Comments on Glass Lewis Report
P&G Urges Shareholders to Vote “FOR” ALL of
P&G’s Directors on the BLUE Proxy Card
The Procter & Gamble Company (NYSE:PG) today issued the
following statement in response to the report issued by Glass Lewis
& Co. (“Glass Lewis”) regarding the election of directors to
the P&G Board at the Company’s Annual Meeting of Shareholders
to be held on October 10, 2017:
P&G’s Board and management team are
implementing a strategy that is working and has strong
momentum.
- P&G met or exceeded all of its
going-in fiscal 2017 objectives: balanced top- and bottom-line
growth, cash productivity and cash delivered to shareholders.
- Since the CEO transition nearly two
years ago, P&G has delivered total shareholder return (“TSR”)
of 28%, outperforming peers that delivered a TSR of 11%.i
P&G today is a profoundly different, much
stronger and more profitable Company than it was just a few years
ago.
- P&G has a much stronger portfolio,
positioned to win with 65 brands and 10 core categories where
products solve problems and performance drives purchase.
- P&G is consistently the innovation
leader in these categories with innovation that drives brand
leadership.
- P&G brands are consistently ranked
#1 in market share because they are the best at delivering
noticeable superiority in their categories.
- P&G’s productivity program is
substantive and impactful, over-delivering on its first $10 billion
savings goal and well positioned to deliver up to $10 billion more
in savings.
- P&G has overcome unprecedented
negative foreign exchange impacts, while driving margin improvement
and achieving industry-leading margins.
- P&G is simplifying its organization
design to create a more focused, agile and accountable Company
through one organizing principle - the business is run by
category.
Glass Lewis fails to recognize that P&G
has delivered consistently strong operating results over the last
five years, excluding the effects of currency, while executing its
transformation of the Company:
- P&G has delivered constant currency
core earnings per share (EPS) growth of 11% on average.
- P&G core EPS, excluding the effects
of currency, has increased in EVERY year at a rate of 7% to 14% per
year.
- P&G core gross margin has improved
by 450 basis points and core operating margin has increased by 610
basis points, excluding the effects of currency.
- P&G constant currency core
operating margin has increased in EVERY year at a rate of 50 basis
points to 240 basis points per year.
While P&G's Board and management cannot
control the macro environment and currency trends, the Company has
consistently delivered strong operating results throughout a
significant and profound transformation of the business, which has
only accelerated since P&G appointed David Taylor as CEO on
November 1, 2015.
We are disappointed that Glass Lewis failed
to recognize the significant transformation that the P&G Board
and management team are implementing for the benefit of all
shareholders. We have the right plan, the right structure and the
right team in place to continue to deliver results and shareholder
value for the short-, mid- and long-term. We believe that now is
not the time to risk derailing that progress.
The P&G Board has done its homework and
concluded that Nelson Peltz is NOT the right director for P&G.
Mr. Peltz lacks specific qualities P&G is looking for in Board
members. The P&G Board and management team have talked to
numerous directors, CEOs and senior executives who have worked with
Mr. Peltz, and positive recommendations were not forthcoming.
People would only speak candidly about their experiences with Mr.
Peltz if those discussions were kept confidential, for fear of
retribution.
We believe that putting the wrong person like
Mr. Peltz on the P&G Board represents a risk of derailment. The
consequences of derailment can be quite damaging. The weighted
average shareholder return of companies on which Mr. Peltz serves
as a board member is 4%.ii One company has NEGATIVE 10% returns.
That company has had negative volume growth every year since Mr.
Peltz joined the board, and current year-to-date organic sales
growth is NEGATIVE 1.0%, versus POSITIVE 3.9% the year before Mr.
Peltz joined.
The P&G Board and management team strongly recommend
shareholders vote “FOR” ALL of P&G’s highly qualified Directors
on the BLUE Proxy Card.
Shareholders are urged NOT to vote using any white proxy card or
voting instruction forms you might receive from Nelson Peltz or
Trian. Please disregard and discard the white proxy card.
Shareholders can vote by Internet, telephone or by signing and
dating the BLUE Proxy Card and mailing it in the postage
paid envelope provided. If you have any questions about how to vote
your shares, or need additional assistance, please contact our
proxy solicitors, D.F. King & Co., Inc. at (877) 361-7966 or
MacKenzie Partners, Inc. at (800) 322-2885.
P&G notes that additional information regarding the proxy
contest, as well as the Company’s strategy and recent results, is
available at VoteBlue.PG.com.
About Procter & Gamble
P&G serves consumers around the world with one of the
strongest portfolios of trusted, quality, leadership brands,
including Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®,
Dawn®, Downy®, Fairy®, Febreze®, Gain®, Gillette®, Head &
Shoulders®, Lenor®, Olay®, Oral-B®, Pampers®, Pantene®, SK-II®,
Tide®, Vicks®, and Whisper®. The P&G community includes
operations in approximately 70 countries worldwide. Please visit
http://www.pg.com for the latest news and information about P&G
and its brands.
Forward-Looking Statements
Certain statements in this release or presentation, other than
purely historical information, including estimates, projections,
statements relating to our business plans, objectives, and expected
operating results, and the assumptions upon which those statements
are based, are “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements generally
are identified by the words “believe,” “project,” “expect,”
“anticipate,” “estimate,” “intend,” “strategy,” “future,”
“opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,”
“will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and
assumptions, which are subject to risks and uncertainties that may
cause results to differ materially from those expressed or implied
in the forward-looking statements. We undertake no obligation to
update or revise publicly any forward-looking statements, whether
because of new information, future events or otherwise.
Risks and uncertainties to which our forward-looking statements
are subject include, without limitation: (1) the ability to
successfully manage global financial risks, including foreign
currency fluctuations, currency exchange or pricing controls and
localized volatility; (2) the ability to successfully manage local,
regional or global economic volatility, including reduced market
growth rates, and to generate sufficient income and cash flow to
allow the Company to affect the expected share repurchases and
dividend payments; (3) the ability to manage disruptions in credit
markets or changes to our credit rating; (4) the ability to
maintain key manufacturing and supply arrangements (including
execution of supply chain optimizations, and sole supplier and sole
manufacturing plant arrangements) and to manage disruption of
business due to factors outside of our control, such as natural
disasters and acts of war or terrorism; (5) the ability to
successfully manage cost fluctuations and pressures, including
prices of commodity and raw materials, and costs of labor,
transportation, energy, pension and healthcare; (6) the ability to
stay on the leading edge of innovation, obtain necessary
intellectual property protections and successfully respond to
changing consumer habits and technological advances attained by,
and patents granted to, competitors; (7) the ability to compete
with our local and global competitors in new and existing sales
channels, including by successfully responding to competitive
factors such as prices, promotional incentives and trade terms for
products; (8) the ability to manage and maintain key customer
relationships; (9) the ability to protect our reputation and brand
equity by successfully managing real or perceived issues, including
concerns about safety, quality, ingredients, efficacy or similar
matters that may arise; (10) the ability to successfully manage the
financial, legal, reputational and operational risk associated with
third party relationships, such as our suppliers, distributors,
contractors and external business partners; (11) the ability to
rely on and maintain key company and third party information
technology systems, networks and services, and maintain the
security and functionality of such systems, networks and services
and the data contained therein; (12) the ability to successfully
manage uncertainties related to changing political conditions
(including the United Kingdom’s decision to leave the European
Union) and potential implications such as exchange rate
fluctuations and market contraction; (13) the ability to
successfully manage regulatory and legal requirements and matters
(including, without limitation, those laws and regulations
involving product liability, intellectual property, antitrust,
privacy, tax, environmental, and accounting and financial
reporting) and to resolve pending matters within current estimates;
(14) the ability to manage changes in applicable tax laws and
regulations including maintaining our intended tax treatment of
divestiture transactions; (15) the ability to successfully manage
our ongoing acquisition, divestiture and joint venture activities,
in each case to achieve the Company’s overall business strategy and
financial objectives, without impacting the delivery of base
business objectives; and (16) the ability to successfully achieve
productivity improvements and cost savings and manage ongoing
organizational changes, while successfully identifying, developing
and retaining key employees, including in key growth markets where
the availability of skilled or experienced employees may be
limited. For additional information concerning factors that could
cause actual results and events to differ materially from those
projected herein, please refer to our most recent 10-K, 10-Q and
8-K reports.
Important Additional Information and Where to Find It
The Company has filed a definitive proxy statement on Schedule
14A and form of associated BLUE Proxy Card with the Securities and
Exchange Commission (“SEC”) in connection with the solicitation of
proxies for its 2017 Annual Meeting of Shareholders (the
“Definitive Proxy Statement”). The Company, its directors and
certain of its executive officers will be participants in the
solicitation of proxies from shareholders in respect of the 2017
Annual Meeting. Information regarding the names of the Company’s
directors and executive officers and their respective interests in
the Company by security holdings or otherwise is set forth in the
Definitive Proxy Statement. Details concerning the nominees of the
Company’s Board of Directors for election at the 2017 Annual
Meeting are included in the Definitive Proxy Statement. BEFORE
MAKING ANY VOTING DECISION, INVESTORS AND SHAREHOLDERS OF THE
COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR
FURNISHED TO THE SEC, INCLUDING THE COMPANY’S DEFINITIVE PROXY
STATEMENT AND ANY SUPPLEMENTS THERETO AND ACCOMPANYING BLUE PROXY
CARD, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders
may obtain a free copy of the Definitive Proxy Statement and other
relevant documents that the Company files with the SEC from the
SEC’s website at www.sec.gov or the Company’s website at
http://www.pginvestor.com as soon as reasonably practicable after
such materials are electronically filed with, or furnished to, the
SEC.
Non-GAAP Reconciliation
This press release contains certain non-GAAP measurements that
management believes are meaningful to investors because they
provide useful perspective on underlying business trends (i.e.
trends excluding non-recurring or unusual items) and results,
provide a supplemental measure of year-on-year results, and provide
a view of our business results through the eyes of management.
These measures are also a factor in determining senior management’s
at-risk compensation. These non-GAAP measures are not intended to
be considered in place of the related GAAP measure and may not be
the same as similar measures used by other companies. This data
should be read in conjunction with previously published company
reports on Forms 10-K, 10-Q, and 8-K, which are available on
www.PGInvestor.com under Financial Reporting. Reconciliations of
non-GAAP measures to GAAP are provided below.
The Core earnings measures included in the following
reconciliation tables refer to the equivalent GAAP measures
adjusted as applicable for the following items:
- Incremental
restructuring: The Company has had and continues to have an
ongoing level of restructuring activities. Such activities have
resulted in ongoing annual restructuring related charges of
approximately $250 - $500 million before tax. Beginning in 2012
Procter & Gamble began a $10 billion strategic productivity and
cost savings initiative that includes incremental restructuring
activities. In 2017, the company announced elements of an
additional multi-year productivity and cost savings plan. These
plans result in incremental restructuring charges to accelerate
productivity efforts and cost savings. The adjustment to Core
earnings includes only the restructuring costs above what we
believe are the normal recurring level of restructuring costs.
- Early debt
extinguishment charges: During the three months ended
December 31, 2016, the Company recorded a charge of $345 million
after tax due to the early extinguishment of certain long-term
debt. This charge represents the difference between the
reacquisition price and the par value of the debt
extinguished.
- Venezuela
deconsolidation charge: For accounting purposes, evolving
conditions resulted in a lack of control over our Venezuelan
subsidiaries. Therefore, in accordance with the applicable
accounting standards for consolidation, effective June 30, 2015, we
deconsolidated our Venezuelan subsidiaries and began accounting for
our investment in those subsidiaries using the cost method of
accounting. The charge was incurred to write off our net assets
related to Venezuela.
- Charges for
certain European legal matters: Several countries in Europe
issued separate complaints alleging that the Company, along with
several other companies, engaged in violations of competition laws
in prior periods. The Company established Legal Reserves related to
these charges.
- Venezuela B/S
remeasurement & devaluation impacts: Venezuela is a
highly inflationary economy under U.S. GAAP. Prior to
deconsolidation, the government enacted episodic changes to
currency exchange mechanisms and rates, which resulted in currency
remeasurement charges for non-dollar denominated monetary assets
and liabilities held by our Venezuelan subsidiaries.
- Non-cash
impairment charges: During fiscal years 2013 and 2012 the
Company incurred impairment charges related to the carrying value
of goodwill and indefinite lived intangible assets in our
Appliances and Salon Professional businesses.
- Gain on Iberian
JV buyout: During fiscal year 2013 we incurred a holding
gain on the purchase of the balance of our Iberian joint venture
from our joint venture partner.
We do not view the above items to be part of our sustainable
results, and their exclusion from core earnings measures provides a
more comparable measure of year-on-year results.
Core EPS and currency-neutral Core
EPS: Core earnings per share, or Core EPS, is a measure of
the Company's diluted net earnings per share from continuing
operations adjusted as indicated. Currency-neutral Core EPS is a
measure of the Company's Core EPS excluding the incremental current
year impact of foreign exchange. Management views these non-GAAP
measures as a useful supplemental measure of Company performance
over time.
Core operating profit margin and
currency-neutral Core operating profit margin: Core
operating profit margin is a measure of the Company's operating
margin adjusted for items as indicated. Currency-neutral Core
operating profit margin is a measure of the Company's Core
operating profit margin excluding the incremental current year
impact of foreign exchange. Management believes these non-GAAP
measures provide a supplemental perspective to the Company’s
operating efficiency over time.
Core gross margin and currency-neutral
Core gross margin: Core gross margin is a measure of the
Company's gross margin adjusted for items as indicated.
Currency-neutral Core gross margin is a measure of the Company's
Core gross margin excluding the incremental current year impact of
foreign exchange.
Management believes these non-GAAP measures provide a
supplemental perspective to the Company’s operating efficiency over
time.
1. Core EPS and currency-neutral Core
EPS:
FY 12 FY 13
FY 14 FY 15 FY 16
FY 17 Diluted Net Earnings Per Share from Continuing
Operations, attributable to P&G $2.97
$3.50 $3.63 $2.84
$3.49
$3.69
Incremental Restructuring 0.15 0.14 0.11 0.17 0.18 0.10 Early Debt
Extinguishment Charges - - - - - 0.13 Venezuela B/S Remeasurement
& Devaluation Impacts - 0.08 0.09 0.04 -
-
Charges for Certain European Legal Matters 0.03 0.05 0.02 0.01 - -
Venezuela Deconsolidation Charge - - - 0.71 - - Non-Cash Impairment
Charges 0.31 0.10 - - - - Gain on Iberian JV Buyout - (0.21) - - -
- Rounding (0.01) (0.01) - (0.01) -
-
Core EPS $3.45 $3.65 $3.85
$3.76 $3.67 $3.92 Percentage change vs. prior
year Core EPS - 6% 5% (2)% (2)% 7% Currency Impact to Earnings -
0.15 0.32 0.52 0.35 0.15
Currency-Neutral Core EPS -
$3.80 $4.17 $4.28 $4.02 $4.07
Percentage change vs. prior year Core EPS - 10% 14% 11% 7% 11%
Currency-Neutral Core EPS 5-year average growth
11%
Note – All reconciling items are presented net of tax. Tax
effects are calculated consistent with the nature of the underlying
transaction.
2. Core operating profit
margin:
FY 12
FY 13 FY 14 FY 15
FY 16 FY 17 Operating Profit
Margin 17.1% 17.7% 18.7%
15.6% 20.6% 21.5%
Incremental Restructuring 0.7% 0.7% 0.5% 0.9% 0.9% 0.6% Charges for
Certain European Legal Matters 0.1% 0.2% 0.1% - - - Venezuela B/S
Remeasurement & Devaluation Impacts - 0.5% 0.4% 0.2% - -
Venezuela Deconsolidation Charge - - - 2.9% - - Non-Cash Impairment
1.2% 0.4% - - - - Rounding 0.1% (0.1)% - -
- -
Core Operating Profit Margin
19.2% 19.4% 19.7% 19.6% 21.5%
22.1%
Changevs FY13
Basis point change vs. prior year Core margin 20 30 (10) 190 60 270
Currency Impact to Margin 0.3% 1.2% 1.4% 0.5%
0.3%
Currency-Neutral Core Operating Profit
Margin 19.7% 20.9% 21.0% 22.0%
22.4% Basis point change vs. prior year Core margin
50 150 130 240 90
610
3. Core gross margin:
FY 12
FY 13 FY 14 FY 15
FY 16 FY 17 Gross Margin
48.2% 48.5% 47.5%
47.6% 49.6% 50.0%
Incremental Restructuring
0.2% 0.3% 0.4% 0.7% 1.0% 0.8%
Rounding
- - - 0.1%
-
-
Core Gross Margin 48.4%
48.8% 47.9% 48.4% 50.6% 50.8%
Changevs FY13
Basis point change vs. prior year Core margin 40 (90) 50 220 20 200
Currency Impact to Margin 0.1% 1% 0.4% 0.7%
0.4%
Currency-Neutral Core Gross Margin
48.9% 48.9% 48.8% 51.3% 51.2%
Basis point change vs. prior year Core margin
50 10 90 290 60 450
i TSR calculations since November 1, 2015. Market data as of
September 21, 2017. The peers selected by Trian in its September 6,
2017 White Paper are as follows: Beiersdorf, Church & Dwight,
Clorox, Colgate-Palmolive, Edgewell Personal Care, Henkel,
Kimberly-Clark, L’Oreal, Reckitt Benckiser and Unilever. The TSR
for “P&G Peers” is a simple average, which follows the same
methodology utilized by Trian in its measurement of the same peer
constituency in its presentation filed with the SEC on September 6,
2017.
ii TSR calculations since November 1, 2015. Market data as of
September 21, 2017. The TSR for “Peltz Serving on Board” is a
weighted average based on the market capitalization of Madison
Square Garden, Mondelez, Sysco and Wendy’s.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170922005287/en/
P&G Media Relations:Damon Jones,
513-983-0190jones.dd@pg.comorP&G Investor Relations:John
Chevalier, 513-983-9974
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