2015 Annual Report CONTENTS Letter to Shareowners����������������������������������������������������������������� 1 P&G — A Company of Leading Brands������������������������������������������ 6 Global Reach with a Human Touch���������������������������������������������� 8 Form 10-K Index�������������������������������������������������������������������������� 9 Form 10-K��������������������������������������������������������������������������������� 11 Measures Not Defined by U.S. GAAP����������������������������������������� 40 Global Company Leadership������������������������������������������������������ 81 Board of Directors��������������������������������������������������������������������� 82 Company and Shareowner Information������������������������������������� 83 Recognition������������������������������������������������������������������������������� 84 FINANCIAL HIGHLIGHTS (unaudited) 2015 (1) 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 (2) Diluted Net Earnings per Common Share (2) Dividends per Common Share $76,279 11,790 7,036 11.7% $  3.06 2.44 2.59 2014 2013 2012 2011 $80,510 14,740 11,643 14.1% $  3.86 4.01 2.45 $80,116 13,817 11,312 13.7% $  3.71 3.86 2.29 $79,545 12,611 10,756 11.2% $  2.97 3.66 2.14 $76,982 14,779 11,797 14.5% $  3.69 3.93 1.97 NET SALES OPERATING CASH FLOW DILUTED NET EARNINGS ($ billions) ($ billions) (per common share) BY GEOGRAPHIC REGION BY MARKET MATURITY 2015 NET SALES BY BUSINESS SEGMENT (3) 10% 10% 29% 27% 24% Baby, Feminine and Family Care Beauty, Hair and Personal Care Fabric Care and Home Care Health Care Grooming 8% 26% 40% 8% 10% 8% Asia Pacific Europe Greater China India, Middle East and Africa (IMEA) Latin America North America Developed Developing 38% 62% Various statements in this Annual Report, including estimates, projections, objectives and expected results, 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 and are generally identified by the words “believe,” “expect,” “anticipate,” “intend,” “opportunity,” “plan,” “project,” “will,” “should,” “could,” “would,” “likely” and similar expressions. Forward-looking statements are based on current assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements, including the risks and uncertainties discussed on pages 13–17 of this Annual Report. We undertake no obligation to update or revise publicly any forward-looking statements. (1) Our 2015 net sales were negatively impacted by approximately $4.8 billion of unfavorable foreign exchange fluctuation compared to 2014. Net earnings attributable to Procter & Gamble in 2015 were negatively impacted by approximately $1.4 billion due to foreign exchange, $2.1 billion of non-cash impairment charges related to the Batteries business reported in discontinued operations and a $2.1 billion charge related to a change in accounting for our Venezuelan operations from consolidation to the cost method. These impacts are discussed more fully later in this Annual Report. (2) Diluted net earnings per share are calculated based on net earnings attributable to Procter & Gamble. (3) 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. All other brand names are trademarks of their respective owners. A.G. LAFLEY Chairman of the Board, President and Chief Executive Officer Dear Shareowners, Fiscal 2015 was a tough year due to weakening developing market economics and the unprecedented negative impact of foreign exchange. Because we are a dollar-denominated company headquartered in the U.S., and given the reality of the geographic footprint of our business — with significant exposures in markets such as Brazil, Japan and Russia — Company worldwide sales and profits were negatively impacted by foreign exchange. All-in sales were down 5%, including the negative 6-point impact of foreign exchange. Organic sales grew 1%. Organic sales for our 10 core categories grew 2%, about one point below underlying market growth. On an all-in GAAP basis, earnings per share were $2.44, down due to significant one-time charges and restructuring costs. Core earnings per share were $4.02, down 2%, including a 13-point, $1.5 billion negative impact of foreign exchange. On a constant currency basis, core earnings per share were up 11%. 2  The Procter & Gamble Company Despite the sales and earnings pressures, we continued to generate strong adjusted free cash flow of $11.6 billion, increased the dividend for the 59th year in a row, and returned $11.9 billion to shareowners — $7.3 billion in dividends and $4.6 billion in share repurchase. Over the past five years, we’ve returned $60 billion to shareowners — $12 billion a year on average. We have announced our intention to return up to $70 billion to shareowners over the next four years through a combination of dividend payments, share retirement and share repurchase. Building a Better Company In response to consumer demand, we broadened our U.S. portfolio with Tide PODS Plus Febreze, Tide PODS Free & Gentle and Tide PODS Original Scent. These offerings continue to fuel the Unit Dose segment, where P&G’s global retail sales are over $1.5 billion. This year, P&G will be 178 years old. A company does not last for that long if its management is not willing to change anything and everything, except for its purpose and core values, to serve consumers and create value for shareowners. We are leading the most comprehensive series of changes in the Company’s history. We are putting the strategies and capabilities in place to transform P&G into a faster-growing, more profitable and far simpler company. We are putting the strategies and capabilities in place to transform P&G into a faster-growing, more profitable and far simpler company. We are recommitting ourselves to putting the consumer at the center of everything we do. The purpose of any business is to create a consumer and to serve that consumer better than anyone else can. That’s why we’re investing in capabilities to understand consumer needs better than ever. That’s why we’re investing in creating and building brands that consumers prefer. And that’s why we’re investing in innovative products that deliver better performance, quality, experiences and value. As we rededicate ourselves to the fundamentals of consumer-preferred brands and products, what has changed at P&G? What’s different, and how are we building a better P&G? A More Focused Business Portfolio Power Oral Care is an important P&G business with annual sales over $1 billion, including our most recent innovation —  the first power toothbrush with Bluetooth® technology. Current household penetration is low, and we have significant growth potential using our proven model to grow penetration. We conducted a comprehensive diagnosis to answer a fundamental strategic question: Which businesses should P&G be in? We chose 10 business categories where P&G understands consumers and has leading market positions, strong brands, differentiated products and business models proven to grow and create value. These 10 categories have been growing faster, and their operating margins are higher than those of the total Company. Their sales and profits are highly concentrated in the top consumer markets around the world. Yet they have significant growth opportunity in big, developed countries such as the U.S.,  The Procter & Gamble Company  3 Germany, the U.K. and Japan, where household penetration rates can still be improved, and in developing markets such as China, Brazil, India, Russia, Turkey and Mexico, where P&G has been improving its strategic position. They have played and will continue to play to P&G’s core strengths: consumer understanding, innovation, productivity, branding, go-to-market execution and leveraging Company scale and scope. After decades of category extension and geographic expansion to get bigger, we are narrowing our focus to these 10 categories to get better. Ultimately, a more focused P&G will lead to becoming the best-performing company in the consumer products industry — winning with consumers and delivering the most consistent and reliable performance in our chosen categories, countries, channels and customers. Committed to Growth and Value Creation At P&G, we win with shoppers and consumers by providing consumer-preferred brands and products that become leading value creators in their categories. The best measure of winning is Operating Total Shareholder Return (TSR). We like Operating TSR because it is a single, coordinated and integrated measure of growth and value creation that brings together winning with shoppers and consumers to deliver sales growth, gross and operating margin improvement, and asset efficiency. SK-II, P&G’s billion-dollar prestige skin care brand, has introduced two new essentials: SK-II Mid-Day Miracle Essence and SK-II Mid-Night Miracle Essence, to deliver a boost of crystal-clear skin anytime, anywhere, and strengthen the skin barrier over time. The foundational building block of Operating TSR is operating cash flow, and our strong cash flow performance for many years has enabled reinvestment in the business and steady returns to shareowners. The second building block is operating margins, which we have started to improve and will continue to improve as we move into the core business portfolio and continue to execute our innovation and productivity programs with excellence. The third building block is organic sales growth, which has been modest, but will improve as we build household penetration on more of our brands and introduce an even stronger lineup of new and improved products that are coming to market over the next one, two and three years. Operating TSR is a balanced measure of performance, and everyone in the Company — the technician on the manufacturing floor, the sales person in the retail store, the scientist in the innovation lab — is focused on their contribution to deliver consistent and reliable growth and value creation. More Innovative and More Productive We have always believed that product innovation is the lifeblood of our business. We invent brands and products that create and transform categories, and that build consumer trial and create value in those categories for years — often for decades. Our brand and product innovations drive category market growth, which creates value for our retail customers and suppliers. We’re rededicating ourselves to product innovation that “wins from the top”— offering the best-performing products in the category, with the highest quality, at a modest price premium —  yielding superior consumer value and growth. We’re investing more in R&D and We developed Pampers Premium Care Pants to delight moms and babies with comfort and skin protection. Pants are the preferred style in many countries and the fastest-growing segment of the diaper market. They’re available in China and Russia, and expanding to more markets. 4  The Procter & Gamble Company meaningful product innovation. Early examples include Pampers Swaddlers and Pants, Tide and Ariel PODS, Downy Unstopables, Pantene conditioners with advanced Pro-V science, Gillette FlexBall and Venus Swirl, and Oral-B Powerbrush. Each of these product innovations is building or is expected to build its category and brand sales — and there are more to come. We extended Gillette FlexBall innovation to the market-leading women’s razor brand, with Venus Swirl. We’ve sold over 2.5 million Venus Swirl razors in the U.S., and Venus’ U.S. share of women’s system razors has grown over four points to 64% since Venus Swirl’s January 2015 launch. Innovation is our lifeblood, but what has changed is the realization that we cannot deliver consistent and reliable growth and value creation without continuous improvement in productivity. We are implementing the biggest supply chain redesign in the Company’s history. We are moving to fewer categories, brands, initiatives, product lines and SKUs. We are consolidating to fewer plants, agencies, suppliers and organizations. We are focusing on fewer priorities and activities. This is leading to lower costs in overhead, cost-of-goods-sold, marketing and trade spending. In turn, this is driving more focus and more savings to reinvest in accelerating growth of the leading brands, the most significant product innovations, and the countries and customers with the highest potential for sales, profit and cash growth. Better Execution We are rededicating ourselves to the power of execution. We are raising our standards to be the best at execution. We are renewing focus on gaining trial among consumers at the point of market entry. We are recommitting to superior advertising to create awareness and sampling clearly superior-performing products to attract consumers to our brands. We are investing in our sales force to build profitable distribution and shelf assortment. We are investing in a more agile, flexible and faster distribution network to reduce out-of-stocks and optimize inventory. And we are renewing our manufacturing operations to improve quality and to accelerate innovation at lower cash, capital and operating costs. Execution is the only strategy a consumer sees, and we intend to be the best. Better Balance P&G is a company that needs balance to win. Whenever we get out of balance, we underperform. We win when we deliver balanced sales growth and profit growth. We win when we leverage both innovation and productivity. We win when we have clear strategies and execute with excellence. Consumers and shareowners expect balance from P&G. We are making changes to achieve this balance, to deliver consistent and reliable growth and value creation for the short-, mid- and long-term. Stronger Ownership Unstopables has expanded from in-wash scent beads to a collection of products delivering sophisticated scent experiences for homes. With breakthrough fragrance technology and long-lasting, high-quality perfumes, sales of the Unstopables collection have grown to nearly $300 million globally. Personal leadership, accountability and ownership have always been core values for P&G people. But as a company becomes bigger, more global and more complex, it can become more difficult for individuals to feel strong personal ownership in their connection to business unit success. We have simplified the organization to bring a higher level of business ownership to each business leader and to  The Procter & Gamble Company  5 every P&G person. We have linked individual performance to each person’s contribution to Operating TSR at every level of the Company. The intent is for P&G people to be engaged in serving consumers and shoppers, driving product innovation and productivity, sourcing and distributing brands and products, and executing programs to win with consumers and shareowners — many of whom are P&G employees. Strong Leadership On November 1, David Taylor will become P&G’s next CEO. David is an accomplished leader with 35 years of proven results in many of P&G’s businesses and functions in multiple markets around the world. His breadth of experience and track record of success are strong. He is hands-on, with deep knowledge of consumers and categories. He is focused and strategic, with strong operational leadership to take action and execute with excellence. David has played a central role in working with P&G leadership, the Board and me on developing the strategies and business portfolio to win with consumers and deliver balanced growth and value creation. As CEO, David will focus on leading P&G’s transformation with excellence. As Executive Chairman, I look forward to supporting David, the leadership team and you. I will continue to chair the Board of Directors and provide advice and counsel to David and P&G leadership on Company and business unit strategies, portfolio choices and organization decisions. The NyQuil SEVERE and DayQuil SEVERE launch was the largest in the Cold & Flu category in North America since 2012, delivering maximum-strength symptomfighting ingredients to consumers. SEVERE gained trial in 8.5+ million households and grew total DayQuil and NyQuil sales. A Better P&G We are transforming into a better P&G. The foundation is based on P&G’s Purpose, Values and Principles. The consumer is at the center of everything we do. We will win consistently with about 65 leading brands organized into 10 businesses in industry-based sectors. We will go to market in six regions through about 30 country clusters. We will create value through consumer-preferred brands and products that win at the zero, first and second moments of truth. We will play P&G’s game to our core strengths — positioned to grow again through the power of P&G brands, products and people. It won’t all happen immediately, and some quarters will be better than others — but the choices we’ve made matter. The new P&G will grow sales, profit and cash more consistently and more sustainably to create value more reliably for P&G shareowners. A.G. LAFLEY Chairman of the Board, President and Chief Executive Officer Head & Shoulders, our largest shampoo brand and the #1 shampoo brand globally,† has grown organic sales for the past 20 years. This year we launched the Instant Relief Collection in the U.S., designed to provide cooling scalp relief with the first wash. P&G calculation based on Nielsen sales information. † 6  The Procter & Gamble Company P&G — A Company of Leading Brands BABY, FEMININE AND FAMILY CARE 20.2 billion $ BABY CARE FAMILY CARE FEMININE CARE Subcategories: Baby Wipes, Diapers and Pants Subcategories: Paper Towels, Tissues, Toilet Paper Subcategories: Adult Incontinence, Feminine Care FABRIC CARE HOME CARE Subcategories: Fabric Enhancers, Laundry Additives, Laundry Detergents Subcategories: Air Care, Dish Care, P&G Professional, Surface Care NET SALES† FABRIC AND HOME CARE 22.3 billion $ NET SALES†  The Procter & Gamble Company  7 P&G is focusing on 10 product categories with about 65 brands. These 10 categories have been growing faster, and their operating margins are higher than those of the total Company. P&G is the leader in seven of these categories and is #2 in the remaining three, with significant growth potential in all of them. They play to P&G’s core strengths: consumer understanding, innovation, productivity, branding, go-to-market execution and leveraging Company scale and scope. We are well positioned to build consumer trial and create value in these categories, and drive category market growth, which creates value for our retail customers and suppliers. Across the 10 categories, P&G has 21 brands with annual sales of $1 billion to about $10 billion, and 11 brands with sales of $500 million to $1 billion — many of those with billiondollar potential. BEAUTY 18.1 billion $ HAIR CARE SKIN AND PERSONAL CARE Subcategories: Hair Care Subcategories: Antiperspirant and Deodorant, Personal Cleansing, Skin Care ORAL CARE PERSONAL HEALTH CARE SHAVE CARE Subcategories: Toothbrush, Toothpaste, Other Oral Care Subcategories: Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care Subcategories: Electronic Hair Removal, Female Blades & Razors, Male Blades & Razors, Pre- and PostShave Products, Other Shave Care NET SALES† HEALTH AND GROOMING 15.2 billion $ NET SALES† Results for all sectors exclude net sales in Corporate. Results for the Beauty sector include sales for several Beauty categories P&G plans to exit, as the Company announced on July 9, 2015. † 8  The Procter & Gamble Company Global Reach with a Human Touch We take our portfolio of brands to consumers through six regional Selling and Market Operations. ASIA PACIFIC EUROPE INDIA, MIDDLE EAST AND AFRICA (IMEA) GREATER CHINA LATIN AMERICA NORTH AMERICA 26% 40 % of net sales EUROPE of net sales NORTH AMERICA 8% of net sales GREATER CHINA 10% of net sales LATIN AMERICA 8% of net sales INDIA, MIDDLE EAST AND AFRICA (IMEA) P&G’s fiscal 2015 net sales were $76.3 billion. 8% of net sales ASIA PACIFIC 9 The Procter & Gamble Company Form 10-K Index Part I Page Item 1. Business 12 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 17 Item 2. Properties 17 Item 3. Legal Proceedings 17 Item 4. Mine Safety Disclosure 17 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19 Item 6. Selected Financial Data 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data Management's Reports and Reports of Independent Registered Public Accounting Firm 42 Consolidated Statements of Earnings 45 Consolidated Statements of Comprehensive Income 46 Consolidated Balance Sheets 47 Consolidated Statements of Shareholders' Equity 48 Consolidated Statements of Cash Flows 49 Notes to Consolidated Financial Statements 50 Note 1: Summary of Significant Accounting Policies 50 Note 2: Goodwill and Intangible Assets 52 Note 3: Supplemental Financial Information 54 Note 4: Short-term and Long-term Debt 55 Note 5: Risk Management Activities and Fair Value Measurements 56 Note 6: Accumulated Other Comprehensive Income/(Loss) 59 Note 7: Earnings Per Share 60 Note 8: Stock-based Compensation 60 Note 9: Postretirement Benefits and Employee Stock Ownership Plan 62 Note 10: Income Taxes 66 Note 11: Commitments and Contingencies 68 Note 12: Segment Information 69 Note 13: Discontinued Operations 70 Note 14: Subsequent Event 72 Note 15: Quarterly Results (Unaudited) 72 The Procter & Gamble Company 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 73 Item 9A. Controls and Procedures 73 Item 9B. Other Information 73 Part III Item 10. Directors, Executive Officers and Corporate Governance 73 Item 11. Executive Compensation 73 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 73 Item 13. Certain Relationships and Related Transactions and Director Independence 75 Item 14. Principal Accountant Fees and Services 75 Part I Item 15. Exhibits and Financial Statement Schedules 75 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, 2015 [] 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 Common Stock, without Par Value Name of each exchange on which registered 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 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 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), and (2) has No 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 preceding No 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 Smaller reporting company Large accelerated filer 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 $246 billion on December 31, 2014. There were 2,712,561,733 shares of Common Stock outstanding as of July 31, 2015. Documents Incorporated by Reference Portions of the Proxy Statement for the 2015 Annual Meeting of Shareholders which will be filed within one hundred and twenty days of the fiscal year ended June 30, 2015 (2015 Proxy Statement) are incorporated by reference into Part III of this report to the extent described herein. The Procter & Gamble Company 12 PART I Item 1. usiness. 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 illiam 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- 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.pginvestor.com. Copies of these reports are also available, without charge, by contacting Computershare Inc., 250 Royall Street, Canton, MA 02021. Financial Information a out Segments As of June 30, 2015 the Company has five reportable segments under U.S. GAAP: eauty, Hair and Personal Care Grooming Health Care Fabric Care and Home Care and aby, 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. hile none of our reportable segments are highly seasonal, components within certain reportable segments, such as Appliances (Grooming) and Prestige Fragrances ( eauty, Hair and Personal Care) are seasonal. 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, high-frequency stores and pharmacies. e 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. e 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. e 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. e 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. hile many of the benefits from these efforts will not be realized until future years, we believe these activities demonstrate our commitment to future growth. Ke Product Categories. Information on key product categories can be found in Note 12 to our Consolidated Financial Statements. Ke Customers. Our customers include mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, distributors, e-commerce and highfrequency stores. Sales to al-Mart Stores, Inc. and its affiliates represent approximately 14 of our total revenue in 2015, 2014 and 2013. No other customer represents more than 10 of our net sales. Our top ten customers account for approximately 33 of our total sales in 2015, 2014 and 2013. The nature of our business results in no material backlog orders or contracts with the government. e believe our practices related to working capital items for customers and suppliers are consistent with the industry segments in which we compete. Narrati e Descri tion of Business Sources and A aila ilit 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. e 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 product to customers. The prices we pay for materials and other commodities are subject to fluctuation. hen 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. 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 Trademarks and Patents. e 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 Additional information about our reportable segments can be found in the MD&A and Note 12 to our Consolidated Financial Statements. 13 The Procter & Gamble Company used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. All major 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. Com etiti e 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. e are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. e 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. e believe this combination provides the most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important differentiating factors. Research and De elo ment Ex enditures. Research and development expenditures enable us to develop technologies and obtain patents across all categories in order to meet the needs and improve the lives of our consumers. Total research and development expenses were $2.0 billion in 2015 and 2014 and $1.9 billion in 2013. Ex enditures for En ironmental Com liance. Expenditures for compliance with federal, state and local environmental laws and regulations are fairly consistent from year to year and are not material to the Company. No material change is expected in fiscal year 2016. Em lo ees. Total number of employees is an estimate of total Company employees excluding interns, co-ops and employees of joint ventures as of the years ended June 30. The number of employees includes manufacturing and non-manufacturing employees. A discussion of progress on non-manufacturing enrollment objectives is included in Note 3 to our Consolidated Financial Statements. The number of employees includes employees of discontinued operations. Total Num er of Em lo ees 2015 110,000 2014 118,000 2013 121,000 2012 126,000 2011 129,000 2010 127,000 Financial Information a out Foreign and Domestic O erations. Net sales in the U.S. account for approximately 37 of total net sales. No other individual country exceeds 10 of total net sales. Operations outside the U.S. are generally characterized by the same conditions discussed in the description of the business above and may be affected by additional factors including changing currency values, different rates of inflation, economic growth and political and economic uncertainties and disruptions. Our sales by geography for the fiscal years ended June 30 were as follows: 2015 North America (1) Europe 2014 201 40 38 39 2 28 27 Asia Pacific 8 9 Greater China 8 8 IMEA (2) Latin America (1) (2) 10 8 7 10 10 North America includes results for the United States, Canada and Puerto Rico only. IMEA includes India, Middle East and Africa. Net sales and total assets in the United States and internationally were as follows (in billions): Net Sales ears ended une 0 Total Assets United States International 2015 2 . 4 .0 2014 $28.3 $52.2 2013 $28.1 $52.0 2015 5.0 4.5 2014 $68.8 $75.5 2013 $68.3 $71.0 ears ended une 0 Item 1A. Risk Factors. e discuss our expectations regarding future performance, events and outcomes, such as our business outlook and objectives in this Form 10-K, quarterly reports, press releases and other written and oral communications. All statements, except for historical and present factual information, are forward-looking statements and are based on financial data and business plans available only as of the time the statements are made, which may become outdated or incomplete. e assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain, and investors must recognize that events could significantly differ from our expectations. The following discussion of risk factors identifies significant factors that may adversely affect our business, operations, financial position or future financial performance. This information should be read in conjunction with the MD&A and the Consolidated Financial Statements and related Notes incorporated in this report. The following discussion of risks is not all inclusive, but is designed to highlight what we believe are important factors to consider when evaluating our expectations. These and other factors could cause our future results to differ from those in the forward-looking statements and from historical trends. The Procter & Gamble Company 14 Our usiness is su ect to numerous risks as a result of our ha ing significant o erations and sales in international markets, including foreign currenc fluctuations, currenc exchange or ricing controls and locali ed olatilit . e are a global company, with operations in approximately 70 countries and products sold in more than 180 countries and territories around the world. e hold assets, incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U.S. dollar, and our operations outside the U.S. generate a significant portion of our net revenue. Fluctuations in exchange rates for foreign currencies, such as the recent volatility in the Russian ruble, may reduce the U.S. dollar value of revenues, profits and cash flows we receive from non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, or otherwise adversely impact our business results or financial condition. Moreover, discriminatory or conflicting fiscal policies in different countries could adversely affect our results. See also the Results of Operations and Cash Flow, Financial Condition and Liquidity sections of the MD&A and Note 5 to our Consolidated Financial Statements. e also have sizable businesses and maintain local currency cash balances in a number of foreign countries with exchange, import authorization, pricing or other controls, including Argentina, China, Egypt, Greece, India, Nigeria, Ukraine and enezuela. Our results of operations and financial condition could be adversely impacted if we are unable to successfully manage such controls and repatriate earnings from overseas, or if new or increased tariffs, quotas, exchange or price controls, trade barriers or similar restrictions are imposed on our business outside the U.S., such as the current year impact of deconsolidating our enezuelan subsidiaries as discussed in this Form 10-K. Additionally, our business, operations or employees may be affected by political volatility, labor market disruptions or other crises or vulnerabilities in individual countries or regions, including political instability or upheaval, broad economic instability or sovereign risk related to a default by or deterioration in the credit worthiness of local governments, particularly in emerging markets, which could negatively impact our financial condition or results of operations. Uncertain glo al economic conditions, including disru tions in credit markets or changes to our credit rating, ma ad ersel im act demand for our roducts, cause our customers and other usiness artners to suffer financial hardshi or reduce our access to credit, all of which could ad ersel im act our usiness. Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic disruptions, such as: a slow-down in the general economy reduced market growth rates tighter credit markets for our suppliers, vendors or customers or the inability to conduct day-to-day transactions through our financial intermediaries to pay funds to or collect funds from our customers, vendors and suppliers. Additionally, economic conditions may cause our suppliers, distributors, contractors or other third party partners to suffer financial difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results of operations could be adversely affected. Customers may also suffer financial hardships due to economic conditions such that their accounts become uncollectible or are subject to longer collection cycles. If we are unable to generate sufficient income and cash flow, it could affect the Company s ability to achieve expected share repurchase and dividend payments. Adisruption in the credit markets or a downgrade of our current credit rating could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, which could adversely affect our liquidity and capital resources or significantly increase our cost of capital. Disru tion in our glo al su im act our usiness results. l chain ma negati el Our ability to meet our customers needs and achieve cost targets depends on our ability to maintain key manufacturing and supply arrangements, including execution of our previously-announced supply chain simplifications and certain sole supplier or sole manufacturing plant arrangements. The loss or disruption of such manufacturing and supply arrangements, including for issues such as labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw or input materials, natural disasters, acts of war or terrorism or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have an adverse impact on our business, financial condition or results of operations. Our usinesses face cost fluctuations and ressures that could affect our usiness results. Our costs are subject to fluctuations, particularly due to changes in the prices of commodities and raw materials and the costs of labor, transportation, energy, pension and healthcare. Therefore, our business results are dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share. In addition, our financial projections include cost savings described in our announced productivity plan. Failure to manage these fluctuations and deliver the planned cost savings could adversely impact our financial results. Our a ilit to meet our growth targets de ends on successful roduct, marketing and o erations inno ation and successful res onses to com etiti e inno ation. e are a consumer products company that relies on continued global demand for our brands and products. Achieving our business results depends, in part, on successfully developing, introducing and marketing new products and on making significant improvements to our equipment and manufacturing processes. The success of such innovation depends on our ability to correctly anticipate customer and consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid 15 The Procter & Gamble Company infringing upon the intellectual property rights of others. e must also be able to successfully respond to technological advances made by, and intellectual property rights granted to, competitors. Failure to do so could compromise our competitive position and adversely impact our results. The a ilit to achie e our usiness o ecti es is de endent on how well we can com ete with our local and glo al com etitors in new and existing markets and channels. The consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate, as well as challenges in maintaining profit margins. This includes, among other things, increasing competition from mid- and lower-tier value products, including private-label products, in both developed and developing markets. To address these challenges, we must be able to successfully respond to competitive factors, including pricing, promotional incentives and trade terms. In addition, the emergence of new sales channels and business models may affect customer and consumer preferences as well as market dynamics. Failure to successfully respond to competitive factors and effectively compete in new sales channels could negatively impact our results. A significant change in customer relationshi s or in customer demand for our roducts could ha e a significant im act on our usiness. e sell most of our products via retail customers, which include mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, distributors, ecommerce and high-frequency stores. Our success is dependent on our ability to successfully manage relationships with our retail trade customers, which includes our ability to offer trade terms that are mutually acceptable and are aligned with our pricing and profitability targets. Continued consolidation among our retail customers could create significant cost and margin pressure on our business, and our business performance could suffer if we cannot reach agreement with a key customer based on our trade terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the inventory level of our products or experience a significant business disruption. If the re utation of the Com an or one or more of our rands erodes significantl , it could ha e a material im act on our financial results. The Company's reputation, and the reputation of our brands, form the foundation of our relationships with key stakeholders and other constituencies, including consumers, customers and suppliers. The quality and safety of our products are critical to our business. Many of our brands have worldwide recognition, and our financial success is directly dependent on the success of our brands. The success of our brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand's image or its ability to attract consumers. Our results could also be negatively impacted if one of our brands suffers a substantial impediment to its reputation due to a significant product recall, product-related litigation, allegations of product tampering or the distribution and sale of counterfeit products. Additionally, negative or inaccurate postings or comments on social media or networking websites about the Company or one of its brands could generate adverse publicity that could damage the reputation of our brands or the Company. If we are unable to effectively manage real or perceived issues, including concerns about safety, quality, efficacy or similar matters, sentiments toward the Company or our products could be negatively impacted and our financial results could suffer. Our Company also devotes significant time and resources to programs that are consistent with our corporate values and are designed to protect and preserve our reputation, such as social responsibility and environmental sustainability. If these programs are not executed as planned or suffer negative publicity, the Company's reputation and financial results could be adversely impacted. We rel on third arties in man as ects of our usiness, which creates additional risk. Due to the scale and scope of our business, we must rely on relationships with third parties, including our suppliers, distributors, contractors, joint venture partners or external business partners, for certain functions. If we are unable to effectively manage our third party relationships and the agreements under which our third party partners operate, our financial results could suffer. Additionally, while we have policies and procedures for managing these relationships, they inherently involve a lesser degree of control over business operations, governance and compliance, thereby potentially increasing our financial, legal, reputational and operational risk. A reach of information securit , including a c ersecurit reach or failure of one or more ke information technolog s stems, networks, hardware, rocesses, associated sites or ser ice ro iders could ha e a material ad erse im act on our usiness or re utation. e rely extensively on information technology (IT) systems, networks and services, including internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and or used by third-parties or their vendors, to assist in conducting our business. The various uses of these IT systems, networks and services include, but are not limited to: ordering and managing materials from suppliers converting materials to finished products shipping products to customers marketing and selling products to consumers collecting, transmitting, transferring and storing customer, consumer, employee, vendor, investor and other stakeholder information and personal data summarizing and reporting results of operations hosting, processing and sharing, as appropriate, confidential and proprietary research, business plans and financial information complying with regulatory, legal and tax requirements The Procter & Gamble Company 16 providing data security and handling other processes necessary to manage our business. Numerous and evolving information security threats, including advanced persistent cybersecurity threats, pose a risk to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our data. As cybersecurity threats rapidly evolve in sophistication and become more prevalent across the industry globally, the Company is continually increasing its sensitivity and attention to these threats. e continue to assess potential threats and make investments seeking to address these threats, including monitoring of networks and systems and upgrading skills, employee training and security policies for the Company and its third-party providers. However, because the techniques used in these attacks change frequently and may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures. Our IT systems have been, and will likely continue to be, subject to computer viruses or other malicious codes, unauthorized access attempts, phishing and other cyberattacks. To date, we have seen no material impact on our business or operations from these attacks however, we cannot guarantee that our security efforts will prevent breaches or breakdowns to our or our third-party providers databases or systems. If the IT systems, networks or service providers we rely upon fail to function properly, or if we or one of our thirdparty providers suffer a loss, significant unavailability of or disclosure of our business or stakeholder information, due to any number of causes, ranging from catastrophic events or power outages to improper data handling or security breaches, and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to reputational, competitive and business harm as well as litigation and regulatory action. The costs and operational consequences of responding to breaches and implementing remediation measures could be significant. We must successfull manage com liance with legislation, regulation and enforcement, as well as ending legal matters in the U.S. and a road. Our business is subject to a wide variety of laws and regulations across all of the countries in which we do business, including those laws and regulations involving intellectual property, product liability, marketing, antitrust, privacy, environmental, employment, anti-bribery or anti-corruption (such as the U.S. Foreign Corrupt Practices Act) or other matters. Rapidly changing laws, regulations and related interpretations, including changes in accounting standards, as well as increased enforcement actions, create challenges for our compliance and ethics programs and may alter the environment in which we do business. If we are unable to continue to meet these challenges and comply with all laws, regulations and related interpretations, it could negatively impact our reputation and our business results. Failure to successfully manage regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may materially adversely impact our results of operations and financial position. Furthermore, if pending legal matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial position. Changes in a lica le tax regulations could negati el affect our financial results. The Company is subject to taxation in the U.S. and numerous foreign jurisdictions. ecause the U.S. maintains a worldwide corporate tax system, the foreign and U.S. tax systems are somewhat interdependent. For example, certain income that is earned and taxed in countries outside the U.S. is not taxed in the U.S., provided those earnings are indefinitely reinvested outside the U.S. If those same foreign earnings are instead repatriated to the U.S., additional residual U.S. taxation will likely occur, due to the U.S. s worldwide tax system and higher U.S. corporate tax rate. The U.S. is considering corporate tax reform that may significantly change the corporate tax rate and the U.S. international tax rules. Additionally, longstanding international tax norms that determine each country s jurisdiction to tax cross-border international trade are evolving, such as the ase Erosion and Profit Shifting project ( EPS ) currently being undertaken by the G8, G20, and Organization for Economic Cooperation and Development ( OECD ). As these and other tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results. If we are una le to successfull execute our ortfolio o timi ation strateg , as well as successfull manage ongoing ac uisition, oint enture and di estiture acti ities, it could ad ersel im act our usiness. In August 2014, the Company announced a plan to significantly streamline our product portfolio by divesting, discontinuing or consolidating about 100 non-strategic brands, resulting in a portfolio of about 65 brands. The Company has announced a series of transactions that will substantially complete this plan. It will take time to execute this plan, and our ability to successfully do so could impact our results. In addition, as a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. e must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results could be adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands. Our financial results could also be impacted in the event of acquisitions or joint venture activities if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, which could also have an impact on goodwill and intangible assets. 17 The Procter & Gamble Company Our usiness results de end on our a ilit to successfull manage ongoing organi ational change. Our financial targets assume a consistent level of productivity improvement, including those described in our announced productivity plan and our portfolio-optimization strategy. If we are unable to deliver these expected productivity improvements, while continuing to invest in business growth, our financial results could be adversely impacted. e expect these types of changes, which will include staffing adjustments as well as employee departures, to continue for the foreseeable future. Successfully executing these changes, including effective management transitions at leadership levels of the Company and retention of key employees, is critical to our business success. e are generally a build-from-within company and our success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense. It also includes continued development and execution of robust leadership succession plans, including successful execution of our recently announced CEO transition. Item 1 . Unresolved Staff Comments. None. Item 2. Properties. In the U.S., we own and operate 29 manufacturing sites located in 21 different states or territories. In addition, we own and operate 100 manufacturing sites in 38 other countries. Many of the domestic and international sites manufacture products for multiple businesses. eauty, Hair and Personal Care products are manufactured at 37 of these locations Grooming products at 18 Health Care products at 16 Fabric Care and Home Care products at 50 and aby, Feminine and Family Care at 43. Management believes that the Company's manufacturing sites are adequate to support the business and that the properties and equipment have been well maintained. Item 3. Legal Proceedings. On February 10, 2015, the Sacramento County Environmental Management Department (Sacramento EMD) issued an Administrative Enforcement Order to The Procter & Gamble Manufacturing Company, a subsidiary of the Company, alleging violations of California s hazardous waste management regulations at the subsidiary s facility in Sacramento, California. On May 26, 2015, the subsidiary and Sacramento EMD agreed to a Final Stipulation and Order that includes no admission of liability, a release of all claims against the subsidiary, a $200,000 fine assessed against the subsidiary, and an agreement by the subsidiary to make certain plant modifications and have a third party conduct an integrity assessment of certain hazardous waste systems at its Sacramento, California facility. On August 25, 2014, Procuradur a Federal de Protecci n al Ambiente (PROFEPA) issued a ruling to Procter & Gamble Manufactura, S. de R.L. de C. . (Planta allejo), a subsidiary of the Company, citing violations of Mexico s air emissions regulations at the subsidiary s facility in ona Industrial allejo, Mexico City, Mexico and requiring the subsidiary to perform certain corrective measures at the facility, most of which have been completed. On June 15, 2015, PROFEPA issued a final ruling to the subsidiary imposing monetary sanctions of $133,000. The proceedings are still pending as PROFEPA reviews compliance with additional terms of the subsidiary s environmental licenses. The Company is subject, from time to time, to certain other legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters and tax. See Note 11 to our Consolidated Financial Statements for information on certain legal proceedings for which there are contingencies. This item should be read in conjunction with the Company's Risk Factors in Part I, Item 1A for additional information. Item 4. Mine Safety Disclosure. Not applicable. The Procter & Gamble Company 18 EXECUTIVE OFFICERS OF THE REGISTRANT The names, ages and positions held by the Executive Officers of the Company on August 7, 2015, are: Name Age First Elected to Officer Position 68 2013 A. G. Lafley Position Chairman of the oard, President and Chief Executive Officer Director since May 23, 2013 Jon R. Moeller Chief Financial Officer 51 2009 Giovanni Ciserani Group President - Global Fabric and Home Care 53 2013 Martin Riant Group President - Global aby, Feminine and Family Care 56 2013 Carolyn M. Tastad Group President - North America Selling and Market Operations 54 2014 David S. Taylor Group President - Global eauty, Grooming and Health Care Director 57 2013 Mark F. iegger Chief Human Resources Officer 53 2012 Linda Clement-Holmes Chief Information Officer 53 2014 Gary A. Coombe President - Europe Selling and Market Operations 51 2014 Tarek N. Farahat President - Latin America Selling and Market Operations 51 2014 Kathleen . Fish Chief Technology Officer 58 2014 Hatsunori Kiriyama President - Asia Pacific Selling and Market Operations 52 2014 Deborah P. Majoras Chief Legal Officer and Secretary 51 2010 Julio N. Nemeth President - Global usiness Services 54 2015 Matthew Price President - Greater China Selling and Market Operations 49 2015 Marc S. Pritchard Chief rand Officer 55 2008 Mohamed Samir President - India, Middle East and Africa (IMEA) Selling and Market Operations 48 2014 Jeffrey K. Schomburger Global Sales Officer 53 2015 Senior ice President, Comptroller and Treasurer 51 2005 Global Product Supply Officer 58 2011 alarie L. Sheppard Yannis Skoufalos All the Executive Officers named above, excluding Mr. Lafley, have been employed by the Company for more than the past five years. Mr. Lafley is Chairman of the oard, President and Chief Executive Officer of the Company and was reappointed to this position on May 23, 2013. Mr. Lafley originally joined the Company in 1977 and held positions of increasing responsibility, in the U.S. and internationally, until he was elected President and Chief Executive Officer in 2000, a position he held until June 30, 2009. On July 1, 2002, Mr. Lafley was elected Chairman of the oard, a position he held until January 2010, at which time he retired from the Company. During the past five years and prior to his return as CEO, Mr. Lafley served as a consultant to the Company and as a member of the boards of directors of public companies Dell, Inc. and General Electric Company, though he no longer serves on these boards. He also served as a Senior Advisor at Clayton, Dubilier & Rice, LLC, a private equity partnership, consulted with a number of Fortune 50 companies on business and innovation strategy, and advised on CEO succession and executive leadership development. He currently serves on the board of directors of Legendary Pictures, LLC (a film production company). 19 The Procter & Gamble Company PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. ISSUER PURCHASES OF E UITY SECURITIES Period Total Num er of Shares Purchased 1 Total Num er of Shares Purchased as Part of Pu licl Announced Plans or Programs A erage Price Paid er Share 2 A roximate Dollar Value of Shares that Ma Yet Be Purchased Under Our Share Re urchase Program 4 1 2015 - 4 30 2015 (3) 5 1 2015 - 5 31 2015 (3) 6 1 2015 - 6 30 2015 Total (1) (2) (3) 4,420,851 $79.17 4,420,851 (3) 4,420,851 $79.17 4,420,851 (3) The total number of shares purchased for the three months ended June 30, 2015 was 4,420,851. All transactions were made in the open market with large financial institutions. This table excludes shares withheld from employees to satisfy minimum tax withholding requirements on option exercises and other equity-based transactions. The Company administers cashless exercises through an independent third party and does not repurchase stock in connection with cashless exercises. Average price paid per share is calculated on a settlement basis and excludes commission. On April 23, 2015, the Company stated that fiscal year 2015 share repurchases to reduce Company shares outstanding were estimated to be approximately $5 billion, notwithstanding any purchases under the Company's compensation and benefit plans. The share repurchases were authorized pursuant to a resolution issued by the Company's oard of Directors and were financed through a combination of operating cash flows and issuance of long-term and short-term debt. The total value of the shares purchased under the share repurchase plan was $4.6 billion. The share repurchase plan ended on June 30, 2015. Additional information required by this item can be found in Part III, Item 12 of this Form 10-K. SHAREHOLDER RETURN PERFORMANCE GRAPHS Market and Di idend Information P&G has been paying a dividend for 125 consecutive years since its incorporation in 1890 and has increased its dividend for 59 consecutive years at an annual compound average rate of over 9 . in dollars s lit-ad usted Dividends per share 195 $ 0.01 19 $ 0.03 19 $ 0.06 19 $ 0.16 199 $ 0.40 200 $ 1.15 2015 $ 2.59 The Procter & Gamble Company 20 uarterl Di idends uarter Ended 2014 - 2015 201 - 2014 September 30 0. 4 December 31 0. 4 March 31 0. 4 June 30 0. $ 0.6015 0.6015 0.6015 29 0.6436 Common Stock Price Range uarter Ended 2014 - 2015 High 5.40 September 30 201 - 2014 Low High .29 $ Low 82.40 $ 73.61 December 31 9 . 9 1.5 85.82 75.20 March 31 91. 0. 2 81.70 75.26 .10 82.98 78.43 4.20 June 30 P&G trades on the New York Stock Exchange and NYSE Euronext-Paris under the stock symbol PG. There were approximately 2.6 million common stock shareowners, including shareowners of record, participants in the P&G Shareholder Investment Program, participants in P&G stock ownership plans and beneficial owners with accounts at banks and brokerage firms, as of June 30, 2015. Shareholder Return The following graph compares the cumulative total return of P&G s common stock for the five-year period ended June 30, 2015, against the cumulative total return of the S&P 500 Stock Index (broad market comparison) and the S&P 500 Consumer Staples Index (line of business comparison). The graph and table assume $100 was invested on June 30, 2010, and that all dividends were reinvested. Cumulati e Value of 100 In estment, through une 0 Com an Name Index 2010 2011 2012 201 2014 2015 100 $ 109 $ 109 $ 141 $ 149 15 S&P 500 Index 100 131 138 166 207 222 S&P 500 Consumer Staples Index 100 127 145 171 197 215 P&G $ 21 The Procter & Gamble Company Item 6. Selected Financial Data. The information required by this item is incorporated by reference to Note 1 and Note 12 to our Consolidated Financial Statements. Financial Summar Unaudited Amounts in millions, exce t er share amounts 2015 (2) ,2 9 Net sales Gross profit Operating income Net earnings from continuing operations Net earnings from discontinued operations 2010 $ 73,435 40,125 39,628 39,594 38,717 14,740 13,817 12,611 14,779 14,801 ,9 0 11,318 10,953 8,874 11,197 10,201 1, 11. asic net earnings per common share: (1) Earnings from continuing operations .1 $ 0. 467 449 2,030 730 2,645 11,643 11,312 10,756 11,797 12,736 14.1 13.7 11.2 14.5 13.9 4.03 $ 0.16 3.87 $ 0.17 3.08 $ 0.74 3.87 $ 0.25 3.41 0.91 2.50 $ 4.19 $ 4.04 $ 3.82 $ 4.12 $ 4.32 .0 $ 3.86 $ 3.71 $ 2.97 $ 3.69 $ 3.26 (1) Earnings from continuing operations Earnings from discontinued operations 2011 $ 76,982 39,500 Net earnings margin from continuing operations asic net earnings per common share 2012 $ 79,545 ,40 ,0 Earnings from discontinued operations 201 $ 80,116 11, 90 Net earnings attributable to Procter & Gamble Diluted net earnings per common share: 2014 $ 80,510 0. 2 0.15 0.15 0.69 0.24 0.85 Diluted net earnings per common share 2.44 $ 4.01 $ 3.86 $ 3.66 $ 3.93 $ 4.11 Dividends per common share 2.59 $ 2.45 $ 2.29 $ 2.14 $ 1.97 $ 1.80 Research and development expense Advertising expense Total assets Capital expenditures Long-term debt Shareholders' equity (1) (2) 2,04 $ 1,984 $ 1,940 $ 1,947 $ 1,897 $ 1,851 ,290 8,979 9,364 8,981 8,868 8,162 129,495 144,266 139,263 132,244 138,354 128,172 3,848 4,008 3,964 3,306 3,067 , 1 , 29 19,811 19,111 21,080 22,033 21,360 ,050 $ 69,976 $ 68,709 $ 64,035 $ 68,001 $ 61,439 asic net earnings per common share and diluted net earnings per common share are calculated based on net earnings attributable to Procter & Gamble. Our 2015 net sales were negatively impacted by approximately $4.8 billion of unfavorable foreign exchange fluctuation compared to 2014. Net earnings attributable to Procter & Gamble in 2015 were negatively impacted by approximately $1.4 billion due to foreign exchange, $2.1 billion of non-cash impairment charges related to the atteries business reported in discontinued operations and a $2.1 billion enezuelan deconsolidation charge. These impacts are discussed more fully later in Item 7 Summary of 2015 Results and Results of Operations of the MD&A. The Procter & Gamble Company 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management s Discussion and Anal sis 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. Forwardlooking 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 that are subject to risks and uncertainties which may cause actual results to differ materially from those expressed or implied in the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forwardlooking 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 following Management's Discussion and Analysis (MD&A) is intended to provide the reader with an understanding of P&G'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 2015 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. e 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), free cash flow, adjusted free cash flow and adjusted free cash flow productivity. Organic sales growth is net sales growth excluding the impacts of foreign exchange, acquisitions and divestitures. Core EPS is diluted net earnings per share from continuing operations excluding certain specified charges and gains. Free cash flow is operating cash flow less capital spending. Adjusted free cash flow is free cash flow excluding tax payments for the Pet Care divestiture. Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings excluding impairment charges on the atteries business and the enezuelan deconsolidation charge. e 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 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 and are measured on an annual basis versus the prior 12-month period. References to competitive activity include promotional and product initiatives from our competitors. 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, salons, distributors, e-commerce, high-frequency stores and pharmacies. e 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). e are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. 23 The Procter & Gamble Company ORGANI ATIONAL STRUCTURE Our organizational structure is comprised of Global usiness Units (G Us), Selling and Market Operations (SMOs), Global usiness Services (G S) and Corporate Functions (CF). Glo al Business Units Our Global usiness Units (G Us) are organized into four industry-based sectors, comprised of 1) Global eauty, 2) Global Health and Grooming, 3) Global Fabric and Home Care and 4) Global aby, Feminine and Family Care. Under U.S. GAAP, the G Us underlying the four sectors are aggregated into five reportable segments: eauty, Hair and Personal Care Grooming Health Care Fabric Care and Home Care and aby, Feminine and Family Care. The G Us are responsible for developing overall brand strategy, new product upgrades and innovations and marketing plans. The following provides additional detail on our reportable segments and the key product categories and brand composition within each segment. Re orta le Segment of Net Sales of Net Earnings GBUs Categories Billion Dollar Brands eauty, Hair and Personal Care 24 23 Skin and Personal Care (Antiperspirant and Head & Shoulders, Deodorant, Personal Cleansing, Skin Care) Olay, Pantene, SK-II, Cosmetics Hair Care and Color Prestige Salon ella Professional Grooming 10 16 Shave Care (Female lades & Razors, Male lades & Razors, Pre- and Post-Shave Products, Other Shave Fusion, Gillette, Mach3, Prestobarba Care) Electronic Hair Removal Health Care 10 11 Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, itamins Minerals Crest, Oral- , icks Supplements, Other Personal Health Care) Oral Care (Toothbrush, Toothpaste, Other Oral Care) Fabric Care and Home Care 29 24 Fabric Care (Laundry Additives, Fabric Enhancers, Ariel, Dawn, Downy, Laundry Detergents) Home Care (Air Care, Dish Febreze, Gain, Tide Care, P&G Professional, Surface Care) aby, Feminine and Family Care 27 26 aby Care ( aby ipes, Diapers and Pants) Feminine Care (Adult Incontinence, Feminine Care) Always, ounty, Charmin, Pampers Family Care (Paper Towels, Tissues, Toilet Paper) Percent of net sales and net earnings from continuing operations for the year ended June 30, 2015 (excluding results held in Corporate). Recent Developments: As of June 30, 2015, the Company deconsolidated our enezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of accounting. This change resulted in a fourth quarter fiscal 2015 one-time after-tax charge of $2.1 billion ($0.71 per share). In future periods, our financial results will only include sales of finished goods to our enezuela subsidiaries to the extent we receive cash payments from enezuela (expected to be largely through the CENCOEX exchange market). Accordingly, we will no longer include the results of our local enezuelan subsidiaries' operations in future reporting periods (see Note 1 to the Consolidated Financial Statements and additional discussion in this MD&A under enezuela Impacts in Results of Operations). InAugust 2014, the Company announced a plan to significantly streamline our product portfolio by divesting, discontinuing or consolidating about 100 non-strategic brands. The resulting portfolio of about 65 key brands will retain about 85 of sales and 95 of before-tax profit. On July 9, 2015, the Company announced the signing of a definitive agreement with Coty, Inc. to divest four product categories, including 43 of its beauty brands to Coty Inc. Coty's offer was $12.5 billion. hile the final value of the transaction will be determined at closing, based on Coty's stock price and outstanding shares and equity grants as of the date of signing, the value of the transaction was approximately $15.0 billion. hile the ultimate form of the transaction has not yet been decided, the Company s current preference is for a Reverse Morris Trust split-off transaction in which P&G shareholders could elect to participate in an exchange offer to exchange P&G shares for Coty shares. The transaction includes P&G s global salon professional hair care and color, retail hair color, cosmetics and fine fragrance categories, along with select hair styling brands, all of which have historically been part of the Company's eauty, Hair and Personal Care reportable segment and had net sales of $5.5 billion in fiscal year 2015. The Company expects to complete this beauty transaction by the end of calendar year 2016. For the period ended June 30, 2015, the results of the affected beauty categories and brands remain part of our continuing operations. eginning with fiscal year 2015-16 reported results, the earnings, assets and liabilities from the affected beauty businesses will be reported as discontinued operations. On November 13, 2014, the Company announced that it plans to divest the atteries business via a split transaction with erkshire Hathaway valued at $2.9 billion, in which it will exchange a recapitalized Duracell Company for erkshire Hathaway s shares of Procter & Gamble stock. The Company had previously sold its controlling interest in a China-based batteries joint venture, which represented the balance of the The Procter & Gamble Company 24 Company s atteries business, during the quarter ended December 31, 2014. The Company expects to complete the Duracell transaction in the beginning of calendar year 2016, pending necessary regulatory approvals. The atteries business had historically been part of the Company s Fabric Care and Home Care reportable segment. The results of the atteries business are now presented as discontinued operations and, as such, are excluded from both continuing operations and segment results for all periods presented. Additionally, the atteries balance sheet positions as of June 30, 2015 are presented as held for sale in the Consolidated alance Sheets. During fiscal 2015, the Company completed the divestiture of its Pet Care business. The gain on the transaction was not material. The results of the Pet Care business are now presented as discontinued operations and, as such, are excluded from both continuing operations and segment results for all periods presented. Additionally, the Pet Care balance sheet positions as of June 30, 2014 are presented as held for sale in the Consolidated alance Sheets. ith these transactions and other recently completed and announced minor brand divestitures, the Company will have substantially completed the strategic portfolio reshaping program with 93 out of approximately 100 brands having been sold, discontinued or consolidated. e t n e son l e: e are a global market leader in the beauty category. Most of the beauty markets in which we compete are highly fragmented with a large number of global and local competitors. e compete in beauty care, hair care and color and prestige. In beauty care, we offer a wide variety of products, ranging from deodorants to cosmetics to skin care, such as our Olay brand, which is the top facial skin care brand in the world with over 8 global market share. In hair care and color, we compete in both the retail and salon professional channels. e are the global market leader in the retail hair care and color market with over 20 global market share primarily behind our Pantene and Head & Shoulders brands. In the prestige channel, we compete primarily with our prestige fragrances behind Dolce & Gabbana, Gucci and Hugo oss fragrance brands and the SK-II brand. oom n : e are the global market leader in the blades and razors market. Our global blades and razors market share is over 65 , primarily behind the Gillette franchise including Fusion, Mach3, Prestobarba and enus. Our electronic hair removal devices, such as electric razors and epilators, are sold under the raun brand in a number of markets around the world where we compete against both global and regional competitors. e hold over 20 of the male shavers market and nearly 50 of the female epilators market. e lt e: e compete in oral care and personal health care. In oral care, there are several global competitors in the market and we have the number two market share position with approximately 20 global market share. In personal health care, we are a top ten competitor in a large, highly fragmented industry behind respiratory treatments ( icks brand) and nonprescription heartburn medications (Prilosec OTC brand). Nearly all of our sales outside the U.S. in personal health care are generated through the PGT Healthcare partnership with Teva Pharmaceuticals Ltd. c e n ome e: This segment is comprised of a variety of fabric care products including laundry detergents, additives and fabric enhancers and home care products including dishwashing liquids and detergents, surface cleaners and air fresheners. In fabric care, we generally have the number one or number two share position in the markets in which we compete and are the global market leader with approximately 30 global market share, primarily behind our Tide, Ariel and Downy brands. Our global home care market share is approximately 20 across the categories in which we compete. em n ne n ml e: In baby care, we compete mainly in diapers, pants and baby wipes with over 30 global market share. e are the number one or number two baby care competitor in most of the key markets in which we compete, primarily behind Pampers, the Company's largest brand, with annual net sales of approximately $10 billion. e are the global market leader in the feminine care category with approximately 30 global market share, primarily behind Always. e have recently entered the adult incontinence category in certain markets, achieving nearly a 10 market share in those markets where we have entered. Our family care business is predominantly a North American business comprised largely of the ounty paper towel and Charmin toilet paper brands. U.S. market shares are nearly 45 for ounty and over 25 for Charmin. Selling and Market O erations Our SMOs are responsible for developing and executing goto-market plans at the local level. The SMOs include dedicated retail customer, trade channel and country-specific teams. Our SMOs are organized under six regions comprised of North America, Europe, Latin America, Asia Pacific, Greater China and India, Middle East and Africa (IMEA). Throughout the MD&A, we reference business results in developed markets, which are comprised of North America, estern Europe and Japan, and developing markets which are all other markets not included in developed. Glo al Business Ser ices G S provides technology, processes and standard data tools to enable the G Us and the SMOs to better understand the business and better serve consumers and customers. The G S organization is responsible for providing world-class solutions at a low cost and with minimal capital investment. Cor orate Functions CF provides Company-level strategy and portfolio analysis, corporate accounting, treasury, tax, external relations, governance, human resources and legal, as well as other centralized functional support. STRATEGIC FOCUS e are focused on strategies that we believe are right for the long-term health of the Company with the objective of delivering total shareholder return in the top one-third of our peer group. Our value creation progress is measured internally with the operating total shareholder return (O-TSR) model. Over time, 25 The Procter & Gamble Company O-TSR performance is highly correlated with market total shareholder returns. O-TSR is a balanced measure that requires strong performance across the three primary drivers of value creation: sales growth, profit margin expansion and efficient utilization of assets to generate strong, reliable operating cash flow. e operationalize O-TSR deep within the Company by defining tight linkages between business activities and the key drivers of value creation, from strategic choices of global business units, brands and country teams down to individual employees daily work plans. innovations. e are also innovating to improve our category, brand and market business models to better serve consumers and customers. The Company has recently undertaken an effort to focus and strengthen its business portfolio to compete in categories and brands that are structurally attractive and that play to P&G strengths. This will enable us to allocate resources to leading brands - marketed in the right set of countries, channels and customers - where the size of the prize and probability of winning is highest. hen the major portion of this work is complete, we expect to compete in four industry-based sectors made up of approximately ten product categories and 65 leading brands. Finally, we are focused on improving execution and operating discipline in everything we do. Operating discipline and execution have always been - and must continue to be - core capabilities and competitive advantages for P&G. Innovation has always been - and continues to be - P&G's lifeblood. To consistently win with consumers around the world across price tiers and preferences and to consistently win versus our best competitors, each P&G product category needs a full portfolio of innovation, including a mix of commercial programs, product improvements and game-changing Productivity is a core strength for P&G, which creates flexibility to fund our growth efforts, offset cost challenges and or improve operating margins. e have taken significant steps to accelerate productivity and savings across all elements of costs, including cost of goods sold, marketing expense and non-manufacturing overhead. These efforts are yielding significant benefits to our operating margin. The Company expects the delivery of the following long-term annual financial targets will result in total shareholder returns in the top third of the competitive peer group: Organic sales growth above market growth rates in the categories and geographies in which we compete Core EPS growth of high single digits and Adjusted free cash flow productivity of 90 or greater. In periods with significant macroeconomic pressures, we will maintain a disciplined approach to investing so as not to sacrifice the long-term health of our businesses to meet shortterm objectives in any given year. SUMMARY OF 2015 RESULTS Amounts in millions, exce t er share amounts Change s. Prior Year 2015 2014 Change s. Prior Year 201 ,2 9 (5) 11, 90 (20) 14,740 7 13,817 ,9 0 1, (21) 11,318 3 10,953 (482) 467 4 449 Net earnings attributable to Procter & Gamble ,0 (40) 11,643 3 11,312 Diluted net earnings per common share 2.44 (39) 4.01 4 3.86 .0 (21) 3.86 4 3.71 4.02 (2) 4.09 5 3.89 Net sales Operating income Net earnings from continuing operations Net earnings (loss) from discontinued operations Diluted net earnings per share from continuing operations Core earnings per common share Net sales decreased 5 to $76.3 billion including a negative 6 impact from foreign exchange. Organic sales increased 1 . Unit volume decreased 1 . olume grew low single digits in Fabric Care and Home Care. olume decreased low single digits in aby, Feminine and Family Care, Grooming and Health Care, and declined mid-single digits in eauty, Hair and Personal Care. Net earnings from continuing operations decreased $2.4 billion or 21 due to a $2.1 billion after tax charge related to the deconsolidation of our enezuelan subsidiaries and the decline in net sales, partially offset by reduced selling, general and administrative expenses (SG&A). Foreign exchange impacts negatively affected net earnings by approximately 12 . $ 80,510 $ 80,116 Net earnings from discontinued operations decreased $2.3 billion due primarily to impairment charges in our atteries business, which is included in discontinued operations due to the pending divestiture. Net earnings attributable to Procter & Gamble were $7.0 billion, a decrease of $4.6 billion or 40 versus the prior year period due primarily to the enezuelan deconsolidation charge and impairment charges in our atteries business. Diluted net earnings per share decreased 39 to $2.44 Diluted net earnings per share from continuing operations decreased 21 to $3.06. Core EPS decreased 2 to $4.02. Cash flow from operating activities was $14.6 billion. Adjusted free cash flow was $11.6 billion. Adjusted free cash flow productivity was 102 . The Procter & Gamble Company 26 ECONOMIC CONDITIONS AND UNCERTAINTIES e discuss expectations regarding future performance, events and outcomes, such as our business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications. All such statements, except for historical and present factual information, are forwardlooking statements and are based on financial data and our business plans available only as of the time the statements are made, which may become out-of-date or incomplete. e assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain and investors must recognize that events could be significantly different from our expectations. For more information on risks that could impact our results, refer to Item 1A Risk Factors in this 10-K. lo l conom c on t ons Current macroeconomic factors remain dynamic, and any causes of market size contraction, such as greater political unrest in the Middle East and Eastern Europe, further economic instability in the European Union, political instability in certain Latin American markets and economic slowdowns in Japan and China, could reduce our sales or erode our operating margin, in either case reducing our earnings. n es n osts Our costs are subject to fluctuations, particularly due to changes in commodity prices and our own productivity efforts. e have significant exposures to certain commodities, in particular certain oil-derived materials like resins, and volatility in the market price of these commodity input materials has a direct impact on our costs. If we are unable to manage commodity fluctuations through pricing actions, cost savings projects and sourcing decisions as well as through consistent productivity improvements, it may adversely impact our gross margin, operating margin and net earnings. Sales could also be adversely impacted following pricing actions if there is a negative impact on consumption of our products. e strive to implement, achieve and sustain cost improvement plans, including outsourcing projects, supply chain optimization and general overhead and workforce optimization. As discussed later in this MD&A, we initiated certain non-manufacturing overhead reduction projects along with manufacturing and other supply chain cost improvements projects in 2012. If we are not successful in executing these changes, there could be a negative impact on our operating margin and net earnings. oe n c n e e have both translation and transaction exposure to the fluctuation of exchange rates. Translation exposures relate to exchange rate impacts of measuring income statements of foreign subsidiaries that do not use the U.S. dollar as their functional currency. Transaction exposures relate to 1) the impact from input costs that are denominated in a currency other than the local reporting currency and 2) the revaluation of transaction-related working capital balances denominated in currencies other than the functional currency. In 2015 and 2014, the U.S. dollar has strengthened versus a number of foreign currencies leading to lower sales and earnings from these foreign exchange impacts. Certain countries experiencing significant exchange rate fluctuations, like Russia, Ukraine, Japan and Switzerland, have had, and could have, an additional significant impact on our sales, costs and earnings. Increased pricing in response to these fluctuations in foreign currency exchange rates may offset portions of the currency impacts, but could also have a negative impact on consumption of our products, which would affect our sales. ove nment ol c es Our net earnings could be affected by changes in U.S. or foreign government tax policies. For example, the U.S. is considering corporate tax reform that may significantly impact the corporate tax rate and change the U.S. tax treatment of international earnings. Additionally, we attempt to carefully manage our debt and currency exposure in certain countries with currency exchange, import authorization and pricing controls, such as Argentina, China, Egypt, Greece, India, Nigeria, Ukraine and enezuela. Changes in government policies in these areas might cause an increase or decrease in our sales, operating margin and net earnings. During fiscal 2015, the Company deconsolidated its enezuelan subsidiaries due to evolving conditions that have resulted in an other-than-temporary lack of exchangeability between the enezuelan bolivar and U.S. dollar and have restricted our ability to pay dividends and satisfy certain other obligations denominated in U.S. dollars. RESULTS OF OPERATIONS The key metrics included in our discussion of our consolidated results of operations include net sales, gross margin, SG&A, other non-operating items and income taxes. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, the level of initiatives and other activities by competitors, geographic expansion and acquisition and divestiture activity, all of which drive changes in our underlying unit volume as well as pricing actions (which can also indirectly impact volume), changes in product and geographic mix and foreign currency impacts on sales outside the U.S. Most of our cost of products sold and SG&A are to some extent variable in nature. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in developed markets are generally higher than in developing markets for similar products), product mix (for example, the eauty, Hair and Personal Care segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and to a lesser extent scale impacts (for costs that are fixed or less variable in nature). The primary drivers of SG&A are marketing-related costs and nonmanufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we do achieve some level of scale benefit over time due to overall growth and other 27 The Procter & Gamble Company marketing efficiencies. Overhead costs are also variable in nature, but on a relative basis, less so than marketing costs due to our ability to leverage our organization and systems infrastructures to support business growth. Accordingly, we generally experience more scale-related impacts for these costs. The Company is in the midst of a productivity and cost savings plan to redu...
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