditures. Adjusted free cash flow represents the cash that the
Company is able to generate after taking into account planned
maintenance and asset expansion. We view adjusted free cash flow as
an important measure because it is one factor used in determining
the amount of cash available for dividends, share repurchases,
acquisitions and other discretionary investments.
Adjusted free cash flow
productivity: Adjusted free cash flow productivity is
defined as the ratio of adjusted free cash flow to net earnings
excluding the Gillette intangible asset impairment charge. We view
adjusted free cash flow productivity as a useful measure to help
investors understand P&G’s ability to generate cash. Adjusted
free cash flow productivity is used by management in making
operating decisions, in allocating financial resources and for
budget planning purposes. This measure is also used in assessing
the achievement of management goals for at-risk compensation.
THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES
Reconciliation of Non-GAAP
Measures
Three Months Ended December
31, 2023
Three Months Ended
December 31, 2022
Amounts in
millions except per share amounts
As Reported
(GAAP)
Incremental
Restructuring
Intangible
Impairment
Core
(Non-GAAP)
As Reported
(GAAP) (1)
Cost of products sold
$
10,144
$
(12
)
$
—
$
10,132
$
10,897
Gross profit
11,297
12
—
11,308
9,876
Gross margin
52.7
%
0.1
%
—
%
52.7
%
47.5
%
Currency impact to Core gross margin
0.6
%
Currency-neutral Core gross margin
53.4
%
Selling, general and administrative
expense
5,522
(8
)
—
5,515
5,091
Selling, general and administrative
expense as a % of net sales
25.8
%
—
%
—
%
25.7
%
24.5
%
Currency impact to Core selling, general
and administrative expense as a % of net sales
(0.1
)%
Currency-neutral Core selling, general and
administrative expense as a % of net sales
25.6
%
Operating income
4,433
19
1,341
5,793
4,785
Operating margin
20.7
%
0.1
%
6.3
%
27.0
%
23.0
%
Currency impact to Core operating
margin
0.7
%
Currency-neutral Core operating margin
27.7
%
Income taxes
1,003
(20
)
315
1,299
876
Net earnings attributable to P&G
3,468
39
1,026
4,533
3,933
Core EPS
Diluted net earnings per common share
(2)
$
1.40
$
0.02
$
0.42
$
1.84
$
1.59
Currency impact to Core EPS
$
0.03
Currency-neutral Core EPS
$
1.87
Diluted weighted average common shares
outstanding
2,468.4
2,481.2
Common shares outstanding - December 31,
2023
2,353.0
(1) For the period ending December 31, 2022, there were no
adjustments to or reconciling items for Core EPS.
(2) Diluted net earnings per common share are calculated on Net
earnings attributable to Procter & Gamble.
CHANGE VERSUS YEAR AGO
Gross margin
520
BPS
Core gross margin
520
BPS
Currency-neutral Core gross margin
590
BPS
Selling, general and administrative
expense as a % of net sales
130
BPS
Core selling, general and administrative
expense as a % of net sales
120
BPS
Currency-neutral Core selling, general and
administrative as a % of net sales
110
BPS
Operating margin
(230
)
BPS
Core operating margin
400
BPS
Currency-neutral Core operating margin
470
BPS
Diluted EPS
(12
)%
Core EPS
16
%
Currency-neutral Core EPS
18
%
Organic sales growth:
October -
December 2023
Net
Sales Growth
Foreign
Exchange
Impact
Acquisition &
Divestiture
Impact/Other (1)
Organic
Sales
Growth
Beauty
1 %
1 %
(1)%
1 %
Grooming
6 %
3 %
— %
9 %
Health Care
4 %
(2)%
— %
2 %
Fabric & Home Care
5 %
— %
1 %
6 %
Baby, Feminine & Family Care
2 %
1 %
— %
3 %
Total Company
3 %
1 %
— %
4 %
(1)
Acquisition & Divestiture
Impact/Other includes the volume and mix impact of acquisitions and
divestitures and rounding impacts necessary to reconcile net sales
to organic sales.
Total
Company
Net
Sales Growth
Combined
Foreign Exchange &
Acquisition/Divestiture Impact/Other (1)
Organic
Sales Growth
FY 2024 (Estimate)
+2% to +4%
+1% to +2%
+4% to +5%
(1)
Combined Foreign Exchange &
Acquisition/Divestiture Impact/Other includes foreign exchange
impacts, the volume and mix impact of acquisitions and divestitures
and rounding impacts necessary to reconcile net sales to organic
sales.
Core EPS growth:
Total
Company
Diluted
EPS Growth
Impact
of Incremental Non-Core Items (1)
Core EPS
Growth
FY 2024 (Estimate)
(1)% to in-line
+9%
+8% to +9%
(1)
Includes the Gillette intangible
asset impairment charge and incremental non-core restructuring
charges announced in December 2023.
Adjusted free cash flow (dollar amounts in
millions):
Three Months Ended December
31, 2023
Operating Cash Flow
Capital
Spending
Adjusted
Free Cash Flow
$5,101
$(817)
$4,283
Adjusted free cash flow productivity
(dollar amounts in millions):
Three Months Ended December
31, 2023
Adjusted
Free Cash Flow
Net
Earnings
Adjustments to
Net
Earnings (1)
Net
Earnings
as
Adjusted
Adjusted
Free Cash Flow
Productivity
$4,283
$3,493
$1,026
$4,519
95%
(1)
Adjustments to Net Earnings
relate to the Gillette intangible asset impairment charge
recognized in the three months ended December 31, 2023.
Certain columns and rows may not add due to rounding.
Category: PG-IR
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240123881391/en/
P&G Media: Wendy
Kennedy, 513.780.7212 Jennifer Corso, 513.983.2570
P&G Investor Relations:
John Chevalier, 513.983.9974
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