P&G Delivers Fourth Quarter Core EPS of $0.79, Organic Sales up 4%; Fiscal Year 2013 Core EPS of $4.

P&G Delivers Fourth Quarter Core EPS of $0.79, Organic Sales up 4%;

Fiscal Year 2013 Core EPS of $4.05

CINCINNATI--(BUSINESS WIRE)-- The Procter & Gamble Company (NYS: PG) reported fiscal year 2013 diluted net earnings per share from continuing operations of $3.86, up 24 percent versus the prior year. Core earnings per share were $4.05, an increase of five percent versus the prior year. Net sales were $84.2 billion, an increase of one percent including a negative two point impact from foreign exchange. Organic sales grew three percent for the fiscal year.

Core earnings per share were $0.79 for the April - June quarter. Diluted net earnings per share from continuing operations were $0.64, including non-core items of $0.15 per share. Organic sales grew four percent, on five percent unit volume growth. Net sales were $20.7 billion, an increase of two percent versus the prior year period including a negative two percentage point impact from foreign exchange.

"The Company met its objectives for the fourth quarter and fiscal year, and we will build on these results in fiscal 2014," said Chairman, President and Chief Executive Officer, A.G. Lafley. "With an overriding focus on value creation, we will strengthen and accelerate productivity plans. We will continue to make choiceful investments in core brands, our biggest innovation opportunities, and in our core developed and most promising developing markets. In all we do, we will stay focused on winning with consumers, customers and shareholders."

Fiscal Year Discussion

In fiscal year 2013, results were in line with objectives set at the beginning of the fiscal year. Organic sales were in line with initial guidance, with market share trends improving throughout the year. Core earnings per share were ahead of initial projections. Cash results were also ahead of plan, with free cash flow productivity of 95%. The Company increased the quarterly dividend by seven percent and repurchased $6 billion of its shares over the fiscal year.

Net sales increased one percent to $84.2 billion for fiscal 2013. Unit volume growth contributed two percent to sales growth, and pricing added one percent. Unfavorable foreign exchange reduced net sales by two percentage points. Organic sales increased three percent, with all segments growing organic sales.

Diluted net earnings per share from continuing operations were $3.86, an increase of 24 percent versus the prior year period. Excluding non-core items, core earnings per share were $4.05, an increase of five percent versus the prior year period.

Reported and core gross margin increased 30 basis points. Manufacturing and productivity savings improved gross margin by approximately 160 basis points, and pricing improved gross margin by 70 basis points. These benefits were largely offset by product and geographic mix and manufacturing start-up costs. Core SG&A costs increased 10 basis points. Overhead cost savings from the Company's productivity program of approximately 70 basis points and the benefit of sales leverage were more than offset by the impacts of foreign exchange, marketing investments, higher employment costs and merchandising spending. Including restructuring costs and other non-core impacts, reported SG&A increased 50 basis points.

Fiscal Year 2014 Guidance

For fiscal year 2014, P&G expects organic sales growth in the range of three percent to four percent compared to underlying global market growth of about 3.5 percent. All-in sales growth is forecast in the range of one percent to two percent, including a negative foreign exchange impact of approximately two percent.

Core earnings per share are expected to grow in the range of five percent to seven percent, equal to fiscal 2013 growth at the low end of the range and within the Company's long-term, annual growth objectives at the high end of the range. P&G noted that EPS growth estimates include a six percentage point negative impact from foreign exchange. Reported earnings per share are expected to grow in the range of seven percent to nine percent, reflecting somewhat lower non-core restructuring costs in fiscal year 2014 versus the prior year.

April - June Quarter Discussion

Net sales increased two percent to $20.7 billion in the April - June quarter, including unfavorable foreign exchange of two percentage points. Organic sales grew four percent, including a unit volume increase of five percent. Geographic and category mix reduced net sales by one percentage point, while pricing was unchanged versus the prior year.

Core earnings per share, which excludes non-core items, were $0.79, a decrease of four percent versus the prior year. Diluted net earnings per share from continuing operations were $0.64, a decrease of 14 percent versus the prior year. Foreign exchange reduced earnings by $0.06 per share and non-core items lowered earnings by $0.15 per share. Current period non-core items include restructuring charges of $0.02 per share, a $0.04 per share charge for pending European legal matters, and a $0.10 per share non-cash impairment charge to adjust the carrying values of goodwill and intangible assets in the Braun Appliances business. The impairment was primarily driven by the devaluation of the Japanese Yen, as a large portion of the earnings of the Appliances business are generated in Japan.

Core operating profit margin decreased 130 basis points. Manufacturing and productivity savings of 320 basis points and sales leverage were more than offset by unfavorable foreign exchange, geographic and category mix, marketing investments, manufacturing start-up costs for new product initiatives and production capacity, and higher pension and employee benefit costs. Reported operating profit margin decreased 250 basis points.

The core effective tax rate was 22.3 percent, essentially in-line with the prior year level and slightly below the Company's guidance, contributing approximately $0.01 to core earnings per share versus expectations. The fourth quarter tax rate on all-in earnings was 25.0 percent.

Operating cash flow was $4.4 billion for the fourth quarter. Additionally, the Company repurchased $1.0 billion of common stock and returned $1.7 billion of cash to shareholders as dividends.

April - June Quarter Business Segment Discussion

Beauty Segment

Beauty segment net sales increased one percent driven by a four percent increase in unit volume, partially offset by a negative two percentage point impact from foreign exchange and one percentage point of unfavorable product mix. Sales were down in Hair Care, as volume growth was more than offset by pricing adjustments to improve consumer value and unfavorable foreign exchange. In the personal beauty categories, sales were up high single digits behind strong, innovation-driven growth in Personal Cleansing products, Cosmetics and Deodorants. Sales were down versus prior year in Skin Care due to high levels of competitive promotional activity. Prestige sales grew mid-single digits driven by new innovation. Beauty segment net earnings growth drivers were a lower effective tax rate and lower SG&A costs, partially offset by a lower gross margin.

Grooming Segment

Blades and razors net sales increased versus the prior year driven primarily by growth in developing regions due to innovation and customer inventory increases, partially offset by a decrease in developed regions driven by initiative timing and market contraction in Southern Europe. Net sales in Appliances declined due to the divestiture of the household appliances business, high levels of competitive activity, foreign exchange, and comparison against a base period that included initiative activity. Grooming segment net earnings increased, as higher pricing and manufacturing and overhead productivity savings were partially offset by an increase in marketing spending and foreign exchange.

Health Care Segment

Oral Care net sales grew due to geographic portfolio expansion and innovation-driven market share growth. Feminine Care net sales were in line with the prior year period as growth from innovation and improving share trends in North America were offset by foreign exchange. Personal Health Care delivered net sales growth due primarily to the addition of the New Chapter business. Health Care segment earnings increased due to the growth in net sales and overhead productivity savings, which were partially offset by higher marketing spending, reduced gross margin and foreign exchange.

Fabric Care and Home Care Segment

Both Fabric Care and Home Care increased net sales driven by innovation and geographic expansion. Batteries net sales were up primarily due to higher pricing and favorable product mix. Pet Care sales decreased due to the impact of the Natura pet food recall. Fabric Care and Home Care segment net earnings decreased as manufacturing and overhead productivity savings were more than offset by the costs of the Natura recall, unfavorable product mix and foreign exchange.

Baby Care and Family Care Segment

Baby Care net sales decreased, as an increase in sales from innovation and market growth in developing regions were more than offset by foreign exchange. Family Care net sales were up behind innovation in North America and Latin America and customer inventory increases at the end of the quarter ahead of early-July merchandising events. Net earnings for the segment decreased due to foreign exchange, start-up costs for new manufacturing capacity and unfavorable product and geographic mix, which were partially offset by manufacturing, marketing and overhead productivity savings.

*Core excludes incremental restructuring charges, European legal matters, and impairment charges.

Forward-Looking Statements

Certain statements in this release or presentation, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words "believe," "project," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectation and assumptions that are subject to risks and uncertainties which may cause results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise.

Risks and uncertainties to which our forward-looking statements are subject include: (1) the ability to achieve business plans, including growing existing sales and volume profitably and maintaining and improving margins and market share, despite high levels of competitive activity, an increasingly volatile economic environment, lower than expected market growth rates, especially with respect to the product categories and geographical markets (including developing markets) in which the Company has chosen to focus, and/or increasing competition from mid- and lower tier value products in both developed and developing markets; (2) the ability to successfully manage ongoing acquisition, divestiture and joint venture activities to achieve the cost and growth synergies in accordance with the stated goals of these transactions without impacting the delivery of base business objectives; (3) the ability to successfully manage ongoing organizational changes and achieve productivity improvements designed to support our growth strategies, while successfully identifying, developing and retaining particularly key employees, especially in key growth markets where the availability of skilled or experienced employees may be limited; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain key manufacturing and supply sources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory, tax and legal requirements and matters (including, but not limited to, product liability, patent, intellectual property, price controls, import restrictions, environmental and tax policy) and to resolve pending matters within current estimates; (7) the ability to resolve the pending competition law inquiries in Europe within current estimates; (8) the ability to successfully implement, achieve and sustain cost improvement plans and efficiencies in manufacturing and overhead areas, including the Company's outsourcing projects; (9) the ability to successfully manage volatility in foreign exchange rates, as well as our debt and currency exposure (especially in certain countries with currency exchange, import authorization or pricing controls, such as Venezuela, China, India and Argentina); (10) the ability to maintain our current credit rating and to manage fluctuations in interest rate, increases in pension and healthcare expense, and any significant credit or liquidity issues; (11) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Company's significant geographical markets, due to a wide variety of factors, including but not limited to, terrorist and other hostile activities, natural disasters and/or disruptions to credit markets, resulting from a global, regional or national credit crisis; (12) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (13) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (14) the ability to successfully manage increases in the prices of commodities, raw materials and energy, including the ability to offset these increases through pricing actions; (15) the ability to develop effective sales, advertising and marketing programs; (16) the ability to stay on the leading edge of innovation, maintain the positive reputation of our brands and ensure trademark protection; and (17) the ability to rely on and maintain key information technology systems and networks (including Company and third-party systems and networks), the security over such systems and networks, and the data contained therein. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports.

About Procter & Gamble

P&G serves approximately 4.8 billion people around the world with its brands. The Company has one of the strongest portfolios of trusted, quality, leadership brands, including Ace®, Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®, Dawn®, Downy®, Duracell®, Fairy®, Febreze®, Fusion®, Gain®, Gillette®, Head & Shoulders®, Iams®, Lenor®, Mach3®, Olay®, Oral-B®, Pampers®, Pantene®, Prestobarba®, SK-II®, Tide®, Vicks®, Wella® and Whisper®. The P&G community includes operations in approximately 70 countries worldwide. Please visit http://www.pg.com for the latest news and in-depth information about P&G and its brands.

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The Procter & Gamble Company

Exhibit 1: Non-GAAP Measures

In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP measures used in the earnings release and the reconciliation to the most closely related GAAP measure.

Organic Sales Growth: Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this provides investors with a more complete understanding of underlying sales trends by providing sales growth on a consistent basis. Organic sales is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.

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

*Acquisition/Divestiture Impact includes rounding impacts necessary to reconcile net sales to organic sales.

Core EPS: This is a measure of the Company's diluted net earnings per share from continuing operations excluding charges in both years for incremental restructuring due to increased focus on productivity and cost savings, the current year charge from the balance sheet impact of the Venezuela devaluation, charges in the current year and prior year related to the European legal matters, the current year holding gain on the buyout of our Iberian joint venture partner, and current year and prior year impairment charges for goodwill and indefinite lived intangible assets. We do not view these items to be part of our sustainable results. We believe the Core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The table below provides a reconciliation of diluted net earnings per share to Core EPS: