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PROCTER & GAMBLE COMPANY

(PG)
  Report
Delayed Nyse  -  04:03 2022-10-04 pm EDT
130.10 USD   +1.24%
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Procter & Gamble : Q4 2022 Reg G

07/29/2022 | 09:11am EDT

The Procter & Gamble Company Regulation G Reconciliation of Non-GAAP Measures

In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP measures used in Procter & Gamble's July 29, 2022 earnings call, associated slides, and other materials and the reconciliation to the most closely related GAAP measure. We believe that these measures provide useful perspective on underlying business trends (i.e. trends excluding non-recurring or unusual items) and results and provide a supplemental measure of year-on-year results. The non-GAAP measures described below are used by Management in making operating decisions, allocating financial resources and for business strategy purposes. These measures may be useful to investors as they provide supplemental information about business performance and provide investors a view of our business results through the eyes of Management. Certain of these measures are also used to evaluate senior management and are a factor in determining their at-risk compensation. These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measure, but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted. The Company is not able to reconcile its forward-lookingnon-GAAP cash flow and effective tax rate measures because the Company cannot predict the timing and amounts of discrete items such as acquisition and divestitures, which could significantly impact GAAP results.

The measures provided are as follows:

  1. Organic sales growth - page 4
  2. Core EPS and currency-neutral Core EPS - page 6
  3. Core gross margin and currency-neutral Core gross margin - page 9
  4. Core operating profit margin and currency-neutral Core operating profit margin - page 10
  5. Free cash flow productivity and Adjusted free cash flow productivity - page 10

Organic sales growth*:Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions and divestitures, the impact from the July 1, 2018 adoption of new accounting standards for "Revenue from Contracts with Customers", the impact from India Goods and Services Tax changes (which were effective on July 1, 2017), the impact of Venezuela deconsolidation in 2016 and foreign exchange from year-over-year comparisons. Management believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.

The Core earnings measures included in the following reconciliation tables refer to the equivalent GAAP measures adjusted as applicable for the following items:

  • Incremental restructuring:The Company has historically had an ongoing level of restructuring activities. Such activities have resulted in ongoing annual restructuring related charges of approximately $250 - $500 million before tax. Since 2012, the Company has had a strategic productivity and cost savings initiative that resulted in incremental restructuring charges. The adjustment to Core earnings includes only the restructuring costs above what we believe are the normal recurring level of restructuring costs. In fiscal 2021 and onwards, the Company expects to incur restructuring costs within our historical ongoing level.
  • Transitional Impact of U.S. Tax Act: In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "U.S. Tax Act"). This resulted in a net charge of $602 million for the fiscal year 2018. The adjustment to Core earnings only includes this transitional impact. It does not include the ongoing impacts of the lower U.S. statutory rate on the respective years' earnings.
  • Charges for Certain European legal matters: Several countries in Europe issued separate complaints alleging that the Company, along with several other companies, engaged in violations of competition laws in prior periods. In 2016, the Company incurred after-tax charges of $11 million to adjust legal reserves related to these matters.
  • Venezuela deconsolidation charges: For accounting purposes, evolving conditions resulted in a lack of control over our Venezuelan subsidiaries. Therefore, in accordance with the applicable accounting standards for consolidation, effective June 30, 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of accounting. The charge was incurred to write off our net assets related to Venezuela.
  • Venezuela B/S remeasurement & devaluation impacts: Venezuela is a highly inflationary economy under U.S. GAAP. Prior to deconsolidation, the government enacted episodic changes to currency exchange mechanisms and rates, which resulted in currency remeasurement charges for non-dollar denominated monetary assets and liabilities held by our Venezuelan subsidiaries.
  • Gain on Dissolution of the PGT Healthcare Partnership:The Company finalized the dissolution of our PGT Healthcare partnership, a venture between the Company and Teva Pharmaceuticals Industries, Ltd (Teva) in the OTC consumer

1

healthcare business, in the quarter ended September 30, 2018. The transaction was accounted for as a sale of the Teva portion of the PGT business; the Company recognized an after-tax gain on the dissolution of $353 million.

  • Shave Care Impairment: In the fourth quarter of fiscal 2019, the company recognized a one-time,non-cash,after-tax charge of $8.0 billion ($8.3 billion before tax) to adjust the carrying values of the Shave Care reporting unit. This was comprised of a before and after-tax impairment charge of $6.8 billion related to goodwill and an after-tax impairment charge of $1.2 billion ($1.6 billion before tax) to reduce the carrying value of the Gillette indefinite-lived intangible assets.
  • Anti-dilutiveImpacts:The Shave Care impairment charges caused certain equity instruments that are normally dilutive (and hence normally assumed converted or exercised for the purposes of determining diluted net earnings per share) to be anti-dilutive. Accordingly, for U.S. GAAP diluted earnings per share, these instruments were not assumed to be concerted or exercised. Specifically, in the fourth quarter and total fiscal 2019, the weighted average outstanding preferred shares were not included in the diluted weighted average common shares outstanding. Additionally, in the fourth quarter of fiscal 2019, none of our outstanding share-based equity awards were included in the diluted weighted average common shares outstanding. As a result of the non-GAAP Shave Care impairment adjustment, these instruments are dilutive for non-GAAP earnings per share.
  • Early debt extinguishment charges:In the three months ended December 31, 2020, the company recorded after tax charges of $427 million ($512 million before tax), due to early extinguishment of certain long-term debt. These charges represent the difference between the reacquisition price and the par value of the debt extinguished.

We do not view the above items to be part of our sustainable results, and their exclusion from core earnings measures provides a more comparable measure of year-on-year results. These items are also excluded when evaluating senior management in determining their at-risk compensation. Management views the following non-GAAP measures as useful supplemental measures of Company performance and operating efficiency over time.

Core EPS and currency-neutralCore EPS*:Core earnings per share, or Core EPS, is a measure of the Company's diluted net earnings per share from continuing operations adjusted as indicated. Currency-neutral Core EPS is a measure of the Company's Core EPS excluding the incremental current year impact of foreign exchange.

Core gross margin:Core gross margin is a measure of the Company's gross margin adjusted for items as indicated.

Currency-neutralCore gross margin:Currency-neutral Core gross margin is a measure of the Company's Core gross margin excluding the incremental current year impact of foreign exchange.

Core operating profit margin*:Core operating profit margin is a measure of the Company's operating margin adjusted for items as indicated.

Currency-neutralCore operating profit margin*:Currency-neutral Core operating profit margin is a measure of the Company's Core operating profit margin excluding the incremental current year impact of foreign exchange.

Free cash flow and adjusted free cash flow:Free cash flow is defined as operating cash flow less capital spending. Adjusted free cash flow is defined as operating cash flow less capital spending and adjusted for the payment of the transitional tax resulting from the comprehensive U.S legislation commonly referred to as the Tax Cuts and Jobs Act in December 2017 (the "U.S. Tax Act"). Adjusted free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. Management views free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investment.

Free cash flow productivity and adjusted free cash flow productivity*:Free cashflow productivity is defined as the ratio of free cash flow to net earnings. Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to

net earnings excluding the charges for early debt extinguishment (which are not considered part of our ongoing operations). Management views free cash flow productivity and adjusted free cash flow productivity as useful measures to help investors understand P&G's ability to generate cash. These measures are used by management in making operating decisions, allocating financial resources and for budget planning purposes. The Company's long-term target is to generate annual free cash flow productivity at or above 90 percent.

2

* Measure is used to evaluate senior management and is a factor in determining their at-risk compensation.

3

1. Organic sales growth:

Acquisition &

Three Months Ended

Net Sales

Foreign Exchange

Divestiture

Organic Sales

June 30, 2022

Growth

Impact

Impact/Other*

Growth

Beauty

(1)%

3%

(2)%

-%

Grooming

(3)%

6%

-%

3%

Health Care

5%

4%

-%

9%

Fabric Care & Home Care

4%

5%

-%

9%

Baby, Feminine & Family Care

3%

3%

1%

7%

Total P&G

3%

4%

-%

7%

  • Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.

Acquisition &

Twelve Months Ended

Net Sales

Foreign Exchange

Divestiture

Organic Sales

June 30, 2022

Growth

Impact

Impact/Other*

Growth

Total P&G

5%

2%

-%

7%

  • Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.

Organic Sales

Prior Fiscal Years

Acquisition/

Net Sales

Foreign

Divestiture

Organic Sales

Total Company

Growth

Exchange Impact

Impact/Other*

Growth

FY 2021

7%

(1)%

-%

6%

FY 2020

5%

2%

(1)%

6%

FY 2019

1%

4%

-%

5%

FY 2018

3%

(2)%

-%

1%

FY 2017

-%

2%

-%

2%

FY 2016

(8)%

6%

3%

1%

  • Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures for all periods, the impact from the July 1, 2018 adoption of new accounting standards for "Revenue from Contracts with Customers", the impact of India Goods and Services Tax implementation in FY 2018, the impact of Venezuela deconsolidation in 2016 and rounding impacts necessary to reconcile net sales to organic sales.

Organic Sales

Prior Quarters

Acquisition/

Net Sales

Foreign

Divestiture

Organic Sales

Total Company

Growth

Exchange Impact

Impact/Other*

Growth

JFM 2022

7%

3%

-%

10%

OND 2021

6%

-%

-%

6%

JAS 2021

5%

(1)%

-%

4%

AMJ 2021

7%

(3)%

-%

4%

JFM 2021

5%

(1)%

-%

4%

OND 2020

8%

-%

-%

8%

JAS 2020

9%

1%

(1)%

9%

  • Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.

4

Organic Sales

Two- and Three-Year Stacked Growth

Acquisition &

Net Sales

Foreign Exchange

Divestiture

Organic Sales

Total Company

Growth

Impact

Impact/Other*

Growth

Fiscal Year 2022

5%

2%

-%

7%

Fiscal Year 2021

7%

(1)%

-%

6%

Past Two Years Stacked

12%

13%

Fiscal Year 2020

5%

2%

(1)%

6%

Past Three Years Stacked

17%

19%

  • Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.

Organic Sales

Guidance

Combined Foreign Exchange &

Organic Sales

Total Company

Net Sales Growth

Acquisition/Divestiture Impact/Other*

Growth

FY 2023 (Estimate)

+0% to +2%

+3%

+3% to +5%

  • Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Procter & Gamble Company published this content on 29 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2022 13:09:42 UTC.


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Sales 2023 81 021 M - -
Net income 2023 14 789 M - -
Net Debt 2023 25 727 M - -
P/E ratio 2023 22,0x
Yield 2023 2,81%
Capitalization 310 B 310 B -
EV / Sales 2023 4,15x
EV / Sales 2024 3,99x
Nbr of Employees 106 000
Free-Float 59,6%
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Number of Analysts 23
Last Close Price 130,10 $
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Jon R. Moeller Chairman, President & Chief Executive Officer
Andre Schulten Chief Financial Officer
Vittorio Cretella Chief Information Officer
Victor Aguilar Chief Research, Development & Innovation Officer
Shailesh G. Jejurikar Chief Operating Officer
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