3. Oct – Dec 12 (Q2 FY 13) Results
Organic Sales Growth
6%
Organic sales growing i all
O i l i in ll
5% reporting segments
4%
4%
3% 3% 3%
3%
2%
2%
1%
0%
OND 11 JFM 12 AMJ 12 JAS 12 OND 12
4. Oct – Dec 12 (Q2 FY 13) Results
% of Sales In-Line or Growing Value Share
In Line
70%
Intervention plans on key businesses are driving
improving share results.
60%
50%
40%
30%
20%
10%
0%
OND 11 JFM 12 AMJ 12 JAS 12 OND 12
Market share data is value basis, constant currency.
5. Oct – Dec 12 (Q2 FY 13) Results
Pricing Trend
6
Pricing up in line with expectation.
5%
5
4% 4% +4%
4
3
2% 2%
2
1
0
OND 11 JFM 12 AMJ 12 JAS 12 OND 12
6. Oct – Dec 12 (Q2 FY 13) Results
Core EPS Growth
15.0%
Results driven by top-of range sales g
y p g growth and
strong productivity savings. 12%
10.0%
5%
5.0%
-2% 0% 0%
0.0%
OND 11 JFM 12 AMJ 12 JAS 12 OND 12
-5.0%
* History adjusted for Snacks moving to Discontinued Operations.
7. Oct – Dec 12 (Q2 FY 13) Results
Core Operating Profit Growth
Core operating margin improved by 110 basis
15% points,
points including 160 basis points of productivity
improvements and cost savings.
10%
7%
5% 4%
2% 1%
-4%
0%
OND 11 JFM 12 AMJ 12 JAS 12 OND 12
-5%
-10%
* History adjusted for Snacks moving to Discontinued Operations.
8. Fiscal Year 13 Results
Non-Manufacturing E ll
N M f i Enrollment
Non-Mfg
Overhead
Net Role Changes as of June 30, 2012
g , ( ,
(2,000)
)
Net Role Changes July-September, 2012 (1,300)
Net Role Changes O t b – D
N t R l Ch October December, 2012
b (2,200)
(2 200)
Net Role Changes as of December 31, 2012 (5,500)
June 30, 2013 Target (5,700)
Delivered +95% of enrollment target as of
December 31st
9. Fiscal Year 13 Results
Non-Core R
N C Restructuring S
i Spending
di
FY ‘12 FY ‘13 FY ‘13
($MM Before Tax) Total Year JAS OND
Cost of Goods Sold $211 $100 $54
SG&A $510 $192 $101
Total Non-Core Restructuring $721 $292 $155
12. Oct – Dec 12 (Q2 FY 13) Results
Beauty & Grooming
B G i
Organic Volume Growth IYA
By Category
B C t
Global Developed Developing
Hair Care ~= ~= ~=
Skin Care - - -
Personal Cleansing ~= + -
Cosmetics ++ ++ ++
Deodorants ++ ++ ++
Salon Professional - - ++
Prestige + - ++
Blades & Razors ~= ~= +
Braun ~= ~= -
• ++ represents growth above 2%, + represents growth of 2%, ~= represents growth of 1% to decline of 1%;
- represents decline greater than 1%. Company average = 2%.
13. Oct – Dec 12 (Q2 FY 13) Results
Beauty Highlights
B t Hi hli ht
• North America Hair Care shipments increased high-single digits driven by strong growth in Head &
Shoulders and Herbal Essences and pipeline shipments of Pantene Expert Collection and Vidal
Sassoon Pro Series.
• Greater China hair care grew volume and value share with launches of the Head & Shoulders Male
line and Pantene Naturals and strong in-store fundamentals across all brands.
• Western Europe Hair Care volume declined double digits due to price and promotion gaps versus
competition. Value interventions and marketing invesments began to be implemented in Q2 and will
continue into Q3.
• The Prestige business grew organic volume and sales. Growth from initiative launches on Dolce &
Gabbana, Gucci and Hugo Boss, strong holiday sales and distribution expansion in Latin America were
partially off-set by negative impacts from Hurricane Sandy.
• Salon Professional organic sales were about flat Strong sales of Nioxin and the new Illumina color by
flat.
Wella were off-set mainly by market declines in southern Europe.
• North America Skin Care shipments were down mid single digits. The new Fresh Effects mid-tier
boutique began shipping the end of December.
• Greater China Skin Care value share trends improved from P12M down 1.7 points to P3M down 0.6
points. We introduced a Pro-X Whitening line in Q1, a YuLan You Naturals line in Q2 and restaged
Olay Regenerist in January.
14. Oct – Dec 12 (Q2 FY 13) Results
Grooming Highlights
• U S Bl d & R
U.S. Blades Razors volume i
l increased l
d low single di i and value share grew nearly 1 point.
i l digits d l h l i
Male Blades & Razors grew value share nearly 2 points resulting from our recent Top 40
interventions.
• V l share f U S F i Bl d & R
Value h for U.S. Fusion Blades Razors was up nearly 1 5 points; f di
l 1.5 i t for disposables value
bl l
share was up nearly 3 points; and for Mach 3 Blades & Razors values share was flat.
• Latin America Blades & Razor shipments were up high-single digits mainly driven by the
launch of V
l h f Venus i B il A
in Brazil, Argentina, Chil and P
ti Chile d Peru, th l
the launch of P Glid i B il and
h f ProGlide in Brazil, d
customer inventory increases in advance of the annual price increase in Brazil.
• Western Europe Blades & Razors value share increased 0.5 points while volume declined low
single di it d t market contraction and a hi h b
i l digits due to k t t ti d high base-period f
i d from F i P Glid post-
Fusion ProGlide t
launch promotional support.
• Appliances organic shipments were flat as strong holiday shipments in the U.S. were off-set
by
b market softness in Western Europe.
k t ft i W t E
15. Oct – Dec 12 (Q2 FY 13) Results
Health Care S
H lhC Segment
4% 3%
Organic Organic
Sales Volume
• +2% Pricing, -1% Mix
• Volume: Flat Developed, High-singles Developing
• P&G global value market share declined 0 3 points
0.3
16. Oct – Dec 12 (Q2 FY 13) Results
Health Care
H lhC
Organic Volume Growth IYA
By Category
y g y
Global Developed Developing
Oral Care ++ ~= ++
Feminine Care ++ ~=
= ++
Personal Health Care ~= - ++
• ++ represents growth above 2%, + represents growth of 2%, ~= represents growth of 1% to decline of 1%;
- represents decline greater than 1%. Company average = Flat.
17. Oct – Dec 12 (Q2 FY 13) Results
Health Care Hi hli h
H lhC Highlights
• U.S. toothpaste shipments were up versus year ago behind Top 40 intervention plans.
Crest Whit toothpaste value share grew f th 33rd consecutive month since l
C t 3D White t th t l h for the d ti th i launch.
h
• Latin America Oral Care increased value share over 2 point versus year ago and
shipments were up over 20% driven by the successful Oral B toothpaste expansion
across th region.
the i
• Brazil Oral Care national toothpaste value share grew to 8.6% - up more than 3% versus
year ago. The major drivers of the growth were the July launch of 3D White toothpaste –
which i nearly a 2 5% value share – and national expansion i t Hi h F
hi h is l 2.5% l h d ti l i into High Frequency St
Stores.
• Western Europe Oral Care volume increased mid-single digits largely due to the continued
success of the Oral B toothpaste expansion in the U.K. and Benelux and the expansions
in
i Q2 i t G
into Greece and P t
d Portugal.
l
• Asia Oral Care volume grew mid-single digits led by Greater China volume increasing
high-single digits behind more effective merchandising and the launch of a Crest
Complete N t l regimen.
C l t Naturals i
18. Oct – Dec 12 (Q2 FY 13) Results
Health Care Hi hli h (continued)
H lhC Highlights
• North America Feminine Care shipments were up low single digits behind growth from our
Top 40 investments.
• Latin America Feminine Care volume increased double digits largely due to strength in
Brazil behind new initiatives on Always and the introduction of Tampax Pearl.
• India Feminine Care shipments increased mid-teens and value share grew more than 2
points versus year ago behind new innovation such as an upgrade on Whisper.
• Vicks ZzzQuil had nearly a 20% value share of the U.S. sleep aid category and was
number one in dollar and unit sales for branded sleep aids.
• Western Europe Personal Health Care volume grew double-digits largely due to growth in
the T
h Teva j i venture products.
joint d
• Central & Eastern Europe, Middle East & Africa Personal Health Care shipments were up
double digits due to the recent launch of Vicks in Russia, Poland, Hungary and the Czech
Republic.
R bli
19. Oct – Dec 12 (Q2 FY 13) Results
Household C
H h ld Care
Fabric & Home Care Segment
g Baby & Family Segment
5% 6%
3% 2%
Organic Organic
Organic
g Organic
g
Sales Volume
Sales Volume
• +1% Pricing, Flat Mix • +2% Pricing, -3% Mix
• Volume: Low-singles Developed, • Volume: Mid-singles Developed,
Flat Developing High-singles Developing
• P&G global value share • P&G global value share
declined 0.3 points declined 0.5 points
20. Oct – Dec 12 (Q2 FY 13) Results
Household C
H h ld Care
Organic Volume Growth IYA
g
By Category
Global Developed Developing
Fabric Care ++ ++ ~=
Home Care ++ ++ ++
Batteries ~= ~= ~=
P&G Professional ++ ++ ~=
Baby Care ++ ~= ++
Family Care ++ ++ -
Pet Care - - ++
• ++ represents growth above 2%, + represents growth of 2%, ~= represents growth of 1% to decline of 1%;
- represents decline greater than 1%. Company average = Flat.
21. Oct – Dec 12 (Q2 FY 13) Results
Household C
H h ld Care Hi hli ht
Highlights
• North America Fabric Care volume increased mid single digits. U.S. laundry value share increased
by over 1 p
y point for the p
past 3 months.
• Asia Fabric Care shipments grew high-single digits and value share was up half-a-point led by India
where value share grew over 1 point versus year ago.
• Western Europe Fabric Care volume was up from growth in Spain behind the launch of Fairy laundry
detergent in September and in the U.K. behind investments from the Top 40 plans.
• Central & Eastern Europe, Middle East and Africa fabric care shipments were down due to
competitive challenges in Russia and Turkey.
p g y
• U.S. Air Care value share increased over 1 point driven by continued growth of Febreze car vent
clips and a strong holiday scent program.
•US A
U.S. Auto Di h C
Dish Care value share i
l h increased 1 points b hi d the T 40 value i
d 1.5 i behind h Top l interventions.
i
• Central & Eastern Europe, Middle East & Africa Home Care value share grew over 1 point with
strong growth in Dish Care in Turkey, where P&G achieved share leadership.
• Western Europe Home Care shipments were down due to contracting markets and increased
competitive pressure.
22. Oct – Dec 12 (Q2 FY 13) Results
Household C
H h ld Care Hi hli h (continued)
Highlights
• Global Batteries value share grew nearly 0.5 points with share up in 4 out of 5 regions.
• North America Batteries shipments increased mid-single digits. U.S. value share grew nearly 1
point due to the launch of the Duralock initiative and pantry loading from Hurricane Sandy.
• Western Europe Batteries volume declined due to market contraction and our focus on improving
our margin structure in the region – which is expected to negatively impact volume in the short
short-
term.
• North America Pet Care volume declined slightly due to increased competitive pressure in the Pet
Specialty channel.
• North America Baby Care volume was up led by growth in the premium tier from the “3-way fit”
innovation and the addition of a new size and by Luvs, which had new distribution and increased
marketing support.
• Asia Baby Care shipments increased mid-teens and value share increased over 0.5 points with
volume and share growth in both India and China.
• Pampers shipments in BRIC markets grew high-teens with value share up in all four markets.
• North America Family Care volume was up double digits due to continued strength of the Charmin
DuraClean and Bounty Trap & Lock innovations and growth of Bounty Basic and Charmin Basic
(from the October 1st list price reduction).
24. FY 2013 Guidance
FY 2013 Guidance
Organic Sales G
Organic S l Growth
O
O ii th
Growth
h
6%
Increased sales guidance
I d l id
5%
4% 3% to 4%
4%
3% 3%
3%
2%
1%
0%
FY 10 FY 11 FY 12 FY 13E
25. FY 2013 Guidance
Core EPS G
C Growth
th
10%
FY ‘13 outlook raised
13
8% 7%
3% to 6%
6% 5%
4%
2%
-1%
-1%
0%
FY 10 FY 11 FY 12 FY 13E
-2%
* History adjusted for Snacks moving to Discontinued Operations.
26. FY 2013 Guidance
Macro Assumptions Included in G
Guidance
Global Market Growth 4% +
Commodity Prices* Roughly Neutral vs.
Prior Year
Foreign Exchange* -2% Top-line
* Based on mid-October spot rates
27. FY 2013 Guidance
Key Risks Not Included in G
Guidance
Large devaluation of an important currency, such as the
g p y,
Venezuelan Bolivar
Market
M k t growth deceleration f
th d l ti from:
• Payroll tax increase
• Dynamics associated with the debt ceiling in the U.S.
y g
• Worsening conditions in Europe
• Developing market slow-downs
For additional information regarding potential risks, please refer to the 10-K for the year ending June 30, 2012
28. FY 2013 Guidance
Cash G
C Generation and Usage Assumptions
Free Cash Flow Productivity: ~ 90%
Capital Spending, % Sales: ~5 %
Dividends: $6B+
Share Repurchase: $5B to $6B
Raise Share Repurchase for FY 2013
to $5-6 billion
29. FY 2013 Guidance
Returning Value to S
Shareholders
FY ‘12 FY ‘13 E
Dividends $6B $6B+
Share Repurchase $4B $5-6B
Value to Shareholders $10B $11-12B+
Shareholder Yield, ~5.8 to
5.5%
% of market cap
p 6.3%
Dividend increase and $5-6 billion
repurchase assumed in FY 2013
Shareholder Yield is calculated based on market cap of the last day of each Fiscal Year. FY 13 Estimate is based on Market Cap of $190B
30. Q3 FY 13 Guidance
Organic Sales G
O i S l Growth
h
6%
Implies organic growth sequentially
in-line or higher versus Q2 3%
to
4% 4%
4%
3% 3% 3%
2%
2%
0%
OND 11 JFM 12 AMJ 12 JAS 12 OND 12 JFM 13E
31. Q3 FY 13 Guidance
Core EPS G
C S Growth
15% FY 13 back-half reflects strengthened
investments in innovation & marketing plans
12%
10%
-3%
5% to
5%
+3%
-2% 0% 0%
0%
OND 11 JFM 12 AMJ 12 JAS 12 OND 12 JFM 13E
-5%
* History adjusted for Snacks moving to Discontinued Operations.
32.
33. 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,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue”, “will likely results,” and similar
estimate, intend, strategy, future, opportunity, plan, may, should, will, would, will be, will continue , will results,
expressions. Forward-looking statements are based on current expectation and assumptions that are subject to risks and uncertainties which may
cause results to differ materially from 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: (1) the ability to achieve business plans, including growing
existing sales and volume profitably and maintaining and improving margins and market share, despite high levels of competitive activity, an
increasingly volatile economic environment, lower than expected market growth rates, especially with respect to the product categories and
geographical markets (including developing markets) in which the Company has chosen to focus, and/or increasing competition from mid- and lower
tier value products in both developed and developing markets; (2) the ability to successfully manage ongoing acquisition, divestiture and joint venture
activities to achieve the cost and growth synergies in accordance with the stated goals of these transactions without impacting the delivery of base
business objectives; (3) the ability to successfully manage ongoing organizational changes and achieve productivity improvements designed to
support our growth strategies, while successfully identifying, developing and retaining particularly key employees, especially in key growth markets
where the availability of skilled employees is limited; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain key
manufacturing and supply sources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory tax and
regulatory,
legal requirements and matters (including product liability, patent, intellectual property, price controls, import restrictions, environmental and tax
policy), and to resolve pending matters within current estimates; (7) the ability to resolve the pending competition law inquiries in Europe within current
estimates; (8) the ability to successfully implement, achieve and sustain cost improvement plans and efficiencies in manufacturing and overhead
areas, including the Company's outsourcing projects; (9) the ability to successfully manage volatility in foreign exchange rates, as well as our debt and
currency exposure (especially in certain countries with currency exchange controls, such as Venezuela, China, India and Argentina); (10) the ability to
maintain our current credit rating and to manage fluctuations in interest rate, increases in pension and healthcare expense, and any significant credit
or liquidity issues; (11) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's
significant geographical markets, due to a wide variety of factors, including but not limited to, terrorist and other hostile activities, natural disasters
and/or disruptions to credit markets, resulting from a global, regional or national credit crisis; (12) the ability to successfully manage competitive
factors, including prices, promotional incentives and trade terms for products; (13) the ability to obtain patents and respond to technological advances
attained by competitors and patents granted to competitors; (14) the ability to successfully manage increases in the prices of commodities, raw
materials and energy, including the ability to offset these increases through pricing actions; (15) the ability to develop effective sales, advertising and
marketing programs; (16) the ability to stay on the leading edge of innovation maintain a positive reputation on our brands and ensure trademark
innovation,
protection; and (17) the ability to rely on and maintain key information technology systems and networks (including Company and third-party systems
and networks), the security over such systems and networks, and the data contained therein. 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.
34. The Procter & Gamble Company: Reg 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 January 25, 2013 earnings call and associated slides with the reconciliation to the
most closely related GAAP measure. The measures provided are as follows:
1. Organic Sales Growth – page 1
2. Core EPS – pages 2 through 4
3. Core Operating Profit Margin – page 4
4. Core Gross Margin – page 4
5. Core Selling, General & Administrative Expenses (SG&A) as a % of Net Sales – page 5
6. Core Operating Profit Growth – page 5
7. Core Effective Tax Rate – page 5
8. Free Cash Flow – page 6
1. 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/ Organic
Net Sales Exchange Divestiture Sales
Total P&G
Growth Impact Impact* Growth
OND 11 4% 0% 0% 4%
JFM 12 2% 1% 0% 3%
AMJ 12 -1% 4% 0% 3%
JAS 12 -4% 6% 0% 2%
OND 12 2% 1% 0% 3%
JFM 13 (Estimate) 3% to 4% 0% 0% 3% to 4%
FY 2013 (Estimate) 1% to 2% 2% 0% 3% to 4%
FY 2010 3% 1% -1% 3%
FY 2011 5% 0% -1% 4%
FY 2012 3% 0% 0% 3%
Total Developing
OND 12 5% 2% 0% 7%
Net Foreign Acquisition/ Organic
Sales Exchange Divestiture Sales
OND 2012
Growth Impact Impact* Growth
Beauty 1% 1% 1% 3%
Grooming -4% 3% 3% 2%
Health Care 3% 2% -1% 4%
Fabric Care and Home Care 3% 0% 0% 3%
Baby Care and Family Care 4% 1% 0% 5%
Total P&G 2% 1% 0% 3%
*Acquisition/Divestiture Impact includes rounding impacts necessary to reconcile net sales to organic sales.
1
35. 2. Core EPS: This is a measure of the Company’s diluted net earnings per share from continuing operations
excluding certain items that are not judged to be part of the Company’s sustainable results or trends. This
includes FY 2013 holding gain on the buyout of our Iberian joint venture partner, FY 2013 and 2012 charges
related to incremental restructuring charges due to increased focus on productivity and cost savings, charges
in FY’s 2012, 2011 and 2010 related to European legal matters, FY 2012 impairment charges for goodwill
and indefinite lived intangible assets, a significant benefit in FY 2011 from the settlement of U.S. tax
litigation primarily related to the valuation of technology donations, a FY 2010 charge related to a tax
provision for retiree healthcare subsidy payments in the U.S. healthcare reform legislation, and incremental
restructuring charges in FY 2009 to offset the dilutive impact of the Folgers divestiture. 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. The tables
below provide a reconciliation of diluted net earnings per share to Core EPS:
Fiscal Year Data: FY FY FY FY
FY 2013 (est.) 2012 2011 2010 2009
Diluted Net Earnings Per Share -
Continuing Operations $4.04 to $4.14 $3.12 $3.85 $3.47 $3.35
Impairment Charges - $0.51 - - -
Settlement from U.S. Tax Litigation - - ($0.08) - -
Charges for European legal matters - $0.03 $0.10 $0.09 -
Taxation of retiree healthcare subsidy - - - $0.05 -
Incremental restructuring charges $0.15 $0.20 - - $0.09
Gain on buyout of Iberian JV ($0.21) - - - -
Rounding/Other Impacts ($0.01) ($0.01) - - ($0.01)
Core EPS $3.97 to $4.07 $3.85 $3.87 $3.61 $3.43
Core EPS Growth 3% to 6% -1% 7% 5%
Quarter / Period Data:
JFM 13
(est.) JFM 12
Diluted Net Earnings Per Share $0.90 to $0.96 $0.82
Snacks results of operations – Discontinued Operations - ($0.01)
Diluted Net Earnings Per Share-Continuing Operations $0.90 to $0.96 $0.81
Impairment charges - $0.01
Incremental restructuring 0.01 $0.12
Core EPS $0.91 to $0.97 $0.94
Core EPS Growth -3% to +3%
2
36. OND 12 OND 11
Diluted Net Earnings Per Share-Continuing Operations $1.39 $0.56
Impairment charges - $0.50
Charges for European legal matters - $0.02
Gain on buyout of Iberian JV ($0.21) -
Incremental restructuring $0.05 $0.01
Rounding ($0.01) -
Core EPS $1.22 $1.09
Core EPS Growth 12%
JAS 12 JAS 11
Diluted Net Earnings Per Share-Continuing Operations $0.96 $1.01
Incremental restructuring $0.09 -
Charges for European Legal Matters $0.01 -
Core EPS $1.06 $1.01
Core EPS Growth 5%
AMJ 12 AMJ 11
Diluted Net Earnings Per Share $1.24 $0.84
Gain from snacks divestiture ($0.48) -
Snacks results of operations – Discontinued Operations ($0.02) ($0.02)
Diluted Net EPS - Continuing Operations $0.74 $0.82
Incremental restructuring $0.08 -
Core EPS $0.82 $0.82
Core EPS Growth 0%
JFM 12 JFM 11
Diluted Net Earnings Per Share $0.82 $0.96
Snacks Results of Operations – Discontinued ($0.01) ($0.02)
Diluted Net Earnings Per Share-Continuing $0.81 $0.94
Incremental restructuring $0.12 -
Non-cash Impairment charges $0.01 -
Core EPS $0.94 $0.94
Core EPS Growth 0%
3
37. OND 11 OND 10
Diluted Net Earnings Per Share-Continuing
Operations $0.56 $1.09
Impairment charges $0.50 -
Charges for European legal matters $0.02 $0.10
Settlement from U.S. tax litigation - ($0.08)
Incremental restructuring $0.01 -
Core EPS $1.09 $1.11
Core EPS Growth -2%
Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of
the underlying transaction. The charge for the significant settlement from U.S. tax litigation is tax expense.
3. Core Operating Profit Margin:
This is a measure of the Company’s operating margin adjusted for current and prior year charges related to
incremental restructuring charges due to increased focus on productivity and cost savings, prior year charges
related to European legal matters, and prior year impairment charges for goodwill and indefinite lived
intangible assets:
OND 12 OND 11
Operating Profit Margin 20.3% 12.3%
Impairment charges - 7.1%
Charges for European legal matters - 0.3%
Incremental restructuring 0.7% 0.1%
Rounding impacts - 0.1%
Core Operating Profit Margin 21.0% 19.9%
Basis point change 110
4. Core Gross Margin:
This is a measure of the Company’s Gross Margin adjusted for the current year charges related to
incremental restructuring charges due to increased focus on productivity and cost savings:
OND 12 OND 11
Gross Margin 50.9% 50.1%
Incremental restructuring 0.3% -
Core Gross Margin 51.2% 50.1%
Basis point change 110
4
38. 5. Core SG&A as a % of Net Sales:
This is a measure of the Company’s SG&A as a % of Net Sales adjusted for the current and prior year
charges related to incremental restructuring charges due to increased focus on productivity and cost savings,
and prior year charges related to European legal matters:
OND 12 OND 11
Selling, General & Administrative 30.6% 30.6%
Expenses (SG&A) as a % Net Sales
Incremental restructuring -0.5% -0.1%
European legal matters - -0.3%
Rounding impacts 0.1% -
Core SG&A as a % Net Sales 30.2% 30.2%
Basis point change 0
6. Core Operating Profit Growth:
This is a measure of the Company’s operating profit growth adjusted for the fiscal 2012 impairment charges
for goodwill and indefinite lived intangible assets, fiscal year 2013 and 2012 charges related to incremental
restructuring charges due to increased focus on productivity and cost savings, and charges in fiscal 2012 and
2011 related to the European legal matters:
OND OND
12 JAS 12 AMJ 12 JFM 12 11
Operating Profit Growth 68% -7% -4% -11% -36%
Impairment charges -61% 0% 0% 1% 37%
Charges for European legal matters -4% 1% 0% 0% -6%
Incremental restructuring 4% 7% 8% 12% 1%
Core Operating Profit Growth 7% 1% 4% 2% -4%
7. Core Effective Tax Rate:
This is a measure of the Company’s effective tax rate adjusted for current year charges for incremental
restructuring and the current year holding gain on the buyout of our Iberian joint venture partner. The table
below provides a reconciliation of the effective tax rate to the Core tax rate:
OND
2012
Effective Tax Rate 21.9%
Tax impact of incremental restructuring -0.3%
Tax impact of gain on buyout of Iberian JV 2.8%
Core Effective Tax Rate 24.4%
5
39. 8. 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. Free cash flow is also one of the measures used to evaluate senior management
and is a factor in determining their at-risk compensation. The reconciliation of free cash flow is provided
below (amounts in millions):
Operating Capital Free Cash
Cash Flow Spending Flow
Oct-Dec ‘12 $3,849 ($724) $3,125
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