Operating Cash Flow

Operating Cash Flow

Capital Spending

Adjustments to Operating Cash Flow Adjusted Free

Cash Flow

2021 $ 18,371 $ (2,787) $ 225 $ 15,809 2020 $ 17,403 $ (3,073) $ 543 $ 14,873

Adjustments to Operating Cash Flow include transitional tax payments resulting from the U.S. Tax Act of $225 and $215 in 2021 and 2020, respectively, and tax payments related to the Merck acquisition of $328 in 2020.

Adjusted Free Cash Flow Productivity. Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding the charges for early debt extinguishment (which are not considered part of our ongoing operations). We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Adjusted free cash flow productivity is used by management in making operating decisions, in allocating financial resources and for budget planning purposes. This measure is used in assessing the achievement of management goals for at-risk compensation. The Company’s long-term target is to generate annual adjusted free cash flow productivity at or above 90 percent.

The following table provides a numerical reconciliation of adjusted free cash flow productivity ($ millions):

Adjusted Free Cash

Flow Net


Early Debt Extinguishment


Net Earnings Excluding


Adjusted Free Cash Flow


2021 $ 15,809 $ 14,352 $ 427 $ 14,779 107 % 2020 14,873 13,103 — 13,103 114 %




The Procter & Gamble Company 33

Core EPS. Core EPS is a measure of the Company’s diluted net earnings per share from continuing operations adjusted as indicated. Management views this non- GAAP measure as a useful supplemental measure of Company performance over time. Core EPS is also used in assessing the achievement of management goals for at-risk compensation. The table below provides a reconciliation of diluted net earnings per share to Core EPS, including the following reconciling items:

• Charges for early debt extinguishment: During fiscal year 2021, the Company recorded after tax charges of $427 million ($512 million before tax), due to the early extinguishment of certain long-term debt. These charges represent the difference between the reacquisition price and the par value of the debt extinguished.

• Incremental Restructuring: The Company has historically had an ongoing level of restructuring activities. Such activities have resulted in ongoing annual restructuring related charges of approximately $250 – $500 million before tax. Beginning in fiscal 2012, the Company had a strategic productivity and cost savings initiative that resulted in incremental restructuring charges through fiscal 2020. The adjustment to Core earnings includes only the restructuring costs above the normal recurring level of restructuring costs. In fiscal 2021, the Company incurred restructuring costs within our historical ongoing level.

We do not view the above items to be indicative of underlying business results and their exclusion from Core earnings measures provides a more comparable measure of year-on-year results. These items are also excluded when evaluating senior management in determining their at-risk compensation.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES (Amounts in Millions Except Per Share Amounts)

Reconciliation of Non-GAAP Measures Twelve Months Ended June 30, 2021 Twelve Months Ended June 30, 2020







NET EARNINGS ATTRIBUTABLE TO P&G 14,306 427 14,733 13,027 415 13,442

Core EPS Core EPS

DILUTED NET EARNINGS PER COMMON SHARE $ 5.50 $ 0.16 $ 5.66 $ 4.96 $ 0.16 $ 5.12

Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is incorporated by reference to the section entitled Other Information under Management’s Disclosure and Analysis, and Note 9 to the Consolidated Financial Statements.



34 The Procter & Gamble Company

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