05 August 2009

PG: Income Statement Analysis for the June 2009 Quarter

Procter & Gamble (NYSE: PG) earned $0.80 per diluted share in the quarter that ended 30 June 2009, down from $0.92 last year ($0.90 excluding income from discontinued operations).  This period was the fourth quarter of P&G's fiscal year.

The average estimate for P&G earnings in the recent quarter was $0.78.

This post, which is our first on P&G, takes a peek at the company's latest Income Statement

In a second article, we will report P&G's scores as measured by the GCFR Financial Gauges.  The follow-up post will provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.

P&G sells well-known consumer products, including brands, according to the company's web site, such as Pampers, Tide, Ariel, Always, Pantene, Bounty, Pringles, Charmin, Downy, Iams, Crest, Actonel and Olay.  Based in Cincinnati, the company traces its roots back to 1837.

Please click here to see a full-sized, normalized depiction of the actual results for the just-concluded quarter, as well as the quarterly Income Statements for the last couple of years.  Please note that our organization of revenues, expenses, gains, and losses, which we use for all analyses, can and often does differ in material respects from company-used formats.  The standardization facilitates cross-company comparisons.

It's worth noting that the results for the June 2008 quarter were restated to reflect last year's sale of the Folgers coffee business to J.M. Smucker (NYSE: SJM).

P&G's Revenue in the June quarter was 10.6 percent less than last year, but it was up 1.3 percent from the March 2009 period.  The company indicated that much of the Revenue decline, 9 percent, could be attributed to the stronger U.S. dollar, which diminishes the reported value of non-U.S. sales.  Product price increases and volume declines essentially canceled each other out, with respect to Revenue.

Revenue in the four quarters of fiscal 2009 slipped 3.3 percent compared to fiscal 2008.

The Cost of Goods Sold was 49.7 percent of Revenue in the quarter, which translates into a Gross Marginof 50.3 percent, up almost a full percentage point from 49.4 percent in June 2008.  The negative "impact of higher commodity costs moderated versus prior quarters."

Sales, General, and Administrative (SG&A) expenses decreased from 31.5 percent of Revenue last year to 31.2 percent. P&G was able to reduce its marketing costs.

Operating Income was down 4.4 percent from last year's June quarter.  Costs reductions prevented the hefty Revenue decline from having a greater negative effect on earnings

Interest and other non-operating items in the quarter summed to a net expense of $289 million, which matched the expense last year.

The 24.8-percent effective income tax rate was more burdensome than the unusually low 14.4 percent in last year's June quarter.  The rate in 2008 benefited from "significant adjustments to tax reserves."

Given all of the above, Net Income fell by 18.1 percent. Diluted earnings per share decreased by 13.5 percent, as fewer shares outstanding softened the decline.

Full disclosure: No position in PG at time of writing.

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