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Section 1: 8-K (8-K)

pg-20200123
PROCTER & GAMBLE CO8-K00000804241/23/2020OH1-43431-0411980One Procter & Gamble PlazaCincinnatiOH45202513983-1100FalseFalseFalseFalseFalseFalse00000804242020-01-232020-01-230000080424us-gaap:CommonStockMember2020-01-232020-01-230000080424exch:XNYS2020-01-232020-01-230000080424pg:A4.125EURdueDecember2020Domain2020-01-232020-01-230000080424pg:A0.275due2020Domain2020-01-232020-01-230000080424pg:A2.000due2021Domain2020-01-232020-01-230000080424pg:A2.000due2022Domain2020-01-232020-01-230000080424pg:A1.125due2023Domain2020-01-232020-01-230000080424pg:A0.500due2024Domain2020-01-232020-01-230000080424pg:A0.625due2024Domain2020-01-232020-01-230000080424pg:A1.375due2025Domain2020-01-232020-01-230000080424pg:A4.875EURdueMay2027Domain2020-01-232020-01-230000080424pg:A1.200due2028Domain2020-01-232020-01-230000080424pg:A1.250due2029Domain2020-01-232020-01-230000080424pg:A1.800due2029Domain2020-01-232020-01-230000080424pg:A6.250GBPdueJanuary2030Domain2020-01-232020-01-230000080424pg:A5.250GBPdueJanuary2033Domain2020-01-232020-01-230000080424pg:A1.875due2038Domain2020-01-232020-01-23

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act Of 1934
Date of Report (Date of earliest event reported)January 23, 2020

402401987_pg-20200123_g1.jpg
THE PROCTER & GAMBLE COMPANY
(Exact name of registrant as specified in its charter)
 

OhioOH1-43431-0411980
(State of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)
One Procter & Gamble Plaza,CincinnatiOH
One Procter & Gamble Plaza, Cincinnati, Ohio45202
(Address of principal executive offices)(Zip Code)
(513) 983-1100
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨

FalseWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨FalseSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨FalsePre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨FalsePre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, without Par ValuePGNYSE
4.125% EUR notes due December 2020PG20ANYSE
0.275% Notes due 2020PG20NYSE
2.000% Notes due 2021PG21NYSE
2.000% Notes due 2022PG22BNYSE
1.125% Notes due 2023PG23ANYSE
0.500% Notes due 2024PG24ANYSE
0.625% Notes due 2024PG24BNYSE
1.375% Notes due 2025PG25NYSE
4.875% EUR notes due May 2027PG27ANYSE
1.200% Notes due 2028PG28NYSE
1.250% Notes due 2029PG29BNYSE
1.800% Notes due 2029PG29ANYSE
6.250% GBP notes due January 2030PG30NYSE
5.250% GBP notes due January 2033PG33NYSE
1.875% Notes due 2038PG38NYSE
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨ False
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On January 23, 2020, The Procter & Gamble Company (the "Company") issued a news release with respect to earnings for the quarter ended December 31, 2019. The Company is furnishing this 8-K pursuant to Item 2.02, "Results of Operations and Financial Condition."

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit NumberDescription
99.1
News Release by The Procter & Gamble Company dated January 23, 2020.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
THE PROCTER & GAMBLE COMPANY
By/s/ SANDRA T. LANE
Sandra T. Lane, Assistant Secretary
January 23, 2020
  
EXHIBIT(S)
99.1 News Release by The Procter & Gamble Company dated January 23, 2020.
(Back To Top)

Section 2: EX-99.1 (FY1920 Q2 OND 8-K EXHIBIT 99.1)

Document

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News ReleaseThe Procter & Gamble Company
One P&G Plaza
Cincinnati, OH 45202

P&G ANNOUNCES FISCAL YEAR 2020 SECOND QUARTER RESULTS
Net Sales +5%; Organic Sales +5%; Diluted Net EPS $1.41, +16%; Core EPS $1.42, +14%
RAISES SALES, EARNINGS, ADJUSTED FREE CASH FLOW PRODUCTIVITY
AND CASH RETURN GUIDANCE

CINCINNATI, January 23, 2020 - The Procter & Gamble Company (NYSE:PG) reported second quarter fiscal year 2020 net sales of $18.2 billion, an increase of five percent versus the prior year. Excluding the net impacts of foreign exchange, acquisitions and divestitures, organic sales also increased five percent. Diluted net earnings per share were $1.41, up 16% versus the prior year. Core earnings per share increased 14% to $1.42. Currency-neutral core EPS increased 15% versus the prior year.

Operating cash flow was $4.4 billion for the quarter. Free cash flow productivity was 100%. The Company returned $5.4 billion of cash to shareholders through $1.9 billion in dividend payments and $3.5 billion of common stock repurchases.

“We delivered another strong quarter of organic sales growth, core earnings per share and cash returned to shareowners,” said David Taylor, Chairman, President and Chief Executive Officer. “Our strong first half results enable us to further increase our outlook for the full fiscal year across each of these metrics and to increase our commitment of cash return to shareowners. Our focus remains on executing our strategies of superiority, productivity, constructive disruption and improving P&G’s organization and culture to deliver balanced top-line and bottom-line growth along with strong cash generation in a challenging competitive and macroeconomic environment.”



October - December Quarter Discussion
Net sales in the second quarter of fiscal year 2020 were $18.2 billion, up five percent versus the prior year. Unfavorable foreign exchange negatively impacted sales by one percentage point for the quarter. Excluding the net impacts of foreign exchange, acquisitions and divestitures, organic sales also increased five percent driven by a three percent increase in organic shipment volume. Increased pricing contributed one percent to net sales. Positive mix was a one percent help to net sales driven by the disproportionate organic growth of the Health Care segment and the Skin and Personal Care category, both of which have higher than company average selling prices.
October - December 2019VolumeForeign ExchangePriceMix
Other (2)
Net SalesOrganic VolumeOrganic Sales
Net Sales Drivers (1)
Beauty5%  (1)% 2%  1%  —%  7%  5%  8%  
Grooming2%  (2)% 2%  —%  —%  2%  2%  4%  
Health Care11%  (1)% 1%  1%  2%  14%  5%  7%  
Fabric & Home Care3%  (1)% 1%  1%  —%  4%  3%  5%  
Baby, Feminine & Family Care—%  (1)% —%  1%  1%  1%  —%  1%  
Total P&G3%  (1)% 1%  1%  1%  5%  3%  5%  
(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 eight percent versus year ago. Skin and Personal Care organic sales increased double digits driven by premium innovation and increased pricing. Hair Care organic sales increased mid-single digits driven by premium innovation, positive mix impact from the disproportionate growth of premium products and devaluation-driven price increases.
Grooming segment organic sales increased four percent versus year ago. Shave Care organic sales increased low single digits driven by innovation and devaluation-driven price increases partially offset by related unit volume declines in certain markets and competitive activity. Appliances organic sales increased high single digits driven by innovation and positive mix impact from the disproportionate growth of premium products.
Health Care segment organic sales increased seven percent. Oral Care organic sales increased mid-single digits due to innovation and positive mix in the premium toothpaste and toothbrush segments. Personal Health Care organic sales increased high single digits primarily due to innovation, increased marketing spending, increased pricing and positive mix due to strong growth in North America Respiratory category, which has higher than average selling prices. Personal



Health Care all-in sales increased over 30% versus the base period with the addition of the Merck OTC business.
Fabric and Home Care segment organic sales increased five percent for the quarter. Fabric Care organic sales increased mid-single digits driven by innovation and positive mix driven by the disproportionate growth of premium products, partially offset by retailer inventory decreases in Japan following the build-up in advance of the October VAT increase. Home Care organic sales increased high single digits driven by innovation, increased pricing and positive mix due to the disproportionate growth of premium products.
Baby, Feminine and Family Care segment organic sales increased one percent versus year ago. Baby Care organic sales decreased low single digits due to competitive activity, category contraction in certain markets and retailer inventory decrease in Japan following the October VAT increase, partially offset by positive mix due to premium innovation. Feminine Care organic sales increased mid-single digits driven by innovation, increased marketing spending and positive product mix resulting from the disproportionate growth of premium products. Family Care organic sales increased low single digits due to innovation and increased pricing, partially offset by unfavorable mix impact due to the disproportionate growth of large sizes.

Diluted net earnings per share were $1.41, a 16% increase versus the prior year, driven primarily by the increase in net sales and an increase in operating margin. Core earnings per share were $1.42, a 14% increase versus the prior year, due to lower non-core restructuring charges versus the prior year. Currency-neutral core earnings per share increased 15% for the quarter.

Reported gross margin increased 250 basis points, including 50 basis points of lower non-core restructuring charges versus the prior year. Core gross margin increased approximately 200 basis points versus the prior year, including 10 basis points of negative foreign exchange impacts. On a currency-neutral basis, core gross margin increased approximately 210 basis points driven by 120 basis points of productivity savings, 40 basis points of pricing benefit, 70 basis points from



commodity cost decreases and 20 basis points help from other items, partially offset by 40 basis points of unfavorable product mix.

Selling, general and administrative expense (SG&A) as a percentage of sales increased 30 basis points on a reported basis versus the prior year, including a 10 basis-point hurt from a year-on-year increase in non-core restructuring charges. Core and currency-neutral core SG&A as a percentage of sales increased 20 basis points versus the prior year as 120 basis points of sales leverage benefit and 100 basis points of savings from overhead and marketing expenses were more than offset by 150 basis points of increased marketing investments and 90 basis points of inflation, increased digital investments, incentive compensation costs and other impacts.

Operating profit margin increased 230 basis points versus the base period on a reported basis including approximately 40 basis points help from lower non-core restructuring charges. Core and currency-neutral core operating margin increased 190 basis points including total productivity cost savings of 220 basis points. Foreign exchange was neutral to operating margin for the quarter.

Fiscal Year 2020 Guidance
The Company raised its outlook for fiscal 2020 all-in sales growth from a range of three to five percent to a range of four to five percent growth versus the prior fiscal year. This estimate includes a modest negative impact from foreign exchange, largely offset by a modest positive impact from acquisitions and divestitures. The Company increased its guidance for organic sales growth from a range of three to five percent to a range of four to five percent.

The Company increased its guidance range for fiscal 2020 all-in GAAP diluted net earnings per share growth to 235% to 245%, noting that the comparison period is significantly depressed by the Gillette Shave Care impairment charges in fiscal 2019. P&G raised its fiscal 2020



guidance for core earnings per share growth from a range of five to ten percent to a range of eight to eleven percent versus fiscal 2019.

The Company is not able to reconcile its forward-looking non-GAAP adjusted free cash flow productivity measure without unreasonable efforts because the Company cannot predict the timing and amounts of discrete cash items, such as acquisitions, divestitures, or impairments, which could significantly impact GAAP results. The Company increased its estimate for fiscal 2020 adjusted free cash flow productivity from 95% to 100%.

The Company now expects to pay over $7.5 billion in dividends and repurchase $7 billion to $8 billion of common shares in fiscal 2020. This compares to prior guidance of over $7.5 billion in dividends and $6 billion to $8 billion of common share repurchases.



Forward-Looking Statements
Certain statements in this release or presentation, 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 affect the expected share repurchases and dividend payments; (3) the ability to manage disruptions in credit markets 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 factors outside of our control, such as natural disasters and acts of war or terrorism; (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 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 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 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 conditions (including the United Kingdom’s decision to leave the European Union) and potential implications such as exchange rate fluctuations and market contraction; (13) the ability to successfully manage regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, product and packaging composition, intellectual property, antitrust, data protection, tax, environmental, and accounting and financial reporting) and to resolve pending matters within current estimates; (14) the ability to manage changes in applicable tax laws and regulations including maintaining our intended tax treatment of divestiture transactions; (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; and (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. 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 http://www.pg.com for the latest news and information about P&G and its brands.
#    #    #
P&G Media Contacts:
Damon Jones, 513.983.0190
Jennifer Corso, 513.983.2570
P&G Investor Relations Contact:
John Chevalier, 513.983.9974




THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
Three Months Ended December 31
20192018% Chg
NET SALES$18,240  $17,438  5%  
Cost of products sold8,869  8,919  (1)% 
GROSS PROFIT9,371  8,519  10%  
Selling, general and administrative expense4,889  4,623  6%  
OPERATING INCOME4,482  3,896  15%  
Interest expense(100) (138) (28)% 
Interest income36  63  (43)% 
Other non-operating income, net 114  95  20%  
EARNINGS BEFORE INCOME TAXES4,532  3,916  16%  
Income taxes789  700  13%  
NET EARNINGS3,743  3,216  16%  
Less: Net earnings attributable to noncontrolling interests26  22  18%  
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE$3,717  $3,194  16%  
EFFECTIVE TAX RATE17.4 %17.9 %
NET EARNINGS PER SHARE (1)
Basic$1.47  $1.25  18%  
Diluted$1.41  $1.22  16%  
DIVIDENDS PER COMMON SHARE$0.7459  $0.7172  
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING2,630.1  2,623.0  
COMPARISONS AS A % OF NET SALESBasis Pt Chg
Gross profit51.4%  48.9%  250  
Selling, general and administrative expense26.8%  26.5%  30  
Operating income24.6%  22.3%  230  
Earnings before income taxes24.8%  22.5%  230  
Net earnings20.5%  18.4%  210  
Net earnings attributable to Procter & Gamble20.4%  18.3%  210  
(1) Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.




THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information
Three Months Ended December 31, 2019
Net Sales% Change Versus Year AgoEarnings/(Loss) Before Income Taxes% Change Versus Year AgoNet Earnings% Change Versus Year Ago
Beauty$3,598  7%  $1,072  11%  $858  11%  
Grooming1,648  2%  494  10%  411  9%  
Health Care2,530  14%  732  9%  571  10%  
Fabric & Home Care5,787  4%  1,278  13%  975  13%  
Baby, Feminine & Family Care4,582  1%  1,076  16%  822  16%  
Corporate95  N/A  (120) N/A  106  N/A  
Total Company$18,240  5%  $4,532  16%  $3,743  16%  

Three Months Ended December 31, 2019
Net Sales Drivers (1)
VolumeOrganic VolumeForeign ExchangePriceMix
Other (2)
Net Sales
Beauty5%  5%  (1)% 2%  1%  —%  7%  
Grooming2%  2%  (2)% 2%  —%  —%  2%  
Health Care11%  5%  (1)% 1%  1%  2%  14%  
Fabric & Home Care3%  3%  (1)% 1%  1%  —%  4%  
Baby, Feminine & Family Care—%  —%  (1)% —%  1%  1%  1%  
Total Company3%  3%  (1)% 1%  1%  1%  5%  
(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.




THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Statements of Cash Flows
Six Months Ended December 31
Amounts in millions20192018
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD$4,239  $2,569  
OPERATING ACTIVITIES
Net earnings7,360  6,427  
Depreciation and amortization1,400  1,293  
Share-based compensation expense202  181  
Deferred income taxes(549) 37  
Gain on sale of assets(13) (370) 
Changes in:
Accounts receivable(257) (398) 
Inventories(533) (531) 
Accounts payable, accrued and other liabilities958  1,141  
Other operating assets and liabilities(55) (370) 
Other20  164  
TOTAL OPERATING ACTIVITIES8,533  7,574  
INVESTING ACTIVITIES
Capital expenditures(1,684) (1,781) 
Proceeds from asset sales15  18  
Acquisitions, net of cash acquired(54) (3,848) 
Purchases of short-term investments —  (158) 
Proceeds from sales and maturities of investment securities6,151  1,117  
Change in other investments (58) 
TOTAL INVESTING ACTIVITIES4,429  (4,710) 
FINANCING ACTIVITIES
Dividends to shareholders(3,855) (3,703) 
(Reductions)/increases in short-term debt(68) 1,206  
Additions to long-term debt—  2,368  
Reductions of long-term debt(1,546) (978) 
Treasury stock purchases(6,504) (2,003) 
Impact of stock options and other1,060  1,486  
TOTAL FINANCING ACTIVITIES(10,913) (1,624) 
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(9) (113) 
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH2,040  1,127  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$6,279  $3,696  





THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Condensed Consolidated Balance Sheets
December 31, 2019June 30, 2019
Cash and cash equivalents$6,279  $4,239  
Available-for-sale investment securities—  6,048  
Accounts receivable5,196  4,951  
Inventories5,521  5,017  
Prepaid expenses and other current assets1,921  2,218  
TOTAL CURRENT ASSETS18,917  22,473  
Property, plant and equipment, net21,250  21,271  
Goodwill39,998  40,273  
Trademarks and other intangible assets, net23,980  24,215  
Other noncurrent assets7,578  6,863  
TOTAL ASSETS$111,723  $115,095  
Accounts payable$10,781  $11,260  
Accrued and other liabilities10,230  9,054  
Debt due within one year9,153  9,697  
TOTAL CURRENT LIABILITIES30,164  30,011  
Long-term debt18,985  20,395  
Deferred income taxes6,242  6,899  
Other noncurrent liabilities10,424  10,211  
TOTAL LIABILITIES65,815  67,516  
TOTAL SHAREHOLDERS' EQUITY45,908  47,579  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$111,723  $115,095  




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, 2020 earnings release and the reconciliation to the most closely related GAAP measure. We believe that these measures provide useful perspective on underlying business results and trends (i.e., trends excluding non-recurring or unusual items) and provide a supplemental measure of year-on-year 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 measure, 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 Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following item:
Incremental Restructuring: The Company has had and continues to have an ongoing level of restructuring activities. Such activities have resulted in ongoing annual restructuring related charges of approximately $250 - $500 million before tax. In 2012, the Company began a $10 billion strategic productivity and cost savings initiative that included incremental restructuring activities. In 2017, we communicated details of an additional multi-year productivity and cost savings plan. This results in incremental restructuring charges to accelerate productivity efforts and cost savings. The adjustment to Core earnings includes only the restructuring costs above what we believe are the normal recurring level of restructuring costs.
We do not view the above item to be part of our sustainable results and its exclusion from Core earnings measures provides a more comparable measure of year-on-year results. This item is 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 achievement of management goals for at-risk compensation.
Core operating profit margin: Core operating profit margin is a measure of the Company's operating margin adjusted for items as indicated. Management believes this non-GAAP measure provides a supplemental perspective to the Company’s operating efficiency over time.
Core gross margin: Core gross margin is a measure of the Company's gross margin adjusted for items as indicated. Management believes this non-GAAP measure provides a supplemental perspective to the Company’s operating efficiency over time.
Core selling, general and administrative (SG&A) expense as a percentage of net sales: Core SG&A expense as a percentage of net sales is a measure of the Company's selling, general and administrative expenses adjusted for items as indicated. Management believes this non-GAAP measure provides a supplemental perspective to the Company’s operating efficiency over time.
Core EPS and currency-neutral Core EPS: Core earnings per share, or Core EPS, is a measure of the Company's diluted net earnings per share adjusted as indicated. Currency-neutral Core 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. These measures are also used when evaluating senior management in determining their at-risk compensation.
Free cash flow: Free cash flow is defined as operating cash flow less capital spending. Free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. Management views 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.
Free cash flow productivity: Free cash flow productivity is defined as the ratio of free cash flow to net earnings. Management views free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Free cash flow productivity is used by management in making operating decisions, 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 Company's long-term target is to generate annual free cash flow productivity at or above 90 percent.






THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Three Months Ended December 31, 2019
AS REPORTED (GAAP)INCREMENTAL RESTRUCTURINGROUNDINGNON-GAAP (CORE)
COST OF PRODUCTS SOLD$8,869  $(42) —  8,827  
GROSS PROFIT9,371  42  —  9,413  
GROSS MARGIN51.4 %0.2 %— %51.6 %
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE4,889  25  —  4,914  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET SALES26.8 %0.1 %— %26.9 %
OPERATING INCOME 4,482  17  —  4,499  
OPERATING PROFIT MARGIN24.6 %0.1 %— %24.7 %
NET EARNINGS ATTRIBUTABLE TO P&G3,717  17   3,735  
 Core EPS  
DILUTED NET EARNINGS PER COMMON SHARE (1)
$1.41  $0.01  $—  $1.42  
CURRENCY IMPACT TO CORE EARNINGS0.02  
CURRENCY-NEUTRAL CORE EPS$1.44  
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING2,630.1  
COMMON SHARES OUTSTANDING - DECEMBER 31, 20192,469.5  
(1)Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.


CHANGE VERSUS YEAR AGO
CORE GROSS MARGIN 200  BPS
CORE SELLING GENERAL & ADMINISTRATIVE EXPENSE AS A % OF NET SALES20  BPS  
CORE OPERATING PROFIT MARGIN190  BPS  
CORE EPS14 %
CURRENCY-NEUTRAL CORE EPS15 %







THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Three Months Ended December 31, 2018
AS REPORTED (GAAP)INCREMENTAL RESTRUCTURINGROUNDINGNON-GAAP (CORE)
COST OF PRODUCTS SOLD$8,919  (123) —  8,796  
GROSS PROFIT8,519  123  —  8,642  
GROSS MARGIN48.9 %0.7 %— %49.6 %
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE4,623  38  (1) 4,660  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET SALES26.5 %0.2 %— %26.7 %
OPERATING INCOME 3,896  85   3,982  
OPERATING PROFIT MARGIN22.3 %0.5 %— %22.8 %
NET EARNINGS ATTRIBUTABLE TO P&G3,194  77   3,272  
 Core EPS:  
DILUTED NET EARNINGS PER COMMON SHARE (1)$1.22  $0.03  $—  $1.25  
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING2,623.0  
(1)Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.








Organic sales growth:
October - December 2019Net Sales GrowthForeign Exchange Impact
Acquisition & Divestiture Impact/Other (1)
Organic Sales Growth
Beauty7%  1%  —%  8%  
Grooming2%  2%  —%  4%  
Health Care14%  1%  (8)% 7%  
Fabric & Home Care4%  1%  —%  5%  
Baby, Feminine & Family Care1%  1%  (1)% 1%  
Total P&G5%  1%  (1)% 5%  

Total P&GNet Sales Growth
Combined Foreign Exchange & Acquisition/Divestiture Impact/Other (1)
Organic Sales Growth
FY 2020 (Estimate)+4% to +5%-%+4% to +5%
(1)Includes rounding impacts necessary to reconcile net sales to organic sales.
Core EPS:
Total P&GDiluted EPS Growth
Impact of Incremental Non-Core Items (1)
Core EPS Growth
FY 2020 (Estimate)+235% to +245%(227)% to (234)%+8% to +11%
(1)Includes the gain on the dissolution of the PGT Healthcare partnership and Shave Care impairment in fiscal 2019 and year-over-year changes in incremental non-core restructuring charges.
Free cash flow (dollar amounts in millions):
Three Months Ended December 31, 2019
Operating Cash FlowCapital SpendingFree Cash Flow
$4,364  $(605) $3,759  
Free cash flow productivity (dollar amounts in millions):
Three Months Ended December 31, 2019
Free Cash FlowNet EarningsFree Cash Flow Productivity
$3,759  $3,743  100%  


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