P&G Highlights Strong Results of Ongoing Transformation In Response to Trian White Paper

CINCINNATI–(BUSINESS WIRE)–Procter & Gamble (NYSE:PG) (“P&G” or the “Company”) today issued the
following statement in response to a white paper from Trian Fund
Management, L.P. (“Trian”):

P&G has maintained an open dialogue and held numerous discussions with
members of Trian, and Nelson Peltz in particular, over the last several
months since Trian made its investment in the Company. The recently
released white paper confirms that Mr. Peltz has a very outdated and
misinformed view of P&G and ignores that:

  • P&G has leading brands with industry leading market shares.
  • P&G has best-in-class margins.
  • P&G has increased currency-neutral core EPS annually by an average of
    11% over the past five years.
  • P&G has returned more than $130 billion of capital to shareholders
    over the last 10 years.
  • P&G has increased its dividend for 61 consecutive years.
  • P&G has recently reorganized to optimize going forward performance.

P&G is confident it has the right plan, the right structure and the
right Board in place to continue its successful transformation and
deliver results and shareholder value for the short-, mid- and long
term. In fact, in the more than 16 interactions Mr. Peltz has had with
P&G Board members and management, he has been fully supportive of P&G
and its ongoing transformation, its strategic plan, and its management
team and Board. It is notable that in six months of interactions with
the P&G Board and management team, Mr. Peltz never shared a white paper.

The reality is that before Mr. Peltz made his investment, P&G was
already successfully executing the most significant transformation in
the Company’s history. As a result, P&G is a profoundly different
company today than it was just a few years ago. P&G is a stronger, more
focused company with a streamlined portfolio of leading brands and

  • P&G has consolidated from 170 brands to 65 brands, creating value for
    shareholders every step of the way.
  • P&G has gone from 16 categories to 10 highly attractive, daily-use
    categories where products solve problems and performance drives

P&G is implementing significant productivity improvements to fuel sales
and earnings growth and investment in brands and categories. P&G is
substantially simplifying its structure through one organizing principle
– the business is run by category – enabling clear ownership and
accountability for decisions and results.

The transformation is bearing fruit. P&G met or exceeded each of its
going-in fiscal 2017 objectives, despite a very challenging macro and
competitive environment. The Company has:

  • Delivered volume-led organic sales growth of 2%.
  • Increased core EPS 11% on a constant currency basis.
  • Improved core operating margin by 60 basis points in 2017, and by 270
    basis points over the last four fiscal years.
  • Improved constant currency core operating margin by 90 basis points in
    2017, and by 610 basis points over the last four fiscal years.

This performance is translating directly into increased value for P&G

  • Since the CEO transition on November 1, 2015, the P&G team has
    delivered total shareholder return (“TSR”) of 28% as of August 18,
    2017 – well above the 12% average of the peers selected by Trian
    throughout that same time period.i
  • P&G also outperformed the S&P 500, which delivered a TSR of 21% in
    that same timeframe.i

P&G is well positioned to maximize long-term shareholder value through
balanced top-line growth, bottom-line growth and cash efficiency.


Mr. Peltz’s primary thesis is that the Company should be reorganized
into three business units. Prior to implementing our transformation, we
studied numerous organizational design structures, including one similar
to what Mr. Peltz proposed in his white paper. We concluded that this
approach would result in higher costs, lower efficiency, reduced
profits, and an added layer of management complexity. His playbook
appears to be code for another restructuring and a precursor to a
breakup of the Company – his “cookie-cutter” plan. Our analysis has
shown that Mr. Peltz’s suggestions would be value destructive, and we
believe it represents another example of his misguided view of P&G’s

Today, as a result of the actions we have taken over the past several
years, P&G has an even more granular and more accountable structure.
Category leaders have complete ownership of the business – from idea to
in-market execution. They make decisions on what is needed to deliver
results and win, whether it is a new product, more investment in
marketing, or additional salespeople. Category leaders have profit and
loss responsibility and are paid based on performance. This is the
ultimate in accountability. Through this, we are enabling greater
efficiency, speed, and agility by moving resources closer to consumers
and retailers, and driving deeper mastery and accountability to serve
consumers and deliver results. The bottom line is that category leaders
are held accountable to deliver and their interests are aligned with


Productivity is the fuel to enable P&G to make critical investments,
while also delivering on the Company’s profit and cash flow objectives.
P&G over-delivered on its first $10 billion productivity goal and is
well positioned to deliver an up to additional $10 billion in savings.

Trian’s white paper completely ignores the fact that P&G’s productivity
program is substantive and impactful. This program has allowed the
Company to improve margins and financial performance while absorbing
historic currency headwinds, underlying cost inflation, the impact of
asset sales, and the cost of transforming the Company. Specifically,
this program has enabled the Company to:

  • Overcome $7 billion in negative foreign exchange impacts as well as
    significant geopolitical uncertainty while building margins and
    improving operating free cash flow.
  • Invest in core R&D innovation capabilities, selling capabilities, and
    increase sampling of noticeably superior products to gain trial among
    new consumers entering the market for the first time.
  • Increase core gross margin by 200 basis points over the last four
    fiscal years, 450 basis points excluding currency impacts.
  • Increase core operating margin by 270 basis points over the last four
    fiscal years, 610 basis points excluding currency impacts.
  • Improve profit per employee by 45% over the last four fiscal years.
  • Increase currency-neutral core EPS annually by an average of 11% over
    the past five years.
  • Achieve fiscal year 2017 core after-tax margins of 16.5%, second
    highest in our industry, which we intend to improve going forward.


P&G’s innovation is focused on the consumer. Rather than study
innovation, as suggested by Mr. Peltz, we are delivering it. P&G’s
innovation machine has delivered Tide PODS, Ariel PODS, Gain FLINGS,
Pampers Pants, Always Discreet, Always Radiant, Downy Unstopables Scent
Beads, and Oral-B Power Toothbrush, among others. In 2016, P&G’s
successful product launches earned the Company five of the top ten spots
and seven of the top 25 spots on the IRI New Product Pacesetter Report
for the most successful product launches. In fact, P&G has had more than
170 products ranked in the top 25 in non-food innovations since the
first report was published – more than our six largest competitors
combined and over four times more than our next competitor. P&G is a
consistently prolific innovator in the consumer products industry.


Based on insights from in-depth research on consumers and market trends,
P&G has been increasingly focusing its efforts on digital and
e-commerce, where consumers shop and engage with brands. Contrary to Mr.
Peltz’s assertions about P&G’s digital advertising and e-commerce, we
are investing wisely, and the results prove it:

  • P&G grew overall e-commerce sales at roughly a 30% rate last fiscal
    year, and grew share in eight out of 10 categories in e-commerce.
  • Today those sales are over $3 billion – more than our top two peer
    competitors combined.
  • This capability in digital and e-commerce has allowed us to win across
    all life stages, including millennials.
  • Among millennials, P&G holds market leading positions with numerous
    brands including Always, Tide, Downy, Dawn, Bounty, Charmin and Crest.
    Furthermore, among millennials, more than half of P&G’s top 20 brands
    are growing household penetration.


Mr. Peltz states that he is not seeking to replace any Directors. We
believe this is because the P&G Directors’ combined skills, diversity,
experiences and successes in running complex organizations make for a
best-in-class Board. Their significant leadership experience across a
range of industries and geographies results in the kind of active
oversight and engaged strategic thinking that benefits our shareholders.
The Directors’ significant experience with consumer needs in global and
local markets and the insights they have from their work outside of P&G
is invaluable when advising the management team.

Contrary to Mr. Peltz’s claims, the full Board carefully considered and
discussed his request to be added to the Board. The Board evaluated Mr.
Peltz against its previously identified list of desired skills and
experiences (e.g., digital, health care, global) and concluded that he
did not fill a current need. In assessing Mr. Peltz, the Board also
utilized abundant data readily available about his experience and
information he had shared in multiple meetings with members of
management and several independent directors with whom he met. While Mr.
Peltz claims to have consumer packaged goods experience, his experience
is limited to food and beverage companies – not household and personal
care categories. The Board and management also talked to many directors,
CEOs and others who have worked with Mr. Peltz, and positive
recommendations were not forthcoming. Several people, however, would
only speak candidly about their experiences with Mr. Peltz if those
discussions were kept confidential, for fear of retribution. The Board
ultimately concluded that adding Mr. Peltz would be a significant
departure from its governance best practices.

The P&G Board has the right skills and experience to continue
successfully overseeing the execution of the plan in place. Mr. Peltz is
not right for the P&G Board and threatens to derail the progress P&G has
been making for all P&G shareholders.

P&G notes that additional information regarding the proxy contest, as
well as the Company’s strategy and recent results, is available at VoteBlue.PG.com.

The P&G Board strongly recommends that shareholders vote the BLUE
Proxy Card to maintain the Company’s momentum and continue advancing its

Vote the BLUE Proxy Card today. Online voting is quick and easy
to use.

Shareholders can find their unique control number next to the arrow
located in the box on the BLUE Proxy Card.

If shareholders have any questions about how to vote their shares, or
need additional assistance, please contact P&G’s proxy solicitors, D.F.
King & Co., Inc. at (877) 361.7966 or MacKenzie Partners, Inc. at (800)

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.
Please visit http://www.pg.com
for the latest news and information about P&G and its brands.

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,” “expect,” “anticipate,” “estimate,” “intend,”
“strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,”
“would,” “will be,” “will continue,” “will likely result,” and similar
expressions. Forward-looking statements are based on current
expectations and assumptions, which are subject to risks and
uncertainties that may cause results to differ materially from those
expressed or implied in the forward-looking statements. We undertake no
obligation to update or revise publicly any forward-looking statements,
whether because of new information, future events or otherwise.

Risks and uncertainties to which our forward-looking statements are
subject include, without limitation: (1) the ability to successfully
manage global financial risks, including foreign currency fluctuations,
currency exchange or pricing controls and localized volatility; (2) the
ability to successfully manage local, regional or global economic
volatility, including reduced market growth rates, and to generate
sufficient income and cash flow to allow the Company to affect the
expected share repurchases and dividend payments; (3) the ability to
manage disruptions in credit markets or changes to our credit rating;
(4) the ability to maintain key manufacturing and supply arrangements
(including execution of supply chain optimizations, and sole supplier
and sole manufacturing plant arrangements) and to manage disruption of
business due to factors outside of our control, such as natural
disasters and acts of war or terrorism; (5) the ability to successfully
manage cost fluctuations and pressures, including prices of commodity
and raw materials, and costs of labor, transportation, energy, pension
and healthcare; (6) the ability to stay on the leading edge of
innovation, obtain necessary intellectual property protections and
successfully respond to changing consumer habits and technological
advances attained by, and patents granted to, competitors; (7) the
ability to compete with our local and global competitors in new and
existing sales channels, including by successfully responding to
competitive factors such as prices, promotional incentives and trade
terms for products; (8) the ability to manage and maintain key customer
relationships; (9) the ability to protect our reputation and brand
equity by successfully managing real or perceived issues, including
concerns about safety, quality, ingredients, efficacy or similar matters
that may arise; (10) the ability to successfully manage the financial,
legal, reputational and operational risk associated with third party
relationships, such as our suppliers, distributors, contractors and
external business partners; (11) the ability to rely on and maintain key
company and third party information technology systems, networks and
services, and maintain the security and functionality of such systems,
networks and services and the data contained therein; (12) the ability
to successfully manage uncertainties related to changing political
conditions (including the United Kingdom’s decision to leave the
European Union) and potential implications such as exchange rate
fluctuations and market contraction; (13) the ability to successfully
manage regulatory and legal requirements and matters (including, without
limitation, those laws and regulations involving product liability,
intellectual property, antitrust, privacy, tax, environmental, and
accounting and financial reporting) and to resolve pending matters
within current estimates; (14) the ability to manage changes in
applicable tax laws and regulations including maintaining our intended
tax treatment of divestiture transactions; (15) the ability to
successfully manage our ongoing acquisition, divestiture and joint
venture activities, in each case to achieve the Company’s overall
business strategy and financial objectives, without impacting the
delivery of base business objectives; and (16) the ability to
successfully achieve productivity improvements and cost savings and
manage ongoing organizational changes, while successfully identifying,
developing and retaining key employees, including in key growth markets
where the availability of skilled or experienced employees may be
limited. For additional information concerning factors that could cause
actual results and events to differ materially from those projected
herein, please refer to our most recent 10-K, 10-Q and 8-K reports.

Important Additional Information and Where to Find It

The Company has filed a definitive proxy statement on Schedule 14A and
form of associated BLUE proxy card with the Securities and Exchange
Commission (“SEC”) in connection with the solicitation of proxies for
its 2017 Annual Meeting of Shareholders (the “Definitive Proxy
Statement”). The Company, its directors and certain of its executive
officers will be participants in the solicitation of proxies from
shareholders in respect of the 2017 Annual Meeting. Information
regarding the names of the Company’s directors and executive officers
and their respective interests in the Company by security holdings or
otherwise is set forth in the Definitive Proxy Statement. Details
concerning the nominees of the Company’s Board of Directors for election
at the 2017 Annual Meeting are included in the Definitive Proxy
copy of the Definitive Proxy Statement and other relevant documents that
the Company files with the SEC from the SEC’s website at www.sec.gov
or the Company’s website at http://www.pginvestor.com
as soon as reasonably practicable after such materials are
electronically filed with, or furnished to, the SEC.

Non-GAAP Reconciliation

This press release contains certain non-GAAP measurements that
management believes are meaningful to investors because they provide
useful perspective on underlying business trends (i.e. trends excluding
non-recurring or unusual items) and results, provide a supplemental
measure of year-on-year results, and provide a view of our business
results through the eyes of management. These measures are also a factor
in determining senior management’s at-risk compensation. These non-GAAP
measures are not intended to be considered in place of the related GAAP
measure and may not be the same as similar measures used by other
companies. This data should be read in conjunction with previously
published company reports on Forms 10-K, 10-Q, and 8-K, which are
available on www.PGInvestor.com
under Financial Reporting. Reconciliations of non-GAAP measures to GAAP
are provided below.

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 had and continues to have an ongoing level of restructuring
    activities. Such activities have resulted in ongoing annual
    restructuring related charges of approximately $250 – $500 million
    before tax. Beginning in 2012 Procter & Gamble began a $10 billion
    strategic productivity and cost savings initiative that includes
    incremental restructuring activities. In 2017, the company announced
    elements of an additional multi-year productivity and cost savings
    plan. These plans result in incremental restructuring charges to
    accelerate productivity efforts and cost savings. The adjustment to
    Core earnings includes only the restructuring costs above what we
    believe are the normal recurring level of restructuring costs.
  • Early debt extinguishment charges: During
    the three months ended December 31, 2016, the Company recorded a
    charge of $345 million after tax due to the early extinguishment of
    certain long-term debt. This charge represents the difference between
    the reacquisition price and the par value of the debt extinguished.
    Management does not view this charge as indicative of the Company’s
    operating performance or underlying business results.
  • 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 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.
  • Non-cash impairment charges: During
    fiscal years 2013 and 2012 the Company incurred impairment charges
    related to the carrying value of goodwill and indefinite lived
    intangible assets in our Appliances and Salon Professional businesses.
  • Gain on Iberian JV buyout: During fiscal
    year 2013 we incurred a holding gain on the purchase of the balance of
    our Iberian joint venture from our joint venture partner.

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
acquisitions, divestitures and foreign exchange from year-over-year
comparisons. Managements believes 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 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.
Management views these non-GAAP measures as a useful supplemental
measure of Company performance over time.

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


P&G Media:
Damon Jones, 513-983-0190
Investor Relations:
John Chevalier, 513-983-9974

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