Procter & Gamble

2018 
Annual Report

Table of Contents

Letter to Shareowners 

Five Measures of  
Noticeable Superiority 

P&G’s 10-Category Portfolio 

Form 10-K 

Measures Not Defined  
by U.S. GAAP 

i

iv

xii

xiii

74

Company and  
Shareholder Information 

Company Leadership 

Board of Directors 

Recognition and Commitments 

75

76

77

78

Citizenship 

Inside Back Cover

FINANCIAL HIGHLIGHTS (UNAUDITED)
Amounts in billions, except per share amounts

Net Sales

Operating Income

2018

2017

2016

2015

2014

$66.8

$65.1

$65.3

$70.7

$74.4

$13.7

$14.0

$13.4

$11.0

$13.9

Net Earnings Attributable to P&G

$9.8

$15.3

$10.5

$7.0

$11.6

Net Earnings Margin from Continuing Operations

14.8%

15.7%

15.4%

11.7%

14.3%

Diluted Net Earnings per Common Share from Continuing Operations 1

$3.67

$3.69

$3.49

$2.84

$3.63

Diluted Net Earnings per Common Share 1

$3.67

$5.59

$3.69

$2.44

$4.01

Operating Cash Flow

$14.9

$12.8

$15.4

$14.6

$14.0

Dividends per Common Share

$2.79

$2.70

$2.66

$2.59

$2.45

2018 NET SALES BY   
BUSINESS SEGMENT  2

2018 NET SALES BY 
GEOGR APHIC REGION

2018 NET SALES BY   
MARKET MATURIT Y

   Beauty 

  Grooming 

  Health Care 

  Fabric & Home Care 

  Baby, Feminine & Family Care 

19%

10%

12%

32%

27%

  North America 3 

  Europe 

  Asia Pacific 

  Greater China 

  Latin America 

  India, Middle East  

  & Africa (IMEA) 

44%

24%

9%

9%

7%

7%

  Developed Markets  

  Developing Markets 

65%

35%

(1) Diluted net earnings per common share are calculated based on net earnings attributable to Procter & Gamble. 

(2) These results exclude net sales in Corporate. 

(3) North America includes the United States, Canada and Puerto Rico.

VARIOUS STATEMENTS IN THIS ANNUAL REPORT, including estimates, projections, objectives and expected results, 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 and are generally identified by the words “believe,” “expect,” “anticipate,” “intend,” “opportunity,” “plan,” “project,” “will,” “should,” “could,” “would,” “likely”  

and similar expressions. Forward-looking statements are based on current assumptions that are subject to risks and uncertainties that may cause actual results  

to differ materially from the forward-looking statements, including the risks and uncertainties discussed in Item 1A – Risk Factors of this Annual Report.  

We undertake no obligation to update or revise publicly any forward-looking statements.

Dear Shareowners,

Fiscal year 2018 marked an important step 
toward our goal of sustained, balanced  
top-line growth, bottom-line growth and 
cash generation, and leadership levels of  
value creation for you, our shareowners. 

We finished above the top end of our going-in  

guidance range on core earnings per share, we  

exceeded our cash targets with another strong  

year of value returned to shareowners, and while  

we were slightly below our target on sales growth,  

we continued to improve market share trends.  

We did all of this while facing market contractions, 

currency devaluations, transportation disruptions  

and trade inventory reductions, as well as rising 

commodity and freight costs.

Core earnings per share were $4.22, an 8% increase, 

above the high end of our going-in target range.  

This includes headwinds from commodity costs  

which rose throughout the year, as well as benefits  

from the U.S. Tax Act. All-in GAAP earnings per share 

were $3.67, a decline of 34% due to a fiscal year  

2017 comparison period that includes a substantial 

earnings gain from the Beauty Brands divestiture  

and one-time non-core charges related to the 

U.S. Tax Act in the current year. 

We delivered strong free cash flow results, generating 

$14.9 billion of operating cash flow. Free cash flow was 

$11.2 billion, with adjusted free cash flow productivity  

of 104%, well above our target of 90%. 

We targeted organic sales growth of 2% to 3% for  

the fiscal year. We delivered 1%. Collectively, eight of  

our 10 product categories grew organic sales over 3%. 

This growth was partially offset by results in Baby  

Care and Grooming, both of which were down versus  

the prior year. 

A number of our large markets had strong organic  

sales growth, with China being a bright spot as we 

continued our strong turnaround there. In China two 

years ago, organic sales were down 5%. We finished  

this year up 7%, with accelerated sales growth as the  

year progressed — 6% in the first half and 8% in the 

second half, which included 10% organic sales growth  

in the fourth quarter. Six of seven categories held  

or grew sales, up from one of seven categories two  

years ago. This was significant progress in our second 

largest market for both sales and profit. In addition, 

India delivered double-digit organic sales growth,  

while Mexico and Japan both delivered mid-single- 

digit organic sales growth. 

Importantly, we improved market share trends in  

seven of our 10 global product categories throughout  

the year. In our largest countries, eight of the 15 

improved versus the prior year, with fourth quarter 

trends better than fiscal year average in 10 of 15.  

In the U.S., which accounts for around 40% of sales,  

all-outlet value share improved from a decline versus 

prior year in fiscal year 2017 to in-line with prior  

year in fiscal 2018, improving throughout the year  

to overall share growth in the April–June quarter. 

Our global e-commerce sales were strong, up  

30% for the year, and accounted for nearly $4.5  

billion of sales — about 7% of our total business.  

For perspective, this is roughly the size of our  

two largest e-commerce competitors combined.  

And we held or built e-commerce value share  

in eight of 10 product categories.

DAVID S. TAYLOR

Chairman of the Board, 

President and Chief Executive Officer

ii • The Procter & Gamble Company

DRIVING SUPERIORITY 
ACROSS CHANNELS

We’re focused on growing where consumers 
shop — whether that’s in-store or online.  
This year, P&G grew organic sales 30% in e-commerce, 
the fastest-growing retail channel around the world.  
P&G also provides a superior experience in-store.  
An independent benchmarking survey* that  
measures retailer perceptions of manufacturers 
across seven key focus areas ranked P&G #1  
for the third year in a row.

All-in sales grew 3%, including a net benefit from  

the impacts of foreign exchange, acquisitions  

and divestitures. 

We continued to dependably generate cash and  

return value to you, our shareowners. In total, P&G 

returned more than $14 billion of value to shareowners. 

We repurchased approximately $7 billion of stock  

and paid $7.3 billion in dividends. We increased our 

dividend by 4%, marking the 62nd consecutive annual 

increase and the 128th consecutive year P&G has paid  

a dividend — every year since our incorporation in 1890. 

In summary, we grew core earnings per share above  

our going-in target, we drove cash productivity ahead 

of target, we returned cash to shareowners, and we 

improved market share trends. We grew sales, but 

modestly below our target range. Overall, we made 

important progress, but we have room to improve  

on all metrics — especially on top-line growth.

Going forward, our objective remains consistent and 

clear — balanced top-line growth, bottom-line growth 

and cash generation that consistently delivers total 

shareholder return in the top third of our peer group. 

We’re confident that we have the right strategy and 

plans in place. 

However, we’re operating in a very dynamic environment 

with changing government policies, geopolitical 

uncertainties, retail channel transformation, disruption 

of the media ecosystem, rising input costs and foreign 

exchange headwinds, and we’re competing against 

highly capable multinational and local competitors.

That is why we are accelerating change to meet these 

challenges and further improve results. This will enable 

us to spot and capitalize on opportunities — and identify 

and fix issues — faster than we ever have in the past.  

We will be the disrupters in our industry.

We are doubling down on the strategic choices  

we’ve made to win with consumers and create  

value for shareowners. We are investing to improve 

superiority, our margin of advantage. We are making 

P&G ever more productive. We are structuring an 

organization and building a culture to lead change  

in this dynamic environment.

* 2017 Advantage Report

DRIVING SUPERIORITY 
IN GROWING SEGMENTS

We’re driving superiority in important growing 
segments to better meet changing 
consumer needs and desires. 

The Procter & Gamble Company • iii

NATURALS

The naturals segment of the consumer market is 
projected to grow about 7% annually over the next 5 years.

Plant-Based Fabric Care Consumers shouldn’t have to 
choose between plant-based and cleaning power. That’s 
why we created Tide purclean — the first plant-based 
laundry detergent with the cleaning power consumers 
expect from Tide. We’ve expanded our innovation with 
Dreft purtouch, Gain Botanicals and Downy Nature 
Blends to offer a full family of plant-based fabric care.

Pampers Pure Protection The natural baby care segment 
is over 5% of the category and growing double digits. 
Pampers Pure Protection diapers, launched in April in the 
U.S., are made with no chlorine bleaching, fragrance or 
parabens and deliver outstanding dryness and protection. 
In tracked retail channels, Pampers Pure is now the #1 
selling diaper in the natural diaper segment.

ADULT INCONTINENCE 

Adult Incontinence is a large and fast-growing segment —  
about $3 billion in retail sales and growing in the  
high single digits — and P&G is leading that growth. 

Always Discreet Before we launched Discreet in the 
U.S., one in three women stated they experienced adult 
incontinence, but only one in nine was using a product 
designed for her needs. Meaningful superiority is driving 
sales growth in Always Discreet adult incontinence  
products of more than 25% in fiscal year 2018. 

The brand is reaching new record share levels across all 
markets and contributing to 11 consecutive quarters of 
organic sales growth in P&G’s Feminine Care category.  
In the eight markets where we’ve launched Discreet, 
category growth has accelerated as much as 50%. 

OVER-THE-COUNTER HEALTH CARE

An aging population and an increased consumer 
focus on wellness make the personal health care 
category very attractive. 

Merck KGaA Acquisition P&G’s acquisition of the Consumer 
Health business of Merck KGaA*— a fast-growing business  
that generates about $1 billion in annual sales — will offer 
consumers a broader range of therapeutic products across  
a wider geographic scope and bring significant technical  
and commercial capability in-house.

*Expected to close in fiscal year 2019

iv • The Procter & Gamble Company

Five Measures of  
Noticeable Superiority

P&G is creating and extending competitive advantage through 
superior product performance, packaging, brand communication, 
retail execution, and consumer and customer value.

PRODUCTS

Superiority starts with superior products — products so good, 

consumers recognize the difference.

PACKAGING

These products are delivered in superior packaging —  

packaging that attracts consumers, conveys the brand  

equity and closes the sale.

BRAND COMMUNICATION

Product and packaging benefits need to be communicated  

with exceptional brand messaging — advertising that makes  

you think, talk, laugh, cry, smile, act and, of course, buy.

RETAIL EXECUTION

We work collaboratively with our customers to deliver superior 

retail execution — in-store with the right store coverage, product 

forms, sizes, price points, shelving and merchandising; and online 

with the right content, assortment, ratings, reviews, search and 

subscription offerings.

CONSUMER & CUSTOMER VALUE EQUATIONS

We’re focused on delivering superior value to consumers and 

our retailer customers, in each price tier where we compete.

SUPERIORITY LEADS TO GROWTH 
AND VALUE CREATION

When we excel across these measures of noticeable 

superiority, we deliver on key business success metrics:

Sales

Profit

Market Share

Household Penetration

Market Size

Where we achieve noticeable superiority on  
at least four of the five superiority measures, 
we deliver on the business success metrics  
80% of the time. 

Where we achieve three or fewer superiority 
measures, we do not deliver on our desired 
business outcomes. 

Explore the noticeable superiority of  

SK-II and Downy & Lenor Scent Beads

SK-II

SK-II’s superiority has driven sales 

growth of over 20% for 15 quarters. 

The Prestige Beauty market is 

growing high single digits, with  

SK-II growing share of the category. 

Here are just two examples from our Skin & 
Personal Care and Fabric Care categories.

Downy & Lenor 
Scent Beads

Scent beads are the fastest-growing 

form of fabric enhancers in the Fabric 

Care category, growing at a rate of 

about 20%, while P&G’s scent beads  

are growing about 30%. Downy,  

known outside North America as  

Lenor, is just one example. 

All SK-II products are based on a 
proprietary formula with a signature 
ingredient, Pitera. SK-II’s bestseller —
Facial Treatment Essence — contains  
over 90% Pitera and works to transform 
all five dimensions of skin.

SK-II is presented in prestige packaging 
that builds the brand’s equity and 
consumer confidence in the product. 
Limited-edition packages featuring 
artist collaborations are designed to 
enhance consumer engagement. 

PRODUCTS

PACK AGING

Scent beads reset consumer expectations 
for scent performance and experience. 
The form is fun, engaging and simple to 
use — just toss in the washer and enjoy 
12 weeks of freshness from wash until 
wear. Scent beads are driving U.S. fabric 
enhancer category growth of mid-single 
digits in fiscal year 2018. 

P&G’s distinctive and appealing 
scent beads packaging shows off 
the product and lets consumers 
experience the fragrance benefit 
at the store shelf with a squeeze 
scent-release. 

SK-II’s brand-building efforts — like the 
Change Destiny movement, and bold 
Facial Treatment Essence campaigns  
like the Bare Skin Project — have helped 
grow new SK-II users by more than 
23% and contributed to 15 consecutive 
quarters of sales growth, including more 
than 30% growth in fiscal year 2018.

At SK-II counters, a beauty consultant 
personalizes the skin care experience 
with state-of-the-art skin analysis. SK-II 
creates immersive retail experiences  
like the Future X Smart Store, enhanced 
by facial recognition and AI. Digital 
analytics support a meaningful 
consumer connection, contributing  
to SK-II’s strong online share of 20%.

This combination of product, package, 
communication and retail experience 
delivers consumer delight that 
supports SK-II’s premium position.  
In the markets where SK-II is present, 
the brand is tied for the #1 position 
in super-premium skin care. 

BRAND 
COMMUNICATION

RETAIL 
EXECUTION

CONSUMER & CUSTOMER  
VALUE EQUATIONS

In Japan, P&G’s Lenor scent beads 
household penetration has increased  
by 27 percentage points over the past  
12 months, supported by compelling 
brand messaging that clearly 
communicates the product benefits.

When we showcase a Fabric Care  
product regimen at shelf and online  
with our “Better Together” product 
lineup, category growth is 1–2 percentage 
points ahead of the average, driven by 
consumers adding fabric enhancers like 
scent beads to their shopping baskets. 

Consumers see the value and there is 
tremendous upside. Global scent beads 
household penetration is only about 15% 
and beads are used in only about 8%  
of laundry loads.

DRIVING SUPERIORITY  
ACROSS AGE GROUPS 

Millennials are more likely to prefer and purchase 
familiar brands and do much of their shopping 
online. This year, we held or grew share in  
eight of our 10 categories in e-commerce.

Accelerating Noticeable 
Brand Superiority 

Our basis for competitive advantage is meaningful  

and noticeable superiority in all elements of our 

consumer proposition — products, packaging,  

brand communication, retail execution (in-store  

and online) and superior value — in each price tier  

where we compete. 

Superiority starts with superior products — products 

so good, consumers easily recognize the difference. 

Superior products are delivered in superior packages —

packaging that attracts consumers, conveys the 

brand equity and closes the sale. Superior product 

and packaging benefits need to be communicated 

with exceptional advertising that engages consumers. 

Superior retail execution in-store means having the 

right store coverage, product forms, sizes, price points, 

shelving and merchandising execution. Online, it  

means having the right content, assortment, ratings, 

reviews, search and subscription offerings. The last 

element is superior consumer and customer value 

equations. For consumers, this means the value of the 

total proposition — product, package, communication, 

retail execution and price. For customers, it includes 

margin, penny profit, trip generation, basket size  

and category growth.

Superiority builds brand relevance across age groups.  
At least 17 of P&G’s top 20 U.S. brands are #1 or #2 in  
market share in any age group, including millennials  
and the 50+ consumer.

50+ Consumers By 2030 there  
will be over 2 billion consumers aged 50+,  
representing half of all consumer spending 
and a significant growth opportunity. 

The data shows that superiority drives our business, 

but no single element is a magic bullet. It’s the 

combination across all elements that creates winning 

brands. Where we achieve superiority on at least 

four of the five elements, we deliver on all measures 

of business success 80% of the time — growing 

household penetration (more households using  

our brands in a given year), growing the market,  

and growing market share, sales and profit. Where  

we achieve just three or fewer of the elements  

of superiority, we do not deliver our desired  

business outcomes.

When we get this model in place, we drive growth. 

There are quite a few examples of where this is 

happening, including our Fabric Care business  

in the U.S., Japan and several markets in Europe;  

our Feminine Care business in North America,  

China and Europe; SK-II; Olay in China; and Fairy and 

Dawn hand dishwashing liquids in many markets. 

Delivering accelerated organic sales growth requires 

superiority in our current core business — in each  

key price tier, in each key product form, in our 

largest and fastest-growing markets, and in all trade 

channels where consumers shop for our products.  

It also requires that we deliver superiority in 

emerging consumer benefit areas, like naturals  

and sustainable products. We’re improving in each 

of these areas, and we are selectively enhancing our 

portfolio through acquisitions, as we are doing in the 

Personal Health Care category with the acquisition  

of Merck KGaA’s Consumer Health business, which  

is expected to close during fiscal year 2019.

We’re making good progress, but we face highly 

capable competitors who continue to innovate.  

We will continue to invest to address these 

challenges and extend our product and package 

advantages, superior execution and consumer  

and customer value propositions.

The Procter & Gamble Company • vii 

LEVERAGING LEAN 
INNOVATION PRINCIPLES

PRODUCTS

We’re innovating faster and more cost effectively  
using lean innovation principles.

Pampers Pure diapers in the 
U.S. reached the market in 18 
months — about half the time  
of a typical rollout in the very 
capital-intensive diaper market.

We brought Pantene Micellar 
Shampoo to market in four 
months, less than one-third  
the time usually required for 
a new shampoo launch.

Development of both products  
was accelerated by partnerships —  
co-designing with retailers and 
working with suppliers to create 
the materials needed.

PACK AGING

Air Assist packaging designed for 
e-commerce shipping of liquids 
delivers significantly better in-use 
experience and reduces plastic 
by 50% — and we’ve just started 
licensing the technology.

This Swiffer Duster package 
can be shipped directly from 
e-retailers with no additional 
outer box, reducing complexity, 
offering greater sustainability 
and lowering packaging cost.

SUSTAINABLE TECHNOLOGIES

We’ve invented a breakthrough 
technology with the capacity to 
revolutionize the plastics recycling 
industry. It separates color, odor and 
other contaminants from recycled 
polypropylene plastic to purify it into 
nearly-new quality resin. We are scaling 
up this process with PureCycle Technologies and look 
for it to unlock the potential for billions of pounds of 
high-quality recycled plastic to replace virgin materials 
for P&G and many other companies.

 
viii • The Procter & Gamble Company

Multi-Category 
Manufacturing Sites

Digitized 
Planning

Supplier 
Integration

Customer 
Collaboration

Delivering Productivity 
to Fuel Investments

We will continue to drive productivity improvement  

to fund investments in superiority, improve our 

industry-leading margins and generate cash.  

We successfully completed a $10 billion productivity 

program in fiscal 2016, and we are approaching the 

midpoint of our second five-year productivity program, 

on track to deliver another $10 billion. We are driving 

cost savings and efficiency improvement in all facets  

of the business. 

We’re dramatically transforming our supply chain.  

Over the past few years, we have made major 

investments into the supply chain to ensure it  

remains a competitive advantage for P&G. 

We’re driving down cost and inventory with our  

Supply Network Transformation. We’re making  

progress toward our vision of synchronizing the supply 

chain with real-time point-of-sales data, with consumer 

purchases triggering updates to our manufacturing 

schedules in plants and orders of materials to suppliers. 

Our six new mixing centers in North America are 

enabling faster customer response times and 

optimized, mixed-product loads to improve  

customer service levels. 

We’re also taking steps to reinvent the media supply 

chain and how our brands work with agencies, and 

we’re pioneering new approaches to continually 

improve our brand building.

DELIVERING PRODUCTIVITY  
ACROSS THE P&G SUPPLY CHAIN

Digitized Planning

•  Globally, eight planning 
sites vs. 300 sites eight 
years ago 

•  We can now support a new 
request from a customer for 
an incremental order in less 
than one hour, which once 
required 24 hours or more 

Multi-Category  
Manufacturing Sites

•  Plants supply several 

categories vs. only one 

•  Production on demand

•  Automated loading and 
unloading enables lower 
inventory

•  Savings from robotics  

and digitization 

•  Globally scalable technology 

We’re returning to one-stop agency shops, where  

it makes sense, reuniting media and creative. We’re 

implementing “fixed and flow” models, reducing the 

number of agencies on fixed retainers while flowing 

creative resources “in and out” as-needed. These 

changes not only reduce the number of agencies 

and save money, but lead to better quality, greater 

creativity, and faster ad-development cycle times.

We’re using data and technology to move from  

wasteful mass marketing to mass one-to-one brand 

building. For example, in China where 70% of our media 

is digital and 30% of our sales are in e-commerce, we 

have one of the largest data management platforms  

in the country, which we use for consumer analytics.  

We can effectively manage frequency and engage 

people when and where it matters. We have saved  

30% of digital spending in China, while increasing  

digital reach by 60%. 

Productivity provides fuel for 
innovation and investment to 
accelerate and sustain faster 
top- and bottom-line growth.

Another area we’re focused on is cash productivity.  

An important cash productivity project has been 

supply-chain financing, which we continue to expand. 

This program is a win both for suppliers and for P&G  

and has yielded nearly $5 billion dollars in cash in  

the five years we’ve been driving it.

Overall, productivity improvement will be critical to 

fund investment for sales and market share growth 

while continuing to expand our profit margins.

Supplier Integration

Customer Collaboration

•  Co-locating suppliers in 

•  With new U.S. mixing 

plants reduces truck traffic  
and distribution cost 

•  Increased synchronization 
of P&G’s operations with 
our suppliers leads to 
lower inventory and  
other costs 

centers, 80% of shipments 
are within 24 hours of 
retailers

•  Leads to higher in-stock 
levels and lower cost  
of goods 

The Procter & Gamble Company • ix

DELIVERING PRODUCTIVITY  
BY REINVENTING MARKETING

Reinventing media from wasteful mass blasting  
to mass reach with one-to-one precision,  
enabled by data and technology. 

Reinventing advertising from  
mass clutter to less doing more.

Reinventing agency partnerships  
from outsourcing too much of our work  
to getting our hands on the keyboard.

Reinventing brands to be a force for good  
and a force for growth — people want to know  
what brands and companies believe in.

x • The Procter & Gamble Company

Improving our 
Organization and 
Culture to Win 

We continue to change our organization structure and 

culture to position us to win in the changing retail and 

competitive landscape. We have more to do, but we are 

simplifying the structure and clarifying responsibility 

and accountability by tailoring the organization to win 

by category and by market. One market where this is 

making a difference is in Greater China, which moved 

from a decline of 5% in organic sales two years ago to 

All these organization and culture changes are  

aimed at creating a company that is more agile,  

more accountable, more efficient and more 

productive — designed to win with consumers  

at the speed of the market. 

Building Citizenship  
into Building the 
Business

7% organic sales growth this year behind by-category 

We continue to build Citizenship into how we deliver 

programs specifically designed to win in China. 

our business results. Our aspiration is to be a positive 

force for good and for growth across each area of our 

To speed up decision-making, we’re moving more 

Citizenship work: Ethics & Corporate Responsibility, 

resources to our business units. This includes a 

Community Impact, Diversity & Inclusion, Gender 

significant portion of Corporate resources, so they  

Equality and Environmental Sustainability. 

can be closer to the consumers we serve, with  

higher accountability, more agility and greater speed.  

For example, we’re making good progress on 

In addition, we’re adding sales people in markets  

Environmental Sustainability, already achieving several 

like China and India. 

goals that we set for 2020. Looking ahead, we have 

established broad-reaching Ambition 2030 goals aimed 

At the same time, we continue to drive more mastery 

at enabling positive impacts on the environment while 

and depth in each category, to supplement our internal 

creating value for consumers and shareowners such 

talent with skilled, experienced external hiring.

as making all product packaging for our 20 leadership 

We’ve made an 
important shift to  
more performance-
based compensation  
for our employees.

brands completely recyclable or reusable, cutting 

greenhouse gas emissions from our manufacturing 

sites in half, and continuing to help stem the flow  

of plastic into oceans.

In the area of Community Impact, we continue to 

improve communities around the world with programs 

like Tide Loads of Hope, which provides laundry services 

to those struck by disaster; P&G Children’s Safe Drinking 

We are also strengthening our compensation and 

Water Program, which has provided more than 13 billion 

incentive programs. For example, based in part on 

liters of clean drinking water; and our Pampers UNICEF 

shareowner input, we have made changes to ensure 

campaign, which has helped eliminate maternal and 

manager compensation better reflects our financial 

newborn tetanus in 20 countries. 

performance versus external competitive benchmarks. 

Recent changes include increasing the percentage of 

We continue to lead on Diversity & Inclusion and 

total compensation at risk, increasing the weighting 

Gender Equality, because we know more ideas for 

more toward category results versus Company results, 

growth are realized when diverse people come 

widening the payout factors to 0% to 200% of target, 

together to offer their best performance, and that 

and increasing the number of people participating in 

economic empowerment for consumers from all 

the program — better linking rewards to performance.

walks of life can lead to market growth. In the last 

The Procter & Gamble Company • xi 

we are using our broad reach to spark important 

conversations that motivate positive change along 

racial, ethnic, sexual orientation and identity,  

disability and gender lines.

P&G’s commitment to Citizenship is supported by our 

Purpose, Values and Principles. They are the foundation 

on which this Company was built, and they have been 

our guiding force for more than 180 years.

Committed to Win

We continue to raise the bar to improve the lives of  

the world’s consumers with consumer-preferred brands 

and products and to deliver even stronger results  

for you, our shareowners.

In the year ahead, we expect to grow organic sales 2%  

to 3%, grow core earnings per share 3% to 8% and deliver 

90% or better adjusted free cash flow productivity. 

And we expect to pay over $7 billion in dividends and 

repurchase up to $5 billion of common shares.

This is another step toward our goal of sustained, 

balanced top-line growth, bottom-line growth  

and cash generation, which yields operating total 

shareholder return in the top third of our peer group. 

While the current environment is highly dynamic,  

I’m confident in the determination and capability  

of P&G people to win in even the most challenging  

of circumstances and serve consumers and shoppers 

better than anybody else in the world. 

Brands

AMBITION 2030

Enabling and Inspiring 
Positive Impact  
in the World

Society

Supply Chain

Employees

Learn more about Ambition 2030 at  

It’s through our efforts to extend our margin of 

www.pg.com/ambition2030

competitive superiority, to drive productivity savings  

year, we increased representation for women, now at 

46% of all P&G managers globally, and we increased 

our U.S. representation and workplace satisfaction of 

African Ancestry, Hispanic and Asian Pacific American 

employees while also making our workplaces and 

communities around the world more inclusive for 

women, the LGBT+ community and people with 

disabilities. And as the world’s largest advertiser,  

to fund investments for growth and enhance our 

industry-leading margins, and to simplify our 

organization structure and increase accountability  

that we’ll win with consumers and deliver balanced  

top- and bottom-line growth that creates value  

over the short, mid- and long term.

DAVID S. TAYLOR

Chairman of the Board,  

President and Chief Executive Officer

xii • The Procter & Gamble Company

P&G’s 10-Category Portfolio

FABRIC CARE

HOME CARE

BABY CARE

FEMININE CARE

FAMILY CARE

PERSONAL HEALTH CARE

OR AL CARE

GROOMING

HAIR CARE

SKIN & PERSONAL CARE

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark one)
[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 2018 

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission File No. 1-434

THE PROCTER & GAMBLE COMPANY
One Procter & Gamble Plaza, Cincinnati, Ohio  45202
Telephone (513) 983-1100
IRS Employer Identification No. 31-0411980
State of Incorporation:  Ohio

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, without Par Value

Name of each exchange on which registered
New York Stock Exchange, NYSE Euronext-Paris

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  

  No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  

  No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days.    Yes  

  No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive 
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 
12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  

  No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this 
Form 10-K or any amendment to this Form 10-K.    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting 
company,  or  an  emerging  growth  company.    See  the  definitions  of  "large  accelerated  filed,"  "accelerated  filer,"  "smaller  reporting 
company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Non-accelerated filer

Accelerated filer

(Do not check if smaller reporting company)

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  

No  

The aggregate market value of the voting stock held by non-affiliates amounted to $231 billion on December 31, 2017.

There were 2,488,011,390 shares of Common Stock outstanding as of July 31, 2018.

Portions of the Proxy Statement for the 2018 Annual Meeting of Shareholders, which will be filed within one hundred and twenty days 
of the fiscal year ended June 30, 2018 (2018 Proxy Statement), are incorporated by reference into Part III of this report to the extent 
described herein.

Documents Incorporated by Reference

FORM 10-K TABLE OF CONTENTS

PART I

Business

Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosure

Properties
Legal Proceedings

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases 

Executive Officers of the Registrant

of Equity Securities
Selected Financial Data

Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.

Financial Statements and Supplementary Data

Management's Report and Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Note 1:  Summary of Significant Accounting Policies
Note 2:  Segment Information
Note 3:  Supplemental Financial Information
Note 4:  Goodwill and Intangible Assets
Note 5:  Income Taxes
Note 6:  Earnings Per Share
Note 7:  Stock-based Compensation
Note 8:  Postretirement Benefits and Employee Stock Ownership Plan
Note 9:  Risk Management Activities and Fair Value Measurements
Note 10:  Short-term and Long-term Debt
Note 11:  Accumulated Other Comprehensive Income/(Loss)
Note 12:  Commitments and Contingencies
Note 13:  Discontinued Operations
Note 14:  Quarterly Results (Unaudited)

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 
Matters

Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14.

Principal Accountant Fees and Services

PART IV Item 15. Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Exhibit Index

Item 16.

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The Procter & Gamble Company        1

PART I

Item 1.  Business.

Additional information required by this item is incorporated 
herein by reference to Management's Discussion and Analysis 
(MD&A);  and  Notes  1  and  2  to  our  Consolidated  Financial 
Statements.  Unless the context indicates otherwise, the terms 
the  "Company,"  "P&G,"  "we,"  "our"  or  "us"  as  used  herein 
refer to The Procter & Gamble Company (the registrant) and 
its subsidiaries.

The  Procter &  Gamble  Company  is  focused  on  providing 
branded  consumer  packaged  goods  of  superior  quality  and 
value  to  improve  the  lives  of  the  world's  consumers.    The 
Company was incorporated in Ohio in 1905, having been built 
from a business founded in 1837 by William Procter and James 
Gamble.    Today,  our  products  are  sold  in  more  than  180 
countries and territories.

Throughout  this  Form  10-K,  we  incorporate  by  reference 
information from other documents filed with the Securities and 
Exchange Commission (SEC).

The Company's Annual Report on Form 10-K, quarterly reports 
on  Form  10-Q  and  current  reports  on  Form  8-K,  and 
amendments thereto, are filed electronically with the SEC.  The 
SEC maintains an internet site that contains these reports at: 
www.sec.gov.  You can also access these reports through links 
from our website at: www.pginvestor.com.

Copies of these reports are also available, without charge, by 
contacting  EQ  Shareowner  Services,  1100  Centre  Pointe 
Curve, Suite 101, Mendota, MN 55120-4100.

Financial Information about Segments

As of June 30, 2018, the Company has five reportable segments 
under U.S. GAAP:  Beauty; Grooming; Health Care; Fabric & 
Home Care and Baby, Feminine & Family Care.  Many of the 
factors  necessary  for  understanding  these  businesses  are 
similar.  Operating margins of the individual businesses vary 
due  to  the  nature  of  materials  and  processes  used  to 
manufacture the products, the capital intensity of the businesses 
and differences in selling, general and administrative expenses 
as a percentage of net sales.  Net sales growth by business is 
also expected to vary slightly due to the underlying growth of 
the  markets  and  product  categories  in  which  they  operate.  
While none  of  our  reportable segments  are  highly seasonal, 
components  within  certain  reportable  segments,  such  as 
Appliances (Grooming) and Personal Health Care (Health), are 
seasonal. 

Additional information about our reportable segments can be 
found in the MD&A and Note 2 to our Consolidated Financial 
Statements.

Narrative Description of Business

Business Model.  Our business model relies on the continued 
growth and success of existing brands and products, as well as 
the  creation  of  new  innovative  products.    The  markets  and 
industry segments in which we offer our products are highly 
competitive.  Our products are sold in more than 180 countries 
and  territories  primarily  through  mass  merchandisers,  e-

commerce,  grocery  stores,  membership  club  stores,  drug 
stores,  department  stores,  distributors,  wholesalers,  baby 
stores,  specialty  beauty  stores,  high-frequency  stores  and 
pharmacies. Our growth strategy is to deliver meaningful and 
noticeable  superiority  in  all  elements  of  our  consumer 
proposition - product, packaging, brand communication, retail 
execution  and  value  equation.  We  use  our  research  and 
development  and  consumer  insights  to  provide  superior 
products and packaging. We utilize our marketing and online 
presence to deliver superior brand messaging to our consumers. 
We work collaboratively with our customers to deliver superior 
retail execution, both in-store and online. In conjunction with 
the above elements, we provide superior value to consumers 
and our retail customers, in each price tier where we compete.

Key  Product  Categories.    Information  on  key  product 
categories can be found in Note 2 to our Consolidated Financial 
Statements.

Key Customers.  Our customers include mass merchandisers, 
e-commerce,  grocery  stores,  membership  club  stores,  drug 
stores,  department  stores,  distributors,  wholesalers,  baby 
stores,  specialty  beauty  stores,  high-frequency  stores  and 
pharmacies.  Sales to Walmart Inc. and its affiliates represent 
approximately 15% of our total sales in 2018, 16% in 2017 and 
15% in 2016.  No other customer represents more than 10% of 
our  total  sales.    Our  top  ten  customers  accounted  for 
approximately 36% of our total sales in 2018 and 35% in both 
2017 and 2016.  The nature of our business results in no material 
backlog orders or contracts with the government.  We believe 
our practices related to working capital items for customers 
and  suppliers  are  consistent  with  the  industry  segments  in 
which we compete.

Sources and Availability of Materials.  Almost all of the raw 
and packaging materials used by the Company are purchased 
from others, some of whom are single-source suppliers.  We 
produce certain raw materials, primarily chemicals, for further 
use in the manufacturing process.  In addition, fuel, natural gas 
and derivative products are important commodities consumed 
in our manufacturing process and in the transportation of input 
materials and finished products to customers.  The prices we 
pay  for  materials  and  other  commodities  are  subject  to 
fluctuation.  When prices for these items change, we may or 
may  not  pass  the  change  to  our  customers.    The  Company 
purchases  a  substantial  variety  of  other  raw  and  packaging 
materials, none of which is material to our business taken as a 
whole.

Trademarks and Patents.  We own or have licenses under 
patents  and  registered  trademarks,  which  are  used  in 
connection with our activity in all businesses.  Some of these 
patents or licenses cover significant product formulation and 
processes used to manufacture our products.  The trademarks 
are  important  to  the  overall  marketing  and  branding  of  our 
products.  All major trademarks in each business are registered.  
In  part,  our  success  can  be  attributed  to  the  existence  and 
continued protection of these trademarks, patents and licenses.

2        The Procter & Gamble Company

Competitive Condition.  The markets in which our products 
are sold are highly competitive.  Our products compete against 
similar products of many large and small companies, including 
well-known global competitors.  In many of the markets and 
industry segments in which we sell our products we compete 
against other branded products as well as retailers' private-label 
brands.  We are well positioned in the industry segments and 
markets  in  which  we  operate,  often  holding  a  leadership  or 
significant  market  share  position.   We  support  our  products 
with advertising, promotions and other marketing vehicles to 
build  awareness  and  trial  of  our  brands  and  products  in 
conjunction with our sales force.  We believe this combination 
provides the most efficient method of marketing for these types 
of  products.    Product  quality,  performance,  value  and 
packaging are also important differentiating factors.

Research  and  Development  Expenditures.    Research  and 
development  (R&D)  expenditures  enable  us  to  develop 
technologies and obtain patents across all categories in order 
to  meet  the  needs  and  improve  the  lives  of  our  consumers.  
Research and development expenses were $1.9 billion in 2018, 
2017  and  2016  (reported  in  Net  earnings  from  continuing 
operations).

Expenditures for Environmental Compliance. Expenditures 
for compliance with federal, state and local environmental laws 
and regulations are fairly consistent from year to year and are 
not material to the Company.  No material change is expected 
in fiscal year 2019.

Employees.  Total number of employees is an estimate of total 
Company  employees  excluding  interns,  co-ops,  contractors 
and employees of joint ventures as of the years ended June 30.  
The number of employees includes manufacturing and non-
manufacturing employees.  The number of employees is not 
restated to exclude employees of discontinued operations.

2018

2017

2016

2015

2014

2013

Total Number of Employees
92,000

95,000

105,000

110,000

118,000

121,000

Financial  Information  about  Foreign  and  Domestic 
Operations.  Net sales in the United States account for 41% 
of total net sales.  No other individual country exceeds 10% of 
total  net  sales.    Operations  outside  the  United  States  are 
generally characterized by the same conditions discussed in the 
description  of  the  business  above  and  may  be  affected  by 
additional  factors 
including  changing  currency  values, 
different rates of inflation, economic growth and political and 
economic uncertainties and disruptions.

Our sales by geography for the fiscal years ended June 30 were 
as follows:

North America (1)
Europe

Asia Pacific

Greater China

Latin America
IMEA (2)

2018
44%

24%

9%

9%

7%

7%

2017

45%

23%

9%

8%

8%

7%

2016

44%

23%

9%

8%

8%

8%

(1)  North America includes results for the United States, Canada and 

(2) 

Puerto Rico only.
IMEA includes India, Middle East and Africa.

Net  sales  and  total  assets  in  the  United  States  and 
internationally were as follows (in billions):

Net Sales  (years ended June 30)
2018

United States
$27.3

International
$39.5

2017

2016
Total Assets  (years ended June 30)
2018

2017

2016

$27.3

$27.0

$63.4

$59.8

$64.4

$37.8

$38.3

$54.9

$60.6

$62.7

Item 1A.  Risk Factors.

We  discuss  our  expectations  regarding  future  performance, 
events  and  outcomes,  such  as  our  business  outlook  and 
objectives  in  this  Form  10-K,  quarterly  and  annual  reports, 
press releases and other written and oral communications.  All 
statements,  except  for  historical  and  present  factual 
information, are “forward-looking statements” and are based 
on financial data and business plans available only as of the 
time the statements are made, which may become outdated or 
incomplete.  We assume no obligation to update any forward-
looking statements as a result of new information, future events 
or other factors.  Forward-looking statements are inherently 
uncertain,  and  investors  must  recognize  that  events  could 
significantly differ from our expectations.

The following discussion of “risk factors” identifies significant 
factors  that  may  adversely  affect  our  business,  operations, 
financial  position  or  future  financial  performance.    This 
information should be read in conjunction with the MD&A and 
the  Consolidated  Financial  Statements  and  related  Notes 
incorporated in this report.  The following discussion of risks 
is not all inclusive, but is designed to highlight what we believe 
are  important  factors  to  consider  when  evaluating  our 
expectations.  These and other factors could cause our future 
results to differ from those in the forward-looking statements 
and from historical trends.

Our business is subject to numerous risks as a result of our 
having  significant  operations  and  sales  in  international 
markets, including foreign currency fluctuations, currency 
exchange or pricing controls and localized volatility.

We are a global company, with operations in approximately 70 
countries and products sold in more than 180 countries and 
territories around the world.  We hold assets, incur liabilities, 
earn revenues and pay expenses in a variety of currencies other 
than  the  U.S.  dollar,  and  our  operations  outside  the  U.S. 
generate a significant portion of our net revenue.  Fluctuations 
in exchange rates for foreign currencies may reduce the U.S. 
dollar  value  of  revenues,  profits  and  cash  flows  we  receive 
from non-U.S. markets, increase our supply costs (as measured 
in  U.S.  dollars)  in  those  markets,  negatively  impact  our 
competitiveness  in  those  markets  or  otherwise  adversely 
impact our business results or financial condition.  Moreover, 
discriminatory or conflicting fiscal or trade policies in different 
countries, including potential changes to tariffs and existing 
trade  policies  and  agreements,  could  adversely  affect  our 
results.  See also the Results of Operations and Cash Flow, 
Financial Condition and Liquidity sections of the MD&A and 
Note 9 to our Consolidated Financial Statements. 

We  also  have  businesses  and  maintain  local  currency  cash 
balances  in  a  number  of  countries  with  currency  exchange, 
import authorization, pricing or other controls or restrictions, 
such as Nigeria, Algeria and Egypt.  Our results of operations 
and financial condition could be adversely impacted if we are 
unable to successfully manage such controls and restrictions, 
continue existing business operations and repatriate earnings 
from overseas, or if new or increased tariffs, quotas, exchange 
or  price  controls,  trade  barriers  or  similar  restrictions  are 
imposed on our business.

Additionally, our business, operations or employees may be 
adversely  affected  by  political  volatility,  labor  market 
disruptions  or  other  crises  or  vulnerabilities  in  individual 
countries or regions, including political instability or upheaval, 
broad economic instability or sovereign risk related to a default 
by  or  deterioration  in  the  credit  worthiness  of  local 
governments, particularly in emerging markets.
Uncertain  global  economic  conditions  may  adversely 
impact demand for our products or cause our customers 
and other business partners to suffer financial hardship, 
which could adversely impact our business.

Our business could be negatively impacted by reduced demand 
for  our  products  related  to  one  or  more  significant  local, 
regional or global economic disruptions, such as: a slow-down 
in the general economy; reduced market growth rates; tighter 
credit  markets  for  our  suppliers,  vendors  or  customers;  a 
significant  shift  in  government  policies;  or  the  inability  to 
conduct  day-to-day 
through  our  financial 
intermediaries  to  pay  funds  to  or  collect  funds  from  our 
customers,  vendors  and  suppliers.   Additionally,  economic 
conditions may cause our suppliers, distributors, contractors 
or other third-party partners to suffer financial difficulties that 
they cannot overcome, resulting in their inability to provide us 
with  the  materials  and  services  we  need,  in  which  case  our 
business and results of operations could be adversely affected.  

transactions 

The Procter & Gamble Company        3

Customers may also suffer financial hardships due to economic 
conditions such that their accounts become uncollectible or are 
subject to longer collection cycles. In addition, if we are unable 
to generate sufficient income and cash flow, it could affect the 
Company’s ability to achieve expected share repurchase and 
dividend payments.
Disruptions  in  credit  markets  or  changes  to  our  credit 
ratings may reduce our access to credit.

A disruption in the credit markets or a downgrade of our current 
credit  rating  could  increase  our  future  borrowing  costs  and 
impair our ability to access capital and credit markets on terms 
commercially acceptable to us, which could adversely affect 
our liquidity and capital resources or significantly increase our 
cost of capital.
Disruption  in  our  global  supply  chain  may  negatively 
impact our business results.

loss  or 

labor  disputes, 

Our  ability  to  meet  our  customers’  needs  and  achieve  cost 
targets depends on our ability to maintain key manufacturing 
and supply arrangements, including execution of supply chain 
optimizations and certain sole supplier or sole manufacturing 
plant  arrangements. 
  The  loss  or  disruption  of  such 
manufacturing and supply arrangements, including for issues 
such  as 
impairment  of  key 
manufacturing sites, discontinuity in our internal information 
and data systems, inability to procure sufficient raw or input 
materials, significant changes in trade policy, natural disasters, 
increasing severity or frequency of extreme weather events due 
to climate change or otherwise, acts of war or terrorism or other 
external factors over which we have no control, could interrupt 
product supply and, if not effectively managed and remedied, 
have an adverse impact on our business, financial condition or 
results of operations.
Our  businesses  face  cost  fluctuations  and  pressures  that 
could affect our business results.

Our  costs  are  subject  to  fluctuations,  particularly  due  to 
changes in the prices of commodities and raw materials and 
the  costs  of  labor,  transportation,  energy,  pension  and 
healthcare.  Therefore, our business results are dependent, in 
part,  on  our  continued  ability  to  manage  these  fluctuations 
through  pricing  actions,  cost  saving  projects  and  sourcing 
decisions,  while  maintaining  and  improving  margins  and 
market  share.    Failure  to  manage  these  fluctuations  could 
adversely impact our financial results.
Our  ability  to  meet  our  growth  targets  depends  on 
successful product, marketing and operations innovation 
and  successful  responses  to  competitive  innovation  and 
changing consumer habits.
We are a consumer products company that relies on continued 
global demand for our brands and products.  Achieving our 
business results depends, in part, on successfully developing, 
introducing  and  marketing  new  products  and  on  making 
significant improvements to our equipment and manufacturing 
processes.   The  success  of  such  innovation  depends  on  our 
ability  to  correctly  anticipate  customer  and  consumer 
acceptance  and  trends,  to  obtain,  maintain  and  enforce 
necessary  intellectual  property  protections  and  to  avoid 
infringing upon the intellectual property rights of others.  We 

4        The Procter & Gamble Company

must  also  successfully  respond  to  technological  advances 
made  by,  and  intellectual  property  rights  granted  to, 
competitors.    Failure  to  continually  innovate,  improve  and 
respond to competitive moves and changing consumer habits 
could  compromise  our  competitive  position  and  adversely 
impact our results.
The ability to achieve our business objectives is dependent 
on  how  well  we  can  compete  with  our  local  and  global 
competitors in new and existing markets and channels.

The consumer products industry is highly competitive.  Across 
all  of  our  categories,  we  compete  against  a  wide  variety  of 
global  and  local  competitors.    As  a  result,  we  experience 
ongoing competitive pressures in the environments in which 
we  operate,  which  may  result  in  challenges  in  maintaining 
profit margins.  To address these challenges, we must be able 
to successfully respond to competitive factors and emerging 
retail  trends,  including  pricing,  promotional  incentives, 
product  delivery  windows  and  trade  terms.    In  addition, 
evolving  sales  channels  and  business  models  may  affect 
customer  and  consumer  preferences  as  well  as  market 
dynamics, which, for example, may be seen in the growing 
consumer preference for shopping online and growth in hard 
discounter  channels.    Failure  to  successfully  respond  to 
competitive factors and emerging retail trends, and effectively 
compete  in  growing  sales  channels  and  business  models, 
particularly e-commerce and mobile commerce applications, 
could negatively impact our results.
A  significant  change  in  customer  relationships  or  in 
customer demand for our products could have a significant 
impact on our business.

We sell most of our products via retail customers, which include 
mass merchandisers, e-commerce, grocery stores, membership 
club  stores,  drug  stores,  department  stores,  distributors, 
wholesalers,  baby  stores,  specialty  beauty  stores,  high-
frequency stores and pharmacies.  Our success is dependent 
on our ability to successfully manage relationships with our 
retail trade customers, which includes our ability to offer trade 
terms that are mutually acceptable and are aligned with our 
pricing  and  profitability  targets.    Continued  concentration 
among our retail customers could create significant cost and 
margin pressure on our business, and our business performance 
could suffer if we cannot reach agreement with a key customer 
on  trade  terms  and  principles.    Our  business  could  also  be 
negatively impacted if a key customer were to significantly 
reduce the inventory level or shelf space of our products as a 
result of increased offerings of private label brands and generic 
non-branded products or for other reasons, significantly tighten 
product delivery windows or experience a significant business 
disruption.
If the reputation of the Company or one or more of our 
brands erodes significantly, it could have a material impact 
on our financial results.

The Company's reputation, and the reputation of our brands, 
form the foundation of our relationships with key stakeholders 
and other constituencies, including consumers, customers and 
suppliers.  The quality and safety of our products are critical 
to  our  business.    Many  of  our  brands  have  worldwide 

recognition and our financial success is directly dependent on 
the success of our brands.  The success of our brands can suffer 
if our marketing plans or product initiatives do not have the 
desired  impact  on  a  brand's  image  or  its  ability  to  attract 
consumers.  Our results could also be negatively impacted if 
one of our brands suffers substantial harm to its reputation due 
to  a  significant  product  recall,  product-related  litigation, 
defects or impurities in our products, product misuse, changing 
consumer perceptions of certain ingredients or environmental 
impacts, allegations of product tampering or the distribution 
and  sale  of  counterfeit  products.   Additionally,  negative  or 
inaccurate  postings  or  comments  on  social  media  or 
networking websites about the Company or one of its brands 
could  generate  adverse  publicity  that  could  damage  the 
reputation of our brands or the Company.  If we are unable to 
effectively manage real or perceived issues, including concerns 
about  safety,  quality,  ingredients,  efficacy,  environmental 
impacts or similar matters, sentiments toward the Company or 
our products could be negatively impacted and our financial 
results  could  suffer.    Our  Company  also  devotes  time  and 
resources  to  citizenship  efforts  that  are  consistent  with  our 
corporate values and are designed to strengthen our business 
and protect and preserve our reputation, including programs 
driving 
strong 
corporate 
communities,  diversity  and  inclusion,  gender  equality  and 
environmental  sustainability.    If  these  programs  are  not 
executed  as  planned  or  suffer  negative  publicity,  the 
Company's reputation and financial results could be adversely 
impacted.
We rely on third parties in many aspects of our business, 
which creates additional risk.

responsibility, 

ethics 

and 

Due to the scale and scope of our business, we must rely on 
relationships  with  third  parties,  including  our  suppliers, 
distributors,  contractors,  commercial  banks,  joint  venture 
partners and external business partners, for certain functions.  
If  we  are  unable  to  effectively  manage  our  third-party 
relationships and the agreements under which our third-party 
partners  operate,  our 
results  could  suffer.  
financial 
Additionally,  while  we  have  policies  and  procedures  for 
managing these relationships, they inherently involve a lesser 
degree  of  control  over  business  operations,  governance  and 
compliance, thereby potentially increasing our financial, legal, 
reputational and operational risk.
An 
information  security  or  operational  technology 
incident, including a cybersecurity breach, or the failure 
of one or more key information or operations technology 
systems, networks, hardware, processes, and/or associated 
sites owned or operated by the Company or one of its service 
providers  could  have  a  material  adverse  impact  on  our 
business or reputation.

As part of the Company’s regular review of potential risks, we 
maintain an information and operational technology (“IT/OT”) 
risk  management  program  that  is  primarily  supervised  by 
information technology management and reviewed by internal 
cross-functional  stakeholders.    As  part  of  this  program, 
analyses  of  emerging  cybersecurity  threats  as  well  as  the 
Company’s plans and strategies to address them are regularly 
prepared  and  presented  to  senior  management,  the  Audit 

Committee and the Board of Directors. Despite our policies, 
procedures  and  programs, 
this  IT/OT  risk 
management program, we may not be effective in identifying 
and mitigating every risk to which we are exposed.

including 

We rely extensively on IT/OT systems, networks and services, 
including  internet  and  intranet  sites,  data  hosting  and 
processing  facilities  and  technologies,  physical  security 
technical 
systems  and  other  hardware,  software  and 
applications  and  platforms,  many  of  which  are  managed, 
hosted, provided and/or used by third parties or their vendors, 
to assist in conducting our business.  The various uses of these 
IT/OT  systems,  networks  and  services  include,  but  are  not 
limited to:

ordering and managing materials from suppliers;
converting materials to finished products;
shipping products to customers;

• 
• 
• 
•  marketing and selling products to consumers;
• 

collecting, 
transferring,  storing  and/or  processing 
customer,  consumer,  employee,  vendor,  investor,  and 
other stakeholder information and personal data, including 
such data from citizens of the European Union who are 
covered  by  the  General  Data  Protection  Regulation 
(“GDPR”); 
summarizing  and  reporting  results  of  operations, 
including financial reporting;

• 

•  managing our banking and other cash liquidity systems 

• 

• 

• 
• 
• 

and platforms;
hosting,  processing  and  sharing,  as  appropriate, 
confidential and proprietary research, business plans and 
financial information;
collaborating via an online and efficient means of global 
business communications;
complying with regulatory, legal and tax requirements;
providing data security; and
handling  other  processes  necessary  to  manage  our 
business.

Numerous and evolving information security threats, including 
advanced persistent cybersecurity threats, pose a risk to the 
security of our services, systems, networks and supply chain, 
as well as to the confidentiality, availability and integrity of 
our  data  and  of  our  critical  business  operations.    As 
cybersecurity  threats  rapidly  evolve  in  sophistication  and 
become  more  prevalent  across  the  industry  globally,  the 
Company is continually increasing its attention to these threats.  
We  assess  potential  threats  and  vulnerabilities  and  make 
investments  seeking  to  address  them,  including  ongoing 
monitoring and updating of networks and systems, increasing 
specialized  information  security  skills,  deploying  employee 
security  training,  and  updating  security  policies  for  the 
Company and its third-party providers.  However, because the 
techniques, tools and tactics used in cyber attacks frequently 
change and may be difficult to detect for periods of time, we 
may  face  difficulties  in  anticipating  and  implementing 
adequate preventative measures or fully mitigating harms after 
such an attack. 

Our  IT/OT  databases  and  systems  and  our  third-party 
providers’ databases and systems have been, and will likely 
continue to be, subject to advanced computer viruses or other 

The Procter & Gamble Company        5

malicious codes, ransomware, unauthorized access attempts, 
denial of service attacks, phishing, social engineering, hacking 
and  other  cyber-attacks.      Such  attacks  may  originate  from 
nation states or attempts by outside parties, hackers, criminal 
organizations or other threat actors.  To date, we have seen no 
material  impact  on  our  business  or  operations  from  these 
attacks; however, we cannot guarantee that our security efforts 
or the security efforts of our third-party providers will prevent 
material breaches, operational incidents or other breakdowns 
to our or our third-party providers’ IT/OT databases or systems.

Periodically, we also need to upgrade our IT/OT systems or 
adopt new technologies.  If such a new system or technology 
does not function properly or otherwise exposes us to increased 
cybersecurity breaches and failures, it could affect our ability 
to order materials, make and ship orders, and process payments 
in addition to other operational and information integrity and 
loss issues.  Further, if the IT/OT systems, networks or service 
providers  we  rely  upon  fail  to  function  properly  or  cause 
operational outages or aberrations, or if we or one of our third-
party  providers  suffer  significant  unavailability  of  key 
operations, or inadvertent disclosure of, lack of integrity of, or 
loss of our sensitive business or stakeholder information, due 
to any number of causes, ranging from catastrophic events or 
power outages to improper data handling, security incidents or 
employee error or malfeasance, and our business continuity 
plans do not effectively address these failures on a timely basis, 
we may be exposed to reputational, competitive, operational, 
financial and business harm as well as litigation and regulatory 
action.  The costs and operational consequences of responding 
to the above items and implementing remediation measures 
could be significant and could adversely impact our results.
Changing political conditions could adversely impact our 
business and financial results.

Changes  in  the  political  conditions  in  markets  in  which  we 
manufacture, sell or distribute our products may be difficult to 
predict and may adversely affect our business and financial 
results. For example, the United Kingdom’s decision to leave 
the European Union has created uncertainty regarding, among 
other things, the U.K.'s future legal and economic framework 
and how the U.K. will interact with other countries, including 
with respect to the free movement of goods, services, capital 
and people. In addition, results of elections, referendums or 
other  political  processes  in  certain  markets  in  which  our 
products  are  manufactured,  sold  or  distributed  could  create 
uncertainty  regarding  how  existing  governmental  policies, 
laws and regulations may change, including with respect to 
sanctions, taxes, the movement of goods, services, capital and 
people  between  countries  and  other  matters.    The  potential 
implications of such uncertainty, which include, among others, 
exchange  rate  fluctuations, 
trade  barriers  and  market 
contraction,  could  adversely  affect  the  Company’s  business 
and financial results.
We must successfully manage compliance with laws and 
regulations, as well as manage new and pending legal and 
regulatory matters in the U.S. and abroad.

Our business is subject to a wide variety of laws and regulations 
across all of the countries in which we do business, including 

6        The Procter & Gamble Company

those  laws  and  regulations  involving  intellectual  property, 
product 
liability,  marketing,  antitrust,  data  protection, 
environmental (including climate, water, waste), employment, 
anti-bribery,  anti-corruption,  tax,  accounting  and  financial 
reporting or other matters.  Rapidly changing laws, regulations 
and related interpretations, as well as increased enforcement 
actions,  create  challenges  for  the  Company,  including  our 
the 
compliance  and  ethics  programs,  and  may  alter 
environment in which we do business, which could adversely 
impact our financial results.  If we are unable to continue to 
meet these challenges and comply with all laws, regulations 
and  related  interpretations,  it  could  negatively  impact  our 
reputation  and  our  business  results.    Failure  to  successfully 
manage regulatory and legal matters and resolve such matters 
without significant liability or damage to our reputation may 
materially  adversely  impact  our  results  of  operations  and 
financial position.  Furthermore, if pending legal or regulatory 
matters result in fines or costs in excess of the amounts accrued 
to  date,  that  may  also  materially  impact  our  results  of 
operations and financial position.
Changes in applicable tax regulations and resolutions of 
tax disputes could negatively affect our financial results.

The Company is subject to taxation in the U.S. and numerous 
foreign jurisdictions.  Changes in the various tax laws can and 
do  occur.  For  example,  on  December  22,  2017,  the  U.S. 
government enacted comprehensive tax legislation commonly 
referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Act”). 
The  changes  included  in  the  U.S.  Tax  Act  are  broad  and 
complex.  The final transition impacts of the U.S. Tax Act may 
differ  from  the  estimates  provided  elsewhere  in  this  report, 
possibly  materially,  due  to,  among  other  things,  changes  in 
interpretations of the U.S. Tax Act, any regulatory guidance or  
legislative action to address questions that arise because of the 
U.S.  Tax  Act  or  any  updates  or  changes  to  estimates  the 
Company  has  utilized  to  calculate  the  transition  impacts, 
including  impacts  from  changes  to  current  year  earnings 
estimates.  

reporting 

requirements 

Additionally,  longstanding  international  tax  norms  that 
determine  each  country’s  jurisdiction  to  tax  cross-border 
international trade are evolving as a result of the Base Erosion 
and  Profit  Shifting 
(“BEPS") 
recommended by the G8, G20 and Organization for Economic 
Cooperation and Development ("OECD").  As these and other 
tax laws and related regulations change, our financial results 
could be materially impacted.  Given the unpredictability of 
these possible changes and their potential interdependency, it 
is very difficult to assess whether the overall effect of such 
potential  tax  changes  would  be  cumulatively  positive  or 
negative for our earnings and cash flow, but such changes could 
adversely impact our financial results.

Statements, which could adversely impact our cash flows and 
financial results.
We  must  successfully  manage  ongoing  acquisition,  joint 
venture and divestiture activities.

As a company that manages a portfolio of consumer brands, 
our  ongoing  business  model  includes  a  certain  level  of 
acquisition, joint venture and divestiture activities.  We must 
be able to successfully manage the impacts of these activities, 
while  at  the  same  time  delivering  against  our  business 
objectives.  Specifically,  our  financial  results  could  be 
adversely impacted by the dilutive impacts from the loss of 
earnings associated with divested brands or dissolution of joint 
ventures  such  as  the  termination  of  the  PGT  Healthcare 
partnership between the Company and Teva Pharmaceutical 
Industries.  Our  financial  results  could  also  be  impacted  by 
acquisitions  or  joint  venture  activities,  such  as  the  planned 
acquisition of Merck KGaA's Consumer Health business, if:  
1) changes in the cash flows or other market-based assumptions 
cause the value of acquired assets to fall below book value, or 
2)  we  are  not  able  to  deliver  the  expected  cost  and  growth 
synergies associated with such acquisitions and joint ventures, 
including  as  a  result  of  integration  and  collaboration 
challenges, which could also have an impact on goodwill and 
intangible assets.
Our business results depend on our ability to successfully 
manage  productivity 
improvements  and  ongoing 
organizational change.

Our financial projections assume certain ongoing productivity 
improvements and cost savings, including staffing adjustments 
as  well  as  employee  departures.    Failure  to  deliver  these 
planned  productivity  improvements  and  cost  savings,  while 
continuing to invest in business growth, could adversely impact 
our  financial  results.  Additionally,  successfully  executing 
organizational  change,  including  management  transitions  at 
leadership levels of the Company and motivation and retention 
of key employees, is critical to our business success.  Factors 
that  may  affect  our  ability  to  attract  and  retain  sufficient 
numbers of qualified employees include employee morale, our 
reputation, competition from other employers and availability 
of  qualified  personnel.  Our  success  is  dependent  on 
identifying,  developing  and  retaining  key  employees  to 
provide  uninterrupted  leadership  and  direction  for  our 
business. 
retaining 
organizational capabilities in key growth markets where the 
depth of skilled or experienced employees may be limited and 
competition for these resources is intense, as well as continuing 
the development and execution of robust leadership succession 
plans.

includes  developing  and 

  This 

Furthermore, we are subject to regular review and audit by both 
foreign and domestic tax authorities.  While we believe our tax 
positions will be sustained, the final outcome of tax audits and 
related  litigation,  including  maintaining  our  intended  tax 
treatment  of  divestiture  transactions  such  as  the  fiscal  2017 
Beauty  Brands  transaction  with  Coty,  may  differ  materially 
from the tax amounts recorded in our Consolidated Financial 

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

Item 3.  Legal Proceedings.

The Procter & Gamble Company        7

In the U.S., we own and operate 25 manufacturing sites located 
in  19  different  states.    In  addition,  we  own  and  operate  85 
manufacturing  sites  in  37  other  countries.    Many  of  the 
domestic  and  international  sites  manufacture  products  for 
multiple businesses.  Beauty products are manufactured at 24 
of  these  locations;  Grooming  products  at  20;  Health  Care 
products at 18;  Fabric & Home Care products at 41; and Baby, 
Feminine  &  Family  Care  at  39.  We  own  our  Corporate 
headquarters in Cincinnati, Ohio. We own or lease our principal 
regional  general  offices  in  Switzerland,  Panama,  Singapore 
and  China.  We  own  or  lease  our  principal  regional  shared 
service  centers  in  Costa  Rica,  the  United  Kingdom  and  the 
Philippines. Management believes that the Company's sites are 
adequate to support the business and that the properties and 
equipment have been well maintained.

The Company is subject, from time to time, to certain legal 
proceedings  and  claims  arising  out  of  our  business,  which 
cover a wide range of matters, including antitrust and trade 
regulation, 
contracts, 
environmental issues, patent and trademark matters, labor and 
employment matters and tax.  See Note 12 to our Consolidated 
Financial  Statements  for  information  on  certain  legal 
proceedings for which there are contingencies.

advertising, 

liability, 

product 

This item should be read in conjunction with the Company's 
Risk Factors in Part I, Item 1A for additional information.

Item 4.  Mine Safety Disclosure.

Not applicable.

8        The Procter & Gamble Company

The names, ages and positions held by the Executive Officers of the Company on August 7, 2018, are:

EXECUTIVE OFFICERS OF THE REGISTRANT

Name

Position

Age

First Elected to
Officer Position

David S. Taylor

Chairman of the Board, President and Chief Executive
Officer

Jon R. Moeller

Vice Chairman and Chief Financial Officer

Steven D. Bishop

Group President - Global Health Care

Mary Lynn Ferguson-McHugh

Group President - Global Family Care and P&G Ventures

Carolyn M. Tastad

Group President - North America Selling and Market
Operations

Gary A. Coombe

President - Global Grooming

Kathleen B. Fish

Chief Research, Development and Innovation Officer

Fama Francisco

President - Global Baby Care and Baby and Feminine Care
Sector

M. Tracey Grabowski

Chief Human Resources Officer

Shailesh Jejurikar

President - Global Fabric Care and Fabric & Home Care
Sector

R. Alexandra Keith

President - Global Hair Care and Beauty Sector

Deborah P. Majoras

Chief Legal Officer and Secretary

Juan Fernando Posada

President - Latin America Selling and Market Operations

Matthew Price

President - Greater China Selling and Market Operations

Marc S. Pritchard

Chief Brand Officer

Loïc Tassel

President - Europe Selling and Market Operations

Jeffrey K. Schomburger

Global Sales Officer

Valarie L. Sheppard

Senior Vice President, Comptroller and Treasurer

Yannis Skoufalos

Global Product Supply Officer

Magesvaran Suranjan

President - Asia Pacific Selling and Market Operations and
India, Middle East and Africa (IMEA) Selling and Market
Operations

60

54

54

58

57

54

61

50

50

51

50

54

56

52

58

51

56

54

61

48

All the Executive Officers named above have been employed by the Company for more than the past five years.

2013

2009

2016

2016

2014

2014

2014

2018

2018

2018

2017

2010

2015

2015

2008

2018

2015

2005

2011

2015

The Procter & Gamble Company        9

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

ISSUER PURCHASES OF EQUITY SECURITIES

PART II

Period

4/1/2018 - 4/30/2018

5/1/2018 - 5/31/2018

6/1/2018 - 6/30/2018
Total

Total Number of
Shares Purchased (1)

Average Price
Paid per Share (2)

6,119,071

6,160,881

5,914,776

18,194,728

$76.82

73.04

76.08

$75.30

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (3)

6,119,071

6,160,881

5,914,776

18,194,728

Approximate Dollar Value of
Shares that May Yet Be
Purchased Under Our Share
Repurchase Program
(3)

(3)

(3)

(3)

(1)  All transactions were made in the open market with large financial institutions.  This table excludes shares withheld from employees to 
satisfy minimum tax withholding requirements on option exercises and other equity-based transactions.  The Company administers cashless 
exercises through an independent third party and does not repurchase stock in connection with cashless exercises.

(2)  Average price paid per share is calculated on a settlement basis and excludes commission.
(3)  On April 19, 2018, the Company stated that in fiscal year 2018 the Company expected to reduce outstanding shares through direct share 
repurchases at a value of approximately $6 to $8 billion, notwithstanding any purchases under the Company's compensation and benefit 
plans.  The share repurchases were authorized pursuant to a resolution issued by the Company's Board of Directors and were financed 
through a combination of operating cash flows and issuance of long-term and short-term debt.  The total value of the shares purchased 
under the share repurchase plan was $7.0 billion.  The share repurchase plan ended on June 30, 2018.

Additional information required by this item can be found in Part III, Item 12 of this Form 10-K.

SHAREHOLDER RETURN PERFORMANCE GRAPHS

Market and Dividend Information

P&G has been paying a dividend for 128 consecutive years since its original incorporation in 1890 and has increased its dividend 
for  62  consecutive  years.    Over  the  past  five  years,  the  dividend  has  increased  at  an  annual  compound  average  rate  of  4%.  
Nevertheless, as in the past, further dividends will be considered after reviewing dividend yields, profitability expectations and 
financing needs and will be declared at the discretion of the Company's Board of Directors.

(in dollars; split-adjusted)

Dividends per share

1958

1968

1978

1988

1998

2008

2018

$

0.02

$

0.04

$

0.08

$

0.17

$

0.51

$

1.45

$

2.79

10        The Procter & Gamble Company

Quarterly Dividends

Quarter ended

September 30

December 31

March 31

June 30

Common Stock Price Range

Quarter ended

September 30

December 31

March 31

June 30

2017 - 2018

2016 - 2017

$

0.6896

0.6896

0.6896

0.7172

$

0.6695

0.6695

0.6695

0.6896

2017 - 2018

2016 - 2017

High

Low

High

Low

$

94.67

$

93.51

91.92

79.51

86.31

85.43

75.81

70.74

$

90.22

$

90.32

92.00

91.13

84.32

81.18

83.24

85.52

P&G trades on the New York Stock Exchange and NYSE Euronext-Paris under the stock symbol PG.  There were approximately 
3.2 million common stock shareowners, including shareowners of record, participants in the P&G Direct Stock Purchase Plan, 
participants in P&G stock ownership plans and beneficial owners with accounts at banks and brokerage firms, as of June 30, 2018. 

Shareholder Return

The following graph compares the cumulative total return of P&G’s common stock for the five-year period ended June 30, 2018, 
against the cumulative total return of the S&P 500 Stock Index (broad market comparison) and the S&P 500 Consumer Staples 
Index (line of business comparison).  The graph and table assume $100 was invested on June 30, 2013, and that all dividends were 
reinvested.

Company Name/Index

P&G

S&P 500 Index

S&P 500 Consumer Staples Index

Cumulative Value of $100 Investment, through June 30

2013

2014

2015

2016

2017

2018

$

100 $

105 $

108 $

121 $

100

100

125

115

134

126

139

150

128 $
164

154

119

188

148

The Procter & Gamble Company        11

Item 6.  Selected Financial Data.

The information required by this item is incorporated by reference to Note 1 and Note 2 to our Consolidated Financial Statements.  
For further details behind the business drivers for recent results presented below, see the Management's Discussion and Analysis.

Financial Summary (Unaudited)

Amounts in millions, except per share amounts

Net sales

Gross profit

Operating income

Net earnings from continuing operations

Net earnings/(loss) from discontinued operations

Net earnings attributable to Procter & Gamble

Net earnings margin from continuing operations
Basic net earnings per common share: (1)
Earnings from continuing operations

Earnings/(loss) from discontinued operations

Basic net earnings per common share
Diluted net earnings per common share: (1)
Earnings from continuing operations

Earnings/(loss) from discontinued operations

Diluted net earnings per common share

Dividends per common share

2018
$ 66,832

32,564

13,711

9,861

—

9,750

2017

2016

2015

2014

2013

$ 65,058

$ 65,299

$ 70,749

$ 74,401

$ 73,910

32,523

13,955

10,194

5,217

15,326

32,390

13,441

10,027

577

10,508

33,693

11,049

8,287
(1,143)
7,036

35,371

13,910

10,658

1,127

11,643

35,858

13,051

10,346

1,056

11,312

14.8%

15.7%

15.4%

11.7%

14.3%

14.0%

$

$

$

$

$

3.75

—

3.75

3.67

—

3.67

2.79

$

$

$

$

$

3.79

2.01

5.80

3.69

1.90

5.59

2.70

$

$

$

$

$

3.59

0.21

3.80

3.49

0.20

3.69

2.66

$

$

$

$

$

2.92
(0.42)
2.50

2.84
(0.40)
2.44

2.59

$

$

$

$

$

3.78

0.41

4.19

3.63

0.38

4.01

2.45

$

$

$

$

$

3.65

0.39

4.04

3.50

0.36

3.86

2.29

Research and development expense

$ 1,908

$ 1,874

$ 1,879

$ 1,991

$ 1,910

$ 1,867

Advertising expense

Total assets

Capital expenditures

Long-term debt

Shareholders' equity

7,103

7,118

7,243

7,180

7,867

8,188

118,310

120,406

127,136

129,495

144,266

139,263

3,717

20,863

3,384

18,038

3,314

18,945

3,736

18,327

3,848

19,807

4,008

19,111

$ 52,883

$ 55,778

$ 57,983

$ 63,050

$ 69,976

$ 68,709

(1)  Basic net earnings per common share and Diluted net earnings per common share are calculated based on Net earnings attributable to 

Procter & Gamble.

12        The Procter & Gamble Company

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

Management's Discussion and Analysis

Forward-Looking Statements

the 

limitation, 

Certain statements in this report, 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.  Forward-
looking  statements  may  appear  throughout  this  report, 
including  without 
following  sections: 
“Management's Discussion and Analysis” and “Risk Factors.”  
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.    A  detailed 
discussion of risks and uncertainties that could cause actual 
results  and  events  to  differ  materially  from  those  projected 
herein  is  included,  without  limitation,  in  the  section  titled 
"Economic Conditions and Uncertainties" and the section titled 
“Risk  Factors”  (Part  I,  Item 1A  of  this  Form  10-K).    We 
undertake  no  obligation  to  update  or  revise  publicly  any 
forward-looking  statements,  whether  because  of  new 
information, future events or otherwise.

The  purpose  of  Management's  Discussion  and  Analysis 
(MD&A) is to provide an understanding of Procter & Gamble's 
financial  condition,  results  of  operations  and  cash  flows  by 
focusing on changes in certain key measures from year to year.  
The MD&A is provided as a supplement to, and should be read 
in  conjunction  with,  our  Consolidated  Financial  Statements 
and  accompanying  notes.    The  MD&A  is  organized  in  the 
following sections:

Summary of 2018 Results 

•  Overview
• 
•  Economic Conditions and Uncertainties
•  Results of Operations
• 
Segment Results
•  Cash Flow, Financial Condition and Liquidity
Significant Accounting Policies and Estimates
• 
•  Other Information

Throughout  the  MD&A  we  refer  to  measures  used  by 
management to evaluate performance, including unit volume 
growth, net sales and net earnings.  We also refer to a number 
of financial measures that are not defined under accounting 
principles generally accepted in the United States of America 
(U.S. GAAP), including organic sales growth, core earnings 
per share (Core EPS), adjusted free cash flow and adjusted free 
cash  flow  productivity.    Organic  sales  growth  is  net  sales 

growth  excluding  the  impacts  of  acquisitions,  divestitures, 
foreign exchange and India Goods and Services tax changes 
from  year-over-year  comparisons.    Core  EPS  is  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.    Adjusted  free  cash  flow  is 
operating  cash  flow  less  capital  spending  and  certain 
divestiture impacts.  Adjusted free cash flow productivity is 
the ratio of adjusted free cash flow to net earnings excluding 
certain one-time items.  We believe these measures provide our 
investors  with  additional  information  about  our  underlying 
results and trends, as well as insight to some of the metrics 
used to evaluate management.  The explanation at the end of 
the MD&A provides more details on the use and the derivation 
of these measures.

Management  also  uses  certain  market  share  and  market 
consumption  estimates  to  evaluate  performance  relative  to 
competition despite some limitations on the availability and 
comparability  of  share  and  consumption 
information.  
References to market share and consumption in the MD&A are 
based on a combination of vendor purchased traditional brick-
and-mortar and online data in key markets as well as internal 
estimates. All market share references represent the percentage 
of  sales  in  dollar  terms  on  a  constant  currency  basis  of  our 
products,  relative  to  all  product  sales  in  the  category.  The 
Company measures fiscal-year-to-date market shares through 
the most recent period for which market share data is available, 
which typically reflects a lag time of one or two months.

OVERVIEW

P&G  is  a  global  leader  in  the  fast-moving  consumer  goods 
industry,  focused  on  providing  branded  consumer  packaged 
goods of superior quality and value to our consumers around 
the world.  Our products are sold in more than 180 countries 
and  territories  primarily  through  mass  merchandisers,  e-
commerce,  grocery  stores,  membership  club  stores,  drug 
stores, department stores, distributors, baby stores, specialty 
beauty stores, high-frequency stores and pharmacies.  We have 
on-the-ground operations in approximately 70 countries.

Our  market  environment  is  highly  competitive  with  global, 
regional and local competitors.  In many of the markets and 
industry segments in which we sell our products, we compete 
against other branded products, as well as retailers' private-
label brands.  Additionally, many of the product segments in 
which we compete are differentiated by price tiers (referred to 
as super-premium, premium, mid-tier and value-tier products).  
We are well positioned in the industry segments and markets 
in which we operate, often holding a leadership or significant 
market share position.

The Procter & Gamble Company        13

ORGANIZATIONAL STRUCTURE

Our organizational structure is comprised of Global Business Units (GBUs), Selling and Market Operations (SMOs), Global 
Business Services (GBS) and Corporate Functions (CF).
Global Business Units

Our GBUs are organized into ten product categories.  Under U.S. GAAP, the GBUs underlying the ten product categories are 
aggregated into five reportable segments:  Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family 
Care.  The GBUs are responsible for developing overall brand strategy, new product upgrades and innovations and marketing 
plans.  The following provides additional detail on our reportable segments and the ten product categories and brand composition 
within each segment.

Reportable Segments

% of
Net Sales (1)

% of Net
Earnings (1)

Beauty

19%

23%

Grooming

10%

14%

Health Care

12%

13%

Fabric & Home Care

32%

27%

Baby, Feminine &
Family Care

27%

23%

Product Categories (Sub-Categories)

Hair Care (Conditioner, Shampoo, Styling Aids, 
Treatments)
Skin and Personal Care (Antiperspirant and 
Deodorant, Personal Cleansing, Skin Care)
Grooming (2) (Shave Care - Female Blades & 
Razors, Male Blades & Razors, Pre- and Post-
Shave Products, Other Shave Care; Appliances)
Oral Care (Toothbrushes, Toothpaste, Other Oral 
Care)
Personal Health Care (Gastrointestinal, Rapid 
Diagnostics, Respiratory, Vitamins/Minerals/
Supplements, Other Personal Health Care)
Fabric Care (Fabric Enhancers, Laundry 
Additives, Laundry Detergents)
Home Care (Air Care, Dish Care, P&G 
Professional, Surface Care)

Major Brands
Head & Shoulders,
Pantene, Rejoice

Olay, Old Spice,
Safeguard, SK-II

Braun, Fusion, Gillette,
Mach3, Prestobarba,
Venus

Crest, Oral-B

Metamucil, Prilosec,
Vicks

Ariel, Downy, Gain, Tide

Cascade, Dawn, Febreze,
Mr. Clean, Swiffer

Baby Care (Baby Wipes, Diapers and Pants)
Feminine Care (Adult Incontinence, Feminine 
Care)

Luvs, Pampers

Always, Tampax

Family Care (Paper Towels, Tissues, Toilet Paper) Bounty, Charmin, Puffs

(1)  Percent of Net sales and Net earnings from continuing operations for the year ended June 30, 2018 (excluding results held in Corporate).
(2)  The Grooming product category is comprised of the Shave Care and Appliances GBUs.  

Recent Developments: 

During fiscal 2018, the Company entered into an agreement to 
acquire  the  over  the  counter  (OTC)  healthcare  business  of 
Merck KGaA for €3.375  billion ($3.9 billion based on current 
exchange rates).  This business primarily sells OTC consumer 
healthcare products, mainly in Europe, Latin America and Asia 
markets.  Total sales for the business during its most recent 
fiscal year were approximately $1 billion.   We anticipate the 
transaction to close during fiscal 2019, with the timing subject 
to regulatory clearance and customary closing conditions.   The 
Company  also  reached  an  agreement  during  fiscal  2018  to 
dissolve our PGT Healthcare partnership, a venture between 
the Company and Teva Pharmaceutical Industries, Ltd (Teva) 
in  the  OTC  consumer  healthcare  business.    Pursuant  to  the 
agreement,  PGT  product  assets  will  return  to  the  original 
respective parent companies to reestablish independent OTC 
businesses.  This transaction was completed in July 2018 and 
will be accounted for as a sale of the Teva portion of the PGT 
business.  The Company expects to record an after-tax gain on 
the sale of approximately $285 million.

During fiscal 2017, the Company completed the divestiture of 
four product categories, which included 43 of the Company's 
beauty brands ("Beauty Brands"), including the global salon 
professional hair care and color, retail hair color, cosmetics and 
the  fine  fragrance  businesses,  along  with  select  hair  styling 
brands.  The Beauty Brands had historically been part of the 
Company’s  Beauty  reportable  segment.    The  results  of  the 
Beauty Brands are presented as discontinued operations and, 
as  such,  are  excluded  from  both  continuing  operations  and 
segment results for all periods presented. 

During fiscal 2016, the Company completed the divestiture of 
its Batteries business.  The Batteries business had historically 
been part of the Company’s Fabric & Home Care reportable 
segment.  The results of the Batteries business are presented 
as discontinued operations and, as such, are excluded from both 
continuing  operations  and  segment  results  for  all  periods 
presented. 

As a result of these divestitures, the Company's portfolio is 
comprised of 10 category-based businesses where P&G has 

14        The Procter & Gamble Company

leading  market  positions,  strong  brands  and  consumer 
meaningful product technologies.

Refer to Note 13 to our Consolidated Financial Statements for 
more details on each of these divestiture transactions.
Beauty:  We are a global market leader in the beauty category.  
Most of the beauty markets in which we compete are highly 
fragmented  with  a  large  number  of  global  and  local 
competitors.  We compete in skin and personal care and in hair 
care.    In  skin  and  personal  care,  we  offer  a  wide  variety  of 
products, ranging from deodorants to personal cleansing to skin 
care, such as our Olay brand, which is one of the top facial skin 
care brands in the world with nearly 6% global market share.  
We are the global market leader in the retail hair care market 
with  over  20%  global  market  share  primarily  behind  our 
Pantene and Head & Shoulders brands. 
Grooming:  We compete in shave care and appliances. In Shave 
Care, we are the global market leader in the blades and razors 
market.  Our global blades and razors market share is nearly 
65%,  primarily  behind  the  Gillette  franchise,  including  our 
  Our 
Fusion,  Mach3,  Prestobarba  and  Venus  brands. 
appliances,  such  as  electric  shavers  and  epilators,  are  sold 
under the Braun brand in a number of markets around the world 
where  we  compete  against  both  global  and  regional 
competitors.  We hold nearly 25% of the male shavers market 
and over 50% of the female epilators market.
Health Care:  We compete in oral care and personal health 
care.  In oral care, there are several global competitors in the 
market and we have the number two market share position with 
nearly 20% global market share behind our Oral-B and Crest 
brands.  In personal health care, we are a top ten competitor in 
a  large,  highly  fragmented  industry,  primarily  behind 
(Vicks  brand),  non-prescription 
respiratory 
heartburn  medications  (Prilosec  OTC  brand)  and  digestive 
wellness  products  (Metamucil,  Pepto  Bismol  and  Align 
brands).  Nearly all of our sales outside the U.S. in personal 
health  care  are  generated  through  the  PGT  Healthcare 
partnership with Teva Pharmaceuticals Ltd. In April 2018, we 
reached  an  agreement  to  dissolve  the  PGT  Healthcare 
partnership  and  to  acquire  the  OTC  healthcare  business  of 
Merck KGaA as discussed above. 
Fabric & Home Care:  This segment is comprised of a variety 
of fabric care products, including laundry detergents, additives 
and  fabric  enhancers;  and  home  care  products,  including 
dishwashing liquids and detergents, surface cleaners and air 
fresheners.  In fabric care, we generally have the number one 
or number two market share position in the markets in which 
we compete and are the global market leader with over 25% 
global  market  share,  primarily  behind  our  Tide,  Ariel  and 
Downy brands.  Our global home care market share is over 
20% across the categories in which we compete.
Baby, Feminine & Family Care:  In baby care, we are the 
global market leader and compete mainly in diapers, pants and 
baby wipes with over 25% global market share.  We have the 
number one or number two market share position in most of 
the  key  markets  in  which  we  compete,  primarily  behind 
Pampers, the Company's largest brand, with annual net sales 
of more than $8 billion.  We are the global market leader in the 

treatments 

feminine care category with over 25% global market share, 
primarily  behind  Always.    We  also  compete  in  the  adult 
incontinence category in certain markets, achieving over 10% 
market share in most of the markets where we compete.  Our 
family  care  business  is  predominantly  a  North  American 
business  comprised  largely  of  the  Bounty  paper  towel  and 
Charmin toilet paper brands.  U.S. market shares are over 40% 
for Bounty and over 25% for Charmin.
Selling and Market Operations

Our SMOs are responsible for developing and executing go-
to-market plans at the local level.  The SMOs include dedicated 
retail customer, trade channel and country-specific teams.  Our 
SMOs  are  organized under  six regions,  comprised of  North 
America, Europe, Latin America, Asia Pacific, Greater China 
and India, Middle East and Africa (IMEA).  Throughout the 
MD&A, we reference business results in developed markets, 
which are comprised of North America, Western Europe and 
Japan, and developing markets, which are all other markets not 
included in developed.  
Corporate Functions

CF  provides  company-level  strategy  and  portfolio  analysis, 
corporate  accounting, 
tax,  external  relations, 
treasury, 
governance,  human  resources  and  legal,  as  well  as  other 
centralized functional support.
Global Business Services

GBS provides technology, processes and standard data tools 
to  enable  the  GBUs,  the  SMOs  and  Corporate  Functions  to 
better understand the business and better serve consumers and 
customers.  The GBS organization is responsible for providing 
world-class solutions at a low cost and with minimal capital 
investment.
STRATEGIC FOCUS

P&G aspires to serve the world’s consumers better than our 
best  competitors  in  every  category  and  in  every  country  in 
which we compete, and, as a result, deliver total shareholder 
return in the top one-third of our peer group.  Delivering and 
sustaining  leadership  levels  of  shareholder  value  creation 
requires  balanced  top-line  growth,  bottom-line  growth  and 
strong cash generation.

Our strategic choices are focused on winning with consumers.  
The consumers who purchase and use our products are at the 
center  of  everything  we  do.   We  win  with  consumers  by 
delivering superiority across the five key elements of product, 
packaging, brand communication, retail execution and value 
equation.

Winning with consumers around the world and against our best 
competitors requires innovation.  Innovation has always been, 
and  continues  to  be,  P&G’s  lifeblood.   Innovation  requires 
consumer insights and technology advancements that lead to 
product 
and 
merchandising programs and game-changing inventions that 
create new brands and categories.  

improved  marketing 

improvements, 

Productivity improvement is critical to delivering our balanced 
top-line  growth,  bottom-line  growth  and  value  creation 
objectives.   Productivity  improvement  and  sales  growth 
reinforce  and  fuel  each  other.   We  are  driving  productivity 

improvement  across  all  elements  of  cost,  including  cost  of 
goods  sold,  marketing  and  promotional  expenses  and  non-
manufacturing overhead.  Productivity improvements and cost 
savings  are  being  reinvested  in  product  and  packaging 
improvements,  brand  awareness-building  advertising  and 
trial-building  sampling  programs,  increased  sales  coverage 
and R&D programs.

We are improving operational effectiveness and organizational 
culture through enhanced clarity of roles and responsibilities, 
accountability and incentive compensation programs.

The Company has undertaken an effort to focus and strengthen 
its business portfolio to compete in categories and with brands 
that are structurally attractive and that play to P&G's strengths.  
The  ongoing  portfolio  of  businesses  consists  of  10  product 
categories.    These  are  categories  where  P&G  has  leading 
market  positions,  strong  brands  and  consumer-meaningful 
product technologies.

The Procter & Gamble Company        15

We believe these strategies are right for the long-term health 
of  the  Company  and  our  objective  of  delivering  total 
shareholder return in the top one-third of our peer group.

The Company expects the delivery of the following long-term 
annual financial targets will result in total shareholder returns 
in the top third of the competitive peer group:

•  Organic  sales  growth  above  market  growth  rates  in  the 

categories and geographies in which we compete;
•  Core EPS growth of mid-to-high single digits; and
•  Adjusted free cash flow productivity of 90% or greater.

In  periods  with  significant  macroeconomic  pressures,  we 
intend to maintain a disciplined approach to investing so as not 
to sacrifice the long-term health of our businesses to meet short-
term objectives in any given year.

$

2018
66,832
13,711
9,861
—
9,750
3.67
3.67
4.22
14,867

Change vs.
Prior Year

3 % $
(2)%
(3)%
N/A
(36)%
(34)%
(1)%
8 %
17 %

2017
65,058
13,955
10,194
5,217
15,326
5.59
3.69
3.92
12,753

Change vs.
Prior Year

— % $
4 %
2 %
N/A
46 %
51 %
6 %
7 %
(17)%

2016
65,299
13,441
10,027
577
10,508
3.69
3.49
3.67
15,435

primarily due to the net impact of a gain on the sale of our 
Beauty Brands business. 

•  Net earnings attributable to Procter & Gamble were $9.8 
billion, a decrease of $5.6 billion or 36% versus the prior 
year primarily due to the aforementioned reduction in net 
earnings from discontinued operations.

•  Diluted net earnings per share decreased 34% to $3.67.

  Diluted  net  earnings  per  share  from  continuing 

operations decreased 1% to $3.67.
  Core EPS increased 8% to $4.22.

•  Cash flow from operating activities was $14.9 billion.
  Adjusted free cash flow was $11.2 billion.
  Adjusted free cash flow productivity was 104%.

SUMMARY OF 2018 RESULTS

Amounts in millions, except per share amounts
Net sales
Operating income
Net earnings from continuing operations
Net earnings from discontinued operations
Net earnings attributable to Procter & Gamble
Diluted net earnings per common share
Diluted net earnings per share from continuing operations
Core earnings per share
Cash flow from operating activities

•  Net sales increased 3% to $66.8 billion including a positive 

2% impact from foreign exchange.
  Organic  sales  increased  1%  on  a  2%  increase  in 

organic volume.

  Unit volume increased 1%.  Volume increased low 
single  digits  in  Beauty,  Health  Care  and  Fabric  & 
Home Care and was unchanged in Grooming. Volume 
decreased  low  single  digits  in  Baby,  Feminine  & 
Family Care. Excluding the impact of minor brand 
divestitures,  organic  volume  increased  mid-single 
digits in Fabric & Home Care.

•  Net earnings from continuing operations decreased $333 
million  or  3%  in  fiscal  2018,  due  primarily  to  the 
transitional  impacts  of  the  U.S. Tax  Cuts  and  Jobs Act 
(U.S. Tax Act). Please refer to Note 5 to our Consolidated 
Financial Statements for further discussion on tax impacts. 
Operating income decreased 2% due to reduced margins, 
partially offset by net sales growth. This was largely offset 
by an increase in Other non-operating income/(expense), 
net, due to higher costs of early extinguishment of debt in 
the  base  period.  Favorable  foreign  exchange  impacts 
increased  net  earnings  from  continuing  operations  by 
approximately $125 million or 1%.

•  Net earnings from discontinued operations were zero in 
fiscal  2018  compared  to  $5.2  billion  in  fiscal  2017 

16        The Procter & Gamble Company

ECONOMIC CONDITIONS AND UNCERTAINTIES

We discuss expectations regarding future performance, events 
and outcomes, such as our business outlook and objectives, in 
annual and quarterly reports, press releases and other written 
and  oral  communications.   All  such  statements,  except  for 
historical  and  present  factual  information,  are  "forward-
looking statements" and are based on financial data and our 
business plans available only as of the time the statements are 
made,  which  may  become  out-of-date  or  incomplete.    We 
assume  no  obligation 
to  update  any  forward-looking 
statements as a result of new information, future events or other 
factors.  Forward-looking statements are inherently uncertain 
and investors must recognize that events could be significantly 
different from our expectations.  For more information on risks 
that could impact our results, refer to Item 1A Risk Factors in 
this Form 10-K.
Global  Economic  Conditions.  Current  macroeconomic 
factors  remain  dynamic,  and  any  causes  of  market  size 
contraction,  such  as  reduced  GDP  in  commodity-dependent 
economies, greater political unrest in the Middle East, Central 
&  Eastern  Europe  and  the  Korean  peninsula,  economic 
uncertainty related to the execution of the United Kingdom's 
exit from the European Union, political instability in certain 
Latin American  markets  and  overall  economic  slowdowns, 
could reduce our sales or erode our operating margin, in either 
case reducing our earnings.
Changes  in  Costs.    Our  costs  are  subject  to  fluctuations, 
particularly due to changes in commodity prices, transportation 
costs and our own productivity efforts.  We have significant 
exposures  to  certain  commodities,  in  particular  certain  oil-
derived  materials  like  resins  and  paper-based  materials  like 
pulp,  and  volatility  in  the  market  price  of  these  commodity 
input  materials  has  a  direct  impact  on  our  costs.    If  we  are 
unable  to  manage  commodity  and  other  cost  fluctuations 
through  pricing  actions,  cost  savings  projects  and  sourcing 
through  consistent  productivity 
decisions,  as  well  as 
improvements,  it  may  adversely  impact  our  gross  margin, 
operating  margin  and  net  earnings.    Sales  could  also  be 
adversely  impacted  following  pricing  actions  if  there  is  a 
negative impact on consumption of our products.  We strive to 
implement,  achieve  and  sustain  cost  improvement  plans, 
including outsourcing projects, supply chain optimization and 
general overhead and workforce optimization.  As discussed 
later in this MD&A, we initiated certain non-manufacturing 
overhead  reduction  projects  along  with  manufacturing  and 
other supply chain cost improvement projects in 2012.  In fiscal 
2017,  we  communicated  specific  elements  of  an  additional 
multi-year  cost  reduction  program  which  is  resulting  in 
enrollment  reductions  and  other  savings.    If  we  are  not 
successful  in  executing  and  sustaining  these  changes,  there 
could be a negative impact on our operating margin and net 
earnings.
Foreign Exchange. We have both translation and transaction 
exposure  to  the  fluctuation  of  exchange  rates.    Translation 
exposures relate to exchange rate impacts of measuring income 
statements of foreign subsidiaries that do not use the U.S. dollar 
as their functional currency.  Transaction exposures relate to 
1)  the  impact  from  input  costs  that  are  denominated  in  a 

currency  other  than  the  local  reporting  currency  and  2)  the 
revaluation  of  transaction-related  working  capital  balances 
denominated in currencies other than the functional currency.  
Over previous fiscal years, the U.S. dollar has strengthened 
versus a number of foreign currencies leading to lower sales 
and earnings from these foreign exchange impacts.  Certain 
countries experiencing significant exchange rate fluctuations, 
like Argentina, Egypt, Russia, Turkey and the United Kingdom 
have previously had, and could in the future have, a significant 
impact on our sales, costs and earnings.  Increased pricing in 
response to certain fluctuations in foreign currency exchange 
rates may offset portions of the currency impacts but could also 
have a negative impact on consumption of our products, which 
would affect our sales and profits.
 Government Policies.  Our net earnings could be affected by 
changes  in  U.S.  or  foreign  government  tax  policies,  for 
example,  the  U.S.  Tax Act  enacted  in  December  2017,  the 
implications  and  uncertainties  of  which  are  disclosed 
elsewhere in this report.  Additionally, we attempt to carefully 
manage  our  debt,  currency  and  other  exposures  in  certain 
countries  with  currency  exchange,  import  authorization  and 
pricing controls, such as Nigeria, Algeria and Egypt.  Further, 
our  earnings  and  sales  could  be  affected  by  changes  to 
in  North  America  and 
international 
elsewhere,  including  potential  increases  of  import  tariffs.  
Changes in government policies in these areas might cause an 
increase  or  decrease  in  our  sales,  operating  margin  and  net 
earnings.

trade  agreements 

For information on risk factors that could impact our results, 
please refer to “Risk Factors” in Part I, Item 1A of this Form 
10-K.
RESULTS OF OPERATIONS

The key metrics included in our discussion of our consolidated 
results of operations include net sales, gross margin, selling, 
general and administrative costs (SG&A), other non-operating 
items  and  income  taxes.   The  primary  factors  driving  year-
over-year changes in net sales include overall market growth 
in  the  categories  in  which  we  compete,  product  initiatives, 
competitive  activities  (the  level  of  initiatives  and  other 
activities by competitors), marketing spending and acquisition 
and  divestiture  activity,  all  of  which  drive  changes  in  our 
underlying unit volume, as well as pricing actions (which can 
also  indirectly  impact  volume),  changes  in  product  and 
geographic mix and foreign currency impacts on sales outside 
the U.S.

Most of our cost of products sold and SG&A are to some extent 
variable  in  nature.    Accordingly,  our  discussion  of  these 
operating costs focuses primarily on relative margins  rather 
than the absolute year-over-year changes in total costs.  The 
primary  drivers  of  changes  in  gross  margin  are  input  costs 
(energy and other commodities), pricing impacts, geographic 
mix  (for  example,  gross  margins  in  developed  markets  are 
generally  higher  than  in  developing  markets  for  similar 
products), product mix (for example, the Beauty segment has 
higher  gross  margins  than  the  Company  average),  foreign 
exchange rate fluctuations (in situations where certain input 
costs may be tied to a different functional currency than the 

underlying  sales),  the  impacts  of  manufacturing  savings 
projects and reinvestments (for example, product or package 
improvements) and to a lesser extent scale impacts (for costs 
that  are  fixed  or  less  variable  in  nature).    The  primary 
components  of  SG&A  are  marketing-related  costs  and  non-
manufacturing  overhead  costs.    Marketing-related  costs  are 
primarily variable in nature, although we may achieve some 
level of scale benefit over time due to overall growth and other 
marketing  efficiencies.    Overhead  costs  are  also  variable  in 
nature, but on a relative basis, less so than marketing costs due 
to  our  ability  to  leverage  our  organization  and  systems 
infrastructures to support business growth.  Accordingly, we 
generally  experience  more  scale-related  impacts  for  these 
costs.

The Company is in the midst of a productivity and cost savings 
plan  to  reduce  costs  in  the  areas  of  supply  chain,  certain 
marketing  activities  and  overhead  expenses.    The  plan  is 
designed  to  accelerate  cost  reductions  by  streamlining 
management decision making, manufacturing and other work 
processes to fund the Company's growth strategy.
Net Sales

Fiscal year 2018 compared with fiscal year 2017 

Net sales increased 3% to $66.8 billion in 2018 on a 1% increase 
in unit volume versus the prior year.  Volume increased low 
single digits in Beauty, Health Care and Fabric & Home Care 
and was unchanged in Grooming. Volume decreased low single 

Operating Costs

Comparisons as a percentage of net sales; Years ended June 30

Gross margin

Selling, general and administrative expense

Operating margin

Earnings from continuing operations before income taxes

Net earnings from continuing operations

Net earnings attributable to Procter & Gamble

Fiscal year 2018 compared with fiscal year 2017

• 
• 

Gross margin decreased 130 basis points to 48.7% of net sales 
in 2018.  Gross margin benefited 200 basis points from total 
manufacturing cost savings (170 basis points net of product 
and packaging reinvestments). This was more than offset by:
a 90 basis-point negative impact due to higher commodity 
• 
costs,
a 50 basis-point decline due to reduced pricing,
a 100 basis-point decline from unfavorable product mix 
(within segments due to the disproportionate growth of 
lower margin product forms, large sizes and club channels 
and  between  segments  caused  by  the  disproportionate 
volume growth in Fabric & Home Care, which has lower 
than company-average gross margins),
a 30 basis-point negative impact from higher restructuring 
charges and
a 30 basis-point negative impact from unfavorable foreign 
exchange.

• 

• 

The Procter & Gamble Company        17

digits  in  Baby,  Feminine  and  Family  Care.  Excluding  the 
impact  of  minor  brand  divestitures,  Fabric  &  Home  Care 
organic volume increased mid-single digits. 

Volume  increased  low  single  digits  in  developed  and 
developing regions. Favorable foreign exchange increased net 
sales by 2%. Pricing had a negative 1% impact on net sales. 
Product mix had a positive 1% impact on net sales primarily 
due  to  a  disproportionate  growth  in  super-premium  brands.  
Organic  sales  grew  1%  driven  by  a  2%  increase  in  organic 
volume.
Fiscal year 2017 compared with fiscal year 2016 

Net sales were unchanged at $65.1 billion in 2017 on a 1% 
increase in unit volume versus the prior year period.  Volume 
increased low single digits in Grooming, Health Care, Fabric 
& Home Care and Baby, Feminine & Family Care.  Volume 
decreased low single digits in Beauty.  Volume increased low 
single  digits  in  developed  regions  and  was  unchanged  in 
developing  regions.    Organic  volume  increased  low  single 
digits in both developed and developing markets.  Unfavorable 
foreign exchange reduced net sales by 2%.  Neither pricing nor 
mix had any net impact on net sales for the year.  Organic sales 
grew 2% driven by a 2% increase in organic volume.

2018

Basis Point
Change

2017

Basis Point
Change

2016

48.7%

28.2%

20.5%

19.9%

14.8%

14.6%

(130)
(30)
(100)
(50)
(90)
(900)

50.0%

28.5%

21.5%

20.4%

15.7%

23.6%

40
(50)
90
(10)
30

750

49.6%

29.0%

20.6%

20.5%

15.4%

16.1%

Total SG&A increased 2% to $18.9 billion driven by increased 
overhead and marketing spending, as well as an increase in 
other net operating expenses, primarily due to higher gains on 
real estate sales in the base period.  SG&A as a percentage of 
net sales decreased 30 basis points to 28.2%. Reductions in 
marketing and overhead spending as a percentage of net sales 
were  partially  offset  by  an  increase  in  other  net  operating 
expenses.

•  Marketing spending as a percentage of net sales decreased 
30 basis points, primarily driven by reductions in agency 
compensation and production costs.

•  Overhead costs as a percentage of net sales decreased 30 
basis points, primarily driven by productivity savings and 
sales  growth 
leverage,  partially  offset  by  higher 
restructuring costs versus the base year.

•  Other  operating  expenses  as  a  percentage  of  net  sales 
increased 30 basis points primarily due to gains on the sale 
of real estate in the base year.

18        The Procter & Gamble Company

Fiscal year 2017 compared with fiscal year 2016 

Gross margin increased 40 basis points (bps) to 50.0% of net 
sales in 2017.  Gross margin increased primarily due to:
• 

a 230 basis-point positive impact from total manufacturing 
cost  savings  (210  basis  points  net  of  product  and 
packaging reinvestments),
a 20 basis-point benefit from lower restructuring charges 
and
a 10 basis-point benefit from positive scale impacts due 
to higher volume.

• 

• 

These impacts were partially offset by:
• 

a 90 basis-point decrease from unfavorable product mix 
between segments (caused primarily by the lower relative 
proportion of sales in Grooming, which has higher than 
company-average  gross  margins)  and  within  segments 
(due to disproportionate growth of lower margin products, 
forms and package sizes in certain businesses),
a 40 basis-point negative impact from unfavorable foreign 
exchange and

a  combined  70  basis-point  impact  due  to  higher 
commodities and other costs.

• 

• 

Total  SG&A  decreased  2%  to  $18.6  billion  as  increased 
overhead and advertising spending were more than offset by a 
reduction  in  other  operating  expenses,  primarily  due  to  a 
reduction in net foreign exchange transactional costs and gains 
on  real  estate  sales.    SG&A  as  a  percentage  of  net  sales 
decreased 50 basis points to 28.5% as a result of the decline in 
other operating expenses.

•  Marketing spending as a percentage of net sales increased 
10 basis points due to an increase in marketing activities, 
partially offset by productivity savings.

•  Overhead costs as a percentage of net sales increased 20 
basis  points,  primarily  driven  by  wage  inflation  and 
increased sales personnel in certain businesses, partially 
offset by 20 basis points of productivity savings.

•  Other operating expenses as a percent of net sales declined 
80  basis  points.    Lower  foreign  exchange  transactional 
charges reduced SG&A as a percentage of net sales by 
approximately  20  basis  points.    The  balance  of  the 
reduction  is  primarily  driven  by  gains  on  sales  of  real 
estate.

Non-Operating Items

Fiscal year 2018 compared with fiscal year 2017

• 

• 

Interest expense was $506 million in 2018, an increase of 
$41  million  versus  the  prior  year  due  to  an  increase  in 
average long term debt balances and an increase in U.S. 
interest rates.
Interest income was $247 million in 2018, an increase of 
$76  million  versus  the  prior  year  primarily  due  to  an 
increase in average balances of interest bearing cash and 
cash equivalents and investment securities balances and 
an increase in U.S. interest rates.

•  Other  non-operating  income/(expense),  which  consists 
primarily  of  divestiture  gains,  investment  income  and 
other  non-operating  items  was  a  net  expense  of  $126 
million in 2018, an improvement of $278 million versus 

the prior year primarily due to lower charges for the early 
extinguishment of debt (which totaled $346 million in the 
current  year  and  $543  million  in  the  base  year)  and  an 
increase in minor brand divestiture gains. In the current 
year we had approximately $190 million in minor brand 
divestiture gains, including Swisse, Bold and other minor 
brands. In 2017, we had approximately $110 million in 
minor  brand  divestiture  gains,  including  Hipoglos  and 
other minor brands. 

Fiscal year 2017 compared with fiscal year 2016

• 

• 

Interest expense was $465 million in 2017, a decrease of 
$114 million versus the prior  year due to a decrease in 
weighted average interest rates.
Interest income was $171 million in 2017, comparable to 
2016.

•  Other  non-operating  income/(expense),  which  consists 
primarily  of  divestiture  gains,  investment  income  and  
other  non-operating  items,  was  a  net  expense  of  $404 
million in 2017 versus a net income of $325 million in 
2016,  a  $729  million  year-over-year  decrease.    This 
change is due to a $543 million current-year charge related 
to early extinguishment of long-term debt and a reduction 
in  gains  on  minor  brand  divestitures.    In  2017,  we  had 
approximately  $110  million  in  minor  brand  divestiture 
gains,  including  Hipoglos  (a  baby  care  brand  sold 
primarily in Brazil) and other minor brands.  The prior 
year  divestiture  activities  included  approximately  $300 
million in minor brand divestiture gains, including Escudo 
and certain hair care brands in Europe and IMEA.

Income Taxes

Fiscal year 2018 compared with fiscal year 2017 
The effective tax rate on continuing operations increased 290
basis points to 26.0% in 2018. A net transitional charge of $602 
million resulting from the enactment of the U.S. Tax Act caused 
a 450 basis-point increase in the current period rate (see Note 
5  to  the  Consolidated  Financial  Statements  for  further 
discussion). The remaining net decrease of 160 basis points in 
the effective rate was driven by:
• 

a  280  basis-point  year  over  year  reduction  from  the 
ongoing impacts of the U.S. Tax Act, as the impact of the 
lower blended U.S. federal rate on current year earnings 
versus  prior  year  rate  was  partially  offset  by  reduced 
foreign tax credits versus prior year due to the inability to 
fully credit foreign taxes under the U.S. Tax Act,
a  170  basis-point  reduction  from  favorable  geographic 
mix of earnings, primarily due to a greater proportion of 
income in lower tax foreign jurisdictions, 
a 180 basis-point increase from reduced favorable discrete 
impacts related to uncertain income tax positions (which 
netted to approximately 25 basis points in the current year 
versus 205 basis points in the prior year),
a 70 basis-point increase from reduced excess tax benefits 
from  share-based  compensation  (60  basis  points  in  the 
current year versus 130 basis points in the prior year) and
a  40  basis-point  unfavorable  impact  due  to  reduced 
benefits from the tax impacts of early extinguishment of 
long-term  debt  (10  basis-point  benefit  in  current  year 
versus 50 basis-point benefit in the prior year).

• 

• 

• 

• 

Fiscal year 2017 compared with fiscal year 2016 
The effective tax rate on continuing operations decreased 190 
basis points to 23.1%.  The rate declined due to:
• 

a  130  basis-point  impact  from  excess  tax  benefits 
associated with share-based payments due to the adoption 
of FASB Accounting Standards Update (ASU) 2016-09 
Improvements 
to  Employee  Share-based  Payment 
Accounting in 2017,
a 150 basis-point benefit  from discrete impacts related to 
uncertain 
to 
approximately 205 basis points in the current year versus 
55 basis points in the prior year),
a 50 basis-point benefit from the tax impact of the early 
extinguishment of long-term debt and
a 130 basis-point benefit from the prior year establishment 
of a valuation allowance on deferred tax assets related to 
net operating loss carryforwards.

tax  positions  (which  netted 

income 

• 

• 

• 

These  benefits  were  partially  offset  by  a  230  basis-point 
increase from unfavorable geographic mix, primarily due to a 
greater proportion of total income taxed in the U.S. and a 40 
basis-point  increase  due  to  the  impact  of  minor  brand 
divestitures.
Net Earnings

Fiscal year 2018 compared with fiscal year 2017 

Net earnings from continuing operations decreased 3% to $9.9 
billion.  Operating income decreased $244 million, or 2%, as 
the increase in net sales and decrease in SG&A as a percentage 
of net sales were more than offset by the reduction in gross 
margin. The increase in net non-operating income/(expense) 
discussed  above  benefited  net  earnings.  Net  earnings  from 
continuing  operations  before  taxes  increased  1%.  Increased 
income  tax  expense  negatively  impacted  net  earnings  from 
continuing operations by approximately 4% due largely to the 
net charge for the transitional impact of the U.S. Tax Act in 
2018. Foreign exchange had a positive impact of $125 million 
on  net  earnings  in  2018  due  to  strengthening  of  certain 
currencies against the U.S. dollar, including those in the United 
Kingdom,  China,  Canada  and  Russia.  This  impact  includes 
both  transactional  charges  and  translational  impacts  from 
converting earnings from foreign subsidiaries to U.S. dollars.

Net earnings from discontinued operations were zero in 2018. 
Net earnings from discontinued operations were $5.2 billion 
in 2017, primarily due to the gain on the sale of the Beauty 
Brands which closed on October 1, 2016 (see Note 13 to the 
Consolidated Financial Statements).

Net earnings attributable to Procter & Gamble decreased $5.6 
billion, or 36%, to $9.8 billion. The decrease was primarily due 
to the reduction in net earnings from discontinued operations.

Diluted  net  earnings  per  share  from  continuing  operations 
declined $0.02, or 1%, to $3.67 due primarily to the reduction 
in net earnings from continuing operations, partially offset by 
a  reduction  in  the  number  of  weighted  average  shares 
outstanding.

Diluted net earnings per share from discontinued operations 
were zero in 2018, and were $1.90 per share in the prior year 
due to the gain on the sale of the Beauty Brands in 2017.  Diluted 
net earnings per share decreased $1.92, or 34%, to $3.67.

The Procter & Gamble Company        19

Core EPS increased 8% to $4.22.  Core EPS represents diluted 
net earnings per share from continuing operations, excluding 
the current year net charge for the transitional impact of the 
U.S.  Tax  Act  and  the  charges  in  both  periods  for  early 
extinguishment of debt and incremental restructuring charges 
related to our productivity and cost savings plans. The increase 
was driven by increased sales, the lower effective tax rate on 
core earnings (excluding the transitional net tax charge from 
the U.S. Tax Act) and the reduction in the number of weighted 
average shares outstanding discussed above.
Fiscal year 2017 compared with fiscal year 2016 

Net  earnings  from  continuing  operations  increased  $167 
million, or 2%, to $10.2 billion.  Operating income improved 
$514 million, or 4%, due to improved gross margin and reduced 
SG&A costs.  Net earnings also benefitted from a lower tax 
rate  in  2017.    These  benefits  were  partially  offset  by  the 
increase  in  net  non-operating  expenses,  discussed  above.  
Foreign  exchange 
reduced  net  earnings  by 
approximately  $420  million  in  2017  due  to  weakening  of 
certain currencies against the U.S. dollar, including those in 
Argentina,  Nigeria,  Egypt  and  the  United  Kingdom.    This 
impact includes both transactional charges as discussed above 
in Operating Costs and translational impacts from converting 
earnings from foreign subsidiaries to U.S. dollars.

impacts 

Net  earnings  from  discontinued  operations  increased  $4.6 
billion in 2017 to $5.2 billion.  This change was driven by the 
$5.3 billion gain on the sale of the Beauty Brands in the current 
year, partially offset by the impact of the base period results, 
which included the net earnings of the Batteries and Beauty 
Brands businesses prior to divestiture, a gain on the sale of the 
Batteries  business  and  impairment  charges  on  the  Batteries 
business prior to divestiture (see Note 13 to the Consolidated 
Financial Statements).

Net earnings attributable to Procter & Gamble increased $4.8 
billion, or 46%, to $15.3 billion.

Diluted  net  earnings  per  share  from  continuing  operations 
increased  $0.20,  or  6%,  to  $3.69  due  to  the  increase  in  net 
earnings  from  continuing  operations  and  a  reduction  in  the 
number of weighted average shares outstanding following the 
shares tendered in the sale of the Beauty Brands to Coty (see 
Note 13 to the Consolidated Financial Statements), along with 
ongoing share repurchases.

Diluted net earnings per share from discontinued operations 
were $1.90.  This was an increase of $1.70 per share versus the 
prior year primarily resulting from the gain on the sale of the 
Beauty Brands.  Diluted net earnings per share increased $1.90, 
or 51%, to $5.59.

the 

excluding 

charge 
long-term  debt  and 

Core EPS increased 7% to $3.92.  Core EPS in fiscal year 2017 
represents  diluted  net  earnings  per  share  from  continuing 
early 
operations 
extinguishment  of 
incremental 
restructuring  charges  related  to  our  productivity  and  cost 
savings plan.  The increase was driven by operating margin 
expansion,  lower  effective  tax  rate  and  the  reduction  in  the 
number  of  weighted  average  shares  outstanding  discussed 
above.

related 

to 

20        The Procter & Gamble Company

SEGMENT RESULTS

Segment results reflect information on the same basis we use for internal management reporting and performance evaluation.  The 
results of these reportable segments do not include certain non-business unit specific costs such as interest expense, investing 
activities and certain restructuring and asset impairment costs.  These costs are reported in our Corporate segment and are included 
as part of our Corporate segment discussion.  Additionally, as described in Note 2 to the Consolidated Financial Statements, we 
apply blended statutory tax rates in the segments.  Eliminations to adjust segment results to arrive at our consolidated effective 
tax rate, including the impacts of the U.S. Tax Act in fiscal 2018, are included in Corporate.  All references to net earnings throughout 
the discussion of segment results refer to net earnings from continuing operations.

Beauty

Grooming

Health Care

Fabric & Home Care

Baby, Feminine & Family Care
TOTAL COMPANY

Net Sales Change Drivers 2018 vs. 2017 (1)

Volume with
Acquisitions &
Divestitures

Volume
Excluding
Acquisitions &
Divestitures

Foreign
Exchange

Price

Mix

Other (2)

Net Sales
Growth

2 %

— %

3 %

3 %

(1)%
1 %

2 %

— %

3 %

4 %

(1)%
2 %

2 %

3 %

3 %

1 %

1 %
2%

— %
(3 )%
(1 )%
(1 )%
(1 )%
(1)%

5 %

(1)%

— %

— %

— %
1 %

— %

— %

— %

— %

— %
—%

9 %

(1)%

5 %

3 %

(1)%
3 %

Net Sales Change Drivers 2017 vs. 2016 (1)

Beauty

Grooming

Health Care

Fabric & Home Care

Volume with
Acquisitions &
Divestitures

Volume
Excluding
Acquisitions &
Divestitures

(2)%

2 %

3 %

1 %

1 %

3 %

4 %

2 %

Price

Mix

Other (2)

Net Sales
Growth

1 %

(1)%

— %

— %

2 %

(2)%

1 %

1 %

1 %

— %

— %

— %

— %

(3)%

2 %

— %

Foreign
Exchange
(2 )%
(2 )%
(2 )%
(2 )%
(2 )%
(2)%

2 %
Baby, Feminine & Family Care
TOTAL COMPANY
1 %
(1)  Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
(2)  Other includes the sales mix impact from acquisitions and divestitures, the impact from India Goods and Services Tax implementation and 

— %
— %

(1)%
— %

(1)%
— %

— %
1%

2 %
2%

rounding impacts necessary to reconcile volume to net sales.

BEAUTY

($ millions)

Volume

Net sales

2018
N/A

$12,406

Change
vs. 2017

2%

9%

Net earnings

% of net sales

$2,320
18.7% 200 bps

21%

2017

N/A

$11,429

$1,914

16.7%

Change
vs. 2016

(2)%

—%

(3)%

(50) bps

Fiscal year 2018 compared with fiscal year 2017

Beauty net sales increased 9% to $12.4 billion in 2018 on a 2% 
increase in unit volume.  Favorable foreign exchange impacts 
increased net sales by 2%. Favorable product mix added 5% 
to net sales, primarily due to the disproportionate growth of 
the  super-premium  SK-II  and  premium  Olay  Skin  brands. 
Organic  sales  increased  7%  on  a  2%  increase  in  organic 
volume.  Global market share of the Beauty segment decreased 
0.2 points.  Volume was unchanged in developed regions and 
increased low single digits in developing regions.
•  Volume in Hair Care increased low single digits. Volume 

in developed regions decreased low single digits mainly 
due to competitive activity.  Developing regions volume 
increased low single digits due to market growth, product 
innovation  and  improved  in-store  executions.  Global 
market share of the hair care category decreased less than 
half a point.

•  Volume in Skin and Personal Care increased low single 
digits.  Developed  market  volume  increased  low  single 
digits  driven  by  product  innovation.   Volume  increased 
mid-single digits in developing regions behind innovation 
and increased marketing.  Global market share of the skin 
and personal care category was unchanged.

Net earnings increased 21% to $2.3 billion in 2018 due to the 
increase  in  net  sales  and  a  200  basis-point  increase  in  net 
earnings margin driven primarily by a reduction in SG&A as 
a  percentage  of  net  sales.  Gross  margin  increased  slightly 
driven by manufacturing cost savings. SG&A as a percentage 
of sales decreased primarily due to positive scale impacts of 
the  net  sales  increase  on  both  marketing  spending  and 
overheads.

Fiscal year 2017 compared with fiscal year 2016 

Beauty net sales were unchanged at $11.4 billion in 2017 on a 
2% decrease in unit volume.  Unfavorable foreign exchange 
reduced net sales by 2%.  Price increases had a 1% positive 
impact on net sales.  Favorable product mix added 2% to net 
sales,  primarily  due  to  growth  of  the  super-premium  SK-II 
brand, which has higher than segment average selling prices.  
Organic sales increased 3% on organic volume that increased 
1%.  Global market share of the Beauty segment decreased 0.6 
points.      Volume  decreased  low  single  digits  in  developed 
regions.   Volume  decreased  low  single  digits  in  developing 
regions.  Excluding minor brand divestitures, organic volume 
in developing regions increased low single digits.

•  Volume in Hair Care decreased low single digits due to 
minor brand divestitures.  Organic volume increased low 
single  digits.    Developed  regions  decreased  low  single 
digits  mainly  due  to  competitive  activity.    Developing 
regions decreased low single digits due to minor brand 
divestitures.  Organic volume increased low single digits 
in  developing  regions  behind  product  innovation  and 
market  growth.    Global  market  share  of  the  hair  care 
category decreased more than half a point.

•  Volume  in  Skin  and  Personal  Care  was  unchanged 
including the impact of minor brand divestitures.  Organic 
volume increased low single digits.  Developed market 
volume decreased low single digits following increased 
pricing and due to competitive activity.  Volume increased 
low single digits in developing regions behind innovation 
and market growth.  Global market share of the skin and 
personal care category decreased half a point.

Net earnings decreased 3% to $1.9 billion in 2017 due to a 50 
basis point decrease in net earnings margin, behind an increase 
in SG&A as a percentage of net sales.  SG&A as a percentage 
of  net  sales  increased  due  to  increased  overhead  spending 
including  investments  in  sales  resources  and  incremental 
marketing  activity.    Gross  margin  decreased  slightly  as  the 
benefits  from  productivity  savings  and  higher  pricing  were 
more than offset by higher commodity costs and unfavorable 
mix  impacts  (driven  by  Hair  Care  from  an  increase  in  the 
proportion  of  lower  margin  forms  and  categories,  and 
unfavorable geographic mix, which more than offset benefit 
from Skin and Personal Care, driven by the growth of SK-II). 

GROOMING

($ millions)

Volume

Net sales

2018
N/A

$6,551

Change vs.
2017

—%

(1)%

Net earnings
% of net sales 21.9% (120) bps

$1,432

(7)%

2017

N/A

$6,642

$1,537

23.1%

Change vs.
2016

2%

(3)%

(1)%

40 bps

Fiscal year 2018 compared with fiscal year 2017 

Grooming net sales decreased 1% to $6.6 billion in 2018 on 
unit volume that was unchanged.  Favorable foreign exchange 
increased  net  sales  by  3%.  Price  reductions  in  Shave  Care 
reduced net sales by 3%. Unfavorable mix reduced net sales 

The Procter & Gamble Company        21

by 1% driven by disproportionate growth of lower tier shave 
care  products.  Organic  sales  decreased  3%  while  organic 
volume was unchanged.  Global market share of the Grooming 
segment decreased 0.8 points.  Volume was unchanged in both 
developed and developing regions.

• 

regions 

in  developed 

Shave  Care  volume  was  unchanged.    Volume  was 
unchanged 
increased 
competitiveness  of  our  products  in  the  U.S.  following 
price reductions was offset by competitive activity in other 
markets. Volume in developing regions was unchanged. 
Global market share of the shave care category decreased 
slightly.

as 

•  Appliances  volume  increased  high  single  digits  in 
developed  and  developing  regions  due  to  product 
innovation.    Global  market  share  of  the  appliances 
category increased more than half a point.

Net earnings decreased 7% to $1.4 billion in 2018 due to the 
net sales decrease and a reduction in net earnings margin.  Net 
earnings margin decreased 120 basis points due to a decrease 
in gross margin and an increase in SG&A as a percentage of 
net sales.  Gross margin decreased due to the negative impact 
of  reduced  pricing  and  the  above  mentioned  unfavorable 
product mix, partially offset by manufacturing cost savings. 
SG&A as a percentage of net sales increased due to overhead 
spending increases and a base period gain on the sale of real 
estate, partially offset by a reduction in current year marketing 
spending.

Fiscal year 2017 compared with fiscal year 2016

Grooming net sales decreased 3% to $6.6 billion in 2017 on a 
2% increase in unit volume.  Unfavorable foreign exchange 
reduced net sales by 2%.  Unfavorable mix reduced net sales 
by 2% driven by disproportionate growth in emerging markets, 
where  average  selling  prices  are  lower  than  in  developed 
regions, in part due to a higher relative proportion of disposable 
razors in those markets.  Price reductions in the U.S. during 
the second half of the year taken to address consumer price-
competitiveness drove a 1% reduction in net sales.  Organic 
sales were unchanged on organic volume that increased 3%.  
Global market share of the Grooming segment decreased 0.7 
points.  Volume increased low single digits in developed and 
developing regions.

• 

Shave Care volume increased low single digits.  Shave 
Care  volume  decreased  low  single  digits  in  developed 
regions  due  to  competitive  activity  and  increased  low 
single  digits  in  developing  regions  behind  product 
innovation.    Global  market  share  of  the  shave  care 
category decreased half a point.

•  Volume in Appliances increased double digits.  Volume 
increased double digits in developed regions and increased 
low  single  digits  in  developing  regions  due  to  product 
innovation.    Global  market  share  of  the  appliances 
category increased nearly half a point.

Net earnings decreased 1% to $1.5 billion in 2017 due to the 
reduction  in  net  sales,  partially  offset  by  an  increase  in  net 
earnings margin.  Net earnings margin increased 40 basis points 
due  to  a  decrease  in  SG&A  as  a  percent  of  net  sales  and 
improved  gross  margin.    SG&A  as  a  percent  of  net  sales 

22        The Procter & Gamble Company

decreased due to a gain on the sale of real estate, partially offset 
by increased overhead spending.  Gross margin increased as 
the benefits of productivity efforts were only partially offset 
by unfavorable foreign exchange impacts, reduced pricing and 
negative mix driven by growth in emerging markets, where 
average selling prices are lower than in developed regions, in 
part due to a higher relative proportion of disposable razors in 
those markets.

HEALTH CARE

($ millions)

Volume

Net sales

2018
N/A

$7,857

Change
vs. 2017

3%

5%

Net earnings

% of net sales

$1,283
16.3% (70) bps

—%

2017

N/A

$7,513

$1,280

17.0%

Change
vs. 2016

3%

2%

2%

— bps

Fiscal year 2018 compared with fiscal year 2017

Health Care net sales increased 5% to $7.9 billion in 2018 on 
a  3%  increase  in  unit  volume.  Favorable  foreign  exchange 
impacts increased net sales by 3%. Lower pricing reduced net 
sales by 1%. Organic sales increased 2% on a 3% increase in 
organic  volume.    Global  market  share  of  the  Health  Care 
segment decreased 0.1 points.  Volume increased low single 
digits in both developed and developing regions.

•  Oral  Care volume  increased low  single digits.   Volume 
increased low single digits in developed regions driven by 
product  innovation  and  marketing  investments  in  the 
premium  power  brush  segment.  Volume  increased  low 
single  digits  in  developing  regions  due  to  product 
innovation and reduced pricing in the form of increased 
promotional spending. Global market share of the oral care 
category decreased less than half a point.

•  Volume  in  Personal  Health  Care  increased  mid-single 
digits. Volume increased low single digits in developed 
regions  and  increased  high  single  digits  in  developing 
regions  due 
increased 
consumption  from  a  strong  cough/cold  season.  Global 
market share of the personal health care category increased 
less than half a point.

innovation  and 

to  product 

Net earnings were unchanged at $1.3 billion in 2018 as the 
increase in net sales was offset by a 70 basis-point decrease in 
net earnings margin.  Net earnings margin decreased due to a 
reduction in gross margin and the impact of a base period gain 
from minor brand divestitures, partially offset by a reduction 
in SG&A as a percentage of net sales. Gross margin decreased 
due  to  unfavorable  mix  impact  (from  the  disproportionate 
growth of larger sizes and club channel which have lower than 
segment-average margins) and reduced selling prices, partially 
offset by manufacturing cost savings. SG&A as a percentage 
of  net  sales  decreased  primarily  due  to  the  positive  scale 
impacts of the net sales increase.

Fiscal year 2017 compared with fiscal year 2016

Health Care net sales increased 2% to $7.5 billion in 2017 on 
a 3% increase in unit volume.  Unfavorable foreign exchange 
reduced net sales by 2%.  Favorable product mix contributed 

1%  to  net  sales  due  primarily  to  an  increase  in  power 
toothbrushes in Oral Care, which have higher than segment-
average selling prices.  Organic sales increased 5% on organic 
volume that increased 4%.  Global market share of the Health 
Care  segment  decreased  0.2  points.    Volume  increased  low 
single  digits  in  developed  regions  and  increased  mid-single 
digits in developing regions.

•  Oral Care volume increased mid-single digits.  Volume 
increased  low  single  digits  in  developed  regions  and 
increased mid-single digits in developing regions driven 
by market growth and product innovation. Global market 
share of the oral care category decreased slightly.

•  Volume  in  Personal  Health  Care  increased  low  single 
digits.  Volume  increased  low  single  digits  in  both 
developed  and  developing  regions  behind  a  stronger 
to  prior  year,  product 
cough/cold  season  relative 
innovation  and  expanded  distribution.    Global  market 
share of the personal health care category was unchanged.

Net earnings increased 2% to $1.3 billion in 2017 due to the 
increase in net sales.  Operating margin was unchanged as a 
higher  gross  margin  was  offset  by  increased  SG&A  as  a 
percentage  of  net  sales.    Gross  margin  increased  due  to 
productivity  cost  savings,  partially  offset  by  unfavorable 
geographic  mix  driven  by  the  disproportionate  growth  of 
developing regions, which have lower than segment-average 
margins.  SG&A increased as a percentage of net sales due to 
increased  overhead  spending,  partially  offset  by  reduced 
marketing spending.

FABRIC & HOME CARE

($ millions)

Volume

Net sales

2018
N/A

$21,441

Change
vs. 2017

3%

3%

Net earnings

% of net sales

$2,708
12.6% (50) bps

—%

2017

N/A

$20,717

$2,713

13.1%

Change
vs. 2016

1%

—%

(2)%

(30) bps

Fiscal year 2018 compared with fiscal year 2017

Fabric & Home Care net sales increased 3% to $21.4 billion
in 2018 on a 3% increase in unit volume.  Favorable foreign 
exchange increased net sales by 1%. Lower pricing reduced 
net sales by 1%. Organic sales increased 3% on a 4% increase 
in organic volume.  Global market share of the Fabric & Home 
Care segment increased  0.1  points.   Volume increased mid-
single  digits  in  developed  regions  and  increased  low  single 
digits 
in  developing  regions.  Excluding  minor  brand 
divestitures,  organic  volume  increased  mid-single  digits  in 
developing regions.
• 

Fabric Care volume increased low single digits. Excluding 
the impact of minor brand divestitures, organic volume 
increased mid-single digits. Volume in developed regions 
increased mid-single digits, due to product innovation and 
behind lower pricing in the form of increased promotional 
spending.  Volume  in  developing  regions  increased  low 
single  digits  due  to  product  innovation  and  category 
growth.  Global market share of the Fabric Care category 
was unchanged.

•  Home Care volume increased low single digits. Volume 
in developed regions increased low single digits  driven 
by  product  innovation.  Volume  in  developing  regions 
increased mid-single digits driven by product innovation 
and category growth. Global market share of the Home 
Care category was unchanged.

Net earnings were unchanged at $2.7 billion in 2018 as the 
increase in net sales was offset by a 50 basis-point decrease in 
net earnings margin.  Net earnings margin decreased due to a 
reduction  in  Gross  margin  partially  offset  by  a  decrease  in 
SG&A as a percentage of net sales. Gross margin decreased 
due  to  unfavorable  product  mix  (due  to  an  increase  in  the 
proportion of larger package sizes with lower than segment-
average margins and newer product forms that have not yet 
been cost optimized), increased commodity costs and reduced 
selling prices, partially offset by manufacturing cost savings. 
SG&A as a percentage of net sales decreased primarily due to 
the positive scale impacts of the net sales increase. Net earnings 
also benefited from a gain on a minor brand divestiture in 2018.

Fiscal year 2017 compared with fiscal year 2016

Fabric & Home Care net sales were unchanged in 2017 at $20.7 
billion on a 1% increase in unit volume.  Unfavorable foreign 
exchange reduced net sales by 2%.  Favorable geographic mix 
increased net sales 1%, primarily driven by increased volume 
in developed regions, which have higher than segment-average 
selling prices.  Organic sales increased 3% on organic volume 
that increased 2%.  Global market share of the Fabric & Home 
Care  segment  decreased  0.1  points.    Volume  increased  low 
single digits in developed regions and decreased low single 
digits  in  developing  regions.    Excluding  minor  brand 
divestitures,  organic  volume  increased  mid-single  digits  in 
developed  regions  and  decreased  low  single  digits  in 
developing regions.

• 

Fabric Care volume increased low single digits as a mid-
single  digit  volume  increase  in  developed  regions,  due 
primarily to product innovation, was partially offset by a 
low single-digit decrease in developing regions, driven by 
competitive  activity  and  reduced  distribution  of  less 
profitable brands.  Global market share of the fabric care 
category was unchanged.

•  Home Care volume increased low single digits driven by 
a  low  single-digit  increase  in  both  developed  and 
developing  regions  due  to  market  growth  and  product 
innovation.  Global market share of the home care category 
was unchanged.

Net earnings decreased 2% to $2.7 billion in 2017 due to a 30 
basis-point  decrease  in  net  earnings  margin.    Net  earnings 
margin decreased due to an increase in the effective tax rate 
driven  by  the  geographic  mix  of  earnings.    Gross  margin 
expanded  slightly,  driven  by  manufacturing  cost  savings, 
partially offset by unfavorable foreign exchange impacts and 
increased commodity costs.  SG&A as a percentage of net sales 
increased slightly due to increased overhead spending.

The Procter & Gamble Company        23

BABY, FEMININE & FAMILY CARE

($ millions)

Volume

Net sales

2018
N/A

$18,080

Change vs.
2017

(1)%

(1)%

Net earnings

% of net sales

$2,251
12.5% (120) bps

(10)%

2017

N/A

$18,252

$2,503

Change
vs. 2016

2%

(1)%

(6)%

13.7% (60) bps

Fiscal year 2018 compared with fiscal year 2017

Baby, Feminine & Family Care net sales in 2018 decreased 1% 
to $18.1 billion on a 1% decrease in unit volume.  Favorable 
foreign exchange increased net sales by 1%.  Lower pricing 
had a negative 1% impact on net sales.  Organic sales decreased 
2% on a 1% decrease in organic volume. Global market share 
of the Baby, Feminine & Family Care segment decreased 0.7 
points.    Volume  was  unchanged  in  developed  regions  and 
decreased mid-single digits in developing regions. Excluding 
minor brand divestitures, organic volume in developed regions 
increased low single digits.
•  Baby Care volume decreased mid-single digits.  Volume 
in developed regions decreased low single digits due to 
competitive  activity  and  trade  inventory  reductions. 
Volume in developing regions decreased high single digits
due  to  competitive  activity,  market  contraction  and  a 
reduction in trade inventories.  Global market share of the 
baby care category decreased more than a point.
Feminine  Care  volume  decreased  low  single  digits. 
Excluding the impact of minor brand divestitures, organic 
volume  increased  low  single  digits.  Organic  volume  in 
developed  regions  increased  low  single  digits  due  to 
product  innovation.  Volume  in  developing  regions 
increased  low  single  digits  due  to  product  innovation.  
Global market share of the feminine care category was 
unchanged.

• 

•  Volume in Family Care, which is predominantly a North 
American business, increased mid-single digits driven by 
product innovation and distribution gains. In the U.S., all-
outlet share of the family care category increased slightly.

Net earnings in 2018 decreased 10% to $2.3 billion primarily 
due to a 120 basis-point decrease in net earnings margin.  Net 
earnings margin decreased primarily due to a decrease in gross 
margin driven by an increase in commodity costs, unfavorable 
product mix (driven by a higher relative mix of larger pack 
sizes  with  lower  than  segment-average  margins  and  newer 
product  forms  that  have  not  yet  been  cost  optimized)  and 
reduced selling prices, partially offset by manufacturing cost 
savings.  SG&A  as  a  percentage  of  net  sales  decreased 
marginally due to reduced marketing spending, partially offset 
by an increase in overhead costs.

Fiscal year 2017 compared with fiscal year 2016

Baby, Feminine & Family Care net sales decreased 1% to $18.3 
billion in 2017 on a 2% increase in unit volume.  Unfavorable 
foreign exchange reduced net sales by 2%.  Lower pricing had 
a negative 1% impact on net sales.  Organic sales increased 
1% on organic volume that increased 2%.  Global market share 

24        The Procter & Gamble Company

of the Baby, Feminine & Family Care segment decreased 0.1 
points.    Volume  increased  low  single  digits  in  developed 
regions and was unchanged in developing regions.

•  Volume  in  Baby  Care  was  unchanged.    Volume  in 
developed regions decreased low single digits, primarily 
due  to  competitive  activity,  and  volume  in  developing 
regions increased low single digits, due to market growth 
and product innovation.  Global market share of the baby 
care category decreased more than half a point.

•  Volume  in  Feminine  Care  increased  low  single  digits. 
Volume in developed regions increased low single digits, 
driven by product innovation, and volume in developing 
regions  decreased  low  single  digits  due  to  competitive 
activity  and  reduced  exports 
to  our  Venezuelan 
subsidiaries.    Global  market  share  of  the  feminine  care 
category was unchanged.

•  Volume in Family Care, which is predominantly a North 
American business, increased mid-single digits driven by 
product innovation and increased merchandising. In the 
U.S., all-outlet share of the family care category increased 
less than a point.

Net earnings decreased 6% to $2.5 billion in 2017 due to the 
reduction  in  net  sales  and  a  60  basis  point  decrease  in  net 
earnings margin.  Net earnings margin decreased as increased 
SG&A as a percent of net sales was only partially offset by an 
increase in gross margin.  SG&A as a percentage of net sales 
increased due to increased marketing and overhead spending.  
Gross margin increased driven by manufacturing cost savings 
partially  offset  by  unfavorable  foreign  exchange  impacts, 
lower  pricing  and  unfavorable  product  mix  across  business 
units due to increased net sales in product forms and larger 
package sizes with lower than segment-average margins.

CORPORATE

($ millions)

Net sales
Net earnings/
(loss)

2018
$497

Change
vs. 2017

(2)%

$(133)

N/A

2017

$505

$247

Change
vs. 2016

20%

N/A

Corporate  includes  certain  operating  and  non-operating 
activities not allocated to specific business segments.  These 
include:  the  incidental  businesses  managed  at  the  corporate 
level;  financing  and  investing  activities;  certain  employee 
benefit costs; other general corporate items; gains and losses 
related to certain divested brands and categories; and certain 
restructuring-type  activities  to  maintain  a  competitive  cost 
structure, 
and  workforce 
optimization.    Corporate  also  includes  reconciling  items  to 
adjust  the  accounting  policies  used  in  the  segments  to  U.S. 
GAAP.  The most significant reconciling item is income taxes, 
to adjust from blended statutory rates that are reflected in the 
segments to the overall Company effective tax rate. For 2018, 
the tax impact also includes the impacts of the U.S. Tax Act, 
which were included in the corporate segment.

including  manufacturing 

Fiscal year 2018 compared with fiscal year 2017

Corporate net sales decreased 2% to $497 million in 2018 due 
to  a  decrease  in  the  incidental  businesses  managed  at  the 

corporate level.  Corporate net earnings/(loss) from continuing 
operations decreased by $380 million in 2018, primarily due 
to:
• 

an increase in income tax expense in 2018 caused by the 
aforementioned  $602  million  net  charge  for 
the 
transitional impacts of the U.S. Tax Act and
an 
approximately $331 million.

in  after-tax  restructuring  charges  of 

increase 

• 

These costs were partially offset by lower charges related to 
the  early  extinguishment  of  long-term  debt  in  2018  versus 
2017, the lower tax rate on current year earnings as a result of 
the U.S. Tax Act and an increase in the proportion of corporate 
overhead spending allocated to the segments.

Fiscal year 2017 compared with fiscal year 2016

Corporate  net  sales  increased  20%,  or  $83  million,  to  $505 
million in 2017 primarily due to an increase in the incidental 
businesses  managed  at  the  corporate  level.  Corporate  net 
earnings 
improved  by 
continuing  operations 
approximately $421 million in 2017, primarily due to:
• 

from 

lower restructuring charges in 2017 compared to the prior 
year,
a gain on the sale of real estate in the current fiscal year, 
lower foreign exchange transactional charges,
a  reduction  in  the  proportion  of  corporate  overhead 
spending not allocated to the segments, consisting in part 
of reduced stranded overheads following divestitures, and
current year tax benefits resulting from the adoption of a 
new accounting standard on the tax impacts of share-based 
payments to employees (see Note 1 to the Consolidated 
Financial Statements).

• 
• 
• 

• 

These benefits were partially offset by a $345 million after-tax 
charge on the early extinguishment of long-term debt in fiscal 
2017 and lower gains from minor brand divestitures compared 
to 2016.

Restructuring Program to deliver Productivity and Cost 
Savings

In 2012, the Company initiated a productivity and cost savings 
plan to reduce costs and better leverage scale in the areas of 
supply  chain,  research  and  development,  marketing  and 
overheads.  The plan was designed to accelerate cost reductions 
by streamlining management decision making, manufacturing 
and  other  work  processes  to  fund  the  Company's  growth 
strategy.  In  2017,  the  Company  communicated  specific 
elements  of  an  additional  multi-year  productivity  and  cost 
savings program.

The  current  productivity  and  cost  savings  plan  will  further 
reduce costs in the areas of supply chain, certain marketing 
activities  and  overhead  expenses.   As  part  of  this  plan,  the 
Company incurred approximately $1.1 billion in total before- 
tax restructuring costs in fiscal 2018, with an additional amount 
of approximately $0.8 billion expected in fiscal 2019.  This 
program  is  expected  to  result  in  additional  enrollment 
reductions, along with further optimization of the supply chain 
and other manufacturing processes. Savings generated from 
restructuring costs are difficult to estimate, given the nature of 
the activities, the timing of the execution and the degree of 

reinvestment.  However,  we  estimate  that  through  2018,  the 
underlying  restructuring  costs  and  other  non-manufacturing 
enrollment 
delivered 
since 
approximately $3.3 billion in annual before-tax gross savings.

reductions 

2012 

have 

Restructuring accruals of $513 million as of June 30, 2018 are 
classified  as  current  liabilities.   Approximately  65%  of  the 
restructuring charges incurred in fiscal 2018 either have been 
or  will  be  settled  with  cash.    Consistent  with  our  historical 
policies for ongoing restructuring-type activities, the resulting 
charges  are  funded  by  and  included  within  Corporate  for 
segment reporting.

In addition to our restructuring programs, we have additional 
ongoing  savings  efforts  in  our  supply  chain,  marketing  and 
overhead areas that yield additional benefits to our operating 
margins.

Refer to Note 3 to the Consolidated Financial Statements for 
more details on the restructuring program and to the Operating 
Costs section of the MD&A for more information about the 
total benefit to operating margins from our total savings efforts.
CASH FLOW, FINANCIAL CONDITION AND 
LIQUIDITY

We  believe  our  financial  condition  continues  to  be  of  high 
quality, as evidenced by our ability to generate substantial cash 
from  operations  and  to  readily  access  capital  markets  at 
competitive rates.

Operating cash flow provides the primary source of cash to 
fund  operating  needs  and  capital  expenditures.    Excess 
operating  cash  is  used  first  to  fund  shareholder  dividends. 
Other  discretionary  uses  include  share  repurchases  and 
acquisitions to complement our portfolio of businesses, brands 
and geographies.  As necessary, we may supplement operating 
cash flow with debt to fund these activities.  The overall cash 
position of the Company reflects our strong business results 
and a global cash management strategy that takes into account 
liquidity  management, 
tax 
considerations.
Operating Cash Flow

economic 

factors 

and 

Fiscal year 2018 compared with fiscal year 2017 

Operating cash flow was $14.9 billion in 2018, a 17% increase 
from the prior year.  Net earnings, adjusted for non-cash items 
(depreciation and amortization, loss on extinguishment of debt, 
share-based compensation, deferred income taxes and gain on 
sale of assets) generated $11.4 billion of operating cash flow.  
Working capital and other impacts generated $3.5 billion of 
operating cash flow as summarized below.

•  An increase in accounts receivable used $177 million of 
cash due to increased sales and the timing of the year-end 
(which  fell  on  a  weekend,  resulting  in  fewer  days 
collection).    The  number  of  days  sales  outstanding 
remained flat versus prior year.

•  Higher inventory used $188 million of cash mainly due to 
inventory  increases  to  support  initiatives  and  business 
growth  across  all  segments.  Inventory  days  on  hand 
decreased approximately 1 day primarily due to foreign 
exchange impacts.  

The Procter & Gamble Company        25

•  Accounts payable, accrued and other liabilities increased, 
generating $1.4 billion of cash.  This was primarily driven 
by  extended  payment  terms  with  our  suppliers  and  an 
increase  in  fourth  quarter  marketing  activity  versus  the 
prior year.   These factors, along with offsetting impacts 
of foreign exchange, drove a 2 day increase in days payable 
outstanding.  Although difficult to project due to market 
and other dynamics, we anticipate incremental cash flow 
benefits from the extended payment terms with suppliers 
could decline slightly over the next fiscal year.

•  Other operating assets and liabilities generated $2.0 billion
of cash, primarily driven by the long-term portion of the 
payable related to the U.S. Tax Act repatriation charge.

Fiscal year 2017 compared with fiscal year 2016 

Operating cash flow was $12.8 billion in 2017, a 17% decrease 
from the prior year.  Net earnings, adjusted for non-cash items 
(depreciation  and  amortization,  share-based  compensation, 
deferred  income  taxes,  loss/(gain)  on  sale  of  assets  and 
impairment charges) and the loss on early extinguishment of 
debt generated $13.0 billion of operating cash flow.  Working 
capital and other impacts used $281 million of operating cash 
flow.

•  An increase in accounts receivable used $322 million of 
cash  due  to  higher  relative  sales  late  in  the  period  as 
compared to the prior period, partially offset by collection 
of  approximately  $150  million  of  retained  receivables 
from the Beauty Brands business.  In addition, the number 
of days sales outstanding increased 1 day due in part to 
foreign exchange impacts.  

•  Lower inventory generated $71 million of cash mainly due 
to supply chain optimizations, partially offset by increases 
to  support  business  growth  and  increased  commodity 
costs. Inventory days on hand decreased approximately 1 
day primarily due to supply chain optimizations.  

•  Accounts payable, accrued and other liabilities decreased, 
using  $149  million  in  operating  cash  flow.    This  was 
caused  by  reduced  accruals  from  lower  fourth  quarter 
marketing and overhead activities as compared to the base 
period,  as  well  as  the  payment  of  approximately  $595 
million of accounts payable and accrued liabilities related 
to the divestiture of the Beauty Brands business, including 
liabilities retained by the Company pursuant to the terms 
of the agreement.  These impacts were partially offset by 
approximately $700 million related to extended payment 
terms with our suppliers.  These factors, along with the 
impact of foreign exchange, drove a 4 day increase in days 
payable outstanding.  

•  Other operating assets and liabilities used $43 million of 

cash.

Adjusted Free Cash Flow.  We view adjusted free cash flow 
as an important measure because it is a factor impacting the 
amount  of  cash  available  for  dividends,  share  repurchases, 
acquisitions and other discretionary investment.  It is defined 
as operating cash flow less capital expenditures and excluding 
tax payments related to certain divestitures and is one of the 
measures used to evaluate senior management and determine 
their at-risk compensation.  

26        The Procter & Gamble Company

Fiscal year 2018 compared with fiscal year 2017 

Adjusted free cash flow was $11.2 billion in 2018, an increase 
of 14% versus the prior year.  The increase was primarily driven 
by the increase in operating cash flows as discussed above.  
Adjusted free cash flow productivity, defined as the ratio of 
adjusted  free  cash  flow  to  net  earnings,  excluding  the 
transitional impact of the U.S. Tax Act and the loss on early 
extinguishment of debt, was 104% in 2018. 
Fiscal year 2017 compared with fiscal year 2016 

Adjusted free cash flow was $9.8 billion in 2017, a decrease 
of  19%  versus  the  prior  year.    The  decrease  was  primarily 
driven by the decrease in operating cash flows.  Adjusted free 
cash  flow  productivity,  defined  as  the  ratio  of  adjusted  free 
cash  flow  to  net  earnings,  excluding  the  loss  on  debt 
extinguishment and impacts of the sale of the Beauty Brands, 
was 94% in 2017. 
Investing Cash Flow

Fiscal year 2018 compared with fiscal year 2017 

Net investing activities consumed $3.5 billion in cash in 2018 
mainly  due  to  capital  spending  and  purchases  of  short-term 
investments, partially offset by proceeds from asset sales and 
sales and maturities of short-term investments. 
Fiscal year 2017 compared with fiscal year 2016 

Net investing activities consumed $5.7 billion in cash in 2017 
mainly  due  to  capital  spending  and  purchases  of  short-term 
investments,  partially  offset  by  proceeds  from  asset  sales, 
transactions  related  to  the  close  of  the  Beauty  Brands 
divestiture and sales and maturities of short-term investments. 
Capital Spending.  Capital expenditures, primarily to support 
capacity expansion, innovation and cost efficiencies, were $3.7 
billion in 2018 and $3.4 billion in 2017.  Capital spending as 
a percentage of net sales increased 40 basis points to 5.6% in 
2018.  Capital spending as a percentage of net sales was 5.2% 
in 2017.
Acquisitions.  Acquisition activity used cash of $109 million 
in  2018,  primarily  related  to  acquisitions  in  the  Beauty 
segment.  Acquisition activity was not material in 2017. 
Proceeds from Divestitures and Other Asset Sales.  Proceeds 
from  asset  sales  in  2018  contributed  $269  million  in  cash, 
primarily from minor brand divestitures.  Proceeds from asset 
sales contributed $571 million in cash in 2017 primarily from 
real estate sales and other minor brand divestitures.  In fiscal 
2017,  the  Company  invested  an  additional  $874  million  of 
cash, received from the issuance of debt, in restricted cash.  At 
the closing of the Beauty Brands transaction, $1.9 billion of 
restricted cash (including the $874 million invested in 2017) 
was released and returned to cash and cash equivalents and 
$475 million of cash was transferred to the discontinued Beauty 
Brands business.
Financing Cash Flow
Dividend  Payments.    Our  first  discretionary  use  of  cash  is 
dividend payments.  Dividends per common share increased 
3.3% to $2.79 per share in 2018.  Total dividend payments to 
common and preferred shareholders were $7.3 billion in 2018 
and $7.2 billion in 2017.  In April 2018, the Board of Directors 

declared an increase in our quarterly dividend from $0.6896 
to $0.7172 per share on Common Stock and Series A and B 
ESOP Convertible Class A Preferred Stock.  This represents a 
4% increase compared to the prior quarterly dividend and is 
the 62nd consecutive year that our dividend has increased.  We 
have  paid  a  dividend  for  128  years,  every  year  since  our 
incorporation in 1890.
Long-Term and Short-Term Debt.  We maintain debt levels 
we consider appropriate after evaluating a number of factors, 
including  cash  flow  expectations,  cash  requirements  for 
ongoing operations, investment and financing plans (including 
acquisitions and share repurchase activities) and the overall 
cost of capital.  Total debt was $31.3 billion as of June 30, 2018
and $31.6 billion as of June 30, 2017.
Treasury Purchases.  Total share repurchases were $7.0 billion
in 2018 and $5.2 billion in 2017. 

Liquidity

At June 30, 2018, our current liabilities exceeded current assets 
by $4.9 billion, largely due to short-term borrowings under our 
commercial  paper  program.    We  anticipate  being  able  to 
support our short-term liquidity and operating needs largely 
through  cash  generated  from  operations.    The  Company 
regularly assesses its cash needs and the available sources to 
fund these needs.  As of June 30, 2018, $11.4 billion of the 
Company’s cash, cash equivalents and marketable securities 
was held off-shore by foreign subsidiaries.  This balance has 
declined  versus  the  prior  year  primarily  due  to  cash 
repatriations  following  the  enactment  of  the  U.S.  Tax Act. 
Under current law, we do not expect restrictions or taxes on 
repatriation of cash held outside of the U.S. to have a material 
effect on our overall liquidity, financial condition or the results 
of operations for the foreseeable future.  Of the June 30, 2018
balance  of  off-shore  cash,  cash  equivalents  and  marketable 
securities, the majority relates to various Western European 
countries. As of June 30, 2018, we did not have material cash, 
cash  equivalents  and  marketable  securities  balances  in  any 
country subject to exchange controls that significantly restrict 
our ability to access or repatriate the funds.

We  utilize  short-  and  long-term  debt  to  fund  discretionary 
items, such as acquisitions and share repurchases.  We have 
strong short- and long-term debt ratings, which have enabled, 
and should continue to enable, us to refinance our debt as it 
becomes due at favorable rates in commercial paper and bond 
markets.  In addition, we have agreements with a diverse group 
of  financial  institutions  that,  if  needed,  should  provide 
sufficient  credit  funding  to  meet  short-term  financing 
requirements.

On  June 30,  2018,  our  short-term  credit  ratings  were  P-1 
(Moody's) and A-1+ (Standard & Poor's), while our long-term 
credit  ratings  were  Aa3  (Moody's)  and  AA-  (Standard & 
Poor's), all with a stable outlook.
We  maintain  bank  credit  facilities  to  support  our  ongoing 
commercial  paper  program.   The  current  facility  is  an  $8.0 
billion facility split between a $3.2 billion five-year facility 
and a $4.8 billion 364-day facility, which expire in November 
2022 and November 2018, respectively.  Both facilities can be 
extended for certain periods of time as specified in the terms 

The Procter & Gamble Company        27

Guarantees and Other Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing 
arrangements,  including  variable  interest  entities,  which  we 
believe could have a material impact on our financial condition 
or liquidity.

of the credit agreement.  These facilities are currently undrawn 
and we anticipate that they will remain undrawn.  These credit 
facilities do not have cross-default or ratings triggers, nor do 
they have material adverse events clauses, except at the time 
of signing.  In addition to these credit facilities, we have an 
automatically  effective  registration  statement  on  Form  S-3 
filed with the SEC that is available for registered offerings of 
short- or long-term debt securities.  For additional details on 
debt see Note 10 to the Consolidated Financial Statements.

Contractual Commitments

The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2018.

Amounts in millions
RECORDED LIABILITIES
Total debt
Capital leases
U.S. Tax Act transitional charge (1)
Uncertain tax positions (2)
OTHER
Interest payments relating to long-term debt
Operating leases (3)
Minimum pension funding (4)
Purchase obligations (5)
TOTAL CONTRACTUAL COMMITMENTS

Total

Less Than 1 Year

1-3 Years

3-5 Years

After 5 Years

$

$

31,217
107
2,884
—

4,944
1,338
402
1,129
42,021

$

$

10,407
22
231
—

574
275
131
778
12,418

$

$

4,630
35
462
—

1,033
442
271
167
7,039

$

$

5,224
23
462
—

811
325
—
47
6,891

$

$

10,956
27
1,730
—

2,526
296
—
137
15,673

(1)  Represents the U.S. federal tax liability associated with the repatriation provisions of the U.S. Tax Act.  Does not include any provisions 

made for foreign withholding taxes on expected repatriations as the timing of those payments is uncertain.

(2)  As of June 30, 2018, the Company's Consolidated Balance Sheet reflects a liability for uncertain tax positions of $584 million, including 
$114  million of interest and penalties.  Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for 
uncertain tax positions beyond one year, a reasonable estimate of the period of cash settlement beyond twelve months from the balance 
sheet date of June 30, 2018, cannot be made.

(3)  Operating lease obligations are shown net of guaranteed sublease income.
(4)  Represents future pension payments to comply with local funding requirements.  These future pension payments assume the Company 
continues to meet its future statutory funding requirements.  Considering the current economic environment in which the Company operates, 
the Company believes its cash flows are adequate to meet the future statutory funding requirements.  The projected payments beyond fiscal 
year 2020 are not currently determinable.

(5)  Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of business.  
Commitments made under take-or-pay obligations represent minimum commitments under take-or-pay agreements with suppliers and are 
in  line  with  expected  usage.   This  includes  service  contracts  for  information  technology,  human  resources  management  and  facilities 
management activities that have been outsourced.  Such amounts also include arrangements with suppliers that qualify as embedded operating 
leases.  While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be 
paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation 
penalties, resulting in a reduced payment.  The amounts do not include other contractual purchase obligations that are not take-or-pay 
arrangements.  Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are 
reflected in historical operating cash flow trends.  We do not believe such purchase obligations will adversely affect our liquidity position.

SIGNIFICANT ACCOUNTING POLICIES AND 
ESTIMATES

In preparing our financial statements in accordance with U.S. 
GAAP, there are certain accounting policies that may require 
a  choice  between  acceptable  accounting  methods  or  may 
require substantial judgment or estimation in their application.  
These  include  revenue  recognition,  income  taxes,  certain 
employee  benefits  and  goodwill  and  intangible  assets.    We 
believe these accounting policies, and others set forth in Note 
1 to the Consolidated Financial Statements, should be reviewed 

as they are integral to understanding the results of operations 
and financial condition of the Company.

The  Company  has  discussed  the  selection  of  significant 
accounting policies and the effect of estimates with the Audit 
Committee of the Company's Board of Directors.
Revenue Recognition

Sales are recognized when revenue is realized or realizable and 
has  been  earned.   For  us,  this  generally  means  revenue  is 
recognized when title to the product, ownership and risk of loss 
transfer to the customer, which can be on the date of shipment 
or  the  date  of  receipt  by  the  customer.   Trade  promotions, 

28        The Procter & Gamble Company

consisting primarily of customer pricing allowances, in-store 
merchandising  funds,  advertising  and  other  promotional 
activities, and consumer coupons, are offered through various 
programs to customers and consumers.  Sales are recorded net 
of trade promotion spending, which is recognized as incurred, 
generally at the time of the sale.  Amounts accrued for trade 
promotions at the end of a period require estimation, based on 
contractual terms, customer performance, sales volumes and 
historical utilization and redemption rates.  The actual amounts 
paid may be different from such estimates.  These differences, 
which have historically not been significant, are recognized as 
a change in management estimate in a subsequent period.  The 
Company will adopt ASU 2014-09, “Revenue from Contracts 
with Customers” on July 1, 2018.  Adoption of this standard 
will result in a change in the timing of recognition of certain 
trade promotional spending.   See Note 1 to our Consolidated 
Financial Statements.
Income Taxes

Our  annual  tax  rate  is  determined  based  on  our  income, 
statutory  tax  rates  and  the  tax  impacts  of  items  treated 
differently  for  tax  purposes  than  for  financial  reporting 
purposes.  Also inherent in determining our annual tax rate are 
judgments  and  assumptions  regarding  the  recoverability  of 
certain deferred tax balances, primarily net operating loss and 
other  carryforwards,  and  our  ability  to  uphold  certain  tax 
positions.

Realization of net operating losses and other carryforwards is 
dependent  upon  generating  sufficient  taxable  income  in  the 
appropriate  jurisdiction  prior  to  the  expiration  of  the 
carryforward periods, which involves business plans, planning 
opportunities  and  expectations  about  future  outcomes.  
Although realization is not assured, management believes it is 
more likely than not that our deferred tax assets, net of valuation 
allowances, will be realized.

We operate in multiple jurisdictions with complex tax policy 
and regulatory environments.  In certain of these jurisdictions, 
we  may  take  tax  positions  that  management  believes  are 
supportable, but are potentially subject to successful challenge 
by  the  applicable  taxing  authority.    These  interpretational 
differences with the respective governmental taxing authorities 
can be impacted by the local economic and fiscal environment.

A core operating principle is that our tax structure is based on 
our business operating model, such that profits are earned in 
line with the business substance and functions of the various 
legal entities.  However, because of the complexity of transfer 
pricing concepts, we may have income tax uncertainty related 
to the determination of intercompany transfer prices for our 
various  cross-border  transactions.    We  have  obtained  and 
continue to prioritize the strategy of seeking advance rulings 
with tax authorities to reduce this uncertainty.  We estimate 
that  our  current  portfolio  of  advance  rulings  reduces  this 
uncertainty with respect to over 70% of our global earnings. 
We  evaluate  our  tax  positions  and  establish  liabilities  in 
accordance  with  the  applicable  accounting  guidance  on 
uncertainty in income taxes.  We review these tax uncertainties 
in  light  of  changing  facts  and  circumstances,  such  as  the 
progress of tax audits, and adjust them accordingly.  We have 

a number of audits in process in various jurisdictions.  Although 
the  resolution  of  these  tax  positions  is  uncertain,  based  on 
currently available information, we believe that the ultimate 
outcomes  will  not  have  a  material  adverse  effect  on  our 
financial position, results of operations or cash flows.

Because  there  are  a  number  of  estimates  and  assumptions 
inherent  in  calculating  the  various  components  of  our  tax 
provision, certain changes or future events such as changes in 
tax legislation, geographic mix of earnings, completion of tax 
audits or earnings repatriation plans could have an impact on 
those estimates and our effective tax rate.  For additional details 
on the Company's income taxes, see Note 5 to the Consolidated 
Financial Statements.
Employee Benefits

We sponsor various post-employment benefits throughout the 
world.  These include pension plans, both defined contribution 
plans and defined benefit plans, and other post-employment 
benefit (OPEB) plans, consisting primarily of health care and 
life insurance for retirees.  For accounting purposes, the defined 
benefit  pension  and  OPEB  plans  require  assumptions  to 
estimate  the  projected  and  accumulated  benefit  obligations, 
including  the  following  variables:  discount  rate;  expected 
salary  increases;  certain  employee-related  factors,  such  as 
turnover,  retirement  age  and  mortality;  expected  return  on 
assets;  and  health  care  cost  trend  rates.    These  and  other 
assumptions  affect  the  annual  expense  and  obligations 
recognized for the underlying plans.  Our assumptions reflect 
our  historical  experiences  and  management's  best  judgment 
regarding future expectations.  As permitted by U.S. GAAP, 
the  net  amount  by  which  actual  results  differ  from  our 
assumptions is deferred.  If this net deferred amount exceeds 
10% of the greater of plan assets or liabilities, a portion of the 
deferred amount is included in expense for the following year.  
The  cost  or  benefit  of  plan  changes,  such  as  increasing  or 
decreasing benefits for prior employee service (prior service 
cost), is deferred and included in expense on a straight-line 
basis  over  the  average  remaining  service  period  of  the 
employees expected to receive benefits.

The  expected  return  on  plan  assets  assumption  impacts  our 
defined  benefit  expense  since  many  of  our  defined  benefit 
pension plans and our primary OPEB plan are partially funded.  
The process for setting the expected rates of return is described 
in Note 8 to the Consolidated Financial Statements.  For 2018, 
the average return on assets assumptions for pension plan assets 
and OPEB assets was 6.8% and 8.3%, respectively.  A change 
in the rate of return of 100 basis points for both pension and 
OPEB assets would impact annual after-tax benefit expense by 
approximately $115 million.

Since  pension  and  OPEB  liabilities  are  measured  on  a 
discounted basis, the discount rate impacts our plan obligations 
and expenses.  Discount rates used for our U.S. defined benefit 
pension and OPEB plans are based on a yield curve constructed 
from a portfolio of high quality bonds for which the timing and 
amount of cash outflows approximate the estimated payouts 
of the plan.  For our international plans, the discount rates are 
set by benchmarking against investment grade corporate bonds 
rated AA or better.  The average discount rate on the defined 

benefit pension plans of 2.5% represents a weighted average 
of local rates in countries where such plans exist.  A 100 basis 
point change in the discount rate would impact annual after-
tax  benefit  expense  by  approximately  $190  million.    The 
average discount rate on the OPEB plan of 4.2% reflects the 
higher interest rates generally applicable in the U.S., which is 
where a majority of the plan participants receive benefits.  A 
100 basis point change in the discount rate would impact annual 
after-tax OPEB expense by approximately $65 million.  For 
additional details on our defined benefit pension and OPEB 
plans, see Note 8 to the Consolidated Financial Statements.
Goodwill and Intangible Assets

reporting  units  and 

Significant judgment is required to estimate the fair value of 
our  goodwill 
intangible  assets. 
Accordingly, we typically obtain the assistance of third-party 
valuation specialists for significant goodwill reporting units 
and intangible assets.  The fair value estimates are based on 
available historical information and on future expectations. We 
typically estimate the fair value of these assets using the income 
method, which is based on the present value of estimated future 
cash flows attributable to the respective assets.  The valuations 
used to test goodwill and intangible assets for impairment are 
dependent  on  a  number  of  significant  estimates  and 
assumptions,  including  macroeconomic  conditions,  overall 
category growth rates, competitive activities, cost containment 
and  margin  progression,  Company  business  plans  and  the 
discount rate applied to cash flows.

Indefinite  lived  intangible  assets  and  goodwill  are  not 
amortized,  but  are  tested  separately  at  least  annually  for 
impairment.  Assumptions used in our impairment evaluations, 
such  as  forecasted  growth  rates  and  cost  of  capital,  are 
consistent with internal projections and operating plans.  We 
believe  these  estimates  and  assumptions  are  reasonable  and 
comparable to those that would be used by other marketplace 
participants.  Unanticipated market or macroeconomic events 
and circumstances may occur, which could affect the accuracy 
or validity of the estimates and assumptions.  For example, 
future changes in the judgments, assumptions and estimates 
that  are  used  in  our  impairment  testing  for  goodwill  and 
indefinite lived intangible assets, including discount and tax 
rates  or  future  cash  flow  projections,  could  result  in 
significantly different estimates of the fair values.  In addition, 
changes  to,  or  a  failure  to  achieve  business  plans  or 
deterioration  of  macroeconomic  conditions  could  result  in 
reduced cash flows or higher discount rates, leading to a lower 
valuation that would trigger an impairment of the goodwill and 
intangible assets of these businesses.

We  test  individual  indefinite  lived  intangible  assets  by 
comparing the book value of each asset to the estimated fair 
value.    Our  impairment  testing  for  goodwill  is  performed 
separately  from  our  impairment  testing  of  indefinite  lived 
intangible assets.  The test to evaluate goodwill for impairment 
is a two step process.  In the first step, we compare the fair 
value of the reporting unit to its carrying value.  If the fair value 
of the reporting unit is less than its carrying value, we perform 
a  second  step  to  determine  the  implied  fair  value  of  the 
reporting unit's goodwill.  The second step of the impairment 
analysis requires a valuation of a reporting unit's tangible and 

The Procter & Gamble Company        29

intangible  assets  and  liabilities  in  a  manner  similar  to  the 
allocation of purchase price in a business combination.  If the 
resulting implied fair value of the reporting unit's goodwill is 
less  than  its  carrying  value,  that  difference  represents  an 
impairment.

Determining the useful life of an intangible asset also requires 
judgment.  Certain brand intangible assets are expected to have 
indefinite lives based on their history and our plans to continue 
to  support  and  build  the  acquired  brands.    Other  acquired 
intangible  assets 
(e.g.,  certain  brands,  all  customer 
relationships, patents and technologies) are expected to have 
determinable useful lives.  Our assessment as to brands that 
have an indefinite life and those that have a determinable life 
is  based  on  a  number  of  factors  including  competitive 
environment, market share, brand history, underlying product 
the  macroeconomic 
life  cycles,  operating  plans  and 
environment  of  the  countries  in  which  the  brands  are  sold. 
Determinable-lived intangible assets are amortized to expense 
over  their  estimated  lives.  An  impairment  assessment  for 
determinable-lived intangibles is only required when an event 
or change in circumstances indicates that the carrying amount 
of the asset may not be recoverable. 

Most  of  our  goodwill  reporting  units  are  comprised  of  a 
combination of legacy and acquired businesses and as a result 
have fair value cushions that, at a minimum, exceed two times 
their  underlying  carrying  values.  Certain  of  our  goodwill 
reporting units, in particular Shave Care and Appliances, are 
comprised entirely of acquired businesses and as a result have 
fair value cushions that are not as high. Both of these wholly-
acquired  reporting  units  have  fair  value  cushions  (the  fair 
values  currently  exceed  the  underlying  carrying  values).  
However, the overall Shave Care cushion, as well as the related 
Gillette  indefinite-lived  intangible  asset  cushion,  have  both 
been  reduced  to  below  10%,  both  due  in  large  part  to  an 
increased competitive market environment, a deceleration of 
category  growth  caused  by  changing  grooming  habits  and 
significant  currency  devaluations  in  a  number  of  countries 
relative to the U.S. dollar that have occurred in recent years,  
and which has contributed to reduced cash flow projections.  
As a result, this reporting unit and indefinite-lived intangible 
asset are more susceptible to impairment risk.

The most significant assumptions utilized in the determination 
of the estimated fair values of Shave Care reporting unit and 
the Gillette indefinite-lived intangible asset are the residual net 
sales and earnings growth rates and discount rate.  The residual 
growth rate represents the expected rate at which the reporting 
unit and Gillette brand are expected to grow beyond the 10-
year time horizon.  The residual growth rate utilized in our fair 
value estimates is consistent with the reporting unit and brand 
operating plans, and approximates expected long term category 
market growth rates.  The residual growth rate is dependent on 
overall  market  growth  rates,  the  competitive  environment, 
inflation,  relative  currency  exchange  rates  and  business 
activities that impact market share.  As a result, the residual 
growth  rate  could  be  adversely  impacted  by  a  sustained 
deceleration  in  category  growth,  grooming  habit  changes, 
devaluation of currencies against the U.S. dollar or an increased 
competitive  environment.    The  discount  rate,  which  is 

30        The Procter & Gamble Company

in 

impacted  by  adverse  changes 

consistent with a weighted average cost of capital that is likely 
to be expected by a market participant, is based upon industry 
required rates of return, including consideration of both debt 
and equity components of the capital structure.  Our discount 
rate  may  be 
the 
macroeconomic environment, volatility in the equity and debt 
markets  or  other  country  specific  factors,  such  as  further 
devaluation of currencies against the U.S. dollar and changes 
in expected rates of inflation.  While management can and has 
implemented  strategies  to  address  these  events,  significant 
changes in operating plans or adverse changes in the future 
could reduce the underlying cash flows used to estimate fair 
values  and  could  result  in  a  decline  in  fair  value  that  could 
trigger  future  impairment  charges  of  the  business  unit's 
goodwill and indefinite-lived intangibles.  As of June 30, 2018, 
the carrying values of Shave Care goodwill and the Gillette 
indefinite-lived  intangible  asset  are  $19.5  billion  and  $15.7 
billion, respectively.

The table below provides a sensitivity analysis for the Shave 
Care reporting unit and the Gillette indefinite lived intangible 
asset, utilizing reasonably possible changes in the assumptions 
for the residual net sales growth rate and the discount rate, to 
demonstrate the potential impacts to the estimated fair values.  
The table below provides, in isolation, the estimated fair value 
impacts related to a 50 basis point decrease to our residual net 
sales growth rate or a 50 basis point increase to our discount 
rate. Given the size of the fair value cushions, changes in the 
assumptions of this magnitude would result in an impairment 
of the underlying goodwill and could result in an impairment 
of the indefinite lived intangible asset. 

Approximate Percent Change in
Estimated Fair Value

+50 bps
Discount Rate

(10)%

(10)%

-50 bps
Residual 
Growth

(7)%

(7)%

Shave Care goodwill
reporting unit

Gillette indefinite-lived
intangible asset

See  Note  4  to  the  Consolidated  Financial  Statements  for 
additional  discussion  on  goodwill  and  intangible  asset 
impairment testing results.
New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements for 
recently  adopted  accounting  pronouncements  and  recently 
issued  accounting  pronouncements  not  yet  adopted  as  of 
June 30, 2018.

OTHER INFORMATION

Hedging and Derivative Financial Instruments

As a multinational company with diverse product offerings, 
we  are  exposed  to  market risks,  such  as  changes in  interest 
rates,  currency  exchange  rates  and  commodity  prices.    We 
evaluate exposures on a centralized basis to take advantage of 
natural  exposure  correlation  and  netting.    Except  within 
financing operations, we leverage the Company's diversified 
portfolio  of  exposures  as  a  natural  hedge  and  prioritize 

operational  hedging  activities  over 
financial  market 
instruments.    To  the  extent  we  choose  to  further  manage 
volatility  associated  with  the  net  exposures,  we  enter  into 
various financial transactions which we account for using the 
applicable accounting guidance for derivative instruments and 
hedging activities.  These financial transactions are governed 
by  our  policies  covering  acceptable  counterparty  exposure, 
instrument types and other hedging practices.  See Note 9 to 
the Consolidated Financial Statements for a discussion of our 
accounting policies for derivative instruments.

Derivative positions are monitored using techniques including 
market  valuation,  sensitivity  analysis  and  value-at-risk 
modeling.    The  tests  for  interest  rate,  currency  rate  and 
commodity derivative positions discussed below are based on 
the  RiskManager™  value-at-risk  model  using  a  one-year 
horizon and a 95% confidence level.  The model incorporates 
the impact of correlation (the degree to which exposures move 
together over time) and diversification (from holding multiple 
currency,  commodity  and  interest  rate  instruments)  and 
assumes  that  financial  returns  are  normally  distributed.  
Estimates of volatility and correlations of market factors are 
drawn from the RiskMetrics™ dataset as of June 30, 2018.  In 
cases where data is unavailable in RiskMetrics™, a reasonable 
proxy is included.

Our market risk exposures relative to interest rates, currency 
rates  and  commodity  prices,  as  discussed  below,  have  not 
changed materially versus the previous reporting period.  In 
addition, we are not aware of any facts or circumstances that 
would significantly impact such exposures in the near term.
Interest Rate Exposure on Financial Instruments.  Interest 
rate  swaps  are  used  to  hedge  exposures  to  interest  rate 
movement on underlying debt obligations.  Certain interest rate 
swaps  denominated  in  foreign  currencies  are  designated  to 
hedge exposures to currency exchange rate movements on our 
investments in foreign operations.  These currency interest rate 
swaps are designated as hedges of the Company's foreign net 
investments.

Based on our interest rate exposure as of and during the year 
ended  June 30,  2018, 
including  derivative  and  other 
instruments sensitive to interest rates, we believe a near-term 
change in interest rates, at a 95% confidence level based on 
historical interest rate movements, would not materially affect 
our financial statements.
Currency Rate Exposure on Financial Instruments.  Because 
we manufacture and sell products and finance operations in a 
number of countries throughout the world, we are exposed to 
the impact on revenue and expenses of movements in currency 
exchange  rates.    Corporate  policy  prescribes  the  range  of 
allowable hedging activity.  To manage the exchange rate risk 
associated with the financing of our operations, we primarily 
use forward contracts and currency swaps with maturities of 
less than 18 months.  In addition, we have entered into certain 
currency swaps with maturities of up to five years to hedge our 
exposure  to  exchange  rate  movements  on  intercompany 
financing transactions.

Based on our currency rate exposure on derivative and other 
instruments as of and during the year ended June 30, 2018, we 

believe, at a 95% confidence level based on historical currency 
rate movements, the impact on such instruments of a near-term 
change  in  currency  rates  would  not  materially  affect  our 
financial statements.
Commodity Price Exposure on Financial Instruments.  We 
use raw materials that are subject to price volatility caused by 
weather, supply conditions, political and economic variables 
and other unpredictable factors.  We may use futures, options 
and swap contracts to manage the volatility related to the above 
exposures.

As of and during the years ended June 30, 2018 and June 30, 
2017, we did not have any commodity hedging activity.

Measures Not Defined By U.S. GAAP

In  accordance  with  the  SEC's  Regulation  G,  the  following 
provides  definitions  of  the  non-GAAP  measures  and  the 
reconciliation to the most closely related GAAP measures.  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.  These measures include:
Organic Sales Growth.  Organic sales growth is a non-GAAP 
measure of sales growth excluding the impacts of the India 
Goods & Services Tax changes, the impact 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.

The Procter & Gamble Company        31

The  following  tables  provide  a  numerical  reconciliation  of 
organic sales growth to reported net sales growth:

Year ended
June 30, 2018

Beauty

Grooming

Health Care

Fabric & Home
Care

Baby, Feminine
& Family Care
TOTAL
COMPANY

Year ended
June 30, 2017

Beauty

Grooming

Health Care

Fabric & Home
Care

Baby, Feminine
& Family Care
TOTAL
COMPANY

Net Sales
Growth

Foreign
Exchange
Impact

9 %

(1)%

5 %

(2 )%

(3 )%

(3 )%

Acquisition 
& 
Divestiture 
Impact/
Other (1)

Organic
Sales
Growth

— %

1 %

— %

7 %

(3)%

2 %

3 %

(1 )%

1 %

3 %

(1)%

(1 )%

— %

(2)%

3 %

(2)%

—%

1 %

Net Sales
Growth

Foreign
Exchange
Impact

— %

(3)%

2 %

2 %

2 %

2 %

— %

2 %

Acquisition 
& 
Divestiture 
Impact/
Other (2)

Organic
Sales
Growth

1 %

3 %

1 % — %

1 %

1 %

5 %

3 %

(1)%

2 %

— %

1 %

— %

2 %

—%

2 %

(1)  Acquisition & Divestiture Impact/Other includes the volume and 
mix impact of acquisitions and divestitures, the impact of the 
India  Goods  and  Services  Tax  implementation  and  rounding 
impacts necessary to reconcile net sales to organic sales.
(2)  Acquisition & Divestiture Impact/Other includes the volume and 
mix impact of acquisitions and divestitures, the impact of the 
Venezuela deconsolidation and rounding impacts necessary to 
reconcile net sales to organic sales.

Adjusted Free Cash Flow.  Adjusted free cash flow is defined 
as  operating  cash  flow  less  capital  spending  and  excluding 
certain  divestiture  impacts  (tax  payments  related  to  certain 
divestitures).  Adjusted free cash flow represents the cash that 
the  Company  is  able  to  generate  after  taking  into  account 
planned maintenance and asset expansion.  We view adjusted 
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.

The  following  table  provides  a  numerical  reconciliation  of 
adjusted free cash flow ($ millions):

Operating
Cash Flow

Capital
Spending

Divestiture 
impacts (1)

Adjusted Free
Cash Flow

2018 $

14,867 $

(3,717) $

— $

11,150

2017

12,753

(3,384)

418

9,787

2016
(3,314)
(1)  Divestiture impacts relate to tax payments for the Beauty Brands 

12,121

15,435

—

divestiture in fiscal 2017.

32        The Procter & Gamble Company

Adjusted Free Cash Flow Productivity.  Adjusted free cash 
flow productivity is defined as the ratio of adjusted free cash 
flow to net earnings excluding the transitional impact of the 
U.S. Tax Act,  the losses on early debt extinguishment, the gain 
on the sale of the Batteries and Beauty Brands businesses and  
Batteries  impairments.    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,  in  allocating  financial  resources  and  for  budget 
planning  purposes.    This  measure  is  used  in  assessing  the 
achievement of management goals for at-risk compensation.  
The Company's long-term target is to generate annual adjusted 
free cash flow productivity at or above 90 percent.

The  following  table  provides  a  numerical  reconciliation  of 
adjusted free cash flow productivity ($ millions):

Net
Earnings

Adjustments 
to Net 
Earnings (1)

Net Earnings
Excluding
Adjustments

Adjusted
Free
Cash
Flow

2018 $ 9,861 $
2017
2016

15,411
10,604

845 $

(4,990)
(72)

10,706 $ 11,150
9,787
10,421
12,121
10,532

Adjusted 
Free
Cash Flow
Productivity
104%
94 %
115 %

(1)  Adjustments to Net Earnings relate to the transitional impact of 
the  U.S.  Tax  Act  in  fiscal  2018,  the  losses  on  early  debt 
extinguishment in fiscal 2018 and 2017, the gain on the sale of 
the Beauty Brands business in 2017, and the gain on the sale of 
the  Batteries  business  and  the  Batteries  impairment  in  fiscal 
2016.

Core EPS.  Core EPS is a measure of the Company's diluted net earnings per share from continuing operations adjusted as indicated.  
Management views this non-GAAP measure as a useful supplemental measure of Company performance over time.  The table 
below provides a reconciliation of diluted net earnings per share to Core EPS, including the following reconciling 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.  In 
2012, the Company began a $10 billion strategic productivity and cost savings initiative that includes incremental restructuring 
activities.  In 2017, we communicated details of an additional multi-year productivity and cost savings plan.  This results 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.  

•  Transitional Impacts of the U.S. Tax Act:  As discussed in Note 5 to the Consolidated Financial Statements, the U.S. government 
enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Act”) in December 
2017.  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 current year earnings. 
•  Early debt extinguishment charges:  In fiscal 2018 and 2017, the Company recorded after-tax charges of $243 million and 
$345 million, respectively, due to the early extinguishment of certain long-term debt.  These charges represent the difference 
between the reacquisition price and the par value of the debt extinguished. 

•  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. 

We do not view the above items to be indicative of underlying business 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.

The Procter & Gamble Company        33

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures

Twelve Months Ended June 30, 2018

AS 
REPORTED 
(GAAP)

INCREMENTAL 
RESTRUCTURING

TRANSITIONAL 
IMPACTS OF THE 
U.S. TAX ACT

COST OF PRODUCTS SOLD

$

34,268

$

(724) $

SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSE

OPERATING INCOME

INCOME TAX ON CONTINUING
OPERATIONS

NET EARNINGS ATTRIBUTABLE
TO P&G

DILUTED NET EARNINGS PER
COMMON SHARE*

18,853

13,711

3,465

9,750

(15)

739

129

610

—

—

—

(602)

602

EARLY DEBT 
EXTINGUISHMENT

ROUNDING

NON-GAAP 
(CORE)

$

(1) $

33,543

1

—

—

18,839

14,450

3,095

(1)

11,204

 Core EPS

103

243

$

3.67

$

0.23

$

0.23

$

0.09

$

— $

4.22

*  Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble. 

CHANGE VERSUS YEAR AGO

CORE EPS

8%

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures

Twelve Months Ended June 30, 2017

COST OF PRODUCTS SOLD

$

32,535

$

— $

(498) $

— $

— $

32,037

AS
REPORTED
(GAAP)

DISCONTINUED
OPERATIONS

INCREMENTAL
RESTRUCTURING

EARLY DEBT
EXTINGUISHMENT

ROUNDING

NON-GAAP
(CORE)

SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSE

OPERATING INCOME

INCOME TAX ON CONTINUING
OPERATIONS

NET EARNINGS ATTRIBUTABLE
TO P&G

DILUTED NET EARNINGS PER
COMMON SHARE*

18,568

13,955

3,063

15,326

—

—

—

(5,217)

99

399

120

279

—

—

198

345

—

—

—

18,667

14,354

3,381

(1)

10,732

 Core EPS

$

5.59

$

(1.90) $

0.10

$

0.13

$

— $

3.92

*  Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

CHANGE VERSUS YEAR AGO

CORE EPS

7%

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures

Twelve Months Ended June 30, 2016

COST OF PRODUCTS SOLD

$

32,909

$

— $

(624) $

— $

— $

32,285

AS
REPORTED
(GAAP)

DISCONTINUED
OPERATIONS

INCREMENTAL
RESTRUCTURING

CHARGES FOR
EUROPEAN LEGAL
MATTERS

ROUNDING

NON-GAAP
(CORE)

SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSE

OPERATING INCOME

INCOME TAX ON CONTINUING
OPERATIONS

NET EARNINGS ATTRIBUTABLE
TO P&G

DILUTED NET EARNINGS PER
COMMON SHARE*

18,949

13,441

3,342

10,508

—

—

—

(577)

31

593

94

499

(13)

13

2

11

—

—

(1)

—

18,967

14,047

3,437

10,441

 Core EPS

$

3.69

$

(0.20) $

0.18

$

— $

— $

3.67

*  Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is incorporated by reference to the section entitled Other Information under Management's 
Disclosure and Analysis, and Note 9 to the Consolidated Financial Statements.

34        The Procter & Gamble Company

Item 8.  Financial Statements and Supplementary Data.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 

Management is responsible for establishing and maintaining adequate internal control over financial reporting of The Procter & 
Gamble Company (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended).  Our internal control 
over  financial  reporting  is  designed  to  provide  reasonable  assurance  regarding  the  reliability  of  financial  reporting  and  the 
preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United 
States of America.

Strong internal controls is an objective that is reinforced through our Worldwide Business Conduct Manual, which sets forth our 
commitment to conduct business with integrity, and within both the letter and the spirit of the law.  Our people are deeply committed 
to our Purpose, Values, and Principles, which unite us in doing what’s right.  Our system of internal controls includes written 
policies and procedures, segregation of duties, and the careful selection and development of employees.  Additional key elements 
of our internal control structure include our Global Leadership Council, which is actively involved in oversight of the business 
strategies, initiatives, results and controls, our Disclosure Committee, which is responsible for evaluating disclosure implications 
of significant business activities and events, our Board of Directors, which provides strong and effective corporate governance, 
and our Audit Committee, which reviews significant accounting policies, financial reporting and internal control matters.

The Company's internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually 
for critical financial reporting areas of the Company and is audited by our Global Internal Audit organization.  Management takes 
the appropriate action to correct any identified control deficiencies.  Global Internal Audit also performs financial and compliance 
audits around the world, provides training, and continuously improves our internal control processes.

Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not 
prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due 
to error or fraud may occur that are not detected.  Also, because of changes in conditions, internal control effectiveness may vary 
over time.

Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2018, using 
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of 
the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting 
as of June 30, 2018, based on these criteria.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal 
control over financial reporting as of June 30, 2018, as stated in their report which is included herein.

/s/ David S. Taylor

David S. Taylor

Chairman of the Board, President and Chief Executive Officer

/s/ Jon R. Moeller

Jon R. Moeller

Vice Chairman and Chief Financial Officer

August 7, 2018

The Procter & Gamble Company        35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the shareholders and the Board of Directors of The Procter & Gamble Company

Opinion on the Financial Statements

We  have  audited  the  accompanying  Consolidated  Balance  Sheets  of  The  Procter  &  Gamble  Company  and  subsidiaries  (the 
"Company") as of June 30, 2018 and 2017, the related Consolidated Statements of Earnings, Comprehensive Income, Shareholders’ 
Equity and Cash Flows for each of the three years in the period ended June 30, 2018 and the related notes (collectively referred 
to as the "financial statements").  In our opinion, the financial statements present fairly, in all material respects, the financial 
position of the Company at June 30, 2018 and 2017, and the results of its operations and its cash flows for each of the three years 
in the period ended June 30, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) 
(PCAOB), the Company's internal control over financial reporting as of June 30, 2018, based on criteria established in Internal 
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and 
our report dated August 7, 2018 expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on 
the Company's financial statements based on our audits.  We are a public accounting firm registered with the PCAOB and are 
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable 
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error 
or fraud.  Our audits included performing procedures to assess the risks of material misstatement of the financial statements, 
whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a 
test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the 
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the 
financial statements.  We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

August 7, 2018

We have served as the Company’s auditor since 1890.

36        The Procter & Gamble Company

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Procter & Gamble Company

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of The Procter & Gamble Company and subsidiaries (the "Company") 
as of June 30, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of 
Sponsoring Organizations of the Treadway Commission(COSO).  In our opinion, the Company maintained, in all material respects, 
effective internal control over financial reporting as of June 30, 2018, based on criteria established in Internal Control - Integrated 
Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) 
(PCAOB), the consolidated financial statements as of and for the year ended June 30, 2018, of the Company and our report dated 
August 7, 2018, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment 
of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal 
Control over Financial Reporting.  Our responsibility is to express an opinion on the Company’s internal control over financial 
reporting based on our audit.  We are a public accounting firm registered with the PCAOB and are required to be independent 
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the 
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material 
respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a 
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed 
risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides 
a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability 
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted 
accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain 
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets 
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial 
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are 
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable 
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that 
could have a material effect on the financial statements.

Because  of  its  inherent  limitations,  internal  control  over  financial  reporting  may  not  prevent  or  detect  misstatements.   Also, 
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because 
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Cincinnati, Ohio

August 7, 2018

Consolidated Statements of Earnings

Amounts in millions except per share amounts; Years ended June 30
NET SALES

Cost of products sold

Selling, general and administrative expense

OPERATING INCOME

Interest expense

Interest income

Other non-operating income/(expense), net

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Income taxes on continuing operations

NET EARNINGS FROM CONTINUING OPERATIONS

NET EARNINGS FROM DISCONTINUED OPERATIONS

NET EARNINGS

Less: Net earnings attributable to noncontrolling interests

The Procter & Gamble Company        37

2018
$ 66,832

2017

2016

$ 65,058

$ 65,299

34,268

18,853

13,711

506

247
(126)
13,326

3,465

9,861

—

9,861

111

32,535

18,568

13,955

465

171
(404)
13,257

3,063

10,194

5,217

15,411

85

32,909

18,949

13,441

579

182

325

13,369

3,342

10,027

577

10,604

96

NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE

$

9,750

$ 15,326

$ 10,508

BASIC NET EARNINGS PER COMMON SHARE: (1)

Earnings from continuing operations

Earnings from discontinued operations

BASIC NET EARNINGS PER COMMON SHARE
DILUTED NET EARNINGS PER COMMON SHARE: (1)

Earnings from continuing operations

Earnings from discontinued operations

DILUTED NET EARNINGS PER COMMON SHARE

DIVIDENDS PER COMMON SHARE

$

$

$

$

$

3.75

—

3.75

3.67

—

3.67

2.79

$

$

$

$

$

3.79

2.01

5.80

3.69

1.90

5.59

2.70

$

$

$

$

$

3.59

0.21

3.80

3.49

0.20

3.69

2.66

(1)  Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & 

Gamble. 

See accompanying Notes to Consolidated Financial Statements. 

38        The Procter & Gamble Company

Consolidated Statements of Comprehensive Income

Amounts in millions; Years ended June 30
NET EARNINGS

OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX

Financial statement foreign currency translation

Unrealized gains/(losses) on hedges (net of $(279), $(186) and $5 tax, respectively)

Unrealized gains/(losses) on investment securities (net of $0, $(6) and $7 tax, 
respectively)

Unrealized gains/(losses) on defined benefit retirement plans (net of $68, $551 and 
$(621) tax, respectively)

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX

TOTAL COMPREHENSIVE INCOME

Less: Total comprehensive income attributable to noncontrolling interests

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
PROCTER & GAMBLE

2018

2017

2016

$

9,861

$

15,411

$

10,604

(6)
(299)

(148)

334
(119)
9,742

109

239
(306)

(59)

1,401

1,275

16,686

85

(1,679)
1

28

(1,477)
(3,127)
7,477

96

$

9,633

$

16,601

$

7,381

See accompanying Notes to Consolidated Financial Statements. 

Consolidated Balance Sheets

Amounts in millions; As of June 30
Assets

CURRENT ASSETS

Cash and cash equivalents

Available-for-sale investment securities

Accounts receivable
INVENTORIES

Materials and supplies

Work in process

Finished goods

Total inventories

Prepaid expenses and other current assets

TOTAL CURRENT ASSETS

PROPERTY, PLANT AND EQUIPMENT, NET

GOODWILL
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET

OTHER NONCURRENT ASSETS

TOTAL ASSETS

Liabilities and Shareholders' Equity

CURRENT LIABILITIES

Accounts payable

Accrued and other liabilities

Debt due within one year

TOTAL CURRENT LIABILITIES

LONG-TERM DEBT

DEFERRED INCOME TAXES

OTHER NONCURRENT LIABILITIES

TOTAL LIABILITIES

SHAREHOLDERS' EQUITY

Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)

Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)

Common stock, stated value $1 per share (10,000 shares authorized; shares issued:
2018 - 4,009.2, 2017 - 4,009.2)

Additional paid-in capital

Reserve for ESOP debt retirement

Accumulated other comprehensive income/(loss)

Treasury stock, at cost (shares held:  2018 -1,511.2, 2017 - 1,455.9)

Retained earnings

Noncontrolling interest

TOTAL SHAREHOLDERS' EQUITY

The Procter & Gamble Company        39

2018

2017

$

2,569

$

9,281

4,686

1,335

588

2,815

4,738

2,046

23,320

20,600

45,175
23,902

5,313

5,569

9,568

4,594

1,308

529

2,787

4,624

2,139

26,494

19,893

44,699
24,187

5,133

$

118,310

$

120,406

$

10,344

$

7,470

10,423

28,237

20,863

6,163

10,164

65,427

967

—

4,009

63,846
(1,204)
(14,749)
(99,217)
98,641

590

52,883

9,632

7,024

13,554

30,210

18,038

8,126

8,254

64,628

1,006

—

4,009

63,641
(1,249)
(14,632)
(93,715)
96,124

594

55,778
120,406

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

118,310

$

See accompanying Notes to Consolidated Financial Statements. 

40        The Procter & Gamble Company

Consolidated Statements of Shareholders' Equity

Dollars in millions;
shares in thousands

Common Stock

Shares

Amount

Preferred
Stock

Add-
itional
Paid-In
Capital

Reserve for
ESOP Debt
Retirement

Accumu-
lated
Other
Comp-
rehensive
Income/
(Loss)

Treasury
Stock

Retained
Earnings

Non-
controlling
Interest

Total
Share-
holders'
Equity

BALANCE JUNE 30, 2015

2,714,571

$4,009

$1,077 $63,852

($1,320) ($12,780) ($77,226) $84,807

$631 $63,050

Net earnings

Other comprehensive loss

Dividends and dividend
equivalents:

 Common

 Preferred, net of tax benefits
Treasury stock purchases (1)

Employee stock plans

Preferred stock conversions

ESOP debt impacts

Noncontrolling interest, net

(103,449)

52,089

4,863

(144)

6

(39)

10,508

96

10,604

(3,127)

(7,181)

(255)

(8,217)

3,234

33

30

74

(85)

(3,127)

(7,181)

(255)

(8,217)

3,090

—

104

(85)

BALANCE JUNE 30, 2016

2,668,074

$4,009

$1,038 $63,714

($1,290) ($15,907) ($82,176) $87,953

$642 $57,983

Net earnings

Other comprehensive loss

Dividends and dividend
equivalents:

 Common

 Preferred, net of tax benefits
Treasury stock purchases (2)

Employee stock plans

Preferred stock conversions

ESOP debt impacts

Noncontrolling interest, net

(164,866)

45,848

4,241

(77)

4

(32)

15,326

85

15,411

1,275

(6,989)

(247)

(14,625)

3,058

28

41

81

1,275

(6,989)

(247)

(14,625)

2,981

—

122

(133)

(133)

BALANCE JUNE 30, 2017

2,553,297

$4,009

$1,006 $63,641

($1,249) ($14,632) ($93,715) $96,124

$594 $55,778

Net earnings

Other comprehensive loss

Dividends and dividend
equivalents:

 Common

 Preferred, net of tax benefits

Treasury stock purchases

Employee stock plans

Preferred stock conversions

ESOP debt impacts

Noncontrolling interest, net

(81,439)

21,655

4,580

199

6

(39)

9,750

111

9,861

(117)

(2)

(119)

(7,057)

(265)

(7,004)

1,469

33

45

89

(7,057)

(265)

(7,004)

1,668

—

134

(113)

(113)

BALANCE JUNE 30, 2018

2,498,093

$4,009

$967 $63,846

($1,204) ($14,749) ($99,217) $98,641

$590 $52,883

(1) 
(2) 

Includes $4,213 of treasury shares acquired in the divestiture of the Batteries business (see Note 13).
Includes $9,421 of treasury shares received as part of the share exchange in the Beauty Brands transaction (see Note 13).

See accompanying Notes to Consolidated Financial Statements. 

Consolidated Statements of Cash Flows

Amounts in millions; Years ended June 30
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
OPERATING ACTIVITIES

Net earnings
Depreciation and amortization
Loss on early extinguishment of debt
Share-based compensation expense
Deferred income taxes
Gain on sale of assets
Goodwill and intangible asset impairment charges
Change in accounts receivable
Change in inventories
Change in accounts payable, accrued and other liabilities
Change in other operating assets and liabilities
Other

TOTAL OPERATING ACTIVITIES
INVESTING ACTIVITIES

Capital expenditures
Proceeds from asset sales
Acquisitions, net of cash acquired
Purchases of short-term investments
Proceeds from sales and maturities of short-term investments
Pre-divestiture addition of restricted cash related to the Beauty Brands divestiture
Cash transferred at closing related to the Beauty Brands divestiture
Release of restricted cash upon closing of the Beauty Brands divestiture
Cash transferred in Batteries divestiture
Change in other investments

TOTAL INVESTING ACTIVITIES
FINANCING ACTIVITIES
Dividends to shareholders
Change in short-term debt
Additions to long-term debt
Reductions of long-term debt (1)
Treasury stock purchases
Treasury stock from cash infused in Batteries divestiture
Impact of stock options and other
TOTAL FINANCING ACTIVITIES
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, END OF YEAR

SUPPLEMENTAL DISCLOSURE
Cash payments for interest
Cash payment for income taxes
Divestiture of Batteries business in exchange for shares of P&G stock (2)
Divestiture of Beauty business in exchange for shares of P&G stock and assumption of debt
Assets acquired through non-cash capital leases are immaterial for all periods.

The Procter & Gamble Company        41

2018

2017

2016

$

5,569

$

7,102

$

6,836

9,861
2,834
346
395
(1,844)
(176)
—
(177)
(188)
1,385
2,000
431
14,867

(3,717)
269
(109)
(3,909)
3,928
—
—
—
—
27
(3,511)

(7,310)
(3,437)
5,072
(2,873)
(7,004)
—
1,177
(14,375)

19
(3,000)
2,569

529
2,830
—
—

$

$

15,411
2,820
543
351
(601)
(5,490)
—
(322)
71
(149)
(43)
162
12,753

(3,384)
571
(16)
(4,843)
1,488
(874)
(475)
1,870
—
(26)
(5,689)

(7,236)
2,727
3,603
(4,931)
(5,204)
—
2,473
(8,568)

(29)
(1,533)
5,569

518
3,714
—
11,360

$

$

10,604
3,078
—
335
(815)
(41)
450
35
116
1,285
204
184
15,435

(3,314)
432
(186)
(2,815)
1,354
(996)
—
—
(143)
93
(5,575)

(7,436)
(418)
3,916
(2,213)
(4,004)
(1,730)
2,672
(9,213)

(381)
266
7,102

569
3,730
4,213
—

$

$

(1) 
(2) 

Includes early extinguishment of debt costs of $346 and $543 in 2018 and 2017, respectively.
Includes $1,730 from cash infused into the Batteries business pursuant to the divestiture agreement (see Note 13).

See accompanying Notes to Consolidated Financial Statements. 

42        The Procter & Gamble Company

Notes to Consolidated Financial Statements

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING 
POLICIES

Nature of Operations

The Procter & Gamble Company's (the "Company," "Procter 
& Gamble," "we" or "us") business is focused on providing 
branded  consumer  packaged  goods  of  superior  quality  and 
value.  Our products are sold in more than 180 countries and 
territories  primarily 
through  mass  merchandisers,  e-
commerce,  grocery  stores,  membership  club  stores,  drug 
stores,  department  stores,  distributors,  wholesalers,  baby 
stores,  specialty  beauty  stores,  high-frequency  stores  and 
pharmacies. 
in 
approximately 70 countries.
Basis of Presentation

  We  have  on-the-ground  operations 

The Consolidated Financial Statements include the Company 
and its controlled subsidiaries.  Intercompany transactions are 
eliminated. 

Because of a lack of control over Venezuela subsidiaries caused 
by  a  number  of  currency  and  other  operating  controls  and 
restrictions, our Venezuelan subsidiaries are not consolidated 
for any year presented.  We account for those subsidiaries using 
the cost method of accounting.
Use of Estimates

Preparation  of  financial  statements  in  conformity  with 
accounting principles generally accepted in the United States 
of  America  (U.S.  GAAP)  requires  management  to  make 
estimates and assumptions that affect the amounts reported in 
the  Consolidated  Financial  Statements  and  accompanying 
disclosures.  These estimates are based on management's best 
knowledge of current events and actions the Company may 
undertake in the future.  Estimates are used in accounting for, 
among other items, consumer and trade promotion accruals, 
restructuring  reserves,  pensions,  post-employment  benefits, 
stock options, valuation of acquired intangible assets, useful 
lives for  depreciation and amortization of  long-lived assets, 
future  cash  flows  associated  with  impairment  testing  for 
goodwill,  indefinite-lived  intangible  assets  and  other  long-
lived  assets,  deferred  tax  assets  and  liabilities,  uncertain 
income tax positions and contingencies.  Actual results may 
ultimately differ from estimates, although management does 
not generally believe such differences would materially affect 
the financial statements in any individual year.  However, in 
regard  to  ongoing  impairment  testing  of  goodwill  and 
indefinite-lived intangible assets, significant deterioration in 
future  cash  flow  projections  or  other  assumptions  used  in 
estimating fair values versus those anticipated at the time of 
the initial valuations, could result in impairment charges that 
materially affect the financial statements in a given year.
Revenue Recognition

Sales are recognized when revenue is realized or realizable and 
has  been  earned.    Revenue  transactions  represent  sales  of 
inventory.  The revenue recorded is presented net of sales and 
other taxes we collect on behalf of governmental authorities.  

Amounts in millions of dollars except per share amounts or as otherwise specified.

The  revenue  includes  shipping  and  handling  costs,  which 
generally are included in the list price to the customer.  Our 
policy  is  to  recognize  revenue  when  title  to  the  product, 
ownership and risk of loss transfer to the customer, which can 
be on the date of shipment or the date of receipt by the customer.  
A  provision  for  payment  discounts  and  product  return 
allowances is recorded as a reduction of sales in the same period 
the revenue is recognized.

Trade  promotions,  consisting  primarily  of  customer  pricing 
allowances, merchandising funds and consumer coupons, are 
offered through various programs to customers and consumers.  
Sales are recorded net of trade promotion spending, which is 
recognized as incurred, generally at the time of the sale.  Most 
of these arrangements have terms of approximately one year.  
Accruals  for  expected  payouts  under  these  programs  are 
included as accrued marketing and promotion in the Accrued 
and  other  liabilities  line  item  in  the  Consolidated  Balance 
Sheets.
Cost of Products Sold

Cost of products sold is primarily comprised of direct materials 
and  supplies  consumed  in  the  manufacturing  of  product,  as 
well as manufacturing labor, depreciation expense and direct 
overhead  expense  necessary  to  acquire  and  convert  the 
purchased materials and supplies into finished product.  Cost 
of products sold also includes the cost to distribute products to 
customers,  inbound  freight  costs,  internal  transfer  costs, 
warehousing costs and other shipping and handling activity.
Selling, General and Administrative Expense

Selling,  general  and  administrative  expense  (SG&A)  is 
primarily comprised of marketing expenses, selling expenses, 
research  and  development  costs,  administrative  and  other 
indirect overhead costs, depreciation and amortization expense 
on  non-manufacturing  assets  and  other  miscellaneous 
operating items.  Research and development costs are charged 
to  expense  as  incurred  and  were  $1.9  billion  in  2018,  $1.9 
billion  in  2017  and  $1.9  billion  in  2016  (reported  in  Net 
earnings  from  continuing  operations).    Advertising  costs, 
charged to expense as incurred, include worldwide television, 
print, radio, internet and in-store advertising expenses and were 
$7.1 billion in 2018, $7.1 billion in 2017 and $7.2 billion in 
2016 (reported in Net earnings from continuing operations).  
Non-advertising  related  components  of  the  Company's  total 
marketing spending reported in SG&A include costs associated 
with consumer promotions, product sampling and sales aids.
Other Non-Operating Income/(Expense), Net

Other non-operating income/(expense), net primarily includes 
net acquisition and divestiture gains, investment income and 
other non-operating items.
Currency Translation

Financial statements of operating subsidiaries outside the U.S. 
generally  are  measured  using  the  local  currency  as  the 
functional currency.  Adjustments to translate those statements 
into U.S. dollars are recorded in Other comprehensive income 
(OCI).    For  subsidiaries  operating  in  highly  inflationary 
economies,  the  U.S.  dollar  is  the  functional  currency.    Re-

measurement  adjustments  for  financial  statements  in  highly 
inflationary economies and other transactional exchange gains 
and losses are reflected in earnings.
Cash Flow Presentation

The Consolidated Statements of Cash Flows are prepared using 
the indirect method, which reconciles net earnings to cash flow 
from operating activities.  Cash flows from foreign currency 
transactions  and  operations  are  translated  at  an  average 
exchange  rate  for  the  period.    Cash  flows  from  hedging 
activities are included in the same category as the items being 
hedged.  Cash flows from derivative instruments designated 
as net investment hedges are classified as financing activities.  
Realized  gains  and  losses  from  non-qualifying  derivative 
instruments used to hedge currency exposures resulting from 
intercompany  financing  transactions  are  also  classified  as 
financing  activities.    Cash  flows  from  other  derivative 
instruments  used  to  manage  interest,  commodity  or  other 
currency exposures are classified as operating activities.  Cash 
payments related to income taxes are classified as operating 
activities.    Cash  flows  from  the  Company's  discontinued 
operations are included in the Consolidated Statements of Cash 
Flows.  See Note 13 for significant cash flow items related to 
discontinued operations.
Investments

Investment securities consist of readily marketable debt and 
equity securities.  Unrealized gains or losses from investments 
classified as trading, if any, are charged to earnings.  Unrealized 
gains or losses on securities classified as available-for-sale are 
generally recorded in OCI.  If an available-for-sale security is 
other than temporarily impaired, the loss is charged to either 
earnings or OCI depending on our intent and ability to retain 
the security until we recover the full cost basis and the extent 
of the loss attributable to the creditworthiness of the issuer.  
Investment  securities  are  included  as  Available-for-sale 
investment  securities  and  Other  noncurrent  assets  in  the 
Consolidated Balance Sheets.

Investments  in  certain  companies  over  which  we  exert 
significant  influence,  but  do  not  control  the  financial  and 
operating  decisions,  are  accounted  for  as  equity  method 
investments.  Other investments that are not controlled, and 
over which we do not have the ability to exercise significant 
influence, are accounted for under the cost method.  Both equity 
and cost method investments are included as Other noncurrent 
assets in the Consolidated Balance Sheets.
Inventory Valuation

Inventories are valued at the lower of cost or market value.  
Product-related inventories are maintained on the first-in, first-
out method.  The cost of spare part inventories is maintained 
using the average-cost method.
Property, Plant and Equipment

Property, plant and equipment is recorded at cost reduced by 
accumulated depreciation.  Depreciation expense is recognized 
over the assets' estimated useful lives using the straight-line 
method.  Machinery and equipment includes office furniture 
and fixtures (15-year life), computer equipment and capitalized 
software (3- to 5-year lives) and manufacturing equipment (3- 

The Procter & Gamble Company        43

to 20-year lives).  Buildings are depreciated over an estimated 
useful life of 40 years.  Estimated useful lives are periodically 
reviewed  and,  when  appropriate,  changes  are  made 
prospectively.  When certain events or changes in operating 
conditions  occur,  asset  lives  may  be  adjusted  and  an 
impairment  assessment  may  be  performed  on 
the 
recoverability of the carrying amounts.
Goodwill and Other Intangible Assets

Goodwill  and  indefinite-lived  intangible  assets  are  not 
amortized, but are evaluated for impairment annually or more 
often if indicators of a potential impairment are present.  Our 
annual impairment testing of goodwill is performed separately 
from  our  impairment  testing  of  indefinite-lived  intangible 
assets. 

We have acquired brands that have been determined to have 
indefinite  lives.    Those  assets  are  evaluated  annually  for 
impairment.   We  evaluate  a  number  of  factors  to  determine 
whether  an  indefinite  life  is  appropriate,  including  the 
competitive  environment,  market  share,  brand  history, 
underlying  product  life  cycles,  operating  plans  and  the 
macroeconomic  environment  of  the  countries  in  which  the 
brands are sold.  In addition, when certain events or changes 
in  operating  conditions  occur,  an  additional  impairment 
assessment  is  performed  and  indefinite-lived  assets  may  be 
adjusted to a determinable life.

The cost of intangible assets with determinable useful lives is 
amortized  to  reflect  the  pattern  of  economic  benefits 
consumed, either on a straight-line or accelerated basis over 
the estimated periods benefited.  Patents, technology and other 
intangible  assets  with  contractual  terms  are  generally 
amortized  over  their  respective  legal  or  contractual  lives.  
Customer  relationships,  brands  and  other  non-contractual 
intangible assets with determinable lives are amortized over 
periods generally ranging from 5 to 30 years.  When certain 
events or changes in operating conditions occur, an impairment 
assessment  is  performed  and  remaining  lives  of  intangible 
assets with determinable lives may be adjusted.

For  additional  details  on  goodwill  and  intangible  assets  see 
Note 4.
Fair Values of Financial Instruments

Certain financial instruments are required to be recorded at fair 
value.  Changes in assumptions or estimation methods could 
affect the fair value estimates; however, we do not believe any 
such changes would have a material impact on our financial 
condition, results of operations or cash flows.  Other financial 
instruments, including cash equivalents, certain investments 
and short-term debt, are recorded at cost, which approximates 
fair  value.   The  fair  values  of  long-term  debt  and  financial 
instruments are disclosed in Note 9.
New Accounting Pronouncements and Policies

In May 2014, the FASB issued ASU 2014-09, “Revenue from 
Contracts with Customers (Topic 606)." This guidance outlines 
a single, comprehensive model of accounting for revenue from 
contracts with customers. We will adopt the standard on July 
1, 2018, using the modified retrospective transition method. 
Our revenue is primarily generated from the sale of finished 

Amounts in millions of dollars except per share amounts or as otherwise specified.

44        The Procter & Gamble Company

product  to  customers.  Those  sales  predominantly  contain  a 
single delivery element and revenue is recognized at a single 
point  in  time  when  ownership,  risks  and  rewards  transfer.  
Accordingly,  the  timing  of  revenue  recognition  is  not 
materially impacted by the new standard.  The adoption of the 
new standard will impact the accrual timing for certain portions 
of our customer and consumer promotional spending, which 
will result in a cumulative adjustment to retained earnings of 
up to $350, net of tax, on the date of adoption.  The provisions 
of the new standard will also impact the classification of certain 
payments to customers, moving an immaterial amount of such 
payments (approximately $300) from expense to a deduction 
from  net  sales.  This  new  guidance  will  not  have  any  other 
material  impacts  on  our  Consolidated  Financial  Statements, 
including financial disclosures.

In  February  2016,  the  FASB  issued ASU  2016-02,  "Leases 
(Topic 842)." The standard requires lessees to recognize lease 
assets and lease liabilities on the balance sheet and requires 
expanded disclosures about leasing arrangements. We plan to 
adopt the standard on July 1, 2019. We are currently assessing 
the impact that the new standard will have on our Consolidated 
Financial Statements, which will consist primarily of a balance 
sheet  gross  up  of  our  operating  leases  to  show  equal  and 
offsetting  lease  assets  and  lease  liabilities.  For  additional 
details on operating leases, see Note 12.

  The  standard  simplifies 

In January 2017, the FASB issued ASU 2017-04, “Intangibles-
Goodwill  and  Other  (Topic  350):  Simplifying  the  Test  for 
the 
Goodwill  Impairment.” 
accounting for goodwill impairment by requiring a goodwill 
impairment  to  be  measured  using  a  single  step  impairment 
model, whereby the impairment equals the difference between 
the carrying amount and the fair value of the specified reporting 
units in their entirety.  This eliminates the second step of the 
current  impairment  model  that  requires  companies  to  first 
estimate the fair value of all assets in a reporting unit, and then 
measure impairments based on those fair values and a residual 
measurement  approach.    It  also  specifies  that  any  loss 
recognized  should  not  exceed  the  total  amount  of  goodwill 
allocated to that reporting unit.  We will adopt the standard no 
later than July 1, 2020.  The impact of the new standard will 
be dependent on the specific facts and circumstances of future 
individual impairments, if any.

the  FASB 

issued  ASU  2017-07, 
In  March  2017, 
"Compensation-Retirement  Benefits: 
the 
Improving 
Presentation of Net Periodic Pension Cost and Net Periodic 
Postretirement  Benefit  Cost  (Topic  715).”   This  guidance 
requires  an  entity  to  disaggregate  the  current  service  cost 
component from the other components of net benefit costs in 
the face of the income statement.  It requires the service cost 
component to be presented with other current compensation 
costs for the related employees in the operating section of the 
income statement.  Other components of net benefit cost are 
required to be presented outside of income from operations.   
We  will  adopt  the  standard  retrospectively  on  July  1,  2018.  
The adoption of ASU 2017-07 is not expected to have a material 
impact  on  our  Consolidated  Financial  Statements.    We 
currently  classify  all  net  periodic  pension  costs  within 
operating costs (as part of Cost of products sold and Selling, 

Amounts in millions of dollars except per share amounts or as otherwise specified.

general and administrative expense).  Had this standard been 
effective and adopted during fiscal 2018, Cost of products sold 
and  Selling,  general  and  administrative  costs  would  have 
increased approximately $164 and $184, respectively, for the 
year ended June 30, 2018 with an offsetting change in Other 
non-operating income/(expense), net.   

In August 2017, the FASB issued ASU 2017-12, “Derivatives 
to 
and  Hedging  (Topic  815):  Targeted  Improvements 
Accounting  for  Hedging Activities."  This  standard  enables 
entities  to  better  portray  the  economics  of  their  risk 
management activities in the financial statements and enhances 
the  transparency  and  understandability  of  hedge  results 
through improved disclosures. The new standard is effective 
for us beginning July 1, 2019, with early adoption permitted. 
We elected to early adopt the new guidance in the first quarter 
of fiscal year 2018. The amended presentation and disclosure 
guidance  was  applied  on  a  prospective  basis.  The  primary 
impact  of  adoption  is  the  required  disclosure  changes.  The 
adoption of the new standard did not have a material impact 
on  our  Consolidated  Financial  Statements,  including  the 
cumulative-effect adjustment required upon adoption.

No other new accounting pronouncement issued or effective 
during  the  fiscal  year  had  or  is  expected  to  have  a  material 
impact on our Consolidated Financial Statements.

NOTE 2

SEGMENT INFORMATION
During fiscal 2017, the Company completed the divestiture of 
four product categories, comprised of 43 of its beauty brands.  
The transactions included the global salon professional hair 
care and color, retail hair color, cosmetics and the fragrance 
businesses, along with select hair styling brands.  In fiscal 2016, 
the Company completed the divestiture of its Batteries business 
to Berkshire Hathaway.  Each of these businesses are reported 
as discontinued operations for all periods presented (see Note 
13).
Under  U.S.  GAAP,  our  Global  Business  Units  (GBUs)  are 
aggregated  into  five  reportable  segments:  1)  Beauty,  2) 
Grooming,  3)  Health  Care,  4)  Fabric  &  Home  Care  and  5) 
Baby, Feminine & Family Care.  Our five reportable segments 
are comprised of:
•  Beauty:  Hair Care (Conditioner, Shampoo, Styling Aids, 
Treatments); Skin and Personal Care (Antiperspirant and 
Deodorant, Personal Cleansing, Skin Care);

•  Grooming:  Shave Care (Female Blades & Razors, Male 
Blades  &  Razors,  Pre-  and  Post-Shave  Products,  Other 
Shave Care); Appliances

•  Health Care:  Oral Care (Toothbrushes, Toothpaste, Other 
Oral  Care);    Personal    Health  Care    (Gastrointestinal, 
Rapid  Diagnostics,  Respiratory,  Vitamins/Minerals/
Supplements, Other Personal Health Care); 

•  Fabric & Home Care:    Fabric Care (Fabric Enhancers, 
Laundry Additives, Laundry Detergents); Home Care (Air 
Care, Dish Care, P&G Professional, Surface Care ); and

•  Baby, Feminine & Family Care:  Baby Care (Baby Wipes, 
Diapers and Pants); Feminine Care (Adult Incontinence, 
Feminine  Care);  Family  Care  (Paper  Towels,  Tissues, 
Toilet Paper).

The accounting policies of the segments are generally the same 
as  those  described  in  Note  1.    Differences  between  these 
policies and U.S. GAAP primarily reflect income taxes, which 
are reflected in the segments using applicable blended statutory 
rates.    Adjustments  to  arrive  at  our  effective  tax  rate  are 
included in Corporate, including the impacts from the U.S. Tax 
Act in fiscal 2018 (see Note 5). 

Corporate  includes  certain  operating  and  non-operating 
activities that are not  reflected in the operating results used 
internally to measure and evaluate the businesses, as well as 
items to adjust management reporting principles to U.S. GAAP.  
Operating  activities  in  Corporate  include  the  results  of 
incidental  businesses  managed  at  the  corporate  level.  
Operating  elements  also  include  certain  employee  benefit 
costs,  the  costs  of  certain  restructuring-type  activities  to 
maintain a competitive cost structure, including manufacturing 
and  workforce  optimization,  certain  significant  asset 
impairment charges and other general Corporate items.  The 
non-operating elements in Corporate primarily include interest 
expense, certain acquisition and divestiture gains, interest and 
investing income and other financing costs. 

Total assets for the reportable segments include those assets 
managed by the reportable segment, primarily inventory, fixed 
assets  and  intangible  assets.    Other  assets,  primarily  cash, 
accounts receivable, investment securities and goodwill, are 
included in Corporate.

The Procter & Gamble Company        45

Our business units are comprised of similar product categories.  
Nine business units individually accounted for 5% or more of 
consolidated net sales as follows: 

Years ended June 30
Fabric Care
Baby Care
Hair Care
Home Care
Skin and Personal Care
Shave Care
Family Care
Oral Care
Feminine Care
All Other
TOTAL

% of Sales by Business Unit (1)
2017
22%
14%
10%
10%
8%
9%
8%
8%
6%
5%
100% 100%

2018
22%
13%
10%
10%
9%
8%
8%
8%
6%
6%

2016
22%
14%
10%
10%
8%
9%
8%
8%
6%
5%
100%

(1)  % of sales by business unit excludes sales held in Corporate.

The Company had net sales in the U.S. of $27.3 billion, $27.3 
billion and $27.0 billion for the years ended June 30, 2018, 
2017  and  2016,  respectively.    Long-lived  assets  in  the  U.S. 
totaled $9.7 billion and $8.8 billion as of June 30, 2018 and 
2017,  respectively.    Long-lived  assets  consists  of  property, 
plant and equipment.  No other country's net sales or long-lived 
assets exceed 10% of the Company totals.

Our largest customer, Walmart Inc. and its affiliates, accounted 
for consolidated net sales of approximately 15%, 16% and 15%
in  2018,  2017  and  2016,  respectively.    No  other  customer 
represents more than 10% of our consolidated net sales.

Amounts in millions of dollars except per share amounts or as otherwise specified.

Net Earnings
/(Loss) from
Continuing
Operations
2,320
$

Depreciation
and
Amortization
236
$

$

Capital
Expenditures
766
$

46        The Procter & Gamble Company

Global Segment Results

BEAUTY

GROOMING

HEALTH CARE

FABRIC & HOME CARE

BABY, FEMININE & FAMILY 
CARE

CORPORATE (1)

TOTAL COMPANY

2018

2017

2016
2018

2017

2016
2018

2017

2016
2018

2017

2016

2018

2017

2016
2018

2017

2016
2018

2017

2016

Earnings/(Loss)
from
Continuing
Operations
Before
Income Taxes

$

3,042

2,546

2,636
1,801

1,985

2,009
1,922

1,898

1,812
4,191

4,249

4,249

3,527

3,868

Net Sales
$ 12,406

11,429

11,477
6,551

6,642

6,815
7,857

7,513

7,350
21,441

20,717

20,730

18,080

18,252

18,505
497

505

422
$ 66,832

$

65,058

65,299

4,042
(1,157)
(1,289)
(1,379)
13,326

13,257

13,369

$

1,914

1,975
1,432

1,537

1,548
1,283

1,280

1,250
2,708

2,713

2,778

2,251

2,503

2,650
(133)
247
(174)
9,861

10,194

10,027

Total
Assets

4,709

4,184

3,888
22,609

22,759

22,819
5,254

5,194

5,139
7,295

6,886

6,919

9,682

9,920

9,863
68,761

71,463

220

218
447

433

451
230

209

204
534

513

531

899

874

886
488

571

$

788
2,834

2,820

3,078

78,508
$ 118,310

$

120,406

127,136

(1)  The Corporate reportable segment includes depreciation and amortization, total assets and capital expenditures of the Beauty Brands and 

Batteries businesses prior to their divestiture.

NOTE 3

SUPPLEMENTAL FINANCIAL INFORMATION

The  components  of  property,  plant  and  equipment  were  as 
follows:

Selected components of current and noncurrent liabilities were 
as follows:

As of June 30
ACCRUED AND OTHER LIABILITIES - CURRENT

2017

2018

As of June 30
2018
PROPERTY, PLANT AND EQUIPMENT

2017

Marketing and promotion

$

3,208

$

2,792

Compensation expenses

1,298

1,344

Buildings

$

7,188

$

6,943

Restructuring reserves

Machinery and equipment

30,595

29,505

Taxes payable

Land

Construction in progress
TOTAL PROPERTY, PLANT
AND EQUIPMENT

Accumulated depreciation
PROPERTY, PLANT AND
EQUIPMENT, NET

841

3,223

765

2,935

41,847

40,148

(21,247)

(20,255)

$ 20,600

$ 19,893

Amounts in millions of dollars except per share amounts or as otherwise specified.

513

268

156

2,027

$

7,470

$

$

Legal and environmental

Other
TOTAL

OTHER NONCURRENT LIABILITIES

Pension benefits

$

4,768

Other postretirement benefits

Uncertain tax positions

U.S. Tax Act transitional tax payable
Other
TOTAL

1,495

581

2,654

666

$ 10,164

$

599

435
364

341

383
330

283

240
1,020

797

672

1,016

1,197

1,261
221

167

323
3,717

3,384

3,314

277

449

168

1,994

7,024

5,487

1,333

564

—

870
8,254

RESTRUCTURING PROGRAM

Separation Costs

The Procter & Gamble Company        47

including  manufacturing 

The Company has historically incurred an ongoing annual level 
of restructuring-type activities to maintain a competitive cost 
and  workforce 
structure, 
optimization.    Before-tax  costs  incurred  under  the  ongoing 
program have generally ranged from $250 to $500 annually.  
In  fiscal  2012,  the  Company  initiated  an  incremental 
restructuring program (covering fiscal 2012 through 2017) as 
part of a productivity and cost savings plan to reduce costs in 
the areas of supply chain, research and development, marketing 
activities and overhead expenses.  The productivity and cost 
savings  plan  was  designed  to  accelerate  cost  reductions  by 
streamlining  management  decision  making,  manufacturing 
and other work processes in order to help fund the Company's 
growth strategy.    Total restructuring costs incurred under the 
plan through fiscal 2017 was $5.6 billion, before tax.

In fiscal 2017 the Company announced specific elements of 
another incremental multi-year productivity and cost savings 
plan to further reduce costs in the areas of supply chain, certain 
marketing activities and overhead expenses.  This program is 
expected to result in incremental enrollment reductions, along 
with  further  optimization  of  the  supply  chain  and  other 
manufacturing processes.  

Restructuring  costs  incurred  consist  primarily  of  costs  to 
separate  employees,  asset-related  costs  to  exit  facilities  and 
other costs.  The Company incurred total restructuring charges 
of $1,070 and $754 for the years ended June 30, 2018 and 2017, 
respectively.  An additional amount of approximately $800 is 
expected to be incurred in fiscal 2019.  Of the charges incurred, 
$251 and $137 were recorded in SG&A for the years ended 
June 30, 2018 and 2017, respectively and $819 and $593 were 
recorded in Cost of products sold for the years ended June 30, 
2018 and 2017, respectively.  The remainder of the charges for 
fiscal 2017 were included in Net earnings from discontinued 
operations.  The following table presents restructuring activity 
for the years ended June 30, 2018 and 2017:

Amounts in millions
RESERVE
JUNE 30, 2016
Charges
Cash spent (1)
Charges against
assets
RESERVE
JUNE 30, 2017
Charges

Cash spent

Charges against
assets
RESERVE
JUNE 30, 2018

Separations

Asset-
Related
Costs

Other

Total

$

243 $ — $

72 $

315

754

151

206

(221)

397

—

—

(397)

—

(397)

228
310

(279)

—
366

—

49
394

277
1,070

(189)

(468)

—

(366)

—

(366)

$

259 $ — $

254 $

513

(1) 

Includes  liabilities  transferred  to  Coty  related  to  our  Beauty 
Brands divestiture.

Employee separation charges for the years ended June 30, 2018 
and 2017 relate to severance packages for approximately 2,720 
and  2,120  employees,  respectively.    The  packages  were 
primarily voluntary and the amounts were calculated based on 
salary levels and past service periods.  Severance costs related 
to  voluntary  separations  are  generally  charged  to  earnings 
when the employee accepts the offer. 

Asset-Related Costs

Asset-related  costs  consist  of  both  asset  write-downs  and 
accelerated  depreciation.    Asset  write-downs  relate  to  the 
establishment of a new fair value basis for assets held-for-sale 
or disposal.  These assets were written down to the lower of 
their current carrying basis or amounts expected to be realized 
upon  disposal,  less  minor  disposal  costs.    Charges  for 
accelerated depreciation relate to long-lived assets that will be 
taken out of service prior to the end of their normal service 
period.    These  assets  relate  primarily  to  manufacturing 
consolidations  and  technology  standardizations.    The  asset-
related  charges  will  not  have  a  significant  impact  on  future 
depreciation charges. 

Other Costs

Other restructuring-type charges are incurred as a direct result 
of the restructuring program.  Such charges primarily include 
asset removal and termination of contracts related to supply 
chain optimization. 

for  ongoing 
Consistent  with  our  historical  policies 
restructuring-type activities, the restructuring program charges 
are  funded  by  and  included  within  Corporate  for  both 
management and segment reporting.  Accordingly, all of the 
charges under the program are included within the Corporate 
reportable segment. 

However,  for  informative  purposes,  the  following  table 
summarizes  the  total  restructuring  costs  related  to  our 
reportable segments:

Years ended June 30

2018

2017

2016

Beauty

Grooming

Health Care

Baby, Feminine & Family
Care
Corporate (1)
Total Company

$

60 $
38
21

115

547

289
$ 1,070 $

90 $

45

15

144

231

229

754 $

72

42

26

250

225

362

977

(1)  Corporate  includes  costs  related  to  allocated  overheads, 
including charges related to our Sales and Market Operations, 
Global  Business  Services  and  Corporate  Functions  activities, 
along  with  costs  related  to  discontinued  operations  from  our 
Batteries and Beauty Brands businesses.

Amounts in millions of dollars except per share amounts or as otherwise specified.

(174)

(395)

Fabric & Home Care

48        The Procter & Gamble Company

NOTE 4

GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill by reportable segment was as follows:

Beauty

Grooming

Health
Care

Fabric &
Home
Care

Baby,
Feminine
& Family
Care

Corporate

Total
Company

Balance at June 30, 2016 - Net (1)
Acquisitions and divestitures

Translation and other

Balance at June 30, 2017 - Net (1)
Acquisitions and divestitures

Translation and other

Balance at June 30, 2018 - Net (1)

$ 12,645 $ 19,477 $ 5,840 $ 1,856 $

—

146

12,791
82

119

—

150

19,627
—

193

(10)
48

5,878
—

51

(3)
4

1,857
—

8

4,532 $
(24)
38

4,546
—

23

— $ 44,350
(37)
386

—

—

— 44,699
82
—

—

394

$ 12,992 $ 19,820 $ 5,929 $ 1,865 $

4,569 $

— $ 45,175

(1)  Grooming goodwill balance is net of $1.2 billion accumulated impairment losses.

During fiscal 2017, the Company completed the divestiture of 
four product categories, comprised of 43 of its beauty brands 
("Beauty Brands").  The transactions included the global salon 
professional hair care and color, retail hair color and cosmetics 
businesses and the fine fragrances business, along with select 
hair  styling  brands  (see  Note  13).   The  Beauty  Brands  had 
historically  been  part  of  the  Company's  Beauty  reportable 
segment.  In accordance with applicable accounting guidance 
for the disposal of long-lived assets, the results of the Beauty 
Brands are presented as discontinued operations.  As a result, 
the goodwill attributable to the Beauty Brands as of June 30, 
2016 is excluded from the preceding table.

The change in goodwill during fiscal 2018 was primarily due 
to  acquisitions  of  two  brands  within  the  Beauty  reportable 
segment  and  currency  translation  across  all  reportable 
segments.    The  change  in  goodwill  during  fiscal  2017  was 
primarily  due  to  minor  brand  divestitures  and  currency 
translation across all reportable segments.

significant  estimates  and  assumptions, 

The goodwill and intangible asset valuations that are utilized 
to test these assets for impairment are dependent on a number 
of 
including 
macroeconomic  conditions,  overall  category  growth  rates, 
competitive activities, cost containment and margin expansion, 
Company business plans and the discount rate applied to cash 
flows.    We  believe  these  estimates  and  assumptions  are 
reasonable and are comparable to those that would be used by 
other marketplace participants.  However, actual events and 
results  could  differ  substantially  from  those  used  in  our 
valuations.   To  the  extent  such  factors  result  in  a  failure  to 
achieve  the  level  of  projected  cash  flows  initially  used  to 
estimate fair value for purposes of establishing the carrying 
amount of goodwill and related intangible assets, we may need 
to record non-cash impairment charges in the future.

Identifiable intangible assets were comprised of:

2018

2017

As of June 30

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

INTANGIBLE ASSETS WITH DETERMINABLE LIVES

Brands

$ 3,146 $

(2,046) $ 3,094 $

(1,898)

Patents and
technology

Customer
relationships

Other
TOTAL

2,617

(2,350)

2,617

(2,261)

1,372

241

(616)

(144)

1,377

239

(564)

(132)

$ 7,376 $

(5,156) $ 7,327 $

(4,855)

INTANGIBLE ASSETS WITH INDEFINITE LIVES

Brands
TOTAL

21,682

$ 29,058 $

— 21,715
(5,156) $ 29,042 $

—

(4,855)

Amortization expense of intangible assets was as follows:

Years ended June 30

Intangible asset amortization

2018
$ 302

2017

2016

$ 325

$ 388

Estimated amortization expense over the next five fiscal years 
is as follows:

Years ending June 30

2019

2020

2021

2022

2023

Estimated
amortization expense $ 280 $ 254 $ 205 $ 188 $ 177

Amounts in millions of dollars except per share amounts or as otherwise specified.

 
NOTE 5

INCOME TAXES
Income taxes are recognized for the amount of taxes payable 
for the current year and for the impact of deferred tax assets 
and  liabilities,  which  represent  future  tax  consequences  of 
events that have been recognized differently in the financial 
statements  than  for  tax  purposes.    Deferred  tax  assets  and 
liabilities are established using the enacted statutory tax rates 
and are adjusted for any changes in such rates in the period of 
change.

On  December  22,  2017,  the  U.S.  government  enacted 
comprehensive tax legislation commonly referred to as the Tax 
Cuts  and  Jobs Act  (the  "U.S. Tax Act").   The  U.S. Tax Act 
significantly revises the future ongoing U.S. corporate income 
tax by, among other things, lowering the U.S. corporate income 
tax rates and implementing a hybrid territorial tax system.  As 
the Company has a June 30 fiscal year-end, the lower corporate 
income tax rate was phased in, resulting in a U.S. statutory 
federal rate of approximately 28% for our fiscal year ended 
June 30, 2018, and 21% for subsequent fiscal years.  However, 
the  U.S.  Tax  Act  eliminates  the  domestic  manufacturing 
deduction and moves to a hybrid territorial system, which also 
largely eliminates the ability to credit certain foreign taxes that 
existed prior to enactment of the U.S. Tax Act.

There are also certain transitional impacts of the U.S. Tax Act.  
As part of the transition to the new hybrid territorial tax system, 
the U.S. Tax Act imposed a one-time repatriation tax on deemed 
repatriation of historical earnings of foreign subsidiaries.  In 
addition, the reduction of the U.S. corporate tax rate caused us 
to adjust our U.S. deferred tax assets and liabilities to the lower 
federal base rate of 21%.  These transitional impacts resulted 
in a provisional net charge of $602 for the fiscal year ended 
June  30,  2018,  comprised  of  an  estimated  repatriation  tax 
charge of $3.8 billion (comprised of U.S. repatriation taxes and 
foreign withholding taxes) and an estimated net deferred tax 
benefit of $3.2 billion.

The  changes  included  in  the  U.S.  Tax  Act  are  broad  and 
complex.  The final transitional impacts of the U.S. Tax Act 
may differ from the above estimate, possibly materially, due 
to, among other things, changes in interpretations of the U.S. 
Tax Act, any legislative action to address questions that arise 
because  of  the  U.S.  Tax Act,  or  any  updates  or  changes  to 
estimates the Company has utilized to calculate the transitional 
impacts, which we expect to finalize when we complete our 
tax return for fiscal 2018.  The SEC has issued rules that would 
allow  for  a  measurement  period  of  up  to  one  year  after  the 
enactment date of the U.S. Tax Act to finalize the recording of 
the related tax impacts.  We currently anticipate finalizing and 
recording any resulting adjustments within the one-year time 
period provided by the SEC.

Earnings  from  continuing  operations  before  income  taxes 
consisted of the following:

Years ended June 30

United States

International
TOTAL

2018
$ 9,277

2017

2016

$ 9,031

$ 8,788

4,049

4,226

4,581

$ 13,326

$ 13,257

$ 13,369

The Procter & Gamble Company        49

Income  taxes  on  continuing  operations  consisted  of  the 
following:

Years ended June 30
CURRENT TAX EXPENSE

2018

2017

2016

U.S. federal

International

U.S. state and local

$ 3,965

$ 1,531

$ 1,673

1,131

213

5,309

1,243

241

3,015

1,483

224

3,380

DEFERRED TAX EXPENSE

U.S. federal

International and other

(1,989)

145

(1,844)

28

20

48

33

(71)

(38)

TOTAL TAX EXPENSE $ 3,465

$ 3,063

$ 3,342

A reconciliation of the U.S. federal statutory income tax rate 
to  our  actual  income  tax  rate  on  continuing  operations  is 
provided below:

Years ended June 30

2018

2017

2016

U.S. federal statutory
income tax rate

Country mix impacts of
foreign operations

Changes in uncertain tax
positions

Excess tax benefits from
the exercise of stock
options

Net transitional impact of
U.S. Tax Act

Other
EFFECTIVE INCOME
TAX RATE

28.1 % 35.0 % 35.0 %

(4.7)% (6.8)% (9.1)%

(0.3)% (2.0)% (0.5)%

(0.4)% (1.3)%

— %

4.5 %
— %
— %
(1.2)% (1.8)% (0.4)%

26.0 % 23.1 % 25.0 %

Country mix impacts of foreign operations includes the effects 
of foreign subsidiaries' earnings taxed at rates other than the 
U.S. statutory rate, the U.S. tax impacts of non-U.S. earnings 
repatriation and any net impacts of intercompany transactions.  
Changes in uncertain tax positions represent changes in our net 
liability related to prior year tax positions.  Excess tax benefits 
from the exercise of stock options reflect the impact of adopting 
(Topic  718):  
"Stock  Compensation 
ASU  2016-09, 
Payment 
to 
Improvements 
Accounting)."

Employee-Share-Based 

Tax benefits charged to shareholders' equity totaled $342 for 
the year ended June 30, 2018.  This primarily relates to the tax 
effects of Net Investment hedges, partially offset by the impact 
of  certain  adjustments  to  pension  obligations  recorded  in 
stockholders' equity.  Tax costs credited to shareholders' equity 
totaled $333 for the year ended June 30, 2017.  This primarily 
relates  to  the  impact  of  certain  adjustments  to  pension 
obligations recorded in stockholders' equity, partially offset by 
the tax effects of Net Investment hedges.

Prior to the passage of the U.S. Tax Act, the Company asserted 
that substantially all of the undistributed earnings of its foreign 
invested  and 
subsidiaries  were  considered 

indefinitely 

Amounts in millions of dollars except per share amounts or as otherwise specified.

We  recognize  the  additional  accrual  of  any  possible  related 
interest and penalties relating to the underlying uncertain tax 
position in income tax expense.  As of June 30, 2018, 2017 and 
2016,  we  had  accrued  interest  of  $99,  $100  and  $323  and 
accrued penalties of $15, $20 and $20, respectively, which are 
not included in the above table.  During the fiscal years ended 
June 30, 2018, 2017 and 2016, we recognized $(22), $62 and 
$2  in  interest  benefit/(expense)  and  $(5),  $0  and  $(2)  in 
penalties  benefit/(expense),  respectively.    The  net  benefits 
recognized resulted primarily from the favorable resolution of 
tax positions for prior years.

Deferred income tax assets and liabilities were comprised of 
the following:

As of June 30
DEFERRED TAX ASSETS
Pension and postretirement benefits $
Loss and other carryforwards

2018

2017

1,478

$

1,775

1,067

1,516

Stock-based compensation

Fixed assets

(45)

(381)

(301)

Accrued marketing and promotion

(20)

(5)

(22)

(4)

(39)

(23)

Unrealized loss on financial and
foreign exchange transactions

Inventory

$

470

$

465

$

857

Accrued interest and taxes

Advance payments

Other

Valuation allowances
TOTAL

476

223

223

61

35

17

4

699

(457)

732

212

210

259

75

30

121

709

(505)

$

3,826

$

5,134

DEFERRED TAX LIABILITIES

Goodwill and intangible assets

$

6,168

$

9,403

Fixed assets

1,276

1,495

Foreign withholding tax on earnings
to be repatriated

Unrealized gain on financial and
foreign exchange transactions
Other
TOTAL

244

169
161

—

314
26

$

8,018

$ 11,238

Net operating loss carryforwards were $3.5 billion and $3.3 
billion at June 30, 2018 and 2017, respectively.  If unused, $1.2 
billion will expire between 2018 and 2037.  The remainder, 
totaling $2.3 billion at June 30, 2018, may be carried forward 
indefinitely.

50        The Procter & Gamble Company

accordingly, no deferred taxes were provided.  Pursuant to the 
provisions of the U.S. Tax Act, these earnings were subjected 
to a one-time transition tax, for which a provisional charge has 
been recorded.  This charge included provisional taxes for all 
U.S. income taxes and for the related foreign withholding taxes 
for the portion of those earnings which are no longer considered 
indefinitely invested.  We have not provided deferred foreign 
withholding  taxes  on  approximately  $33  billion  of  earnings 
that are considered permanently reinvested.

A  reconciliation  of  the  beginning  and  ending  liability  for 
uncertain tax positions is as follows:

Years ended June 30
BEGINNING OF YEAR $

2018

2017

2016

465

$

857

$ 1,096

26

87

124

(38)

(147)

(97)

87

75

97

Increases in tax positions
for prior years

Decreases in tax positions
for prior years

Increases in tax positions
for current year
Settlements with taxing
authorities

Lapse in statute of
limitations

Currency translation
END OF YEAR

Included  in  the  total  liability  for  uncertain  tax  positions  at 
June 30,  2018,  is  $251  that,  depending  on  the  ultimate 
resolution, could impact the effective tax rate in future periods.

The  Company  is  present  in  approximately  70  countries  and 
over 150 taxable jurisdictions and, at any point in time, has 
40-50  jurisdictional  audits  underway  at  various  stages  of 
completion.    We  evaluate  our  tax  positions  and  establish 
liabilities for uncertain tax positions that may be challenged 
by local authorities and may not be fully sustained, despite our 
belief that the underlying tax positions are fully supportable.  
Uncertain tax positions are reviewed on an ongoing basis and 
are  adjusted  in  light  of  changing  facts  and  circumstances, 
including progress of tax audits, developments in case law and 
the  closing  of  statutes  of  limitation.    Such  adjustments  are 
reflected in the tax provision as appropriate.  We have tax years 
open ranging from 2008 and forward.  We are generally not 
able to reliably estimate the ultimate settlement amounts until 
the close of the audit.  While we do not expect material changes, 
it  is  possible  that  the  amount  of  unrecognized  benefit  with 
respect to our uncertain tax positions could increase or decrease 
within the next 12 months.  At this time, we are not able to 
make  a  reasonable  estimate  of  the  range  of  impact  on  the 
balance of uncertain tax positions or the impact on the effective 
tax rate related to any such changes.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company        51

NOTE 6

EARNINGS PER SHARE

Basic net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred 
dividends (net of related tax benefits) by the weighted average number of common shares outstanding during the year.  Diluted 
net earnings per common share are calculated using the treasury stock method on the basis of the weighted average number of 
common shares outstanding plus the dilutive effect of stock options and other stock-based awards (see Note 7) and the assumed 
conversion of preferred stock (see Note 8).

Net earnings per share were as follows:

Years ended June 30

CONSOLIDATED AMOUNTS

2018

Total

2017

2016

Continuing
Operations

Discontinued
Operations

Total

Continuing
Operations

Discontinued
Operations

Total

Net earnings

$

9,861

$ 10,194 $

5,217 $ 15,411

$ 10,027 $

577 $ 10,604

Less:  Net earnings attributable to
noncontrolling interests
Net earnings attributable to P&G
(Diluted)

Preferred dividends, net of tax

Net earnings attributable to P&G
available to common shareholders (Basic) $

SHARES IN MILLIONS

Basic weighted average common shares
outstanding

Add:  Effect of dilutive securities
Conversion of preferred shares(1)
Impact of stock options and other unvested 
equity awards (2)

Diluted weighted average common shares
outstanding

111

85

—

85

96

9,750

(265)

10,109
(247)

5,217

—

15,326
(247)

9,931
(255)

—

577

—

96

10,508
(255)

9,485

$ 9,862 $

5,217 $ 15,079

$ 9,676 $

577 $ 10,253

2,529.3

2,598.1

2,598.1

2,598.1

2,698.9

2,698.9

2,698.9

94.9

32.5

99.3

43.0

99.3

43.0

99.3

103.9

103.9

103.9

43.0

41.6

41.6

41.6

2,656.7

2,740.4

2,740.4

2,740.4

2,844.4

2,844.4

2,844.4

NET EARNINGS PER SHARE (3)
Basic

Diluted

$

$

3.75

3.67

$

$

3.79 $

3.69 $

2.01 $

1.90 $

5.80

5.59

$

$

3.59 $

3.49 $

0.21 $

0.20 $

3.80

3.69

(1)  Despite being  included currently in Diluted net  earnings per common share, the  actual conversion to  common stock  occurs  when  the 
preferred shares are sold.  Shares may only be sold after being allocated to the ESOP participants pursuant to the repayment of the ESOP's 
obligations through 2035.

(2)  Weighted average outstanding stock options of approximately 48 million in 2018, 20 million in 2017 and 55 million in 2016 were not 
included in the Diluted net earnings per share calculation because the options were out of the money or to do so would have been antidilutive 
(i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).

(3)  Net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

Amounts in millions of dollars except per share amounts or as otherwise specified.

52        The Procter & Gamble Company

NOTE 7

STOCK-BASED COMPENSATION

We  have  two  primary  stock-based  compensation  programs 
under which we annually grant stock option, restricted stock 
unit (RSU) and performance stock unit (PSU) awards to key 
managers and directors.

In our main long-term incentive program, key managers can 
elect to receive options or RSUs.  All options vest after three 
years and have a 10-year life.  Exercise prices on options are 
set equal to the market price of the underlying shares on the 
date of the grant.  Effective in fiscal year 2017, RSUs vest and 
settle in shares of common stock three years from the grant 
date.  RSUs granted prior to fiscal years 2017 vest and settle 
in shares of common stock five years from the grant date.

Senior-level executives participate in an additional long-term 
incentive program that awards PSUs, which are paid in shares 
after the end of a three-year performance period.  Under this 
program, the number of PSUs that will vest is based on the 
Company's 
pre-established 
performance goals during that three year period.

performance 

relative 

to 

In addition to these long-term incentive programs, we award 
RSUs  to  the  Company's  non-employee  directors  and  make 
other  minor  stock  option  and  RSU  grants  to  employees  for 
which the terms are not substantially different from our long-
term incentive awards.

A total of 185 million shares of common stock were authorized 
for  issuance  under  the  stock-based  compensation  plan 
approved by shareholders in 2014, of which 65 million shares 
remain available for grant.

The Company recognizes stock-based compensation expense 
based on the fair value of the awards at the date of grant.  The 
fair value is amortized on a straight-line basis over the requisite 
service period.  Awards to employees eligible for retirement 
prior  to  the  award  becoming  fully  vested  are  recognized  as 
compensation expense from the grant date through the date the 
employee  first  becomes  eligible  to  retire  and  is  no  longer 
required to provide services to earn the award.  Stock-based 
compensation expense is included as part of Cost of products 
sold and SG&A in the Consolidated Statement of Earnings and 
includes an estimate of forfeitures, which is based on historical 
data.  Total expense and related tax benefit were as follows:

Years ended June 30
Stock options
RSUs and PSUs

Total stock-based expense

2018
$ 220
175
$ 395

2017 (1)
$ 216
150
$ 366

2016 (1)
$ 199
143
$ 342

Income tax benefit

$

87

$ 111

$

85

(1) 

Includes amounts related to discontinued operations, which are 
not material in any period presented.

Amounts in millions of dollars except per share amounts or as otherwise specified.

We utilize an industry standard lattice-based valuation model 
to  calculate  the  fair  value  for  stock  options  granted.  
Assumptions utilized in the model, which are evaluated and 
revised to reflect market conditions and experience, were as 
follows:

Years ended June 30

2018

2017

2016

Interest rate
Weighted average
interest rate
Dividend yield
Expected
volatility
Expected life in
years

1.9 - 2.9% 0.8 - 2.6% 0.7 - 1.9%

2.8%

3.1%

18%

9.2

2.6%

3.2%

15%

9.6

1.8%

3.2%

16%

8.3

Lattice-based option valuation models incorporate ranges of 
assumptions for inputs and those ranges are disclosed in the 
preceding  table.    Expected  volatilities  are  based  on  a 
combination of historical volatility of our stock and implied 
volatilities of call options on our stock.  We use historical data 
to estimate option exercise and employee termination patterns 
within  the  valuation  model.    The  expected  life  of  options 
granted is derived from the output of the option valuation model 
and represents the average period of time that options granted 
are expected to be outstanding.  The interest rate for periods 
within the contractual life of the options is based on the U.S. 
Treasury yield curve in effect at the time of grant.

A  summary  of  options  outstanding  under  the  plans  as  of 
June 30,  2018  and  activity  during  the  year  then  ended  is 
presented below:

Options
(in
thousands)

Weighted
Average
Exercise
Price

Weighted
Average
Contract-
ual Life in
Years

Aggregate
Intrinsic
Value

206,485 $ 72.46
82.19
20,292
63.44
(19,622)
82.92
(1,501)

205,654 $ 74.21
143,169 $ 69.96

5.3 $ 1,349
3.8 $ 1,326

Options

Outstanding,
beginning of year
Granted
Exercised
Canceled
OUTSTANDING,
END OF YEAR

EXERCISABLE

The following table provides additional information on stock 
options:

Years ended June 30

2018

2017

2016

Weighted average grant-date fair
value of options granted

$ 11.89

$10.45

$ 8.48

Intrinsic value of options
exercised

Grant-date fair value of options
that vested

Cash received from options
exercised

Actual tax benefit from options
exercised

500

1,334

1,388

209

246

200

1,245

2,630

2,332

127

421

433

At June 30, 2018, there was $203 of compensation cost that 
has not yet been recognized related to stock option grants.  That 
cost is expected to be recognized over a remaining weighted 
average period of 2.0 years.

A summary of non-vested RSUs and PSUs outstanding under 
the plans as of June 30, 2018 and activity during the year then 
ended is presented below:

RSUs

PSUs

Units (in
thousands)

Weighted
Average
Grant Date
Fair Value

Units (in
thousands)

Weighted
Average
Grant Date
Fair Value

5,359 $
1,978
(1,777)
(184)

74.98
79.73
72.27
74.79

1,194 $
784
(550)
(43)

82.40
78.59
73.38
81.56

5,376 $

77.17

1,385 $

84.08

RSU and PSU
awards
Non-vested at
July 1, 2017
Granted
Vested
Forfeited
Non-vested at 
June 30, 2018

At June 30, 2018, there was $255 of compensation cost that 
has not yet been recognized related to RSUs and PSUs.  That 
cost is expected to be recognized over a remaining weighted 
average period of 2.1 years.  The total grant date fair value of 
shares vested was $175, $163 and $97 in 2018, 2017 and 2016, 
respectively.

The  Company  settles  equity  issuances  with  treasury  shares.  
We have no specific policy to repurchase common shares to 
mitigate  the  dilutive  impact  of  options,  RSUs  and  PSUs.  
However,  we  have  historically  made  adequate discretionary 
purchases, based on cash availability, market trends and other 
factors, to offset the impacts of such activity.

The Procter & Gamble Company        53

NOTE 8

POSTRETIREMENT  BENEFITS  AND  EMPLOYEE 
STOCK OWNERSHIP PLAN

We offer various postretirement benefits to our employees.
Defined Contribution Retirement Plans

We have defined contribution plans, which cover the majority 
of our U.S. employees, as well as employees in certain other 
countries.  These plans are fully funded.  We generally make 
contributions to participants' accounts based on individual base 
salaries and years of service.  Total global defined contribution 
expense was $292, $270 and $292 in 2018, 2017 and 2016, 
respectively.

The primary U.S. defined contribution plan (the U.S. DC plan) 
comprises  the  majority  of  the  expense  for  the  Company's 
defined  contribution  plans.    For  the  U.S.  DC  plan,  the 
contribution rate is set annually.  Total contributions for this 
plan approximated 14% of total participants' annual wages and 
salaries in 2018, 2017 and 2016.

We  maintain  The  Procter &  Gamble  Profit  Sharing  Trust 
(Trust)  and  Employee  Stock  Ownership  Plan  (ESOP)  to 
provide a portion of the funding for the U.S. DC plan and other 
retiree  benefits  (described  below).    Operating  details  of  the 
ESOP are provided at the end of this Note.  The fair value of 
the ESOP Series A shares allocated to participants reduces our 
cash contribution required to fund the U.S. DC plan.
Defined  Benefit  Retirement  Plans  and  Other  Retiree 
Benefits

We offer defined benefit retirement pension plans to certain 
employees.    These  benefits  relate  primarily  to  local  plans 
outside  the  U.S.  and,  to  a  lesser  extent,  plans  assumed  in 
previous acquisitions covering U.S. employees.

We also provide certain other retiree benefits, primarily health 
care and life insurance, for the majority of our U.S. employees 
who  become  eligible  for  these  benefits  when  they  meet 
minimum age and service requirements.  Generally, the health 
care plans require cost sharing with retirees and pay a stated 
percentage  of  expenses,  reduced  by  deductibles  and  other 
coverages.    These  benefits  are  primarily  funded  by  ESOP 
Series  B  shares  and  certain  other  assets  contributed  by  the 
Company.

Amounts in millions of dollars except per share amounts or as otherwise specified.

54        The Procter & Gamble Company

Obligation and Funded Status.  The following provides a reconciliation of benefit obligations, plan assets and funded status of 
these defined benefit plans:

Years ended June 30
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year (3)
Service cost
Interest cost
Participants' contributions
Amendments
Net actuarial loss/(gain)
Acquisitions/(divestitures) (4)
Curtailments
Special termination benefits
Currency translation and other
Benefit payments
BENEFIT OBLIGATION AT END OF YEAR (3)

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year
Actual return on plan assets
Acquisitions/(divestitures) (4)
Employer contributions
Participants' contributions
Currency translation and other
ESOP debt impacts (5)
Benefit payments
FAIR VALUE OF PLAN ASSETS AT END OF YEAR
FUNDED STATUS

Pension Benefits (1)
2017
2018

Other Retiree Benefits (2)

2018

2017

$ 16,160
280
348
13
12
(722)
—
—  
8
148
(589)
$ 15,658

$ 17,285
310
300
14
2
(643)
(413)
(132)  
4
35
(602)
$ 16,160

$ 10,829
553
—
406
13
55
—
(589)
$ 11,267
$

$ 10,269
884
(34)
316
14
(18)
—
(602)
$ 10,829
(5,331)

(4,391) $

$

$

$

$
$

5,187
112
177
73
(231)
(308)
—
—  
7
5
(244)
4,778

$

$

$

3,831
(481)
—
33
73
(3)
50
(244)
3,259
$
(1,519) $

5,632
133
175
74
—
(554)
(31)
(37)
21
16
(242)
5,187

3,787
136
—
36
74
(4)
44
(242)
3,831
(1,356)

(1)  Primarily non-U.S.-based defined benefit retirement plans.
(2)  Primarily U.S.-based other postretirement benefit plans.
(3)  For the pension benefit plans, the benefit obligation is the projected benefit obligation.  For other retiree benefit plans, the benefit obligation 

is the accumulated postretirement benefit obligation.

(4)  For the year ended June 30, 2017, this represents the obligations and plans which were classified as held for sale at June 30, 2016.
(5)  Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.

The underfunding of pension benefits is primarily a function of the different funding incentives that exist outside of the U.S. In 
certain countries, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations 
prior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as they become 
due.

As of June 30
CLASSIFICATION OF NET AMOUNT RECOGNIZED

Noncurrent assets

Current liabilities

Noncurrent liabilities
NET AMOUNT RECOGNIZED

AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)

Net actuarial loss

Prior service cost/(credit)
NET AMOUNTS RECOGNIZED IN AOCI

$

$

3,787

244

4,031

$

$

4,548

245

4,793

Amounts in millions of dollars except per share amounts or as otherwise specified.

Pension Benefits

Other Retiree Benefits

2018

2017

2018

2017

$

$

$

420
(43)
(4,768)
(4,391) $

196
(40)
(5,487)
(5,331)

$

$

$

$

— $
(24)
(1,495)
(1,519) $

—
(23)
(1,333)
(1,356)

2,366
(478)
1,888

$

$

1,819
(293)
1,526

The Procter & Gamble Company        55

The accumulated benefit obligation for all defined benefit pension plans was $14,370 and $14,512 as of June 30, 2018 and 2017, 
respectively.  Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations 
in excess of plan assets consisted of the following:

As of June 30

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

Accumulated Benefit Obligation 
Exceeds the Fair Value of Plan Assets

Projected Benefit Obligation 
Exceeds the Fair Value of Plan Assets

2018

2017

2018

2017

$

8,467

$

7,573

3,740

13,699

12,276

8,279

$

8,962

$

7,974

4,150

14,181

12,630

8,654

Net Periodic Benefit Cost.  Components of the net periodic benefit cost were as follows:

Years ended June 30

2018

2017

2016

2018

2017

2016

Pension Benefits

Other Retiree Benefits

AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST

Service cost

Interest cost

Expected return on plan assets

Amortization of net actuarial loss
Amortization of prior service cost/(credit)

Amortization of net actuarial loss/ prior service cost
due to settlements and curtailments

Special termination benefits
GROSS BENEFIT COST/(CREDIT)

Dividends on ESOP preferred stock
NET PERIODIC BENEFIT COST/(CREDIT)

$

280

348

(751)

295
28

—

8

208

—

4

528

—

6

349

—

$

208

$

528

$

349

$

310 (1) $

300
(675)
375
28

314 (1) $
466
(731)
265
29

112

177
(451)
69
(41)

186 (2)

—  

—

CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI

Net actuarial loss/(gain) - current year

$ (524)

Prior service cost/(credit) - current year

Amortization of net actuarial loss

Amortization of prior service (cost)/credit

12

(295)

(28)

$ (852)
2
(375)
(28)

$ 133 (1) $

124 (1)

219
(416)
78
(52)

—

12
(35)
(52)
(87)

175
(431)
122
(45)

16 (2)

21 (2)
(9)
(45)
$ (54)

$

$ (259)
—
(122)
45

7
(127)
(37)
$ (164)

$

624
(231)
(69)
41

Amortization of net actuarial loss/prior service costs
due to settlements and curtailments

Reduction in net actuarial losses resulting from
curtailment

—

(186)

—

(16)

—  
73
(762)

(132)  
6
(1,565)

—
(3)
362

(37)
2
(387)

Currency translation and other
TOTAL CHANGE IN AOCI
NET AMOUNTS RECOGNIZED IN PERIODIC
BENEFIT COST AND AOCI
(1)  Service cost includes amounts related to discontinued operations in fiscal years ended June 30, 2017 and June 30, 2016, which are not 

$(1,037)

$ (554)

$ (441)

198

$

material for any period.

(2)  For fiscal year ended June 30, 2017, amortization of net actuarial loss / prior service cost due to settlement and curtailments and $18 of the 

special termination benefits are included in Net earnings from discontinued operations.

Amounts expected to be amortized from AOCI into net periodic benefit cost during the year ending June 30, 2019, are as follows:

Net actuarial loss
Prior service cost/(credit)

Pension Benefits

Other Retiree Benefits

$

$

224
26

71
(49)

Amounts in millions of dollars except per share amounts or as otherwise specified.

 
56        The Procter & Gamble Company

Assumptions.  We determine our actuarial assumptions on an annual basis.  These assumptions are weighted to reflect each country 
that may have an impact on the cost of providing retirement benefits.  The weighted average assumptions used to determine benefit 
obligations recorded on the Consolidated Balance Sheets as of June 30, were as follows: (1)

As of June 30

Discount rate

Rate of compensation increase

Health care cost trend rates assumed for next year

Rate to which the health care cost trend rate is assumed to decline (ultimate
trend rate)

Year that the rate reaches the ultimate trend rate

(1)  Determined as of end of fiscal year.

Pension Benefits

Other Retiree Benefits

2018

2017

2018

2017

2.5%  
2.6%

N/A

N/A

N/A

2.4%  

3.0%

N/A

N/A

N/A

4.2%  
N/A

6.6%

4.9%

2025

3.9%

N/A

6.4%

4.9%

2022

The weighted average assumptions used to determine net benefit cost recorded on the Consolidated Statement of Earnings for the 
years ended June 30, were as follows: (1)

Years ended June 30

Discount rate

Expected return on plan assets

Rate of compensation increase

(1)  Determined as of beginning of fiscal year.

Pension Benefits

Other Retiree Benefits

2017

2018
2.4% 2.1%
6.8% 6.9%
3.0% 2.9%

2016

3.1%
7.2%

3.1%

2017

2018
3.9% 3.6%
8.3% 8.3%
N/A
N/A

2016

4.5%
8.3%

N/A

For plans that make up the majority of our obligation, the Company calculates the benefit obligation and the related impacts on 
service and interest costs using specific spot rates along the corporate bond yield curve. For the remaining plans, the Company 
determines these amounts utilizing a single weighted-average discount rate derived from the corporate bond yield curve used to 
measure the plan obligations. 

Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets.  For the defined 
benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term 
rates of return obtained from pension investment consultants.  The expected long-term rates of return for plan assets are 8 - 9%
for equities and 5 - 6% for bonds.  For other retiree benefit plans, the expected long-term rate of return reflects that the assets are 
comprised primarily of Company stock.  The expected rate of return on Company stock is based on the long-term projected return 
of 8.5% and reflects the historical pattern of returns.

Assumed health care cost trend rates could have a significant effect on the amounts reported for the other retiree benefit plans. A 
one percentage point change in assumed health care cost trend rates would have the following effects:

Effect on the total service and interest cost components

Effect on the accumulated postretirement benefit obligation

One-Percentage
Point Increase

One-Percentage
Point Decrease

$

62

$

737

(47)
(585)

Plan Assets.  Our investment objective for defined benefit retirement plan assets is to meet the plans' benefit obligations and to 
improve plan self-sufficiency for future benefit obligations.  The investment strategies focus on asset class diversification, liquidity 
to meet benefit payments and an appropriate balance of long-term investment return and risk.  Target ranges for asset allocations 
are determined by assessing different investment risks and matching the actuarial projections of the plans' future liabilities and 
benefit payments with current as well as expected long-term rates of return on the assets, taking into account investment return 
volatility and correlations across asset classes.  Plan assets are diversified across several investment managers and are generally 
invested in liquid funds that are selected to track broad market equity and bond indices.  Investment risk is carefully controlled 
with  plan  assets  rebalanced  to  target  allocations  on  a  periodic  basis  and  with  continual  monitoring  of  investment  managers' 
performance relative to the investment guidelines established with each investment manager.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company        57

Our target asset allocation for the year ended June 30, 2018, and actual asset allocation by asset category as of June 30, 2018 and 
2017, were as follows:

Target Asset Allocation

Actual Asset Allocation at June 30

Asset Category

Cash

Debt securities

Equity securities
TOTAL

Pension Benefits
—%

65%

35%

100%

Other Retiree
Benefits

Pension Benefits

Other Retiree Benefits

2018

2017

2018

2017

2%

3%

95%

100%

2%

59%

39%

100%

2%

53%

45%

100%

1%

4%

95%

100%

1%

4%

95%

100%

The following tables set forth the fair value of the Company's plan assets as of June 30, 2018 and 2017 segregated by level within 
the fair value hierarchy (refer to Note 9 for further discussion on the fair value hierarchy and fair value principles).  Company 
stock listed as Level 2 in the hierarchy represents preferred shares which are valued based on the value of Company common 
stock.  The majority of our Level 3 pension assets are insurance contracts.  Their fair values are based on their cash equivalent or 
models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, 
including credit risk and interest rate curves.  There was no significant activity within the Level 3 pension and other retiree benefits 
plan assets during the years presented.  Investments valued using net asset value as a practical expedient are primarily equity and 
fixed income collective funds.  These assets are not valued using the fair value hierarchy, but rather valued using the net asset 
value reported by the managers of the funds and as supported by the unit prices of actual purchase and sale transactions. 

As of June 30
ASSETS AT FAIR VALUE

Cash and cash equivalents
Company stock (1)
Other (2)

TOTAL ASSETS IN THE FAIR
VALUE HEIRARCHY

Investments valued at net asset value
TOTAL ASSETS AT FAIR VALUE

Pension Benefits

Other Retiree Benefits

Fair Value
Hierarchy Level

2018

2017

Fair Value
Hierarchy Level

2018

2017

1

$

136

$

1, 2 & 3

—

400

536
10,731   

$ 11,267

134

—

165

299

10,530

10,829

1

2

1

$

5

$

6

3,092

3,643

4   

7

3,101

158   
3,259   

$

3,656

175

3,831

(1)  Company stock is net of ESOP debt discussed below.
(2)  The Company's other pension plan assets measured at fair value are generally classified as Level 3 within the fair value hierarchy.   There 

are no material other pension plan asset balances classified as Level 1 or Level 2 within the fair value hierarchy.

Cash Flows.  Management's best estimate of cash requirements 
and  discretionary  contributions  for  the  defined  benefit 
retirement  plans  and  other  retiree  benefit  plans  for  the  year 
ending June 30, 2019, is $134 and $39, respectively.  For the 
defined benefit retirement plans, this is comprised of $82 in 
expected  benefit  payments  from  the  Company  directly  to 
participants  of  unfunded  plans  and  $52  of  expected 
contributions to funded plans.  For other retiree benefit plans, 
this is comprised of $24 in expected benefit payments from the 
Company directly to participants of unfunded plans and $15 
of  expected  contributions  to  funded  plans.    Expected 
contributions are dependent on many variables, including the 
variability of the market value of the plan assets as compared 
to  the  benefit  obligation  and  other  market  or  regulatory 
conditions.  In addition, we take into consideration our business 
investment  opportunities  and  resulting  cash  requirements.  
Accordingly,  actual  funding  may  differ  significantly  from 
current estimates.

Total  benefit  payments  expected  to  be  paid  to  participants, 
which  include  payments  funded  from  the  Company's  assets 
and payments from the plans are as follows:

Years ending June 30
EXPECTED BENEFIT PAYMENTS

Pension
Benefits

Other Retiree
Benefits

$

2019

2020

2021

2022

2023

$

517

508

545

557

577

194

207

219

231

241

2024 - 2028

3,280

1,339

Amounts in millions of dollars except per share amounts or as otherwise specified.

58        The Procter & Gamble Company

Employee Stock Ownership Plan

NOTE 9

We maintain the ESOP to provide funding for certain employee 
benefits discussed in the preceding paragraphs.

RISK MANAGEMENT ACTIVITIES AND FAIR VALUE 
MEASUREMENTS

The ESOP borrowed $1.0 billion in 1989 and the proceeds were 
used to purchase Series A ESOP Convertible Class A Preferred 
Stock to fund a portion of the U.S. DC plan.  Principal and 
interest requirements of the borrowing were paid by the Trust 
from  dividends  on  the  preferred  shares  and  from  advances 
provided  by  the  Company.   The  original  borrowing  of  $1.0 
billion has been repaid in full, and advances from the Company 
of  $52  remain  outstanding  at  June 30,  2018.    Each  share  is 
convertible at the option of the holder into one share of the 
Company's common stock.  The dividend for the current year 
was equal to the common stock dividend of $2.79 per share. 
The liquidation value is $6.82 per share.

In 1991, the ESOP borrowed an additional $1.0 billion.  The 
proceeds were used to purchase Series B ESOP Convertible 
Class A Preferred Stock to fund a portion of retiree health care 
benefits.  These shares, net of the ESOP's debt, are considered 
plan assets of the other retiree benefits plan discussed above.  
Debt  service  requirements  are  funded  by  preferred  stock 
dividends, cash contributions and advances provided by the 
Company,  of  which  $825  are  outstanding  at  June 30,  2018.  
Each share is convertible at the option of the holder into one 
share of the Company's common stock.  The dividend for the 
current year was equal to the common stock dividend of $2.79 
per share.  The liquidation value is $12.96 per share.

including 

Our  ESOP  accounting  practices  are  consistent  with  current 
ESOP  accounting  guidance, 
the  permissible 
continuation  of  certain  provisions  from  prior  accounting 
guidance.  ESOP debt, which is guaranteed by the Company, 
is recorded as debt (see Note 10) with an offset to the Reserve 
for  ESOP  debt  retirement,  which  is  presented  within 
Shareholders' equity.  Advances to the ESOP by the Company 
are  recorded  as  an  increase  in  the  Reserve  for  ESOP  debt 
retirement.  Interest incurred on the ESOP debt is recorded as 
Interest  expense.    Dividends  on  all  preferred  shares,  net  of 
related tax benefits, are charged to Retained earnings.

The series A and B preferred shares of the ESOP are allocated 
to employees based on debt service requirements.  The number 
of preferred shares outstanding at June 30 was as follows:

Shares in thousands

Allocated

Unallocated
TOTAL SERIES A

Allocated

Unallocated
TOTAL SERIES B

2018
34,233

4,117

2017

2016

36,488

39,241

5,060

6,095

38,350

41,548

45,336

25,895

28,512

54,407

25,378

30,412
55,790

23,925

32,319
56,244

For purposes of calculating diluted net earnings per common 
share, the preferred shares held by the ESOP are considered 
converted from inception.

As a multinational company with diverse product offerings, 
we  are  exposed  to  market  risks,  such  as  changes in  interest 
rates,  currency  exchange  rates  and  commodity  prices.    We 
evaluate exposures on a centralized basis to take advantage of 
natural  exposure  correlation  and  netting.    To  the  extent  we 
choose to manage volatility associated with the net exposures, 
we enter into various financial transactions that we account for 
using  the  applicable  accounting  guidance  for  derivative 
instruments  and  hedging  activities. 
  These  financial 
transactions are governed by our policies covering acceptable 
counterparty  exposure,  instrument  types  and  other  hedging 
practices.

If  the  Company  elects  to  do  so  and  if  the  instrument  meets 
certain specified accounting criteria, management designates 
derivative instruments as cash flow hedges, fair value hedges 
or net investment hedges. We record derivative instruments at 
fair  value  and  the  accounting  for  changes  in  the  fair  value 
depends  on  the  intended  use  of  the  derivative,  the  resulting 
designation and the effectiveness of the instrument in offsetting 
the risk exposure it is designed to hedge.  We generally have 
a  high  degree  of  effectiveness  between  the  exposure  being 
hedged and the hedging instrument.
Credit Risk Management

We have counterparty credit guidelines and normally enter into 
transactions with investment grade financial institutions, to the 
extent  commercially  viable.    Counterparty  exposures  are 
monitored daily and downgrades in counterparty credit ratings 
are reviewed on a timely basis.  We have not incurred, and do 
not  expect  to  incur,  material  credit  losses  on  our  risk 
management or other financial instruments.

Substantially all of the Company's financial instruments used 
in  hedging  transactions  are  governed  by  industry  standard 
netting and collateral agreements with counterparties.  If the 
Company's credit rating were to fall below the levels stipulated 
in  the  agreements,  the  counterparties  could  demand  either 
collateralization  or  termination  of  the  arrangements.    The 
aggregate  fair  value  of  the  instruments  covered  by  these 
contractual  features  that  are  in  a  net  liability  position  as  of 
June 30, 2018, was not material.  The Company has not been 
required  to  post  collateral  as  a  result  of  these  contractual 
features.
Interest Rate Risk Management

Our policy is to manage interest cost using a mixture of fixed-
rate  and  variable-rate  debt.    To  manage  this  risk  in  a  cost-
efficient manner, we enter into interest rate swaps whereby we 
agree to exchange with the counterparty, at specified intervals, 
the  difference  between  fixed  and  variable  interest  amounts 
calculated by reference to a notional amount.

We  designate  certain  interest  rate  swaps  that  meet  specific 
accounting criteria as fair value hedges.  For fair value hedges, 
the changes in the fair value of both the hedging instruments 
and 
immediately 
recognized in earnings.  Historically, we had interest rate swaps 

the  underlying  debt  obligations  are 

Amounts in millions of dollars except per share amounts or as otherwise specified.

designated as cash flow hedges.  For the years ended June 30, 
2018 and 2017, we did not have any contracts outstanding. 
Foreign Currency Risk Management

We  manufacture  and  sell  our  products  and  finance  our 
operations in a number of countries throughout the world.  As 
a  result,  we  are  exposed  to  movements  in  foreign  currency 
exchange  rates.    We  leverage  the  Company’s  diversified 
portfolio of exposures as a natural hedge. In certain cases, we 
enter into non-qualifying foreign currency contracts to hedge 
certain balance sheet items subject to revaluation. The change 
in fair value of these instruments and the underlying exposure 
are both immediately recognized in earnings. 

To  manage  exchange  rate  risk  related  to  our  intercompany 
financing,  we  primarily  use  forward  contracts  and  currency 
swaps.    The  change  in  fair  value  of  these  non-qualifying 
in  earnings, 
instruments 
substantially offsetting the foreign currency mark-to-market 
impact of the related exposure.  

immediately 

recognized 

is 

Historically,  we  had  certain  foreign  currency  swaps  with 
original maturities up to five years, which were intended to 
offset the effect of exchange rate fluctuations on intercompany 
loans  denominated  in  foreign  currencies;  these  swaps  were 
accounted  for  as  cash  flow  hedges.    Those  swaps  were 
terminated during the year ended June 30, 2017 and as a result, 
there  was  an  immaterial  gain  reclassified  from AOCI  into 
earnings  for  the  year  ended  June  30,  2017  in  the  following 
tables but there were no outstanding contracts as of June 30, 
2018 and 2017.  
Net Investment Hedging

We  hedge  certain  net  investment  positions  in  foreign 
subsidiaries.  To accomplish this, we either borrow directly in 
foreign currencies and designate all or a portion of the foreign 
currency  debt  as  a  hedge  of  the  applicable  net  investment 
position  or  we  enter  into  foreign  currency  swaps  that  are 
designated as hedges of net investments.  Changes in the fair 
value of these instruments are recognized in OCI and offset 
the change in the value of the net investment being hedged.  
Upon adoption of ASU 2017-12, the time value component of 
the net investment hedge currency swaps is excluded from the 
assessment of hedge effectiveness and reported in income on 
a  systematic  basis.  Changes  in  the  fair  value  of  the  swap, 
including changes in the fair value of the excluded time value 
component, are recognized in OCI and offset the value of the 
underlying net assets.
Commodity Risk Management Certain raw materials used 
in our products or production processes are subject to price 
volatility caused by weather, supply conditions, political and 
economic  variables  and  other  unpredictable  factors.    To 
manage the volatility related to anticipated purchases of certain 
of these materials, we have historically, on a limited basis, used 
futures and options with maturities generally less than one year 
and swap contracts with maturities up to five years.  As of and 
during the years ended June 30, 2018 and 2017, we did not 
have any commodity hedging activity.

The Procter & Gamble Company        59

Insurance

We self-insure for most insurable risks.  However, we purchase 
insurance for Directors and Officers Liability and certain other 
coverage where it is required by law or by contract.
Fair Value Hierarchy

Accounting guidance on fair value measurements for certain 
financial assets and liabilities requires that financial assets and 
liabilities carried at fair value be classified and disclosed in 
one of the following categories:

•  Level 1:    Quoted  market  prices  in  active  markets  for 

identical assets or liabilities.

•  Level 2:  Observable market-based inputs or unobservable 

inputs that are corroborated by market data.

•  Level 3:    Unobservable  inputs  reflecting  the  reporting 
entity's own assumptions or external inputs from inactive 
markets.

When applying fair value principles in the valuation of assets 
and liabilities, we are required to maximize the use of quoted 
market prices and minimize the use of unobservable inputs.  
The Company has not changed its valuation techniques used 
in measuring the fair value of any financial assets or liabilities 
during the year.  Our fair value estimates take into consideration 
the credit risk of both the Company and our counterparties.

When active market quotes are not available for financial assets 
and  liabilities,  we  use  industry  standard  valuation  models.  
Where applicable, these models project future cash flows and 
discount the future amounts to a present value using market-
based  observable  inputs  including  credit  risk,  interest  rate 
curves, foreign currency rates and forward and spot prices for 
currencies.  In circumstances where market-based observable 
inputs  are  not  available,  management  judgment  is  used  to 
develop assumptions to estimate fair value.  Generally, the fair 
value of our Level 3 instruments is estimated as the net present 
value of expected future cash flows based on external inputs. 

The following table sets forth the Company's financial assets 
as of June 30, 2018 and 2017 that were measured at fair value 
on a recurring basis during the period:

As of June 30

Investments:

Fair Value Asset

2018

2017

U.S. government securities

$

5,544

$

6,297

Corporate bond securities

Other investments

TOTAL

3,737

141

3,271

132

$

9,422

$

9,700

Investment  securities  are  presented  in  Available-for-sale 
investment  securities  and  Other  noncurrent  assets.    The 
amortized  cost  of  the  U.S.  government  securities  with 
maturities  less  than  one  year  was  $2,003  and  $2,494  as  of 
June 30, 2018 and 2017, respectively.  The amortized cost of 
the U.S. government securities with maturities between one 
and five years was $3,659 and $3,824 as of June 30, 2018 and 
2017,  respectively.    The  amortized  cost  of  corporate  bond 
securities with maturities of less than a year was $1,291 and 
$730  as  of  June 30,  2018  and  2017,  respectively.    The 
Amounts in millions of dollars except per share amounts or as otherwise specified.

60        The Procter & Gamble Company

amortized  cost  of  corporate  bond  securities  with  maturities 
between  one  and  five  years  was  $2,503  and  $2,547  as  of 
June 30,  2018  and  2017,  respectively.    The  Company's 
investments measured at fair value are generally classified as 
Level 2 within the fair value hierarchy.  There are no material 
investment balances classified as Level 1 or Level 3 within the 
fair  value  hierarchy,  or  using  net  asset  value  as  a  practical 
expedient.    Fair  values  are  generally  estimated  based  upon 
quoted market prices for similar instruments.

The fair value of long-term debt was $23,402 and $21,396 as 
of  June 30,  2018  and  2017,  respectively.   This  includes  the 

Disclosures about Financial Instruments

current portion of debt instruments ($1,769 and $1,694 as of 
June 30, 2018 and 2017, respectively).  Certain long-term debt 
(debt designated as a fair value hedge) is recorded at fair value.  
All other long-term debt is recorded at amortized cost, but is 
measured at fair value for disclosure purposes.  We consider 
our debt to be Level 2 in the fair value hierarchy.  Fair values 
are  generally  estimated  based  on  quoted  market  prices  for 
identical or similar instruments.

The notional amounts and fair values of financial instruments used in hedging transactions as of June 30, 2018 and 2017 are as 
follows:

As of June 30

Notional Amount

Fair Value Asset

Fair Value (Liability)

2018

2017

2018

2017

2018

2017

DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS

Interest rate contracts

$

4,587

$

4,552

DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS

Foreign currency interest rate contracts
TOTAL DERIVATIVES DESIGNATED AS
HEDGING INSTRUMENTS

$

$

1,848

$

6,102

6,435

$ 10,654

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

Foreign currency contracts

$

7,358

$

4,969

TOTAL DERIVATIVES AT FAIR VALUE

$ 13,793

$ 15,623

$

$

$

$

$

125

$

180

41

166

30

196

$

$

$

$

14

194

25

219

$

$

$

$

$

(53) $

(2)

(75) $

(177)

(128) $

(179)

(56) $

(7)

(184) $

(186)

All derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets.  All derivative liabilities 
are presented in Accrued and other liabilities or Other noncurrent liabilities.  

The fair value of the interest rate derivative asset/liability directly offsets the cumulative amount of the fair value hedging adjustment 
included in the carrying amount of the underlying debt obligation.  The carrying amount of the underlying debt obligation, which 
includes the unamortized discount or premium and the fair value adjustment, was $4,639 and $4,705 as of June 30, 2018 and 2017, 
respectively.  In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign 
currency denominated debt instruments are designated as net investment hedges.  The carrying value of those debt instruments 
designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those 
instruments, was $15,012 and $19,030 as of June 30, 2018 and 2017, respectively.  The decrease in the notional balance of the 
net investment hedges, including the debt instruments designated as net investment hedges, is primarily driven by the reduction 
in net foreign currency hedgeable assets as a result of US tax reform.  The increase in the notional balance of foreign currency 
contracts not designated as hedging instruments reflects changes in the level of intercompany financing activity during the period. 

All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.  
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter.  There were 
no transfers between levels during the periods presented.  In addition, there was no significant activity within the Level 3 assets 
and liabilities during the periods presented.  There were no significant assets or liabilities that were re-measured at fair value on 
a non-recurring basis during the years ended June 30, 2018 and 2017.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company        61

Before tax gains/(losses) on our financial instruments in hedging relationships are categorized as follows:

As of June 30
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign currency interest rate contracts

$

2018

2017

(34) $

(163)

Amount of Gain/(Loss) Recognized in AOCI on
Derivatives

Years ended June 30
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS

Amount of Gain/(Loss) Reclassified from AOCI
into Earnings

2018

2017

Foreign currency contracts

$

— $

69

Years ended June 30
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS

Interest rate contracts
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

Foreign currency contracts

Amount of Gain/(Loss) Recognized in Earnings

2018

2017

$

$

(106) $

(1) $

(193)

59

(1)  For  the  derivatives in  net  investment  hedging  relationships,  the  amount  of  gain/(loss)  excluded  from  effectiveness  testing,  which  was 

(2) 

recognized in earnings, was $138 and $48 for the fiscal year ended June 30, 2018 and 2017, respectively.
In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated 
debt instruments are designated as net investment hedges.  The amount of gain/(loss) recognized in AOCI for such instruments was $367
and $161, as of June 30, 2018 and 2017, respectively.

The gain/(loss) reclassified from AOCI into earnings on the derivatives in cash flow hedging relationships is recognized in the 
same period during which the related item affects earnings.  Such amounts related to foreign currency contracts are included in 
the Consolidated Statement of Earnings in SG&A.  The gain/(loss) on the derivatives in fair value hedging relationships is fully 
offset by the mark-to-market impact of the related exposure.  These are both recognized in the Consolidated Statement of Earnings 
in Interest Expense.  The gain/(loss) on derivatives not designated as hedging instruments is substantially offset by the currency 
mark-to-market of the related exposure.  These are both recognized in the Consolidated Statements of Earnings in SG&A.

Amounts in millions of dollars except per share amounts or as otherwise specified.

62        The Procter & Gamble Company

NOTE 10
SHORT-TERM AND LONG-TERM DEBT 

Long-term debt maturities during the next five fiscal years are 
as follows:

Years ending June 30
Debt maturities

2020

2019

2021
$1,772 $2,621 $2,034 $2,839 $2,498

2023

2022

The  Procter  &  Gamble  Company  fully  and  unconditionally 
guarantees the registered debt and securities issued by its 100% 
owned finance subsidiaries.

As of June 30
DEBT DUE WITHIN ONE YEAR

2018

2017

Current portion of long-term debt

$ 1,772

$ 1,676

Commercial paper

Loan due August 2018

Other
TOTAL
Short-term weighted average 
interest rates (1)

7,761

11,705

800

90

—

173

$ 10,423

$ 13,554

0.7%

0.5%

(1) 

Short-term  weighted  average  interest  rates  include  the  effects  of 
interest rate swaps discussed in Note 9.

As of June 30
LONG-TERM DEBT

2018

2017

1.60% USD note due November 2018

1,000

1,000

1.75% USD note due October 2019

1.90% USD note due November 2019

0.28% JPY note due May 2020

1.90% USD note due October 2020

4.13% EUR note due December 2020
9.36% ESOP debentures due 
2018-2021 (1)
1.85% USD note due February 2021

1.70% USD note due November 2021

2.00% EUR note due November 2021

2.30% USD note due February 2022

2.15% USD note due August 2022

2.00% EUR note due August 2022

3.10% USD note due August 2023

1.13% EUR note due November 2023

0.50% EUR note due October 2024

2.70% USD note due February 2026

2.45% USD note due November 2026

600

550

903

600

698

327

600

875

873

1,000

1,250

1,164

1,000

1,455

582

600

875

—

550

894

—

686

417

600

875

858

1,000

—

1,144

1,000

1,430

—

600

875

4.88% EUR note due May 2027

1,164

1,144

2.85% USD note due August 2027

1.25% EUR note due October 2029

5.55% USD note due March 2037

3.50% USD note due October 2047

Capital lease obligations

All other long-term debt

750

582

763

600

107

—

—

1,130

—

51

3,717

5,460

Current portion of long-term debt
TOTAL
Long-term weighted average 
interest rates (2)
2.6%
(1)  Debt  issued  by  the  ESOP  is  guaranteed  by  the  Company  and  is 

(1,676)
$18,038

(1,772)
$20,863

2.5%

recorded as debt of the Company, as discussed in Note 8.

(2)  Long-term  weighted  average  interest  rates  include  the  effects  of 

interest rate swaps discussed in Note 9.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company        63

NOTE 11

ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The table below presents the changes in Accumulated other comprehensive income/(loss) (AOCI), including the reclassifications 
out of Accumulated other comprehensive income/(loss) by component:

Changes in Accumulated Other Comprehensive Income/(Loss) by Component

Hedges

Investment
Securities

Pension and Other
Retiree Benefits

Financial Statement
Translation

Total AOCI

BALANCE at JUNE 30, 2016
OCI before reclassifications (1)
Amounts reclassified from AOCI (2)
Net current period OCI

BALANCE at JUNE 30, 2017
OCI before reclassifications (3)
Amounts reclassified from AOCI (4)

Net current period OCI

Less:  Other comprehensive income/(loss)
attributable to non-controlling interests
BALANCE at JUNE 30, 2018

$

(2,641) $

(237)

(69)

(306)

(2,947)
(299)

—

(299)

—

$

(3,246) $

34
(49)
(10)
(59)
(25)
(141)
(7)

(148)

$

(5,798) $
910

491

1,401
(4,397)
74

260

334

(7,502) $ (15,907)
980

356
(117)
239
(7,263)
(6)
—

295

1,275
(14,632)
(372)
253

(6)

(119)

—
(173) $

(5)
(4,058) $

3

(2)
(7,272) $ (14,749)

(1)  Net of tax (benefit) / expense of $(186), $(6) and $360 for gains/losses on hedges, investment securities and pension and other retiree benefit 

items, respectively, for the period ended June 30, 2017.

(2)  Net of tax (benefit) / expense of $0, $0 and $191 for gains/losses on hedges, investment securities and pension and other retiree benefit 

items, respectively, for the period ended June 30, 2017.

(3)  Net of tax (benefit) / expense of $(279), $0 and $(23) for gains/losses on hedges, investment securities and pension and other retiree benefit 

items, respectively, for the period ended June 30, 2018.

(4)  Net of tax (benefit) / expense of $0, $0 and $91 for gains/losses on hedges, investment securities and pension and other retiree benefit items, 

respectively, for the period ended June 30, 2018.

The below provides additional details on amounts reclassified from AOCI into the Consolidated Statement of Earnings:

•  Hedges:  see Note 9 for classification of gains and losses from hedges in the Consolidated Statements of Earnings.
• 
• 

Investment securities:  amounts reclassified from AOCI into Other non-operating income, net.
Pension and other retiree benefits:  amounts reclassified from AOCI into Cost of product sold, SG&A, and Net earnings from 
discontinued operations and included in the computation of net periodic pension cost (see Note 8 for additional details).
Financial statement translation:  amounts reclassified from AOCI into Net earnings from discontinued operations.  These 
amounts relate to accumulated translation associated with foreign entities sold as part of the sale of the Beauty Brands business.

• 

NOTE 12

COMMITMENTS AND CONTINGENCIES

Guarantees

routine 

provide 

indemnifications 

In conjunction with certain transactions, primarily divestitures, 
we  may 
(e.g., 
indemnification  for  representations  and  warranties  and 
retention  of  previously  existing  environmental,  tax  and 
employee liabilities) for which terms range in duration and, in 
some circumstances, are not explicitly defined.  The maximum 
obligation under some indemnifications is also not explicitly 
stated and, as a result, the overall amount of these obligations 
cannot  be  reasonably  estimated.    Other  than  obligations 
recorded as liabilities at the time of divestiture, we have not 
made  significant  payments  for  these  indemnifications.    We 
believe that if we were to incur a loss on any of these matters, 
the  loss  would  not  have  a  material  effect  on  our  financial 
position, results of operations or cash flows.

In  certain  situations,  we  guarantee  loans  for  suppliers  and 
customers.  The total amount of guarantees issued under such 
arrangements is not material.
Off-Balance Sheet Arrangements

We  do  not  have  off-balance  sheet  financing  arrangements, 
including variable interest entities, that have a material impact 
on our financial statements.  
Purchase Commitments and Operating Leases

We  have  purchase  commitments  for  materials,  supplies, 
services and property, plant and equipment as part of the normal 
course  of  business.    Commitments  made  under  take-or-pay 
obligations are as follows: 

Years ending
June 30

Purchase
obligations

2019

2020

2021

2022

2023

There-
after

$ 778 $ 111 $ 56 $ 34 $ 13 $ 137

Such amounts represent minimum commitments under take-
or-pay agreements with suppliers and are in line with expected 

Amounts in millions of dollars except per share amounts or as otherwise specified.

transaction were reflected as an addition to treasury stock and 
the  cash  received  related  to  the  debt  assumed  by  Coty  was 
reflected as an investing activity in the Consolidated Statement 
of Cash Flows.  The Company recorded an after-tax gain on 
the  final  transaction  of  $5.3  billion,  net  of  transaction  and 
related costs.

Two  of  the  fine  fragrance  brands,  Dolce  &  Gabbana  and 
Christina Aguilera, were excluded from the divestiture.  These 
brands  were  subsequently  divested  at  amounts 
that 
approximated their adjusted carrying values.

In February 2016, the Company completed the divestiture of 
its Batteries business to Berkshire Hathaway (BH) via a split 
transaction,  in  which  the  Company  exchanged  the  Duracell 
Company,  which  the  Company  had  infused  with  additional 
cash, to repurchase all 52.5 million shares of P&G stock owned 
by  BH.    During  the  fiscal  year  ended  June 30,  2016,  the 
Company  recorded  non-cash,  before-tax  goodwill  and 
indefinite-lived asset impairment charges of $402 ($350 after 
tax), to reduce the Batteries carrying value to the total estimated 
proceeds based on the value of BH’s shares in P&G stock at 
the time of the impairment charges (see Note 4).  The Company 
recorded an after-tax gain on the final transaction of $422 to 
reflect  a  subsequent  increase  in  the  final  value  of  the  BH’s 
shares in P&G stock.  The total value of the transaction was 
$4.2 billion representing the value of the Duracell business and 
the  cash  infusion.    The  cash  infusion  of  $1.7  billion  was 
reflected as a purchase of treasury stock.

In  accordance  with  applicable  accounting  guidance  for  the 
disposal of long-lived assets, the results of the Beauty Brands 
and  Batteries  businesses  are  presented  as  discontinued 
operations  and,  as  such,  have  been  excluded  from  both 
continuing  operations  and  segment  results  for  all  periods 
presented.  The  Beauty  Brands  were  historically  part  of  the 
Company's Beauty reportable segment.  The Batteries business 
was historically part of the Company's Fabric & Home Care
reportable segment. 

64        The Procter & Gamble Company

usage.  These amounts include purchase commitments related 
to  service  contracts  for  information  technology,  human 
resources  management  and  facilities  management  activities 
that  have  been  outsourced  to  third-party  suppliers.  Such 
amounts also include arrangements with suppliers that qualify 
as embedded operating leases.   Due to the proprietary nature 
of  many  of  our  materials  and  processes,  certain  supply 
contracts contain penalty provisions for early termination.  We 
do not expect to incur penalty payments under these provisions 
that would materially affect our financial position, results of 
operations or cash flows.

We  also  lease  certain  property  and  equipment  for  varying 
periods.    Future  minimum  rental  commitments  under  non-
cancelable  operating  leases,  net  of  guaranteed  sublease 
income, are as follows: 

Years ending
June 30

Operating
leases

Litigation

2019

2020

2021

2022

2023

There-
after

$ 275 $ 240 $ 202 $ 172 $ 153 $ 296

We are subject, from time to time, to certain legal proceedings 
and  claims  arising  out  of  our  business,  which  cover  a  wide 
range  of  matters,  including  antitrust  and  trade  regulation, 
product liability, advertising, contracts, environmental, patent 
and trademark matters, labor and employment matters and tax.

While  considerable  uncertainty  exists,  in  the  opinion  of 
management and our counsel, the ultimate resolution of the 
various  lawsuits  and  claims  will  not  materially  affect  our 
financial position, results of operations or cash flows.

We are also subject to contingencies pursuant to environmental 
laws and regulations that in the future may require us to take 
action  to  correct  the  effects  on  the  environment  of  prior 
manufacturing  and  waste  disposal  practices.    Based  on 
currently available information, we do not believe the ultimate 
resolution of environmental remediation will materially affect 
our financial position, results of operations or cash flows.

NOTE 13

DISCONTINUED OPERATIONS

On October 1, 2016, the Company completed the divestiture 
of  four  product  categories  to  Coty,  Inc.  (“Coty”).    The 
divestiture  included  41  of  the  Company's  beauty  brands 
(“Beauty Brands”), including the global salon professional hair 
care and color, retail hair color, cosmetics and a majority of 
the  fine  fragrance  businesses,  along  with  select  hair  styling 
brands.  The form of the divestiture transaction was a Reverse 
Morris Trust split-off, in which P&G shareholders were given 
the election to exchange their P&G shares for shares of a new 
corporation that held the Beauty Brands (Galleria Co.), and 
then immediately exchange those shares for Coty shares.  The 
value P&G received in the transaction was $11.4 billion.  The 
value was comprised of 105 million shares of common stock 
of the Company, which were tendered by shareholders of the 
Company and exchanged for the Galleria Co. shares, valued 
at  approximately  $9.4  billion,  and  the  assumption  of  $1.9 
billion  of  debt  by  Galleria  Co.    The  shares  tendered  in  the 

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company        65

On July 1, 2015, the Company adopted ASU 2014-08, which included new reporting and disclosure requirements for discontinued 
operations.  The new requirements are effective for discontinued operations occurring on or after the adoption date, which includes 
the Beauty Brands divestiture.  Discontinued operations prior to July 1, 2015, which included the Batteries divestiture, are reported 
based on the previous disclosure requirements for discontinued operations.

The following table summarizes Net earnings from discontinued operations and reconciles to the Consolidated Statements of 
Earnings:

Years ended June 30

Beauty Brands

Batteries
Net earnings from discontinued operations

2017

2016

$

$

5,217

—

5,217

$

$

336

241

577

The following is selected financial information included in Net earnings from discontinued operations for the Beauty Brands:

Years ended June 30

Net sales

Cost of products sold

Selling, general and administrative expense

Intangible asset impairment charges

Interest expense

Interest income

Other non-operating income/(expense), net

Earnings/(loss) from discontinued operations before income taxes

Income taxes on discontinued operations

Gain on sale of business before income taxes
Income tax expense/(benefit) on sale of business
Net earnings from discontinued operations

Beauty Brands

2017

2016

$

1,159

$

450

783

—

14

—

16
(72)
46

5,197
(138) (1)
5,217

$

$

$

$

$

$

4,910

1,621

2,763

48

32

2

9

457

121

—
—
336

(1)  The income tax benefit of the Beauty Brands divestiture represents the reversal of underlying deferred tax balances partially offset by current 

tax expense related to the transaction.

The following is selected financial information included in cash flows from discontinued operations for the Beauty Brands:

Years ended June 30
NON-CASH OPERATING ITEMS

Depreciation and amortization

Deferred income tax benefit

Gain on sale of businesses

Goodwill and intangible asset impairment charges

Net increase in accrued taxes
CASH FLOWS FROM OPERATING ACTIVITIES

Cash taxes paid
CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

Beauty Brands

2017

2016

$

$

$

24
(649)
5,210

—

93

418

38

$

$

$

106

—

8

48

—

—

114

Amounts in millions of dollars except per share amounts or as otherwise specified.

66        The Procter & Gamble Company

Following is selected financial information included in Net earnings from discontinued operations for the Batteries business:

Earnings
Before
Impairment
Charges and
Income Taxes

Net Sales

Impairment
Charges

Income Tax 
(Expense)/ 
Benefit

Loss on Sale 
Before Income 
Taxes

Batteries

2016

1,517

266

(402)

(45)

(288)

Income Tax 
(Expense)/ 
Benefit on 
Sale

Net Earnings 
from 
Discontinued 
Operations

710 (1)

241

(1)  The income tax benefit of the Batteries divestiture primarily represents the reversal of underlying deferred tax balances.

NOTE 14

QUARTERLY RESULTS (UNAUDITED)

Quarters Ended
NET SALES

OPERATING INCOME

GROSS MARGIN

NET EARNINGS:

2017-2018

2016-2017
2017-2018

2016-2017
2017-2018

2016-2017

Sep 30
$ 16,653

Dec 31
$ 17,395

Mar 31
$ 16,281

Jun 30
$ 16,503

Total Year
$ 66,832

16,518
3,735

3,771
50.6%

51.0 %

16,856
4,003

3,875
50.2%

50.8 %

15,605
3,296

3,360
48.8%

49.8 %

16,079
2,677

2,949
45.3%

48.4 %

65,058
13,711

13,955

48.7%

50.0 %

Net earnings from continuing operations

2017-2018

$ 2,870

$ 2,561

$ 2,540

$ 1,890

$ 9,861

Net earnings/(loss) from discontinued operations

Net earnings attributable to Procter & Gamble

DILUTED NET EARNINGS PER COMMON 
SHARE: (1)
Earnings from continuing operations

Earnings/(loss) from discontinued operations

Net earnings

2016-2017
2017-2018

2016-2017
2017-2018

2016-2017

2017-2018

$

2016-2017
2017-2018

2016-2017
2017-2018

2016-2017

2,875
—

(118)
2,853

2,714

1.06

1.00
—

(0.04)
1.06

0.96

2,561
—

5,335
2,495

7,875

0.93

0.93
—

1.95
0.93

2.88

$

2,556
—

—
2,511

2,522

0.95

0.93
—

—
0.95

0.93

$

2,202
—

—
1,891

2,215

0.72

0.82
—

—
0.72

0.82

$

10,194
—

5,217
9,750

15,326

$

3.67

3.69
—

1.90
3.67

5.59

(1)  Diluted net earnings per share is calculated on Net earnings attributable to Procter & Gamble.

Item 9.  Changes in and Disagreements with Accountants on 
Accounting and Financial Disclosure.

Not applicable.

Item 9A.  Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.

The Company's President and Chief Executive Officer, David 
S. Taylor, and the Company's Chief Financial Officer, Jon R. 
Moeller, performed an evaluation of the Company's disclosure 
controls  and  procedures  (as  defined  in  Rules  13a-15(e)  and 
15d-15(e) of the Securities Exchange Act of 1934 (Exchange 
Act)) as of the end of the period covered by this Annual Report 
on Form 10-K.

Messrs. Taylor and Moeller have concluded that the Company's 
disclosure  controls  and  procedures  were  effective  to  ensure 
that information required to be disclosed in reports we file or 

Amounts in millions of dollars except per share amounts or as otherwise specified.

submit  under  the  Exchange Act  is  (1) recorded,  processed, 
summarized and reported within the time periods specified in 
Securities  and  Exchange  Commission  rules  and  forms,  and 
(2) accumulated  and  communicated  to  our  management, 
including  Messrs. Taylor  and  Moeller,  to  allow  their  timely 
decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial 
reporting  that  occurred  during  the  Company's  fourth  fiscal 
quarter that have materially affected, or are reasonably likely 
to  materially  affect,  the  Company's  internal  control  over 
financial reporting.

Item 9B.  Other Information.

Not applicable.

The Procter & Gamble Company        67

PART III

Item 11.  Executive Compensation.

The  information  required  by  this  item  is  incorporated  by 
reference to the following sections of the 2018 Proxy Statement 
filed  pursuant  to  Regulation  14A:  the  subsections  of  the 
Corporate  Governance  section  entitled  Board  Meetings  and 
Committees  of 
the  Board  and  entitled  Compensation 
Committee  Interlocks  and  Insider  Participation;  and  the 
the  section  entitled  Director 
portion  beginning  with 
Compensation  up  to  but  not  including  the  section  entitled 
Security  Ownership  of  Management  and  Certain  Beneficial 
Owners.

Item 10.    Directors,  Executive  Officers  and  Corporate 
Governance.

The  Board  of  Directors  has  determined  that  the  following 
members  of  the Audit  Committee  are  independent  and  are 
Audit Committee financial experts as defined by SEC rules: 
Ms. Patricia A. Woertz (Chair) and Mr. Kenneth I. Chenault.

The  information  required  by  this  item  is  incorporated  by 
reference to the following sections of the 2018 Proxy Statement 
filed pursuant to Regulation 14A: the section entitled Election 
of  Directors;  the  subsection  of  the  Corporate  Governance 
section entitled Board Meetings and Committees of the Board; 
the subsection of the Corporate Governance section entitled 
Code of Ethics; the subsections of the Other Matters section 
entitled Director Nominations for Inclusion in the 2019 Proxy 
Statement  and  entitled  Shareholder  Recommendations  of 
Board Nominees and Committee Process for Recommending 
Board  Nominees;  and  the  section  entitled  Section 16(a) 
Beneficial  Ownership  Reporting  Compliance.  Pursuant  to 
Instruction  3  of  Item 401(b)  of  Regulation  S-K,  Executive 
Officers of the Registrant are reported in Part I of this report.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table gives information about the Company's common stock that may be issued upon the exercise of options, 
warrants and rights under all of the Company's equity compensation plans as of June 30, 2018.  The table includes the following 
plans:  The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & 
Gamble 2003 Non-Employee Directors' Stock Plan; The Gillette Company 2004 Long-Term Incentive Plan; The Procter & Gamble 
2009 Stock and Incentive Compensation Plan; and The Procter & Gamble 2014 Stock and Incentive Compensation Plan.

Plan Category
Equity compensation plans approved by 
security holders (1)
Options
Restricted Stock Units (RSUs)/Performance
Stock Units (PSUs)
Equity compensation plans not approved 
by security holders (3)
Options
GRAND TOTAL

(a)
Number of securities 
to be issued upon 
exercise of 
outstanding options,
warrants and rights

(b)
Weighted-
average exercise
price of outstanding
options, warrants and
rights

(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))

204,890,213

$74.3190

11,449,954

N/A

876,818
217,216,985

48.1700
$74.2076 (4)

(2)

(2)

(3)

(1) 

Includes The Procter & Gamble 1992 Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 
2003 Non-Employee Directors' Stock Plan; The Procter & Gamble 2009 Stock and Incentive Compensation Plan; and The Procter & Gamble 
2014 Stock and Incentive Compensation Plan.

(2)  Of the plans listed in (1), only The Procter & Gamble 2014 Stock and Incentive Compensation Plan allow for future grants of securities.  
The maximum number of shares that may be granted under this plan is 185 million shares. Stock options and stock appreciation rights are 
counted on a one for one basis while full value awards (such as RSUs and PSUs) will be counted as 5 shares for each share awarded.  Total 
shares available for future issuance under this plan is 65 million.
Includes The Gillette Company 2004 Long-Term Incentive Plan.  This plan does not allow for future grants of securities.

(3) 
(4)  Weighted average exercise price of outstanding options only.

68        The Procter & Gamble Company

The Gillette Company 2004 Long-Term Incentive Plan

Shareholders of The Gillette Company approved The Gillette 
Company 2004 Long-Term Incentive Plan on May 20, 2004, 
and the plan was assumed by the Company upon the merger 
between  The  Procter &  Gamble  Company  and  The  Gillette 
Company.    All  options  became  immediately  vested  and 
exercisable on October 1, 2005 as a result of the merger.  After 
the merger, all outstanding options became options to purchase 
shares  of  The  Procter &  Gamble  Company  subject  to  an 
exchange ratio of .975 shares of P&G stock per share of Gillette 
stock.  Only employees previously employed by The Gillette 
Company prior to October 1, 2005 are eligible to receive grants 
under this plan.  The last grant of equity under this plan was 
on February 27, 2009.

The  plan  was  designed  to  attract,  retain  and  motivate 
employees of The Gillette Company and, until the effective 
date  of  the  merger  between The  Gillette  Company  and The 
Procter & Gamble Company, non-employee members of the 
Gillette  Board  of  Directors.    Under  the  plan,  eligible 
participants  are:  (i) granted  or  offered  the  right  to  purchase 
stock  options,  (ii) granted  stock  appreciation  rights  and/or 
(iii) granted  shares  of  the  Company's  common  stock  or 
restricted stock units (and dividend equivalents).  Subject to 
adjustment for changes in the Company's capitalization and 
the  addition  of  any  shares  authorized  but  not  issued  or 
redeemed  under  The  Gillette  Company  1971  Stock  Option 
Plan, the number of shares to be granted under the plan is not 
to exceed 19 million shares.

Except in the case of death of the recipient, all stock options 
and stock appreciation rights must expire no later than ten years 
from the date of grant.  The exercise price for all stock options 
granted under the plan must be equal to or greater than the fair 
market value of the Company's stock on the date of grant.  Any 
common  stock  awarded  under  the  plan  may  be  subject  to 
restrictions on sale or transfer while the recipient is employed, 
as the committee administering the plan may determine.

If a recipient of a grant leaves the Company while holding an 
unexercised  option  or  right:  (1) any  unexercisable  portions 
immediately  become  void,  except  in  the  case  of  death, 
retirement, special separation (as those terms are defined in the

 plan) or any grants as to which the Compensation Committee 
of  the  Board  of  Directors  has  waived  the  termination 
provisions;  and  (2) any  exercisable  portions  immediately 
become void, except in the case of death, retirement, special 
separation, voluntary resignation that is not for Good Reason 
(as those terms are defined in the plan) or any grants as to which 
the Compensation Committee of the Board of Directors has 
waived the termination provisions.

Additional information required by this item is incorporated 
by  reference  to  the  2018  Proxy  Statement  filed  pursuant  to 
Regulation  14A,  beginning  with  the  subsection  of  the 
Beneficial Ownership section entitled Security Ownership of 
Management and Certain Beneficial Owners and up to but not 
including  the  subsection  entitled  Section 16(a)  Beneficial 
Ownership Reporting Compliance.

Item 13.  Certain Relationships and Related Transactions and 
Director Independence.

The  information  required  by  this  item  is  incorporated  by 
reference to the following sections of the 2018 Proxy Statement 
filed  pursuant  to  Regulation  14A:  the  subsections  of  the 
Corporate Governance section entitled Director Independence 
and  Review  and  Approval  of  Transactions  with  Related 
Persons.

Item 14.  Principal Accountant Fees and Services.

The  information  required  by  this  item  is  incorporated  by 
reference to the following section of the 2018 Proxy Statement 
filed  pursuant  to  Regulation  14A:  Report  of  the  Audit 
Committee, which ends with the subsection entitled Services 
Provided by Deloitte.

PART IV

Item 15.  Exhibits and Financial Statement Schedules.

1.  Financial Statements:

The  following  Consolidated  Financial  Statements  of  The 
Procter & Gamble Company and subsidiaries, management's 
report  and  the  reports  of  the  independent  registered  public 
accounting firm are incorporated by reference in Part II, Item 8 
of this Form 10-K.

•  Consolidated  Statements  of  Other  Comprehensive 

Income - for years ended June 30, 2018, 2017 and 2016

•  Consolidated Balance Sheets - as of June 30, 2018 and 

2017

•  Consolidated  Statements  of  Shareholders'  Equity  -  for 

years ended June 30, 2018, 2017 and 2016

•  Consolidated Statements of Cash Flows - for years ended 

June 30, 2018, 2017 and 2016

•  Management's Report on Internal Control over Financial 

•  Notes to Consolidated Financial Statements

Reporting

•  Report of Independent Registered Public Accounting Firm 

on Internal Control over Financial Reporting

•  Report of Independent Registered Public Accounting Firm 

on Consolidated Financial Statements

•  Consolidated  Statements  of  Earnings  -  for  years  ended 

June 30, 2018, 2017 and 2016 

2.  Financial Statement Schedules:

These  schedules  are  omitted  because  of  the  absence  of  the 
conditions  under  which  they  are  required  or  because  the 
information  is  set  forth  in  the  Consolidated  Financial 
Statements or Notes thereto.

The Procter & Gamble Company        69

EXHIBITS

Exhibit     (3-1) - Amended  Articles  of  Incorporation  (as  amended  by  shareholders  at  the  annual  meeting  on  October 11,  2011  and 
consolidated by the Board of Directors on April 8, 2016) (Incorporated by reference to Exhibit (3-1) of the Company's 
Annual Report on Form 10-K for the year ended June 30, 2016).

(3-2) - Regulations (as approved by the Board of Directors on April 8, 2016, pursuant to authority granted by shareholders at the 
annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on 
Form 10-K for the year ended June 30, 2016).

Exhibit     (4-1) -

Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee 
(Incorporated by reference to Exhibit (4-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 
2015).

Exhibit   (10-1) - The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended), which was originally adopted by 
shareholders at the annual meeting on October 9, 2001 +; and related correspondence and terms and conditions (Incorporated 
by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2013). *

(10-2) - The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by the shareholders 

at the annual meeting on October 12, 1992 +. *

(10-3) - The Procter & Gamble Executive Group Life Insurance Policy +. *

(10-4) -

Summary of the Company’s Retirement Plan Restoration Program (Incorporated by reference to Exhibit (10-27) of the 
Company's Annual Report on Form 10-K for the year ended June 30, 2016); and related correspondence and terms and 
conditions (Incorporated by reference to Exhibit (10-8) of the Company's Form 10-Q for the quarter ended September 30, 
2015). *

(10-5) - The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which was originally 

adopted by the shareholders at the annual meeting on October 11, 1994 +. *

(10-6) -

Summary of the Company’s Long-Term Incentive Program (Incorporated by reference to Exhibit (10-6) of the Company's 
Annual  Report  on  Form  10-K  for  the  year  ended  June  30,  2016);  related  correspondence  and  terms  and  conditions 
(Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 
2017). *

(10-7) - The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004), which was originally 
adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-7) of the Company's 
Annual Report on Form 10-K for the year ended June 30, 2015). *

(10-8) - The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended), which was originally adopted by the 

shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions +. *

(10-9) - The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-4) of 

the Company's Form 10-Q for the quarter ended December 31, 2013). *

(10-10) -

Summary of the Company's Short Term Achievement Reward Program +; related correspondence and terms and conditions 
(Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2015). *

(10-11) - Company's Forms of Separation Agreement & Release (Incorporated by reference to Exhibit (10-1) of the Company's 
Form 10-Q for the quarter ended March 31, 2018); Company's Form of Separation Letter and Release (Incorporated by 
reference to Exhibit (10-2)) of the Company's Form 10-Q for the quarter ended March 31, 2018). *

(10-12) -

Summary  of  personal  benefits  available  to  certain  officers and  non-employee  directors  (Incorporated  by  reference  to 
Exhibit (10-1) of the Company's Form 10-Q for the quarter ended September 30, 2013). *

(10-13) - The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) +. *

(10-14) - The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-14) of the Company’s 

Annual Report on Form 10-K for the year ended June 30, 2017). *

(10-15) - The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-15) 

of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *

(10-16) - The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-16) of the 

Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *

(10-17) - The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-17) of the Company’s Annual Report 

on Form 10-K for the year ended June 30, 2017). *

70        The Procter & Gamble Company

(10-18) - The  Gillette  Company  Deferred  Compensation  Plan  (Incorporated  by  reference  to  Exhibit  (10-18)  of  the  Company’s 

Annual Report on Form 10-K for the year ended June 30, 2017). *

(10-19) -

Senior Executive Recoupment Policy +. *

(10-20) - The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through 
August 21, 2006 (Incorporated by reference to Exhibit (10-20) of the Company's Annual Report on Form 10-K for the 
year ended June 30, 2017). *

(10-21) - The Procter & Gamble 2009 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at 
the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-21) of the Company's Annual Report 
on Form 10-K for the year ended June 30, 2017), and the Regulations of the Compensation and Leadership Development 
Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock 
and Incentive  Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan 
(Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option 
Plan +. *

(10-22) - The  Procter  &  Gamble  2009  Stock  and  Incentive  Compensation  Plan  - Additional  terms  and  conditions  and  related 
correspondence (Incorporated by reference to Exhibit (10-2) of the Company Form 10-Q for the quarter ended December 
31, 2013). *

(10-23) - The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit (10-1) of the Company's 
Form 10-Q for the quarter ended September 30, 2017); related correspondence and terms and conditions (Incorporated 
by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2017). *

(10-24) - The Procter & Gamble 2013 Non-Employee Directors' Stock Plan (Incorporated by reference to Exhibit (10-3) of the 

Company's Form 10-Q for the quarter ended December 31, 2013). *

(10-25) - The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at 
the annual meeting on October 14, 2014 (Incorporated by reference to Exhibit (10-25) of the Company's Annual Report 
on Form 10-K for the year ended June 30, 2016); and the Regulations of the Compensation and Leadership Development 
Committee for The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit 
(10-1) of the Company's Form 10-Q for the quarter ended December 31, 2017). *

(10-26) - The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by 
reference to Exhibit (10-26) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017), and The 
Procter & Gamble 2014 Stock and Incentive Compensation Plan - Related correspondence (Incorporated by reference to 
Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2016). *

Exhibit      (12) - Computation of Ratio of Earnings to Fixed Charges. +

Exhibit      (21) - Subsidiaries of the Registrant. +

Exhibit      (23) - Consent of Independent Registered Public Accounting Firm. +

Exhibit      (31) - Rule 13a-14(a)/15d-14(a) Certifications. +

Exhibit      (32) - Section 1350 Certifications. +

Exhibit   (99-1) - Summary of Directors and Officers Insurance Program. +

101.INS (1) XBRL Instance Document

101.SCH (1)

  XBRL Taxonomy Extension Schema Document

101.CAL (1)   XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF (1)

  XBRL Taxonomy Definition Linkbase Document

101.LAB (1)

  XBRL Taxonomy Extension Label Linkbase Document

101.PRE (1)

  XBRL Taxonomy Extension Presentation Linkbase Document

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement 
or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act 
of 1934 and otherwise are not subject to liability.

* Compensatory plan or arrangement.

+ Filed herewith.

Item 16.  Form 10-K Summary.

Not applicable.

The Procter & Gamble Company        71

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this 
report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.

THE PROCTER & GAMBLE COMPANY

By /s/    DAVID S. TAYLOR

(David S. Taylor)
Chairman of the Board, President and Chief Executive Officer

August 7, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons 
in the capacities and on the dates indicated.

Signature

/s/    DAVID S. TAYLOR
(David S. Taylor)

/s/    JON R. MOELLER
(Jon R. Moeller)

Title

Date

Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)

August 7, 2018

Vice Chairman and Chief Financial Officer
(Principal Financial Officer)

August 7, 2018

/s/    VALARIE L. SHEPPARD
(Valarie L. Sheppard)

Senior Vice President, Comptroller & Treasurer
(Principal Accounting Officer)

August 7, 2018

/s/    FRANCIS S. BLAKE
(Francis S. Blake)

/s/    ANGELA F. BRALY
(Angela F. Braly)

/s/    AMY L. CHANG
(Amy L. Chang)

/s/    KENNETH I. CHENAULT
(Kenneth I. Chenault)

/s/    SCOTT D. COOK
(Scott D. Cook)

/s/    JOSEPH JIMENEZ
(Joseph Jimenez)

/s/    TERRY J. LUNDGREN
(Terry J. Lundgren)

/s/    W. JAMES MCNERNEY, JR.
(W. James McNerney, Jr.)

/s/    NELSON PELTZ
(Nelson Peltz)

/s/    MARGARET C. WHITMAN
(Margaret C. Whitman)

/s/    PATRICIA A. WOERTZ
(Patricia A. Woertz)

/s/    ERNESTO ZEDILLO
(Ernesto Zedillo)

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

August 7, 2018

72        The Procter & Gamble Company

EXHIBIT INDEX

Exhibit     (3-1) - Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011 and consolidated 
by the Board of Directors on April 8, 2016) (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report 
on Form 10-K for the year ended June 30, 2016). 

(3-2) - Regulations (as approved by the Board of Directors on April 8, 2016, pursuant to authority granted by shareholders at the 
annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on 
Form 10-K for the year ended June 30, 2016). 

Exhibit     (4-1) -

Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee 
(Incorporated by reference to Exhibit (4-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 
2015).

Exhibit   (10-1) - The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended), which was originally 
adopted by shareholders at the annual meeting on October 9, 2001 +; and related correspondence and terms 
and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended 
December 31, 2013).

(10-2) - The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by 

the shareholders at the annual meeting on October 12, 1992 +.

(10-3) - The Procter & Gamble Executive Group Life Insurance Policy +.

(10-4) - Summary  of  the  Company’s  Retirement  Plan  Restoration  Program  (Incorporated  by  reference  to  Exhibit 
(10-27)  of  the  Company's Annual  Report  on  Form  10-K  for  the  year  ended  June  30,  2016);  and  related 
correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8) of the Company's Form 
10-Q for the quarter ended September 30, 2015).

(10-5) - The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which 

was originally adopted by the shareholders at the annual meeting on October 11, 1994 +.

(10-6) -

Summary of the Company’s Long-Term Incentive Program (Incorporated by reference to Exhibit (10-6) of the Company's 
Annual  Report  on  Form  10-K  for  the  year  ended  June  30,  2016);  related  correspondence  and  terms  and  conditions 
(Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 
2017).

(10-7) - The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004), which was originally 
adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-7) of the Company's 
Annual Report on Form 10-K for the year ended June 30, 2015).

(10-8) - The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended), which was originally adopted 
by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and 
conditions +.

(10-9) - The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-4) of 

the Company's Form 10-Q for the quarter ended December 31, 2013).

(10-10) - Summary of the Company's Short Term Achievement Reward Program +; related correspondence and terms 
and conditions (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended 
September 30, 2015).

(10-11) - Company's Forms of Separation Agreement & Release (Incorporated by reference to Exhibit (10-1) of the 
Company's Form 10-Q for the quarter ended March 31, 2018); Company's Form of Separation Letter and 
Release (Incorporated by reference to Exhibit (10-2)) of the Company's Form 10-Q for the quarter ended 
March 31, 2018).

(10-12) -

Summary  of  personal  benefits  available  to  certain  officers  and  non-employee  directors  (Incorporated  by  reference  to 
Exhibit (10-1) of the Company's Form 10-Q for the quarter ended September 30, 2013).

(10-13) - The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) +.

(10-14) - The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-14) of the 

Company’s Annual Report on Form 10-K for the year ended June 30, 2017).

(10-15) - The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to 
Exhibit (10-15) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).

(10-16) - The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit 

(10-16) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).

(10-17) - The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-17) of the Company’s 

Annual Report on Form 10-K for the year ended June 30, 2017).

The Procter & Gamble Company        73

(10-18) - The  Gillette  Company  Deferred  Compensation  Plan  (Incorporated  by  reference  to  Exhibit  (10-18)  of  the 

Company’s Annual Report on Form 10-K for the year ended June 30, 2017).

(10-19) -

Senior Executive Recoupment Policy +.

(10-20) - The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through 
August 21, 2006 (Incorporated by reference to Exhibit (10-20) of the Company's Annual Report on Form 10-K for the 
year ended June 30, 2017).

(10-21) - The  Procter  &  Gamble  2009  Stock  and  Incentive  Compensation  Plan,  which  was  originally  adopted  by 
shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-21) of the 
Company's Annual  Report  on  Form  10-K  for  the  year  ended  June  30,  2017),  and  the  Regulations  of  the 
Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive 
Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & 
Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version), The Gillette Company 
2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option Plan +.

(10-22) - The  Procter  &  Gamble  2009  Stock  and  Incentive  Compensation  Plan  - Additional  terms  and  conditions  and  related 
correspondence (Incorporated by reference to Exhibit (10-2) of the Company Form 10-Q for the quarter ended December 
31, 2013).

(10-23) - The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit (10-1) of the Company's 
Form 10-Q for the quarter ended September 30, 2017); related correspondence and terms and conditions (Incorporated 
by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2017).

(10-24) - The Procter & Gamble 2013 Non-Employee Directors' Stock Plan (Incorporated by reference to Exhibit (10-3) of the 

Company's Form 10-Q for the quarter ended December 31, 2013).

(10-25) - The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at 
the annual meeting on October 14, 2014 (Incorporated by reference to Exhibit (10-25) of the Company's Annual Report 
on Form 10-K for the year ended June 30, 2016); and the Regulations of the Compensation and Leadership Development 
Committee for The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit 
(10-1) of the Company's Form 10-Q for the quarter ended December 31, 2017).

(10-26) - The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by 
reference to Exhibit (10-26) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017), and The 
Procter & Gamble 2014 Stock and Incentive Compensation Plan - Related correspondence (Incorporated by reference to 
Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2016).

Exhibit      (12) - Computation of Ratio of Earnings to Fixed Charges. +

Exhibit      (21) -

Subsidiaries of the Registrant. +

Exhibit      (23) - Consent of Independent Registered Public Accounting Firm. +

Exhibit      (31) - Rule 13a-14(a)/15d-14(a) Certifications. +

Exhibit      (32) -

Section 1350 Certifications. +

Exhibit   (99-1) -

Summary of Directors and Officers Insurance Program. +

101.INS (1) XBRL Instance Document

101.SCH (1)

  XBRL Taxonomy Extension Schema Document

101.CAL (1)   XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF (1)

  XBRL Taxonomy Definition Linkbase Document

101.LAB (1)

  XBRL Taxonomy Extension Label Linkbase Document

101.PRE (1)

  XBRL Taxonomy Extension Presentation Linkbase Document

(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement 
or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act 
of 1934 and otherwise are not subject to liability.

+ Filed herewith.

74 • The Procter & Gamble Company

Measures Not Defined by U.S. GAAP

In accordance with the SEC’s Regulation G, the following 

Core EPS* is a measure of the Company’s diluted net 

provides definitions of the non-GAAP measures used in 

earnings per share from continuing operations adjusted as 

Procter & Gamble’s 2018 Annual Report and the reconciliation 

indicated. Management views these non-GAAP measures  

to the most closely related GAAP measure. We believe that 

as a useful supplemental measure of Company performance 

these measures provide useful perspective on underlying 

over time. The table below provides a reconciliation of diluted 

business trends (i.e., trends excluding non-recurring or unusual 

net earnings per share to Core EPS, adjusted for incremental 

items) and results and provide a supplemental measure of 

restructuring, the transitional impact of the U.S. Tax Act, 

year-on-year results. The non-GAAP measures described 

and early debt extinguishment charges. For more detail 

below are used by management in making operating 

on these reconciling items, please see page 32 in the Form 

decisions, allocating financial resources and for business 

10-K included in this Annual Report. We do not view these 

strategy purposes. These measures may be useful to investors 

items to be part of our sustainable results and their exclusion 

as they provide supplemental information about business 

from Core earnings per share provides a more comparable 

performance and provide investors a view of our business 

measure of year-on-year results.

results through the eyes of management. Of these, certain 

measures are also used to evaluate senior management and 

Years ended June 30

2018

2017

are a factor in determining their at-risk compensation. These 

Diluted net earnings per share – continuing operations

$3.67

$3.69

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 

Incremental restructuring charges

$0.23

$0.10

Transitional impacts of the U.S. Tax Act

$0.23

$–

Early debt extinguishment charges

used by other companies due to possible differences in 

Core EPS

method and in the items or events being adjusted.

Core EPS growth

$0.09

$0.13

$4.22

$3.92

8%

Organic sales growth* is a non-GAAP measure of sales 

growth excluding the impacts of acquisitions, divestitures, 

the impact from India Goods & Services Tax implementation 

(which was effective on July 1, 2017) 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.

Organic sales growth excluding Grooming and Baby Care 

is a measure of the company’s organic sales growth excluding 

the organic sales impact of the Grooming and Baby Care 

Year ended 
June 30, 2019 
(Estimate)

Diluted EPS 
Growth

Impact of  
Change in  
Non-Core Items

Core EPS 
Growth

Total Company

16% to 23%

(13%) to (15%)

3% to 8%

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 

businesses. We believe this measure provides investors with  

dividends and discretionary investment.

a supplemental understanding of underlying sales trends 

excluding the Grooming and Baby Care businesses, which  

are facing unique business challenges.

The following tables provide a numerical reconciliation  

of organic sales growth to reported net sales growth:

Fiscal Year 
($ millions)

Operating  
Cash Flow

Capital 
Spending

Free  
Cash Flow

2018

$14,867

$(3,717)

$11,150

Fiscal Year

Total Company Net Sales Growth

Foreign Exchange

Acquisitions/Divestitures/Other 1

Total Company Organic Sales Growth

Grooming and Baby Care Impact to Organic Sales

Organic Sales Growth Excluding Grooming and Baby Care

2018

3%

(2)%

–%

1%

2%

3%

Adjusted free cash flow productivity* is defined as the ratio 

of free cash flow to net earnings excluding the transitional 

impact of the U.S. Tax Act and the loss on early debt 

extinguishment. The underlying charges are non-recurring 

and not considered indicative of underlying earnings 

performance. 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. 

Year ended  
June 30, 2019 
(Estimate)

Net  
Sales  
Growth

Combined Foreign 
Exchange & Acquisitions/
Divestitures/Other 1

Organic  
Sales  
Growth

Fiscal Year 
($ millions)

Net 
Earnings

Adjustments 
to Net 
Earnings

Net Earnings 
Excluding 
Adjustments

Free 
Cash 
Flow

Adjusted Free 
Cash Flow 
Productivity

Total Company

0% to 1%

About 2%

2% to 3%

2018

$9,861

$845

$10,706

$11,150

104%

(1)  Acquisitions/Divestitures/Other includes the volume and mix impact of acquisitions and divestitures, the impact of India Goods  

and Services Tax implementation in fiscal 2018 and rounding impacts necessary to reconcile net sales to organic sales.

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

The Procter & Gamble Company • 75

Company and Shareholder Information

P&G’S PURPOSE

For complete information on  

STOCK SYMBOL

We will provide branded products and 

the DSPP, please read the Plan 

PG

services of superior quality and value 

Prospectus. The Prospectus and  

that improve the lives of the world’s 

online Plan Application are available  

P&G ONLINE

consumers, now and for generations  

at www.pgshareholder.com or by 

to come. As a result, consumers will 

contacting EQ Shareowner Services.

reward us with leadership sales, profit 

and value creation, allowing our people, 

GIVING THE GIF T OF P&G STOCK

our shareholders and the communities  

Did you know that you can give P&G 

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To learn more, please visit www.pg.com.

nieces, nephews and friends? Many  

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For information on our portfolio of  

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please visit www.pg.com/brands  

transferring shares from your account  

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ANNUAL MEETING

CITIZENSHIP

www.pgshareholder.com or contact  

The next annual meeting of shareholders 

P&G is committed to being a good 

EQ Shareowner Services for details.

will be held on Tuesday, October 9, 2018. 

corporate citizen and always doing the 

A full transcript of the meeting will be 

right thing. We focus our Citizenship 

SHAREOWNER SERVICES

available from Susan Felder, Assistant 

efforts in five areas: Ethics & Corporate 

EQ Shareowner Services serves as 

Secretary. Ms. Felder can be reached at  

Responsibility, Community Impact, 

transfer and dividend paying agent for 

1 P&G Plaza, Cincinnati, OH 45202-3315.

Diversity & Inclusion, Gender Equality 

P&G Common Stock and Administrator  

and Environmental Sustainability.  

of the Procter & Gamble Direct Stock 

FORM 10 -K

To learn more, please visit  

www.pg.com/citizenship.

Purchase Plan. Registered shareholders 

Shareholders may obtain a copy of  

and Plan participants needing account 

P&G’s 2018 report to the Securities  

assistance with share transfers, plan 

and Exchange Commission on  

CORPOR ATE HEADQUARTERS

purchases/sales, lost stock certificates, 

Form 10-K at no charge by going to  

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etc., should contact EQ Shareowner 

www.pginvestor.com or by sending 

P.O. Box 599 

Cincinnati, OH 45201-0599

P&G DIREC T STOCK   

PURCHASE PL AN

The Procter & Gamble Direct Stock 

Purchase Plan (DSPP) is a direct stock 

purchase and dividend reinvestment 

plan. The DSPP is open to current P&G 

shareholders as well as new investors 

and is designed to encourage long-

term investment in P&G by providing 

a convenient and economical way 

to purchase P&G stock and reinvest 

dividends. Highlights of the plan include:

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E-mail  www.shareowneronline.com  

a written request to EQ Shareowner 

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Click Contact Us under the Email section. 

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Phone (M–F, 7am–7pm CST) 

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filed as exhibits to our Form 10-K for  

the fiscal year ended June 30, 2018.  

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76 • The Procter & Gamble Company

Company Leadership

David S. Taylor

Chairman of the Board, President and Chief Executive Officer

BUSINESS UNITS AND MARKET OPER ATIONS

COMPANY OPER ATIONS

Steven D. Bishop

Kathleen B. Fish

Group President – Global Health Care

Chief Research, Development and Innovation Officer

Gary A. Coombe

President – Global Grooming

Jennifer Davis

President – Global Feminine Care

Mary Lynn Ferguson-McHugh

Group President – Global Family Care  

and P&G Ventures

Thomas M. Finn

William P. Gipson

President – End-to-End Packaging Transformation  

and Chief Diversity Officer

Tracey Grabowski

Chief Human Resources Officer

Deborah P. Majoras

Chief Legal Officer and Secretary

Jon R. Moeller

President – Global Personal Health Care

Vice Chairman and Chief Financial Officer

Fama Francisco

President – Global Baby Care and  

Baby and Feminine Care Sector

Shailesh Jejurikar

President – Global Fabric Care

and Fabric & Home Care Sector

Henry Karamanoukian

Senior Vice President – Go-to-Market, China

R. Alexandra Keith

Julio N. Nemeth

President – Global Business Services

Javier Polit

Chief Information Officer

Marc S. Pritchard

Chief Brand Officer

Jeffrey K. Schomburger

Global Sales Officer

President – Global Hair Care and Beauty Sector

Valarie L. Sheppard

Senior Vice President, Comptroller and Treasurer

Yannis Skoufalos

Global Product Supply Officer

Juan Fernando Posada

President – Latin America

Matthew Price

President – Greater China

Markus Strobel

President – Global Skin & Personal Care

Magesvaran Suranjan

President – Asia Pacific and India, Middle East and Africa 

Loïc Tassel

President – Europe

Carolyn M. Tastad

Group President – North America

George Tsourapas

President – Global Home Care and P&G Professional

The Procter & Gamble Company • 77

Board of Directors

Francis S. Blake

W. James McNerney, Jr.

Former Chairman of the Board and Chief Executive Officer of 

Senior Advisor at Clayton, Dubilier & Rice (private equity 

The Home Depot, Inc. (national retailer). Director since 2015. 

investment). Former Chairman of the Board of The Boeing 

Also non-Executive Chairman of the Board of Delta Airlines 

Company (aerospace, commercial jetliners and military 

and Director of Macy’s, Inc. Age 69. Member of the Audit and 

defense systems). President of The Boeing Company from 

Governance & Public Responsibility Committees.

2005 to 2013, and Chief Executive Officer from 2005 to 2015. 

Angela F. Braly

Director since 2003. Age 69. Member of the Compensation 

& Leadership Development and Governance & Public 

Former Chair of the Board, President and Chief Executive 

Responsibility Committees.

Officer of WellPoint, Inc. (healthcare insurance), now known 

as Anthem. Director since 2009. Also a Director of Lowe’s 

Nelson Peltz

Companies, Inc., Brookfield Asset Management, and 

Chief Executive Officer and Founding Partner of Trian  

ExxonMobil Corporation. Age 57. Chair of the Governance  

Fund Management, L.P. (investment management)  

& Public Responsibility Committee and member of the 

since its formation in 2005. Director since March 1, 2018.  

Audit Committee.

Amy L. Chang

Also a Director of The Madison Square Garden Company,  

The Wendy’s Company, and Sysco Corporation. Age 76. 

Member of the Governance & Public Responsibility  

Senior Vice President of the Collaboration Technology Group 

and Innovation & Technology Committees.

at Cisco Systems, Inc. (networking). Founder and former 

Chief Executive Officer of Accompany, Inc. (relationship 

David S. Taylor

intelligence). Director since 2017. Former Director of Cisco 

Chairman of the Board, President and Chief Executive  

Systems, Inc., Splunk, Inc., and Informatica. Age 41. Member 

Officer of the Company. Director since 2015. Age 60.

of the Audit and Innovation & Technology Committees.

Margaret C. Whitman

Kenneth I. Chenault

Chief Executive Officer of NewTV (mobile video) since 2018. 

Chairman and Managing Director of General Catalyst 

Former President and Chief Executive Officer of Hewlett 

Partners (venture capital) since 2018. Former Chairman  

Packard Enterprise (multinational information technology) 

and Chief Executive Officer of American Express Company 

from 2015 to 2017. President and Chief Executive Officer of 

(global services, payments and travel) from 2001 to 2018. 

the Hewlett-Packard Company from 2011 to 2015, as well 

Director since 2008. Also a Director of International  

as Chairman of the Board from 2014 to 2015. Director since 

Business Machines Corporation and Facebook. Age 67. 

2011. Also a Director of Hewlett Packard Enterprise and 

Member of the Audit and Compensation & Leadership 

Dropbox. Age 62. Member of the Compensation & Leadership 

Development Committees.

Development and Innovation & Technology Committees.

Scott D. Cook

Patricia A. Woertz

Chairman of the Executive Committee of the Board of Intuit 

Former Chairman of the Board, President and Chief Executive 

Inc. (software and web services). Director since 2000. Age 66. 

Officer of Archer Daniels Midland Company (agricultural 

Member of the Compensation & Leadership Development 

processors of oilseeds, corn, wheat and cocoa, etc.). Director

and Innovation & Technology Committees.

since 2008. Also a Director of 3M Company. Age 65. Chair  

Joseph Jimenez

Former Chief Executive Officer of Novartis AG (global 

of the Audit Committee and member of the Governance  

& Public Responsibility Committee.

healthcare), a position he held from 2010 to 2018. Director 

Ernesto Zedillo

since March 1, 2018. Also a Director of General Motors. Age 58. 

Director of the Center for the Study of Globalization and 

Chair of the Innovation & Technology Committee and member 

Professor in the field of International Economics and Politics 

of the Compensation & Leadership Development Committee.

at Yale University. Former President of Mexico. Director  

Terry J. Lundgren

since 2001. Also a Director of Alcoa Corp. and Citigroup, Inc.  

Age 66. Member of the Governance & Public Responsibility 

Former Executive Chairman and Chairman of the Board of 

and Innovation & Technology Committees.

Macy’s, Inc. (national retailer), a position he held from 2017 

to 2018. Mr. Lundgren held the title of Chairman and Chief 

Executive Officer of Macy’s from 2003 to 2017. Director 

since 2013. Age 66. Chair of the Compensation & Leadership 

THE BOARD OF DIREC TORS HAS FOUR COMMIT TEES:

Development Committee and member of the Innovation  

Audit, Compensation & Leadership Development, 

& Technology Committee.

Governance & Public Responsibility, Innovation & Technology

78 • The Procter & Gamble Company

Recognition and Commitments

P&G is making choices to win with consumers and shoppers by raising the bar in everything we do.  

The external recognitions and commitments below demonstrate our dedication to building the business  

and making a positive difference in the world.

BR ANDS AND INNOVATION

Diversity & Inclusion

• 

 P&G continues to develop products that appeal to 

• 

 CEO David Taylor joined other CEOs and companies to 

environmentally concerned shoppers, such as Pampers 

advance diversity and inclusion in the workplace with 

Pure Collection, Whisper Pure Cotton, Rejoice and Pantene 

CEO Action for Diversity & Inclusion and Catalyst CEO 

Micellar Collections, ZzzQuil PURE Zzzs, Febreze ONE,  

Champions for Change.

Gain Botanicals, Dreft purtouch and Downy Nature Blends.

• 

 P&G spent more than $2 billion with minority- and  

• 

 Recent innovations earned P&G three of the top 25 places 

women-owned businesses for the 11th consecutive year. 

on the IRI New Product Pacesetters Report for the most 

Since 2005, P&G has been a member of the Billion Dollar 

successful non-food product launches of 2017: Herbal 

Roundtable, a forum of companies spending more than  

Essences Bio:Renew (#3), Tide Simply Plus Oxi (#5) and  

$1 billion annually with diverse suppliers.

Olay Eyes (#17). This emphasizes our commitment to 

• 

 We were included on the lists Forbes’ America’s Best 

creating noticeably superior products. 

Employers for Diversity, DiversityInc’s Top 50 Companies 

• 

 Olay Skin Advisor and Always Discreet Boutique were 

for Diversity, NAFE’s Top Companies for Executive Women 

recognized by Edison Universe for innovations in the 

and Working Mother Media’s 100 Best Companies and  

Women’s Wellbeing category. 

Best Companies for Multicultural Women.

• 

 At the 65th Cannes Lions International Festival of 

Creativity, P&G and our agencies were awarded 26 Lions  

Gender Equality

for campaigns that sparked important conversations  

• 

 P&G’s brands — Always, Ariel, Fairy, Joy, Secret, Vicks and 

and built our business, including The Talk, Love Over Bias, 

others — continued to deliver campaigns that tackle 

The Words Matter and It’s a Tide Campaign. 

gender bias and start conversations that motivate change.

• 

 Multiple P&G brands and products were recognized as 

• 

 We partnered with the World Economic Forum to launch 

Kantar’s Product of the Year, BrandSpark’s Most Trusted 

the Global Shapers Community to mobilize youth around 

and Reader’s Digest’s Most Trusted Brands in America.

the world in support of gender equality.

WORKPL ACE

•  Forbes’ America’s Best Employers

•  Glassdoor’s Best Places to Work

•  Universum’s World’s Most Attractive Employers

CITIZENSHIP

Ethics & Corporate Responsibility

• 

 P&G joined forces with Seneca Women to develop a new 

interactive exhibit — Women at Work: Myth vs. Reality —

designed to expose and bust the myths that are holding 

women back in the workplace.

Environmental Sustainability

• 

 In addition to our 2020 environmental goals, we launched 

“Ambition 2030,” our 2030 environmental sustainability 

• 

 Drucker Institute’s Management Top 250 Most Effectively 

goals that embody our commitment to enabling and 

Managed Companies in America

inspiring a positive impact in the world while creating 

• 

 Forbes and Just Capital’s Just 100 America’s Best  

value for consumers, partners and the Company.

Corporate Citizens

•  Fortune’s World’s Most Admired Companies

•  Forbes’ World’s Most Reputable Companies

•  Barron’s Most Respected Companies

• 

 We were included on Corporate Responsibility 

Magazine’s 100 Best Corporate Citizens List, the Dow 

Jones Sustainability Index, Barron’s 100 Most Sustainable 

Companies List and the FTSE4Good Index, and received 

•  Gartner Supply Chain Top 25 — Supply Chain Master

awards from Innovation in Plastics Recycling, edie 

• 

 Human Rights Campaign’s Corporate Equality Index —

Sustainability Leaders and Environmental Leader.

perfect score of 100 for 5th consecutive year

• 

 About 85% of P&G’s production facilities now send zero 

Community Impact

manufacturing waste to landfills, bringing us closer to 

achieving our commitment to send zero manufacturing 

• 

 We delivered our 13 billionth liter of clean water with the 

waste to landfill from global manufacturing sites by 2020.

P&G Children’s Safe Drinking Water Program. 

• 

 We responded to more than 20 natural disasters 

globally — including Hurricanes Harvey, Irma and Maria, 

which devastated Texas, Florida and Puerto Rico —  

with donations of P&G products, financial aid and  

volunteer time.

• 

 P&G washed more than 3,600 loads of laundry for U.S. 

families with our Tide Loads of Hope program.

The paper utilized in the printing of this annual  
report is certified to the FSC® Standards, which 
promotes environmentally appropriate, socially 
beneficial and economically viable management  
of the world’s forests.

Design: Madison Design

Building Citizenship  
into Building the 
Business

Citizenship is built into how we deliver our 
results at P&G. We believe in, and have 
publicly committed to, doing what’s right  
and being a good corporate citizen. We  
focus our efforts across a number of areas.  
To learn more about how our Citizenship 
efforts are a force for good and a force for 
growth, visit us at www.pg.com/citizenship.

ETHICS & CORPORATE RESPONSIBILITY

We define being a good corporate citizen as improving transparency, building 

collaborative partnerships, respecting human and labor rights, doing the right 

thing and sourcing responsibly.

COMMUNITY IMPACT 

We’re there for people in times of need, like providing the comforts of home 

when people are displaced or bringing the power of clean water to communities 

in rural areas. We also lend a hand to improve the communities where we live 

and work every day.

DIVERSITY & INCLUSION 

We aspire to be as diverse as the people who use our products. The more we 

reflect the diversity of our consumers, the better equipped we are to understand 

and serve them. One of the most visible actions we’re taking is to use our voice 

and reach in advertising to start conversations to understand and end bias.

GENDER EQUALITY 

We’re working to build a better world for all of us — inside and outside  

of P&G — free of gender bias, with an equal voice for women and men …  

a world where everyone sees equal. 

ENVIRONMENTAL SUSTAINABILITY 

We’ve already achieved many of our 2020 climate, waste and water goals,  

and in April 2018 we announced “Ambition 2030,” a new set of goals aiming  

to enable and inspire positive impact on the environment and society while 

creating value for consumers, partners and the Company. 

Explore the digital version of the 2018 P&G Annual Report at

www.pg.com/annualreport2018

© 2018 Procter & Gamble
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