(cid:31)(cid:30)(cid:29)(cid:28) Annual Report
`
`Apple Inc., et al.
`Exhibit 1027
`Apple Inc., et al. v. Global Touch Solutions, Inc.
`IPR2015-01174
`
`Exhibit 1027, Page 001
`
`

`

`CONTENTS
`Letter to Shareowners
`P&G’s Billion- and Half-Billion-Dollar Brands
`Sectors and SMOs
`Form 10-K Index
`Form 10-K
`Measures Not Defi ned by U.S. GAAP
`Global Leadership Council
`Board of Directors
`Company & Shareowner Information
`Recognition
`
`FINANCIAL HIGHLIGHTS
`(unaudited)
`
`1
`6
`8
`9
`10
`42
`87
`87
`88
`89
`
`Amounts in millions, except per share amounts
`Net Sales
`Operating Income
`Net Earnings Attributable to Procter & Gamble
`Net Earnings Margin from Continuing Operations
`Diluted Net Earnings per Common Share from Continuing Operations(1)
`Diluted Net Earnings per Common Share(1)
`Dividends per Common Share
`
`2014
`$83,062
`15,288
`11,643
`14.1%
`$ 3.98
`4.01
`2.45
`
`2013
`$82,581
`14,330
`11,312
`13.7%
`$ 3.83
`3.86
`2.29
`
`2012
`$82,006
`13,035
`10,756
`11.2%
`$ 3.06
`3.66
`2.14
`
`2011
`$79,385
`15,233
`11,797
`14.5%
`$ 3.80
`3.93
`1.97
`
`2010
`$75,785
`15,306
`12,736
`14.0%
`$ 3.38
`4.11
`1.80
`
`NET SALES
`($ billions)
`
`OPERATING CASH FLOW
`($ billions)
`
`DILUTED NET EARNINGS
`(per common share)
`
`(cid:31)(cid:30)
`(cid:31)(cid:29)
`(cid:31)(cid:28)
`(cid:31)(cid:31)
`(cid:31)(cid:27)
`
`(cid:31)(cid:30)(cid:29)(cid:28) NET SALES
`
`(cid:30)(cid:29)(cid:28).(cid:27)
`(cid:30)(cid:29)(cid:26).(cid:25)
`(cid:30)(cid:29)(cid:26).(cid:24)
`(cid:30)(cid:23)(cid:22).(cid:21)
`(cid:30)(cid:23)(cid:20).(cid:29)
`
`(cid:31)(cid:30)
`(cid:31)(cid:29)
`(cid:31)(cid:28)
`(cid:31)(cid:31)
`(cid:31)(cid:27)
`
`(cid:30)(cid:27)(cid:21).(cid:24)
`(cid:30)(cid:27)(cid:21).(cid:22)
`(cid:30)(cid:27)(cid:28).(cid:28)
`(cid:30)(cid:27)(cid:28).(cid:28)
`
`(cid:30)(cid:27)(cid:25).(cid:27)
`
`(cid:31)(cid:30)
`(cid:31)(cid:29)
`(cid:31)(cid:28)
`(cid:31)(cid:31)
`(cid:31)(cid:27)
`
`(cid:30)(cid:21).(cid:24)(cid:27)
`(cid:30)(cid:28).(cid:29)(cid:25)
`(cid:30)(cid:28).(cid:25)(cid:25)
`(cid:30)(cid:28).(cid:22)(cid:28)
`(cid:30)(cid:21).(cid:27)(cid:27)
`
`BY BUSINESS SEGMENT((cid:19))
`
`BY GEOGRAPHIC REGION
`
`BY MARKET MATURITY
`
`25%
`
`24%
`
`10%
`
`32%
`
`9%
`
` Beauty
` Grooming
` Health Care
`
` Fabric Care and
`Home Care
` Baby, Feminine
`and Family Care
`
`
`
`7%
`
`10%
`
`16%
`
`28%
`
`39%
`
` North America
` Europe
` Asia
` Latin America
` I ndia, Middle East
`and Africa (IMEA)
`
` Developed
` Developing
`
`39%
`
`61%
`
`Various forward-looking statements are made in this Annual Report, which generally include the words “believe,” “expect,” “anticipate,” “intend,”
`“opportunity,” “plan,” “project,” “will,” “should,” “could,” “would,” “likely,” and similar expressions. Certain factors that may affect these forward-
`looking statements, including the Company’s ability to achieve its goals referred to herein, are discussed on pages (cid:26)(cid:25)–(cid:26)(cid:24) of this Annual Report.
`
`((cid:26)) Diluted net earnings per share are calculated based on net earnings attributable to Procter & Gamble.
`((cid:25)) These results exclude net sales in Corporate.
` * Brand names referenced in this Annual Report are trademarks of The Procter & Gamble Company or one of its subsidiaries.
`
`Exhibit 1027, Page 002
`
`

`

`A.G. Lafl ey
`Chairman of the Board,
`President and
`Chief Executive Offi cer
`
`Dear Shareowners,
`
`At P&G, we are focused on building consumer-preferred brands and products
`that create value for consumers and shareowners. Everything begins with consumer
`understanding and winning at the zero moment of truth when consumers search for our
`brands, at the fi rst moment of truth when they choose our brands, and at the second
`moment of truth when they use our products. Winning these moments of truth leads to
`consumer purchase, preference, regular usage and long-term loyalty. This is how we
`create value for consumers, build leadership brands and businesses, and create value for
`P&G shareowners.
`
`We met our business and fi nancial objectives for fi scal year (cid:30)(cid:29)(cid:28)(cid:27). Organic sales grew
`(cid:26)%, in line with the market. Core earnings per share increased (cid:25)%. We generated
`$(cid:28)(cid:29).(cid:28)billion of free cash fl ow, with (cid:22)(cid:21)% free cash fl ow productivity. We increased the
`dividend (cid:20)% — the (cid:25)(cid:22)th consecutive year that P&G’s dividend has been increased — and
`we returned $(cid:28)(cid:30).(cid:19)billion in cash to shareowners through $(cid:21).(cid:19)billion in dividends
`and $(cid:21)billion in share repurchase.
`
`We delivered commitments, but we know we can do better. We need to continue to
`lead innovation, drive productivity, and improve execution in brand building, product
`innovation, selling and sourcing. When we do, we will generate stronger sales growth
`and more reliable value creation — profi t and cash fl ow.
`
`To accelerate performance improvement, we are taking an important strategic step
`forward in the Company’s business and brand portfolio.
`
`Exhibit 1027, Page 003
`
`

`

`2 The Procter & Gamble Company
`
`A Focused Company of Leading Brands
`P&G will become a simpler, more focused Company of (cid:31)(cid:30) to
`(cid:29)(cid:30) brands, organized into about a dozen businesses and four
`industry-based sectors. We will compete in businesses that are
`structurally attractive and best leverage our core capabilities.
`Within these businesses, we will focus on leading brands or
`brands with leadership potential, marketed in the right countries
`where the size of prize and probability of winning is highest,
`with products that sell. We will discontinue or divest businesses,
`brands, product lines, and unproductive products that are
`structurally unattractive or that don’t fully play to our strengths.
`
`Every brand we plan to keep is strategic, with the potential to
`grow and deliver value creation. These core (cid:31)(cid:30) to (cid:29)(cid:30) brands are
`leaders in their industries, businesses or segments. They offer
`differentiated products and have a track record of growth and
`value creation driven by product innovation and brand preference.
`They generate nearly (cid:28)(cid:30)% of current P&G sales and more than
`(cid:28)(cid:27)% of current profi t. They have grown sales one point faster,
`with a higher profi t margin than the balance of the Company
`during the past three years. The (cid:28)(cid:30) to (cid:25)(cid:30)(cid:30) brands we plan to exit
`have declining sales of −(cid:23)%, declining profi ts of −(cid:25)(cid:22)% and half
`the average Company margin during the past three years.
`
`This strategic step will focus our innovation efforts, brand
`building, and supply network on fewer, more important brands.
`It will focus our selling resources on brands that really matter to
`consumers and retail customers, on businesses where we know
`how to win. It will provide consumers with a better shopping
`experience by simplifying shelf sets. It will improve service and
`
`growth for retail customers. All of these outcomes will accelerate
`growth and value creation.
`
`We will create a faster growing, more profi table Company that
`is far simpler to manage.
`
`A Far More Productive Company
`As a result of the Company’s strategic focus on leading brands,
`we will accelerate and over-deliver the original $(cid:25)(cid:30) billion
`productivity plan we announced in (cid:21)(cid:30)(cid:25)(cid:21). We see signifi cant
`savings potential ahead across all spending elements — cost of
`goods sold, marketing spending, and overhead — for the next
`several years.
`
`In cost of goods sold, we are already achieving productivity
`improvements beyond our original savings objectives. Better
`manufacturing reliability and adherence to quality standards are
`resulting in less raw material usage and reduced fi nished product
`scrapping. Increasing localization of the supply chain is driving
`savings in transportation and warehousing costs.
`
`Earlier this year, we initiated what is probably the biggest
`supply chain redesign in the Company’s history, starting in
`North America. We’re moving from primarily single-category
`production sites to fewer multi-category production plants.
`We’re simplifying, standardizing and upgrading manufacturing
`platforms for faster innovation, qualifi cation and expansion,
`and improved product quality.
`
`We’re transforming our distribution network, starting with
`North America. We’re moving from shipping products to retail
`
`Joining Tide* and Ariel* in the unit dose laundry detergent
`segment, one Gain Flings!* pac offers twice the cleaning
`ingredients of one dose of original Gain liquid. Our unit
`dose detergents span more than (cid:25)(cid:29) countries worldwide,
`with well over $(cid:28) billion in retail sales.
`
`Head & Shoulders*, the world’s #(cid:28) selling shampoo, has been
`a leader for over (cid:21)(cid:29) years with products such as Classic Clean
`shampoo and conditioner. This year, we introduced Fresh Scent
`Technology, which delivers an enhanced sensorial experience
`without compromising superior scalp and hair care effi cacy.
`
`Exhibit 1027, Page 004
`
`

`

`
`
`The Procter & Gamble Company 3
`
`We see signifi cant
`savings potential ahead
`across all spending
`elements — cost of goods
`sold, marketing spending,
`and overhead — for the
`next several years.
`
`customers from many different points — as if they were coming
`from different companies — to consolidating shipping into fewer
`distribution centers. These centers are located strategically closer
`to customers and key population centers in the U.S., enabling
`about (cid:29)(cid:30)% of the business to be within one day or less of the
`store shelf and the shopper. This will allow both P&G and our
`customers to optimize inventory levels while improving service
`and product availability for consumers.
`
`To manage and operate this simpler brand portfolio, we have
`made several important organization design choices — four
`industry-based sectors; streamlining business units and selling
`operations; recombining four brand building functions into one;
`and reducing hierarchy, with all of the business unit and selling
`
`operations leaders reporting to the CEO. Each of these changes
`reduces complexity, and creates clearer accountability for
`performance and results. We’re just beginning to benefi t from
`the productivity opportunities that these organization changes
`create. We’ve reduced roles by (cid:25)(cid:22)% — more than (cid:27)(cid:30)% above the
`original objective, and two years sooner than planned. This is
`strong progress, and we see more opportunity ahead.
`
`We’re starting to improve marketing effi ciency and effectiveness
`through an optimized media mix with more digital, mobile,
`search and social presence, improved message clarity and
`greater savings in non-media spending. We believe we have
`more opportunity to improve marketing effi ciency — in both
`media and non-media areas — while increasing overall marketing
`effectiveness and improving sales growth.
`
`A Company Driven by Innovation
`When we get brand and product innovation right, source and
`sell brands and products effectively and effi ciently, we grow and
`drive meaningful value creation. We generate higher sales and
`profi t per unit, which enables us to capture a greater share of
`the value — profi t and cash — where we choose to compete.
`
`It is this share of value — the share of profi t generated in a
`category — that we want to capture. We have about a (cid:22)(cid:30)% share
`of U.S. laundry market sales, but earn approximately (cid:29)(cid:27)% of the
`profi t and cash generated in the category. We have a nearly (cid:31)(cid:30)%
`share of blades and razors sales globally — and a (cid:28)(cid:30)% share of
`value or profi t. We earn a higher share of profi t as a direct result
`of our innovation-focused business strategy and business models.
`
`Pampers* continues to upgrade the comfort, absorbency and
`design of its line-up. Pampers Swaddlers — the #(cid:28) choice† of
`hospitals — recently expanded into sizes (cid:27), (cid:25) and (cid:21), and now
`holds a (cid:28)(cid:29)% value share of the U.S. diaper category.
`†Based on sales of newborn hospital diapers
`
`Gillette* is once again changing the face of shaving with
`Gillette Fusion ProGlide* with FlexBall* Technology, which allows
`each cartridge to make maximum contact over contours† and get virtually
`every hair — addressing a top shaving need mentioned by (cid:22) out of (cid:28)(cid:29) men.
`†vs. Fusion
`
`Exhibit 1027, Page 005
`
`

`

`4 The Procter & Gamble Company
`
`We are consumer led. Their needs and wants come fi rst. We meet
`those needs with differentiated brands and better-performing
`products — priced to deliver real and perceived consumer value.
`In all four industry sectors and in most of our businesses, there is
`as much, and often more, sales growth and value creation —
`profi t and cash — in the premium and super-premium segments.
`We’ve been very successful in these segments.
`
`In the grooming market, premium products generate about (cid:20)(cid:23)%
`of sales. Gillette has an (cid:29)(cid:29)% share of this segment. Four years ago,
`we introduced Fusion ProGlide, priced at the higher end of the
`premium segment. Fusion grew global share for (cid:23)(cid:25) consecutive
`quarters, reaching $(cid:25) billion in sales faster than any other P&G
`brand in history. Last month, we launched the newest product in
`the Fusion line-up — Fusion ProGlide with FlexBall* Technology,
`the fi rst razor designed to respond to the contours of a man’s
`face, maintaining maximum contact and delivering a closer, more
`complete and comfortable shave. Men prefer this new razor
`(cid:21)-to-(cid:25) versus the best-selling razor in the world — our own Fusion
`ProGlide. FlexBall is off to a very good start, and appears to be
`revitalizing consumer interest in the category, driving an increase
`in U.S. male razor market sales, and acceleration in Gillette’s
`sales and shares.
`
`Crest (cid:23)D White*, a premium oral care regimen, was also launched
`in the U.S. and has grown market share for (cid:25)(cid:31) consecutive quarters.
`On its own worldwide, (cid:23)D White is a billion-dollar business.
`(cid:23)DWhite has also been an important driver of toothpaste market
`share growth in developing or emerging markets, for example,
`adding about a point-and-a-half share in Brazil and one point in
`Mexico last year. We recently launched (cid:23)D White in Europe,
`
`P&G launched seven of the top (cid:31)(cid:30) most successful non-food products
`of the year in the U.S. (Source: (cid:30)(cid:29)(cid:28)(cid:27) IRI New Product Pacesetters list)
`
`driving category growth in a region where many other
`categories are declining. Following the (cid:23)D White launch, we
`introduced Crest (cid:23)D White Luxe* toothpaste and Whitestrips*.
`The Luxe Glamorous White* toothpaste removes up to (cid:28)(cid:30)%
`of surface stains on teeth in just fi ve days and protects against
`future stains with our proprietary WHITELOCK* technology.
`The Whitestrips with FlexFit* Technology stretch and mold to
`your teeth for a completely custom fi t.
`
`Tide, Gain and Ariel three-chamber unit dose laundry detergents
`have been an innovation breakthrough in the laundry detergent
`category — resetting the bar for delightful consumer usage
`experience, product performance and convenience. Tide PODS*
`are priced at a (cid:21)(cid:30)% premium to liquid Tide and have grown to
`more than (cid:31)% of the laundry category. In March, we launched
`Gain Flings!* — priced at a (cid:22)(cid:30)% per use premium to Gain liquid
`detergent. Combined, Tide PODS and Gain Flings! now hold more
`
`Introduced in the U.K. in July (cid:30)(cid:29)(cid:28)(cid:27) and North America in
`August (cid:30)(cid:29)(cid:28)(cid:27), Always Discreet* marks our signifi cant entry
`into the Adult Incontinence category — revolutionizing
`the way women manage sensitive bladders.
`
`The manliest grooming brand is also the smartest.
`Old Spice Re-Fresh* Body Spray’s unique Re-Fresh Technology
`releases bursts of fragrance throughout the day, giving guys
`superior freshness when they need it most.
`
`Exhibit 1027, Page 006
`
`

`

`
`
`The Procter & Gamble Company 5
`
`than a (cid:25)(cid:30)% value share of the U.S. laundry category and over
`(cid:29)(cid:30)% of the unit dose segment. We now offer this innovative
`product form in over (cid:27)(cid:30) countries.
`
`We are currently entering the female Adult Incontinence category.
`This is an attractive $(cid:31) billion category worldwide, growing at
`an annual rate of (cid:31)%. We’re entering the category with superior
`products that deliver signifi cant consumer benefi t advantages
`from Always, a brand that women trust and prefer. We began
`shipments of Always Discreet in the U.K. last month, and will start
`shipments in North America and France this month.
`
`We are setting the brand and product innovation agenda in our
`industry. When we do this well, we build consumer preference
`for our brands, extend our brands’ competitive advantage, grow
`sales and market share cumulatively over time, and capture a
`larger share of category value — profi t and cash.
`
`A New P&G
`In summary, we delivered commitments in fi scal year (cid:21)(cid:30)(cid:25)(cid:20), and
`we are taking an important strategic step forward by focusing
`the Company’s business and brand portfolio to accelerate
`performance. All of this will take time to execute, and the pace
`will be driven by our ability to create the most value for consumers
`and shareowners.
`
`In effect, we are creating a new P&G. We will win consistently
`with (cid:31)(cid:30) to (cid:29)(cid:30) leading brands organized into about a dozen
`businesses in four industries marketed in the right countries with
`products that sell. We will create value through consumer-
`preferred brands and products that win at the zero, fi rst and
`
`We are creating
`a new P&G — a Company
`that will grow sales faster
`and more sustainably,
`will create value more
`reliably, and will be far
`simpler to manage.
`
`second moments of truth. The new P&G will grow sales faster
`and more sustainably, and create value — profi t and cash —
`more reliably for P&G shareowners.
`
`A.G. Lafl ey
`Chairman of the Board, President and Chief Executive Offi cer
`
`Metamucil* is launching a new family of products named Meta*,
`with a range of forms and wellness benefi ts — Metamucil,
`Meta Health Bars with psyllium fi ber and MetaBiotic*, a (cid:30)-in-(cid:28) probiotic
`supplement. To learn more about our new consumer-signifi cant,
`clinically proven benefi ts, visit metawellness.com.
`
`Available at U.S. retailers in September (cid:30)(cid:29)(cid:28)(cid:27),
`Crest Sensi-Stop* Strips is a revolutionary way to get tooth
`sensitivity relief. One strip applied for (cid:28)(cid:29) minutes provides
`immediate relief and up to one month of protection.
`
`Exhibit 1027, Page 007
`
`

`

`6 The Procter & Gamble Company
`
`P&G — A Company of Leading Brands
`P&G has (cid:29)(cid:28) brands with annual sales of $(cid:31) billion to more than $(cid:31)(cid:30) billion, and (cid:31)(cid:27) with sales of
`$(cid:26)(cid:30)(cid:30) million to $(cid:31) billion — many of those with billion-dollar potential. Nearly all of our (cid:29)(cid:28) billion-dollar
`brands and the vast majority of our $(cid:26)(cid:30)(cid:30) million to $(cid:31) billion brands hold the number one or two
`position in their category or segment, and they all have significant growth and value creation potential.
`
`Baby, Feminine and Family Care
`
`Fabric and Home Care
`
`Exhibit 1027, Page 008
`
`

`

`
`
`The Procter & Gamble Company 7
`
`Beauty
`
`Health and Grooming
`
`Exhibit 1027, Page 009
`
`

`

`8 The Procter & Gamble Company
`
`P&G is a company generating $(cid:31)(cid:30) billion in annual sales, with brands
`and categories organized in four industry-based sectors.
`
`BABY, FEMININE AND FAMILY CARE
`
`BEAUTY
`
`Baby Care
`CATEGORIES: Diapers & Pants,
`Baby Wipes
`
`Feminine Care
`CATEGORIES: Adult Incontinence,
`Feminine Care
`
`FABRIC AND HOME CARE
`
`Fabric Care
`CATEGORIES: Fabric Enhancers,
`Laundry Additives, Laundry
`Detergents
`
`Home Care
`CATEGORIES: Air Care, Dish Care,
`Surface Care, P&G Professional
`
`Family Care
`CATEGORIES: Paper Towels,
`Tissues, Toilet Paper
`
`Beauty Care
`CATEGORIES: Antiperspirant and
`Deodorant, Cosmetics, Personal
`Cleansing, Skin Care
`
`Prestige
`CATEGORIES: Prestige
`
`Hair Care and Color
`CATEGORIES: Hair Care, Hair Color
`
`Salon Professional
`CATEGORIES: Salon Professional
`
`Personal Power
`CATEGORIES: Batteries
`
`HEALTH AND GROOMING
`
`Personal Health Care
`CATEGORIES: Gastrointestinal,
`Rapid Diagnostics, Respiratory,
`Vitamins / Minerals / Supplements,
`Other Personal Health Care
`
`Shave Care
`CATEGORIES: Electronic Hair
`Removal, Female Blades & Razors,
`Male Blades & Razors, Pre/Post
`Shave, Other Shave Care
`
`Oral Care
`CATEGORIES: Toothbrush,
`Toothpaste, Other Oral Care
`
`We take our portfolio of brands to consumers through
`fi ve regional Selling and Market Operations.
`
`Asia
`
`Europe
`
`Latin America
`
`North America
`
`India, Middle East
`and Africa (IMEA)
`
`Exhibit 1027, Page 010
`
`

`

`The Procter & Gamble Company
`
`9
`
`Page
`
`11
`
`12
`16
`16
`16
`16
`
`19
`21
`22
`43
`
`44
`47
`48
`49
`50
`51
`52
`77
`77
`77
`
`Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
`Purchases of Equity Securities
`Selected Financial Data
`Management's Discussion and Analysis of Financial Condition and Results of Operations
`Quantitative and Qualitative Disclosures About Market Risk
`Financial Statements and Supplementary Data
`Management's Reports 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
`Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`Controls and Procedures
`Other Information
`
`Part III
`
`78
`Directors, Executive Officers and Corporate Governance
`78
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 78
`Certain Relationships and Related Transactions and Director Independence
`80
`Principal Accountant Fees and Services
`80
`
`Form 10-K Index
`
`Item 1.
`
`Business
`
`Risk Factors
`Unresolved Staff Comments
`Properties
`Legal Proceedings
`Mine Safety Disclosure
`
`Part I
`
`Part II
`
`Item 1A.
`Item 1B.
`Item 2.
`Item 3.
`Item 4.
`
`Item 5.
`
`Item 6.
`Item 7.
`Item 7A.
`Item 8.
`
`Item 9.
`Item 9A.
`Item 9B.
`
`Item 10.
`Item 11.
`Item 12.
`Item 13.
`Item 14.
`
`Item 15.
`
`Exhibits and Financial Statement Schedules
`
`80
`
`Part IV
`
`Exhibit 1027, Page 011
`
`

`

`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`Form 10-K
`
`[x]
`
`[ ]
`
`(Mark one)
`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`For the Fiscal Year Ended June 30, 2014
`
`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
`Name of each exchange on which registered
`Common Stock, without Par Value
`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),
` No
`and (2) has been subject to such filing requirements for the past 90 days. Yes
`
`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
` No
`preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
`
`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 or a smaller
`reporting company (as defined in Rule 12b-2 of the Exchange Act).
`Accelerated filer
`Non-accelerated filer
`Large accelerated filer
`
`Smaller reporting company
`
`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 $221 billion on December 31, 2013.
`
`There were 2,707,652,337 shares of Common Stock outstanding as of July 31, 2014.
`
`Documents Incorporated by Reference
`Portions of the Proxy Statement for the 2014 Annual Meeting of Shareholders which will be filed within one hundred and twenty days
`of the fiscal year ended June 30, 2014 (2014 Proxy Statement) are incorporated by reference into Part III of this report to the extent
`described herein.
`
`Exhibit 1027, Page 012
`
`

`

`The Procter & Gamble Company 11
`
`PART I
`
`Item 1. Business.
`Additional information required by this item is incorporated
`herein by reference to Management's Discussion and
`Analysis (MD&A); Note 1 to our Consolidated Financial
`Statements and Note 12 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, we sell our products 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.pg.com/investors.
`Copies of these reports are also available, without charge, by
`contacting Computershare Inc., 250 Royall Street, Canton,
`MA 02021.
`
`Financial Information about Segments
`As of June 30, 2014, the Company has five reportable
`segments under U.S. GAAP: Beauty; Grooming; Health
`Care; Fabric Care and Home Care; and Baby, Feminine and
`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 Batteries (Fabric
`Care and Home Care), Appliances (Grooming) and Prestige
`Fragrances (Beauty) are seasonal. In addition, anticipation
`or occurrence of natural disasters, such as hurricanes, can
`drive unusually high demand for batteries.
`Additional information about our reportable segments can be
`found in MD&A and Note 12 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 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 around the world
`primarily through mass merchandisers, grocery stores,
`membership club stores, drug stores, department stores,
`salons, e-commerce and high-frequency stores. We utilize
`our superior marketing and online presence to win with
`consumers at the "zero moment of truth" - when they are
`searching for information about a brand or product. We
`work collaboratively with our customers to improve the in-
`store presence of our products and win the "first moment of
`truth" - when a consumer is shopping in the store. We must
`also win the "second moment of truth" - when a consumer
`uses the product, evaluates how well it met his or her
`expectations and decides whether it was a good value. We
`believe we must continue to provide new, innovative
`products and branding to the consumer in order to grow our
`business. Research and product development activities,
`designed to enable sustained organic growth, continued to
`carry a high priority during the past fiscal year. While many
`of the benefits from these efforts will not be realized until
`future years, we believe these activities demonstrate our
`commitment to future growth.
`
`Key Product Categories. Information on key product
`categories can be found in Note 12 to our Consolidated
`Financial Statements.
`
`Key Customers. Our customers include mass
`merchandisers, grocery stores, membership club stores, drug
`stores, department stores, salons, distributors, e-commerce
`and high-frequency stores. Sales to Wal-Mart Stores, Inc.
`and its affiliates represent approximately 14% of our total
`revenue in 2014, 2013 and 2012. No other customer
`represents more than 10% of our net sales. Our top ten
`customers account for approximately 30% of our total unit
`volume in 2014 and 2013 and 31% of our total unit volume
`in 2012. 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 which 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 distribution of input materials and finished
`
`Exhibit 1027, Page 013
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`

`

`12 The Procter & Gamble Company
`
`product 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 products and 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.
`
`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 an
`extensive sales force. We believe