The Procter & Gamble Company reported April - June 2016 quarter net sales of $16.1 billion

OREANDA-NEWS. The Procter & Gamble Company (NYSE:PG) reported April - June 2016 quarter net sales of $16.1 billion, a decrease of three percent versus the prior year period driven by a negative three percentage point impact from foreign exchange and a negative two percent combined impact from Venezuela deconsolidation and minor brand divestitures. Organic sales increased two percent for the quarter driven by a two percent increase in organic shipment volume. Diluted net earnings per share were $0.69, an increase of 283% versus the prior year period that included a Venezuelan deconsolidation charge of $0.71 per share. Core earnings per share were $0.79, a decrease of 15%. Core EPS results declined due to increased marketing investments, lower gains from minor brand divestitures, and a higher core effective tax rate versus the comparison period. Excluding the impact of foreign exchange, currency-neutral core earnings per share decreased eight percent. P&G delivered 145% adjusted free cash flow productivity for the quarter.

“The fourth quarter was another period of progress driving P&G’s results to a balance of strong top-line growth, bottom-line growth and cash generation,” said Chairman, President and Chief Executive Officer David Taylor. “We grew organic volume and sales in all reporting segments. We increased investments in innovation and advertising, funded by strong productivity improvement. Looking forward, we’re committed to continued productivity improvement and cost savings that provide the fuel for innovation and investments needed to accelerate and sustain faster top-line growth. We expect fiscal 2017 to mark another significant step toward our goal of balanced growth and value creation and total shareholder return in the top third of our competitive peer group.”

April - June 2016 Quarter Discussion

In the April - June quarter net sales decreased three percent to $16.1 billion, including a negative three percentage point impact from foreign exchange and a negative two percent combined impact from Venezuela deconsolidation and minor brand divestitures. Organic sales grew two percent on a two percent increase in organic volume. All-in volume was unchanged.

April - June 2016				Foreign								Net		Organic		Organic
Net Sales Drivers*		Volume		Exchange		Price		Mix		Other**		Sales		Volume		Sales
Beauty		(3)%		(3)%		1%		—%		—%		(5)%		1%		1%
Grooming		2%		(4)%		4%		—%		(1)%		1%		2%		7%
Health Care		5%		(2)%		2%		1%		—%		6%		5%		8%
Fabric & Home Care		—%		(2)%		(1)%		(1)%		—%		(4)%		2%		1%
Baby, Feminine & Family Care		1%		(3)%		(2)%		—%		—%		(4)%		2%		1%
Total P&G		—%		(3)%		—%		—%		—%		(3)%		2%		2%

* Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
** Other includes the sales mix impact of acquisitions/divestitures and rounding impacts necessary to reconcile volume to net sales.

• Beauty segment organic sales grew one percent versus the prior year driven by pricing benefits and higher organic volume. Organic sales increased in Skin and Personal Care driven by growth of the super-premium SK-II skin care brand, partially offset by lower sales of Olay. Hair Care organic sales were unchanged as innovation-driven growth on Pantene and Head & Shoulders was offset by declines in other brands from competitive activity.
• Grooming segment organic sales increased seven percent driven by higher pricing and volume. Sales growth was strong in developing markets driven by Fusion FlexBall innovation expansion and higher pricing while in developed markets sales growth behind the Fusion ProShield launch was offset by competitive activity in North America. Organic sales increased on Braun behind innovation-driven volume increases.
• Health Care segment organic sales increased eight percent. Organic sales in Oral Care were up versus the prior year driven by increased marketing, strong innovation results and increased pricing. Personal Health Care organic sales increased due to a late cough and cold season and due to higher pricing mainly in developing markets.
• Fabric & Home Care segment organic sales increased one percent due to an increase in organic volume. Fabric Care organic sales were unchanged as increased organic volume from premium product innovation and increased marketing support was offset by pricing investments. Home Care sales increased primarily due to strong innovation-driven growth in the Dish Care business.
• Baby, Feminine & Family Care segment organic sales increased one percent versus year ago. Baby Care and Feminine Care organic sales both increased behind innovation-driven volume growth. Family Care organic sales decreased as volume growth in the U.S. was more than offset by pricing investments and a decline in Mexico from discontinuation of certain product lines.

Diluted net earnings per share from continuing operations were $0.71, an increase of 318% over the base period that included a Venezuelan deconsolidation charge of $0.71 per share. Diluted net earnings per share were $0.69, an increase of 283% versus the prior year. Current year results included a $0.02 per share loss from discontinued operations and non-core restructuring costs of $0.08 per share. Core earnings per share, which exclude non-core restructuring charges and the results of discontinued operations, were $0.79, a decrease of 15% versus the prior year. Excluding the impact of foreign exchange, currency-neutral core earnings per share decreased eight percent for the quarter.

Reported gross margin increased 130 basis points, including a 30 basis point increase in non-core restructuring charges. Core gross margin improved 160 basis points, including 80 basis points of negative foreign exchange impacts. On a currency-neutral basis, core gross margin increased 240 basis points, driven by 280 basis points of productivity cost savings and a 110 basis point benefit from lower commodity costs, which more than offset headwinds from 140 basis points of unfavorable mix and 10 basis points from innovation and capacity investments.

Selling, general and administrative expense (SG&A) as a percent of sales increased 290 basis points on a reported basis versus the prior year, including a 20 basis point net benefit from a year-on-year decline in non-core restructuring charges. Core SG&A as a percentage of sales increased 310 basis points, including 40 basis points of unfavorable foreign exchange impacts. On a currency-neutral basis, core SG&A increased 270 basis points versus the prior year driven by 280 basis points of increased advertising and sampling investments and 70 basis points of R&D and sales coverage investments and other operating costs, partially offset by 40 basis points of productivity savings from overhead and 40 basis points of savings in agency-related marketing costs.

Reported operating profit margin increased 1,060 basis points driven by the impact of the non-core Venezuelan charge in the prior year. Core operating profit margin was down 150 basis points versus the prior year, including 120 basis points of foreign exchange impacts. On a currency-neutral basis, core operating profit margin decreased 30 basis points as the gross margin improvement was more than offset by the increased investments in SG&A. Total productivity cost savings were 360 basis points for the quarter.

Fiscal Year 2016 Results

Fiscal year 2016 net sales were $65.3 billion, a decrease of eight percent versus the prior year, including a negative six percentage point impact from foreign exchange and a negative two percent from the combined impacts of Venezuela and minor brand divestitures. Organic sales grew one percent as the benefit of increased pricing more than offset a reduction in organic shipment volume. Diluted net earnings per share were $3.69, an increase of 51% versus the prior year which included the one-time charge for the deconsolidation of Venezuela. Core earnings per share were $3.67, a decrease of two percent.

Operating cash flow was $15.4 billion for the year. Adjusted free cash flow productivity was 115%. The Company reduced common stock outstanding at a value more than $8 billion through the combination of direct share repurchases and shares that were exchanged in the Duracell transaction. The Company also returned $7.4 billion of cash to shareholders as dividends. P&G announced an increase to the quarterly dividend in April, making this the 60^th consecutive year of dividend increases.

Fiscal Year 2017 Guidance

P&G said it is projecting organic sales growth of approximately 2% for fiscal 2017. The Company expects the combined headwinds of foreign exchange and minor brand divestitures to reduce sales growth by about one percentage point. As a result, P&G estimates all-in sales growth of about 1% for fiscal 2017.

The Company said it expects core earnings per share growth of mid-single digits versus fiscal 2016 core EPS of $3.67. P&G noted that core EPS growth in the first quarter of fiscal 2017 will be disproportionately affected by foreign exchange headwinds, which do not fully annualize until later in the year, and the impact of lost finished product sales to its Venezuelan subsidiaries.

All-in GAAP earnings per share are expected to increase 45% to 55% versus fiscal year 2016 GAAP EPS of $3.69. The fiscal 2017 GAAP EPS estimate includes approximately $0.10 per share of non-core restructuring costs and a substantial gain from the divestiture of 41 beauty brands to Coty Inc. The exact earnings gain from the transaction with Coty will not be known until the completion of the deal, which is targeted for October 2016.

About Procter & Gamble

P&G serves consumers around the world with one of the strongest portfolios of trusted, quality, leadership brands, including Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®, Dawn®, Downy®, Fairy®, Febreze®, Gain®, Gillette®, Head & Shoulders®, Lenor®, Olay®, Oral-B®, Pampers®, Pantene®, SK-II®, Tide®, Vicks®, and Whisper®. The P&G community includes operations in approximately 70 countries worldwide. 

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
		Three Months Ended June 30											Twelve Months Ended June 30
		2016				2015				% Chg			2016				2015				% Chg
NET SALES		$	16,102			$	16,553			(3	)%		$	65,299			$	70,749			(8	)%
COST OF PRODUCTS SOLD		8,382				8,837				(5	)%		32,909				37,056				(11	)%
GROSS PROFIT		7,720				7,716				—	%		32,390				33,693				(4	)%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		5,218				4,876				7	%		18,949				20,616				(8	)%
VENEZUELA DECONSOLIDATION CHARGE		—				2,028							—				2,028
OPERATING INCOME		2,502				812				208	%		13,441				11,049				22	%
INTEREST EXPENSE		150				148				1	%		579				626				(8	)%
INTEREST INCOME		47				46				2	%		182				149				22	%
OTHER NON-OPERATING INCOME, NET		287				355				(19	)%		325				440				(26	)%
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		2,686				1,065				152	%		13,369				11,012				21	%
INCOME TAXES ON CONTINUING OPERATIONS		678				569				19	%		3,342				2,725				23	%
NET EARNINGS FROM CONTINUING OPERATIONS		2,008				496				305	%		10,027				8,287				21	%
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		(50		)		42				N/A			577				(1,143		)		N/A
NET EARNINGS		1,958				538				264	%		10,604				7,144				48	%
LESS: NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS		7				17				(59	)%		96				108				(11	)%
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE		$	1,951			$	521			274	%		$	10,508			$	7,036			49	%
EFFECTIVE TAX RATE		25.2		%		53.4		%					25.0		%		24.7		%
BASIC NET EARNINGS PER COMMON SHARE*:
EARNINGS FROM CONTINUING OPERATIONS		$	0.73			$	0.15			387	%		$	3.59			$	2.92			23	%
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		$	(0.02	)		$	0.02			N/A			$	0.21			$	(0.42	)		N/A
BASIC NET EARNINGS PER COMMON SHARE		$	0.71			$	0.17			318	%		$	3.80			$	2.50			52	%
DILUTED NET EARNINGS PER COMMON SHARE*:
EARNINGS FROM CONTINUING OPERATIONS		$	0.71			$	0.17			318	%		$	3.49			$	2.84			23	%
EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		$	(0.02	)		$	0.01			N/A			$	0.20			$	(0.40	)		N/A
DILUTED NET EARNINGS PER COMMON SHARE		$	0.69			$	0.18			283	%		$	3.69			$	2.44			51	%
DIVIDENDS PER COMMON SHARE		$	0.669			$	0.663			1	%		$	2.658			$	2.590			3	%
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		2,811.0				2,878.5							2,844.4				2,883.6
COMPARISONS AS A % OF NET SALES										Basis Pt Change											Basis Pt Change
GROSS MARGIN		47.9%				46.6%				130			49.6%				47.6%				200
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		32.4%				29.5%				290			29.0%				29.1%				(10)
VENEZUELA DECONSOLIDATION CHARGE		—%				12.3%				(1,230)			—%				2.9%				(290)
OPERATING MARGIN		15.5%				4.9%				1,060			20.6%				15.6%				500
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		16.7%				6.4%				1,030			20.5%				15.6%				490
NET EARNINGS FROM CONTINUING OPERATIONS		12.5%				3.0%				950			15.4%				11.7%				370
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE		12.1%				3.1%				900			16.1%				9.9%				620

* Basic net earnings per common share and diluted net earnings per common share are calculated on net earnings attributable to Procter & Gamble.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
		Three Months Ended June 30, 2016
						Earnings/(Loss)
						from Continuing				Net
				% Change		Operations		% Change		Earnings/(Loss)		% Change
				Versus		Before Income		Versus		from Continuing		Versus
		Net Sales		Year Ago		Taxes		Year Ago		Operations		Year Ago
Beauty		$2,754		(5)%		$436		(29)%		$308		(32)%
Grooming		1,712		1%		462		6%		361		12%
Health Care		1,803		6%		386		46%		260		50%
Fabric & Home Care		5,104		(4)%		938		(2)%		606		(2)%
Baby, Feminine & Family Care		4,631		(4)%		918		(7)%		587		(11)%
Corporate		98		(11)%		(454)		N/A		(114)		N/A
Total Company		$16,102		(3)%		$2,686		152%		$2,008		305%

		Three Months Ended June 30, 2016
		(Percent Change vs. Year Ago)*
				Volume
		Volume with		Excluding
		Acquisitions &		Acquisitions &		Foreign								Net Sales
		Divestitures		Divestitures		Exchange		Price		Mix		Other**		Growth
Beauty		(3)%		1%		(3)%		1%		—%		—%		(5)%
Grooming		2%		2%		(4)%		4%		—%		(1)%		1%
Health Care		5%		5%		(2)%		2%		1%		—%		6%
Fabric & Home Care		—%		2%		(2)%		(1)%		(1)%		—%		(4)%
Baby, Feminine & Family Care		1%		2%		(3)%		(2)%		—%		—%		(4)%
Total Company		—%		2%		(3)%		—%		—%		—%		(3)%

		Twelve Months Ended June 30, 2016
						Earnings/(Loss)
						from Continuing				Net
				% Change		Operations		% Change		Earnings/(Loss)		% Change
				Versus		Before Income		Versus		from Continuing		Versus
		Net Sales		Year Ago		Taxes		Year Ago		Operations		Year Ago
Beauty		$11,477		(9)%		$2,636		(9)%		$1,975		(9)%
Grooming		6,815		(8)%		2,009		(15)%		1,548		(13)%
Health Care		7,350		(5)%		1,812		7%		1,250		7%
Fabric & Home Care		20,730		(7)%		4,249		5%		2,778		5%
Baby, Feminine & Family Care		18,505		(9)%		4,042		(6)%		2,650		(10)%
Corporate		422		(9)%		(1,379)		N/A		(174)		N/A
Total Company		$65,299		(8)%		$13,369		21%		$10,027		21%

		Twelve Months Ended June 30, 2016
		(Percent Change vs. Year Ago)*
				Volume
		Volume with		Excluding
		Acquisitions &		Acquisitions &		Foreign								Net Sales
		Divestitures		Divestitures		Exchange		Price		Mix		Other**		Growth
Beauty		(5)%		(2)%		(6)%		2%		—%		—%		(9)%
Grooming		(2)%		(2)%		(9)%		5%		(2)%		—%		(8)%
Health Care		(2)%		(2)%		(6)%		2%		1%		—%		(5)%
Fabric & Home Care		(1)%		1%		(6)%		—%		—%		—%		(7)%
Baby, Feminine & Family Care		(3)%		(2)%		(6)%		—%		—%		—%		(9)%
Total Company		(3)%		(1)%		(6)%		1%		—%		—%		(8)%

* Sales percentage changes are approximations based on quantitative formulas that are consistently applied.
** Other includes the sales mix impact of acquisitions/divestitures and rounding impacts necessary to reconcile volume to net sales.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Statements of Cash Flows
		Twelve Months Ended June 30
		2016				2015
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		$	6,836			$	8,548
OPERATING ACTIVITIES
NET EARNINGS		10,604				7,144
DEPRECIATION AND AMORTIZATION		3,078				3,134
SHARE-BASED COMPENSATION EXPENSE		335				337
DEFERRED INCOME TAXES		(815		)		(803		)
VENEZUELA DECONSOLIDATION CHARGE		—				2,028
GAIN ON SALE OF BUSINESSES		(41		)		(766		)
GOODWILL AND INTANGIBLE ASSET IMPAIRMENT CHARGES		450				2,174
CHANGES IN:
ACCOUNTS RECEIVABLE		35				349
INVENTORIES		116				313
ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES		1,285				928
OTHER OPERATING ASSETS & LIABILITIES		204				(976		)
OTHER		184				746
TOTAL OPERATING ACTIVITIES		15,435				14,608
INVESTING ACTIVITIES
CAPITAL EXPENDITURES		(3,314		)		(3,736		)
PROCEEDS FROM ASSET SALES		432				4,498
CASH RELATED TO DECONSOLIDATED VENEZUELA OPERATIONS		—				(908		)
ACQUISITIONS, NET OF CASH ACQUIRED		(186		)		(137		)
PURCHASES OF SHORT-TERM INVESTMENTS		(2,815		)		(3,647		)
PROCEEDS FROM SALES OF SHORT-TERM INVESTMENTS		1,354				1,203
CASH TRANSFERRED IN BATTERIES DIVESTITURE		(143		)		—
RESTRICTED CASH RELATED TO BEAUTY BRANDS DIVESTITURE		(996		)		—
CHANGE IN OTHER INVESTMENTS		93				(163		)
TOTAL INVESTING ACTIVITIES		(5,575		)		(2,890		)
FINANCING ACTIVITIES
DIVIDENDS TO SHAREHOLDERS		(7,436		)		(7,287		)
CHANGE IN SHORT-TERM DEBT		(418		)		(2,580		)
ADDITIONS TO LONG-TERM DEBT		3,916				2,138
REDUCTIONS OF LONG-TERM DEBT		(2,213		)		(3,512		)
TREASURY STOCK PURCHASES		(4,004		)		(4,604		)
TREASURY STOCK FROM CASH INFUSED IN THE BATTERIES DIVESTITURE		(1,730		)		—
IMPACT OF STOCK OPTIONS AND OTHER		2,672				2,826
TOTAL FINANCING ACTIVITIES		(9,213		)		(13,019		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(381		)		(411		)
CHANGE IN CASH AND CASH EQUIVALENTS		266				(1,712		)
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	7,102			$	6,836

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Condensed Consolidated Balance Sheets
		June 30, 2016				June 30, 2015
CASH AND CASH EQUIVALENTS		$	7,102			$	6,836
AVAILABLE-FOR-SALE INVESTMENTS SECURITIES		6,246				4,767
ACCOUNTS RECEIVABLE		4,373				4,568
INVENTORIES		4,716				4,979
DEFERRED INCOME TAXES		1,507				1,356
PREPAID EXPENSES AND OTHER CURRENT ASSETS		2,653				2,708
CURRENT ASSETS HELD FOR SALE		7,185				4,432
TOTAL CURRENT ASSETS		33,782				29,646
PROPERTY, PLANT AND EQUIPMENT, NET		19,385				19,655
GOODWILL		44,350				44,622
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET		24,527				25,010
NONCURRENT ASSETS HELD FOR SALE		—				5,204
OTHER NONCURRENT ASSETS		5,092				5,358
TOTAL ASSETS		$	127,136			$	129,495
ACCOUNTS PAYABLE		$	9,325			$	8,138
ACCRUED AND OTHER LIABILITIES		7,449				8,091
CURRENT LIABILITIES HELD FOR SALE		2,343				1,543
DEBT DUE WITHIN ONE YEAR		11,653				12,018
TOTAL CURRENT LIABILITIES		30,770				29,790
LONG-TERM DEBT		18,945				18,327
DEFERRED INCOME TAXES		9,113				9,179
NONCURRENT LIABILITIES HELD FOR SALE		—				717
OTHER NONCURRENT LIABILITIES		10,325				8,432
TOTAL LIABILITIES		69,153				66,445
TOTAL SHAREHOLDERS' EQUITY		57,983				63,050
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	127,136			$	129,495

The Procter & Gamble Company

Exhibit 1: Non-GAAP Measures

In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP measures used in Procter & Gamble's August 2, 2016 earnings call and associated slides and the reconciliation to the most closely related GAAP measure. We believe that these measures provide useful perspective of 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. These measures are also used to evaluate senior management and are a factor in determining their at-risk compensation. These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measure, but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted.

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

• Incremental restructuring: While the Company has and continues to have an ongoing level of restructuring activities, beginning in 2012 Procter & Gamble began a $10 billion strategic productivity and cost savings initiative that includes incremental restructuring activities. This results in incremental restructuring charges to accelerate productivity efforts and cost savings.
• Venezuela deconsolidation charge: 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.
• 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. The Company established legal reserves related to these charges. Management does not view these charges as indicative of underlying business results.
• Venezuela Balance Sheet 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.

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.

Organic sales growth: Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of the Venezuela deconsolidation, acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis, and this measure is used in assessing achievement of management goals for at-risk compensation.

Core EPS and currency-neutral Core EPS: 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. Management views these non-GAAP measures as a useful supplemental measure of Company performance over time. The tables below provide a reconciliation of revised diluted net earnings per share to Core EPS and of Core EPS to currency-neutral Core EPS.

Core operating profit margin and currency-neutral Core operating profit margin: Core operating profit margin is a measure of the Company's operating margin adjusted for items as indicated. 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. Management believes these non-GAAP measures provide a supplemental perspective to the Company’s operating efficiency over time.

Core gross margin and currency-neutral Core gross margin: Core gross margin is a measure of the Company's gross margin adjusted for items as indicated. Currency-neutral Core gross margin is a measure of the Company's Core gross margin excluding the incremental current year impact of foreign exchange. Management believes these non-GAAP measures provide a supplemental perspective to the Company’s operating efficiency over time.

Free cash flow: Free cash flow is defined as operating cash flow less capital spending. Free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. We view free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends and discretionary investment.

Adjusted free cash flow productivity: Adjusted free cash flow productivity is defined as the ratio of free cash flow to net earnings excluding impairments and the gain on the sale of the Batteries business. We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Adjusted free cash flow productivity is 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 adjusted free cash flow productivity at or above 90 percent.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information & Non-GAAP Measures
Three Months Ended June 30, 2016
											CHARGES FOR
		AS									EUROPEAN
		REPORTED			DISCONTINUED			INCREMENTAL			LEGAL						NON-GAAP
		(GAAP)			OPERATIONS			RESTRUCTURING			MATTERS			ROUNDING			(CORE)
NET SALES		16,102			—			—			—			—			16,102
COST OF PRODUCTS SOLD		8,382			—			(235	)		—			—			8,147
GROSS PROFIT		7,720			—			235			—			—			7,955
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		5,218			—			4			—			—			5,222
OPERATING INCOME		2,502			—			231			—			—			2,733
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX		2,686			—			231			—			—			2,917
INCOME TAX ON CONTINUING OPERATIONS		678			—			17			—						695
NET EARNINGS FROM CONTINUING OPERATIONS		2,008			—			215			—			(1	)		2,222
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		(50	)		50			—			—						—
NET EARNINGS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		7			1			—			—			(1	)		7
NET EARNINGS ATTRIBUTABLE TO P&G		1,951			49			215			—						2,215
GROSS MARGIN		47.9	%		—	%		1.5	%		—	%					49.4	%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET SALES		32.4	%		—	%		—	%		—	%		—	%		32.4	%
OPERATING PROFIT MARGIN		15.5	%		—	%		1.4	%		—	%		0.1	%		17.0	%
EFFECTIVE TAX RATE		25.2	%		—	%		(1.4	)%		—	%		—	%		23.8	%
																	Core EPS:
DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS*		0.71			—			0.08			—			—			0.79
		CURRENCY IMPACT TO CORE EARNINGS															(0.07	)
		CURRENCY-NEUTRAL CORE EPS															0.86

CHANGE VERSUS YEAR AGO
CORE GROSS MARGIN		160			BPS
CORE SELLING GENERAL & ADMINISTRATIVE EXPENSE AS A % OF NET SALES		310			BPS
CORE OPERATING PROFIT MARGIN		(150	)		BPS
CORE EFFECTIVE TAX RATE		540			BPS
CORE EPS		(15	)%
CURRENCY-NEUTRAL CORE EPS		(8	)%

* Diluted net earnings per common share from continuing operations are calculated on net earnings attributable to Procter & Gamble.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information & Non-GAAP Measures
Three Months Ended June 30, 2015
														CHARGES FOR
		AS												EUROPEAN						NON-
		REPORTED			DISCONTINUED			INCREMENTAL			VENEZUELA			LEGAL						GAAP
		(GAAP)			OPERATIONS			RESTRUCTURING			DECONSOLIDATION			MATTERS			ROUNDING			(CORE)
NET SALES		16,553			—			—			—			—			—			16,553
COST OF PRODUCTS SOLD		8,837			—			(199	)		—			—			—			8,638
GROSS PROFIT		7,716			—			199			—			—			—			7,915
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		4,876			—			(37	)		—			16			—			4,855
VENEZUELA DECONSOLIDATION CHARGE		2,028			—			—			(2,028	)		—			—			—
OPERATING INCOME		812			—			236			2,028			(16	)		—			3,060
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX		1,065			—			236			2,028			(16	)		1			3,314
INCOME TAX ON CONTINUING OPERATIONS		569			—			63			(24	)		—			1			609
NET EARNINGS FROM CONTINUING OPERATIONS		496			—			173			2,052			(16	)		—			2,705
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		42			(42	)		—			—			—			—			—
NET EARNINGS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		17			(2	)		—			—			—			—			15
NET EARNINGS ATTRIBUTABLE TO P&G		521			(40	)		173			2,052			(16	)		—			2,690
GROSS MARGIN		46.6	%		—	%		1.2	%		—	%		—	%		—	%		47.8	%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET SALES		29.5	%		—	%		(0.2	)%		—	%		0.1	%		(0.1	)%		29.3	%
OPERATING PROFIT MARGIN		4.9	%		—	%		1.4	%		12.3	%		(0.1	)%		—	%		18.5	%
EFFECTIVE TAX RATE		53.4	%		—	%		0.6	%		(35.8	)%		0.1	%		0.1	%		18.4	%
																				CORE EPS
DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS*		0.17						0.06			0.71			(0.01	)					0.93

* Diluted net earnings per common share from continuing operations are calculated on net earnings attributable to Procter & Gamble.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information & Non-GAAP Measures
Fiscal Year Ended June 30, 2016
											CHARGES FOR
		AS									EUROPEAN						NON-
		REPORTED			DISCONTINUED			INCREMENTAL			LEGAL						GAAP
		(GAAP)			OPERATIONS			RESTRUCTURING			MATTERS			ROUNDING			(CORE)
NET SALES		65,299			—			—			—			—			65,299
COST OF PRODUCTS SOLD		32,909			—			(624	)		—			—			32,285
GROSS PROFIT		32,390			—			624			—			—			33,014
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		18,949			—			31			(13	)		—			18,967
OPERATING INCOME		13,441			—			593			13			—			14,047
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX		13,369			—			593			13			(1	)		13,974
INCOME TAX ON CONTINUING OPERATIONS		3,342			—			94			2			(1	)		3,437
NET EARNINGS FROM CONTINUING OPERATIONS		10,027			—			499			11						10,537
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		577			(577	)					—						—
NET EARNINGS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		96			—						—						96
NET EARNINGS ATTRIBUTABLE TO P&G		10,508			(577	)		499			11						10,441
GROSS MARGIN		49.6	%		—	%		1.0	%		—	%		—	%		50.6	%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET SALES		29.0	%		—	%		—	%		—	%		—	%		29.0	%
OPERATING PROFIT MARGIN		20.6	%		—	%		0.9	%		—	%		—	%		21.5	%
EFFECTIVE TAX RATE		25.0	%		—	%		(0.4	)%		—	%		—	%		24.6	%
																	Core EPS:
DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS*		3.49			—			0.18			—			—			3.67
		CURRENCY IMPACT TO CORE EARNINGS															(0.35	)
		CURRENCY-NEUTRAL CORE EPS															4.02

CHANGE VERSUS YEAR AGO
CORE GROSS MARGIN		220			BPS
CORE SELLING GENERAL & ADMINISTRATIVE EXPENSE AS A % OF NET SALES		20			BPS
CORE OPERATING PROFIT MARGIN		190			BPS
CORE EFFECTIVE TAX RATE		380			BPS
CORE EPS		(2	)%
CURRENCY-NEUTRAL CORE EPS		7	%

* Diluted net earnings per common share from continuing operations are calculated on net earnings attributable to Procter & Gamble.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Selected Financial Information & Non-GAAP Measures
Fiscal Year Ended June 30, 2015
																	CHARGES FOR
		AS									VENEZUELA B/S						EUROPEAN						NON-
		REPORTED			DISCONTINUED			INCREMENTAL			REMEASUREMENT			VENEZUELA			LEGAL						GAAP
		(GAAP)			OPERATIONS			RESTRUCTURING			& DEVALUATION			DECONSOLIDATION			MATTERS			ROUNDING			(CORE)
NET SALES		70,749			—			—			—			—			—			—			70,749
COST OF PRODUCTS SOLD		37,056			—			(518	)		—			—			—			(1	)		36,537
GROSS PROFIT		33,693			—			518			—			—			—			1			34,212
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		20,616			—			(103	)		(138	)		—			(28	)		1			20,348
VENEZUELA DECONSOLIDATION CHARGE		2,028									—			(2,028	)					—			—
OPERATING INCOME		11,049			—			621			138			2,028			28			—			13,864
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAX		11,012			—			621			138			2,028			28			—			13,827
INCOME TAX ON CONTINUING OPERATIONS		2,725			—			145			34			(24	)		—			(1	)		2,879
NET EARNINGS FROM CONTINUING OPERATIONS		8,287			—			476			104			2,052			28			1			10,948
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS		(1,143	)		1,143			—			—			—			—			—			—
NET EARNINGS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		108			(10	)		—						—			—			—			98
NET EARNINGS ATTRIBUTABLE TO P&G		7,036			1,153			476			104			2,052			28			1			10,850
GROSS MARGIN		47.6	%		—	%		0.7	%		—	%		—	%		—	%		0.1	%		48.4	%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AS A % OF NET SALES		29.1	%		—	%		(0.1	)%		(0.2	)%		—	%		—	%		—	%		28.8	%
OPERATING PROFIT MARGIN		15.6	%		—	%		0.9	%		0.2	%		2.9	%		—	%		—	%		19.6	%
EFFECTIVE TAX RATE		24.7	%		—	%		0.1	%		—	%		(4.0	)%		—	%		—	%		20.8	%
																							CORE EPS
DILUTED NET EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS*		2.84			—			0.17			0.04			0.71			0.01			(0.01	)		3.76

* Diluted net earnings per common share from continuing operations are calculated on net earnings attributable to Procter & Gamble.

Organic sales growth:

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

						Acquisition/
				Foreign		Divestiture		Organic Sales
April - June 2016		Net Sales Growth		Exchange Impact		Impact*		Growth
Beauty		(5)%		3%		3%		1%
Grooming		1%		4%		2%		7%
Health Care		6%		2%		—%		8%
Fabric & Home Care		(4)%		2%		3%		1%
Baby, Feminine & Family Care		(4)%		3%		2%		1%
Total P&G		(3)%		3%		2%		2%

				Combined Foreign Exchange &		Organic Sales
Total P&G		Net Sales Growth		Acquisition/Divestiture Impact*		Growth
FY 2017
(Estimate)		1%		1%		2%

* Acquisition/Divestiture Impact also includes the Venezuela deconsolidation, the mix impacts of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.

Core EPS and currency-neutral Core EPS:

		Diluted EPS				Core EPS
Total P&G		Growth		Impact of Incremental Non-Core Items*		Growth
FY 2017						Up mid-single
(Estimate)		Up 45% to 55%		(41%) to (49%)		digits

* Includes change in discontinued operations (includes Batteries gain/impairments, anticipated gain on sale of Beauty Brands)

Free cash flow (dollars in millions):

Three Months Ended June 30, 2016
Operating Cash Flow			Capital Spending			Free Cash Flow
$4,139			$(1,291)			$2,848

Twelve Months Ended June 30, 2016
Operating Cash Flow			Capital Spending			Free Cash Flow
$15,435			$(3,314)			$12,121

Adjusted free cash flow productivity (dollars in millions):

Three Months Ended June 30, 2016
						Net Earnings Excluding
		Gain on		Impairment		Batteries Gain/		Adjusted Free Cash
Net Earnings		Batteries Sale		Charges		Impairment Charges		Flow Productivity
$1,958		$—		$—		$1,958		145%

Twelve Months Ended June 30, 2016
						Net Earnings Excluding
		Gain on		Impairment		Batteries Gain/		Adjusted Free Cash
Net Earnings		Batteries Sale		Charges		Impairment Charges		Flow Productivity
$10,604		$(422)		$350		$10,532		115%