Proctor and Gamble 2016 Annual Report Download - page 25

The Procter & Gamble Company 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis
Forward-Looking Statements
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 limitation, in the 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 results
and events to differ materially from such forward-looking
statements is included in the section titled "Economic
Conditions and Uncertainties" and the section titled “Risk
Factors” (Item 1A of this Form 10-K). Forward-looking
statements are made as of the date of this report, and 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:
• Overview
• Summary of 2016 Results
• 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 the Venezuela
deconsolidation, acquisitions, divestitures and foreign
exchange 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 market consumption in the
MD&A are based on a combination of vendor-reported
consumption and market size data, 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.
OVERVIEW
P&G is a global leader in fast-moving consumer goods,
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, grocery stores,
membership club stores, drug stores, department stores,
distributors, baby stores, specialty beauty stores, e-commerce,
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.