Press Release

P&G Delivers Second Quarter Currency-Neutral Core EPS up 6%; Maintains Organic Sales and Currency-Neutral Core EPS Growth Outlooks for Fiscal Year; Adjusts Fiscal Year Earnings Targets for Foreign Exchange

Company Release - 1/27/2015 7:01 AM ET

CINCINNATI--(BUSINESS WIRE)-- The Procter & Gamble Company (NYSE:PG) reported second quarter fiscal year 2015 core earnings per share of $1.06 versus $1.15 the prior year. On a currency-neutral basis, core earnings per share increased six percent. Diluted net earnings per share were $0.82, including non-core items which reduced diluted EPS by $0.24 per share. Organic sales grew two percent for the quarter. Reported net sales were $20.2 billion, a decrease of four percent versus the prior year, including a negative five percentage point impact from foreign exchange.

"The October - December 2014 quarter was a challenging one with unprecedented currency devaluations," said Chairman, President and Chief Executive Officer A.G. Lafley. "Virtually every currency in the world devalued versus the U.S. dollar, with the Russian Ruble leading the way. While we continue to make steady progress on the strategic transformation of the company - which focuses P&G on about a dozen core categories and 70 to 80 brands, on leading brand growth, on accelerating meaningful product innovation and increasing productivity savings - the considerable business portfolio, product innovation, and productivity progress was not enough to overcome foreign exchange."

"The outlook for the year will remain challenging. Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by 12%, or at least $1.4 billion after tax. We have and will continue to offset as much of this currency impact as we can through productivity driven cost savings. And we will continue to invest in our businesses, brands and product innovation, because it is the right thing to do for the mid- and long-term, while we deliver another year of strong cash returns to shareowners. We are adjusting fiscal year earnings targets accordingly. We are mobilized to deliver another fiscal year of modest organic sales growth, and to continue to grow market share on more category-leading brands. We are working to deliver core earnings per share as close as possible to those of last fiscal year."

October - December Quarter Discussion

Net sales decreased four percent versus year ago to $20.2 billion in the October - December quarter, including a negative five percent impact from foreign exchange. Organic sales were up two percent, with growth in four of five reporting segments. Organic volume was unchanged versus the prior year. Pricing added one percentage point to sales growth, and geographic and product mix was also positive.

October – December 2014     Foreign           Organic   Organic
Net Sales Drivers   Volume   Exchange   Price   Mix   Other*   Net Sales   Volume   Sales
Beauty, Hair and Personal Care -2 % -4 % 1 % 0 % -1 % -6 % -2 % -1 %
Grooming -2 % -7 % 4 % 0 % 0 % -5 % -2 % 2 %
Health Care -2 % -4 % 0 % 3 % 0 % -3 % -2 % 1 %
Fabric Care and Home Care 2 % -6 % 1 % 0 % -1 % -4 % 2 % 3 %
Baby, Feminine and Family Care   0 %   -6 %   1 %   3 %   0 %   -2 %   0 %   4 %
Total P&G   0 %   -5 %   1 %   1 %   -1 %   -4 %   0 %   2 %
*Other includes the sales mix impact of acquisitions/divestitures and rounding impacts necessary to reconcile volume to net sales
 
  • Beauty, Hair and Personal Care segment organic sales decreased one percent driven primarily by declines in the Prestige and Skin and Personal Care categories. This was partially offset by innovation-driven sales growth in the Salon Professional and Antiperspirant & Deodorant businesses.
  • Grooming segment organic sales increased two percent due to higher pricing and innovation on Gillette grooming and innovation on Braun. This growth was partially offset by lower shipment volume.
  • Health Care segment organic sales increased one percent behind growth in Oral Care from innovation and increased pricing. These improvements were partially offset by lower volume in Personal Health Care, primarily from a decline on Prilosec due to a new market entrant.
  • Fabric Care and Home Care segment organic sales increased three percent as growth on Fabric Care from product innovations and consumer value corrections were partially offset by lower volume in Home Care, mainly in Asia.
  • Baby, Feminine and Family Care segment organic sales increased four percent behind pricing and innovation in Baby Care and Feminine Care, partially offset by lower sales in Family Care due to a soft period in Mexico and consumer value interventions in the U.S.

Core earnings per share were $1.06, a decrease of eight percent versus the prior year. Foreign exchange reduced core earnings by about $0.16 per share, resulting in a 14% decrease in core earnings per share. Excluding these foreign exchange impacts, constant currency core EPS increased 6%. Diluted net earnings per share were $0.82, including a loss on discontinued operations of $0.20 and other non-core charges of $0.04. The loss in discontinued operations includes a $0.26 per share non-cash impairment charge in the battery business. For a full reconciliation of non-core items, please see Exhibit #1: Non-GAAP Measures.

Core operating profit margin decreased 60 basis points due to a decrease in core gross margin of about 20 basis points and an increase in core SG&A as a percentage of net sales of about 30 basis points. Reported operating profit margin decreased 80 basis points. Reported gross margin decreased 40 basis points as manufacturing savings of 190 basis points were more than offset by unfavorable geographic and product mix, unfavorable foreign exchange, higher commodity costs, incremental restructuring charges and innovation and capacity expansion investments. Reported SG&A as a percentage of sales increased 40 basis points as productivity savings of 70 basis points from overhead and 70 basis points of marketing efficiencies, primarily in non-working marketing spending areas, were more than offset by foreign exchange impacts and overhead investments. Total productivity savings in cost of goods sold and SG&A were 330 basis points.

P&G generated operating cash flow of $3.4 billion for the quarter. P&G returned $3.7 billion in cash to shareholders, including $1.8 billion in dividends and $1.9 billion of common stock repurchases. Fiscal year-to-date, P&G has returned approximately $7.9 billion to shareholders via $3.6 billion in dividends and $4.3 billion in stock repurchases. Fiscal year-to-date, adjusted free cash flow productivity is 95%.

Discontinued Operations

As a result of the previously announced divestiture of its Duracell battery business to Berkshire Hathaway, expected to close in the second half of calendar year 2015, and in accordance with the applicable accounting guidance, the results of the batteries business are presented as discontinued operations. During the quarter, the Company took a non-cash charge of $740 million after-tax, or $0.26 per share, included in discontinued operations to adjust the carrying values of the batteries business to reflect the value it expects to receive. During the first quarter of fiscal year 2015, the Company previously took a write down in the asset value of its battery business to be more reflective of the value it expected to receive from the sale of its interest in a China-based battery joint venture, which closed as expected during the second quarter.

Fiscal Year 2015 Guidance

P&G maintained its organic sales growth and currency-neutral core earnings per share growth guidance ranges for fiscal year 2015. The Company expects significant negative sales and earnings impacts from foreign exchange in the second half of its fiscal year.

The Company maintained its guidance for organic sales growth in the low-to-mid single digit range. Net sales growth is now expected to be lower versus the prior fiscal year in the range of -3% to -4%, including a negative five point headwind from foreign exchange and a one point impact from minor brand divestitures.

P&G maintained its outlook for currency-neutral core earnings per share growth in the double-digits. Including currency impacts, Core EPS is now expected to be in the range of in-line to down low-single digits versus prior year Core EPS of $4.09. All-in GAAP diluted net earnings per share are now expected to be down in the mid-teens range versus the prior year. This includes approximately $0.67 per share of non-core charges, primarily from $0.20 per share of non-core restructuring charges and $0.58 of impairment charges, which are partially offset by approximately $0.14 of earnings from discontinued Batteries and Pet Care operations.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information
   
GAAP CORE (NON-GAAP)*

Three Months Ended

Three Months Ended
December 31 December 31
2014   2013   % Change 2014   2013   % Change
NET SALES $ 20,161 $ 21,099 (4)% $ 20,161 $ 21,099 (4)%
COST OF PRODUCTS SOLD 10,083 10,474 (4)% 10,006 10,422 (4)%
GROSS PROFIT 10,078 10,625 (5)% 10,155 10,677 (5)%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 6,131 6,323 (3)% 6,074 6,283 (3)%
OPERATING INCOME 3,947 4,302 (8)% 4,081 4,394 (7)%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 1.02 $ 1.12 (9)% $ 1.06 $ 1.15 (8)%
TAX RATE 22.5 % 21.2 % 22.3 % 21.0 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 50.0 % 50.4 % (40) 50.4 % 50.6 % (20)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 30.4 % 30.0 % 40 30.1 % 29.8 % 30
OPERATING MARGIN 19.6 % 20.4 % (80) 20.2 % 20.8 % (60)
 

CASH FLOW (SIX MONTHS ENDED DECEMBER 31) SOURCE/(USE)

2014   2013  
OPERATING CASH FLOW $ 7,068 $ 5,343
FREE CASH FLOW 5,426 3,680
DIVIDENDS (3,614 ) (3,409 )
SHARE REPURCHASE (4,253 ) (4,004 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information, Restated for Batteries Discontinued Operations
   
GAAP CORE (NON-GAAP)*
Three Months Ended Three Months Ended
September 30 September 30
2014   2013   % Change 2014   2013   % Change
NET SALES $ 20,186 $ 20,174 -% $ 20,186 $ 20,174 -%
COST OF PRODUCTS SOLD 10,209 10,208 -% 10,116 10,145 -%
GROSS PROFIT 9,977 9,966 -% 10,070 10,029 -%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 6,199 5,996 3% 6,059 5,993 1%
OPERATING INCOME 3,778 3,970 (5)% 4,011 4,036 (1)%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 0.97 $ 1.00 (3)% $ 1.04 $ 1.01 3%
TAX RATE 22.4 % 23.4 % 22.4 % 23.4 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 49.4 % 49.4 % 49.9 % 49.7 % 20
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 30.7 % 29.7 % 100 30.0 % 29.7 % 30
OPERATING MARGIN 18.7 % 19.7 % (100) 19.9 % 20.0 % (10)
 

CASH FLOW (THREE MONTHS ENDED SEPTEMBER 30) SOURCE/(USE)

2014   2013  
OPERATING CASH FLOW $ 3,633 $ 2,044
FREE CASH FLOW 2,823 1,319
DIVIDENDS (1,806 ) (1,708 )
SHARE REPURCHASE (2,378 ) (2,502 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information, Restated for Batteries Discontinued Operations
   
GAAP CORE (NON-GAAP)*
Year Ended June 30 Year Ended June 30
2014   2013   % Change 2014   2013   % Change
NET SALES $ 80,510 $ 80,116 -% $ 80,510 $ 80,116 -%
COST OF PRODUCTS SOLD 41,010 39,991 3% 40,705 39,743 2%
GROSS PROFIT 39,500 40,125 (2)% 39,805 40,373 (1)%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 24,760 26,000 (5)% 24,277 25,166 (4)%
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSET IMPAIRMENT CHARGES - 308 N/A - - N/A
OPERATING INCOME 14,740 13,817 7% 15,528 15,207 2%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 3.86 $ 3.71 4% $ 4.09 $ 3.89 5%
TAX RATE 21.1 % 22.8 % 20.6 % 23.0 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 49.1 % 50.1 % (100) 49.4 % 50.4 % (100)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 30.8 % 32.5 % (170) 30.2 % 31.4 % (120)
OPERATING MARGIN 18.3 % 17.2 % 110 19.3 % 19.0 % 30
 

CASH FLOW (YEAR ENDED JUNE 30) - SOURCE/(USE)

2014   2013  
OPERATING CASH FLOW $ 13,958 $ 14,873
FREE CASH FLOW 10,110 10,865
DIVIDENDS (6,911 ) (6,519 )
SHARE REPURCHASE (6,005 ) (5,986 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information, Restated for Batteries Discontinued Operations
   
GAAP CORE (NON-GAAP)*
Three Months Ended June 30 Three Months Ended June 30
2014   2013   % Change 2014   2013   % Change
NET SALES $ 19,596 $ 19,746 (1)% $ 19,596 $ 19,746 (1)%
COST OF PRODUCTS SOLD 10,288 10,247 -% 10,188 10,191 -%
GROSS PROFIT 9,308 9,499 (2)% 9,408 9,555 (2)%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 6,146 6,656 (8)% 6,047 6,546 (8)%
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSET IMPAIRMENT CHARGES - 308 N/A - - -%
OPERATING INCOME 3,162 2,535 25% 3,361 3,009 12%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 0.87 $ 0.61 43% $ 0.93 $ 0.76 22%
TAX RATE 18.8 % 24.9 % 18.7 % 22.0 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 47.5 % 48.1 % (60) 48.0 % 48.4 % (40)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 31.4 % 33.7 % (230) 30.9 % 33.2 % (230)
OPERATING MARGIN 16.1 % 12.8 % 330 17.2 % 15.2 % 200
 

CASH FLOW (YEAR ENDED JUNE 30) - SOURCE/(USE)

2014   2013  
OPERATING CASH FLOW $ 13,958 $ 14,873
FREE CASH FLOW 10,110 10,865
DIVIDENDS (6,911 ) (6,519 )
SHARE REPURCHASE (6,005 ) (5,986 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information, Restated for Batteries Discontinued Operations
   
GAAP CORE (NON-GAAP)*
Three Months Ended March 31 Three Months Ended March 31
2014   2013   % Change 2014   2013   % Change
NET SALES $ 19,641 $ 19,731 -% $ 19,641 $ 19,731 -%
COST OF PRODUCTS SOLD 10,040 9,808 2% 9,950 9,758 2%
GROSS PROFIT 9,601 9,923 (3)% 9,691 9,973 (3)%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 6,295 6,631 (5)% 5,954 6,220 (4)%
OPERATING INCOME 3,306 3,292 -% 3,737 3,753 -%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 0.87 $ 0.85 2% $ 1.00 $ 0.96 4%
TAX RATE 20.3 % 20.9 % 19.1 % 22.0 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 48.9 % 50.3 % (140) 49.3 % 50.5 % (120)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 32.1 % 33.6 % (150) 30.3 % 31.5 % (120)
OPERATING MARGIN 16.8 % 16.7 % 10 19.0 % 19.0 %
 

CASH FLOW (NINE MONTHS ENDED MARCH 31) - SOURCE/(USE)

2014   2013  
OPERATING CASH FLOW $ 9,452 $ 10,481
FREE CASH FLOW 6,845 8,055
DIVIDENDS (5,097 ) (4,797 )
SHARE REPURCHASE (5,505 ) (4,985 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information, Restated for Batteries Discontinued Operations
   
GAAP CORE (NON-GAAP)*
Three Months Ended Three Months Ended
December 31 December 31
2013   2012   % Change 2013   2012   % Change
NET SALES $ 21,099 $ 20,922 1% $ 21,099 $ 20,922 1%
COST OF PRODUCTS SOLD 10,474 10,182 3% 10,422 10,132 3%
GROSS PROFIT 10,625 10,740 (1)% 10,677 10,790 (1)%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 6,323 6,512 (3)% 6,283 6,416 (2)%
OPERATING INCOME 4,302 4,228 2% 4,394 4,374 -%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 1.12 $ 1.33 (16)% $ 1.15 $ 1.16 (1)%
TAX RATE 21.2 % 21.3 % 21.0 % 23.9 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 50.4 % 51.3 % (90) 50.6 % 51.6 % (100)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 30.0 % 31.1 % (110) 29.8 % 30.7 % (90)
OPERATING MARGIN 20.4 % 20.2 % 20 20.8 % 20.9 % (10)
 

CASH FLOW (SIX MONTHS ENDED DECEMBER 31) - SOURCE/(USE)

2013   2012  
OPERATING CASH FLOW $ 5,343 $ 6,619
FREE CASH FLOW 3,680 5,090
DIVIDENDS (3,409 ) (3,206 )
SHARE REPURCHASE (4,004 ) (3,984 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information, Restated for Batteries Discontinued Operations
   
GAAP CORE (NON-GAAP)*
Three Months Ended Three Months Ended
September 30 September 30
2013   2012   % Change 2013   2012   % Change
NET SALES $ 20,174 $ 19,717 2% $ 20,174 $ 19,717 2%
COST OF PRODUCTS SOLD 10,208 9,754 5% 10,145 9,662 5%
GROSS PROFIT 9,966 9,963 -% 10,029 10,055 -%
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 5,996 6,201 (3)% 5,993 5,984 -%
OPERATING INCOME 3,970 3,762 6% 4,036 4,071 (1)%
DILUTED NET EPS FROM CONTINUING OPERATIONS** $ 1.00 $ 0.92 9% $ 1.01 $ 1.01 -%
TAX RATE 23.4 % 24.9 % 23.4 % 23.8 %
 

COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 49.4 % 50.5 % (110) 49.7 % 51.0 % (130)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 29.7 % 31.5 % (180) 29.7 % 30.3 % (60)
OPERATING MARGIN 19.7 % 19.1 % 60 20.0 % 20.6 % (60)
 

CASH FLOW (THREE MONTHS ENDED SEPTEMBER 30) - SOURCE/(USE)

2013   2012  
OPERATING CASH FLOW $ 2,044 $ 2,770
FREE CASH FLOW 1,319 1,965
DIVIDENDS (1,708 ) (1,605 )
SHARE REPURCHASE (2,502 ) (2,584 )
*Core excludes incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement impact from Venezuela.
**Diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.
 

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,” “anticipate,” “estimate,” “expect,” “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.

Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial, operational and manufacturing risks, including, among others, (a) an increasingly volatile economic environment, with potentially significant disruptions and reduced market growth rates, (b) foreign currency fluctuations, (c) significant credit or liquidity issues, (d) debt, currency exposure and repatriation issues in countries with currency exchange, import authorization or pricing controls (such as Venezuela, Argentina, China, India and Egypt), (e) maintaining key manufacturing and supply sources (including sole supplier and sole manufacturing plant arrangements), and (f) managing disruption of business due to factors outside of our control, such as natural disasters and acts of war or terrorism; (2) the ability to successfully manage cost fluctuations and pressures, including commodity prices, raw materials, labor costs, energy costs and pension and health care costs, and achieve cost savings described in our announced productivity plan; (3) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to technological advances attained by, and patents granted to, competitors; (4) the ability to compete with our local and global competitors by successfully responding to competitive factors, including prices, promotional incentives and trade terms for products; (5) the ability to manage and maintain key customer relationships; (6) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, efficacy or similar matters that may arise; (7) the ability to successfully manage the financial, legal, reputational and operational risk associated with third party relationships, such as our suppliers, contractors and external business partners; (8) the ability to rely on and maintain key information technology systems and networks (including Company and third-party systems and networks) and maintain the security and functionality of such systems and networks and the data contained therein; (9) the ability to successfully manage regulatory, tax and legal requirements and matters (including, without limitation, product liability, intellectual property, price controls, import restrictions, accounting standards and environmental and tax policy) and to resolve pending matters within current estimates; (10) the ability to successfully manage our portfolio optimization strategy, as well as ongoing acquisition, divestiture and joint venture activities, to achieve the Company’s overall business strategy, without impacting the delivery of base business objectives; and (11) the ability to successfully achieve productivity improvements and manage ongoing organizational changes, while successfully identifying, developing and retaining particularly key employees, especially 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 to materially differ from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports.

About Procter & Gamble

P&G serves nearly five billion people around the world with its brands. The Company has 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®, Wella® and Whisper®. The P&G community includes operations in approximately 70 countries worldwide. Please visit http://www.pg.com for the latest news and in-depth information about P&G and its brands.

 
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
     
Three Months Ended December 31   Six Months Ended December 31
2014   2013   % CHG   2014   2013   % CHG
NET SALES $ 20,161 $ 21,099 (4 )%   $ 40,347 $ 41,273 (2 )%
COST OF PRODUCTS SOLD 10,083   10,474   (4 )% 20,292   20,682   (2 )%
GROSS PROFIT 10,078 10,625 (5 )% 20,055 20,591 (3 )%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 6,131 6,323 (3 )% 12,330 12,319 %
OPERATING INCOME 3,947 4,302 (8 )% 7,725 8,272 (7 )%
INTEREST EXPENSE 160 185 (14 )% 330 351 (6 )%
INTEREST INCOME 34 22 55 % 65 44 48 %
OTHER NON-OPERATING INCOME, NET 19   43   (56 )% 40   48   (17 )%
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 3,840 4,182 (8 )% 7,500 8,013 (6 )%
INCOME TAXES ON CONTINUING OPERATIONS 865   885   (2 )% 1,685   1,782   (5 )%
NET EARNINGS FROM CONTINUING OPERATIONS 2,975   3,297   (10 )% 5,815   6,231   (7 )%
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS (577 ) 175   N/A (1,397 ) 298   N/A
NET EARNINGS 2,398 3,472 (31 )% 4,418 6,529 (32 )%
LESS: NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 26   44   (41 )% 56   74   (24 )%
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE 2,372   3,428   (31 )% 4,362   6,455   (32 )%
 
EFFECTIVE TAX RATE 22.5 % 21.2 % 22.5 % 22.2 %
 
NET EARNINGS PER COMMON SHARE:
EARNINGS FROM CONTINUING OPERATIONS $ 1.06 $ 1.18 (10 )% $ 2.08 $ 2.21 (6 )%
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS $ (0.21 ) $ 0.06 N/A $ (0.52 ) $ 0.11 N/A
BASIC NET EARNINGS PER COMMON SHARE $ 0.85 $ 1.24 (31 )% $ 1.56 $ 2.32 (33 )%
DILUTED NET EARNINGS PER COMMON SHARE:
EARNINGS FROM CONTINUING OPERATIONS $ 1.02 $ 1.12 (9 )% $ 2.00 $ 2.11 (5 )%
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS $ (0.20 ) $ 0.06 N/A $ (0.49 ) $ 0.10 N/A
DILUTED NET EARNINGS PER COMMON SHARE $ 0.82 $ 1.18 (31 )% $ 1.51 $ 2.21 (32 )%
DIVIDENDS PER COMMON SHARE $ 0.644 $ 0.602 $ 1.287 $ 1.203
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,885.2 2,908.5 2,886.8 2,916.4
 
COMPARISONS AS A % OF NET SALES

Basis Pt
Change

Basis Pt
Change

GROSS MARGIN 50.0 % 50.4 % (40 ) 49.7 % 49.9 % (20 )
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 30.4 % 30.0 % 40 30.6 % 29.8 % 80
OPERATING MARGIN 19.6 % 20.4 % (80 ) 19.1 % 20.0 % (90 )
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 19.0 % 19.8 % (80 ) 18.6 % 19.4 % (80 )
NET EARNINGS FROM CONTINUING OPERATIONS 14.8 % 15.6 % (80 ) 14.4 % 15.1 % (70 )
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE 11.8 % 16.2 % (440 ) 10.8 % 15.6 % (480 )
 
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information
   
Three Months Ended December 31, 2014
    Earnings/(Loss)      
From
Continuing Net
% Change Operations % Change Earnings/(Loss) % Change
Versus Before Income Versus From Continuing Versus
Net Sales   Year Ago   Taxes   Year Ago   Operations   Year Ago
Beauty, Hair and Personal Care $4,962 (6 )% $1,089 (6 )% $863 (7 )%
Grooming 2,007 (5 )% 713 (2 )% 544 (2 )%
Health Care 2,088 (3 )% 514 (2 )% 369 (1 )%
Fabric Care and Home Care 5,775 (4 )% 1,083 (6 )% 706 (6 )%
Baby, Feminine and Family Care 5,217 (2 )% 1,117 2 % 760 (1 )%
Corporate 112     N/A   (676 )   N/A   (267 )   N/A
Total Company 20,161     (4 )%   3,840     (8 )%   2,975     (10 )%
 
Three Months Ended December 31, 2014
(Percent Change vs. Year Ago)*
  Volume          
Volume with excluding
Acquisitions Acquisitions
& & Foreign Net Sales
Divestitures   Divestitures   Exchange   Price   Mix   Other   Growth
Beauty, Hair and Personal Care (2)% (2)% (4)% 1% —% (1)% (6)%
Grooming (2)% (2)% (7)% 4% —% —% (5)%
Health Care (2)% (2)% (4)% —% 3% —% (3)%
Fabric Care and Home Care 2% 2% (6)% 1% —% (1)% (4)%
Baby, Feminine and Family Care —%   —%   (6)%   1%   3%   —%   (2)%
Total Company —%   —%   (5)%   1%   1%   (1)%   (4)%
Sales percentage changes are approximations based on quantitative formulas that are consistently applied.
*Other includes the sales mix impact of acquisitions/divestitures and rounding impacts necessary to reconcile volume to net sales.
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information
   
Six Months Ended December 31, 2014
    Earnings/(Loss)      
From
Continuing Net
% Change Operations % Change Earnings/(Loss) % Change
Versus Before Income Versus From Continuing Versus
Net Sales   Year Ago   Taxes   Year Ago   Operations   Year Ago
Beauty, Hair and Personal Care $9,819 (4 )% $2,015 (3 )% $1,573 (3 )%
Grooming 3,948 (3 )% 1,334 % 1,010 %
Health Care 4,099 1 % 973 7 % 691 8 %
Fabric Care and Home Care 11,708 (3 )% 2,164 (7 )% 1,425 (7 )%
Baby, Feminine and Family Care 10,539 % 2,319 6 % 1,585 6 %
Corporate 234     N/A   (1,305 )   N/A   (469 )   N/A
Total Company 40,347     (2 )%   7,500     (6 )%   5,815     (7 )%
 
Six Months Ended December 31, 2014
(Percent Change vs. Year Ago)*
  Volume          
Volume with excluding
Acquisitions Acquisitions
& & Foreign Net Sales
Divestitures   Divestitures   Exchange   Price   Mix   Other   Growth
Beauty, Hair and Personal Care (2)% (1)% (3)% —% —% 1% (4)%
Grooming (2)% (2)% (4)% 4% (1)% —% (3)%
Health Care 1% 1% (2)% —% 2% —% 1%
Fabric Care and Home Care 2% 2% (4)% —% —% (1)% (3)%
Baby, Feminine and Family Care —%   —%   (4)%   2%   2%   —%   —%
Total Company —%   —%   (3)%   1%   1%   (1)%   (2)%
Sales percentage changes are approximations based on quantitative formulas that are consistently applied.
*Other includes the sales mix impact of acquisitions/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 Statement of Cash Flows
   
Six Months Ended December 31
2014   2013
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 8,558 $ 5,947
OPERATING ACTIVITIES
NET EARNINGS 4,418 6,529
DEPRECIATION AND AMORTIZATION 1,540 1,526
SHARE BASED COMPENSATION EXPENSE 151 153
DEFERRED INCOME TAXES 31 (126 )
GAIN ON PURCHASE/SALE OF BUSINESSES (299 ) (5 )
GOODWILL AND INDEFINITE LIVED INTANGIBLES IMPAIRMENT CHARGES 1,713
CHANGES IN:
ACCOUNTS RECEIVABLE (342 ) (376 )
INVENTORIES (506 ) (446 )
ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES 243 (1,191 )
OTHER OPERATING ASSETS & LIABILITIES (164 ) (859 )
OTHER 283   138  
TOTAL OPERATING ACTIVITIES 7,068   5,343  
INVESTING ACTIVITIES
CAPITAL EXPENDITURES (1,642 ) (1,663 )
PROCEEDS FROM ASSET SALES 3,648 15
ACQUISITIONS, NET OF CASH ACQUIRED (112 ) 1
PURCHASES OF AVAILABLE-FOR-SALE INVESTMENT SECURITIES (2,106 )
PROCEEDS FROM SALES/MATURITIES OF AVAILABLE-FOR-SALE INVESTMENT SECURITIES 179
CHANGE IN OTHER INVESTMENTS (836 ) (149 )
TOTAL INVESTING ACTIVITIES (869 ) (1,796 )
FINANCING ACTIVITIES
DIVIDENDS TO SHAREHOLDERS (3,614 ) (3,409 )
CHANGE IN SHORT-TERM DEBT 352 (429 )
ADDITIONS TO LONG-TERM DEBT 1,112 4,271
REDUCTION OF LONG-TERM DEBT (1,911 ) (3 )
TREASURY STOCK PURCHASES (4,253 ) (4,004 )
IMPACT OF STOCK OPTIONS AND OTHER 2,009   937  
TOTAL FINANCING ACTIVITIES (6,305 ) (2,637 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (248 ) 72  
CHANGE IN CASH AND CASH EQUIVALENTS (354 ) 982  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,204   $ 6,929  
 
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Condensed Consolidated Balance Sheet
   
December 31, 2014 June 30, 2014
CASH AND CASH EQUIVALENTS $ 8,204 $ 8,558
AVAILABLE-FOR-SALE INVESTMENTS SECURITIES 4,047 2,128
NET ACCOUNTS RECEIVABLE 5,802 6,386
TOTAL INVENTORIES 6,477 6,759
ASSETS HELD FOR SALE 4,153 2,849
OTHER 4,495   4,937
TOTAL CURRENT ASSETS 33,178 31,617
NET PROPERTY, PLANT AND EQUIPMENT, NET 20,745 22,304
NET GOODWILL AND OTHER INTANGIBLE ASSETS 76,442 84,547
OTHER NON-CURRENT ASSETS 5,898   5,798
TOTAL ASSETS $ 136,263   $ 144,266
ACCOUNTS PAYABLE 7,733 8,461
ACCRUED EXPENSES AND OTHER LIABILITIES 8,853 8,999
LIABILITIES HELD FOR SALE 1,237 660
DEBT DUE WITHIN ONE YEAR 16,329   15,606
TOTAL CURRENT LIABILITIES 34,152 33,726
LONG-TERM DEBT 18,124 19,811
OTHER 19,175   20,753
TOTAL LIABILITIES 71,451   74,290
TOTAL SHAREHOLDERS' EQUITY 64,812   69,976
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 136,263   $ 144,266

The Procter & Gamble Company

Exhibit 1: Non-GAAP Measures

In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure.

Organic Sales Growth: Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this provides investors with a more complete understanding of underlying sales trends by providing sales growth on a consistent basis. Organic sales is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

The reconciliation of reported sales growth to organic sales is as follows:

    Foreign   Acquisition/  
Net Sales Exchange Divestiture Organic Sales
October - December 2014 Growth Impact Impact* Growth
Beauty, Hair and Personal Care (6)% 4% 1% (1)%
Grooming (5)% 7% 0% 2%
Health Care (3)% 4% 0% 1%
Fabric Care and Home Care (4)% 6% 1% 3%
Baby, Feminine and Family Care   (2)%   6%   0%   4%
Total P&G   (4)%   5%   1%   2%
    Foreign Exchange   Acquisition/   Organic Sales
Total P&G Net Sales Growth Impact Divestiture Impact*

 

Growth

FY 2015
(Estimate)

(3) to (4)% 5% 1%

Low-to-mid single
digit

*Acquisition/Divestiture Impact includes volume and mix impacts of acquired and divested businesses, as well as rounding impacts necessary to reconcile net sales to organic sales.
 

Core EPS and Currency-neutral Core EPS: Core EPS is a measure of the Company's diluted net earnings per share from continuing operations excluding charges in both years for European legal matters and incremental restructuring due to increased focus on productivity and cost savings. We do not view these items to be part of our sustainable results. We believe the Core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

Currency-neutral Core EPS is a measure of the Company's Core EPS excluding the impact of foreign exchange. We believe the currency-neutral Core EPS measure provides a more comparable view of year-on-year earnings per share growth.

The table below provides a reconciliation of diluted net earnings per share to Core EPS and Core EPS to Currency-neutral Core EPS:

  OND 14   OND 13
Diluted Net Earnings Per Share $0.82 $1.18
Earnings from Discontinued Operations 0.20 (0.06)
Diluted Net Earnings Per Share from Continuing Operations 1.02 1.12
Incremental Restructuring 0.03 0.03
Charges for European Legal Matters 0.01
Core EPS $1.06 $1.15
Percentage change vs. prior period (8)%
Currency Impact to Earnings $0.16
Currency-neutral Core EPS $1.22
Percentage change vs. prior period 6%
Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction.
 
    Impact of       Currency-
Diluted EPS

Incremental

Core EPS Foreign Neutral Core
Total P&G Growth

Non-Core Items

Growth Exchange Impact EPS Growth

FY 2015
(Estimate)

Down mid-teens

Approximately
14%

in-line to down
low single digits

Approximately
12%

Double digit
growth

Core Operating Profit Margin: This is a measure of the Company's Operating Margin adjusted for charges in both years for incremental restructuring due to increased focus on productivity and cost savings and charges for European legal matters:

  OND 14   OND 13
Operating Profit Margin 19.6 % 20.4 %
Incremental Restructuring 0.5 % 0.4 %
Charges for European Legal Matters 0.2 % %
Rounding (0.1 )% %
Core Operating Profit Margin 20.2 % 20.8 %
Basis point change -60

Core Gross Margin: This is a measure of the Company's gross margin adjusted for the charges in both years for incremental restructuring due to increased focus on productivity and cost savings:

  OND 14   OND 13
Gross Margin 50.0 % 50.4 %
Incremental Restructuring 0.4 % 0.2 %
Rounding    
Core Gross Margin 50.4 % 50.6 %
Basis point change -20

Core Selling, General and Administrative Expense (SG&A) as a percentage of sales: This is a measure of the Company's SG&A as a percentage of sales adjusted for charges in both years for incremental restructuring due to increased focus on productivity and cost savings and charges for European legal matters:

  OND 14   OND 13
SG&A as a % of NOS 30.4 % 30.0 %
Incremental Restructuring (0.1 )% (0.2 )%
Charges for European Legal Matters (0.2 )% %
Core SG&A as a % of NOS 30.1 % 29.8 %
Basis point change 30

Core Tax Rate: This is a measure of the Company's tax rate adjusted for the current and prior year tax impacts related to the impacts of incremental restructuring and charges for European legal matters:

  OND 14   OND 13
Effective Tax Rate 22.5 % 21.2 %
Incremental Restructuring % (0.2 )%
Charges for European Legal Matters (Non-Tax-Deductible) (0.2 )% %
Core Tax Rate 22.3 % 21.0 %
Basis point change 130

Adjusted free cash flow: Adjusted free cash flow is defined as operating cash flow less capital spending excluding tax payments for the Pet divestiture. We view adjusted free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends and discretionary investment. The reconciliation of adjusted free cash flow is provided below (amounts in millions):

        Cash Tax  
Operating Cash Capital Payment - Pet Adjusted Free
    Flow   Spending   Free Cash Flow   Sale   Cash Flow

Fiscal year-to-date
December 31, 2014

  $7,068   $(1,642)   $5,426   $363   $5,789

Adjusted free cash flow productivity: Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding impairment charges. The Company's long-term target is to generate annual free cash flow at or above 90 percent of net earnings. Adjusted free cash flow productivity is also a measure used to evaluate senior management and is a factor in determining their at-risk compensation. The reconciliation of adjusted free cash flow productivity is provided below:

  Adjusted         Adjusted Free
Free Cash Net Impairment Net Earnings Excl. Cash Flow
    Flow   Earnings   Charges   Impairment Charges   Productivity

Fiscal year-to-date
December 31, 2014

  $5,789   $4,418   $1,672   $6,090   95%

The Procter & Gamble Company

Exhibit 2: Non-GAAP Measures - Prior Period Results

In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP measures used in the Selected Financial Information Restated for Batteries Discontinued Operations and the reconciliation to the most closely related GAAP measure.

Core EPS: Core EPS is a measure of the Company's diluted net earnings per share from continuing operations excluding incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement and devaluation impacts from Venezuela. We believe the Core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

CORE EPS
                                           
JAS 14   JAS 13   JAS 12   OND 13   OND 12   JFM 14   JFM 13   AMJ 14   AMJ 13   FY 14   FY 13
Diluted Net Earnings Per Share from Continuing Operations, attributable to P&G $ 0.97   $ 1.00   $ 0.92   $ 1.12   $ 1.33   $ 0.87   $ 0.85   $ 0.87   $ 0.61   $ 3.86   $ 3.71
Incremental Restructuring 0.03 0.02 0.08 0.03 0.04 0.04 0.03 0.04 0.01 0.12 0.17
Venezuela B/S Remeasurement & Devaluation Impacts 0.04 - - - - 0.10 0.08 - - 0.09 0.08
Charges for Pending European Legal Matters - - 0.01 - - - - 0.02 0.04 0.02 0.05
Goodwill & Intangible Impairment - - - - - - - - 0.10 - 0.10
Gain on Buyout of Iberian JV - - - - (0.21 ) - - - - - (0.21 )
Rounding   -       (0.01 )     -     -       -       (0.01 )     -     -       -     -       (0.01 )
Core EPS $ 1.04 $ 1.01 $ 1.01 $ 1.15 $ 1.16 $ 1.00 $ 0.96 $ 0.93 $ 0.76 $ 4.09 $ 3.89
 
Percentage change vs. prior period 3 % % (1 )% 4 % 22 % 5 %
 

Core Gross Margin: This is a measure of the Company's gross margin adjusted for incremental restructuring charges due to increased focus on productivity and cost savings:

CORE GROSS MARGIN
                                           
JAS 14   JAS 13   JAS 12   OND 13   OND 12   JFM 14   JFM 13   AMJ 14   AMJ 13   FY 14   FY 13
Gross Margin 49.4 %   49.4 %   50.5 %   50.4 %   51.3 %   48.9 %   50.3 %   47.5 %   48.1 %   49.1 %   50.1 %
Incremental Restructuring 0.5 % 0.3 % 0.5 % 0.2 % 0.2 % 0.5 % 0.3 % 0.5 % 0.3 % 0.4 % 0.3 %
Rounding -     -     -     -     0.1 %   (0.1 )%   (0.1 )%   -     -     (0.1 )%   -  
Core Gross Margin 49.9 % 49.7 % 51.0 % 50.6 % 51.6 % 49.3 % 50.5 % 48.0 % 48.4 % 49.4 % 50.4 %
Basis point change 20 -130 -100 -120 -40 -100
 

Core Selling, General and Administrative Expense (SG&A) as a percentage of sales: This is a measure of the Company's SG&A as a percentage of sales adjusted for incremental restructuring charges, certain legal reserves, and balance sheet remeasurement and devaluation impacts from Venezuela:

CORE SG&A
                                           
JAS 14   JAS 13   JAS 12   OND 13   OND 12   JFM 14   JFM 13   AMJ 14   AMJ 13   FY 14   FY 13
SG&A as a % of NOS 30.7 %   29.7 %   31.5 %   30.0 %   31.1 %   32.1 %   33.6 %   31.4 %   33.7 %   30.8 %   32.5 %
Incremental Restructuring - - (1.0 )% (0.2 )% (0.5 )% (0.2 )% (0.3 )% (0.2 )% - (0.2 )% (0.4 )%
Charges for Pending European Legal Matters - - (0.1 )% - - - - (0.3 )% (0.5 )% (0.1 )% (0.2 )%
Venezuela B/S Remeasurement & Devaluation Impacts (0.7 )% - - - - (1.5 )% (1.8 )% - - (0.4 )% (0.4 )%
Rounding -     -     (0.1 )%   -     0.1 %   (0.1 )%   -     -     -     0.1 %   (0.1 )%
Core SG&A as a % of NOS 30.0 % 29.7 % 30.3 % 29.8 % 30.7 % 30.3 % 31.5 % 30.9 % 33.2 % 30.2 % 31.4 %
Basis point change 30 -60 -90 -120 -230 -120
 

Core Operating Profit Margin: This is a measure of the Company's Operating Margin adjusted for incremental restructuring charges, certain legal reserves, goodwill and indefinite-lived asset impairment charges, and balance sheet remeasurement and devaluation impacts from Venezuela:

CORE OPERATING MARGIN
                                           
JAS 14   JAS 13   JAS 12   OND 13   OND 12   JFM 14   JFM 13   AMJ 14   AMJ 13   FY 14   FY 13
Operating Profit Margin 18.7 %   19.7 %   19.1 %   20.4 %   20.2 %   16.8 %   16.7 %   16.1 %   12.8 %   18.3 %   17.2 %
Incremental Restructuring 0.5 % 0.3 % 1.4 % 0.4 % 0.7 % 0.7 % 0.6 % 0.7 % 0.3 % 0.5 % 0.7 %
Charges for Pending European Legal Matters - - 0.1 % - - - - 0.3 % 0.5 % 0.1 % 0.2 %
Venezuela B/S Remeasurement & Devaluation Impacts 0.7 % - - - - 1.5 % 1.8 % - - 0.4 % 0.4 %
Goodwill & Intangible Impairment - - - - - - - - 1.6 % - 0.4 %
Rounding -     -     -     -     -     -     (0.1 )%   0.1 %   -     -     0.1 %
Core Operating Profit Margin 19.9 % 20.0 % 20.6 % 20.8 % 20.9 % 19.0 % 19.0 % 17.2 % 15.2 % 19.3 % 19.0 %
Basis point change -10 -60 -10 0 200 30
 

Core Tax Rate: This is a measure of the Company's tax rate adjusted for the tax impacts of incremental restructuring charges, certain legal reserves, a gain on the buyout of our Iberian JV, goodwill and indefinite-lived intangible asset impairment charges, and balance sheet remeasurement and devaluation impacts from Venezuela:

CORE TAX RATE
                                           
JAS 14   JAS 13   JAS 12   OND 13   OND 12   JFM 14   JFM 13   AMJ 14   AMJ 13   FY 14   FY 13
Effective Tax Rate 22.4 %   23.4 %   24.9 %   21.2 %   21.3 %   20.3 %   20.9 %   18.8 %   24.9 %   21.1 %   22.8 %
Incremental Restructuring (0.1 )% (0.1 )% (1.1 )% (0.2 )% (0.3 )% 0.1 % - 0.2 % 0.1 % (0.1 )% (0.3 )%
Pending European Legal Matters (Non-Tax-Deductible) - - (0.1 )% - - - - (0.3 )% (0.8 )% (0.1 )% (0.2 )%
Venezuela B/S Remeasurement & Devaluation Impacts 0.1 % - - - - (1.3 )% 1.1 % - - (0.3 )% 0.2 %
Goodwill & Intangible Impairment - - - - - - - - (2.2 )% - (0.4 )%
Gain on Buyout of Iberian JV - - - - 2.9 % - - - - - 1.0 %
Rounding -     0.1 %   0.1 %   -     -     -     -     -         -     (0.1 )%
Core Tax Rate 22.4 % 23.4 % 23.8 % 21.0 % 23.9 % 19.1 % 22.0 % 18.7 % 22.0 % 20.6 % 23.0 %
Basis point change -100 -40 -290 -290 -330 -240
 

Free Cash Flow: Free cash flow is defined as operating cash flow less capital spending. We view free cash flow as an important measure because it is one factor in determining the amount of cash available for dividends and discretionary investment. The reconciliation of free cash flow is provided below (amounts in millions):

FREE CASH FLOW
       
Three Months Ended   Six Months Ended   Nine Months Ended   Year Ended
JAS 14   JAS 13   JAS 12   OND 13   OND 12   JFM 14   JFM 13   AMJ 14   AMJ 13   FY 14   FY 13
Operating Cash Flow 3,633   2,044   2,770 5,343   6,619 9,452   10,481 13,958   14,873   13,958   14,873
Capital Expenditures (810)   (725)   (805)   (1,663)   (1,529)   (2,607)   (2,426)   (3,848)   (4,008)   (3,848)   (4,008)
Free Cash Flow 2,823 1,319 1,965 3,680 5,090 6,845 8,055 10,110 10,865 10,110 10,865

P&G Media Contacts
Paul Fox, 513-983-3465
Jennifer Corso, 513-983-2570
or
P&G Investor Relations Contact
John Chevalier, 513-983-9974

Source: Procter & Gamble