April 7, 2009
Consumer Staples – Household Products
Henry Fund Research
The Procter & Gamble Co.
Monty Piyush Gupta
Monty-gupta@uiowa.edu
Investment Recommendation
Current Price Target Price Range
Buy
$49.65
$65.68-92.36
INVESTMENT THESIS
Procter & Gamble (PG) is the largest household products company in the world, with diversified offerings spread across a large number of household and personal care products. The intrinsic value of PG share is $74.32, which is at a 40 percent premium above the prevailing share price of $49.65, making PG a good investment opportunity. PG generates 55 percent of its revenue from overseas markets, 30% of which comes from emerging markets. This provides it a geographically diversification, relatively hedging it against US economic meltdown.
Source: finance.google.com
Key Stock Statistics
52-Week Price Range Market Capitalization (B) Shares Outstanding (M) Institutional Ownership 60-Month Beta Dividend Yield Price/Earnings (ttm) Price/Book Price/Sales ROA (ttm) ROE(ttm) Projected 5-Year Growth $43.93-73.57 $145.52 3080.8 57.64% 0.60 3.24% 11.46 2.38 1.72 7.52% 18.54% 9.5%
Despite slowdown in sales in FY2009, PG will be impacted less because of its tiered product portfolio by providing the same product at various price points. Trade down from high-end product sales will be compensated by increased low-end product revenue. PG has undertaken continuous product portfolio restructuring, strengthening its portfolio through acquisition and divestiture. Continuous restructuring will assist in improving bottom-lines due to revenue synergies and cost savings. PG will also benefit from steep decline in oil prices and in commodity prices in 2008 - 09, which constitute a substantial part of cost of goods sold. Our buy recommendation stems from our belief that PG will continue to provide consistently growing revenue. The sales will boost from its strengthening operations in US and overseas economies, especially in the emerging markets, continuous product portfolio restructuring, its Gillette acquisition, and from its strong marketing and distribution network. PG will be negatively impacted due to decline in consumer spending, steep rise in gas and commodity prices, unfavorable foreign exchange rates, steep reduction in prices by competition due to shrinking consumer spending, and certain policies by the new US government, like the recent budget proposal regarding income made overseas. Consumer trade down to lower priced products will also unfavorably impact high-margin product sales for PG.
EPS ($)
Year EPS 2006 2.79 2007 3.22 2008 3.86 2009E 4.18 2010E 4.45 2011E 4.80
All earnings represent earnings from operations and have been filtered from net nonrecurring gains.
Valuation Models
DCF-EP Relative P/E Relative multiple- PEG Dividend Discount Model P/E Average $ 105.70 $ 55.20 $ 59.48 $ 52.35 $ 98.85 $74.32
Important disclosures appear on the last page of this report.
Henry Fund Research
EXECUTIVE SUMMARY
Procter & Gamble is the largest consumer staples companies in the world and among the top-10 market capitalized companies. P&G is a undoubted leader in the household condurable product category. With a 171-year history, Procter & Gamble has grown substantially over the years because of its strong management, nimble-footedness, and receptiveness to change. GBU- Beauty
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
The Beauty products unit consists of two sub-segments: Beauty and Grooming. The unit owns 8 one-billion-dollar brands. Beauty products is the second largest revenue generating product category at Procter & Gamble, covering cosmetics, deodorants, hair care, skin care, etc.
The Grooming segment constitutes products in blades, razors, home appliances, and facial and shaving products etc. The Grooming segment was strengthened substantially by the 2005 acquisition of Gillette at a price of $54 billion. Today, PG is by far the market leader in the global blades and razors Procter & Gamble will continue to be one of the safest market, with almost 70% of market share. While grooming investment prospects. It will continue to generate higher products contribute 10% of total revenues, it is the most revenue, increased margins, and high return on invested profitable business unit responsible for 13% of net earnings. capital because of its superior product offerings, diversified product portfolio, geographic diversification, and creation of Key Products: cosmetics, skin care, personal cleansing, hair product synergies through acquisitions and divestitures. care, prestige fragrances, blades and razors, electric hair removal devices, and home appliances.
COMPANY DESCRIPTION
Procter & Gamble is the largest manufacturer and distributor of branded non-durable consumer goods globally. As of 2008, Procter & Gamble has a total market capitalization of $145 billion, making it the 23rd largest company in the world[1]. The company offers an entire range of personal care, health care, household care products, and snacks. Billion-dollar brands: Head & Shoulders, Pantene, Wella, Olay, Braun, Mach3, Gillette, and Fusion. Beauty and grooming products contribute 33% of total net sales and 35% of net profits at PG. With the category being the high margin generator, Beauty GBU is the area highest growth area for PG. The company is concentrating on increasing it’s foot-print in the sector and the margins will benefit from such a move.
Global Business Units (GBUs) The company is divided into three global business units (GBUs) namely beauty, health and well-being, and household GBU-Health and Well-Being care products.
The Health and Well-Being unit contributes almost 23% of PG’s global revenue and 24% of net earnings. The unit is further divided into Health Care, Snacks, Coffee, and Pet Care. Procter & Gamble offers personal health, oral care, pharmaceuticals and feminine care products in the Health Care unit. With leading global brands like Oral-B and Crest, PG has almost 20% of the global branded oral-care products market share, preceded only by Colgate. PG also holds about 33% of global market share in feminine care and is the market leader. In the Snacks category, PG does not have extensive product offerings. Barring marginal products, Pringles is the only large brand in the PG suite of products. As a one-billiondollar brand, Pringle enjoys 10% of the global potato chips market. After the divesture of Folgers, the coffee segment at PG became marginalized. PG has almost 10% of the branded pet-care market in North America, with brands like Iams and Eukanuba. Key Products: feminine care, personal health, oral care, pharmaceuticals, snacks, coffee and pet foods.
Source: P&G financial statements
Source: P&G financial statements
2
Henry Fund Research
Billion-dollar brands: Actonel, Always, Crest, Oral-B, Iams and Pringles. GBU-Household Care The Household is the oldest and the largest strategic business unit at PG. Household contributes 45% of the total company revenues. It is further segregated into ‘Fabric Care and Home Care’ and ‘Baby Care and Family Care’. Fabric Care and Home Care is the largest single business unit at PG, with 28% of the total revenues. Baby care contributes another 16% of total net sales.
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
Key products: batteries, fabric care, air care, dish care, Source: Company financial statements 2008 surface care, baby wipes, diapers, paper towels, etc Billion-Dollar brands: Duracell, Dawn, Downy, Gain, Ariel, Tide, Charmin, Bounty, and Pampers. PG has continued interest in strengthening its household product category. Although this segment is has low profit margins, PG core competence, extensive experience and penetration will continue to make this sector PG’s principal product category.
Source: Company financial statements 2007
Sales and distribution The company’s net sales have grown consistently. The sales increase in 2008 was more than 9%, with 4% unit volume growth, 5% from currency exchange impact and 1% pricing impact. Procter & Gamble has a strong, developed relation with its channel partners, which is a big strength for them. Their sales partners include mass merchandisers, grocery stores, membership clubs, and drug stores. The biggest ten customers account for more than 30% of total unit sales, with Wal-Mart contributing 15% of total unit sales.
Source: P&G financial statements
Global operations As a result of all these initiatives, we project that Procter & Procter & Gamble has a formidable position in the consumer Gamble will have steady rise in the gross margin and products industry. It offers products in 22 product categories operating margin over the next 5 years. globally and is a market leader in more 65% of these 2008 2009E 2010E 2011E 2012E products. The company owns 24 brands that generate more 83,503 86,008 88,588 91,246 93,983 than $1 billion of annual sales, and another 20 brands Net sales 40,695 41,645 42,895 42,895 44,181 generating between $500m and $1b in sales. Together these Cost of goods sold 42,808 44,363 45,694 48,351 49,802 Gross Income 44 brands generate 85% of total sales.
Gross Margin 51.27% 51.58% 51.58%
The company has been strengthening its global presence by Operating income 17,083 18,305 19,080 expanding in overseas markets. It is consolidating its product 20.46% 21.28% 21.54% Operating margin offerings as well as launching new products in foreign EPS 3.86 4.18 4.45 markets. This trend is highlighted by the fact that the revenue Source: company figures and analyst estimates outside of US has increased from 56% of total sales in 2007 to 58% in 2008.
52.99% 19,768 21.66% 4.80
52.99% 20,421 21.73% 5.14
3
Henry Fund Research
Research & development and Innovation Innovation is one of the key drivers of organic sales growth and profitability in consumer goods industry. R&D helps in innovation which creates higher consumer value, helps in product differentiation and prevents against product commoditization. Procter & Gamble invests in innovation more than any other consumer products company[9]. We estimate that the R&D expense at PG will out-pace the sales growth and will grow at 5% CAGR in the next 5 years.
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
INDUSTRY TRENDS
Sustainability initiatives The non-durable industry is starting to adopt green initiatives throughout its business systems. Companies in the industry are adopting green initiatives because they want to be socially responsible corporate citizens and it makes economic sense. There is an increased awareness and demand from the consumers to adopt green products. Consumers are demanding green products because such products are considered safer for people as well as for the environment; therefore, there has been a shift in buying behavior towards companies “perceived” to be green[6]. For example, there has been a thrust on making the packaging green. An important development was the launch of concentrated liquid laundry detergents. The concentrated provide the same product efficiency with a smaller amount of packaging. Another worth-mentioning green initiative in the sector has been Clorox Co’s introduction of its Green Works Line of cleaners. It is considered to a revelation in natural cleaning products because their effectiveness is comparable to conventional cleaners, yet they are made from plant-based ingredients. The detergent industry has also taken other green initiatives. The industry is in trying to make their products more powerful in cold water wash, thus helping reduction in power consumption. Procter & Gamble launched Tide Coldwater, and Clorox introduced Clorox Plus Coldwater Bleach, both of which have been received with enthusiasm. In March 2009, Procter & Gamble Co. has announced a series of new corporate sustainability program. PG will develop at least $50 billion in innovative and sustainable products by 2012. PG is also targeting a 20% reduction in carbon dioxide emissions, energy consumption, water consumption and waste disposal[10]. Volatility in oil and commodity prices restricting margins 2008 was the third year in a row of unusual commodity cost pressures [6]. The commodity price index has been volatile, climbing from 158 points to reach a peak of 183 in June 2008. Commodities are the largest single cost for non-durable companies and this unusual rise in commodity prices has significant impact on their bottom line. Another important trend has been the volatility in oil prices, which rose to $150 per barrel mid-2008. Currently, prices are in the range of $40 - $45, indicating the price uncertainty. We expect the price to stabilize the range of $60-65 in the year 2009.
Source: company annual report and analyst estimate ($m)
RECENT DEVELOPMENTS
Acquisitions and divestitures Procter & Gamble has been aggressively chasing product portfolio restructuring to build a diversified and balanced portfolio of businesses to accomplish revenue synergies and cost savings.
Recent Procter & Gamble sizable deals
Brand Johnson Pdts. Folgers Gillette & Co Transaction Divested Divested Acquired Counter-party RCJP Acquisition J.M. Smucker Co Gillette & Co Amount Unknown $2.95 billion $ 54 billion Date Mar 09 Nov 08 June 05
Source: [2],[3],company financials
Policy changes: President Obama’s administration has proposed a revision in the policy on deferred tax on overseas income by US corporations[4]. Per existing law, US companies can defer payment of taxes on foreign income until the income is brought back to US. The policy proposed in March 2009, suggests repealing or limiting this practice. The revision will be unfavorable for all companies, including Procter & Gamble, which have sizable foreign revenue. A.G. Lafley, CEO at PG, has strongly criticized the proposal[7]. PG generates 56% of its revenues overseas. If the revision is passed, the overseas profits which are currently ploughedback in the same markets will be taxed immediately and will severely impact PG.
4
Henry Fund Research
Product Portfolio Restructuring With the US consumer products industry becoming extremely competitive, and with increased price competition and increased commodity prices, household and personal care companies are focusing on restructuring to get costcutting and streamlined product lines. PG has made acquisitions and divestitures of certain brands like divestiture of Folgers coffee and niche brands like Johnson products- a bouquet of 30 hair care products targeted towards African Americans. It also acquired Gillette in 2005. As per company estimates, Gillette acquisition will generate cost saving of $1.2 billion per annum due to sales, maketing and distribution synergies. Emerging markets present growth opportunities Non-durable consumer product companies are increasingly looking for growth from foreign markets. As the developed markets of the United States and Western Europe are reaching near-saturation, the new drivers of demand will be in developing and emerging countries. This is because in many emerging nations, the growth of real gross domestic product (GDP), consumer disposable income, and population growth are outpacing those of developed countries.
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
As per Mckinsey report, by 2015, the US baby-boomer generation (age 50+) will command almost 60% of net US wealth and 40% of spending. In many categories, boomers will represent over 50% of consumption and will comprise a majority of share growth[8]. With such a major share of sales coming from aging populations, companies offering niche products targeted at this segment will benefit from this trend. PG’s Olay Regenerist, Olay Definitely, Olay Micro-sculpting cream, etc are products targeted for aging populations. Colgate also launched Colgate Total with focus on babyboomers. Product innovation- the key to success The consumer non-durable industry is one of the most matured industries in the world. New product development will be the key to a company’s future sales growth in the industry. New product innovation will evolve largely from a company’s ability and willingness to spend in research and development (R&D), which could offer high rewards and provide sources of high risk in the form of research failures.
MARKETS AND COMPETITION
The biggest competitors to Procter & Gamble in the global consumer non-durable products industry are Unilever Plc, L’Oreal SA, and Kimberly-Clarke.
Source: Global Insight Inc research report
Our projection of 2009 Real GDP is largely in the same area. Source: Standard & Poor industry report US economy will offer less than 1% real GDP growth, if not negative, whereas BRIC (Brazil, Russia, India and China) nations are likely to offer 5-9% growth. PG will benefit from its continuous focus on increased market share in developing markets. Demographic and lifestyle changes will stimulate demand The aging baby boomers and their changing lifestyle and product demands in the US have been a source of new product development by consumer product companies. For example, these individuals are very sensitive to their look, which has given unprecedented push to skin care and haircoloring products in the last decade.
Source: Standard & Poor industry report
5
Henry Fund Research
Procter & Gamble is the undoubted leader in the industry, with the largest product portfolio as well as the highest geographic reach. In 2008, it generated $83 billion in sales, far above Unilever’s $54 billion, the second ranked player in the industry. It also enjoys a leadership status in more than two-thirds of the product categories in which it operates.
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
ECONOMIC OUTLOOK
Although the current condition is gloomy for the entire economy, the consumer staples sector has been less adversely impacted. Traditionally, the sector has been recession resistant. This is because even in the economic slowdown, consumers will continue to consume household non-durable Unilever (UL) Plc products. In fact, consumers may sacrifice other products, Unilever is a UK based consumer non-durables goods including basic and luxury products, but household products company. Unilever is the biggest competitor for Procter & are usually least adversely impacted. Gamble. Unilever manufactures and markets goods in food, home and personal care category. Unilever competes with PG However, the household goods sector is not completely recession proof. If the overall economy is impacted by very closely in most of home and personal care products. recession and the inflation is very high, even the consumer In personal care category, UL has strong product line in hair staples sector will get severely affected. care, deodorants, skin care and skin cleansing, with Sunsilk, Rexona, Lux, Axe, Pond’s and Dove being the large, global On the one hand, the revenue will be adversely affected due brands. UL also has a powerful presence in oral care with to reduced spending on expensive brands. However, Close-up and Signal being two popular brands. companies like Procter & Gamble, which offer the same UL’s home care product portfolio includes laundry products like laundry detergent, liquids and tablets. UL also manufactures soap bars for low income consumers. UL Home care brands include Surf, Snuggle, Radiant, Cif and Domestos. UL offers stiff competition to PG in low-end markets. products at multiple price points, get compensated by increased spending in less expensive brands.
In addition, inflation in the economy can further increase problems for the consumers. As per data by the US Department of Labor, in the year 2008, the producer price index for finished goods declined by 150bps, whereas the Colgate-Palmolive (CL) producer price index for the entire economy was up by 20 CL is one of the leading manufacturers of consumer goods in bps. The producer prices in the consumer products industry is Oral, personal and home care segment and Pet Nutrition expected to decline in 2009, which will provide growth segment. Although CL is roughly 10% of PG in market opportunities in the sector. capitalization, it offers formidable competition to PG in all its Producer Price Index product categories. CL leading brands are Colgate, Palmolive, Irish Spring, Softsoap, Protex and Ajax. Kimberly-Clark Corporation (KMB) KMB is a strong competitor to PG in healthcare, personal care and consumer tissue segments. KMB products are sold under global brands like Kotex, Kleenex, Huggies, Depend, Pull-Ups, Kimberly-Clark etc. The company has grown rapidly in the last decade with robust organic growth as well as many acquisitions. As is showcased in the following table, PG clearly has higher operating margins as well as net profit margins than all its peers.
Company Name M-Cap Current Price P/E Ratio P/B Value P/S Ratio Net Margin Gross Margin
Source: US Department of Commerce statistics
Procter & Gamble Co Church & Dwight Co Clorox Co ColgatePalmolive Co Energizer Holdings Inc KimberlyClark Corp
151.41 3.79 7.77 30.43 3.36 20.80
51.66 53.96 55.9 60.82 57.6 50.24
14 19.4 16.7 16.6 10.1 12.4
2.48 2.84 17.52 3.11 5.36
1.81 1.56 1.43 1.98 0.8 1.07
14.3% 8.1% 8.7% 12.8% 8.1% 8.6%
50.70% 40.11% 40.68% 56.66% 48.16% 30.17%
Source: MSN Money
Falling commodity prices Another economic reason of optimism for the consumer staples sector is the falling commodity prices. The “all crops index of prices received” by the US Department of Commerce (above) shows that the commodity prices were extremely volatile in 2008, jumping from 158 points in Jan. ’08 to peaking at 183 in June ’08 and then declining to 157 points in Jan ’09. The volatility, especially when the prices are falling, can be a problem for large consumer products manufacturers who lock in purchase price ahead of time.
6
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
However, in the long run, reducing commodity prices will up marginally in March 2009, to close at 26.0. The index was boost profitability. at 105 in January 2007. The decline, driven by a deteriorating business environment and worsening job market, suggests Currency exchange rate fluctuation that overall economic conditions have weakened even The strengthening of the dollar has posed another challenge further. Looking ahead, increasing concerns about business for all industries that have heavy international exposure. conditions, employment and earnings, and inflation Most large consumer product companies, including Procter & expectations, will further sap confidence and drive Gamble, have significant international presence. The expectations to their new lowest level. strengthening of the dollar in comparison to other global currencies translates to lower in-dollar revenues from international operations. As seen in the following chart, from a peak of 1.6 dollars to a euro in Feb. ’08, the current prices are 1.31 euros to a dollar. Yen to dollar rates are no exception, and have moved from 110 yen/ dollar in Jan. ’08 to 88 yen/ dollar in Jan. ’09. Exchange Rate - Dollar/Euro
Source: Consumer Confidence Index - The Conference Board
CATALYSTS FOR GROWTH
Procter & Gamble is unarguably the largest and one of the best governed consumer product companies in the world. The catalysts for growth for Procter & Gamble are its continued ability to innovate, launch new products, and enter new geographical markets. Exchange Rate - Yen/Dollar The demand in the developed markets has reached nearsaturation. In addition, the competition in the consumer product industry is severe, with intense price wars. However, with the exploding consumer disposable income and spending income in some of the developing countries like China and India, there is huge potential for market penetration and increased revenue. In addition, the population in most of the developing countries is growing much faster than the developed countries. More people translates to more demand for consumer household products.
Procter & Gamble has also made efforts to make inroads in new product categories. The company acquired Carnett’s car wash, an Atlanta based company with 14 locations [5], to provide an extension to its popular Mr. Clean brand. Consumer confidence Similarly, it acquired the world’s largest shaving product company, Gillette. Therefore, either organically or through Consumer confidence has significant impact on consumer acquisition, entering new product categories will be one of spending. If consumers are not confident about the future, the largest growth catalysts for Procter & Gamble. they will prefer saving to spending. Although food retailers are protected against consumer spending behavior, if the situation persists and consumer confidence witnesses massive Procter & Gamble’s future growth also will be dependent on breakdowns, even the resilient sectors like consumer staples its ability to acquire and divest products that help in strengthening its existing product offerings and positively will be affected. impact the bottom line. The consumer confidence index has reached an all-time low of 25 points (1985=100) in February 2009[11]. It then picked
7
Henry Fund Research
In emerging countries, both men and women are increasingly aware of personal grooming and beauty products. Westernization, development, the corporate environment, and media influence are the factors that will lead to increased demand for personal care, beauty, and grooming products in developing countries. Therefore, such products offer great potential for growth for PG, which already has 35% of its revenue in developing nations and is looking to increase sales impetus there.
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
impacted PG and further upward moment of the dollar can strike a powerful blow to PG. While commodity and oil prices are very low now, we witnessed an unprecedented rally in both industries towards mid-2008. If oil or commodity prices rise again, it will impact PG negatively. During the last commodity price increase era, PG managed to pass on the price increase to customers, but this may not be an option over a long period of time in an price-sensitive industry like household products. Unfavorable policy change: the US government last month proposed a change in tax policy on foreign income of domestic companies. If the proposal is accepted and implemented, it will have severe impact on PG.
INVESTMENT POSITIVES
The intrinsic share price as per our valuation is $70 per share, which is at a 40 percent premium above the prevailing share price. PG has an extremely diversified consumer product portfolio; therefore, it is hedged against economic meltdown. Since the company generates 56 percent of its revenue from outside of North America, it is likely to be secure against further US economic meltdowns. The company is pushing for growth from developing/emerging markets where there is great growth potential. High GDP growth, population explosion and higher disposable income in developing markets will be a driver of revenue growth. PG is committed to Investing heavily in innovation, through new product development as well as through innovative marketing and distribution support. The continued emphasis on innovations will drive higher revenue and higher margins. The company has announced continuous product portfolio restructuring, strengthening its portfolio through acquisition and divestiture. Further restructuring – disposing underperforming brands and acquiring brands that provide cost and brand portfolio synergies, will assist in improving bottom lines due to revenue synergies and cost savings. PG will also benefit from any further decline in oil prices and in commodity prices in 2009, which constitutes a substantial part of cost of goods sold. PG is shifting its product portfolio focus towards health, beauty and grooming products. Higher profit margins and increased demands for innovative products will boost profit margins.
VALUATION
The valuation of share price of Procter & Gamble and the buy recommendation has been done assuming the risk free rate of 3.58% - the prevailing 30-year Treasury bond rate. The market risk premium has been taken at 5%. The terminal growth has been considered at 3% which is the average growth rate in the consumer non-durable product industry. The model assumes WACC of 6.65% and cost of equity of 6.68%. Finally, the model has been made using a market beta of 0.62 which was the beta for PG share on March 31, 2009. While we have recommended a buy for Procter & Gamble considering the intrinsic share price of $74.32- which is average of the five valuation models used to calculate the intrinsic value , against the prevailing share price of $49.65, our recommendation may change depending upon the following factors: Substantial change in the revenues or net margin due to further deterioration in economic condition or pricedecline by competition Sharp increase in commodity prices which can lead to significant impact on high margin products through decline in profit margins. Shift of management away from R&D and innovation, which is a key driver of growth in this industry. Implementation of revision in the policy on deferred tax on overseas income by US corporations. Company’s inability to create attractive marketing and sales programs to attract customers to new products as well as persuade them to prefer PG products over competition offerings.
INVESTMENT NEGATIVES
Substantial economic slowdown will severely hurt Procter & Gamble. PG generates its highest margins from grooming and fragrance products, both of which are considered luxury items. A strong economic recession can impact these categories. PG generates 56% of its revenues from outside North America. The strengthening of the dollar has already
8
REFERENCES
[1] Fortune 500: 2008 rankings [2] http://www.reuters.com/article/marketsNews/idAFN3139910020090331?rpc=44 [3] http://www.reuters.com/article/ousivMolt/idUSWNAS687320080604 [4] http://finance.yahoo.com/news/Head-of-PampG-blasts-Obama-apf-14789582.html [5] http://www.minyanville.com/articles/P-pg-CAR-proctor-gamble-g/index/a/22001/from/yahoo [6] Standard & Poor’s household non-durable consumer industry report, Loran Braverman [7] http://online.wsj.com/article/SB123843840081770525.html?mod=djempersonal [8] http://www.mckinsey.com/mgi/publications/serving_aging_baby_boomers/index.asp [9] P&G annual financial statements [10] http://cincinnati.bizjournals.com/cincinnati/stories/2009/03/23/daily59.html [11] http://www.conference-board.org/economics/ConsumerConfidence.cfm Net advantage S&P; Consumer industry survey http://www.finance.yahoo.com http://www.finance.google.com http://moneycentral.msn.com/investor/finder/customstocks.asp
IMPORTANT DISCLAIMER
This report was created by a student(s) enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa’s Tippie School of Management. The intent of these reports is to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report.
Important disclosures appear on the last page of this report.
Procter & Gamble Monty Piyush Gupta Assumptions WACC Marginal tax rate Terminal growth rate Normal cash level (% of revenue) Risk Free Rate Market Risk Premium Share price Beta Cash & equivalent level in future Contractual obligations Capital Leases Operating leases Min pension fund Purchase obligations Total contractual obligations
$
6.65% 35% 3% 8% 3.58% 5.00% 46.97 0.62 8%
Average of 2003-2007
30-year Treasury rate as of 03/31/09 Closing price on 03/31/09 Beta as on 03/31/09 of sales
407,000 1,656,000 1,401 4,325 2,068,726
Price per Valuation models DCF-EP Relative Multiple-P/E Relative Multiple-PEG P/E Dividend Discount Model AVERAGE VALUATION
$ $ $ $ $ $
105.70 55.20 59.48 98.85 52.35 74.32
Procter & Gamble Co. (year ending on June 30) (figures in '000s) Value Drivers
NOPLAT
2006 1,119,000 12,413,000 13,532,000 35% 3,729,000 391,650 99,050 4,021,600 9,460,000 18,970,400
2007 1,304,000 14,710,000 16,014,000 35% 4,370,000 456,400 197,400 4,629,000 (339,000) 11,046,000
2008 1,467,000 16,078,000 17,545,000 35% 4,003,000 513,450 161,700 4,354,750 (210,000) 12,980,250
2009E 1,599,965 17,193,722 18,793,687 35% 4,522,376 559,988 171,143 171,143 4,740,078 (210,000) 13,843,609
2010E 1,831,210 17,752,121 19,583,332 35% 4,658,047 640,924 176,277 176,277 4,946,416 (210,000) 14,426,915
2011E 1,791,775 18,495,362 20,287,136 35% 4,797,788 627,121 181,565 181,565 5,061,779 (210,000) 15,015,358
2012E 1,796,926 19,158,721 20,955,647 35% 4,941,722 628,924 187,012 187,012 5,196,621 (210,000) 15,549,026
2013E 1,825,804 19,789,359 21,615,164 35% 5,089,974 639,031 192,623 192,623 5,343,760 (210,000) 16,061,404
CV 1,880,578 20,398,926 22,279,505 35% 5,242,673 658,202 198,401 198,401 5,504,072 (210,000) 16,565,432
Interest expense Earnings before income taxes (EBT) EBITA Less: Taxes on EBITA Marginal Tax Rate Total Income Tax Provision Plus: Tax Shield on Interest Expense Less: Tax on Interest Income Less: Tax on Nonoperating Income Taxes on EBITA Plus: Change in Deferred Taxes
NOPLAT INVESTED CAPITAL
Operating Working Capital: (+) Normal Cash (< 0.5% of Sales) (+) Receivables (+) Inventory (+) Prepaid Expenses and othercurrent assests (-) Accounts Payable (-) Accrued Expenses: Other (-) Income Taxes Payable Net Operating Working Capital Net Property, Plant and Equipment Other Operating Assets
NET INVESTED CAPITAL
5,457,760 5,725,000 6,291,000 2,876,000 4,910,000 9,587,000 3,360,000 2,492,760 18,770,000 3,569,000 24,831,760
5,354,000 6,629,000 6,819,000 3,300,000 5,710,000 9,586,000 3,382,000 3,424,000 19,540,000 4,265,000 27,229,000
3,313,000 6,761,000 8,416,000 3,785,000 6,775,000 10,154,000 945,000 4,401,000 20,640,000 4,837,000 29,878,000
6,880,647 6,785,748 9,168,255 3,898,550 7,631,586 10,868,026 4,389,085 3,844,503 22,143,947 4,982,110 30,970,560
7,087,067 6,897,608 9,185,918 4,015,507 8,049,528 11,312,509 3,633,419 4,190,645 22,481,427 5,131,573 31,803,646
7,299,679 7,057,305 8,582,162 4,135,972 8,352,396 11,748,347 3,896,347 4,078,027 23,067,423 5,285,520 32,430,970
7,518,669 7,244,700 8,386,769 4,260,051 8,645,647 12,253,579 3,975,374 3,535,589 23,935,760 5,444,086 32,915,436
7,744,229 7,449,514 8,405,151 4,387,852 8,917,166 12,775,775 4,090,847 3,202,959 24,564,042 5,607,409 33,374,410
7,976,556 7,666,548 8,537,197 4,519,488 9,193,164 13,334,309 4,209,780 2,962,535 25,300,269 5,775,631 34,038,435
ROIC (NOPLAT/Invested Capital) NOPLAT Invested Capital (Beginning)
ROIC (=NOPLAT/Invested Capital)
18,970,400 #REF! #REF!
11,046,000 24,831,760 44.48%
12,980,250 27,229,000 47.67%
13,843,609 29,878,000 46.33%
14,426,915 30,970,560 46.58%
15,015,358 31,803,646 47.21%
15,549,026 32,430,970 47.94%
16,061,404 32,915,436 48.80%
16,565,432 33,374,410 49.64%
Free Cash Flow (NOPLAT - Net Investment) NOPLAT Net Investment (change in invested capital)
Free Cash Flow (NOPLAT - Net Investment)
18,970,400 #REF! #REF!
11,046,000 2,397,240 8,648,760
12,980,250 2,649,000 10,331,250
13,843,609 1,092,560 12,751,049
14,426,915 833,085 13,593,830
15,015,358 627,325 14,388,033
15,549,026 484,465 15,064,561
16,061,404 458,974 15,602,430
16,565,432 664,025 15,901,407
ECONOMIC PROFIT Invested Capital (Beginning) ROIC WACC
EP (Invested Capital*(ROIC-WACC))
#REF! #REF! 6.65% #REF! 6,693,000 5,457,760 1,235,240 1,133,000 2,368,240
24831760 44.48% 6.65% 9,394,156 5,354,000 5,354,000 0 202,000 202,000
27229000 47.67% 6.65% 11,168,938 3,313,000 3,313,000 0 228,000 228,000
29878000 46.33% 6.65% 11,856,082 6,880,647 6,880,647 0 215,000 215,000
30970560.12 46.58% 6.65% 12,366,710 7,087,067 7,087,067 0 221,500 221,500
31803645.54 47.21% 6.65% 12,899,734 7,299,679 7,299,679 0 218,250 218,250
32430970.36 47.94% 6.65% 13,391,672 7,518,669 7,518,669 0 219,875 219,875
32915435.56 48.80% 6.65% 13,871,822 7,744,229 7,744,229 0 219,063 219,063
33374409.51 49.64% 6.65% 14,345,319 7,976,556 7,976,556 0 219,469 219,469
Cash on Hand "Normal" Cash Excess Cash Short-Term Investments Non-Operating Assets
Procter & Gamble Co
WACC calculation Common Shares Outstanding Current Price Market Value of Equity Preferred Shares Outstanding Current Price** Market Value of Preferred 3,080,800 $ 46.97 144,705,176 1,366,000 12.96 17,703,360
72.8%
$
8.91%
Market Value of Debt Value of Capital (D + E + PFD) Risk Free Rate Market Premium (Long term Geometric av)
36,321,000 198,729,536
18.3% 100.0% 3.58% 5.00%
Market Value of Debt (estimated by company in notes to financial statements- Note 5, page 65 of annual report)
Beta Cost of Equity cost of preferred stock Debt rating Default spread Cost of Debt
WACC
0.62
6.68%
Beta as of 03/31/09
12.88% AA0.81%
5.39% 6.65%
Procter & Gamble Co. Discounted Cash Flow/ Economic Profit analysis
WACC
Terminal growth rate
CV ROIC Cost of Equity DCF Model No of periods ahead
6.65% 3.00%
49.64%
6.68%
2009E 2010E 2011E 2012E 2013E CV
FCF PV(FCF) PV(FCF) + PV(Non-Oper) - PV(Debt) - PV(contractual obligations) - PV(ESOP) PV(Equity) Shares Outst.
Target Price
1 12,751,049 11,955,736 $ $ $ $ $ $
$
2 13,593,830 11,950,956
3 14,388,033 11,860,218
4 15,064,561 11,643,355
5 15,602,430 11,306,920
5 426,166,281 308,838,306
367,555,492 228,000 36,321,000 2,068,726 3,766,665 325,627,101 3,080,800
105.70
1 operating leases PV operating leases PV (operating lease) Economic Profit Model Economic Profit ROIC EP PV(EP) PV(EP) Invested Capital PV(Operations) + PV(Non-Operations) - PV(Debt) - PV(contractual obligations) - PV(ESOP) PV(Equity) Shares Outst.
Target Price 299,000
2
288,000
3
240,000
4
196,000
5
185,000
5
448,000
280,351 $ 1,341,596
253,194
197,835
151,488
134,068
324,661
46.33% 11,856,082 11,116,591 337,677,492 29,878,000 367,555,492 228,000 36,321,000 2,068,726 3,766,665 325,627,101 3,080,800
105.70
46.58% 12,366,710 10,872,139
47.21% 12,899,734 10,633,396
47.94% 13,391,672 10,350,384
48.80% 13,871,822 10,052,767
49.64% 392,791,871 284,652,216
$ $ $ $ $
$
Procter & Gamble Co. Dividend Discount Model
WACC CV Growth Rate CV ROIC Cost of Equity
Expected Dividend PV Expected Dividend Total PV Expected Dividends
6.65% 3% 49.64% 6.68% 1 2009E 1.61 1.51
2 2010E 1.72 1.51
3 2011E 1.88 1.55
4 2012E 1.99 1.54
5 2013E 2.11 1.53
5 CV 61.77 44.71
52.35 As of June 30, 2008 55.21 As of today based on the cost of equity
Today Last year end Next year end days in year time lapsed this year fraction lapsed this year
4/27/2009 6/30/2008 6/30/2009 365 301 0.82
Procter & Gamble Co. Fundamental P/E evaluation 2009E
EPS Key Assumptions WACC CV ROE CV Growth Rate Cost of Equity Future Cash Flows P/E Multiple EPS(next period) Stock Price Dividends Per Share Future Cash Flows Discounted Cash Flows Fundamental P/E Target Fundamental P/E Target Effective Fundamental P/E Expected 5-Yr. Growth Rate Fundamental PEG Ratio Discounting Periods $ 4.18 $
2010E
4.45 $
2011E
4.80 $
2012E
5.14 $
2013E
5.48 $
CV
5.82
6.65% 17.55%
3.00% 6.68%
22.53 $ $ 131.21 5.82
$
$
0.930 $
0.930 $
1.030 $
1.030 $
1.150 $
1.150 $
1.280 $
1.280 $
1.450
132.658
$
$ $
0.872 $
98.85
0.905 $
0.947 $
0.988 $
96.010
As of End of Last FY End.
98.85 As of Today 23.65 Based on 2009E EPS
1
2
3
4
5
6
Procter & Gamble Relative Multiple EPS Growth Next 5 Yr PEG 09E 11.40% 1.64 8.90% 1.83 9.20% 1.81 16.30% 0.66 7.60% 1.80 12.00% 1.16 10.90% 1.48
Symbol CHD CLX CL ENR KMB AVP Average PG
Company Name Church & Dwight Co Inc Clorox Co Colgate-Palmolive Co Energizer Holdings Inc Kimberly-Clark Corp Avon Products Inc Procter & Gamble
Stock price Stock price 2009E EPS 2009E P/E 53.96 61.2 3.27 55.9 60.33 3.71 60.82 70 4.21 57.6 59.3 5.48 50.24 57 4.17 22.09 23.09 1.66 51.66 58 3.68
18.72 16.26 16.63 10.82 13.67 13.91 15.00
PE PEG share price
55.20 59.48
Procter & Gamble Co. (year ending on June 30) (figures in '000s) Annual Balance Sheet ASSETS Current Assets Cash & cash equivalents Investment securities Accounts receivable Total inventories Deferred income taxes Prepaid expenses & other current assets Total current assets Long Term Assets Total property, plant & equipment Accumulated depreciation Net property, plant & equipment Net goodwill & other intangible assets Other non-current assets Total Assets LIABILITIES & SHAREHOLDER EQUITY Current Liabilities Accounts payable Accrued & other liabilities Taxes payable Debt due within one year Total Current Liabilities Long Term Liabilities Long-term debt Deferred income taxes Other non-current liabilities Total Long Term & Other Liabilities Total liabilities SHAREHOLDER EQUITY Preferred stock Total Common Stock & Paid-in Capital Reserve for ESOP debt retirement Accumulated other income (loss) Treasury stock, at cost Retained earnings (accumulated deficit) Total shareholders' equity Total Liabilities and Sh-holder equity
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
CV
6,693,000 1,133,000 5,725,000 6,291,000 1,611,000 2,876,000 24,329,000
5,354,000 202,000 6,629,000 6,819,000 1,727,000 3,300,000 24,031,000
3,313,000 228,000 6,761,000 8,416,000 2,012,000 3,785,000 24,515,000
6,880,647 215,000 6,785,748 9,168,255 2,072,360 3,898,550 29,020,560
7,087,067 221,500 6,897,608 9,185,918 2,134,531 4,015,507 29,542,131 40,405,437 17,924,010 22,481,427 99,724,600 5,131,573 156,879,731
7,299,679 218,250 7,057,305 8,582,162 2,198,567 4,135,972 29,491,934 41,617,601 18,550,178 23,067,423 102,716,338 5,285,520 160,561,215
7,518,669 219,875 7,244,700 8,386,769 2,264,524 4,260,051 29,894,588 42,866,129 18,930,368 23,935,760 105,797,828 5,444,086 165,072,262
7,744,229 219,063 7,449,514 8,405,151 2,332,459 4,387,852 30,538,268 44,152,112 19,588,071 24,564,042 108,971,763 5,607,409 169,681,481
7,976,556 219,469 7,666,548 8,537,197 2,402,433 4,519,488 31,321,690 45,476,676 20,176,407 25,300,269 112,240,916 5,775,631 174,638,506
31,881,000 34,721,000 38,086,000 39,228,580 13,111,000 15,181,000 17,446,000 17,084,633 18,770,000 19,540,000 20,640,000 22,143,947 89,027,000 90,178,000 94,000,000 96,820,000 3,569,000 4,265,000 4,837,000 4,982,110 135,695,000 138,014,000 143,992,000 152,966,617
4,910,000 9,587,000 3,360,000 2,128,000 19,985,000 35,976,000 12,354,000 4,472,000 52,802,000 72,787,000
5,710,000 9,586,000 3,382,000 12,039,000 30,717,000 23,375,000 12,015,000 5,147,000 40,537,000 71,254,000
6,775,000 10,154,000 945,000 13,084,000 30,958,000 23,581,000 11,805,000 8,154,000 43,540,000 74,498,000
7,631,586 10,868,026 4,389,085 13,621,405 36,510,102 24,288,430 11,595,000 6,650,500 42,533,930 79,044,032
8,049,528 11,312,509 3,633,419 14,112,460 37,107,915 25,017,083 11,385,000 7,402,250 43,804,333 80,912,248
8,352,396 11,748,347 3,896,347 14,370,663 38,367,753 25,767,595 11,175,000 7,026,375 43,968,970 82,336,723
8,645,647 12,253,579 3,975,374 14,811,925 39,686,525 26,540,623 10,965,000 7,214,313 44,719,936 84,406,461
8,917,166 12,775,775 4,090,847 15,206,231 40,990,018 27,336,842 10,755,000 7,120,344 45,212,186 86,202,204
9,193,164 13,334,309 4,209,780 15,660,383 42,397,636 28,156,947 10,545,000 7,167,328 45,869,275 88,266,911
1,451,000 61,832,000 1,288,000 -518,000 34,235,000 35,666,000 62,908,000
1,406,000 63,020,000 1,308,000 617,000 38,772,000 41,797,000 66,760,000
1,366,000 64,309,000 1,325,000 3,746,000 47,588,000 48,986,000 69,494,000
1,327,138 65,624,365 1,364,750 3,858,380 45,978,128 50,455,580 73,922,585
1,289,382 66,966,634 1,405,693 3,974,131 46,826,218 51,969,247 75,967,484 156,879,731
1,252,699 68,336,358 1,447,863 4,093,355 47,538,382 53,528,325 78,224,492 160,561,215
1,217,061 69,734,098 1,491,299 4,216,156 48,144,389 55,134,175 80,665,801 165,072,262
1,182,436 71,160,427 1,536,038 4,342,641 48,458,387 56,788,200 83,479,278 169,681,481
1,148,796 72,615,930 1,582,119 4,472,920 48,775,778 58,491,846 86,371,595 174,638,506
135,695,000 138,014,000 143,992,000 152,966,617
Procter & Gamble Co. (year ending on June 30) (figures in '000s) Annual Income Statement Beauty Grooming GBU- Beauty Health care Snacks, coffee and pet care GBU - Health and Well-Being Fabric care and home care Baby care and family care GBU - Household Care Corporate Net sales Cost of products sold Marketing, reseacrh, SG&A exp Operating income (loss) Interest expense Other non-operating income (expense), net Earnings before income taxes (EBT) Total current provision for income taxes Total deferred income tax provisions Income taxes Net earnings (loss) Preferred dividends, net of tax benefit Net earnings (loss) to common Weighted average shares outstanding-basic Net earnings (loss) per share (EPS) Dividends per common share Dividend payout ratio
2006 16,687,000 5,114,000 21,801,000 11,831,000 4,383,000 16,214,000 18,918,000 11,972,000 30,890,000 (683,000) 68,222,000 33,125,000 21,848,000 13,249,000 1,119,000 283,000 12,413,000 3,841,000 (112,000) 3,729,000 8,684,000 8,684,000 3,054,900 2.79 1.15 41.22%
2007 17,889,000 7,437,000 25,326,000 13,381,000 4,537,000 17,918,000 21,469,000 12,726,000 34,195,000 (963,000) 76,476,000 36,686,000 24,340,000 15,450,000 1,304,000 564,000 14,710,000 4,117,000 253,000 4,370,000 10,340,000 161,000 10,179,000 3,159,000 3.22 1.28 39.75%
2008 19,515,000 8,254,000 27,769,000 14,578,000 4,852,000 19,430,000 23,831,000 13,898,000 37,729,000 (1,425,000) 83,503,000 40,695,000 25,725,000 17,083,000 1,467,000 462,000 16,078,000 2,789,000 1,214,000 4,003,000 12,075,000 176,000 11,899,000 3,080,800 3.86 1.45 37.56%
2009E 20,100,450 8,501,620 28,602,070 15,015,340 4,997,560 20,012,900 24,545,930 14,314,940 38,860,870 (1,467,750) 86,008,090 41,645,146 26,058,237 18,304,707 1,599,965 488,980 17,193,722 4,057,791 464,585 4,522,376 12,671,346 181,280 12,490,066 2,988,376 4.18 1.61 38.55%
2010E 20,703,464 8,756,669 29,460,132 15,465,800 5,147,487 20,613,287 25,282,308 14,744,388 40,026,696 (1,511,783) 88,588,333 42,894,500 26,614,150 19,079,683 1,831,210 503,649 17,752,121 4,179,524 478,523 4,658,047 13,094,074 186,718 12,907,356 2,898,725 4.45 1.72 38.70%
2011E 21,324,567 9,019,369 30,343,936 15,929,774 5,301,911 21,231,686 26,040,777 15,186,720 41,227,497 (1,557,136) 91,245,983 44,181,335 27,296,270 19,768,378 1,791,775 518,758 18,495,362 4,304,910 492,878 4,797,788 13,697,573 192,320 13,505,253 2,811,763 4.80 1.88 39.16%
2012E 21,964,304 9,289,950 31,254,254 16,407,667 5,460,969 21,868,636 26,822,000 15,642,321 42,464,322 (1,603,850) 93,983,362 45,506,775 28,055,261 20,421,326 1,796,926 534,321 19,158,721 4,434,057 507,665 4,941,722 14,216,999 198,090 14,018,909 2,727,410 5.14 1.99 38.74%
2013E 22,623,234 9,568,648 32,191,882 16,899,897 5,624,798 22,524,695 27,626,660 16,111,591 43,738,252 (1,651,966) 96,802,863 46,871,978 28,866,072 21,064,813 1,825,804 550,351 19,789,359 4,567,079 522,894 5,089,974 14,699,386 204,032 14,495,353 2,645,588 5.48 2.11 38.54%
CV 23,301,931 9,855,708 33,157,638 17,406,894 5,793,542 23,200,436 28,455,460 16,594,939 45,050,399 (1,701,525) 99,706,949 48,278,138 29,716,168 21,712,643 1,880,578 566,861 20,398,926 4,704,092 538,581 5,242,673 15,156,253 210,153 14,946,100 2,566,220 5.82 2.26 38.74%
Procter & Gamble Co. (year ending on June 30) (figures in '000s) Annual Cash Flow Cash & cash equivalents, beginning of year CASH FLOW FROM OPERATIONS Net earnings (loss) Depreciation & amortization Share based compensation expense Deferred income taxes Accounts receivable Inventories Accounts payable, accrued & other liabils Other operating assets & liabilities Other operating activities Net cash flows from operating activities CASH FLOW FROM INVESTING Capital expenditures Proceeds from asset sales Acquisitions, net of cash acquired Change in investment securities Net cash flows from investing activities CASH FLOW FROM FINANCING Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Impact of stock options & other Treasury purchases Net cash flows from financing activities Effect of exchange rate changes on cash & cash equivalents Change in cash & cash equivalents Cash & cash equivalents, end of year
2006 6,389,000 8,684,000 2,627,000 585,000 (112,000) (524,000) 383,000 230,000 (508,000) 10,000 11,375,000
2007 6,693,000 10,340,000 3,130,000 668,000 253,000 (729,000) (389,000) (273,000) (157,000) 592,000 13,435,000
2008 5,354,000 12,075,000 3,166,000 555,000 1,214,000 432,000 (1,050,000) 134,000 (1,239,000) 527,000 15,814,000
2009E 3,313,000 12,671,346 3,461,335 944,422 1,518,971 540,523 (313,772) 167,662 (1,050,251) 1,846,420 19,786,658
2010E 6,880,647 13,094,074 4,359,003 764,134 1,671,456 594,785 (1,445,658) 184,494 (1,705,877) 725,583 21,772,987
2011E 7,087,067 13,697,573 4,557,837 798,989 1,747,699 621,916 (1,511,601) 192,909 (1,783,689) 758,680 22,766,152
2012E 7,299,679 14,216,999 4,657,254 816,417 1,785,820 635,481 (1,544,573) 197,117 (1,822,596) 775,228 23,262,734
2013E 7,518,669 14,699,386 4,706,963 825,131 1,804,881 642,264 (1,561,058) 199,221 (1,842,049) 783,503 23,511,025
CV 7,744,229 15,156,253 4,731,817 829,488 1,814,411 645,655 (1,569,301) 200,273 (1,851,775) 787,640 23,635,171
(2,667,000) 882,000 171,000 884,000 (730,000)
(2,945,000) 281,000 (492,000) 673,000 (2,483,000)
(3,046,000) 928,000 (381,000) (50,000) (2,549,000)
(3,006,566) 915,986 (376,067) (49,353) (2,516,000)
(3,026,283) 921,993 (378,534) (49,676) (2,532,500)
(3,016,424) 918,989 (377,301) (49,515) (2,524,250)
(3,021,354) 920,491 (377,917) (49,595) (2,528,375)
(3,018,889) 919,740 (377,609) (49,555) (2,526,313)
(3,020,121) 920,116 (377,763) (49,575) (2,527,344)
(3,703,000) (8,627,000) 22,545,000 (5,282,000) 1,319,000 (16,830,000) (10,578,000)
(4,209,000) 8,981,000 4,758,000 (17,929,000) 1,499,000 (5,578,000) (12,478,000)
(4,655,000) 1,844,000 7,088,000 (11,747,000) 1,867,000 (10,047,000) (15,650,000)
(4,183,254) 1,657,126 6,369,689 (10,556,537) 1,677,795 (9,028,818) (14,064,000)
(5,772,527) 2,286,690 8,789,618 (14,567,105) 2,315,211 (12,458,986) (19,407,100)
(6,073,664) 2,405,980 9,248,148 (15,327,031) 2,435,989 (13,108,937) (20,419,515)
(6,222,647) 2,464,997 9,474,999 (15,702,993) 2,495,743 (13,430,490) (20,920,391)
(6,299,246) 2,495,341 9,591,635 (15,896,294) 2,526,465 (13,595,817) (21,177,918)
(6,337,725) 2,510,583 9,650,224 (15,993,395) 2,541,897 (13,678,866) (21,307,281)
237,000 304,000 6,693,000
187,000 (1,339,000) 5,354,000
344,000 (2,041,000) 3,313,000
360,989 3,567,647 6,880,647
373,032 206,419 7,087,067
390,225 212,612 7,299,679
405,023 218,990 7,518,669
418,765 225,560 7,744,229
431,781 232,327 7,976,556
Procter & Gamble Co. (year ending on June 30) (figures in '000s) Annual Balance Sheet ASSETS Current Assets Cash & cash equivalents Investment securities Accounts receivable Total inventories Deferred income taxes Prepaid expenses & other current assets Total current assets Long Term Assets Total property, plant & equipment Accumulated depreciation Net property, plant & equipment Net goodwill & other intangible assets Other non-current assets Total Assets LIABILITIES & SHAREHOLDER EQUITY Current Liabilities Accounts payable Accrued & other liabilities Taxes payable Debt due within one year Total Current Liabilities Long Term Liabilities Long-term debt Deferred income taxes Other non-current liabilities Total Long Term & Other Liabilities Total liabilities SHAREHOLDER EQUITY Preferred stock Total Common Stock & Paid-in Capital Reserve for ESOP debt retirement Accumulated other income (loss) Treasury stock, at cost Retained earnings (accumulated deficit) Total shareholders' equity Total Liabilities and Sh-holder equity
2006
2007
2008
2009E
2010E
2011E
2012E
2013E
CV
9.81% 0.83% 8.39% 9.22% 2.36% 4.22% 17.93% 23.49% 41.12% 13.83% 65.61% 2.63% 100.00%
7.00% 0.15% 8.67% 8.92% 2.26% 4.32% 17.41% 25.16% 43.72% 14.16% 65.34% 3.09% 100.00%
3.97% 0.16% 8.10% 10.08% 2.41% 4.53% 17.03% 26.45% 45.81% 14.33% 65.28% 3.36% 100.00%
8.00% 0.14% 7.89% 10.66% 2.41% 4.53% 18.97% 25.80% 43.55% 14.48% 63.29% 3.26% 100.00%
8.00% 0.14% 7.79% 10.37% 2.41% 4.53% 18.83% 26.13% 44.36% 14.33% 63.57% 3.27% 100.00%
8.00% 0.14% 7.73% 9.41% 2.41% 4.53% 18.37% 25.97% 44.57% 14.37% 63.97% 3.29% 100.00%
8.00% 0.13% 7.71% 8.92% 2.41% 4.53% 18.11% 26.05% 44.16% 14.50% 64.09% 3.30% 100.00%
8.00% 0.13% 7.70% 8.68% 2.41% 4.53% 18.00% 26.01% 44.36% 14.48% 64.22% 3.30% 100.00%
8.00% 0.13% 7.69% 8.56% 2.41% 4.53% 17.94% 26.03% 44.37% 14.49% 64.27% 3.31% 100.00%
3.62% 7.07% 2.48% 1.57% 14.73% 26.51% 9.10% 3.30% 38.91% 53.64%
4.14% 6.95% 2.45% 8.72% 22.26% 16.94% 8.71% 3.73% 29.37% 51.63%
4.71% 7.05% 0.66% 9.09% 21.50% 16.38% 8.20% 5.66% 30.24% 51.74%
4.99% 7.10% 2.87% 8.90% 23.87% 15.88% 7.58% 4.35% 27.81% 51.67%
5.13% 7.21% 2.32% 9.00% 23.65% 15.95% 7.26% 4.72% 27.92% 51.58%
5.20% 7.32% 2.43% 8.95% 23.90% 16.05% 6.96% 4.38% 27.38% 51.28%
5.24% 7.42% 2.41% 8.97% 24.04% 16.08% 6.64% 4.37% 27.09% 51.13%
5.26% 7.53% 2.41% 8.96% 24.16% 16.11% 6.34% 4.20% 26.65% 50.80%
5.26% 7.64% 2.41% 8.97% 24.28% 16.12% 6.04% 4.10% 26.27% 50.54%
1.07% 45.57% 0.95% -0.38% 25.23% 52.28% 46.36% 100%
1.02% 45.66% 0.95% 0.45% 28.09% 54.65% 48.37% 100%
0.95% 44.66% 0.92% 2.60% 33.05% 58.66% 48.26% 100%
0.87% 42.90% 0.89% 2.52% 30.06% 58.66% 48.33% 100%
0.82% 42.69% 0.90% 2.53% 29.85% 58.66% 48.42% 100%
0.78% 42.56% 0.90% 2.55% 29.61% 58.66% 48.72% 100%
0.74% 42.24% 0.90% 2.55% 29.17% 58.66% 48.87% 100%
0.70% 41.94% 0.91% 2.56% 28.56% 58.66% 49.20% 100%
0.66% 41.58% 0.91% 2.56% 27.93% 58.66% 49.46% 100%
Procter & Gamble Co. (year ending on June 30) (figures in '000s) Annual Income Statement Beauty Grooming GBU- Beauty Health care Snacks, coffee and pet care GBU - Health and Well-Being Fabric care and home care Baby care and family care GBU - Household Care Corporate Net sales Cost of products sold Marketing, reseacrh, SG&A exp Operating income (loss) Interest expense Other non-operating income, net Earnings before income taxes (EBT) Total current provision for income tax Total deferred income tax provisions Income taxes Net earnings (loss) 2006 24.46% 7.50% 31.96% 17.34% 6.42% 23.77% 27.73% 17.55% 45.28% -1.00% 100% 48.55% 32.02% 19.42% 1.64% 0.41% 18.20% 5.63% -0.16% 5.47% 12.73% 2007 23.39% 9.72% 33.12% 17.50% 5.93% 23.43% 28.07% 16.64% 44.71% -1.26% 100% 47.97% 31.83% 20.20% 1.71% 0.74% 19.23% 5.38% 0.33% 5.71% 13.52% 2008 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.73% 30.81% 20.46% 1.76% 0.55% 19.25% 3.34% 1.45% 4.79% 14.46% 2009E 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.42% 30.30% 21.28% 1.86% 0.57% 19.99% 4.72% 0.54% 5.26% 14.73% 2010E 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.38% 30.04% 21.58% 2.07% 0.57% 20.08% 4.72% 0.54% 5.26% 14.83% 2011E 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.51% 29.92% 21.57% 1.96% 0.57% 20.18% 4.72% 0.54% 5.26% 14.92% 2012E 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.44% 29.85% 21.71% 1.91% 0.57% 20.37% 4.72% 0.54% 5.26% 15.11% 2013E 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.44% 29.82% 21.74% 1.89% 0.57% 20.42% 4.72% 0.54% 5.26% 15.16% CV 23.37% 9.88% 33.26% 17.46% 5.81% 23.27% 28.54% 16.64% 45.18% -1.71% 100% 48.46% 29.80% 21.73% 1.89% 0.57% 20.42% 4.72% 0.54% 5.26% 15.16%