x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Ohio
|
|
1-434
|
|
31-0411980
|
(State of Incorporation)
|
|
(Commission File Number)
|
|
(I.R.S. Employer Identification Number)
|
One Procter & Gamble Plaza, Cincinnati, Ohio
|
|
45202
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
|
Large accelerated filer
|
þ
|
|
|
Accelerated filer
|
¨
|
|
|
Non-accelerated filer
|
¨
|
(Do not check if smaller reporting company)
|
||||
|
|
|
|
|
Smaller reporting company
|
¨
|
|
|
|
|
|
|
Emerging growth company
|
¨
|
|
Item 1.
|
Financial Statements
|
|
Three Months Ended September 30
|
||||||
Amounts in millions except per share amounts
|
2017
|
|
2016
|
||||
NET SALES
|
$
|
16,653
|
|
|
$
|
16,518
|
|
Cost of products sold
|
8,229
|
|
|
8,102
|
|
||
Selling, general and administrative expense
|
4,689
|
|
|
4,645
|
|
||
OPERATING INCOME
|
3,735
|
|
|
3,771
|
|
||
Interest expense
|
115
|
|
|
131
|
|
||
Interest income
|
49
|
|
|
35
|
|
||
Other non-operating income, net
|
82
|
|
|
63
|
|
||
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
3,751
|
|
|
3,738
|
|
||
Income taxes on continuing operations
|
881
|
|
|
863
|
|
||
NET EARNINGS FROM CONTINUING OPERATIONS
|
2,870
|
|
|
2,875
|
|
||
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS
|
—
|
|
|
(118
|
)
|
||
NET EARNINGS
|
2,870
|
|
|
2,757
|
|
||
Less: Net earnings attributable to noncontrolling interests
|
17
|
|
|
43
|
|
||
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE
|
$
|
2,853
|
|
|
$
|
2,714
|
|
|
|
|
|
||||
BASIC NET EARNINGS PER COMMON SHARE: (1)
|
|
|
|
||||
Earnings from continuing operations
|
$
|
1.09
|
|
|
$
|
1.03
|
|
Earnings/(loss) from discontinued operations
|
—
|
|
|
(0.04
|
)
|
||
BASIC NET EARNINGS PER COMMON SHARE
|
1.09
|
|
|
0.99
|
|
||
DILUTED NET EARNINGS PER COMMON SHARE: (1)
|
|
|
|
||||
Earnings from continuing operations
|
$
|
1.06
|
|
|
$
|
1.00
|
|
Earnings/(loss) from discontinued operations
|
—
|
|
|
(0.04
|
)
|
||
DILUTED NET EARNINGS PER COMMON SHARE
|
1.06
|
|
|
0.96
|
|
||
DIVIDENDS PER COMMON SHARE
|
$
|
0.6896
|
|
|
$
|
0.6695
|
|
Diluted weighted average common shares outstanding
|
2,690.6
|
|
|
2,822.9
|
|
(1)
|
Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.
|
|
Three Months Ended September 30
|
||||||
Amounts in millions
|
2017
|
|
2016
|
||||
NET EARNINGS
|
$
|
2,870
|
|
|
$
|
2,757
|
|
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
|
|
|
|
||||
Financial statement translation
|
840
|
|
|
(1
|
)
|
||
Unrealized gains/(losses) on hedges
|
(463
|
)
|
|
(115
|
)
|
||
Unrealized gains/(losses) on investment securities
|
(4
|
)
|
|
(13
|
)
|
||
Unrealized gains/(losses) on defined benefit retirement plans
|
(33
|
)
|
|
93
|
|
||
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
|
340
|
|
|
(36
|
)
|
||
TOTAL COMPREHENSIVE INCOME
|
3,210
|
|
|
2,721
|
|
||
Less: Total comprehensive income attributable to noncontrolling interests
|
17
|
|
|
43
|
|
||
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE
|
$
|
3,193
|
|
|
$
|
2,678
|
|
Amounts in millions
|
|
|
|
|
September 30, 2017
|
|
June 30, 2017
|
|||||
Assets
|
|
|
|
|
|
|
|
|||||
CURRENT ASSETS
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
|
|
|
|
$
|
5,024
|
|
|
$
|
5,569
|
|
|
Available-for-sale investment securities
|
|
|
|
|
10,983
|
|
|
9,568
|
|
|||
Accounts receivable
|
|
|
|
|
4,942
|
|
|
4,594
|
|
|||
INVENTORIES
|
|
|
|
|
|
|
|
|||||
Materials and supplies
|
|
|
|
|
1,344
|
|
|
1,308
|
|
|||
Work in process
|
|
|
|
|
588
|
|
|
529
|
|
|||
Finished goods
|
|
|
|
|
3,091
|
|
|
2,787
|
|
|||
Total inventories
|
|
|
|
|
5,023
|
|
|
4,624
|
|
|||
Prepaid expenses and other current assets
|
|
|
|
|
2,124
|
|
|
2,139
|
|
|||
TOTAL CURRENT ASSETS
|
|
|
|
|
28,096
|
|
|
26,494
|
|
|||
PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
|
|
20,108
|
|
|
19,893
|
|
|||
GOODWILL
|
|
|
|
|
45,189
|
|
|
44,699
|
|
|||
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET
|
|
|
|
24,262
|
|
|
24,187
|
|
||||
OTHER NONCURRENT ASSETS
|
|
|
|
|
5,196
|
|
|
5,133
|
|
|||
TOTAL ASSETS
|
|
|
|
|
$
|
122,851
|
|
|
$
|
120,406
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|||||
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|||||
Accounts payable
|
|
|
|
|
$
|
9,458
|
|
|
$
|
9,632
|
|
|
Accrued and other liabilities
|
|
|
|
|
7,240
|
|
|
7,024
|
|
|||
Debt due within one year
|
|
|
|
|
14,026
|
|
|
13,554
|
|
|||
TOTAL CURRENT LIABILITIES
|
|
|
|
|
30,724
|
|
|
30,210
|
|
|||
LONG-TERM DEBT
|
|
|
|
|
20,188
|
|
|
18,038
|
|
|||
DEFERRED INCOME TAXES
|
|
|
|
|
8,481
|
|
|
8,126
|
|
|||
OTHER NONCURRENT LIABILITIES
|
|
|
|
|
8,043
|
|
|
8,254
|
|
|||
TOTAL LIABILITIES
|
|
|
|
|
67,436
|
|
|
64,628
|
|
|||
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|||||
Preferred stock
|
|
|
|
|
991
|
|
|
1,006
|
|
|||
Common stock – shares issued –
|
September 2017
|
|
4,009.2
|
|
|
|
|
|
||||
|
June 2017
|
|
4,009.2
|
|
|
4,009
|
|
|
4,009
|
|
||
Additional paid-in capital
|
|
|
|
|
63,705
|
|
|
63,641
|
|
|||
Reserve for ESOP debt retirement
|
|
|
|
|
(1,229
|
)
|
|
(1,249
|
)
|
|||
Accumulated other comprehensive income/(loss)
|
|
|
|
|
(14,292
|
)
|
|
(14,632
|
)
|
|||
Treasury stock
|
|
|
|
|
(95,563
|
)
|
|
(93,715
|
)
|
|||
Retained earnings
|
|
|
|
|
97,197
|
|
|
96,124
|
|
|||
Noncontrolling interest
|
|
|
|
|
597
|
|
|
594
|
|
|||
TOTAL SHAREHOLDERS’ EQUITY
|
|
|
|
|
55,415
|
|
|
55,778
|
|
|||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
$
|
122,851
|
|
|
$
|
120,406
|
|
|
Three Months Ended September 30
|
||||||
Amounts in millions
|
2017
|
|
2016
|
||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
$
|
5,569
|
|
|
$
|
7,102
|
|
OPERATING ACTIVITIES
|
|
|
|
||||
Net earnings
|
2,870
|
|
|
2,757
|
|
||
Depreciation and amortization
|
692
|
|
|
728
|
|
||
Share-based compensation expense
|
84
|
|
|
44
|
|
||
Deferred income taxes
|
426
|
|
|
(177
|
)
|
||
Gain on sale of assets
|
(81
|
)
|
|
(75
|
)
|
||
Changes in:
|
|
|
|
||||
Accounts receivable
|
(304
|
)
|
|
(424
|
)
|
||
Inventories
|
(357
|
)
|
|
(287
|
)
|
||
Accounts payable, accrued and other liabilities
|
235
|
|
|
298
|
|
||
Other operating assets and liabilities
|
(30
|
)
|
|
135
|
|
||
Other
|
96
|
|
|
26
|
|
||
TOTAL OPERATING ACTIVITIES
|
3,631
|
|
|
3,025
|
|
||
INVESTING ACTIVITIES
|
|
|
|
||||
Capital expenditures
|
(1,132
|
)
|
|
(684
|
)
|
||
Proceeds from asset sales
|
120
|
|
|
183
|
|
||
Acquisitions, net of cash acquired
|
—
|
|
|
(14
|
)
|
||
Purchases of short-term investments
|
(1,942
|
)
|
|
(631
|
)
|
||
Proceeds from sales and maturities of short-term investments
|
388
|
|
|
243
|
|
||
Cash transferred related to the Beauty Brands divestiture
|
—
|
|
|
(348
|
)
|
||
Restricted cash related to the Beauty Brands business
|
—
|
|
|
(874
|
)
|
||
Change in other investments
|
32
|
|
|
4
|
|
||
TOTAL INVESTING ACTIVITIES
|
(2,534
|
)
|
|
(2,121
|
)
|
||
FINANCING ACTIVITIES
|
|
|
|
||||
Dividends to shareholders
|
(1,823
|
)
|
|
(1,851
|
)
|
||
Change in short-term debt
|
48
|
|
|
1,519
|
|
||
Additions to long-term debt
|
2,124
|
|
|
891
|
|
||
Reductions of long-term debt
|
(151
|
)
|
|
(1,001
|
)
|
||
Treasury stock purchases
|
(2,502
|
)
|
|
(1,002
|
)
|
||
Impact of stock options and other
|
580
|
|
|
937
|
|
||
TOTAL FINANCING ACTIVITIES
|
(1,724
|
)
|
|
(507
|
)
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
82
|
|
|
(43
|
)
|
||
CHANGE IN CASH AND CASH EQUIVALENTS
|
(545
|
)
|
|
354
|
|
||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
5,024
|
|
|
$
|
7,456
|
|
|
|
|
Three Months Ended September 30
|
||||||||||
|
|
|
Net Sales
|
|
Earnings/(Loss) from Continuing Operations Before Income Taxes
|
|
Net Earnings from Continuing Operations
|
||||||
Beauty
|
2017
|
|
$
|
3,138
|
|
|
$
|
836
|
|
|
$
|
632
|
|
|
2016
|
|
2,996
|
|
|
783
|
|
|
592
|
|
|||
Grooming
|
2017
|
|
1,577
|
|
|
414
|
|
|
329
|
|
|||
|
2016
|
|
1,658
|
|
|
529
|
|
|
415
|
|
|||
Health Care
|
2017
|
|
1,902
|
|
|
455
|
|
|
305
|
|
|||
|
2016
|
|
1,861
|
|
|
496
|
|
|
320
|
|
|||
Fabric & Home Care
|
2017
|
|
5,383
|
|
|
1,179
|
|
|
769
|
|
|||
|
2016
|
|
5,302
|
|
|
1,129
|
|
|
728
|
|
|||
Baby, Feminine & Family Care
|
2017
|
|
4,545
|
|
|
964
|
|
|
630
|
|
|||
|
2016
|
|
4,595
|
|
|
1,045
|
|
|
697
|
|
|||
Corporate
|
2017
|
|
108
|
|
|
(97
|
)
|
|
205
|
|
|||
|
2016
|
|
106
|
|
|
(244
|
)
|
|
123
|
|
|||
Total Company
|
2017
|
|
$
|
16,653
|
|
|
$
|
3,751
|
|
|
$
|
2,870
|
|
|
2016
|
|
16,518
|
|
|
3,738
|
|
|
2,875
|
|
|
Beauty
|
|
Grooming
|
|
Health Care
|
|
Fabric & Home Care
|
|
Baby, Feminine & Family Care
|
|
Total Company
|
||||||||||||
Goodwill at June 30, 2017
|
$
|
12,791
|
|
|
$
|
19,627
|
|
|
$
|
5,878
|
|
|
$
|
1,857
|
|
|
$
|
4,546
|
|
|
$
|
44,699
|
|
Translation and other
|
173
|
|
|
195
|
|
|
58
|
|
|
14
|
|
|
50
|
|
|
490
|
|
||||||
Goodwill at September 30, 2017
|
$
|
12,964
|
|
|
$
|
19,822
|
|
|
$
|
5,936
|
|
|
$
|
1,871
|
|
|
$
|
4,596
|
|
|
$
|
45,189
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
||||
Intangible assets with determinable lives
|
$
|
7,372
|
|
|
$
|
(4,956
|
)
|
Intangible assets with indefinite lives
|
21,846
|
|
|
—
|
|
||
Total identifiable intangible assets
|
$
|
29,218
|
|
|
$
|
(4,956
|
)
|
|
% change in estimated fair value
|
||||
|
+50 bps discount rate
|
|
-50 bps long-term growth
|
||
Shave Care goodwill reporting unit
|
(10
|
)%
|
|
(7
|
)%
|
Gillette indefinite-lived intangible asset
|
(10
|
)%
|
|
(7
|
)%
|
|
Three Months Ended September 30, 2017
|
|
Three Months Ended September 30, 2016
|
||||||||||||||||
CONSOLIDATED AMOUNTS
|
Continuing Operations
|
Discontinued Operations
|
Total
|
|
Continuing Operations
|
Discontinued Operations
|
Total
|
||||||||||||
Net earnings/(loss)
|
$
|
2,870
|
|
$
|
—
|
|
$
|
2,870
|
|
|
$
|
2,875
|
|
$
|
(118
|
)
|
$
|
2,757
|
|
Net earnings attributable to noncontrolling interests
|
(17
|
)
|
—
|
|
(17
|
)
|
|
(43
|
)
|
—
|
|
(43
|
)
|
||||||
Net earnings/(loss) attributable to P&G (Diluted)
|
2,853
|
|
—
|
|
2,853
|
|
|
2,832
|
|
(118
|
)
|
2,714
|
|
||||||
Preferred dividends, net of tax benefit
|
(62
|
)
|
—
|
|
(62
|
)
|
|
(63
|
)
|
—
|
|
(63
|
)
|
||||||
Net earnings/(loss) attributable to P&G available to common shareholders (Basic)
|
$
|
2,791
|
|
$
|
—
|
|
$
|
2,791
|
|
|
$
|
2,769
|
|
$
|
(118
|
)
|
$
|
2,651
|
|
|
|
|
|
|
|
|
|
||||||||||||
SHARES IN MILLIONS
|
|
|
|
|
|
|
|
||||||||||||
Basic weighted average common shares outstanding
|
2,550.5
|
|
—
|
|
2,550.5
|
|
|
2,674.7
|
|
2,674.7
|
|
2,674.7
|
|
||||||
Effect of dilutive securities
|
|
|
|
|
|
|
|
||||||||||||
Conversion of preferred shares (1)
|
96.6
|
|
—
|
|
96.6
|
|
|
101.0
|
|
101.0
|
|
101.0
|
|
||||||
Exercise of stock options and other unvested equity awards (2)
|
43.5
|
|
—
|
|
43.5
|
|
|
47.2
|
|
47.2
|
|
47.2
|
|
||||||
Diluted weighted average common shares outstanding
|
2,690.6
|
|
—
|
|
2,690.6
|
|
|
2,822.9
|
|
2,822.9
|
|
2,822.9
|
|
||||||
|
|
|
|
|
|
|
|
||||||||||||
PER SHARE AMOUNTS (3)
|
|
|
|
|
|
|
|
||||||||||||
Basic net earnings/(loss) per common share
|
$
|
1.09
|
|
$
|
—
|
|
$
|
1.09
|
|
|
$
|
1.03
|
|
$
|
(0.04
|
)
|
$
|
0.99
|
|
Diluted net earnings/(loss) per common share
|
$
|
1.06
|
|
$
|
—
|
|
$
|
1.06
|
|
|
$
|
1.00
|
|
$
|
(0.04
|
)
|
$
|
0.96
|
|
(1)
|
Despite being included currently in Diluted net earnings per common share, the actual conversion to common stock occurs when the preferred shares are sold. Shares may only be sold after being allocated to the ESOP participants pursuant to the repayment of the ESOP's obligations through 2035.
|
(2)
|
Weighted average outstanding stock options of approximately 20 million and 26 million for the three months ended September 30, 2017 and 2016, respectively, were not included in the Diluted net earnings per share calculation because the options were out of the money or to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).
|
(3)
|
Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings/(loss) attributable to Procter & Gamble.
|
|
Three Months Ended September 30
|
||||||
|
2017
|
|
2016
|
||||
Share-based compensation expense
|
$
|
84
|
|
|
$
|
44
|
|
Net periodic benefit cost for pension benefits (1)
|
51
|
|
|
96
|
|
||
Net periodic benefit cost/(credit) for other retiree benefits (1)
|
(38
|
)
|
|
(19
|
)
|
(1)
|
The components of the total net periodic benefit cost for both pension benefits and other retiree benefits for those interim periods, on an annualized basis, do not differ materially from the amounts disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2017, excluding the settlement, curtailment, and special termination costs related to the divestiture of the Beauty Brands business reported in Net earnings from discontinued operations.
|
|
Fair Value Asset
|
||||||
|
September 30, 2017
|
|
June 30, 2017
|
||||
Investments
|
|
|
|
||||
U.S. government securities
|
$
|
7,188
|
|
|
$
|
6,297
|
|
Corporate bond securities
|
3,795
|
|
|
3,271
|
|
||
Other investments
|
132
|
|
|
132
|
|
||
Total
|
$
|
11,115
|
|
|
$
|
9,700
|
|
|
Notional Amount
|
|
Derivative Fair Value Asset/(Liability)
|
||||||||||||
|
September 30, 2017
|
|
June 30, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
||||||||
Derivatives in Fair Value Hedging Relationships
|
|
|
|
|
|
|
|
||||||||
Interest rate contracts (1)
|
$
|
4,612
|
|
|
$
|
4,552
|
|
|
$
|
175
|
|
|
$
|
178
|
|
Derivatives in Net Investment Hedging Relationships
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
$
|
8,749
|
|
|
$
|
6,102
|
|
|
$
|
(184
|
)
|
|
$
|
(163
|
)
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
$
|
5,754
|
|
|
$
|
4,969
|
|
|
$
|
(68
|
)
|
|
$
|
18
|
|
(1)
|
The fair value of the derivative asset/liability directly offsets the cumulative amount of the fair value hedging adjustment included in the carrying amount of the underlying debt obligation. The carrying amount of the underlying debt obligation, net of the fair value adjustment, was $4,764 as of September 30, 2017 and $4,705 as of June 30, 2017, respectively.
|
|
Amount of Gain/(Loss) Recognized in AOCI on Derivatives
|
||||||
|
September 30, 2017
|
|
June 30, 2017
|
||||
Derivatives in Net Investment Hedging Relationships
|
|
|
|
||||
Foreign exchange contracts
|
$
|
(115
|
)
|
|
$
|
(104
|
)
|
|
Amount of Gain/(Loss) Reclassified from AOCI into Earnings
|
||||||
|
Three Months Ended September 30
|
||||||
|
2017
|
|
2016
|
||||
Derivatives in Cash Flow Hedging Relationships (1)
|
|
|
|
||||
Foreign currency contracts
|
—
|
|
|
(8
|
)
|
||
|
|
|
|
||||
|
Amount of Gain/(Loss) Recognized in Earnings
|
||||||
|
Three Months Ended September 30
|
||||||
|
2017
|
|
2016
|
||||
Derivatives in Fair Value Hedging Relationships (2)
|
|
|
|
||||
Interest rate contracts
|
$
|
(3
|
)
|
|
$
|
(28
|
)
|
Debt
|
3
|
|
|
28
|
|
||
Total
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives Not Designated as Hedging Instruments (3)
|
|
|
|
||||
Foreign currency contracts
|
$
|
(1
|
)
|
|
$
|
(8
|
)
|
(1)
|
The gain or loss on cash flow hedging relationships is reclassified from AOCI into net income in the same period during which the related item affects earnings. Such amounts related to foreign currency contracts are included in the Consolidated Statements of Earnings in Selling, general and administrative expense (SG&A).
|
(2)
|
The gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are both recognized in the Consolidated Statements of Earnings in Interest expense.
|
(3)
|
The gain or loss on foreign currency contracts not designated as hedging instruments is included in the Consolidated Statements of Earnings in SG&A. This gain or loss substantially offsets the foreign currency mark-to-market impact of the related exposure.
|
|
Changes in Accumulated Other Comprehensive Income/(Loss) by Component
|
|||||||||||||
|
Hedges
|
|
Investment Securities
|
|
Pension and Other Retiree Benefits
|
|
Financial Statement Translation
|
|
Total
|
|||||
Balance at June 30, 2017
|
(2,947
|
)
|
|
(25
|
)
|
|
(4,397
|
)
|
|
(7,263
|
)
|
|
(14,632
|
)
|
OCI before reclassifications (1)
|
(463
|
)
|
|
(2
|
)
|
|
(97
|
)
|
|
840
|
|
|
278
|
|
Amounts reclassified from AOCI (2)
|
—
|
|
|
(2
|
)
|
|
64
|
|
|
—
|
|
|
62
|
|
Net current period OCI
|
(463
|
)
|
|
(4
|
)
|
|
(33
|
)
|
|
840
|
|
|
340
|
|
Balance at September 30, 2017
|
(3,410
|
)
|
|
(29
|
)
|
|
(4,430
|
)
|
|
(6,423
|
)
|
|
(14,292
|
)
|
(1)
|
Net of tax expense/(benefit) of $(278), $0 and $(26) for gains/losses on hedges, investment securities and pension and other retiree benefit items, respectively.
|
(2)
|
Net of tax expense/(benefit) of $0, $0 and $24 for gains/losses on hedges, investment securities and pension and other retiree benefit items, respectively.
|
•
|
Hedges: see Note 7 for classification of gains and losses from hedges in the Consolidated Statements of Earnings.
|
•
|
Investment securities: amounts reclassified from AOCI into Other non-operating income, net.
|
•
|
Pension and other retiree benefits: amounts reclassified from AOCI into Cost of products sold and SG&A and included in the computation of net periodic pension costs.
|
|
|
|
Three Months Ended September 30, 2017
|
|
|
||||||||||||||
|
Accrual Balance June 30, 2017
|
|
Charges
|
|
Cash Spent
|
|
Charges Against Assets
|
|
Accrual Balance September 30, 2017
|
||||||||||
Separations
|
$
|
228
|
|
|
$
|
46
|
|
|
$
|
(34
|
)
|
|
$
|
—
|
|
|
$
|
240
|
|
Asset-related costs
|
—
|
|
|
86
|
|
|
—
|
|
|
(86
|
)
|
|
—
|
|
|||||
Other costs
|
49
|
|
|
25
|
|
|
(21
|
)
|
|
—
|
|
|
53
|
|
|||||
Total
|
$
|
277
|
|
|
$
|
157
|
|
|
$
|
(55
|
)
|
|
$
|
(86
|
)
|
|
$
|
293
|
|
|
Three Months Ended September 30, 2017
|
||
Beauty
|
$
|
20
|
|
Grooming
|
6
|
|
|
Health Care
|
4
|
|
|
Fabric & Home Care
|
30
|
|
|
Baby, Feminine & Family Care
|
51
|
|
|
Corporate (1)
|
46
|
|
|
Total Company
|
$
|
157
|
|
(1)
|
Corporate includes costs related to allocated overheads, including charges related to our Sales and Market Operations, Global Business Services and Corporate Functions activities.
|
|
Three Months Ended September 30
|
||
|
2016
|
||
Net sales
|
$
|
1,159
|
|
Cost of products sold
|
450
|
|
|
Selling, general and administrative expense
|
783
|
|
|
Interest expense
|
14
|
|
|
Other non-operating income/(loss), net
|
16
|
|
|
Earnings/(loss) from discontinued operations before income taxes
|
$
|
(72
|
)
|
Income taxes on discontinued operations
|
46
|
|
|
Net earnings/(loss) from discontinued operations
|
$
|
(118
|
)
|
|
Three Months Ended September 30
|
||
|
2016
|
||
NON-CASH OPERATING ITEMS
|
|
||
Depreciation and amortization
|
$
|
24
|
|
Before tax gain on sale of business
|
13
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
||
Capital expenditures
|
$
|
38
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Overview
|
•
|
Summary of Results – Three Months Ended September 30, 2017
|
•
|
Economic Conditions and Uncertainties
|
•
|
Results of Operations – Three Months Ended September 30, 2017
|
•
|
Business Segment Discussion – Three Months Ended September 30, 2017
|
•
|
Liquidity and Capital Resources
|
•
|
Reconciliation of Measures Not Defined by U.S. GAAP
|
Reportable Segments
|
Product Categories (Sub-Categories)
|
Major Brands
|
Beauty
|
Hair Care (Conditioner, Shampoo, Styling Aids, Treatments)
|
Head & Shoulders, Pantene, Rejoice
|
Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care)
|
Olay, Old Spice, Safeguard, SK-II
|
|
Grooming
|
Grooming (1) (Shave Care - Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care; Appliances)
|
Braun, Fusion, Gillette, Mach3, Prestobarba, Venus
|
Health Care
|
Oral Care (Toothbrushes, Toothpaste, Other Oral Care)
|
Crest, Oral-B
|
Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care)
|
Prilosec, Vicks
|
|
Fabric & Home Care
|
Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents)
|
Ariel, Downy, Gain, Tide
|
Home Care (Air Care, Dish Care, P&G Professional, Surface Care)
|
Cascade, Dawn, Febreze, Mr. Clean, Swiffer
|
|
Baby, Feminine & Family Care
|
Baby Care (Baby Wipes, Diapers and Pants)
|
Luvs, Pampers
|
Feminine Care (Adult Incontinence, Feminine Care)
|
Always, Tampax
|
|
Family Care (Paper Towels, Tissues, Toilet Paper)
|
Bounty, Charmin
|
(1)
|
The Grooming product category is comprised of the Shave Care and Appliances Global Business Units.
|
|
Three Months Ended September 30
|
||
|
Net Sales
|
|
Net Earnings
|
Beauty
|
19%
|
|
24%
|
Grooming
|
10%
|
|
12%
|
Health Care
|
11%
|
|
11%
|
Fabric & Home Care
|
33%
|
|
29%
|
Baby, Feminine & Family Care
|
27%
|
|
24%
|
Total Company
|
100%
|
|
100%
|
•
|
Net sales increased 1% to $16.7 billion. Organic sales, which exclude the impacts of acquisitions and divestitures and foreign exchange, also increased 1%. Organic sales increased 5% in Beauty, 1% in Health Care and 2% in Fabric & Home Care. Organic sales declined 1% in Baby, Feminine & Family Care and 6% in Grooming.
|
•
|
Unit volume increased 1%, with organic volume also up 1%. Volume increased low single digits in Fabric & Home Care, was unchanged in Beauty and Health Care and decreased low single digits in Baby, Feminine & Family Care and Grooming segments. Excluding the impacts of minor brand divestitures, organic volume increased low single digits in Health Care and was unchanged in Baby, Feminine & Family Care.
|
•
|
Net earnings from continuing operations were $2.9 billion, unchanged versus the prior year period. A decrease in operating income due primarily to lower gross margin, was offset by an increase in non operating income, primarily due to an increase in gains from minor brand divestitures, an increase in interest income and a reduction in interest expense.
|
•
|
Diluted net earnings per share from continuing operations increased 6% to $1.06 due primarily to reduced shares outstanding.
|
•
|
Net earnings attributable to Procter & Gamble increased 5% versus the prior year period to $2.9 billion. The base period included a loss from discontinued operations.
|
•
|
Core net earnings attributable to Procter & Gamble, which excludes incremental restructuring charges, increased 1% to $2.9 billion. Core net earnings per share increased 6% to $1.09 due to the increase in core net earnings and the reduction in shares outstanding.
|
•
|
Operating cash flow was $3.6 billion. Free cash flow, which is operating cash flow less capital expenditures, was $2.5 billion. Free cash flow productivity, which is the ratio of free cash flow to net earnings, was 87%.
|
|
Three Months Ended September 30
|
||||
Amounts in millions, except per share amounts
|
2017
|
|
2016
|
|
% Chg
|
Net sales
|
$16,653
|
|
$16,518
|
|
1%
|
Operating income
|
3,735
|
|
3,771
|
|
(1)%
|
Net earnings from continuing operations
|
2,870
|
|
2,875
|
|
—%
|
Net earnings/(loss) from discontinued operations
|
—
|
|
(118)
|
|
N/A
|
Net earnings attributable to Procter & Gamble
|
2,853
|
|
2,714
|
|
5%
|
Diluted net earnings per common share
|
1.06
|
|
0.96
|
|
10%
|
Diluted net earnings per share from continuing operations
|
1.06
|
|
1.00
|
|
6%
|
Core net earnings per common share
|
1.09
|
|
1.03
|
|
6%
|
|
|||||
|
Three Months Ended September 30
|
||||
COMPARISONS AS A % OF NET SALES
|
2017
|
|
2016
|
|
Basis Pt Chg
|
Gross profit
|
50.6%
|
|
51.0%
|
|
(40)
|
Selling, general & administrative expense
|
28.2%
|
|
28.1%
|
|
10
|
Operating income
|
22.4%
|
|
22.8%
|
|
(40)
|
Earnings from continuing operations before income taxes
|
22.5%
|
|
22.6%
|
|
(10)
|
Net earnings from continuing operations
|
17.2%
|
|
17.4%
|
|
(20)
|
Net earnings attributable to Procter & Gamble
|
17.1%
|
|
16.4%
|
|
70
|
•
|
a 70 basis point decline due to higher commodity costs,
|
•
|
a 50 basis point decline from unfavorable product mix (primarily within segments due to disproportionate growth of lower margin products and between segments caused by the disproportionate net sales growth in Fabric & Home Care, which has lower than company-average gross margin),
|
•
|
a 30 basis point impact from unfavorable foreign exchange and
|
•
|
a 20 basis point decline from lower restructuring costs and other impacts.
|
|
Three Months Ended September 30, 2017
|
|||||||||||||||||||
|
Net Sales
|
|
% Change Versus Year Ago
|
|
Earnings/(Loss) from Continuing Operations Before Income Taxes
|
|
% Change Versus Year Ago
|
|
Net Earnings from Continuing Operations
|
|
% Change Versus Year Ago
|
|||||||||
Beauty
|
$
|
3,138
|
|
|
5
|
%
|
|
$
|
836
|
|
|
7
|
%
|
|
$
|
632
|
|
|
7
|
%
|
Grooming
|
1,577
|
|
|
(5
|
)%
|
|
414
|
|
|
(22
|
)%
|
|
329
|
|
|
(21
|
)%
|
|||
Health Care
|
1,902
|
|
|
2
|
%
|
|
455
|
|
|
(8
|
)%
|
|
305
|
|
|
(5
|
)%
|
|||
Fabric & Home Care
|
5,383
|
|
|
2
|
%
|
|
1,179
|
|
|
4
|
%
|
|
769
|
|
|
6
|
%
|
|||
Baby, Feminine & Family Care
|
4,545
|
|
|
(1
|
)%
|
|
964
|
|
|
(8
|
)%
|
|
630
|
|
|
(10
|
)%
|
|||
Corporate
|
108
|
|
|
2
|
%
|
|
(97
|
)
|
|
N/A
|
|
|
205
|
|
|
N/A
|
|
|||
Total Company
|
$
|
16,653
|
|
|
1
|
%
|
|
$
|
3,751
|
|
|
—
|
%
|
|
$
|
2,870
|
|
|
—
|
%
|
•
|
Volume in Hair Care was unchanged. Developed market volume decreased low single digits due to lower promotional activity at certain customers and following increased pricing. Volume in developing regions was unchanged as increases from product innovation offset decreases following increased pricing. Global market share of the Hair Care category was unchanged.
|
•
|
Volume in Skin and Personal Care was unchanged. Volume decreased low single digits in developed regions following increased pricing. Volume increased low single digits in developing regions due to product innovation and increased marketing. Global market share of the Skin and Personal Care category decreased slightly.
|
•
|
Shave Care volume decreased low single digits in both developed and developing regions due to competitive activity, and lower distribution in certain markets. Global market share of the Shave Care category decreased less than a point.
|
•
|
Volume in Appliances increased double digits in both developed and developing regions due to product innovation. Global market share of the Appliances category increased more than two points.
|
•
|
Oral Care volume increased low single digits. Volume increased low single digits in both developed and developing regions driven by market growth, product innovation and marketing investments. Global market share of the Oral Care category decreased nearly half a point.
|
•
|
Volume in Personal Health Care decreased low single digits. Volume decreased mid-single digits in developed regions due to relatively lower levels of product innovation versus year ago. Volume was unchanged in developing regions. Organic volume increased low single digits in developing regions due to increased distribution. Global market share of the Personal Health Care category was unchanged.
|
•
|
Fabric Care volume increased low single digits. Developed regions grew mid-single digits driven by product innovation. Developing regions grew low single digits due to product innovation and market growth. Global market share of the Fabric Care category was unchanged.
|
•
|
Home Care volume was unchanged. Developed market volume declined low single digits due to hand dishwashing market contraction. Developing regions increased mid-single digits due to product innovation and marketing investments. Global market share of the Home Care category was unchanged.
|
•
|
Volume in Baby Care decreased mid-single digits. Developed regions declined low single digits due to competitive activities. Developing regions declined high single digits due to volume decline following increased pricing, competitive activity and reduction in trade inventories. Global market share of the Baby Care category decreased more than a point.
|
•
|
Volume in Feminine Care decreased low single digits. Organic volume, which excludes the impact of minor brand divestitures, increased low single digits. Organic volume decreased low single digits in developed regions due to competitive activity. Volume increased mid-single digits in developing regions due to product innovation and market growth. Global market share of the Feminine Care category was unchanged.
|
•
|
Volume in Family Care, which is predominantly a North American business, increased mid-single digits driven by product innovation, distribution gains and increased marketing activities. In the U.S., all-outlet share of the Family Care category increased more than a point.
|
Three Months Ended September 30, 2017
|
Net Sales Growth
|
|
Foreign Exchange Impact
|
|
Acquisition/Divestiture Impact*
|
|
Organic Sales Growth
|
Beauty
|
5%
|
|
—%
|
|
—%
|
|
5%
|
Grooming
|
(5)%
|
|
(1)%
|
|
—%
|
|
(6)%
|
Health Care
|
2%
|
|
(1)%
|
|
—%
|
|
1%
|
Fabric & Home Care
|
2%
|
|
—%
|
|
—%
|
|
2%
|
Baby, Feminine & Family Care
|
(1)%
|
|
—%
|
|
—%
|
|
(1)%
|
Total Company
|
1%
|
|
—%
|
|
—%
|
|
1%
|
Fiscal Year-to-Date, September 30, 2017
|
||||
Operating Cash Flow
|
|
Capital Spending
|
|
Free Cash Flow
|
$3,631
|
|
$(1,132)
|
|
$2,499
|
Fiscal Year-to-Date, September 30, 2017
|
||||
Free Cash Flow
|
|
Net Earnings
|
|
Free Cash Flow Productivity
|
$2,499
|
|
$2,870
|
|
87%
|
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts) Reconciliation of Non-GAAP Measures |
|||||||||||
Three Months Ended September 30, 2017
|
|||||||||||
|
AS REPORTED (GAAP)
|
|
INCREMENTAL RESTRUCTURING
|
|
ROUNDING
|
|
NON-GAAP (CORE)
|
||||
COST OF PRODUCTS SOLD
|
8,229
|
|
|
(100
|
)
|
|
—
|
|
|
8,129
|
|
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE
|
4,689
|
|
|
5
|
|
|
—
|
|
|
4,694
|
|
OPERATING INCOME
|
3,735
|
|
|
95
|
|
|
—
|
|
|
3,830
|
|
INCOME TAX ON CONTINUING OPERATIONS
|
881
|
|
|
20
|
|
|
—
|
|
|
901
|
|
NET EARNINGS ATTRIBUTABLE TO P&G
|
2,853
|
|
|
75
|
|
|
—
|
|
|
2,928
|
|
|
|
|
|
|
|
|
Core EPS
|
||||
DILUTED NET EARNINGS PER COMMON SHARE*
|
1.06
|
|
|
0.03
|
|
|
—
|
|
|
1.09
|
|
|
|
CHANGE VERSUS YEAR AGO
|
|
|
|
|
|
|
|
CORE EPS
|
6
|
%
|
|
|
|
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts) Reconciliation of Non-GAAP Measures |
||||||||||||||
Three Months Ended September 30, 2016
|
||||||||||||||
|
AS REPORTED (GAAP)
|
|
DISCONTINUED OPERATIONS
|
|
INCREMENTAL RESTRUCTURING
|
|
ROUNDING
|
|
NON-GAAP (CORE)
|
|||||
COST OF PRODUCTS SOLD
|
8,102
|
|
|
—
|
|
|
(111
|
)
|
|
—
|
|
|
7,991
|
|
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE
|
4,645
|
|
|
—
|
|
|
23
|
|
|
(1
|
)
|
|
4,667
|
|
OPERATING INCOME
|
3,771
|
|
|
—
|
|
|
88
|
|
|
1
|
|
|
3,860
|
|
INCOME TAX ON CONTINUING OPERATIONS
|
863
|
|
|
—
|
|
|
15
|
|
|
1
|
|
|
879
|
|
NET EARNINGS ATTRIBUTABLE TO P&G
|
2,714
|
|
|
118
|
|
|
73
|
|
|
—
|
|
|
2,905
|
|
|
|
|
|
|
|
|
|
|
Core EPS:
|
|||||
DILUTED NET EARNINGS PER COMMON SHARE*
|
0.96
|
|
|
0.04
|
|
|
0.03
|
|
|
—
|
|
|
1.03
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share (2)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under Our Share Repurchase Program
|
||
7/01/2017 - 7/31/2017
|
8,343,614
|
|
|
$87.73
|
|
5,690,332
|
|
|
(3)
|
8/01/2017 - 8/31/2017
|
10,879,865
|
|
|
$91.91
|
|
10,879,865
|
|
|
(3)
|
9/01/2017 - 9/30/2017
|
10,736,922
|
|
|
$93.14
|
|
10,736,922
|
|
|
(3)
|
Total
|
29,960,401
|
|
|
$91.19
|
|
27,307,119
|
|
|
|
(1)
|
All transactions were made in the open market with large financial institutions. This table excludes shares withheld from employees to satisfy minimum tax withholding requirements on option exercises and other equity-based transactions. The Company administers cashless exercises through an independent third party and does not repurchase stock in connection with cashless exercises.
|
(2)
|
Average price paid per share for open market transactions is calculated on a settlement basis and excludes commission.
|
(3)
|
On July 27, 2017, the Company stated that in fiscal year 2018 the Company expects to reduce outstanding shares through direct share repurchases at a value of approximately $4 to $7 billion, notwithstanding any purchases under the Company's compensation and benefit plans. Purchases may be made in the open market and/or private transactions and purchases may be increased, decreased or discontinued at any time without prior notice. The share repurchases are authorized pursuant to a resolution issued by the Company's Board of Directors and are expected to be financed by a combination of operating cash flows and issuance of long-term and short-term debt.
|
Item 6.
|
Exhibits
|
|
|
|
|
3-1
|
|
|
Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011 and consolidated by the Board of Directors on April 8, 2016) (Incorporated by reference to Exhibit (3-1) of the Company's Form 10-K for the year ended June 30, 2016)
|
|
|
|
|
3-2
|
|
|
Regulations (as approved by the Board of Directors on April 8, 2016, pursuant to authority granted by shareholders at the annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3-2) of the Company's Form 10-K for the year ended June 30, 2016)
|
|
|
|
|
4-1
|
|
|
Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee (Incorporated by reference to Exhibit (4-1) of the Company Annual Report on Form 10-K for the year ended June 30, 2015)
|
|
|
|
|
10-1
|
|
|
The Procter & Gamble Performance Stock Program Summary * +
|
|
|
|
|
10-2
|
|
|
The Procter & Gamble Performance Stock Program - Related Correspondence and Terms and Conditions * +
|
|
|
|
|
10-3
|
|
|
Summary of the Company’s Short Term Achievement Reward Program * +
|
|
|
|
|
10-4
|
|
|
Company’s Form of Separation Letter & Release * +
|
|
|
|
|
12
|
|
|
Computation of Ratio of Earnings to Fixed Charges
|
|
|
|
|
31.1
|
|
|
Rule 13a-14(a)/15d-14(a) Certification – Chief Executive Officer
|
|
|
|
|
31.2
|
|
|
Rule 13a-14(a)/15d-14(a) Certification – Chief Financial Officer
|
|
|
|
|
32.1
|
|
|
Section 1350 Certifications – Chief Executive Officer
|
|
|
|
|
32.2
|
|
|
Section 1350 Certifications – Chief Financial Officer
|
|
|
|
|
101.INS (1)
|
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
|
101.SCH (1)
|
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL (1)
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
101.DEF (1)
|
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
|
101.LAB (1)
|
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
101.PRE (1)
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
|
Compensatory plan or arrangement
|
|
|
|
+
|
|
Filed herewith
|
|
|
|
(1
|
)
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
|
|
|
|
|
|
|
|
|
|
THE PROCTER & GAMBLE COMPANY
|
|
|
|
|
|
October 20, 2017
|
|
|
|
/s/ VALARIE L. SHEPPARD
|
Date
|
|
|
|
(Valarie L. Sheppard)
|
|
|
|
|
Senior Vice President, Comptroller and Treasurer
|
Exhibit
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101.INS (1)
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
101.SCH (1)
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL (1)
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF (1)
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
101.LAB (1)
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE (1)
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
+
|
|
Filed herewith
|
|
|
|
(1
|
)
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
|
III.
|
PERFORMANCE CATEGORIES
|
•
|
Organic sales growth - 30%
|
•
|
Constant currency core before-tax operating profit growth - 20%
|
•
|
Core earnings per share (EPS) growth - 30%
|
•
|
Adjusted free cash flow productivity - 20%
|
•
|
Termination on Account of Death (except in France and the UK). The Award is immediately vested and will become deliverable on the Settlement Date or Agreed Settlement Date, whichever is applicable.
|
•
|
Termination on Account of Death for awards granted in France or the UK. The consequences of death are determined by the local plan supplement, if applicable.
|
•
|
Termination on Account of Retirement or Disability after June 30th of the fiscal year in which this Award was granted. PSUs are retained and will be delivered on the Settlement Date.
|
•
|
Termination pursuant to a Written Separation Agreement that provides for retention of the Award, after June 30th of the fiscal year in which this Award was granted. PSUs are retained and will be delivered on the Settlement Date.
|
•
|
Termination in connection with a divestiture or separation of any of the Company’s businesses, as determined by the Company’s Chief Human Resources Officer. PSUs are retained and will be delivered on the Settlement Date.
|
Target Number of Units:
|
|
Maximum Number of Units:
|
|
Conversion Ratio:
|
1 PSU = 1 Common Share
|
Grant Date:
|
[GRANT DATE]
|
Vest Date:
|
[30 June 20XX]
|
Performance Period:
|
[1 July 20XX - 30 June 20XX]
|
Original Settlement Date (Shares Delivered on):
|
[ORIGINAL SETTLEMENT DATE]
|
Acceptance Deadline:
|
[ACCEPTANCE DATE]
|
|
THE PROCTER & GAMBLE COMPANY
|
|
|
Mark Biegger
|
|
|
Chief Human Resources Officer
|
|
Attachment(s):
|
To Accept Your Award
|
To Reject Your Award
|
||
Read and check the boxes below:
|
Read and check the box(es) below:
|
||
¨
|
I have read, understand and agree to be bound by each of:
|
¨
|
I have read and understand the terms noted above and do not agree to be bound by these terms. I hereby reject the stock option award detailed above.
|
|
● The Procter & Gamble 2014 Stock and Incentive Compensation Plan
● Regulations of the Committee
● This Award Agreement, including Attachments A and B
|
|
|
¨
|
I accept the stock option award detailed above (including attachments)
|
¨
|
I have read and understand the terms noted above and do not agree to be bound by these terms. I hereby reject the performance share award detailed above.
|
¨
|
I accept the performance share award detailed above (including attachments)
|
|
|
•
|
The STAR Target for each participant is calculated as:
|
•
|
The Business Unit Performance Factor is based on the fiscal year success for the appropriate STAR business unit. The STAR business units are defined by the Chief Human Resources Officer and may consist of business categories, segments, geographies, functions, organizations or a combination of one or more of these items. The STAR business units will be defined within ninety (90) days of the beginning of the fiscal year, but may be adjusted as necessary to reflect business and/or organizational changes (e.g., reorganization, acquisition, merger, divestiture, etc.). The Business Unit Performance Factors can range from 50% to 150% with a target of 100%. In general, a committee consisting of at least two of the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer and/or the Chief Operating Officer (the “STAR Committee”), conducts a comprehensive retrospective assessment of the fiscal year performance of each STAR business unit against previously established goals for one or more of the following measures: Operating Total Shareholder Return, Key Competitor Comparison, After Tax Profit, Operating Cash Flow, Value Share, Volume, Net Outside Sales, Customer spending effectiveness, SRAP cost progress, Transportation and warehouse cost progress, Internal controls, Accounts receivable payscore (collection effectiveness), Organization Head Self-Assessment, and Cross Organization Assessment. The STAR Committee makes a recommendation of an appropriate Business Unit Performance Factor to the C&LD Committee. There may also be other factors significantly affecting STAR business unit results positively or negatively which can be considered by the STAR Committee when making its recommendation. No member of the STAR Committee makes any recommendation or determination as to their own STAR award. As a result, there are certain instances in which a Business Unit Performance Factor recommendation to the C&LD Committee must be made exclusively by the Chief Executive Officer.
|
•
|
The Total Company Performance Factor is based on the total Company’s success during the fiscal year and ranges from 70% to 130%, with a target of 100%. The same Total Company Performance Factor is applied to all STAR award calculations, regardless of STAR business unit. It is determined using a matrix which compares results against pre-established goals for fiscal year organic sales growth and core earnings per share (“EPS”) growth for the fiscal year.
|
•
|
Retirement, Death or Special Separation with a Separation Package: If a participant worked at least 28 days (4 calendar weeks) during the fiscal year, the STAR award is pro-rated by dividing the number of calendar days the participant was an “active employee” during the fiscal year by 365.
|
•
|
Voluntary Resignation or Termination for cause: Separating employees must have been active employees as of June 30 (the close of the fiscal year for which the award is payable) to receive an award.
|
•
|
Separation due to a Company authorized divestiture: In the case of divestitures the CHRO is authorized to determine the appropriate STAR payout based on Business Unit factors either at Target or at projected or actual business results. The CHRO is also authorized to pay awards for the current or following partial fiscal year at time of divestiture close for administrative convenience.
|
Employment Separation Date:
|
Your last day of employment with P&G will be [ ], which will be your “Employment Separation Date” for purposes of this letter.
|
Vacation:
|
You will receive payment for your accrued but unused vacation as of your Employment Separation Date, which sum will be paid to you in accordance with P&G policy and applicable laws. You will not accrue any additional vacation following your Employment Separation Date.
|
STAR Award
|
As of your Employment Separation Date, if you were otherwise eligible for a STAR award and you worked at least 28 days (4 calendar weeks) during the fiscal year, you will receive a pro-rated STAR award for the fiscal year. Your STAR award will be pro-rated by dividing the number of calendar days during the fiscal year from July 1 through your Employment Separation Date by 365. Your STAR award will be paid in cash in the September (but no later than September 15th) immediately following the end of the fiscal year in which your employment terminates with P&G.
|
Separation Payment
[Optional]:
|
P&G will, within thirty (30) calendar days after you sign this letter, provide you with a separation payment in the amount of $[ ] (“Separation Payment”) (representing [ ] weeks of pay at your current salary), less applicable state and federal withholdings and deductions, which sum will be paid in one lump sum payment. The Separation Payment will be the only assistance P&G provides upon your separation. Other resources may be available to you as a participant in general compensation and benefit plans, which it will be your responsibility to identify and make any necessary arrangements upon separation.
Amounts you owe to P&G as of your Last Day of Employment, including, but not limited to, wage and/or benefit overpayments and unpaid loans, will also be deducted from the Separation Payment.
|
Unemployment Compensation Benefits [Optional]:
|
Your Separation Payment will be allocated to the [ ] week period following your Employment Separation Date.
|
Special Retirement (“Rule of 70”) [Optional]:
|
P&G will agree to allow the “Rule of 70” to apply to you, but only for purposes of eligibility for retiree health care benefits under the Procter & Gamble Retiree Welfare Benefits Plan. The Rule of 70 is a special eligibility rule for retiree health care coverage (including medical, dental, and prescription drug benefits) under the Procter & Gamble Retiree Welfare Benefits Plan that only applies in specific circumstances. The Rule of 70 will apply to you with respect to health care coverage under the Procter & Gamble Retiree Welfare Benefits Plan as long as that Plan continues to exist and as long as the Rule of 70 continues as an eligibility rule for coverage under that Plan.
For purposes of this paragraph only, the parties agree that your employment with P&G ended on [ ], and that you were not terminated for cause. The parties also agree that at the time your employment with the Company ended, you were [ ] years old and had [ ] years of service with the Company, making your full years of age plus full years of service [ ], which is greater than 70.
To avoid confusion, other than establishing that the Rule of 70 applies to you for purposes of retiree health care coverage under the Procter & Gamble Welfare Benefits Plan, you are subject to the same terms and conditions of the Procter & Gamble Welfare Benefits Plan, including but not limited to (1) coverage does not begin until you enrolls in the Plan, and once enrolled coverage is only prospective, (2) the monthly premiums required for coverage under the Plan must be paid on time to avoid coverage from terminating, (3) you will become ineligible for coverage under the Plan while you are employed by a direct competitor of P&G (as determined by P&G’s Chief Human Resources Officer) in an officer and/or director capacity (if you were at Band 5 or below at the time your employment with the Company ended) or in any capacity (if you were at Band 6 or above at the time your employment with the Company ended), and (4) the Company’s reservation of amendment and termination rights with respect to the Plan.
|
Retention of Vested & Unvested Equity Awards [Optional]:
|
Your separation will be treated as a Special Separation for purposes of any outstanding equity awards granted under the Procter & Gamble 2009 Stock and Incentive Compensation Plan, the Procter & Gamble 2001 Stock and Incentive Compensation Plan, the Procter & Gamble 1992 Stock Plan, or the Gillette Company 2004 Long-Term Incentive Plan and, as a result, you will retain the awards subject to the original terms and conditions of the awards. You will also retain awards granted under the Procter & Gamble 2014 Stock & Incentive Compensation Plan subject to the terms and conditions of those Awards.
This Separation Letter & Release does not alter the rights and obligations that you may have under the Procter & Gamble 2014 Stock & Incentive Compensation Plan, the Procter & Gamble 2009 Stock and Incentive Compensation Plan, the Procter & Gamble 2001 Stock and Incentive Plan, the Procter & Gamble 1992 Stock Plan, and the Gillette Company 2004 Long-Term Incentive Plan.
|
Release of Claims - Including Employment Claims:
|
You hereby release P&G from any and all claims or rights you may have against P&G. The term “P&G” includes The Procter & Gamble Company and any of its present, former and future owners, parents, affiliates and subsidiaries, and its and their directors, officers, shareholders, employees, agents, benefit plans, trustees, fiduciaries, servants, representatives, predecessors, successors and assigns. This release applies to claims about which you now know or may later discover, and includes but is not limited to: (1) claims arising under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621, et seq.; (2) claims arising under any other federal, state or local law, regulation or ordinance or other order that regulates the employment relationship and/or employee benefits; and (3) claims arising out of or relating in any way to your employment with P&G or the conclusion of that employment. This release does not apply to claims that may arise after the date you sign this letter or that may not be released under applicable law.
Governmental Agencies: Nothing in this Separation Letter & Release prohibits or prevents you from filing a charge with or participating, testifying, or assisting in any investigation, hearing, or other proceeding before the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board or a similar agency enforcing federal, state or local anti-discrimination laws. However, to the maximum extent permitted by law, you agree that if such an administrative claim is made to such an anti-discrimination agency, you shall not be entitled to recover any individual monetary relief or other individual remedies. Nothing in this Separation Letter & Release prohibits you from: (1) reporting possible violations of federal law or regulations, including any possible securities laws violations, to any governmental agency or entity, including but not limited to the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, or any agency Inspector General; (2) making any other disclosures that are protected under the whistleblower provisions of federal law or regulations; or (3) otherwise fully participating in any federal whistleblower programs, including but not limited to any such programs managed by the U.S. Securities and Exchange Commission and/or the Occupational Safety and Health Administration. You understand you do not need the prior authorization from the Company to make any such reports or disclosures, and you are not required to notify the Company that you have made such reports or disclosures. Moreover, nothing in this Separation Letter & Release prohibits or prevents you from receiving individual monetary awards or other individual relief by virtue of participating in such federal whistleblower programs.
|
Return of P&G Property:
|
You agree that by the date you sign this letter, you will return to P&G in good condition all of its equipment, materials and information that were in your possession, custody or control (including, but not limited to, computers, phones, iPads, tablets files, documents, credit cards, keys and identification badges). You further agree that you will provide your manager with all passwords to P&G electronic communication and data systems before your Employment Separation Date.
|
No Other Agreements:
|
Except as specifically set forth in this Paragraph (“No Other Agreements”), this letter supersedes any prior written or oral agreements between P&G and you concerning the termination of your employment and any benefits you might receive following that event. This letter is neither a Negotiated Separation Agreement under the Procter & Gamble Basic Separation Program nor an agreement under any other separation program or plan sponsored by The Procter & Gamble Company or any of its subsidiaries. This letter does not alter your rights and obligations under the terms of the P&G Profit Sharing and Employee Stock Ownership Plan, other retirement plans, the P&G Stock and Incentive Compensation Plan, and other compensation plans.
|
(1)
|
I have reviewed this quarterly report on Form 10-Q of The Procter & Gamble Company;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ DAVID S. TAYLOR
|
(David S. Taylor)
|
Chairman of the Board, President and Chief Executive Officer
|
|
October 20, 2017
|
Date
|
(1)
|
I have reviewed this quarterly report on Form 10-Q of The Procter & Gamble Company;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ JON R. MOELLER
|
(Jon R. Moeller)
|
Vice Chairman and Chief Financial Officer
|
|
October 20, 2017
|
Date
|
(1)
|
The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in that Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company.
|
/s/ DAVID S. TAYLOR
|
(David S. Taylor)
|
Chairman of the Board, President and Chief Executive Officer
|
|
October 20, 2017
|
Date
|
(1)
|
The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in that Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company.
|
/s/ JON R. MOELLER
|
(Jon R. Moeller)
|
Vice Chairman and Chief Financial Officer
|
|
October 20, 2017
|
Date
|