Oct – Dec 12 (Q2 FY 13) ResultsOrganic Sales Growth6% Organic sales growing i all O i l i in ll5% reporting segments 4%4% 3% 3% 3%3% 2%2%1%0% OND 11 JFM 12 AMJ 12 JAS 12 OND 12
Oct – Dec 12 (Q2 FY 13) Results% of Sales In-Line or Growing Value Share In Line70% Intervention plans on key businesses are driving improving share results.60%50%40%30%20%10%0% OND 11 JFM 12 AMJ 12 JAS 12 OND 12Market share data is value basis, constant currency.
Oct – Dec 12 (Q2 FY 13) ResultsPricing Trend6 Pricing up in line with expectation. 5%5 4% 4% +4%43 2% 2%210 OND 11 JFM 12 AMJ 12 JAS 12 OND 12
Oct – Dec 12 (Q2 FY 13) ResultsCore EPS Growth15.0% Results driven by top-of range sales g y p g growth and strong productivity savings. 12%10.0% 5%5.0% -2% 0% 0%0.0% OND 11 JFM 12 AMJ 12 JAS 12 OND 12-5.0% * History adjusted for Snacks moving to Discontinued Operations.
Oct – Dec 12 (Q2 FY 13) ResultsCore Operating Profit Growth Core operating margin improved by 110 basis15% points, points including 160 basis points of productivity improvements and cost savings.10% 7% 5% 4% 2% 1% -4% 0% OND 11 JFM 12 AMJ 12 JAS 12 OND 12-5%-10% * History adjusted for Snacks moving to Discontinued Operations.
Fiscal Year 13 ResultsNon-Manufacturing E llN M f i Enrollment Non-Mfg Overhead Net Role Changes as of June 30, 2012 g , ( , (2,000) ) Net Role Changes July-September, 2012 (1,300) Net Role Changes O t b – D N t R l Ch October December, 2012 b (2,200) (2 200) Net Role Changes as of December 31, 2012 (5,500) June 30, 2013 Target (5,700) Delivered +95% of enrollment target as of December 31st
Fiscal Year 13 ResultsNon-Core RN C Restructuring S i Spending di FY ‘12 FY ‘13 FY ‘13 ($MM Before Tax) Total Year JAS OND Cost of Goods Sold $211 $100 $54 SG&A $510 $192 $101 Total Non-Core Restructuring $721 $292 $155
Oct – Dec 12 (Q2 FY 13) Results Beauty & Grooming B G i Organic Volume Growth IYA By Category B C t Global Developed Developing Hair Care ~= ~= ~= Skin Care - - - Personal Cleansing ~= + - Cosmetics ++ ++ ++ Deodorants ++ ++ ++ Salon Professional - - ++ Prestige + - ++ Blades & Razors ~= ~= + Braun ~= ~= -• ++ represents growth above 2%, + represents growth of 2%, ~= represents growth of 1% to decline of 1%; - represents decline greater than 1%. Company average = 2%.
Oct – Dec 12 (Q2 FY 13) Results Beauty Highlights B t Hi hli ht• North America Hair Care shipments increased high-single digits driven by strong growth in Head & Shoulders and Herbal Essences and pipeline shipments of Pantene Expert Collection and Vidal Sassoon Pro Series.• Greater China hair care grew volume and value share with launches of the Head & Shoulders Male line and Pantene Naturals and strong in-store fundamentals across all brands.• Western Europe Hair Care volume declined double digits due to price and promotion gaps versus competition. Value interventions and marketing invesments began to be implemented in Q2 and will continue into Q3.• The Prestige business grew organic volume and sales. Growth from initiative launches on Dolce & Gabbana, Gucci and Hugo Boss, strong holiday sales and distribution expansion in Latin America were partially off-set by negative impacts from Hurricane Sandy.• Salon Professional organic sales were about flat Strong sales of Nioxin and the new Illumina color by flat. Wella were off-set mainly by market declines in southern Europe.• North America Skin Care shipments were down mid single digits. The new Fresh Effects mid-tier boutique began shipping the end of December.• Greater China Skin Care value share trends improved from P12M down 1.7 points to P3M down 0.6 points. We introduced a Pro-X Whitening line in Q1, a YuLan You Naturals line in Q2 and restaged Olay Regenerist in January.
Oct – Dec 12 (Q2 FY 13) Results Grooming Highlights• U S Bl d & R U.S. Blades Razors volume i l increased l d low single di i and value share grew nearly 1 point. i l digits d l h l i Male Blades & Razors grew value share nearly 2 points resulting from our recent Top 40 interventions.• V l share f U S F i Bl d & R Value h for U.S. Fusion Blades Razors was up nearly 1 5 points; f di l 1.5 i t for disposables value bl l share was up nearly 3 points; and for Mach 3 Blades & Razors values share was flat.• Latin America Blades & Razor shipments were up high-single digits mainly driven by the launch of V l h f Venus i B il A in Brazil, Argentina, Chil and P ti Chile d Peru, th l the launch of P Glid i B il and h f ProGlide in Brazil, d customer inventory increases in advance of the annual price increase in Brazil.• Western Europe Blades & Razors value share increased 0.5 points while volume declined low single di it d t market contraction and a hi h b i l digits due to k t t ti d high base-period f i d from F i P Glid post- Fusion ProGlide t launch promotional support.• Appliances organic shipments were flat as strong holiday shipments in the U.S. were off-set by b market softness in Western Europe. k t ft i W t E
Oct – Dec 12 (Q2 FY 13) ResultsHealth Care SH lhC Segment 4% 3% Organic Organic Sales Volume • +2% Pricing, -1% Mix • Volume: Flat Developed, High-singles Developing • P&G global value market share declined 0 3 points 0.3
Oct – Dec 12 (Q2 FY 13) Results Health Care H lhC Organic Volume Growth IYA By Category y g y Global Developed Developing Oral Care ++ ~= ++ Feminine Care ++ ~= = ++ Personal Health Care ~= - ++• ++ represents growth above 2%, + represents growth of 2%, ~= represents growth of 1% to decline of 1%; - represents decline greater than 1%. Company average = Flat.
Oct – Dec 12 (Q2 FY 13) ResultsHealth Care Hi hli hH lhC Highlights• U.S. toothpaste shipments were up versus year ago behind Top 40 intervention plans. Crest Whit toothpaste value share grew f th 33rd consecutive month since l C t 3D White t th t l h for the d ti th i launch. h• Latin America Oral Care increased value share over 2 point versus year ago and shipments were up over 20% driven by the successful Oral B toothpaste expansion across th region. the i• Brazil Oral Care national toothpaste value share grew to 8.6% - up more than 3% versus year ago. The major drivers of the growth were the July launch of 3D White toothpaste – which i nearly a 2 5% value share – and national expansion i t Hi h F hi h is l 2.5% l h d ti l i into High Frequency St Stores.• Western Europe Oral Care volume increased mid-single digits largely due to the continued success of the Oral B toothpaste expansion in the U.K. and Benelux and the expansions in i Q2 i t G into Greece and P t d Portugal. l• Asia Oral Care volume grew mid-single digits led by Greater China volume increasing high-single digits behind more effective merchandising and the launch of a Crest Complete N t l regimen. C l t Naturals i
Oct – Dec 12 (Q2 FY 13) ResultsHealth Care Hi hli h (continued)H lhC Highlights• North America Feminine Care shipments were up low single digits behind growth from our Top 40 investments.• Latin America Feminine Care volume increased double digits largely due to strength in Brazil behind new initiatives on Always and the introduction of Tampax Pearl.• India Feminine Care shipments increased mid-teens and value share grew more than 2 points versus year ago behind new innovation such as an upgrade on Whisper.• Vicks ZzzQuil had nearly a 20% value share of the U.S. sleep aid category and was number one in dollar and unit sales for branded sleep aids.• Western Europe Personal Health Care volume grew double-digits largely due to growth in the T h Teva j i venture products. joint d• Central & Eastern Europe, Middle East & Africa Personal Health Care shipments were up double digits due to the recent launch of Vicks in Russia, Poland, Hungary and the Czech Republic. R bli
Oct – Dec 12 (Q2 FY 13) ResultsHousehold CH h ld Care Fabric & Home Care Segment g Baby & Family Segment 5% 6% 3% 2% Organic Organic Organic g Organic g Sales Volume Sales Volume• +1% Pricing, Flat Mix • +2% Pricing, -3% Mix• Volume: Low-singles Developed, • Volume: Mid-singles Developed, Flat Developing High-singles Developing• P&G global value share • P&G global value share declined 0.3 points declined 0.5 points
Oct – Dec 12 (Q2 FY 13) Results Household C H h ld Care Organic Volume Growth IYA g By Category Global Developed Developing Fabric Care ++ ++ ~= Home Care ++ ++ ++ Batteries ~= ~= ~= P&G Professional ++ ++ ~= Baby Care ++ ~= ++ Family Care ++ ++ - Pet Care - - ++• ++ represents growth above 2%, + represents growth of 2%, ~= represents growth of 1% to decline of 1%; - represents decline greater than 1%. Company average = Flat.
Oct – Dec 12 (Q2 FY 13) Results Household C H h ld Care Hi hli ht Highlights• North America Fabric Care volume increased mid single digits. U.S. laundry value share increased by over 1 p y point for the p past 3 months.• Asia Fabric Care shipments grew high-single digits and value share was up half-a-point led by India where value share grew over 1 point versus year ago.• Western Europe Fabric Care volume was up from growth in Spain behind the launch of Fairy laundry detergent in September and in the U.K. behind investments from the Top 40 plans.• Central & Eastern Europe, Middle East and Africa fabric care shipments were down due to competitive challenges in Russia and Turkey. p g y• U.S. Air Care value share increased over 1 point driven by continued growth of Febreze car vent clips and a strong holiday scent program.•US A U.S. Auto Di h C Dish Care value share i l h increased 1 points b hi d the T 40 value i d 1.5 i behind h Top l interventions. i• Central & Eastern Europe, Middle East & Africa Home Care value share grew over 1 point with strong growth in Dish Care in Turkey, where P&G achieved share leadership.• Western Europe Home Care shipments were down due to contracting markets and increased competitive pressure.
Oct – Dec 12 (Q2 FY 13) Results Household C H h ld Care Hi hli h (continued) Highlights• Global Batteries value share grew nearly 0.5 points with share up in 4 out of 5 regions.• North America Batteries shipments increased mid-single digits. U.S. value share grew nearly 1 point due to the launch of the Duralock initiative and pantry loading from Hurricane Sandy.• Western Europe Batteries volume declined due to market contraction and our focus on improving our margin structure in the region – which is expected to negatively impact volume in the short short- term.• North America Pet Care volume declined slightly due to increased competitive pressure in the Pet Specialty channel.• North America Baby Care volume was up led by growth in the premium tier from the “3-way fit” innovation and the addition of a new size and by Luvs, which had new distribution and increased marketing support.• Asia Baby Care shipments increased mid-teens and value share increased over 0.5 points with volume and share growth in both India and China.• Pampers shipments in BRIC markets grew high-teens with value share up in all four markets.• North America Family Care volume was up double digits due to continued strength of the Charmin DuraClean and Bounty Trap & Lock innovations and growth of Bounty Basic and Charmin Basic (from the October 1st list price reduction).
FY 2013 GuidanceFY 2013 GuidanceOrganic Sales GOrganic S l GrowthOO ii th Growth h6% Increased sales guidance I d l id5% 4% 3% to 4%4% 3% 3%3%2%1%0% FY 10 FY 11 FY 12 FY 13E
FY 2013 GuidanceCore EPS GC Growth th10% FY ‘13 outlook raised 138% 7% 3% to 6%6% 5%4%2% -1% -1%0% FY 10 FY 11 FY 12 FY 13E-2% * History adjusted for Snacks moving to Discontinued Operations.
FY 2013 Guidance Macro Assumptions Included in G Guidance Global Market Growth 4% + Commodity Prices* Roughly Neutral vs. Prior Year Foreign Exchange* -2% Top-line* Based on mid-October spot rates
FY 2013 GuidanceKey Risks Not Included in G GuidanceLarge devaluation of an important currency, such as the g p y,Venezuelan BolivarMarketM k t growth deceleration f th d l ti from:• Payroll tax increase• Dynamics associated with the debt ceiling in the U.S. y g• Worsening conditions in Europe• Developing market slow-downsFor additional information regarding potential risks, please refer to the 10-K for the year ending June 30, 2012
FY 2013 GuidanceCash GC Generation and Usage AssumptionsFree Cash Flow Productivity: ~ 90%Capital Spending, % Sales: ~5 %Dividends: $6B+Share Repurchase: $5B to $6B Raise Share Repurchase for FY 2013 to $5-6 billion
FY 2013 GuidanceReturning Value to S Shareholders FY ‘12 FY ‘13 E Dividends $6B $6B+ Share Repurchase $4B $5-6B Value to Shareholders $10B $11-12B+ Shareholder Yield, ~5.8 to 5.5% % of market cap p 6.3% Dividend increase and $5-6 billion repurchase assumed in FY 2013Shareholder Yield is calculated based on market cap of the last day of each Fiscal Year. FY 13 Estimate is based on Market Cap of $190B
Q3 FY 13 GuidanceOrganic Sales GO i S l Growth h6% Implies organic growth sequentially in-line or higher versus Q2 3% to 4% 4%4% 3% 3% 3% 2%2%0% OND 11 JFM 12 AMJ 12 JAS 12 OND 12 JFM 13E
Q3 FY 13 GuidanceCore EPS GC S Growth15% FY 13 back-half reflects strengthened investments in innovation & marketing plans 12%10% -3% 5% to5% +3% -2% 0% 0%0% OND 11 JFM 12 AMJ 12 JAS 12 OND 12 JFM 13E-5% * History adjusted for Snacks moving to Discontinued Operations.
Forward Looking StatementsCertain statements in this release or presentation, other than purely historical information, including estimates, projections, statements relating to ourbusiness plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E ofthe Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “anticipate,”“estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue”, “will likely results,” and similar estimate, intend, strategy, future, opportunity, plan, may, should, will, would, will be, will continue , will results,expressions. Forward-looking statements are based on current expectation and assumptions that are subject to risks and uncertainties which maycause results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-lookingstatements, 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 growingexisting sales and volume profitably and maintaining and improving margins and market share, despite high levels of competitive activity, anincreasingly volatile economic environment, lower than expected market growth rates, especially with respect to the product categories andgeographical markets (including developing markets) in which the Company has chosen to focus, and/or increasing competition from mid- and lowertier value products in both developed and developing markets; (2) the ability to successfully manage ongoing acquisition, divestiture and joint ventureactivities to achieve the cost and growth synergies in accordance with the stated goals of these transactions without impacting the delivery of basebusiness objectives; (3) the ability to successfully manage ongoing organizational changes and achieve productivity improvements designed tosupport our growth strategies, while successfully identifying, developing and retaining particularly key employees, especially in key growth marketswhere the availability of skilled employees is limited; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain keymanufacturing and supply sources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory tax and regulatory,legal requirements and matters (including product liability, patent, intellectual property, price controls, import restrictions, environmental and taxpolicy), and to resolve pending matters within current estimates; (7) the ability to resolve the pending competition law inquiries in Europe within currentestimates; (8) the ability to successfully implement, achieve and sustain cost improvement plans and efficiencies in manufacturing and overheadareas, including the Companys outsourcing projects; (9) the ability to successfully manage volatility in foreign exchange rates, as well as our debt andcurrency exposure (especially in certain countries with currency exchange controls, such as Venezuela, China, India and Argentina); (10) the ability tomaintain our current credit rating and to manage fluctuations in interest rate, increases in pension and healthcare expense, and any significant creditor liquidity issues; (11) the ability to manage continued global political and/or economic uncertainty and disruptions, especially in the Companyssignificant geographical markets, due to a wide variety of factors, including but not limited to, terrorist and other hostile activities, natural disastersand/or disruptions to credit markets, resulting from a global, regional or national credit crisis; (12) the ability to successfully manage competitivefactors, including prices, promotional incentives and trade terms for products; (13) the ability to obtain patents and respond to technological advancesattained by competitors and patents granted to competitors; (14) the ability to successfully manage increases in the prices of commodities, rawmaterials and energy, including the ability to offset these increases through pricing actions; (15) the ability to develop effective sales, advertising andmarketing programs; (16) the ability to stay on the leading edge of innovation maintain a positive reputation on our brands and ensure trademark innovation,protection; and (17) the ability to rely on and maintain key information technology systems and networks (including Company and third-party systemsand networks), the security over such systems and networks, and the data contained therein. For additional information concerning factors that couldcause actual results to materially differ from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports.
The Procter & Gamble Company: Reg G Reconciliation of Non-GAAP measuresIn accordance with the SEC’s Regulation G, the following provides definitions of the non-GAAP measuresused in Procter & Gambles January 25, 2013 earnings call and associated slides with the reconciliation to themost closely related GAAP measure. The measures provided are as follows: 1. Organic Sales Growth – page 1 2. Core EPS – pages 2 through 4 3. Core Operating Profit Margin – page 4 4. Core Gross Margin – page 4 5. Core Selling, General & Administrative Expenses (SG&A) as a % of Net Sales – page 5 6. Core Operating Profit Growth – page 5 7. Core Effective Tax Rate – page 5 8. Free Cash Flow – page 61. 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 witha 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 determiningtheir at-risk compensation. The reconciliation of reported sales growth to organic sales is as follows: Foreign Acquisition/ Organic Net Sales Exchange Divestiture Sales Total P&G Growth Impact Impact* Growth OND 11 4% 0% 0% 4% JFM 12 2% 1% 0% 3% AMJ 12 -1% 4% 0% 3% JAS 12 -4% 6% 0% 2% OND 12 2% 1% 0% 3% JFM 13 (Estimate) 3% to 4% 0% 0% 3% to 4% FY 2013 (Estimate) 1% to 2% 2% 0% 3% to 4% FY 2010 3% 1% -1% 3% FY 2011 5% 0% -1% 4% FY 2012 3% 0% 0% 3% Total Developing OND 12 5% 2% 0% 7% Net Foreign Acquisition/ Organic Sales Exchange Divestiture Sales OND 2012 Growth Impact Impact* Growth Beauty 1% 1% 1% 3% Grooming -4% 3% 3% 2% Health Care 3% 2% -1% 4% Fabric Care and Home Care 3% 0% 0% 3% Baby Care and Family Care 4% 1% 0% 5% Total P&G 2% 1% 0% 3%*Acquisition/Divestiture Impact includes rounding impacts necessary to reconcile net sales to organic sales. 1
2. Core EPS: This is a measure of the Company’s diluted net earnings per share from continuing operationsexcluding certain items that are not judged to be part of the Company’s sustainable results or trends. Thisincludes FY 2013 holding gain on the buyout of our Iberian joint venture partner, FY 2013 and 2012 chargesrelated to incremental restructuring charges due to increased focus on productivity and cost savings, chargesin FY’s 2012, 2011 and 2010 related to European legal matters, FY 2012 impairment charges for goodwilland indefinite lived intangible assets, a significant benefit in FY 2011 from the settlement of U.S. taxlitigation primarily related to the valuation of technology donations, a FY 2010 charge related to a taxprovision for retiree healthcare subsidy payments in the U.S. healthcare reform legislation, and incrementalrestructuring charges in FY 2009 to offset the dilutive impact of the Folgers divestiture. We believe the CoreEPS measure provides an important perspective of underlying business trends and results and provides amore comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measuresused to evaluate senior management and is a factor in determining their at-risk compensation. The tablesbelow provide a reconciliation of diluted net earnings per share to Core EPS:Fiscal Year Data: FY FY FY FY FY 2013 (est.) 2012 2011 2010 2009Diluted Net Earnings Per Share -Continuing Operations $4.04 to $4.14 $3.12 $3.85 $3.47 $3.35 Impairment Charges - $0.51 - - - Settlement from U.S. Tax Litigation - - ($0.08) - - Charges for European legal matters - $0.03 $0.10 $0.09 - Taxation of retiree healthcare subsidy - - - $0.05 - Incremental restructuring charges $0.15 $0.20 - - $0.09 Gain on buyout of Iberian JV ($0.21) - - - - Rounding/Other Impacts ($0.01) ($0.01) - - ($0.01)Core EPS $3.97 to $4.07 $3.85 $3.87 $3.61 $3.43Core EPS Growth 3% to 6% -1% 7% 5%Quarter / Period Data: JFM 13 (est.) JFM 12Diluted Net Earnings Per Share $0.90 to $0.96 $0.82 Snacks results of operations – Discontinued Operations - ($0.01)Diluted Net Earnings Per Share-Continuing Operations $0.90 to $0.96 $0.81 Impairment charges - $0.01 Incremental restructuring 0.01 $0.12 Core EPS $0.91 to $0.97 $0.94Core EPS Growth -3% to +3% 2
OND 12 OND 11Diluted Net Earnings Per Share-Continuing Operations $1.39 $0.56 Impairment charges - $0.50 Charges for European legal matters - $0.02 Gain on buyout of Iberian JV ($0.21) - Incremental restructuring $0.05 $0.01 Rounding ($0.01) - Core EPS $1.22 $1.09Core EPS Growth 12% JAS 12 JAS 11Diluted Net Earnings Per Share-Continuing Operations $0.96 $1.01 Incremental restructuring $0.09 - Charges for European Legal Matters $0.01 -Core EPS $1.06 $1.01Core EPS Growth 5% AMJ 12 AMJ 11Diluted Net Earnings Per Share $1.24 $0.84 Gain from snacks divestiture ($0.48) - Snacks results of operations – Discontinued Operations ($0.02) ($0.02)Diluted Net EPS - Continuing Operations $0.74 $0.82 Incremental restructuring $0.08 -Core EPS $0.82 $0.82Core EPS Growth 0% JFM 12 JFM 11 Diluted Net Earnings Per Share $0.82 $0.96 Snacks Results of Operations – Discontinued ($0.01) ($0.02) Diluted Net Earnings Per Share-Continuing $0.81 $0.94 Incremental restructuring $0.12 - Non-cash Impairment charges $0.01 - Core EPS $0.94 $0.94 Core EPS Growth 0% 3
OND 11 OND 10Diluted Net Earnings Per Share-ContinuingOperations $0.56 $1.09 Impairment charges $0.50 - Charges for European legal matters $0.02 $0.10 Settlement from U.S. tax litigation - ($0.08) Incremental restructuring $0.01 - Core EPS $1.09 $1.11Core EPS Growth -2%Note – All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature ofthe underlying transaction. The charge for the significant settlement from U.S. tax litigation is tax expense.3. Core Operating Profit Margin:This is a measure of the Company’s operating margin adjusted for current and prior year charges related toincremental restructuring charges due to increased focus on productivity and cost savings, prior year chargesrelated to European legal matters, and prior year impairment charges for goodwill and indefinite livedintangible assets: OND 12 OND 11 Operating Profit Margin 20.3% 12.3% Impairment charges - 7.1% Charges for European legal matters - 0.3% Incremental restructuring 0.7% 0.1% Rounding impacts - 0.1% Core Operating Profit Margin 21.0% 19.9% Basis point change 1104. Core Gross Margin:This is a measure of the Company’s Gross Margin adjusted for the current year charges related toincremental restructuring charges due to increased focus on productivity and cost savings: OND 12 OND 11 Gross Margin 50.9% 50.1% Incremental restructuring 0.3% - Core Gross Margin 51.2% 50.1% Basis point change 110 4
5. Core SG&A as a % of Net Sales:This is a measure of the Company’s SG&A as a % of Net Sales adjusted for the current and prior yearcharges related to incremental restructuring charges due to increased focus on productivity and cost savings,and prior year charges related to European legal matters: OND 12 OND 11 Selling, General & Administrative 30.6% 30.6%Expenses (SG&A) as a % Net Sales Incremental restructuring -0.5% -0.1% European legal matters - -0.3% Rounding impacts 0.1% -Core SG&A as a % Net Sales 30.2% 30.2%Basis point change 06. Core Operating Profit Growth:This is a measure of the Company’s operating profit growth adjusted for the fiscal 2012 impairment chargesfor goodwill and indefinite lived intangible assets, fiscal year 2013 and 2012 charges related to incrementalrestructuring charges due to increased focus on productivity and cost savings, and charges in fiscal 2012 and2011 related to the European legal matters: OND OND 12 JAS 12 AMJ 12 JFM 12 11Operating Profit Growth 68% -7% -4% -11% -36% Impairment charges -61% 0% 0% 1% 37% Charges for European legal matters -4% 1% 0% 0% -6% Incremental restructuring 4% 7% 8% 12% 1%Core Operating Profit Growth 7% 1% 4% 2% -4%7. Core Effective Tax Rate:This is a measure of the Company’s effective tax rate adjusted for current year charges for incrementalrestructuring and the current year holding gain on the buyout of our Iberian joint venture partner. The tablebelow provides a reconciliation of the effective tax rate to the Core tax rate: OND 2012Effective Tax Rate 21.9% Tax impact of incremental restructuring -0.3% Tax impact of gain on buyout of Iberian JV 2.8%Core Effective Tax Rate 24.4% 5
8. Free Cash Flow:Free cash flow is defined as operating cash flow less capital spending. We view free cash flow as animportant measure because it is one factor in determining the amount of cash available for dividends anddiscretionary investment. Free cash flow is also one of the measures used to evaluate senior managementand is a factor in determining their at-risk compensation. The reconciliation of free cash flow is providedbelow (amounts in millions): Operating Capital Free Cash Cash Flow Spending Flow Oct-Dec ‘12 $3,849 ($724) $3,125 6