UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark one)
[x]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TRUE
For the Fiscal Year Ended June 30, 20192020
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ]]FALSE 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
CincinnatiTHE PROCTER & GAMBLE COMPANYOH
One Procter & Gamble PlazaOne Procter & Gamble Plaza, Cincinnati, Ohio 4520245202
513Telephone (513) 983-1100983-1100
IRS Employer Identification No. 31-041198031-0411980
State of Incorporation: OhioOH
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, without Par ValuePGNew York Stock Exchange
4.125% EUR notes due December 2020PG20ANew York Stock Exchange
0.275% Notes2.000% notes due 20202021PG20PG21New York Stock Exchange
2.000% Notesnotes due 20212022PG21PG22BNew York Stock Exchange
2.000% Notes1.125% notes due 20222023PG22BPG23ANew York Stock Exchange
1.125% Notes0.500% notes due 20232024PG23APG24ANew York Stock Exchange
0.500% Notes0.625% notes due 2024PG24APG24BNew York Stock Exchange
0.625% Notes1.375% notes due 20242025PG24BPG25New York Stock Exchange
1.375% Notes due 2025PG25New York Stock Exchange
4.875% EUR notes due May 2027PG27ANew York Stock Exchange
1.200% Notesnotes due 2028PG28New York Stock Exchange
1.250% Notesnotes due 2029PG29BNew York Stock Exchange
1.800% Notesnotes due 2029PG29ANew York Stock Exchange
6.250% GBP notes due January 2030PG30New York Stock Exchange
5.250% GBP notes due January 2033PG33New York Stock Exchange
1.875% Notesnotes due 2038PG38New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ
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 been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filed," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerþAccelerated filer¨
Non-accelerated filer¨(Do not check if smaller reporting company)
Smaller reporting company¨FALSE
Emerging growth company¨FALSE
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þFalse
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes þ No o TRUE
The aggregate market value of the voting stock held by non-affiliates amounted to $226$304 billion on December 31, 2018.2019.
There were 2,502,259,6682,486,086,692 shares of Common Stock outstanding as of July 31, 2019.2020.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 20192020 Annual Meeting of Shareholders, which will be filed within one hundred and twenty days of the fiscal year ended June 30, 2019 (20192020 (2020 Proxy Statement), are incorporated by reference into Part III of this report to the extent described herein.



FORM 10-K TABLE OF CONTENTSPage
PART IItem 1.
1
Item 1A.
2
Item 1B.
67
Item 2.
67
Item 3.
67
Item 4.
67
78
PART IIItem 5.
89
Item 6.
1011
Item 7.
11
Item 7A.
2932
Item 8.
3033
3033
3537
3638
3739
3840
3941
4042
Note 1: Summary of Significant Accounting Policies
4042
Note 2: Segment Information
4344
Note 3: Supplemental Financial Information
4446
Note 4: Goodwill and Intangible Assets
4647
Note 5: Income Taxes
4748
Note 6: Earnings Per Share
4950
Note 7: Stock-based Compensation
5051
Note 8: Postretirement Benefits and Employee Stock Ownership Plan
5153
Note 9: Risk Management Activities and Fair Value Measurements
5658
Note 10: Short-term and Long-term Debt
5961
Note 11: Accumulated Other Comprehensive Income/(Loss)
6062
Note 12:Leases
62
Note 13: Commitments and Contingencies
6063
Note 13: Discontinued Operations
61
Note 14: Merck Acquisition
6264
Note 15: Quarterly Results (Unaudited)
6265
Item 9.
6365
Item 9A.
6365
Item 9B.
6365
PART IIIItem 10.
6466
Item 11.
6466
Item 12.
6466
Item 13.
6467
Item 14.
6467
PART IVItem 15.
6567
Item 16.
6769
6870
6971



The Procter & Gamble Company 1

PART I

Item 1. Business.
Additional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 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 products of superior quality and value to improve the lives of the world's consumers, now and for generations to come. The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble. Today, our products are sold in more than 180 countries and territories.
Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).
The Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: www.sec.gov. You can also access these reports through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference. The information contained on our website is not incorporated by reference into this report.
Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.
Financial Information about Segments
Information about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements.
Narrative Description of Business
Business Model. Our business model relies on the continued growth and success of existing brands and products, as well as the creation of new innovative products.products and brands. The markets and industry segments in which we offer our products are highly competitive. Our products are sold in more than 180 countries and territories through numerous channels as well as direct-to-consumer. Our growth strategy is to deliver meaningful and noticeable superiority in all elements of our consumer proposition - product, packaging, brand communication, retail execution and consumer and customer value equation. We use our research and development and consumer insights to provide superior products and packaging. We utilize our marketing and online presence to deliver superior brand messaging to our consumers. We work collaboratively with our customers to deliver superior retail execution, both in-store and online. In conjunction with the above elements, we provide superior value to consumers and our retail customers in each price tier where
in which we compete. Productivity improvement is also critical to delivering our objectives of balanced top and bottom-line growth and value creation.
Key Product Categories. Information on key product categories can be found in the MD&A and Note 2 to our Consolidated Financial Statements.
Key Customers. Our customers include mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and pharmacies.professional channels. These customers sell our products to individual consumers. We also sell direct to consumers. Sales to Walmart Inc. and its affiliates represent approximately 15% of our total sales in 2020, 2019 and 2018 and 16% in 2017.2018. No other customer represents more than 10% of our total sales. Our top ten customers accounted for approximately 36%38% of our total sales in 2020 and 36% in 2019 and 2018, and 35% in 2017.2018. The nature of our business does not result in material backlog orders or contracts with the government. We believe our practices related to working capital items for customers and suppliers are consistent with the industry segments in which we compete.
Sources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from others,third parties, some of whom are single-source suppliers. We produce certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing processprocesses and in the transportation of input materials and finished products to customers. The prices we pay for materials and other commodities are subject to fluctuation. When prices for these items change, we may or may not pass the change to our customers. The Company purchases a substantial variety of other raw and packaging materials, none of which isare material to our business taken as a whole.
Trademarks and Patents. We own or have licenses under patents and registered trademarks, which are used in connection with our activity in all businesses. Some of these patents or licenses cover significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. All major trademarks in each business are registered. In part, our success can be attributed to the existence and continued protection of these trademarks, patents and licenses.
Competitive Condition. The markets in which our products are sold are highly competitive. Our products compete against similar products of many large and small companies, including well-known global competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands. We are well positioned in

2 The Procter & Gamble Company
the industry segments and markets in which we operate, often holding a leadership or significant market share position. We support our products with advertising, promotions and other marketing vehicles to build awareness and trial of our brands and products in conjunction with our sales force. We 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.
Expenditures for Environmental Compliance.Expenditures for compliance with federal, state and local environmental laws

2 The Procter & Gamble Company

and regulations are fairly consistent from year to year and are not material to the Company. No material change is expected in fiscal year 2020.2021.
Employees. TotalAs of June 30, 2020, the Company had approximately 99,000 employees, an increase of two percent versus the prior year due to business growth and in-sourcing of certain media planning and other services. The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures as of the years ended June 30.ventures. The number of employees includes manufacturing and non-manufacturing employees. The number of employees is not restated to exclude employees of discontinued operations.
 Total Number of Employees
201997,000
201892,000
201795,000
2016105,000
2015110,000
2014118,000

Item 1A. Risk Factors.
We discuss our expectations regarding future performance, events and outcomes, such as our business outlook and objectives in this Form 10-K, as well as in our quarterly and annual reports, current reports on Form 8-K, 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. We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors.factors, except to the extent required by law. 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&AManagement's Discussion and Analysis 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.trends, perhaps materially.
Our business is subject to numerous risks as a result of our having significant operations and sales in international markets, including foreign currency fluctuations, currency exchange or pricing controls and localized volatility.
We are a global company, with operations in approximately 70 countries and products sold in more than 180 countries
and territories around the world. We hold assets, incur liabilities, earn revenuesgenerate sales and pay expenses in a variety of currencies other than the U.S. dollar, and our operations outside the U.S. generate more than fifty percent of our annual net revenue.sales. Fluctuations in exchange rates for foreign currencies may
have and could continue to reduce the U.S. dollar value of revenues, profitssales, earnings and cash flows we receive from non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely impact our business results or financial condition. Moreover, discriminatory or conflicting fiscal or trade policies in different countries, including changes to tariffs and existing trade policies and agreements, 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 9 to ourthe Consolidated Financial Statements.Statements and related Notes.
We also have businesses and maintain local currency cash balances in a number of countries with currency exchange, import authorization, pricing or other controls or restrictions, such as Nigeria, Algeria, Argentina, Egypt and Turkey. Our results of operations, and financial condition and cash flows could be adversely impacted if we are unable to successfully manage such controls and restrictions, continue existing business operations 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.
Additionally, our business, operations or employees mayhave been and could continue to be adversely 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 worthinesscreditworthiness of local governments, particularly in emerging markets.
Uncertain global economic conditions may adversely impact demand for our products or cause our customers and other business partners to suffer financial hardship, which could adversely impact our business.
Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic disruptions. These disruptions such as:have included and may in the future include: a slow-down or recession in the general economy; reduced market growth rates; tighter credit markets for our suppliers, vendors or customers; a significant shift in government policies; the deterioration of economic relations between countries or regions, including potential negative consumer sentiment toward non-local products or sources; 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, these and other economic conditions may cause our suppliers, distributors, contractors or other third-party partners to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide us with the

The Procter & Gamble Company 3
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. In addition, if we are unable to generate sufficient sales, income and cash flow, it could affect the Company’s ability to achieve expected share repurchase and dividend payments.



The Procter & Gamble Company 3

Disruptions in credit markets or changes to our credit ratings may reduce our access to credit.
A disruption 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.
DisruptionOur business results depend on our ability to manage disruptions in our global supply chain may negatively impact our business results.chain.
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 supply chain optimizations 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, discontinuity in our internal information and data systems, inability to procure sufficient raw or input materials, significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, could interrupthave interrupted product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, or results of operations.operations or cash flows.
Our businesses face cost fluctuations and pressures that could affect our business 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,depend, 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. Failure to manage these fluctuations could adversely impact our financial results.results of operations or cash flows.
Our ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation and changing consumer habits.
We 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 infringing upon the intellectual property rights of others. We must also successfully respond to technological advances made by, and intellectual property rights granted to, competitors. Failure to continually innovate, improve and respond to competitive moves and changing consumer habits could compromise our competitive position and adversely impact our results.financial condition, results of operations or cash flows.
The ability to achieve our business objectives is dependentdepends on how well we can compete with our local and global competitors 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, which may result in challenges in maintaining profit margins. To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms. In addition, evolving sales channels and business models may affect customer and consumer preferences as well as market dynamics, which, for example, may be seen in the growing consumer preference for shopping online, ease of competitive entry into certain categories, and growth in hard discounter channels. Failure to successfully respond to competitive factors and emerging retail trends, and effectively compete in growing sales channels and business models, particularly e-commerce and mobile commerce applications, could negatively impact our results.results of operations or cash flows.
A significant change in customer relationships or in customer demand for our products could have a significant impact on our business.
We sell most of our products via retail customers, which include mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and pharmacies.professional channels. Our success is dependentdepends 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 concentration 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 on trade terms and principles. Our business could also be negatively impacted if a key customer were to significantly reduce the inventory level of or shelf space ofallocated to our products as a result of increased offerings of other branded manufacturers, private label brands and generic non-branded products or for other reasons, significantly tighten product delivery windows or experience a significant business disruption.

4 The Procter & Gamble Company
If the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact 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 dependentdepends 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 of operations or cash flows could also be negatively impacted if

4 The Procter & Gamble Company

one of our brands suffers substantial harm to its reputation due to a significant product recall, product-related litigation, defects or impurities in our products, product misuse, changing consumer perceptions of certain ingredients or environmental impacts, 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, ingredients, efficacy, environmental impacts or similar matters, sentiments toward the Company or our products could be negatively impacted, and our financial results of operations or cash flows could suffer. Our Company also devotes time and resources to citizenship efforts that are consistent with our corporate values and are designed to strengthen our business and protect and preserve our reputation, including programs driving ethics and corporate responsibility, strong communities, diversity and inclusion, gender equality and environmental sustainability. If these programs are not executed as planned or suffer negative publicity, the Company's reputation and financial results of operations or cash flows could be adversely impacted.
We rely on third parties in many aspects of our business, which creates additional risk.
Due to the scale and scope of our business, we must rely on relationships with third parties, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and 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 results of operations and cash flows could be adversely impacted. Further, failure of these third parties to meet their obligations to the Company or substantial disruptions in the relationships between the Company and these third parties could adversely impact our operations and financial results could suffer.results. 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.
An
A significant information security or operational technology incident, including a cybersecurity breach, or the failure of one or more key information or operations technology systems, networks, hardware, processes, and/or associated sites owned or operated by the Company or one of its service providers could have a material adverse impact on our business or reputation.
As part of the Company’s regular review of potential risks, we maintain anWe rely extensively on information and operational technology (“("IT/OT”OT") risk management program that is primarily supervised by information technology management and reviewed by internal cross-functional stakeholders. As part of this program, analyses of emerging cybersecurity threats as well as the Company’s plans and strategies to address them are regularly prepared and presented to senior management, the Audit Committee and the Board of Directors. Despite our policies, procedures and programs, including this IT/OT risk management program, we may not be effective in identifying and mitigating every risk to which we are exposed.
We rely extensively on IT/OT systems, networks and services, including internet and intranet sites, data hosting and processing facilities and technologies, physical security systems and other hardware, software and technical applications and platforms, many 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/OT 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, transferring, storing and/or processing customer, consumer, employee, vendor, investor, and other stakeholder information and personal data, including such data from persons covered by an expanding landscape of privacy and data regulations, such as citizens of the European Union who are covered by the General Data Protection Regulation (“GDPR”) or residents of California covered by the California Consumer Privacy Act ("CCPA");
•summarizing and reporting results of operations, including financial reporting;
•managing our banking and other cash liquidity systems and platforms;
•hosting, processing and sharing, as appropriate, confidential and proprietary research, business plans and financial information;
•collaborating via an online and efficient means of global business communications;
•complying with regulatory, legal and tax requirements;
•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 services, systems, networks and supply chain, as well as to the confidentiality, availability and integrity of our data and of our critical business operations. As cybersecurity threats rapidly evolve in sophistication and become more prevalent across the industry globally, the Company is continually increasing its attention to these threats. We assess potential threats and vulnerabilities and make investments seeking to address them, including ongoing monitoring and updating of networks and systems, increasing specialized information security skills, deploying employee security training, and updating security policies for the Company and its third-party providers. However,In addition, because the techniques, tools and tactics used in cyber-attacks frequently change and may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after such an attack.

The Procter & Gamble Company 5
Our IT/OT databases and systems and our third-party providers’ databases and systems have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other cyber-attacks. Such attacks may originate from

The Procter & Gamble Company 5

outside parties, hackers, criminal organizations or other threat actors, including nation states. In addition, insider actors-malicious or otherwise-could cause technical disruptions and/or confidential data leakage. To date, we have seen no material impact on our business or operations from these attacks; however, weWe cannot guarantee that our security efforts or the security efforts of our third-party providers will prevent material breaches, operational incidents or other breakdowns to our or our third-party providers’ IT/OT databases or systems.
Periodically, we also need to upgrade our IT/OT systems or adopt new technologies. If such a new system or technology does not function properly or otherwise exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders, and process payments in addition to other operational and information integrity and loss issues. Further, if the IT/OT systems, networks or service providers we rely upon fail to function properly or cause operational outages or aberrations, or if we or one of our third-party providers suffer significant unavailability of key operations, or inadvertent disclosure of, lack of integrity of, or loss of our sensitive business or stakeholder information, due to any number of causes, ranging from catastrophic events or power outages to improper data handling, security incidents or employee error or malfeasance, and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to reputational, competitive, operational, financial and business harm as well as litigation and regulatory action. Periodically, we also upgrade our IT/OT systems or adopt new technologies. If such a new system or technology does not function properly or otherwise exposes us to increased cybersecurity breaches and failures, it could affect our ability to order materials, make and ship orders, and process payments in addition to other operational and information integrity and loss issues. The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results.results of operations and cash flows.
Changing political conditions could adversely impact our business and financial results.
Changes in the political conditions in markets in which we manufacture, sell or distribute our products may be difficult to predict and may adversely affect our business and financial results. For example, the United Kingdom’s pending withdrawal from the European Union ("Brexit") has created uncertainty regarding, among other things, the U.K.'s future legal and economic framework and how the U.K. will interact with other countries, including with respect to the free movement of goods, services, capital and people. In addition, results of elections, referendums or other political processes in certain markets in which our products are manufactured, sold or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, tariffs, import and export controls and the general movement of goods, services, capital and people between countries and other matters. The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, new or increased tariffs, trade barriers and
market contraction, could adversely affect the Company’s businessresults of operations and financial results.cash flows.
We must successfully manage compliance with laws and regulations, as well as manage new and pending legal and regulatory matters in the U.S. and abroad.
Our business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product
liability, product composition or formulation, packaging content or disposability,end-of-life responsibility, marketing, antitrust, data protection, environmental (including increasing focus on the climate, water, waste)and waste impacts of consumer packaged goods companies' operations and products), employment, anti-bribery, anti-corruption, tax, accounting and financial reporting or other matters. Rapidly changing laws, regulations, policies and related interpretations, as well as increased enforcement actions, create challenges for the Company, including our compliance and ethics programs, may alter the environment in which we do business and may increase the ongoing costs of compliance, which could adversely impact our financial results.results of operations and cash flows. If we are unable to continue to meet these challenges and comply with all laws, regulations, policies 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 financial condition, results of operations and financial position.cash flows. Furthermore, if pending legal or regulatory 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 applicable tax regulations and resolutions of tax disputes could negatively affect our financial results.
The Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Changes in the various tax laws can and do occur. For example, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Act”). The changes included in the U.S. Tax Act are broad and complex.  The ongoing impacts of the U.S. Tax Act may differ from the estimates provided elsewhere in this report,the reports we file with the Securities and Exchange Commission, possibly materially, due to, among other things, changes in interpretations, any regulatory guidance or legislative action to address questions that arise or any updates or changes to estimates the Company has used to calculate the impacts. 
Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution. An outgrowth of the original Base Erosion and Profit Shifting (“BEPS") project is a new project undertaken by the 129more than 130 member countries of the expanded OECD Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of this project extends beyond pure digital businesses and is likely to

6 The Procter & Gamble Company
impact all multinational businesses by potentially redefining jurisdictional taxation rights. As this and other tax laws and related regulations change or evolve, our financial condition, results of operations and cash flows could be materially impacted. Given the unpredictability of these possible changes, 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.results of operations and cash flows.
Furthermore, we are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation, including maintaining our intended tax treatment of divestiture transactions such as the fiscal 2017

6 The Procter & Gamble Company

Beauty Brands transaction with Coty, may differ materially from the tax amounts recorded in our Consolidated Financial Statements, which could adversely impact our results of operations and cash flows and financial results.flows.
We must successfully manage ongoing acquisition, joint venture and divestiture activities.
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. We 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 have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures. Our financial results of operations and cash flows have been and, in the future could also be, impacted by acquisitions or joint venture activities, such as the integration of Merck KGaA's Consumer Health business acquired in fiscal 2019, 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, including as a result of integration and collaboration challenges, which could also haveresult in an impact onimpairment of goodwill and intangible assets.
Our business results depend on our ability to successfully manage productivity improvements and ongoing organizational change.change, including attracting and retaining key talent as part of our overall succession planning.
Our financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments as well as employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to invest in business growth, could adversely impact our financial results.results of operations and cash flows. Additionally, successfully executing organizational change, including the move to a new organizational structure in fiscal 2020, management transitions at leadership levels of the Company and motivation and retention of key employees, is critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of qualified employees include employee morale, our reputation, competition from other employers and availability of qualified personnel.individuals. Our success is dependentdepends 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, as well as continuing the development and execution of robust leadership succession plans.
We must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of a disease outbreak, including epidemics, pandemics, or similar widespread public health concerns.
Our business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic, or similar widespread public health concern, such as travel restrictions or recommendations or mandates from governmental authorities to avoid large gatherings or to self-quarantine as a result of the novel coronavirus (COVID-19) pandemic. These impacts include, but are not limited to:
•Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling or similar pantry-loading activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows;
•Inability to meet our customers’ needs and achieve cost targets due to disruptions in our manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other essential manufacturing and supply elements such as raw materials or other finished product components, transportation, or other manufacturing and distribution capability;
•Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; or
•Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, or otherwise prevent our third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which

The Procter & Gamble Company 7
could adversely impact our results of operations and cash flows.
Despite our efforts to manage and remedy these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
In the U.S., we own and operate 2423 manufacturing sites located in 1817 different states. In addition, we own and operate 8584 manufacturing sites in 37 other countries. Many of the domestic and international sites manufacture products for
multiple businesses. Beauty products are manufactured at 24 of these locations; Grooming products at 19; Health Care products at 21; Fabric & Home Care products at 39;38; and Baby, Feminine & Family Care at 37.36. We own our Corporate headquarters in Cincinnati, Ohio. We own or lease our principal regional general offices in Switzerland, Panama, Singapore, China and China.Dubai. We own or lease our principal regional shared service centers in Costa Rica, the United Kingdom and the Philippines. Management believes that the Company's sites are adequate to support the business and that the properties and equipment have been well maintained.
Item 3. Legal Proceedings.
The Company is subject, from time to time, to certain 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 1213 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.


8 The Procter & Gamble Company 7


INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The names, ages and positions held by the Executive Officers of the Company on August 6, 2019,2020, are:
Name Position Age 
First Elected to
Officer Position
NamePositionAgeFirst Elected to
Officer Position
 
David S. Taylor Chairman of the Board, President and Chief Executive Officer 61 2013David S. TaylorChairman of the Board, President and Chief Executive Officer62
2013a
 
Jon R. Moeller Vice Chairman, Chief Operating Officer and Chief Financial Officer 55 2009Jon R. MoellerVice Chairman, Chief Operating Officer and Chief Financial Officer56
2009b
 
Steven D. Bishop Chief Executive Officer - Health Care 55 2016Steven D. BishopChief Executive Officer - Health Care56
2016c
 
Gary A. CoombeGary A. CoombeChief Executive Officer - Grooming56
2014d
Mary Lynn Ferguson-McHugh Chief Executive Officer - Family Care and P&G Ventures 59 2016Mary Lynn Ferguson-McHughChief Executive Officer - Family Care and P&G Ventures60
2016e
 
Carolyn M. Tastad Group President - North America and Chief Sales Officer 58 2014
 
Gary A. Coombe Chief Executive Officer - Grooming 55 2014
 
Kathleen B. Fish Chief Research, Development and Innovation Officer 62 2014
 
Fama Francisco Chief Executive Officer - Baby and Feminine Care 51 2018
 
M. Tracey Grabowski Chief Human Resources Officer 51 2018
Ma. Fatima D. FranciscoMa. Fatima D. FranciscoChief Executive Officer - Baby and Feminine Care52
2018f
 
Shailesh Jejurikar Chief Executive Officer - Fabric and Home Care 52 2018Shailesh JejurikarChief Executive Officer - Fabric and Home Care53
2018g
 
R. Alexandra Keith Chief Executive Officer - Beauty 51 2017R. Alexandra KeithChief Executive Officer - Beauty52
2017h
Carolyn M. TastadCarolyn M. TastadGroup President - North America and Chief Sales Officer59
2014i
M. Tracey GrabowskiM. Tracey GrabowskiChief Human Resources Officer52
2018j
Kathleen B. FishKathleen B. FishChief Research, Development and Innovation Officer632014
 
Deborah P. Majoras Chief Legal Officer and Secretary 55 2010Deborah P. MajorasChief Legal Officer and Secretary562010
 
Marc S. Pritchard Chief Brand Officer 59 2008Marc S. PritchardChief Brand Officer602008
 
Valarie L. Sheppard Controller and Treasurer and Executive Vice President - Company Transition Leader 55 2005Valarie L. SheppardController and Treasurer and Group Vice President - Company Transition Leader562005
All the Executive Officers named above have been employed by the Company for more than the past five years.
aMr. Taylor previously served as Group President - Global Beauty, Grooming & Health Care (February - October 2015).
bMr. Moeller previously served as Vice Chairman and Chief Financial Officer (2017 - 2019) and as Chief Financial Officer (2009 - 2017).
cMr. Bishop previously served as Group President - Global Oral Care (January - October 2015).
dMr. Coombe previously served as President - Europe Selling & Market Operations (November 2014 - February 2018).
eMs. Ferguson-McHugh previously served as Group President - Global Family Care (2014-2015).
fMs. Francisco previously served as President - Global Feminine Care (November 2015 - August 2018) and as Vice President - Brand Franchise Leader, Feminine Care (January - October 2015).
gMr. Jejurikar previously served as President - Global Fabric Care and Brand-Building Officer Global Fabric & Home Care (November 2015 - July 2018) and as President - Fabric Care, North America; Brand-Building Officer Fabric & Home Care New Business Creation (November 2014 - October 2015).
hMs. Keith previously served as President - Global Skin & Personal Care (November 2014 - June 2017).
iMs. Tastad previously served as Group President - North America Selling & Market Operations (January 2015 - May 2019).
jMs. Grabowski previously served as Vice President - Human Resources, North America Selling and Market Operations (April 2015 - July 2018).


8 The Procter & Gamble Company 9

PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
ISSUER PURCHASES OF EQUITY SECURITIES
PeriodTotal Number of
Shares Purchased		Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate Dollar Value of Shares that May Yet Be Purchased Under Our Share Repurchase Program
4/1/2020 - 4/30/20200n/a0
(1)
5/1/2020 - 5/31/20200n/a0
(1)
6/1/2020 - 6/30/20200n/a0
(1)
Total0n/a0
(1)
Period 
Total Number of
Shares Purchased (1)
 
Average Price
Paid per Share (2)
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (3)
 Approximate Dollar Value of Shares that May Yet Be Purchased Under Our Share Repurchase Program
4/1/2019 - 4/30/2019 5,739,213 $104.54 5,739,213 
(3) 
5/1/2019 - 5/31/2019 6,125,301 106.12 6,125,301 
(3) 
6/1/2019 - 6/30/2019 4,567,568 109.47 4,567,568 
(3) 
Total 16,432,082 $106.50 16,432,082 
(3) 
(1)On April 17, 2020, the Company stated that in fiscal year 2020 the Company expected to reduce outstanding shares through direct share repurchases at a value of $7 to $8 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 Board 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 $7.4 billion. The share repurchase plan ended on June 30, 2020.
(1)
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.
(2)
Average price paid per share is calculated on a settlement basis and excludes commission.
(3)
On April 23, 2019, the Company stated that in fiscal year 2019 the Company expected to reduce outstanding shares through direct share repurchases at a value of 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 Board 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 $5.0 billion. The share repurchase plan ended on June 30, 2019.
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 Dividend Information
P&G has been paying a dividend for 129130 consecutive years since its original incorporation in 1890 and has increased its dividend for 6364 consecutive years. Over the past five years, the dividend has increased at an annual compound average rate of 3%. Nevertheless, as in the past, further dividends will be considered after reviewing dividend yields, profitability and cash flow expectations and financing needs and will be declared at the discretion of the Company's Board of Directors.

pg-20200630_g1.jpg
dividend.jpg
(in dollars; split-adjusted)1956197019801990200020102020
Dividends per share$0.01$0.04$0.11$0.22$0.64$1.80$3.03



(in dollars; split-adjusted)1959196919791989199920092019
Dividends per share$0.02$0.04$0.10$0.19$0.57$1.64$2.90


10 The Procter & Gamble Company 9

Common Stock Information
P&G trades on the New York Stock Exchange under the stock symbol PG. ThereAs of June 30, 2020, there were approximately 3.34 million million common stock shareowners, including shareowners of record, participants in P&G stock ownership plans participants in the P&G Direct Stock Purchase Plan, and beneficial owners with accounts at banks and brokerage firms, as offirms.June 30, 2019.
Shareholder Return
The following graph compares the cumulative total return of P&G’s common stock for the five-year period ended June 30, 2019,2020, 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, 2014,2015, and that all dividends were reinvested.
tsra03.jpgpg-20200630_g2.jpg
Cumulative Value of $100 Investment, through June 30
Company Name/Index201520162017201820192020
P&G$100  $112  $119  $110  $160  $179  
S&P 500 Stock Index100  104  123  140  155  166  
S&P 500 Consumer Staples Index100  119  122  117  137  142  


 Cumulative Value of $100 Investment, through June 30
Company Name/Index201420152016201720182019
P&G$100
$103
$115
$122
$113
$164
S&P 500 Stock Index100
107
112
132
151
166
S&P 500 Consumer Staples Index100
109
130
134
129
150

10 The Procter & Gamble Company 11

Item 6. Selected Financial Data.
The information required by this item is incorporated by reference to Note 1 and Note 2 to our Consolidated Financial Statements. For further details behind the business drivers for recent results presented below, see the Management's Discussion and Analysis.
Financial Summary (Unaudited)
Amounts in millions, except per share amounts20202019201820172016
Net sales$70,950  $67,684  $66,832  $65,058  $65,299  
Gross profit35,700  32,916  32,400  32,420  32,275  
Operating income15,706  5,487  13,363  13,766  13,258  
Net earnings from continuing operations13,103  3,966  9,861  10,194  10,027  
Net earnings from discontinued operations—  —  —  5,217  577  
Net earnings attributable to Procter & Gamble13,027  3,897  9,750  15,326  10,508  
Net earnings margin from continuing operations18.5 %5.9 %14.8 %15.7 %15.4 %
Basic net earnings per common share: (1)
Earnings from continuing operations$5.13  $1.45  $3.75  $3.79  $3.59  
Earnings from discontinued operations—  —  —  2.01  0.21  
Basic net earnings per common share$5.13  $1.45  $3.75  $5.80  $3.80  
Diluted net earnings per common share: (1)
Earnings from continuing operations$4.96  $1.43  $3.67  $3.69  $3.49  
Earnings from discontinued operations—  —  —  1.90  0.20  
Diluted net earnings per common share$4.96  $1.43  $3.67  $5.59  $3.69  
Dividends per common share$3.03  $2.90  $2.79  $2.70  $2.66  
Research and development expense$1,834  $1,861  $1,908  $1,874  $1,879  
Advertising expense7,326  6,751  7,103  7,118  7,243  
Total assets120,700  115,095  118,310  120,406  127,136  
Capital expenditures3,073  3,347  3,717  3,384  3,314  
Long-term debt23,537  20,395  20,863  18,038  18,945  
Shareholders' equity$46,878  $47,579  $52,883  $55,778  $57,983  
Amounts in millions, except per share amounts2019 2018 2017 2016 2015 2014
Net sales$67,684
 $66,832
 $65,058
 $65,299
 $70,749
 $74,401
Gross profit32,916
 32,400
 32,420
 32,275
 33,649
 35,356
Operating income5,487
 13,363
 13,766
 13,258
 11,056
 13,958
Net earnings from continuing operations3,966
 9,861
 10,194
 10,027
 8,287
 10,658
Net earnings/(loss) from discontinued operations—
 —
 5,217
 577
 (1,143) 1,127
Net earnings attributable to Procter & Gamble$3,897
 $9,750
 $15,326
 $10,508
 $7,036
 $11,643
Net earnings margin from continuing operations5.9% 14.8% 15.7% 15.4% 11.7% 14.3%
Basic net earnings per common share: (1)
           
Earnings from continuing operations$1.45
 $3.75
 $3.79
 $3.59
 $2.92
 $3.78
Earnings/(loss) from discontinued operations—
 —
 2.01
 0.21
 (0.42) 0.41
Basic net earnings per common share$1.45
 $3.75
 $5.80
 $3.80
 $2.50
 $4.19
Diluted net earnings per common share: (1)
           
Earnings from continuing operations$1.43
 $3.67
 $3.69
 $3.49
 $2.84
 $3.63
Earnings/(loss) from discontinued operations—
 —
 1.90
 0.20
 (0.40) 0.38
Diluted net earnings per common share$1.43
 $3.67
 $5.59
 $3.69
 $2.44
 $4.01
Dividends per common share$2.90
 $2.79
 $2.70
 $2.66
 $2.59
 $2.45
Research and development expense$1,861
 $1,908
 $1,874
 $1,879
 $1,991
 $1,910
Advertising expense6,751
 7,103
 7,118
 7,243
 7,180
 7,867
Total assets115,095
 118,310
 120,406
 127,136
 129,495
 144,266
Capital expenditures3,347
 3,717
 3,384
 3,314
 3,736
 3,848
Long-term debt20,395
 20,863
 18,038
 18,945
 18,327
 19,807
Shareholders' equity$47,579
 $52,883
 $55,778
 $57,983
 $63,050
 $69,976
(1)Basic net earnings per common share and Diluted net earnings per common share are calculated based on Net earnings attributable to Procter & Gamble.

(1)
Basic net earnings per common share and Diluted net earnings per common share are calculated based on Net earnings attributable to Procter & Gamble.


The Procter & Gamble Company 11

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis
Forward-Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, the following sections: “Management's Discussion and Analysis”Analysis,” “Risk Factors” and “Risk Factors.”"Notes 4 and 13 to the Consolidated Financial Statements." These forward-looking statements generally
are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.
Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial risks,

12 The Procter & Gamble Company
including foreign currency fluctuations, currency exchange or pricing controls and localized volatility; (2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments; (3) the ability to manage disruptions in credit markets or changes to our credit rating; (4) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to factors outside of our control, such as natural disasters, acts of war or terrorism, or disease outbreaks; (5) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials, and costs of labor, transportation, energy, pension and healthcare; (6) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits and technological advances attained by, and patents granted to, competitors; (7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products; (8) the ability to manage and maintain key customer relationships; (9) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, ingredients, efficacy or similar matters that may arise; (10) the ability to successfully manage the financial, legal, reputational and operational risk associated with third-party relationships, such as our suppliers, contract manufacturers, distributors, contractors and external business partners; (11) the ability to rely on and maintain key company and third party information and operational technology systems, networks and services, and maintain the security and functionality of such systems, networks and services and the data contained therein; (12) the ability to successfully manage uncertainties related to changing political conditions (including the United Kingdom’s exit from the European Union) and potential implications such as exchange rate fluctuations and market contraction; (13) the ability to successfully manage regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, product and packaging composition, intellectual property, labor and employment, antitrust, data protection, tax, environmental, and accounting and financial reporting) and to resolve pending matters within current estimates; (14) the ability to manage changes in applicable tax laws and regulations including maintaining our intended tax treatment of divestiture transactions; (15) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Company’s overall business strategy and financial objectives, without impacting the delivery of base business objectives; (16) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes, while successfully identifying, developing and
retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited; and (17) the ability to successfully manage the demand, supply, and operational challenges associated with a disease outbreak, including epidemics, pandemics, or similar widespread public health concerns (including the novel coronavirus, COVID-19, outbreak). A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from those projected herein, is included without limitation, in the section titled "Economic Conditions and Uncertainties" and the section titled “Risk Factors”"Risk Factors" (Part I, Item 1A1A) of this Form 10-K). We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise.10-K.
The purpose of Management's Discussion and Analysis (MD&A) is to provide an understanding of Procter & Gamble's financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and accompanying notes.Notes. The MD&A is organized in the following sections:
•Overview
•Summary of 20192020 Results
•Economic Conditions and Uncertainties
•Results of Operations
•Segment Results
•Cash Flow, Financial Condition and Liquidity
•Significant Accounting Policies and Estimates
•Other Information
Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales and net earnings. We also refer to a number of financial measures that are not defined under accounting principles generally accepted in the United States of America (U.S. GAAP), includingconsisting of organic sales growth, core earnings per share (Core EPS), adjusted free cash flow and adjusted free cash flow productivity. Organic sales growth is net sales
growth excluding the impacts of acquisitions, divestitures and foreign exchange and the fiscal 2019 adoption of new accounting standards for "Revenue from Contracts with Customers" (see Note 1 to the Consolidated Financial Statements) from year-over-year comparisons. Core EPS is diluted net earnings per share from continuing operations excluding certain items that are not judged to be part of the Company's sustainable results or trends. Adjusted free cash flow is operating cash flow less capital spending, and transitional tax payments related to the U.S. Tax Act.Act and tax payments related to the Merck OTC consumer healthcare acquisition. Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings excluding certain one-time items.earnings. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight to some of the metrics used to evaluate management. The explanation at the end of the MD&A provides more details on the use and the derivation of these measures, as well as reconciliations to the most directly comparable U.S. GAAP measures.
Management also uses certain market share and market consumption estimates to evaluate performance relative to competition despite some limitations on the availability and

The Procter & Gamble Company 13
comparability of share and consumption information. References to market share and consumption in the MD&A are based on a combination of vendor purchased traditional brick-and-mortar and online data in key markets as well as internal estimates. All market share references represent the percentage of sales of our products in dollar terms on a constant currency basis, of our products, relative to all product sales in the category. The Company measures fiscal-year-to-date market shares through the most recent period for which market share data is available, which typically reflects a lag time of one or two months.months as compared to the end of the reporting period. Management also uses unit volume growth to evaluate and explain drivers of changes in net sales. Organic volume growth reflects year-over-year changes in unit volume excluding the impacts of acquisitions and divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales.
OVERVIEW
Procter & Gamble is a global leader in the fast-moving consumer goods industry, 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, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and pharmacies.professional channels. We also sell direct to consumers. We have on-the-ground operations in approximately 70 countries.
Our market environment is highly competitive with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products, as well as retailers' private-label brands. Additionally, many of the product segments in which we compete are differentiated by price tiers (referred to as super-premium, premium, mid-tier and value-tier products). We believe we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position.


12 The Procter & Gamble Company

ORGANIZATIONAL STRUCTURE
In fiscal 2019,2020, our organizational structure was comprised of GlobalSector Business Units (GBUs)(SBUs), SellingEnterprise Markets (EMs), Corporate Functions (CF) and Market Operations (SMOs), Global Business Services (GBS) and Corporate Functions (CF).
GlobalSector Business Units
Our GBUsSBUs are organized into ten product categories. Under U.S. GAAP, the GBUsSBUs underlying the ten product categories are aggregated into five reportable segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The GBUsSBUs 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 ten product categories and brand composition within each segment.
Reportable Segments
% of
Net Sales (1)
% of Net
Earnings (1)
Product Categories (Sub-Categories)Major Brands
Beauty19%21%
Hair Care (Conditioner, Shampoo, Styling Aids, Treatments)
Head & Shoulders, Herbal Essences, Pantene, Rejoice
Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care)
Olay, Old Spice, Safeguard, Secret, SK-II
Grooming9%10%
Grooming (2) (Shave Care - Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care; Appliances)
Braun, Gillette, Venus
Health Care13%12%
Oral Care (Toothbrushes, Toothpaste, Other Oral Care)
Crest, Oral-B
Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory,
Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care)
Metamucil, Neurobion, Pepto-Bismol, Vicks
Fabric & Home Care33%31%
Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents)
Ariel, Downy, Gain, Tide
Home Care (Air Care, Dish Care, P&G Professional, Surface Care)
Cascade, Dawn, Fairy, Febreze, Mr. Clean, Swiffer
Baby, Feminine & Family Care26%26%
Baby Care (Baby Wipes, Taped Diapers and Pants)
Luvs, Pampers
Feminine Care (Adult Incontinence, Feminine Care)
Always, Always Discreet, Tampax
Family Care (Paper Towels, Tissues, Toilet Paper)
Bounty, Charmin, Puffs
Reportable Segments
% of
Net Sales (1)
% of Net
Earnings (1)
Product Categories (Sub-Categories)Major Brands
Beauty19%22%
Hair Care (Conditioner, Shampoo, Styling Aids, Treatments)
Head & Shoulders, Herbal Essences, Pantene, Rejoice
Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care)
Olay, Old Spice, Safeguard, SK-II, Secret
Grooming9%13%
Grooming (2) (Shave Care - Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care; Appliances)
Braun, Gillette, Venus
Health Care12%13%
Oral Care (Toothbrushes, Toothpaste, Other Oral Care)
Crest, Oral-B
Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory,
Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care)
Metamucil, Neurobion, Pepto Bismol, Vicks
Fabric & Home Care33%29%
Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents)
Ariel, Downy, Gain, Tide
Home Care (Air Care, Dish Care, P&G Professional, Surface Care)
Cascade, Dawn, Fairy, Febreze, Mr. Clean, Swiffer
Baby, Feminine & Family Care27%23%
Baby Care (Baby Wipes, Taped Diapers and Pants)
Luvs, Pampers
Feminine Care (Adult Incontinence, Feminine Care)
Always, Always Discreet, Tampax
Family Care (Paper Towels, Tissues, Toilet Paper)
Bounty, Charmin, Puffs
(1)
Percent of Net sales and Net earnings from continuing operations for the year ended June 30, 2019 (excluding results held in Corporate).
(2)
The Grooming product category is comprised of the Shave Care and Appliances GBUs. Percent of Net sales and Net earnings from continuing operations for the year ended June 30, 2020 (excluding results held in Corporate).
(2) The Grooming product category is comprised of the Shave Care and Appliances operating segments.

14 The Procter & Gamble Company
Recent Developments:
During fiscal 2019, the Company completed the acquisition of the over the counterover-the-counter (OTC) healthcare business of Merck KGaA (Merck OTC) for $3.7 billion (based on exchange rates at the time of closing). This business primarily sells OTC consumer healthcare products, mainly in markets in Europe, Latin America and Asia markets.Asia. Total sales for the business during Merck OTC's most recent fiscal year ended December 31, 2017 were approximately $1 billion. Refer to Note 14 to our Consolidated Financial Statements for more details on this transaction.
During fiscal 2019, the Company also dissolved our PGT Healthcare partnership, a venture between the Company and Teva Pharmaceutical Industries, Ltd (Teva) in the OTC consumer healthcare business. Pursuant to the agreement, PGT product assets were returned to the original respective parent companies to reestablish independent OTC businesses. This transaction was accounted for as a sale of the Teva portion of the PGT business. The Company recorded an after-tax gain on the sale of $353 million.

During fiscal 2017, the Company completed the divestiture of four product categories, which included 43 of the Company's beauty brands ("Beauty Brands"), including the global salon professional hair care and color, retail hair color, cosmetics and the fine fragrance businesses, along with select hair styling brands. The Beauty Brands had historically been part of the Company’s Beauty reportable segment. The results of the Beauty Brands are presented as discontinued operations and, as such, are excluded from both continuing operations and segment results for all periods presented.
Refer to Notes 13 and 14 to our Consolidated Financial Statements for more details on each of these transactions.
Organization Design Changes:
The Company recently announcedimplemented changes to our organization design effective July 1, 2019. In the new design, the ten product categories are beingwere organized into six Sector Business Units (SBUs).SBUs. The SBUs will beare responsible for global brand strategy, innovation and supply chain. They will have direct profit responsibility for markets representing the large majority

The Procter & Gamble Company 13

of the Company's sales and earnings (referred to as Focus Markets) and will beare responsible for innovation plans, supply plans and operating frameworks to drive growth and value creation in the remaining markets (referred to as Enterprise Markets). For segment reporting purposes, the product categories will continue to be aggregated into the same five external reporting segments. Throughout the MD&A, we reference business results by region, which are comprised of North America, Europe, Greater China, Latin America, Asia Pacific and India, Middle East and Africa (IMEA).
Beauty: We 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. We compete in skin and personal care and in hair care. In skin and personal care, we offer a wide variety of products, ranging from deodorants to personal cleansing to skin care, such as our Olay brand, which is one of the top facial skin care brands in the world with nearlyapproximately 6% global market share. We are the global market leader in the retail hair care market with over 20% global market share primarily behind our Pantene and Head & Shoulders brands.
Grooming: We compete in shave care and appliances. In shave care, we are the global market leader in the blades and razors market. Our global blades and razors market share is over 60%, primarily behind theour Gillette franchise, including our Fusion, Mach3, Prestobarba and Venus brands. Our appliances, such as electric shavers and epilators, are sold under the Braun brand in a number of markets around the world where we compete against both global and regional competitors. We hold nearly 25% of the male
electric shavers market and over 50% of the female epilators market.
Health Care: We 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 nearly 20% global market share behind our Oral-BCrest and CrestOral-B brands. In personal health care, we are a top ten competitor in a large, highly fragmented industry, primarily behind respiratory treatments (Vicks brand) and digestive wellness products (Metamucil, Pepto Bismol and Align brands). As discussed above,earlier, in fiscal 2019, we dissolved the PGT Healthcare partnership with Teva, which previously managed nearly all of our personal health care sales outside the U.S., and reestablished an independent OTC businesses.business. We also acquired Merck OTC as discussed above.
Fabric & Home Care: 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 market share position in the markets in which we compete and are the global market leader with over 25% global market share, primarily behind our Tide, Ariel and Downy brands. Our global home care market share is over 20%approximately 25% across the categories in which we compete.compete primarily behind our Cascade, Dawn, Febreze and Swiffer brands.
Baby, Feminine & Family Care: In baby care, we are the global market leader and compete mainly in taped diapers, pants and baby wipes with overnearly 25% global market share. We have the number one or number two market share position in most of the key markets in which we compete, primarily behind Pampers, the Company's largest brand, with annual net sales
of nearly $8over $7 billion. We are the global market leader in the feminine care category with 25% global market share, primarily behind Always.our Always and Tampax brands. We also compete in the adult incontinence category in certain markets behind Always Discreet, achieving nearly 10% market share in most of the key markets wherein which we compete. Our family care business is predominantly a North American business comprised largelyprimarily of the Bounty paper towel and Charmin toilet paper brands. U.S. market shares are over 40% for Bounty and over 25% for Charmin.
Selling and Market OperationsEnterprise Markets
Our SMOs are responsible for developing and executing go-to-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, Western Europe and Japan, and developing markets, which are all other markets not included in developed. As a result of the above-mentioned changes in our organization design effective July 1, 2019, we will be organized under five regions,EMs are responsible for sales and profit delivery in specific countries, supported by SBU agreed innovation and supply chain plans, along with Asia Pacificscaled services like planning, distribution and IMEA being combined into a single region.customer management.
Corporate Functions
Corporate FunctionsCF 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.services.


The Procter & Gamble Company 15
Global Business Services
GBS provides technology, processes and standard data tools to enable the GBUs,SBUs, the SMOsEMs and Corporate FunctionsCF to better understand the business and better serve consumers and customers. The GBS organization is responsible for providing world-class solutions at a low cost and with minimal capital investment.
STRATEGIC FOCUS
Procter & Gamble aspires to serve the world’s consumers better than our best competitors in every category and in every country in which we compete, and, as a result, deliver total shareholder return in the top one-third of our peer group.  Delivering and sustaining leadership levels of shareholder value creation requires balanced top-line growth,top- and bottom-line growth and strong cash generation.
OurThe Company has undertaken an effort to focus and strengthen its business portfolio to compete in categories and with brands that are structurally attractive and that play to P&G's strengths. The ongoing portfolio of businesses consists of ten product categories where P&G has leading market positions, strong brands and consumer-meaningful product technologies.
Within these categories, our strategic choices are focused on winning with consumers.  The consumers who purchase and use our products are at the center of everything we do.  We win with consumers by delivering superiority across the five key elements of product, packaging, brand communication, retail execution and value equation.
Winning with consumers around the world and against our best competitors requires innovation.  Innovation has always been, and continues to be, P&G’s lifeblood.  Innovation requires consumer insights and technology advancements that lead to product improvements, improved marketing and

14 The Procter & Gamble Company

merchandising programs and game-changing inventions that create new brands and categories.
Productivity improvement is critical to delivering our balanced top-line growth,top- and bottom-line growth and value creation
objectives. Productivity improvement and sales growth reinforce and fuel each other. We are drivingOur objective is to drive productivity improvement across all elements of cost, including cost of goods sold, marketing and promotional expensesspending and non-manufacturing overhead. ProductivityWe plan to reinvest productivity improvements and cost savings are being reinvested in product and packaging improvements, brand awareness-building advertising and trial-building sampling programs, increased sales coverage and R&D programs.programs as well as to offset cost increases (including commodity and foreign exchange impacts) and improve operating margins.
We are constructively disrupting our industry and the way we do business, including how we innovate, communicate and leverage new technologies, to create more value.
We are improving operational effectiveness and organizational culture through enhanced clarity of roles and responsibilities, accountability and incentive compensation programs.
The Company has undertaken an effort to focus and strengthen its business portfolio to compete in categories and with brands that are structurally attractive and that play to P&G's strengths. The ongoing portfolio of businesses consists of 10 product
categories. These are categories where P&G has leading market positions, strong brands and consumer-meaningful product technologies.
We believe these strategies are right for the long-term health of the Company and our objective of delivering total shareholder return in the top one-third of our peer group.
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 fast-moving consumer goods peer group:
•Organic sales growth above market growth rates in the categories and geographies in which we compete;
•Core EPSearnings per share (EPS) growth of mid-to-high single digits; and
•Adjusted free cash flow productivity of 90% or greater.
In periods with significant macroeconomic pressures, such as the current COVID-19 pandemic, we intend to maintain a disciplined approach to investing so as not to sacrifice the long-term health of our businesses to meet short-term objectives in any given year.

SUMMARY OF 20192020 RESULTS
Amounts in millions, except per share amounts20202019Change vs. Prior Year
Net sales$70,950  $67,684  5 %
Operating income15,706  5,487  186 %
Net earnings13,103  3,966  230 %
Net earnings attributable to Procter & Gamble13,027  3,897  234 %
Diluted net earnings per common share4.96  1.43  247 %
Core earnings per share5.12  4.52  13 %
Cash flow from operating activities17,403  15,242  14 %
Amounts in millions, except per share amounts2019 2018 Change vs. Prior Year
Net sales$67,684
 $66,832
 1 %
Operating income5,487
 13,363
 (59)%
Net earnings3,966
 9,861
 (60)%
Net earnings attributable to Procter & Gamble3,897
 9,750
 (60)%
Diluted net earnings per common share1.43
 3.67
 (61)%
Core earnings per share4.52
 4.22
 7 %
Cash flow from operating activities15,242
 14,867
 3 %

•Net sales increased 1%5% to $67.7$71.0 billion on a 3%4% increase in unit volume. Foreign exchange had a negative 4%2% impact on net sales. Net sales growth was driven by mid-singlea double digit increasesincrease in Beauty and Health Care, and a lowhigh single digit increase in Fabric & Home Care, partially offset bya mid-single digit increase in Beauty and a low single digit declineincrease in Baby, Feminine & Family Care. Grooming net sales
decreased low single digits. Organic sales increased 6% on a 4% increase in organic volume. Organic sales increased high single digits in Health Care and in Fabric & Home Care, increased mid-single digits in Beauty and in Baby, Feminine & Family Care and a mid-single digit declineincreased low single digits in Grooming.
◦Organic sales increased 5% on a 2% increase in organic volume. Organic sales increased high single digits in Beauty and Fabric & Home Care, increased mid-single digits in Health Care and increased low single digits in Grooming and Baby, Feminine & Family Care.
◦Unit volumes increased 3%. Volume increased mid-single digits in Health Care and Fabric & Home Care and increased low single digits in Beauty and Baby, Feminine & Family Care. Volume decreased low single digits in Grooming.

16 The Procter & Gamble Company
•Operating income decreased $7.9increased $10.2 billion, or 59%,186% versus year ago, due primarily to the $8.3 billion base period non-cash impairment charges of $8.3 billion related to Shave Care goodwill and Gillette indefinite-lived intangible assets (Shave Care impairment), partially offset. The remaining $1.9 billion increase was driven by the benefit from the net sales increase. For a more detailed discussion on the Shave Care impairment refer to
increase and an increase in operating margin.
the Significant Accounting Policies and Estimates section in the MD&A and Note 4 to the Consolidated Financial Statements.
•Net earnings decreased $5.9increased $9.1 billion or 60%230% versus year ago, due to the after-tax impact of the Shave Care impairment, partially offset byaforementioned items and a reduction in current year incomeeffective tax expense, a current yearrates, partially offset by the base period gain on the dissolution of the PGT Healthcare partnership and the base period charges for the early extinguishment of debt. The reduction in current year income tax expense was driven by the impacts of the U.S. Tax Cuts and Jobs Act enacted in December 2017 (U.S. Tax Act), comprised of the reduction in tax rate on the current year earnings and the base period charges related to the transitional impacts of the U.S. Tax Act.other minor divestitures. Foreign exchange impacts negatively affected net earnings by approximately $900$390 million.
•Net earnings attributable to Procter & Gamble were $3.9$13.0 billion, a decreasean increase of $5.9$9.1 billion or 60%234% versus the prior year primarily due to the aforementioned items.
•Diluted net earnings per share decreased 61%(EPS) increased 247% to $1.43.$4.96.
◦Core EPS increased 7% to $4.52.
◦ Core EPS increased 13% to $5.12.
•Cash flow from operating activities was $15.2$17.4 billion.
◦Adjusted free cash flow was $12.1 billion.
◦Adjusted free cash flow productivity was 105%.

◦ Adjusted free cash flow was $14.9 billion.
The Procter & Gamble Company 15
◦ Adjusted free cash flow productivity was 114%.


ECONOMIC CONDITIONS AND UNCERTAINTIES
We 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 "forward-looking 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. We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors.factors, except as required by law. Forward-looking statements are inherently uncertain and investors must recognize that events could be significantly different from our expectations. For more information on risk factors that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.
Global Economic Conditions. Our products are sold in numerous countries across North America, Europe, Latin America, Asia and Africa, with more than half our sales generated outside the United States. As such, we are exposed to and impacted by global macro-economic factors, U.S. and foreign government policies and foreign exchange fluctuations. Current macroeconomicglobal economic conditions are highly volatile due to the COVID-19 pandemic, resulting in both market size contractions in certain countries due to economic slowdowns and government restrictions on movement, as well as market size increases in certain countries due to pantry loading and increased consumption of household cleaning and personal health and hygiene products by consumers. Other macro-economic factors also remain dynamic, and any causes of market size contraction, such as
reduced GDP in commodity-dependent economies, greater political unrest or instability in the Middle East, Central & Eastern Europe, certain Latin American markets, the Hong Kong market in Greater China and the Korean peninsula and economic uncertainty related to the execution of the United Kingdom's exit from the European Union, political instability in certain Latin American and Asian markets and overall economic slowdowns, could reduce our sales or erode our operating margin, in either case reducing our earnings.net earnings and cash flows.
Changes in Costs. Our costs are subject to fluctuations, particularly due to changes in commodity prices, transportation costs and our own productivity efforts. We have significant exposures to certain commodities, in particular certain oil-derived materials like resins and paper-based materials like pulp, and volatility in the market price of these commodity input materials has a direct impact on our costs. Disruptions in our manufacturing, supply and distribution operations due to the COVID-19 pandemic may also impact our costs. If we are unable to manage commodity and other cost fluctuationsthese impacts 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, net earnings and net earnings.cash flows. Sales could also be adversely impacted following pricing actions if there is a negative impact on consumption of our products. We 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 thisthe MD&A, in 2012 we initiated overhead and supply chain cost improvement projects. In fiscal 2017, we communicated specific elements of an additional multi-year cost reduction program which is resulting in targeted enrollment reductions and other savings. If we are not successful in executing and sustaining these changes, there could be a negative impact on our gross margin, operating margin, net earnings and net earnings.cash flows.
Foreign Exchange. We 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 four of the past five years, including fiscal 2019,2020, 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 Argentina, Russia,Brazil, Greater China, Turkey Brazil, China and the United Kingdom have had, and could continue to have, a significant impact on our sales, costs and net earnings. Increased pricing in response to certain 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, gross margin, operating margin, net earnings and profits.cash flows.

The Procter & Gamble Company 17
Government Policies. Our net earnings could be affected by changes in U.S. or foreign government tax policies, for example, the U.S. Tax Act, and the implicationscurrent work being led by the OECD for the G20 focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of this project extends beyond pure digital businesses and uncertainties of which are disclosed elsewhere in this report.is likely to impact all multinational businesses by redefining jurisdictional taxation rights. Further, our sales, net earnings and cash flows may be impacted by U.S. and foreign government policies to manage the COVID-19 pandemic, such as movement restrictions or site closures. Additionally, we attempt to carefully manage our debt, currency and other exposures in certain countries with currency exchange, import authorization and pricing controls, such as Nigeria, Algeria, Egypt, Argentina and Turkey. Further, our sales, net earnings and salescash flows could be affected by changes to international trade agreements in North America and elsewhere, including increases of import tariffs, both currently effective and future potential changes. Changes in government policies in these areas might cause an increase or decrease in our sales, gross margin, operating margin, net earnings and cash flows.
COVID-19 Pandemic disclosures
The Company’s priorities during the COVID-19 pandemic are protecting the health and safety of our employees; maximizing the availability of products that help consumers with their health, hygiene and cleaning needs; and using our employees’ talents and our resources to help society meet and overcome the current challenges. Because the Company sells products that are essential to the daily lives of consumers, the COVID-19 pandemic has not had a material net impact to our consolidated sales, net earnings and cash flows in the current year. However, the pandemic has had offsetting impacts during the period. For example, during the second half of fiscal 2020 we experienced a significant increase in demand and consumption of certain of our product categories (health, hygiene and home cleaning products) primarily in North America, caused in part by changing consumer habits and pantry stocking, due to the COVID-19 pandemic, contributing to increases in sales, net earnings and cash flows. At the same time, we experienced a decrease in sales due to the economic slowdown and restricted consumer movements in certain regions, including Europe, IMEA, Asia Pacific and Latin America, in certain channels, including travel retail, professional and electronics stores, and in certain of our beauty and grooming products. While we experienced a decrease in sales in Greater China during the third quarter of fiscal 2020, demand recovered in the fourth quarter as restrictions on consumer movement were relaxed. In the future, the pandemic may cause reduced demand for our products if it results in a recessionary global economic environment. Demand in certain of our Enterprise Markets, including certain countries in Latin America, Asia Pacific, and IMEA may be particularly susceptible to recession. It could also lead to volatility in consumer access to our products due to government actions impacting our ability to produce and ship products or impacting
consumers’ movements and access to our products. We believe that over the long term, there will continue to be strong demand for categories in which we operate, particularly our products that deliver essential health, hygiene and cleaning benefits. However, the timing and extent of demand recovery in markets such as Greater China and Japan, the resumption of international travel, the timing and impact of potential consumer pantry destocking in markets including North America and Europe, and product demand volatility caused by future economic trends are unclear. Accordingly, there may be heightened volatility in sales, net earnings and cash flows during and subsequent to the duration of the pandemic. Our retail customers are also being impacted by the pandemic. Their success in addressing the issues and maintaining their operations could impact consumer access to, and as a result, sales of our products.
Our ability to continue to operate without any significant negative impacts will in part depend on our ability to protect our employees and our supply chain. The Company has endeavored to follow actions recommended by governments and health authorities to protect our employees world-wide, with particular measures in place for those working in our plants and distribution facilities. We have also worked closely with local and national officials to keep our manufacturing facilities open due to the essential nature of the majority our products. We were able to broadly maintain our operations in the current fiscal year, but we have experienced some disruption in our supply chain in certain Enterprise Markets due primarily to the restriction of employee movements as well as increased transportation and manufacturing costs. We intend to continue to work with government authorities and implement our employee safety measures to ensure that we are able to continue manufacturing and distributing our products during the pandemic. However, uncertainty resulting from the pandemic could result in an unforeseen disruption to our supply chain (for example a closure of a key manufacturing or distribution facility or the inability of a key material or transportation supplier to source and transport materials) that could impact our operations.
Because the pandemic has not had a material negative impact on our operations or demand for our products and resulting sales and net earnings.earnings, it has also not negatively impacted the Company’s liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets enabled by our strong short- and long-term credit ratings. We have also not observed any material impairments of our assets or a significant change in the fair value of assets due to the COVID-19 pandemic.
For additional information on risk factors that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.


18 The Procter & Gamble Company
RESULTS OF OPERATIONS
The key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative costs (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, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions both(both in-store and onlineonline), and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our 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 marketsNorth America are generally higher than in developing marketsthe Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input

16 The Procter & Gamble Company

costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and to a lesser extent scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit
over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts
for these costs due to our ability to leverage our organization and systemssystems' infrastructures to support business growth.
AFor a detailed discussion of the fiscal 2018 year-over-year2019 year over year changes, can be found inplease refer to the MD&A section in Part II, Item 7 of the Form 8-K filed October 22, 2018, which updated ourCompany's Form 10-K for the fiscal year ended June 30, 2018, to revise disclosures to reflect the adoption of the Financial Accounting Standards Board (FASB) ASU 2017-07 and 2016-18. For more information on the adoption of this standard, refer to Note 1 to the Consolidated Financial Statements.2019.
Net Sales
Net sales increased 1%5% to $67.7$71.0 billion in 2019fiscal 2020 on a 3%4% increase in unit volume versus the prior year. Volume increased mid-singledouble digits in Health Care, andincreased mid-single digits in Fabric & Home Care and increased low single digits in Beauty and Baby, Feminine & Family Care. Volume decreased low single digits in Grooming.
Volume Excluding the impacts of acquisitions and divestitures, including the Merck OTC acquisition, organic volume increased mid-single digits in developed regionsHealth Care and lowincreased high single digits in developing regions. Excluding the impact of acquisitionsFabric & Home Care.
On a regional basis, volume increased high single digits in North America and divestitures, organic volume increased low single digits in developed regions.Greater China, Europe, Asia Pacific and Latin America driven by innovation, market growth and increased demand, particularly in household cleaning and personal health and hygiene products in the second half of the fiscal year, driven in part by increased consumption and pantry loading due to the COVID-19 pandemic. Volume decreased low single digits in IMEA as growth in the first half of the year was more than offset by market contraction in the second half of the fiscal year driven by economic slowdown resulting from the COVID-19 pandemic. Unfavorable foreign exchange reduced net sales by 4%2%. PricingIncreased pricing had a positive 2%1% impact on net sales. Product mixMix had a positive 1% impact on net sales driven by the slightly higherdisproportionate organic growth of the Skin and Personal Care and Personal Health Care and Home Care categories and developed regions,the North America region, all of which have higher than company average selling prices. Organic sales grew 5% driven by6% on a 2%4% increase in organic volume.



Operating Costs
Comparisons as a percentage of net sales; Years ended June 3020202019Basis Point Change
Gross margin50.3 %48.6 %170  
Selling, general and administrative expense28.2 %28.2 %—  
Operating margin22.1 %8.1 %1,400  
Earnings before income taxes22.3 %9.0 %1,330  
Net earnings18.5 %5.9 %1,260  
Net earnings attributable to Procter & Gamble18.4 %5.8 %1,260  
Comparisons as a percentage of net sales; Years ended June 302019 2018 Basis Point Change
Gross margin48.6% 48.5% 10
Selling, general and administrative expense28.2% 28.5% (30)
Operating margin8.1% 20.0% (1,190)
Earnings from continuing operations before income taxes9.0% 19.9% (1,090)
Net earnings5.9% 14.8% (890)
Net earnings attributable to Procter & Gamble5.8% 14.6% (880)


Gross margin increased 10170 basis points to 48.6%50.3% of net sales in 2019.fiscal 2020. Gross margin benefited 160from:
•150 basis points from total manufacturing cost savings (130 basis points net of product and packaging reinvestments),
•90 basis points from lower commodity costs and
•60 basis points of positive pricing impacts and 50 basis points from lower restructuring costs. impacts.
These were offset by:
by a 10070 basis-point decline from unfavorable product mix (due to the disproportionate organic

The Procter & Gamble Company 19
growth of the Fabric & Home Care segment which has lower than company average gross margin and other impacts (primarily mix within segments due to the growth of lower margin product forms and the club channellarger sizes in certain categories and due to the disproportionate growth of the Fabric Care category, which is one of our largest categories and has lower than company-average gross margins)categories),
an 80 basis-point negative impact due to higher commodity costs and
a 5020 basis-point negative impact from unfavorable foreign exchange.exchange and 20 basis points of other impacts.
Total SG&A was relatively unchanged at $19.1increased 5% to $20.0 billion, as a decreaseprimarily due to increases in marketing spending was offset by an increase in overhead costs and, to a lesser extent, increases in other net operating expenses.expenses and overhead costs. SG&A as a percentage of net sales decreased 30 basis points towas unchanged at 28.2%. ReductionsAn increase in marketing spending as a percentage of net sales
were partially offset by an increase in overhead costs and other net operating expenses as a percentage of net sales was offset by a decrease in overhead costs as a percentage of net sales.
•Marketing spending as a percentage of net sales increased 10 basis points due to investments in media and other marketing spending, partially offset by the positive scale impacts of the net sales increase and savings in agency compensation, production costs and advertising spending.
•Overhead costs as a percentage of net sales decreased 8040 basis points due to the positive scale impacts of the organic net sales increase reductions in agency compensation and the impact of adopting the new standard on "Revenue from Contracts with Customers" which prospectively reclassified certain customer spending from marketing (SG&A) expense to a reduction of net sales.
Overhead costs as a percentage of net sales increased 30 basis points, as productivity savings, and fixed cost leverage from the increased organic net sales, were more thanpartially offset by the impact of inflation higher incentive compensation costs and other cost increases, including the ongoing and integration-related overhead costs of the Merck OTC acquisition.increases.
•Other net operating expenses as a percentage of net sales increased 20approximately 30 basis points primarily due to an increase in foreign exchange transactional charges and the net impact of changes in indirect tax reserves, partially offset by thebase period gain on sale of real estate in the current year.estate.

The Procter & Gamble Company 17

Operating margin decreased 1,190increased 1,400 basis points to 8.1%22.1% for fiscal 2019 primarily2020. 1,230 basis points of this increase is due to the one-time, non-cash before-taxShave Care impairment charge of $8.3 billion for Shave Care.in the base period. The remaining increase is due to the increase in gross margin as discussed above.
Non-Operating Items
•Interest expense was $509$465 million in 2019,fiscal 2020, a marginal increasedecrease of $3$44 million versus the prior year due primarily to a reduction in U.S. interest rates, partially offset by an increase in average debt balances and an increase in U.S. interest rates.debt.
•Interest income was $220$155 million in 2019,fiscal 2020, a reduction of $27$65 million versus the prior year due to a reduction in average cash and investment securities balances.balances and a reduction in U.S. interest rates.
•
Other non-operating income, which consists primarily of divestiture gains, investment income and other non-operating items increased $649 million to $871 million, primarily due to a $355 million before-tax gain from the dissolution of the PGT Healthcare partnership in the current year (discussed earlier in the Recent Developments section) and $346 million of base year charges for the early extinguishment of debt, partially offset by higher minor brand divestiture gains in the base year.
•Other non-operating income, which consists primarily of divestiture gains and other non-operating items decreased $433 million to $438 million, primarily due to the base period gains from brand divestitures including a $355 million before-tax gain from the dissolution of the PGT Healthcare partnership.
Income Taxes
Income taxes decreased $1.4increased $628 million to $2.7 billion due to $2.1 billion.increased earnings, partially offset by a decline in the effective tax rate. The effective tax rate increased 870decreased 1,750 basis points to 34.7%17.2% in 2019. The current2020 due to:
•a 1,750 basis-point reduction due to the prior year impact of the Shave Care impairment charges caused a 1,750 basis-point increase in the effective tax rate,charge as there iswas no tax benefit related to the goodwill portion of the impairment. Excluding this impact, the effective tax rate declined 880 basis points, primarily due to the impacts of the Tax Cutscharge and Jobs Act (the "U.S. Tax Act") in December 2017. The U.S. Tax Act, among other things, lowered the U.S. corporate income tax rates, but also imposed
•a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries and caused us to adjust our U.S. deferred tax assets and liabilities to the lower federal base rate of 21%. These transitional impacts resulted in135 basis-point current year reduction from a provisional net charge of $602 million for the fiscal year ended June 30, 2018, comprised of an estimated repatriation tax charge of $3.8 billion (comprised of U.S. repatriation taxes and foreign withholding taxes) and an estimated net deferred tax benefit of $3.2 billion. In addition, because the Company has a June 30 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of approximately 28% forarising from transactions to simplify our fiscal year ended June 30, 2018, and 21% for our fiscal year ended June 30, 2019 and subsequent fiscal years. Combined, these impacts reduced the current year effective tax rate by 950 basis points, consisting of:legal entity structure.
a 500 basis-point reduction from the impact of the lower blended U.S. federal tax rate on current year earnings versus the prior year rate, and
a 450 basis-point reduction due to prior year transitional impacts from the U.S. Tax Act.
The remaining 70 basis point net increase in the current year income tax rate was drivenThese reductions were partially offset by:
•a 16060 basis-point increase from unfavorable impacts offrom geographic mix of current year earnings, caused primarily by disproportionately higher sales and earnings in the U.S.,
•a 1040 basis-point increase related to the prior year tax impact of the gain on the dissolution of the PGT Healthcare partnership,
•a 30 basis-point increase from reduced favorablecurrent year unfavorable discrete impacts related to uncertain tax positions (which netted to approximately 15 basis points(15 basis-point increase in the current year rate versus 25 basis pointsa 15 basis-point decrease in the prior year),year rate) and
•a 1005 basis-point reductionincrease from increasedlower excess tax benefits of share-based compensation (160 basis points(155 basis-point reduction in the current year versus 60 basis points160 basis-point reduction in the prior year).
Net Earnings
Operating income decreased $7.9increased 186% or $10.2 billion or 59%, primarilyto $15.7 billion. $8.3 billion of the increase was due to the $8.3 billion before tax impairmentbase period charge for the Shave Care. ThisCare impairment. The remaining $1.9 billion increase was due to the net sales increase and the increase in gross margin partially offset by the net sales increase, along with the marginal increase in gross margin and decrease in SG&A, spending as a percentage of sales, all of which are discussed above.
Earnings before income taxes decreased $7.3increased 161% or $9.8 billion or 54% to $6.1$15.8 billion, as the reductionincrease in operating income discussed in the preceding paragraphabove was partially offset by the current year gainbase period gains from the dissolution of the PGT Healthcare partnership and the base year charges for the early extinguishment of debt, each of which was discussed earlier.other minor brand divestitures. Net earnings decreased $5.9increased 230% or $9.1 billion or 60% to $4.0 billion. Net earnings declined less than earnings before income taxes$13.1 billion due to the above discussedincrease in operating income and the reduction in effective income taxes.taxes rates discussed above. Foreign exchange impacts reduced net earnings by approximately $900$390 million in 2019fiscal 2020 due to weakening of certain currencies against the U.S. dollar, including those in Argentina, Russia, Turkey, Brazil, China, Turkey and the United Kingdom. This impact includes both transactional charges and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars.
Net earnings attributable to Procter & Gamble decreased $5.9increased $9.1 billion, or 60%234%, to $3.9$13.0 billion.
Diluted net earnings per share decreased $2.24,EPS increased $3.53, or 61%247%, to $1.43$4.96 due primarily to the reductionincrease in net earnings.
Core EPS increased 7%13% to $4.52.$5.12. Core EPS represents diluted net earnings per shareEPS from continuing operations, excluding the currentbase year charge for the Shave Care impairment, the currentbase year gain on the dissolution of the PGT Healthcare partnership the base year charges for both the net transitional impact of the U.S. Tax Act and for early extinguishment of debt and incremental restructuring charges in both years related to our productivity and cost savings plans. The increase was primarily driven by the lower effective tax rate on core earnings, resulting from the U.S. Tax Actincrease in net sales and the net sales increase.increase in operating margin discussed previously.




1820 The Procter & Gamble Company

SEGMENT RESULTS
Segment results reflect information on the same basis we use for internal management reporting and performance evaluation. The results of these reportable segments do not include certain non-business unit specific costs. These costs, including the Shave Care impairment in fiscal 2019, are reported in our Corporate segment and are included as part of our Corporate segment discussion. Additionally, we apply blended statutory tax rates in the segments. Eliminations to adjust segment results to arrive at our consolidated effective tax rate are included in Corporate. See Note 2 to the Consolidated Financial Statements for additional information on items included in the Corporate segment. Eliminations to adjust segment results to arrive at our consolidated effective tax rate, including the impacts of the U.S. Tax Act in fiscal 2018, are included in Corporate.

Net Sales Change Drivers 2019 vs. 2018 (1)
Net Sales Change Drivers 2020 vs. 2019 (1)
Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix 
Other (2)
 Net Sales GrowthVolume with Acquisitions & DivestituresVolume Excluding Acquisitions & DivestituresForeign ExchangePriceMix
Other (2)
Net Sales Growth
Beauty3 % 2 % (4)% 2% 4% (1)% 4 %Beauty3 %2 %(2)%2 %1 %— %4 %
Grooming(1)% (1)% (5)% 2% —% (1)% (5)%Grooming(1)%(1)%(3)%2 %— %— %(2)%
Health Care5 % 4 % (3)% 1% 2% — % 5 %Health Care10 %5 %(2)%1 %1 %— %10 %
Fabric & Home Care4 % 5 % (3)% 1% 1% — % 3 %Fabric & Home Care6 %7 %(1)%1 %1 %— %7 %
Baby, Feminine & Family Care1 % 1 % (4)% 1% —% — % (2)%Baby, Feminine & Family Care3 %3 %(2)%1 %1 %— %3 %
TOTAL COMPANY3 % 2 % (4)% 2% 1% (1)% 1 %TOTAL COMPANY4 %4 %(2)%1 %1 %1 %5 %
(1)Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
(2)Other includes the sales mix impact from acquisitions and divestitures the impact from the adoption of the new accounting standard for "Revenue from Contracts with Customers" in fiscal 2019 and rounding impacts necessary to reconcile volume to net sales.
BEAUTY
($ millions)2019 2018 Change vs. 2018($ millions)20202019Change vs. 2019
VolumeN/A N/A 3%VolumeN/AN/A3%
Net sales$12,897 $12,406 4%Net sales$13,359$12,8974%
Net earnings$2,637 $2,320 14%Net earnings$2,737$2,6374%
% of net sales20.4% 18.7% 170 bps% of net sales20.5%20.4%10 bps
Beauty net sales increased 4% to $12.9$13.4 billion in 2019fiscal 2020 on a 3% increase in unit volume. Unfavorable foreign exchange impacts reduced net sales by 4%2%. Higher pricing increased net sales by 2%. Favorable product mix added 4%1% to net sales primarily due to the disproportionate growth of the Skin and Personal Care category, including the super-premium SK-II and premium Olay Skin brandsskin care brand, which havehas higher than segment average selling prices. Organic sales increased 8%.5% on a 2% increase in organic volume. Global market share of the Beauty segment decreased 0.1increased 0.2 points. Volume increased mid-single digits in North America, Europe and Asia Pacific and increased low single digits in both developedGreater China and developing regions.Latin America. Volume decreased high single digits in IMEA.
•Volume in Hair Care increased low single digits. Volume increased mid-single digits in developed regionsEurope and Asia Pacific and increased low single digits due to product innovationin North America and increased distribution. Developing regions volume increased low single digitsLatin America due to product innovation and market growth. Volume decreased double digits in IMEA and decreased low single digits in Greater China due to the economic slowdown caused by the COVID-19 pandemic in the second half of the fiscal year and market declines in certain countries. Global market share of the hair care category was unchanged.
•Volume in Skin and Personal Care increased high single digits. Excluding the impact of minor brand acquisitions, organic volume increased mid-single digits. Developed regions volume increased mid-single digits. Excluding the impact of minor brand acquisitions, developed regions
volume was unchanged. Volume increased double digits in developing regionsGreater China,
increased mid-single digits in North America, and increased low single digits in Europe and Asia Pacific due to premium innovation, continued growth of SK-II, increased marketing spending and market growth.growth, partially offset by a volume decrease in the SK-II brand and a mid-single digits decline in IMEA due to the COVID-19 pandemic related travel restrictions. Global market share of the skin and personal care category was unchanged.increased nearly half a point.
Net earnings increased 14%4% to $2.6$2.7 billion in 2019fiscal 2020 due to the increase in net sales and a 17010 basis-point increase in net earnings margin. Net earnings margin increased due to a reduction in U.S. income tax rates and a decrease in SG&A as a percentage of net sales, partially offset by a decrease in gross margin. Gross margin decreased slightlyand an increase in the effective tax rate. The gross margin decrease was mainly duedriven by the negative impacts of unfavorable mix (due to unfavorable foreign exchange impacts.the decline of the super-premium SK-II brand, driven by the impacts of the COVID-19 pandemic, and the disproportionate growth of large sizes) and other hurts related to new manufacturing startup costs partially offset by increased selling prices. SG&A as a percentage of net sales decreased primarily due to a reduction in marketing spending driven by the positive scale impacts of the net sales increase and the impacts of adopting the new accounting standard on "Revenue from Contracts with Customers". Thea reduction in marketing spending due to productivity savings. The increase in the effective tax rate was due todriven by the impactsunfavorable geographic mix of the U.S. Tax Act, both from overall rate reduction and the manner in which the impacts were allocated between the business and corporate segments in the prior year, as discussed in the Corporate segment below.earnings.
GROOMING
($ millions)2019 2018 Change vs. 2018($ millions)20202019Change vs. 2019
VolumeN/A N/A (1)%VolumeN/AN/A(1)%
Net sales$6,199 $6,551 (5)%Net sales$6,069$6,199(2)%
Net earnings$1,529 $1,432 7%Net earnings$1,329$1,529(13)%
% of net sales24.7% 21.9% 280 bps% of net sales21.9%24.7%(280) bps

The Procter & Gamble Company 1921

Grooming net sales decreased 5%2% to $6.2$6.1 billion in 2019fiscal 2020 on a 1% decrease in unit volume. Unfavorable foreign exchange impacts reduced net sales by 5%3%. Increased pricing had a 2% positive impact to net sales. Organic sales increased 1%. Global market share of the Grooming segment decreased 0.90.2 points. Volume increased low singlemid-single digits in developed regionsAsia Pacific and was unchanged in Europe and Latin America. Volume decreased low single digits in developing regions.North America and Greater China and decreased mid-single digits in IMEA.
•Shave Care volume decreased low single digits. Volume increaseddecreased mid-single digits in IMEA and decreased low single digits in developed regionsNorth America and Europe due to increased competitiveness following price reductionsmarket decline and reduced shaving incidents resulting from the COVID-19 pandemic and competitive activity. This was partially offset by a mid-single digit volume increase in the prior year and product innovation. Volume in developing regions decreased low single digitsAsia Pacific due to reduced demand following devaluation related price increases and competitive activity.innovation. Global market share of the shave care category decreased half a point.was unchanged.
•Appliances volume increased low single digits. Volume increased mid-teens in North America and mid-single digits in developed regionsEurope due to innovation and increased consumption of at-home styling products due to pandemic related movement restrictions. Volume decreased double digits in Asia Pacific, decreased high single digits in Greater China and decreased low single digits in IMEA due to market growth. Volume in developing regions was unchanged.contraction, competitive activity and the economic slowdown caused by the COVID-19 pandemic. Global market share of the appliances category decreasedincreased more than half a point.
Net earnings increased 7%decreased 13% to $1.5$1.3 billion in 2019fiscal 2020 due to the decrease in net sales and a 280 basis-point increasedecrease in net earnings margin, which more than offset the net sales decrease.margin. The net earnings margin increased primarilydecreased due to a reduction in U.S. income tax rates and a reductionan increase in SG&A as a percentage of net sales, partially offset byan increase in the effective tax rate and a decrease in gross margin. Gross margin declineddecreased due to the negative impact of unfavorable mix (due to the disproportionate growth of disposable razors, lower tier products instyling appliances and the Appliances category and large count packsAsia Pacific region all of which have lower than segment average margins), unfavorable foreign exchange impacts and increased commodity costs, partially offset by the positive impacts of manufacturing cost savings and increased pricing.selling prices. SG&A as a percentage of net sales decreasedincreased primarily due to a current yearbase period gain on the sale of operating real estate partially offset by current period reductions in overhead costs and marketing spending anddue to productivity savings. The increase in the impacts from adoption of the new accounting standard on "Revenue from Contracts with Customers". The reduction in theeffective tax rate was primarily due to the impacts of the U.S. Tax Act, botha base period benefit from the overall rate reduction and the manner in which the impacts were allocated between the business and corporate segments in the prior year, as discussed in the Corporate segment below.favorable adjustments to reserves for uncertain tax positions.
HEALTH CARE
($ millions)20202019Change vs. 2019
VolumeN/AN/A10%
Net sales$9,028$8,21810%
Net earnings$1,652$1,5199%
% of net sales18.3%18.5%(20) bps
($ millions)2019 2018 Change vs. 2018
VolumeN/A N/A 5%
Net sales$8,218 $7,857 5%
Net earnings$1,519 $1,283 18%
% of net sales18.5% 16.3% 220 bps
Health Care net sales increased 5%10% to $8.2$9.0 billion in 2019fiscal 2020 on a 5%10% increase in unit volume. Unfavorable foreign exchange impacts reduced net sales by 3%2%. HigherIncreased pricing increasedhad a 1% positive impact to net sales by 1%.sales. Favorable mix increased net sales by 2%1% due to the disproportionate organic growth of the Personal Health Care category and developed regions, both of which havehas higher
than segment average selling prices. Organic sales increased 6% on a 4% increase in organic volume, which excludesExcluding the impactnet impacts of the PGT Healthcare partnership dissolution and the Merck OTC consumer healthcare acquisition.acquisition and minor brand divestitures, organic sales increased 7% on a 5% increase in organic volume. Global market share of the Health Care segment increased 0.50.4 points. Volume increased more than 20% in IMEA, increased double digits in Latin America and Europe, increased high single digits in Asia Pacific and increased mid-single digits in developedNorth America. Excluding the net impacts of the Merck OTC consumer healthcare acquisition and developing regions.minor brand divestitures, organic volume increased high single digits in IMEA, increased mid-single digits in Latin America and increased low single digits in Europe and Asia Pacific.
•Oral Care volume increased low single digits. Volume increased double digits in IMEA, increased mid-single digits in Latin America and increased low single digits in North America and Asia Pacific due to product innovation and market growth. This growth was partially offset by low single digits volume decreases in Europe and Greater China due to competitive activities and the COVID-19 pandemic related economic slowdown and electronics stores closures. Excluding the impact of minor brand divestitures, organic volume increased low single digits in Europe. Global market share of the PGT Healthcare partnership dissolution andoral care category increased less than half a point.
•Volume in Personal Health Care increased over 20%. Excluding the impacts of the Merck OTC consumer healthcare acquisition, organic volume increased low single digits in developing regions.
Oral Caredouble digits. Organic volume increased low single digits. Volumemid-teens in North America and Europe and increased mid-single digits in developed regions due to product innovation. Volume increased low single digits in developing regionsIMEA due to product innovation, increased marketing spending and increased consumption and retailer inventory increases in certain markets driven by the COVID-19 pandemic. This was partially offset by competitive activity. Global market share of the oral care category increased nearly half a point.
Volumelow single digit volume decrease in Personal Health Care increased double digits. Excluding the impacts of the acquisitionAsia Pacific and dissolution described above, organic volume increased mid-single digits. Developed regions volume was unchanged, while organic volume grew mid-single digitsLatin America due to product innovation. Volume in developing regions increased double digits, while organic volume was up high single digits due to innovationdevaluation related price increases and market growth.the COVID-19 related economic slowdown. Global market share of the personal health care category increased more than halfnearly a point.
Net earnings increased 18%9% to $1.5$1.7 billion in 2019fiscal 2020 due to the increase in net sales andpartially offset by a 22020 basis-point increasedecrease in net earnings margin. NetThe net earnings margin increaseddecreased due to an increase in SG&A as a decreasepercentage of net sales and a reduction in U.S.non-operating income, tax rates, partially offset by a reductionan increase in gross margin. Gross margin decreasedincreased due to manufacturing cost savings and increased selling prices partially offset by unfavorable mix impact (from the disproportionate growth of club channelcertain products and products withcertain markets in IMEA both of which have lower than segment-average margins, partially offset by the net impacts of the acquisition and dissolution in personal health care) and increases in commodity costs, partially offset by manufacturing cost savings and positive pricing impacts.margins). SG&A as a percentage of net

22 The Procter & Gamble Company
sales was unchanged asincreased due to an increase in overhead costs was offsetand other operating expenses primarily caused by a reduction in marketing spending. Overhead costs as a percentage of net sales increased due to the net impacts of the personal health careMerck OTC consumer healthcare acquisition, and dissolution, including both integration-related spending and higher relative levels of selling costs in the acquired business, partially offset by the positive scale impacts of the net sales increase. Marketing spending as a percentage of net salesNon-operating income declined primarily due to the positive scale impacts of the net sales increase and the impactsa base period gain from adoption of the new accounting standard on "Revenue from Contracts with Customers". The reduction in the tax rate was due to the impacts of the U.S. Tax Act, both from the overall rate reduction and the manner in which the impacts were allocated between the business and corporate segments in the prior year, as discussed in the Corporate segment below.minor brand divestitures.





20 The Procter & Gamble Company

FABRIC & HOME CARE
($ millions)20202019Change vs. 2019
VolumeN/AN/A6%
Net sales$23,735$22,0807%
Net earnings$4,154$3,51818%
% of net sales17.5%15.9%160 bps
($ millions)2019 2018 Change vs. 2018
VolumeN/A N/A 4%
Net sales$22,080 $21,441 3%
Net earnings$3,518 $2,708 30%
% of net sales15.9% 12.6% 330 bps
Fabric & Home Care net sales increased 3%7% to $22.1$23.7 billion in 2019fiscal 2020 on a 4%6% increase in unit volume. Unfavorable foreign exchange impacts reduced net sales by 3%1%. Higher pricing increased net sales by 1%. Positive mix impacts increased net sales by 1% due to the disproportionate growth of premium products.the Home Care category and the North America region, both of which have higher than segment average selling prices. Organic sales increased 7%9% on a 5%7% increase in organic volume. Global market share of the Fabric & Home Care segment increased 0.50.7 points. Volume increased double digits in North America, increased high single digits in Latin America, increased mid-single digits in developed regionsGreater China and Europe and increased low single digits in developing regions. Excluding the impact of minor brand divestitures, organic volume increased mid-singleAsia Pacific. Volume decreased low single digits in developing regions.IMEA.
•Fabric Care volume increased mid-single digits. Volume increasedgrew double digits in North America and Latin America, grew mid-single digits in both developedGreater China and developing regions, due togrew low single digits in Europe. Volume growth was driven by product innovation and market growth.to a lesser extent the consumption increase and pantry loading driven by the COVID-19 pandemic. This growth was partially offset by a low single digit volume decrease in IMEA due to the COVID-19 pandemic related economic slowdown. Volume in Asia Pacific was unchanged. Global market share of the Fabric Care category increased less than half a point.
•Home Care volume increased mid-singledouble digits. Volume increased in developedall regions increasedled by double digit growth in North America and Europe, high single digits growth in Asia Pacific, mid-single digits growth in Latin America and low single digits growth in IMEA. The volume growth was driven by product innovation as well as the consumption increase and market growth. Volume in developing regions increased low single digitspantry loading driven by product innovation, partially offset by volume declines following devaluation related price increases.the COVID-19 pandemic. Global market share of the Home Care category increased nearlymore than half a point.
Net earnings increased 30%18% to $3.5$4.2 billion in 2019fiscal 2020 due to the increase in net sales and a 330160 basis-point increase in net earnings margin. NetThe net earnings margin increased due to a decreasean increase in U.S. incomegross margin partially offset by an increase in the effective tax ratesrate. The gross margin increase was driven by manufacturing cost savings and a reduction in SG&A as a percentage of sales partially offset by a marginal reduction in gross margin. Gross margin decreased due to unfavorable product mix (driven by the disproportionate growth of large sizes and club channel, both of which have lower than average margins, and new innovation with higher than segment-average product costs), unfavorable foreign exchange impacts and increased commodity costs, partially offset by manufacturingunfavorable product mix (due to the disproportionate growth of premium innovation that has not yet been cost savings and increased pricing.optimized). SG&A as a
percentage of net sales decreased due to reductionswas unchanged as an increase in both overhead costs and marketing spending drivenwas offset by productivity savings, fixed cost leverage fromthe positive scale benefits of increased net sales andon overhead costs. The increase in the impacts from adoption of the new accounting standard on "Revenue from Contracts with Customers". The reduction in theeffective tax rate was due todriven by the impactsunfavorable geographical mix of the U.S. Tax Act, both from the overall rate reduction and the manner in which the impacts were allocated between the business and corporate segments in the prior year, as discussed in the Corporate segment below.earnings.

BABY, FEMININE & FAMILY CARE
($ millions)20202019Change vs. 2019
VolumeN/AN/A3%
Net sales$18,364$17,8063%
Net earnings$3,465$2,73427%
% of net sales18.9%15.4%350 bps
($ millions)2019 2018 Change vs. 2018
VolumeN/A N/A 1%
Net sales$17,806 $18,080 (2)%
Net earnings$2,734 $2,251 21%
% of net sales15.4% 12.5% 290 bps

Baby, Feminine & Family Care net sales decreased 2%increased 3% to $17.8$18.4 billion in 2019fiscal 2020 on a 1%3% increase in unit volume. Unfavorable foreign exchange impacts reduced net sales by 4%2%. Increased pricing hadwas a positive 1% impact onto net sales. Positive mix impact increased net sales by 1% due to the disproportionate growth of the North America region which has higher than segment average selling prices. Organic sales increased 2%4%. Global market share of the Baby, Feminine & Family Care segment increased 0.1decreased 0.3 points. Volume increased high single digits in North America and was unchanged in Asia Pacific. Volume decreased high single digits in Latin America, decreased mid-single digits in IMEA and decreased low single digits in developed regions. Volume in developing regions decreased low single digitsGreater China and Europe.
•Baby Care volume decreased mid-single digits. Volume decreased double digits in developed regionsLatin America, decreased high single digits in IMEA, decreased mid-single digits in Europe and decreased low single digits in Greater China and Asia Pacific due to competitive activity, including competitive pricing activity in certain markets, and category contraction. Volume in developing regions decreased high single digits due to competitive activity, volume declines following devaluation related price increases, and category contraction in certain markets.markets (partly due to declining birth rates in China) and to a lesser extent the economic slowdown caused by the COVID-19 pandemic. This was partially offset by a low single digit volume increase in North America driven by market growth and product innovation. Global market share of the baby care category decreased more than half a point.
•Feminine Care volume increased mid-singlelow single digits. Volume growth was led by a double digit increase in developed regionsAsia Pacific due to a new launch in the adult incontinence category in Japan, as well as high single digits growth in North America, mid-single digits growth in Europe and low single digits growth in Greater China and Latin America, all due to product innovation, increased mid-single digits.marketing spending, adult incontinence category growth and to a lesser extent the increased consumption and pantry loading related to the COVID-19 pandemic in certain markets. Excluding the impact of a minor brand acquisition, organic volume in North America increased mid-single digits. This was partially offset by a low single digitsdigit volume decrease in IMEA due to product innovation and adult incontinence category growth. Volume in developing regions increased mid-single digits due to product innovation.the economic slowdown caused by the COVID-19 pandemic. Global market share of the feminine care category increased nearly half a point.

The Procter & Gamble Company 23
•Volume in Family Care, which is predominantly a North American business, increased mid-singlehigh single digits driven by the COVID-19 pandemic related market growth, consumption increase and pantry loading, product innovation, increased marketing spending and market growth. In the U.S., all-outlet share of the family care category increaseddecreased more than half a point.
Net earnings in 2019fiscal 2020 increased 21%27% to $2.7$3.5 billion due to the increase in net sales and a 290350 basis-point increase in net earnings margin, partially offset by the reduction in net sales.margin. Net earnings margin increased primarily due to a reductionan increase in U.S. incomegross margin, partially offset by an increase in the effective tax ratesrate and a decreasemarginal increase in SG&A as a percentage of net sales, partially offset by a marginal decrease in gross margin.sales. The gross margin decreaseincrease was driven by an increasemanufacturing cost savings, a reduction in commodity costs and unfavorable foreign exchange impactshigher selling prices partially offset by manufacturing cost savingsunfavorable product mix (due to the disproportionate growth of large sizes and increased pricing.product forms with lower than segment average margins). SG&A as a percentage of net sales decreasedincreased marginally due primarily to reducedan increase in marketing spending, andpartially offset by a reduction in overhead costs driven by productivity savings and the impacts from adoptionpositive scale benefits of the new accounting standard on "Revenue from Contracts with Customers".net sales increase. The reductionincrease in the effective tax rate was due to the impactsdriven by an unfavorable geographic mix of the U.S. Tax Act, both from the overall rate reduction and the manner in which the impacts were allocated between business and corporate segments in the prior year, as discussed in the Corporate segment below.earnings.

The Procter & Gamble Company 21

CORPORATE
($ millions)2019 2018 Change vs. 2018($ millions)20202019Change vs. 2019
Net sales$484 $497 (3)%Net sales$395$484(18)%
Net earnings/(loss)$(7,971) $(133) N/ANet earnings/(loss)$(234)$(7,971)N/A
Corporate includes certain operating and non-operating activities not allocated to specific business segments. These include: the incidental businesses managed at the corporate level; financing and investing activities; certain employee benefit costs; other general corporate items; gains and losses related to certain divested brands and categories; certain asset impairment charges; and certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used in the segments to U.S. GAAP. The most significant ongoing reconciling item is income taxes, to adjust from blended statutory rates that are reflected in the segments to the overall Company effective tax rate. For 2018, the tax impact also includes the impacts of the U.S. Tax Act, which were included in the corporate segment.
Corporate net sales decreased 3%18% to $484$395 million in 2019fiscal 2020 due to a decrease in the net sales of the incidental businesses managed at the corporate level. Corporate net loss increaseddecreased by $7.8$7.7 billion in 2019fiscal 2020 primarily due to the $8.0 billion after tax ($8.3 billion before tax) base period charge for the Shave Care impairment, as well as the impact of the allocation methodology of the lower U.S. Tax rates. The U.S. Tax Act was enacted in the middle of fiscal 2018; therefore, the net benefit was held in Corporate. Beginning in fiscal 2019, the lower rates are included in the reporting segments. These impacts were partially offset by the following benefits, each of which was discussed earlier:
thehigher base period net charge for the transitional impacts of the U.S. Tax Act,
the base period loss on early debt extinguishment,
lower restructuring charges in fiscal 2019 compared to the prior year and
higher current year divestiture gains (primarily driven by gain on the dissolution of the PGT healthcare partnership).
Restructuring Program to deliverDeliver Productivity and Cost Savings
In fiscal 2012, the Company initiated a productivity and cost savings plan to reduce costs and better leverage scale in the areas of supply chain, research and development, marketing
and overheads. The plan was designed to accelerate cost reductions by streamlining management decision making, manufacturing and other work processes to both fund the Company's growth strategy.strategy and increase the Company's operating margin. In fiscal 2017, the Company communicated specific elements of an additional multi-year productivity and cost savings program.
The current productivity and cost savings plan willis further reducereducing costs in the areas of supply chain, certain marketing activities and overhead expenses. As part of this plan, the Company incurred approximately $1.8$1.5 billion in total before- tax restructuring costs across 20182019 and 2019, with an additional
amount2020. In fiscal 2021 and onwards, the Company expects to incur restructuring costs within the range of approximately $0.6 billion expected in 2020. This program is expectedour historical ongoing level of $250 to result in additional enrollment reductions, along with further optimization of the supply chain and other manufacturing processes.$500 million annually. Savings generated from the Company's restructuring costsprogram are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. However, we estimate that through 2019,2020, the underlying restructuring costs incurred since 2012 (approximately $7.4$8.2 billion), along with other non-manufacturing enrollment reductions since 2012 have delivered approximately $3.6$3.7 billion in annual before-tax gross savings.
Restructuring accruals of $468$472 million as of June 30, 20192020 are classified as current liabilities. Approximately 67%52% of the restructuring charges incurred in fiscal 20192020 either have been or will be settled with cash. Consistent with our historical policies for ongoing restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.
In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins.
Refer to Note 3 to the Consolidated Financial Statements for more details on the restructuring program and to the Operating Costs section of the MD&A for more information about the total benefit to operating margins from our total savings efforts.
CASH FLOW, FINANCIAL CONDITION AND LIQUIDITY
We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates.
Operating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.

24 The Procter & Gamble Company
Operating Cash Flow
Operating cash flow was $15.2$17.4 billion in 2019,2020, a 3%14% increase from the prior year. Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation and deferred income taxes, gain on sale of assets and goodwill and indefinite-lived intangible impairment charges)taxes) generated approximately $14.6$16.1 billion of operating cash flow. Working capital and other impacts generated $0.7$1.3 billion of operating cash flow as summarized below.
An increase•A decrease in accounts receivable used $276generated $634 million of cash primarily due to increased sales and the timing of the end of the fiscal year (which fell on a weekend,Tuesday versus Sunday in the prior year end, resulting in fewer

22 The Procter & Gamble Company

additional collection days collection).in the current year) and lower relative sales at the end of the period in certain markets driven by COVID-19. The number of days sales outstanding increaseddecreased approximately one day5 days versus prior year.
•Higher inventory used $239$637 million of cash mainly due to inventory increases to support initiatives, and business growth across all segments.segments and to replenish stocks in certain categories depleted by the COVID-19 pandemic related demand increases. Inventory days on hand increased approximately 24 days primarily due to initiative support and foreign exchange impacts.inventory replenishment.
•Accounts payable, accrued and other liabilities increased, generating $1.9 billion of cash. ThisApproximately $700 million of this was primarily driven by extended payment terms with our suppliers (see Extended Payment Terms and Supply Chain Financing below). The remaining amount was driven by higher payables from increased manufacturing activity due to the pandemic related demand increases, an increase in marketing spending in the fourth quarter marketing activity versus the prior year. These factors, along with foreign exchange, drove an approximate 8 day increaseyear and increases in taxes payable related to the Merck integration. Days payable outstanding increased approximately 4 days payable outstanding. Although difficult to project81 days as of June 30, 2020 due to market and other dynamics, we anticipate incremental cash flow benefits from the extended payment terms with suppliers could decline in fiscal 2020.above.
•Other net operating assets and liabilities used $1.0 billiondeclined, using $710 million of cash, primarily driven by the payment of the current year portion of taxes due related to the U.S. Tax Act repatriation charge ($215 million) and statutory pension related accruals and contributions.
Adjusted Free Cash Flow. We view adjusted free cash flow as an important non-GAAP measure because it is a factor impacting the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investment.investments. It is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the U.S. Tax Act and ittax payments related to the Merck acquisition. Adjusted free cash flow is one of the measures used to evaluate senior management and determine their at-risk compensation.
Adjusted free cash flow was $12.1$14.9 billion in 2019,2020, an increase of 9%23% versus the prior year. The increase was primarily driven by the increase in operating cash flows as discussed above. Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings, excludingwas 114% in 2020.
Extended Payment Terms and Supply Chain Financing. Beginning in fiscal 2014, in response to evolving market practices, the Shave Care impairment chargesCompany began a program to negotiate extended payment terms with its suppliers. At about the same time, the Company initiated a Supply Chain Finance program (SCF) with several global financial institutions (SCF Banks). Under the SCF, qualifying suppliers may elect to sell their receivables from the Company to an SCF Bank. These participating suppliers negotiate their receivables sales arrangements directly with the respective SCF Bank. While the Company is not party to those agreements, the SCF Banks allow the participating suppliers to utilize the Company’s creditworthiness in establishing credit spreads and associated costs. This generally provides the suppliers with more favorable terms than they would be able to secure on their own. The Company has no economic interest in a supplier’s decision to sell a receivable. Once a qualifying supplier elects to participate in the SCF and reaches an agreement with an SCF Bank, the supplier elects which individual Company invoices they sell to the SCF bank. However, all the Company’s payments to participating suppliers are paid to the SCF Bank on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the SCF Bank. The SCF Bank pays the supplier on the invoice due date for any invoices that were not previously sold by the supplier to the SCF Bank.
The terms of the Company’s payment obligation are not impacted by a supplier’s participation in the SCF. Our payment terms with our suppliers for similar materials within individual markets are consistent between suppliers that elect to participate in the SCF and those that do not participate. Accordingly, our average days outstanding are not significantly impacted by the portion of suppliers or related input costs that are included in the SCF. In addition, the SCF is available to both material suppliers, where the underlying costs are largely included in Cost of goods sold, and to service suppliers, where the underlying costs are largely included in SG&A. As of June 30, 2020, approximately 3% of our global suppliers have elected to participate in the SCF. Payments to those suppliers during 2020 total approximately $13 billion, which equals approximately 24% of our total Cost of goods sold and SG&A for the period. For participating suppliers, we believe substantially all of their receivables with the Company are sold to the SCF Banks. Accordingly, we would expect that at each balance sheet date, a similar proportion of amounts originally due to suppliers would instead be payable to SCF Banks. All outstanding amounts related to suppliers participating in the SCF are recorded within Accounts payable in our Consolidated Balance Sheets, and the gain on dissolutionassociated payments are included in operating activities within our Consolidated Statements of Cash Flows. As of both June 30, 2020 and 2019, the PGT Healthcare partnership, was 105%amount due to suppliers participating in 2019.the SCF and included in Accounts payable were approximately $4 billion.
Although difficult to project due to market and other dynamics, we anticipate incremental cash flow benefits from the extended payment terms with suppliers could increase at

The Procter & Gamble Company 25
a slower rate in fiscal 2021. Future changes in our suppliers’ financing policies or economic developments, such as changes in interest rates, general market liquidity or the Company’s creditworthiness relative to participating suppliers could impact suppliers’ participation in the SCF and/or our ability to negotiate extended payment terms with our suppliers. However, any such impacts are difficult to predict.
Investing Cash Flow
Net investing activities generated $3.0 billion in cash in 2020, mainly due to proceeds from sales and maturities of investment securities, partially offset by capital spending. Net investing activities consumed $3.5 billion in cash in 2019, mainly due to capital spending and business acquisitions, partially offset by proceeds from sales and maturities of short-term investments.
Capital Spending. Capital expenditures, primarily to support capacity expansion, innovation and cost efficiencies, were $3.1 billion in 2020 and $3.3 billion in 2019, a decrease of 10% versus prior year.2019. Capital spending as a percentage of net sales decreased70 60 basis points to 4.9%4.3% in 2019.2020.
Acquisitions. Acquisition activity used cash of $58 million in 2020, primarily related to final contractual payments from the prior year acquisition of Merck OTC along with a minor Baby Care acquisition. Acquisition activity used $3.9 billion in 2019, primarily related to the Merck OTC acquisition. Acquisition activity used $109 million in 2018, primarily related to acquisitions in the Beauty segment.
Proceeds from Divestitures and Other Asset Sales. Proceeds from asset sales were $30 million and $394 million in 2020 and 2019, respectively, primarily from minor brand divestitures in both years and the sale of real estate. Proceeds from asset sales contributed $269 millionestate in cash in 2018 primarily from minor brand divestitures.2019.
Short-term investments.Investment Securities. Short-term investmentsInvestments generated net cash of $6.2 billion in 2020 and $3.5 billion in 2019 primarily from sales and
maturities of available-for-sale investments. Net cash flow from short-term investments was not material in 2018.investment securities.
Financing Cash Flow
Net financing activities consumed $8.4 billion of cash in 2020, mainly due to dividends to shareholders and treasury stock purchases, partially offset by a net increase in debt and the impact of stock options. Net financing activities consumed $10.0 billion in cash in 2019, mainly due to dividends to shareholders and treasury stock purchases, partially offset by the impact of stock options.
Dividend Payments. Our first discretionary use of cash is dividend payments. Dividends per common share increased 4%5% to $2.90$3.0284 per share in 2019.2020. Total dividend payments to common and preferred shareholders were $7.8 billion in 2020 and $7.5 billion in 2019 and $7.3 billion in 2018.2019. In April 2019,2020, the Board of Directors declared an increase in our quarterly dividend from $0.7172$0.7459 to $0.7459$0.7907 per share on Common Stock and Series A and B ESOP Convertible Class A Preferred Stock. This represents a 4%6% increase compared to the prior quarterly dividend and is the 63rd64th consecutive year that our dividend has increased. We have paid a dividend for 129130 consecutive years, every year since our incorporation in 1890.
Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for
ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and the overall cost of capital. Total debt was $34.7 billion as of June 30, 2020 and $30.1 billion as of June 30, 2019 and $31.32019. The increase is primarily due to the issuance of bonds generating $5.0 billion as of June 30, 2018.cash.
Treasury Purchases. Total share repurchases were $7.4 billion in 2020 and $5.0 billion in 2019 and $7.0 billion in 2018.2019.
Liquidity
At June 30, 2019,2020, our current liabilities exceeded current assets by $7.5$5.0 billion largely due to short-term borrowings under our commercial paper program. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. The Company regularly assesses its cash needs and the available sources to fund these needs. As of June 30, 2019, $5.7 billion of2020, the Company’sCompany did not have material net cash and cash equivalents and marketable securities was related to foreign subsidiaries primarily various Western European and Asian countries.nor related to any country subject to exchange controls that significantly restrict our ability to access or repatriate the funds. Under current law, we do not expect restrictions or taxes on repatriation of cash held outside of the U.S. to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. As of June 30, 2019, we did not have material cash, cash equivalents and marketable securities balances in any country subject to exchange controls that significantly restrict our ability to access or repatriate the funds.
We utilize short- and long-term debt to fund discretionary items, such as acquisitions and share repurchases. We have strong short- and long-term debt ratings, which have enabled, and should continue to enable, us to refinance our debt as it becomes due at favorable rates in commercial paper and bond markets. In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide sufficient credit funding to meet short-term financing requirements.
On June 30, 2019,2020, our short-term credit ratings were P-1 (Moody's) and A-1+ (Standard & Poor's), while our long-term

The Procter & Gamble Company 23

credit ratings were Aa3 (Moody's) and AA- (Standard & Poor's), all with a stable outlook.
We maintain bank credit facilities to support our ongoing commercial paper program. The current facility is an $8.0 billion facility split between a $3.2 billion four-yearfive-year facility and a $4.8 billion 364-day facility, which expire in November 20222024 and November 2019,2020, respectively. Both facilities can be extended for certain periods of time as specified in the terms of the credit agreement. These facilities are currently undrawn and we anticipate that they will remain undrawn. These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time
of signing. In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities. For additional details on debt see Note 10 to the Consolidated Financial Statements.

26 The Procter & Gamble Company
Guarantees and Other Off-Balance Sheet Arrangements
We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities,
which we believe could have a material impact on our financial condition or liquidity.
Contractual Commitments
The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2019.2020.
($ millions)TotalLess Than 1 Year1-3 Years3-5 YearsAfter 5 Years
RECORDED LIABILITIES
Total debt$34,589  $11,189  $5,154  $5,148  $13,098  
Leases1,023  239  352  220  212  
U.S. Tax Act transitional charge (1)
2,346  224  450  984  688  
Uncertain tax positions (2)
59  59  —  —  —  
OTHER
Interest payments relating to long-term debt6,676  673  1,173  955  3,875  
Minimum pension funding (3)
603  196  407  —  —  
Purchase obligations (4)
1,577  782  412  145  238  
TOTAL CONTRACTUAL COMMITMENTS$46,873  $13,362  $7,948  $7,452  $18,111  
Amounts in millionsTotal Less Than 1 Year 1-3 Years 3-5 Years After 5 Years
RECORDED LIABILITIES         
Total debt$29,988
 $9,695
 $4,791
 $4,807
 $10,695
Capital leases33
 9
 15
 7
 2
U.S. Tax Act transitional charge (1)
2,557
 214
 449
 646
 1,248
Uncertain tax positions (2)
143
 143
 —
 —
 —
OTHER         
Interest payments relating to long-term debt4,682
 572
 979
 737
 2,394
Operating leases1,218
 255
 375
 300
 288
Minimum pension funding (3)
471
 153
 318
 —
 —
Purchase obligations (4)
1,491
 633
 397
 193
 268
TOTAL CONTRACTUAL COMMITMENTS$40,583
 $11,674
 $7,324
 $6,690
 $14,895
(1)Represents the U.S. federal tax liability associated with the repatriation provisions of the U.S. Tax Act. Does not include any provisions made for foreign withholding taxes on expected repatriations as the timing of those payments is uncertain.
(2)As of June 30, 2020, the Company's Consolidated Balance Sheet reflects a liability for uncertain tax positions of $643 million, including $158 million of interest and penalties. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for uncertain tax positions beyond one year, a reasonable estimate of the period of cash settlement beyond twelve months from the balance sheet date of June 30, 2020 cannot be made.
(3)Represents future pension payments to comply with local funding requirements. These future pension payments assume the Company continues to meet its future statutory funding requirements. Considering the current economic environment in which the Company operates, the Company believes its cash flows are adequate to meet the future statutory funding requirements. The projected payments beyond fiscal year 2023 are not currently determinable.
(4)Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of business. Commitments made under take-or-pay obligations represent minimum commitments under take-or-pay agreements with suppliers and are in line with expected usage. This includes service contracts for information technology, human resources management and facilities management activities that have been outsourced. While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such purchase obligations will adversely affect our liquidity position.
(1)
Represents the U.S. federal tax liability associated with the repatriation provisions of the U.S. Tax Act. Does not include any provisions made for foreign withholding taxes on expected repatriations as the timing of those payments is uncertain.
(2)
As of June 30, 2019, the Company's Consolidated Balance Sheet reflects a liability for uncertain tax positions of $617 million, including $150 million of interest and penalties. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for uncertain tax positions beyond one year, a reasonable estimate of the period of cash settlement beyond twelve months from the balance sheet date of June 30, 2019, cannot be made.
(3)
Represents future pension payments to comply with local funding requirements. These future pension payments assume the Company continues to meet its future statutory funding requirements. Considering the current economic environment in which the Company operates, the Company believes its cash flows are adequate to meet the future statutory funding requirements. The projected payments beyond fiscal year 2022 are not currently determinable.
(4)
Primarily reflects future contractual payments under various take-or-pay arrangements entered into as part of the normal course of business. Commitments made under take-or-pay obligations represent minimum commitments under take-or-pay agreements with suppliers and are in line with expected usage. This includes service contracts for information technology, human resources management and facilities management activities that have been outsourced. While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such purchase obligations will adversely affect our liquidity position.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
In preparing our financial statements in accordance with U.S. GAAP, there are certain accounting policies that may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. These include revenue recognition, income taxes, certain employee benefits and goodwill and intangible assets. We believe these accounting policies, and others set forth in Note
1 to the Consolidated Financial Statements, should be reviewed as they are integral to understanding the results of operations and financial condition of the Company.
The Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Company's Board of Directors.
Revenue Recognition

24 The Procter & Gamble Company

Our revenue is primarily generated from the sale of finished product to customers. Those sales predominantly contain a single performance obligation and revenue is recognized at a
single point in time when ownership, risks and rewards transfer, which can be on the date of shipment or the date of receipt by the customer. Trade promotions, consisting primarily of customer pricing allowances, in-store merchandising funds, advertising and other promotional activities, and consumer coupons, are offered through various programs to customers and consumers.  Sales are recorded net of trade promotion spending, which is recognized as incurred at the time of the sale.  Amounts accrued for trade promotions at the end of a period require estimation, based on contractual terms, sales volumes and historical utilization and redemption rates.  The actual amounts paid may be different from such estimates.  These differences, which have historically not been significant, are recognized as a change in management estimate in a subsequent period.  The Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” on July 1, 2018.  Adoption of this standard resulted in a change

The Procter & Gamble Company 27
in the timing of recognition of certain trade promotional spending.  See Note 1 to our Consolidated Financial Statements.
Income Taxes
Our annual tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Also inherent in determining our annual tax rate are judgments and assumptions regarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.
Realization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.
We operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.
A core operating principle is that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities. However, because of the complexity of transfer pricing concepts, we may have income tax uncertainty related to the determination of intercompany transfer prices for our various cross-border transactions. We have obtained and continue to prioritize the strategy of seeking advance rulings with tax authorities to reduce this uncertainty. We estimate that our current portfolio of advance rulings reduces this uncertainty with respect to over 70% of our global earnings. We evaluate our tax positions and establish liabilities in
accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have a number of audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.
Because there are a number of estimates and assumptions inherent in calculating the various components of our tax provision, certain changes or future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. See Note 5 to the Consolidated Financial Statements for additional details on the Company's income taxes.
Employee Benefits
We sponsor various post-employment benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other post-employment benefit (OPEB) plans, consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPEB plans require assumptions to estimate the net projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assets; and health care cost trend rates. These and other assumptions affect the annual expense and net obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.
The expected return on plan assets assumption impacts our defined benefit expense since many of our defined benefit pension plans and our primary OPEB plan are partially funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2019,2020, the average return on assets assumptions for pension plan assets and OPEB assets was 6.6% and 8.3%8.4%, respectively. A change in the rate of return of 100 basis points for both pension and OPEB assets would impact annual after-tax benefit benefit/expense by approximately $115$130 million.
Since pension and OPEB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPEB plans are based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts

The Procter & Gamble Company 25

of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans of 1.9%1.5% represents a weighted average of local rates in countries where such plans exist. A 100 basis point change in the discount rate would impact annual after-tax benefit expense by approximately $200$220 million. The average discount rate on the OPEB plan of 3.7%3.1% reflects the higher interest rates generally applicable in the U.S., which is where a majority of the plan participants receive benefits. A 100 basis point change in the discount rate would impact annual after-tax OPEB expense by approximately $60$50 million. See Note 8 to the Consolidated Financial StatementStatements for

28 The Procter & Gamble Company
additional details on our defined benefit pension and OPEB plans.
Goodwill and Intangible Assets
Significant judgment is required to estimate the fair value of our goodwill reporting units and intangible assets. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant goodwill reporting units and intangible assets. The fair value estimates are based on available historical information and on future expectations. We typically estimate the fair value of these assets using the income method, which is based on the present value of estimated future cash flows attributable to the respective assets. The valuations used to establish and to test goodwill and intangible assets for impairment are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin progression, Company business plans and the discount rate applied to cash flows.
Indefinite-lived intangible assets and goodwill are not amortized, but are tested at least annually for impairment. Our ongoing annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the 3 months ended December 31. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. We believe these estimates and assumptions are reasonable and comparable to those that would be used by other marketplace participants. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions. For example, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill and indefinite-lived intangible assets, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values. In addition, changes to, or a failure to achieve business plans or deterioration of macroeconomic conditions could result in reduced cash flows or higher discount rates, leading to a lower valuation that would trigger an impairment of the goodwill and intangible assets of these businesses.
We test individual indefinite-lived intangible assets by comparing the book value of each asset to the estimated fair value. Our impairment testing for goodwill is performed separately from our impairment testing of indefinite-lived intangible assets. The test to evaluate goodwill for impairment is a two steptwo-step process. In the first step (step one), we compare
the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit is less than its carrying value, we perform a second step (step two) to determine the implied fair value of the reporting unit's goodwill. The second step of the impairment analysis requires a valuation of a reporting unit's tangible and intangible assets and liabilities in a manner similar to the allocation of purchase price in a business combination. The difference between the step one fair value and the amounts allocated to the assets and liabilities in step two is the
implied fair value of the reporting unit’s goodwill.
If this implied fair value of the reporting unit's goodwill is less than its carrying value, that difference represents an impairment.
Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired intangible assets (e.g., certain brands, all customer relationships, patents and technologies) are expected to have determinable useful lives. Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. Determinable-lived intangible assets are amortized to expense over their estimated lives. An impairment assessment for determinable-lived intangibles is only required when an event or change in circumstances indicates that the carrying amount of the asset may not be recoverable.
Most of our goodwill reporting units are comprised of a combination of legacy and acquired businesses and as a result have fair value cushions that, at a minimum, exceed two times their underlying carrying values. Certain of our goodwill reporting units, in particular Shave Care and Appliances, are comprised entirely of acquired businesses and as a result have fair value cushions that are not as high. The Appliances wholly-acquired reporting unit has a fair value that significantly exceeds the underlying carrying value. As previously disclosed,
During fiscal 2019, a non-cash before- and after-tax impairment charge of $6.8 billion was recognized to reduce the fair valuecarrying amount of goodwill for the Shave Care reporting unit, and a non-cash, before-tax impairment charge of $1.6 billion ($1.2 billion after-tax) was recognized to reduce the relatedcarrying amount of the Gillette indefinite-lived intangible asset have been reduced during the recent year to amounts that approximated carryingits fair value. The underlying reductions in fair value reductionsvalues were due in large part to significant currency devaluations in a number of countries relative to the U.S. dollar, a deceleration of category growth caused by changing grooming habits, primarily in the developed markets, and an increased competitive market environment in the U.S. and certain other markets, which collectively have resulted in reduced cash flow projections. The business continued to be impacted by these factors during the quarter ended June 30, 2019, which reduced previous estimates of earnings for both fiscal 2019 and fiscal 2020. Because of this, we re-performed our step one impairment tests for these assets as of June 30, 2019 and determined that the fair values have been reduced below their respective carrying values.
Therefore, we conducted a step two test of goodwill for the Shave Care reporting unit. Step two requires that we allocate the fair value of the reporting unit to identifiable assets and

26 The Procter & Gamble Company

liabilities of the reporting unit, including previously amortized or unrecognized intangible assets. Any residual fair value after this allocation is compared to the goodwill balance and any excess goodwill is charged to expense. The step two test resulted in an implied fair value of the Shave Care goodwill that was below the carrying value. Therefore, we recognized a non-cash before and after-tax impairment charge of $6.8 billion. The resulting carrying value of the Shave Care goodwill is $12.6 billion as of June 30, 2019.markets. As a result of the methodology used infiscal 2019 impairment determined by the step two testing, the Shave Care fair value now exceedsexceeded the carrying value by approximately 20%. This is primarily due to higher estimated fair values as of June 30, 2019. Because the impairment testing for certain fixed assets and defined lived intangibles assets, both of which have been partially amortized subsequent to their initial acquisition, along with fair values assigned to intangible assets not eligible for recognition in the financial statements.
The Gillette indefinite-lived intangible asset impairment charge was $1.6 billion ($1.2 billion after tax). This charge was equal to the difference between its estimated fair value (as calculated in step one) and its carrying value. The resulting carrying value ofis a one-step process, the Gillette indefinite-lived intangible asset is $14.1 billion as of June 30,fair value approximated its carrying value at that date.During our annual impairment testing during the quarter ended December 31, 2019, which is equal to its estimated fair value. we reduced the discount rate used in the valuation based on developments in the macroeconomic environment.As a result of this change and updates to other underlying cash flow projections, the Shave Care fair value exceeded the carrying value by more than 20% and the

The Procter & Gamble Company 29
Gillette indefinite-lived intangible asset is more susceptible to future impairment risk.
The Shave Care goodwill and Gillette indefinite-lived asset impairment charges are presented as a separate line item infair value exceeded the Consolidated Statements of Earnings. Irrespective of these impairment charges, the Shave Care business has consistently generated significant earnings and cash flow and will continue to be a strategic business for the Company, with attractive earnings, cash flow and growth opportunities.carrying value by approximately 5%.
The most significant assumptions utilized in the determination of the estimated fair values of the Shave Care reporting unit and the Gillette indefinite-lived intangible asset are the net sales and earnings growth rates (including residual growth rates) and discount rate. The residual growth rate represents the expected rate at which the reporting unit and Gillette brand are expected to grow beyond the shorter-term business planning periodperiod. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit and brand operating plans and approximates expected long termlong-term category market growth rates. The net sales and earningsresidual growth rates arerate is dependent on overall market growth rates, the competitive environment, inflation, relative currency exchange rates and business activities that impact market share and input cost fluctuations.share. As a result, thesethe residual growth ratesrate could be adversely impacted by a sustained deceleration in category growth, grooming habit changes, an increased competitive environment, increases in input costs or devaluation of currencies against the U.S. dollar. Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S.dollar or an increased competitive environment. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other country specific factors, such as further devaluation of currencies against the U.S. dollar. Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S.
While management can and has implemented strategies to address
these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the Shave Care reporting unit's goodwill and indefinite-lived intangibles. As of June 30, 2020, the carrying values of the Shave Care goodwill and the Gillette indefinite-lived intangible asset were $12.5 billion and $14.1 billion, respectively.
The COVID-19 pandemic that occurred during the second half of fiscal 2020 resulted in a reduction in shave incidents by consumers and a weakening of certain currencies relative to the U.S. dollar, which led to a reduction in net sales for Gillette-branded products.This resulted in a triggering event for the Gillette indefinite-lived intangible asset, which caused us to perform an additional impairment assessment for that asset as of June 30, 2020.That assessment indicated that the fair value of the Gillette trade name approximated its carrying value.Accordingly, no impairment charge was recorded during the year ended June 30, 2020.
The duration and severity of the pandemic could result in additional future impairment charges for the Shave Care reporting unit goodwill and the Gillette indefinite-lived intangible asset. Our June 30, 2020 impairment assessment of the Gillette intangible asset assumes the pandemic’s
impact on net sales will begin to abate during the first half of fiscal 2021 and be largely eliminated by the second half of the fiscal year.There is an extreme level of uncertainty relating to how the pandemic will evolve and how governments and consumers will react.Accordingly, there is a significant amount of uncertainty related to this key assumption. A more prolonged pandemic could impact the results of operations due to changes to assumptions utilized in the determination of the estimated fair values of Shave Care reporting unit and the Gillette indefinite-lived intangible asset that are significant enough to trigger an impairment. Net sales and earnings growth rates could be negatively impacted by more prolonged reductions or changes in demand for our shave care products, whichmay be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, financial hardship, changes in the use and frequency of grooming products or by shifts in demand away from one or more of our higher priced products to lower priced products. In addition, relative global and country/regional macroeconomic factors could result in additional and prolonged devaluation of other countries’ currencies relative to the U.S. dollar. Finally, the discount rate utilized in our valuation model could be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital.
The table below provides a sensitivity analysis for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset, utilizing reasonably possible changes in the assumptions for the shorter term and residual growth rates and the discount rate, to demonstrate the potential impacts to the estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25 basis point increase to discount rate or a 25 basis point decrease to our shorter-term and residual growth rates, botheither of which, in isolation, would result in incrementalan additional impairment charges toof the Gillette indefinite-lived intangible asset.
Approximate Percent Change in Estimated Fair ValueApproximate Percent Change in Estimated Fair Value
+25 bps Discount Rate 
-25 bps
Growth Rate
+25 bps Discount Rate-25 bps
Growth Rate
Shave Care goodwill reporting unit(5)% (6)%Shave Care goodwill reporting unit(6)%(6)%
Gillette indefinite-lived intangible asset(5)% (5)%Gillette indefinite-lived intangible asset(6)%(6)%

See Note 4 to the Consolidated Financial Statements for additional discussion on goodwill and intangible asset impairment testing results.
New Accounting Pronouncements
Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of June 30, 2019.2020.


30 The Procter & Gamble Company
OTHER INFORMATION
Hedging and Derivative Financial Instruments
As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. We evaluate exposures on a centralized basis to take advantage of natural exposure correlation and netting. We leverage the Company's diversified portfolio of exposures as a natural hedge and prioritize operational hedging activities over financial market instruments. To the extent we choose to further manage volatility within our financing operations, as discussed below, we enter into various financial transactions which we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices. See Note 9 to the Consolidated Financial Statements for a discussion of our accounting policies for derivative instruments.
Derivative positions are monitored using techniques including market valuation, sensitivity analysis and value-at-risk modeling. The tests for interest rate, currency rate and commodity derivative positions discussed below are based on the RiskManager™ value-at-risk model using a one-year horizon and a 95% confidence level. The model incorporates

The Procter & Gamble Company 27

the impact of correlation (the degree to which exposures move together over time) and diversification (from holding multiple currency, commodity and interest rate instruments) and assumes that financial returns are normally distributed. Estimates of volatility and correlations of market factors are drawn from the RiskMetrics™ dataset as of June 30, 2019.2020. In cases where data is unavailable in RiskMetrics™, a reasonable proxy is included.
Our market risk exposures relative to interest rates, currency rates and commodity prices, as discussed below, have not changed materially versus the previous reporting period. In addition, we are not aware of any facts or circumstances that would significantly impact such exposures in the near term.
Interest Rate Exposure on Financial Instruments. Interest rate swaps are used to hedge exposures to interest rate movement on underlying debt obligations. Certain interest rate swaps denominated in foreign currencies are designated to hedge exposures to currency exchange rate movements on our investments in foreign operations. These currency interest rate swaps are designated as hedges of the Company's foreign net investments.
Based on our interest rate exposure as of and during the year ended June 30, 2019,2020, including derivative and other instruments sensitive to interest rates, we believe a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would not materially affect our financial statements.
Currency Rate Exposure on Financial Instruments.Because we manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to the impact on revenue and expenses of movements in currency exchange rates. Corporate policy
prescribes the range of allowable hedging activity. To manage the exchange rate risk associated with the financing of our operations, we primarily use forward contracts and currency swaps with maturities of less than 18 months.
Based on our currency rate exposure on derivative and other instruments as of and during the year ended June 30, 2019,2020, we believe, at a 95% confidence level based on historical currency rate movements, the impact on such instruments of a near-term change in currency rates would not materially affect our financial statements.
Commodity Price Exposure on Financial Instruments. We use raw materials that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. We may use futures, options and swap contracts to manage the volatility related to the above exposures.
As of and during the years ended June 30, 20192020 and June 30, 2018,2019, we did not have any commodity hedging activity.
Measures Not Defined By U.S. GAAP
In accordance with the SEC's Regulation S-K Item 10(e), the following provides definitions of the non-GAAP measures and the reconciliation to the most closely related GAAP measures. We believe that these measures provide useful perspective of underlying business trends (i.e. trends excluding non-recurring
or unusual items) and results and provide a supplemental measure of year-on-year results. The non-GAAP measures described below are used by management in making operating decisions, allocating financial resources and for business strategy purposes. These measures may be useful to investors as they provide supplemental information about business performance and provide investors a view of our business results through the eyes of management. These measures are also used to evaluate senior management and are a factor in determining their at-risk compensation. These non-GAAP measures are not intended to be considered by the user in place of the related GAAP measure, but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted. These measures include:
Organic Sales Growth. Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of the July 1, 2018 adoption of new accounting standards for "Revenue from Contracts with Customers", acquisitions, divestitures and foreign exchange from year-over-year comparisons. The impact of the adoption of the new accounting standard for Revenue from Contracts with Customers is driven by the prospective reclassification of certain customer spending from marketing (SG&A) expense to a reduction of net sales. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis, and thisbasis. This measure is used in assessing achievement of management goals for at-risk compensation.


The Procter & Gamble Company 31
The following tables provide a numerical reconciliation of organic sales growth to reported net sales growth:
Year ended June 30, 2019Net Sales GrowthForeign Exchange Impact
Acquisition & Divestiture Impact/Other (1)
Organic Sales Growth
Year ended June 30, 2020Year ended June 30, 2020Net Sales GrowthForeign Exchange ImpactAcquisition & Divestiture Impact/Other (1)Organic Sales Growth
Beauty4 %4%— %8%Beauty4 %2 %(1)%5 %
Grooming(5)%5%1 %1%Grooming(2)%3 %— %1 %
Health Care5 %3%(2)%6%Health Care10 %2 %(5)%7 %
Fabric & Home Care3 %3%1 %7%Fabric & Home Care7 %1 %1 %9 %
Baby, Feminine & Family Care(2)%4%— %2%Baby, Feminine & Family Care3 %2 %(1)%4 %
TOTAL COMPANY1 %4%— %5%TOTAL COMPANY5 %2 %(1)%6 %
(1)
(1) Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures and rounding impacts necessary to reconcile net sales to organic sales.
Acquisition & Divestiture Impact/Other includes the volume and mix impact of acquisitions and divestitures, the impact from the July 1, 2018 adoption of a new accounting standard for "Revenue from Contracts with Customers" and rounding impacts necessary to reconcile net sales to organic sales.
Adjusted Free Cash Flow. Adjusted free cash flow is defined as operating cash flow less capital spending, and excluding certain tax payments related to the Merck OTC Consumer Healthcare acquisition in 2020 and the transitional tax resulting from the U.S. Tax Act in 2020 and 2019 (the Company incurred a transitional tax liability of approximately $3.8 billion from the U.S. Tax Act, which is payable over a period of 8 years). Adjusted free cash flow represents the cash that the Company is able to generate

28 The Procter & Gamble Company

after taking into account planned maintenance and asset expansion. We view adjusted free cash flow as an important measure because it is one factor used in determining the amount of cash available for
dividends, share repurchases, acquisitions and other discretionary investments.
The following table provides a numerical reconciliation of adjusted free cash flow ($ millions):
Operating
Cash Flow		Capital
Spending
Adjustments to Operating Cash Flow (1)
Adjusted Free
Cash Flow
2020$17,403  $(3,073) $543  $14,873  
2019$15,242  $(3,347) $235  $12,130  
 
Operating
Cash Flow
Capital
Spending
Adjustments to Operating Cash Flow (1)
Adjusted Free
Cash Flow
2019$15,242
$(3,347)$235
$12,130
2018$14,867
$(3,717)$—
$11,150
(1)(1) Adjustments to Operating Cash Flow include tax payments for the transitional tax resulting from the U.S. Tax Act of $215 and $235 in 2020 and 2019, respectively, and tax payments related to the Merck acquisition of $328 in 2020.
Adjustments to Operating Cash Flow relate to tax payments for the transitional tax resulting from the U.S. Tax Act.
Adjusted Free Cash Flow Productivity. Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding 1) the fiscal 2019 Shave Care impairment and 2) the fiscal 2019 gain on dissolution of the
PGT Healthcare partnership.earnings. We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Adjusted free cash flow productivity is used by management in making operating decisions, in allocating financial resources and for budget planning purposes. This measure is used in assessing the achievement of management goals for at-risk compensation. The Company's long-term target is to generate annual adjusted free cash flow productivity at or above 90 percent.
The following table provides a numerical reconciliation of adjusted free cash flow productivity ($ millions):
Adjusted Free Cash FlowNet
Earnings		Adjusted Free
Cash Flow
Productivity
2020$14,873  $13,103  114 %

 
Net
Earnings
Adjustments to Net Earnings (1)
Net Earnings Excluding AdjustmentsAdjusted Free Cash Flow
Adjusted Free
Cash Flow
Productivity
2019$3,966
$7,625
$11,591
$12,130
105%
(1)
Adjustments to Net Earnings relate to the Shave Care impairment charges and the gain on the dissolution of the PGT Healthcare partnership in fiscal 2019.
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:
•
Incremental Restructuring
•Incremental Restructuring: The Company has had and continues to have an ongoing level of restructuring activities. Such activities have resulted in ongoing annual restructuring related charges of approximately $250 - $500 million before tax. In 2012, the Company began a $10 billion strategic productivity and cost savings initiative that included incremental restructuring activities. In 2017, we communicated details of an additional multi-year productivity and cost savings plan. This results in incremental restructuring charges to accelerate productivity efforts and cost savings. The adjustment to Core earnings includes only the restructuring costs above what we believe are the normal recurring level of restructuring costs.
•Gain on Dissolution of the PGT Healthcare Partnership: The Company dissolved our PGT Healthcare partnership, a venture between the Company and Teva Pharmaceuticals Industries, Ltd (Teva) in the OTC consumer healthcare business, during the year ended June 30, 2019. The transaction was accounted for as a sale of the Teva portion of the PGT business and the Company recognized an after-tax gain on the dissolution of $353 million.  
•Shave Care Impairment: As discussed in Note 4 to the Consolidated Financial Statements and in the Significant Accounting Policies and Estimates section of the MD&A, in the fourth quarter of fiscal 2019, the Company recognized a non-cash after-tax charge of $8.0 billion ($8.3 billion before tax) to adjust the carrying values of the Shave Care reporting unit and the Gillette indefinite-lived intangible asset. This was comprised of a before and after-tax impairment charge of $6.8 billion related to goodwill and an after-tax impairment charge of $1.2 billion ($1.6 billion before tax) to reduce the carrying value of the Gillette indefinite-lived intangible asset.
•Anti-Dilutive Impacts: As discussed in Note 6 to the Consolidated Financial Statements, the Shave Care impairment charges caused preferred shares that are normally dilutive (and hence, normally assumed converted for purposes of determining diluted earnings per share) to be anti-dilutive. Accordingly, for U.S. GAAP the preferred shares were not assumed to be converted into common shares for diluted earnings per share and the related dividends paid to the preferred

32 The Procter & Gamble Company
shareholders were deducted from net income to calculate net earnings available to common shareholders. As a result of the non-GAAP Shave Care impairment adjustment, these instruments are dilutive for non-GAAP core EPS.

: The Company has had and continues to have an ongoing level of restructuring activities. Such activities have resulted in ongoing annual restructuring related charges of approximately $250 - $500 million before tax. In 2012, the Company began a $10 billion strategic productivity and cost savings initiative that includes incremental restructuring activities. In 2017, we communicated details of an additional multi-year productivity and cost savings plan. This results in incremental restructuring charges to accelerate productivity efforts and cost savings. The adjustment to Core earnings includes only the restructuring costs above what we believe are the normal recurring level of restructuring costs.
•
Gain on Dissolution of the PGT Healthcare Partnership: The Company dissolved our PGT Healthcare partnership, a venture between the Company and Teva Pharmaceuticals Industries, Ltd (Teva) in the OTC consumer healthcare business, during the year ended June 30, 2019. The transaction was accounted for as a sale of the Teva portion of the PGT business; the Company recognized an after-tax gain on the dissolution of $353 million.
•
Transitional Impacts of the U.S. Tax Act: As discussed in Note 5 to the Consolidated Financial Statements, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Act”) in December 2017.  This resulted in a net charge of $602 million for the fiscal year 2018.  The adjustment to core earnings only includes this transitional impact.  It does not include the ongoing impacts of the lower U.S. statutory rate on pre-tax earnings.
•
Early debt extinguishment charges: In fiscal 2018, the Company recorded after-tax charges of $243 million, 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.
•
Shave Care Impairment: As discussed in Note 4 to the Consolidated Financial Statements and in the Significant Accounting Policies and Estimates section of the MD&A, in the fourth quarter of fiscal 2019, the Company recognized a one-time, non-cash after-tax charge of $8.0 billion ($8.3 billion before tax) to adjust the carrying values of the Shave Care reporting unit. This was comprised of a before and after-tax impairment charge of $6.8 billion related to goodwill and an after-tax impairment charge of $1.2 billion ($1.6 billion before tax) to reduce the carrying value of the Gillette indefinite-lived intangible assets.
•
Anti-Dilutive Impacts: As discussed in Note 6 to the Consolidated Financial Statements, the Shave Care impairment charges caused preferred shares that are normally dilutive (and hence, normally assumed converted for purposes of determining diluted earnings per share) to be anti-dilutive. Accordingly for U.S. GAAP, the preferred shares were not assumed to be converted into common shares for diluted earnings per share and the related dividends paid to the preferred shareholders were deducted from net income to calculate earnings available to common shareholders. As a result of the non-GAAP Shave Care impairment adjustment, these instruments are dilutive for non-GAAP core earnings per share.

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
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Twelve Months Ended June 30, 2020
AS REPORTED (GAAP)INCREMENTAL RESTRUCTURINGNON-GAAP (CORE)
NET EARNINGS ATTRIBUTABLE TO P&G13,027  415  13,442  
Core EPS
DILUTED NET EARNINGS PER COMMON SHARE (1)
$4.96  $0.16  $5.12  
(1) Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble Company 29
Gamble.

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Twelve Months Ended June 30, 2019
 AS REPORTED (GAAP) ANTI-DILUTIVE IMPACTS INCREMENTAL RESTRUCTURING SHAVE CARE IMPAIRMENT GAIN ON DISSOLUTION OF PGT PARTNERSHIP ROUNDING NON-GAAP (CORE)
COST OF PRODUCTS SOLD$34,768
 $—
 $(426) $—
 $—
 $—
 $34,342
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE19,084
 —
 23
 —
 —
 (1) 19,106
OPERATING INCOME5,487
 —
 403
 8,345
 —
 1
 14,236
INCOME TAX ON CONTINUING OPERATIONS2,103
 —
 69
 367
 (2) —
 2,537
NET EARNINGS ATTRIBUTABLE TO P&G3,897
 —
 354
 7,978
 (353) 1
 11,877
              Core EPS
Diluted Net Earnings attributable to common shareholders (1)
3,634
 263
 354
 7,978
 (353) 1
 11,877
Diluted Weighted Average Common Shares Outstanding (1)
2,539.5
 90.2
       

 2,629.7
DILUTED NET EARNINGS PER COMMON SHARE$1.43
 $0.06
 $0.13
 $3.03
 $(0.13) $—
 $4.52
CHANGE VERSUS YEAR AGO
CORE EPS13 %

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Twelve Months Ended June 30, 2019
AS REPORTED (GAAP)ANTI-DILUTIVE IMPACTSINCREMENTAL RESTRUCTURINGSHAVE CARE IMPAIRMENTGAIN ON DISSOLUTION OF PGT PARTNERSHIPROUNDINGNON-GAAP (CORE)
NET EARNINGS ATTRIBUTABLE TO P&G3,897  —  354  7,978  (353) 1  11,877  
Core EPS
Diluted Net Earnings attributable to common shareholders (1)
3,634  263  354  7,978  (353) 1  11,877  
Diluted Weighted Average Common Shares Outstanding (1)
2,539.5  90.2  2,629.7  
DILUTED NET EARNINGS PER COMMON SHARE$1.43  $0.06  $0.13  $3.03  $(0.13) $—  $4.52  
(1) The reduction in net earnings from current periodthe 2019 charge for the Shave Care impairment caused the preferred shares outstanding to be anti-dilutive. Accordingly, for U.S. GAAP, the preferred shares were not assumed to be converted into common shares for diluted earnings per share and the related dividends paid to the preferred shareholders were deducted from net income to calculate earnings available to common shareholders. Excluding the impairment charge results in higher non-GAAP earnings which causes the preferred shares to be dilutive. The adjustments in this row are made to reflect the dilutive preferred share impact resulting from the Shave Care impairment adjustment.

CHANGE VERSUS YEAR AGO
CORE EPS7%
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
Twelve Months Ended June 30, 2018
 AS REPORTED (GAAP) INCREMENTAL RESTRUCTURING TRANSITIONAL IMPACTS OF THE U.S. TAX ACT EARLY DEBT EXTINGUISHMENT ROUNDING NON-GAAP (CORE)
COST OF PRODUCTS SOLD$34,432
 $(724) $—
 $—
 $(1) $33,707
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE19,037
 (1) —
 —
 1
 19,037
OPERATING INCOME13,363
 725
 —
 —
 —
 14,088
INCOME TAX ON CONTINUING OPERATIONS3,465
 129
 (602) 103
 —
 3,095
NET EARNINGS ATTRIBUTABLE TO P&G9,750
 610
 602
 243
 (1) 11,204
            Core EPS
DILUTED NET EARNINGS PER COMMON SHARE*$3.67
 $0.23
 $0.23
 $0.09
 $—
 $4.22
* 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.

30 The Procter & Gamble Company 33

Item 8. Financial Statements and Supplementary Data.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting of The Procter & Gamble Company (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.
Strong internal controls is an objective that is reinforced through our Worldwide Business Conduct Manual, which sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law. Our people are deeply committed to our Purpose, Values, and Principles, which unite us in doing what’s right. Our system of internal controls includes written policies and procedures, segregation of duties, and the careful selection and development of employees. Additional key elements of our internal control structure include our Global Leadership Council, which is actively involved in oversight of the business strategies, initiatives, results and controls, our Disclosure Committee, which is responsible for evaluating disclosure implications of significant business activities and events, our Board of Directors, which provides strong and effective corporate governance, and our Audit Committee, which reviews significant accounting policies, financial reporting and internal control matters.
The Company's internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually for critical financial reporting areas of the Company and is audited by our Global Internal Audit organization. Management takes the appropriate action to correct any identified control deficiencies. Global Internal Audit also performs financial and compliance audits around the world, provides training, and continuously improves our internal control processes.
Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.
Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2019,2020, using criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting as of June 30, 2019,2020, based on these criteria.
Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of June 30, 2019,2020, as stated in their report which is included herein.
/s/ David S. Taylor
(David S. TaylorTaylor)
Chairman of the Board, President and Chief Executive Officer
/s/ Jon R. Moeller
(Jon R. MoellerMoeller)
Vice Chairman, Chief Operating Officer and Chief Financial Officer
August 6, 20192020



34 The Procter & Gamble Company 31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of The Procter & Gamble Company
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of The Procter & Gamble Company and subsidiaries (the "Company") as of June 30, 20192020 and 2018,2019, the related Consolidated Statements of Earnings, Comprehensive Income, Shareholders’ Equity and Cash Flows for each of the three years in the period ended June 30, 20192020 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2019,2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2019,2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 6, 20192020 expressed an unqualified opinion on the Company's internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers in the year ended June 30, 2019 due to the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606).
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current-period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.it relates.
Goodwill and Intangible Assets - Shave Care Goodwill and Gillette Indefinite Lived Intangible Asset - Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill and indefinite lived intangible assets for impairment involves the comparison of the fair value of each reporting unit or indefinite lived intangible asset to its carrying value. The Company estimates fair value using the income method, which is based on the present value of estimated future cash flows attributable to the respective assets. This requires management to make significant estimates and assumptions related to forecasts of future net sales and earnings, including growth rates beyond a 10-year time period, royalty rates and discount rates. Changes in the assumptions could have a significant impact on either the fair value, the amount of any impairment charge, or both. The Company performed their annual impairment assessments of the Shave Care reporting unit as of October 1, 2019 and the Gillette brand indefinite lived intangible asset (the “Gillette brand”) as of December 31, 2019.  Because the estimated fair values exceeded their carrying values, no impairments were recorded. Given reductions in cash flows caused by currency devaluations, changing consumer grooming habits, the COVID-19 pandemic affecting demand and an increase in the competitive market environment, the Company revised their cash flow estimates and updated their fair value estimates for the Gillette brand as of June 30, 2020 and determined that the fair value of the Gillette brand approximated its carrying value. As of June 30, 2020, the Shave Care reporting unit goodwill was $12.5 billion, and the Gillette brand was $14.1 billion.
We identified the Company’s impairment evaluations of goodwill for the Shave Care reporting unit and the Gillette brand as a critical audit matter because of the reductions in cash flows and the significant judgments made by management to estimate the

Goodwill and Intangible Assets - Shave Care Goodwill and Gillette Indefinite Lived Intangible Asset - Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill and indefinite lived intangible assets for impairment involves the comparison of the fair value of each reporting unit or indefinite lived intangible asset to its carrying value. The Company estimates fair value using the income method, which is based on the present value of estimated future cash flows attributable to the respective assets. This requires management to make significant estimates and assumptions related to forecasts of future net sales and earnings, including growth rates beyond a 10-year time period, royalty rates and discount rates. Changes in the assumptions could have a significant impact on either the fair value, the amount of any impairment charge, or both. The Company performed their annual impairment assessments of the Shave Care reporting unit as of October 1, 2018 and the Gillette brand indefinite-lived intangible asset (the “Gillette brand”) as of December 31, 2018.  Because the estimated fair values exceeded their carrying values, no impairments were recorded. Given recent reductions in cash flows caused by currency devaluations, changing consumer grooming habits affecting demand and an increase in the competitive market environment, the Company revised their cash flow estimates and

32 The Procter & Gamble Company

updated their fair value estimates for both the Shave Care reporting unit and the Gillette brand as of June 30, 2019 and determined the carrying values exceeded the fair values resulting in an impairment of the Shave Care Goodwill and the Gillette brand. The Company measured the impairment of goodwill using the two-step method which requires management to make significant estimates and judgments to allocate the fair value of the Shave Care reporting unit to its identifiable assets and liabilities including estimating the fair value of property, plant and equipment and intangibles. The residual fair value of the Shave Care reporting unit was compared to the carrying value of its goodwill with the excess in carrying value of $6.8 billion before and after tax recorded as an impairment. The impairment of the Gillette brand of $1.6 billion before tax and $1.2 billion after tax was measured as the difference between its fair value and carrying value. As of June 30, 2019, after recording of the impairments, the Shave Care reporting unit goodwill was $12.6 billion, and the Gillette brand was $14.1 billion.
We identified the Company’s impairment evaluations of goodwill for the Shave Care reporting unit and the Gillette brand as a critical audit matter because of the recent reductions in cash flows and the significant judgments made by management to estimate the fair values of the reporting unit and the brand and to estimate the fair value of the reporting unit’s assets and liabilities for purposes of measuring the impairment of goodwill. A high degree of auditor judgment and an increased extent of effort was required when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecasts of future net sales and earnings as well as the selection of royalty rates and discount rates and the estimation and allocation of fair value to the reporting unit’s assets and liabilities including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to forecasts of future net sales and earnings and the selection of the royalty rates and discount rates for the Shave Care reporting unit and the Gillette brand included the following, among others:
•
We tested the effectiveness of controls over goodwill and indefinite lived intangible assets, including those over the determination of fair value, such as controls related to management’s development of forecasts of future net sales, earnings, the selection of royalty rates, discount rates and allocation of the reporting unit fair value to its identifiable assets and liabilities.
•
We evaluated management’s ability to accurately forecast net sales and earnings by comparing actual results to management’s historical forecasts.
•
We evaluated the reasonableness of management’s forecast of net sales and earnings by comparing the forecasts to:
•
Historical net sales and earnings.
•
Underlying analysis detailing business strategies and growth plans.
•
Internal communications to management and the Board of Directors.
•
Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.
•
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, net sales and earnings growth rates, royalty rates, discount rates and estimation and allocation of the reporting unit fair value to its identifiable assets and liabilities by:
•
Testing the source information underlying the determination of net sales and earnings growth rates, royalty rates, discount rates, estimation and allocation of the reporting unit fair value to its identifiable assets and liabilities and the mathematical accuracy of the calculations.
•
Developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management.
Acquisition of the over the counter healthcare business of Merck KGaA - Refer to Note 14 to the financial statements
Critical Audit Matter Description
The Company completed the acquisition of the over the counter healthcare business of Merck KGaA (Merck OTC) for $3.7 billion on November 30, 2018. The Company accounted for this transaction under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated, on a preliminary basis, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $2.1 billion and resulting goodwill of $2.1 billion. Of the identified intangible assets acquired, the most significant included brand indefinite lived intangible assets of $946 million and brand defined life intangible assets of $701 million (the “brand intangible assets”). The Company estimated the fair value of the brand intangible assets using the royalty savings method, which is a specific discounted cash flow method that required management to make significant estimates and assumptions related to future cash flows and the selection of royalty rates and discount rates.

The Procter & Gamble Company 3335

fair values of the reporting unit and the brand. A high degree of auditor judgment and an increased extent of effort was required when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecasts of future net sales and earnings as well as the selection of royalty rates and discount rates, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to forecasts of future net sales and earnings and the selection of the royalty rates and discount rates for the Shave Care reporting unit and the Gillette brand included the following, among others:
•We tested the effectiveness of controls over goodwill and indefinite lived intangible assets, including those over the determination of fair value, such as controls related to management’s development of forecasts of future net sales, earnings, the selection of royalty rates, and discount rates.
•We evaluated management’s ability to accurately forecast net sales and earnings by comparing actual results to management’s historical forecasts.
•We evaluated the reasonableness of management’s forecast of net sales and earnings by comparing the forecasts to:
•Historical net sales and earnings.
•Underlying analysis detailing business strategies and growth plans including consideration of the effects related to the COVID-19 pandemic.
•Internal communications to management and the Board of Directors.
•Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.
•With the assistance of our fair value specialists, we evaluated the net sales and earnings growth rates, royalty rates, and discount rates by:
•Testing the source information underlying the determination of net sales and earnings growth rates, royalty rates, and discount rates and the mathematical accuracy of the calculations.
•Developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management.

We identified the brand intangible assets for Merck OTC as a critical audit matter because of the significant estimates and assumptions management makes to fair value these assets for purposes of recording the acquisition. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows as well as the selection of the royalty rates and discount rates, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future cash flows and the selection of the royalty rates and discount rates for the brand intangible assets included the following, among others:
•
We tested the effectiveness of controls over the valuation of the brand intangible assets, including management’s controls over forecasts of future cash flows and selection of the royalty rates and discount rates.
•
We evaluated the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and certain peer companies.
•
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, royalty rates and discount rates by:
•
Testing the source information underlying the determination of the royalty rates and discount rates and testing the mathematical accuracy of the calculations.
•
Developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management.


/s/ Deloitte & Touche LLP
Cincinnati, Ohio
August 6, 20192020
We have served as the Company’s auditor since 1890.


3436 The Procter & Gamble Company

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of The Procter & Gamble Company

Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Procter & Gamble Company and subsidiaries (the "Company") as of June 30, 2019,2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2019,2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, 2019,2020, of the Company and our report dated August 6, 2019,2020, expressed an unqualified opinion on those financial statements and included an explanatory paragraph related to the Company’s change in method of accounting for revenue from contracts with customers in the year ended June 30, 2019 due to the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606).
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP
Cincinnati, Ohio
August 6, 20192020



The Procter & Gamble Company 3537

Consolidated Statements of Earnings
Amounts in millions except per share amounts; Years ended June 30202020192018
NET SALES$70,950  $67,684  $66,832  
Cost of products sold35,250  34,768  34,432  
Selling, general and administrative expense19,994  19,084  19,037  
Goodwill and indefinite-lived intangibles impairment charges—  8,345  —  
OPERATING INCOME15,706  5,487  13,363  
Interest expense(465) (509) (506) 
Interest income155  220  247  
Other non-operating income, net438  871  222  
EARNINGS BEFORE INCOME TAXES15,834  6,069  13,326  
Income taxes2,731  2,103  3,465  
NET EARNINGS13,103  3,966  9,861  
Less: Net earnings attributable to noncontrolling interests76  69  111  
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE (1)
$13,027  $3,897  $9,750  
NET EARNINGS PER COMMON SHARE: (2)
Basic$5.13  $1.45  $3.75  
Diluted$4.96  $1.43  $3.67  
Amounts in millions except per share amounts; Years ended June 302019 2018 2017
NET SALES$67,684
 $66,832
 $65,058
Cost of products sold34,768
 34,432
 32,638
Selling, general and administrative expense19,084
 19,037
 18,654
Goodwill and indefinite lived intangibles impairment charges8,345
 —
 —
OPERATING INCOME5,487
 13,363
 13,766
Interest expense509
 506
 465
Interest income220
 247
 171
Other non-operating income/(expense), net871
 222
 (215)
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES6,069
 13,326
 13,257
Income taxes on continuing operations2,103
 3,465
 3,063
NET EARNINGS FROM CONTINUING OPERATIONS3,966
 9,861
 10,194
NET EARNINGS FROM DISCONTINUED OPERATIONS—
 —
 5,217
NET EARNINGS3,966
 9,861
 15,411
Less: Net earnings attributable to noncontrolling interests69
 111
 85
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE$3,897
 $9,750
 $15,326
      
BASIC NET EARNINGS PER COMMON SHARE: (1)
     
Earnings from continuing operations$1.45
 $3.75
 $3.79
Earnings from discontinued operations—
 —
 2.01
BASIC NET EARNINGS PER COMMON SHARE$1.45
 $3.75
 $5.80
DILUTED NET EARNINGS PER COMMON SHARE: (1)
     
Earnings from continuing operations$1.43
 $3.67
 $3.69
Earnings from discontinued operations—
 —
 1.90
DILUTED NET EARNINGS PER COMMON SHARE$1.43
 $3.67
 $5.59
(1)Net earnings attributable to Procter & Gamble in fiscal 2019 was negatively impacted by the impairment charges of $8.3 billion related to Shave Care goodwill and Gillette indefinite-lived intangible assets.
(2)Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble.

(1)

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


See accompanying Notes to Consolidated Financial Statements.
3638 The Procter & Gamble Company

Consolidated Statements of Comprehensive Income
Amounts in millions; Years ended June 30202020192018
NET EARNINGS$13,103  $3,966  $9,861  
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation (net of $59, $78 and $(279) tax, respectively)(1,083) (213) (305) 
Unrealized gains/(losses) on investment securities (net of $(1), $0 and $0 tax, respectively)(12) 184  (148) 
Unrealized gains/(losses) on defined benefit retirement plans (net of $(42), $22 and $68 tax, respectively)(150) 169  334  
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX(1,245) 140  (119) 
TOTAL COMPREHENSIVE INCOME11,858  4,106  9,742  
Less: Total comprehensive income attributable to noncontrolling interests60  70  109  
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE$11,798  $4,036  $9,633  
Amounts in millions; Years ended June 302019 2018 2017
NET EARNINGS$3,966
 $9,861
 $15,411
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX     
Foreign currency translation (net of $78, $(279) and $(186) tax, respectively)(213) (305) (67)
Unrealized gains/(losses) on investment securities (net of $0, $0 and $(6) tax, respectively)184
 (148) (59)
Unrealized gains on defined benefit retirement plans (net of $22, $68 and $551 tax, respectively)169
 334
 1,401
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX140
 (119) 1,275
TOTAL COMPREHENSIVE INCOME4,106
 9,742
 16,686
Less: Total comprehensive income attributable to noncontrolling interests70
 109
 85
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE$4,036
 $9,633
 $16,601


See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company 3739

Consolidated Balance Sheets
Amounts in millions; As of June 302019 2018
Amounts in millions except stated values; As of June 30Amounts in millions except stated values; As of June 3020202019
Assets   Assets
CURRENT ASSETS   CURRENT ASSETS
Cash and cash equivalents$4,239
 $2,569
Cash and cash equivalents$16,181  $4,239  
Available-for-sale investment securities6,048
 9,281
Available-for-sale investment securities—  6,048  
Accounts receivable4,951
 4,686
Accounts receivable4,178  4,951  
INVENTORIES   INVENTORIES
Materials and supplies1,289
 1,335
Materials and supplies1,414  1,289  
Work in process612
 588
Work in process674  612  
Finished goods3,116
 2,815
Finished goods3,410  3,116  
Total inventories5,017
 4,738
Total inventories5,498  5,017  
Prepaid expenses and other current assets2,218
 2,046
Prepaid expenses and other current assets2,130  2,218  
TOTAL CURRENT ASSETS22,473
 23,320
TOTAL CURRENT ASSETS27,987  22,473  
PROPERTY, PLANT AND EQUIPMENT, NET21,271
 20,600
PROPERTY, PLANT AND EQUIPMENT, NET20,692  21,271  
GOODWILL40,273
 45,175
GOODWILL39,901  40,273  
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET24,215
 23,902
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET23,792  24,215  
OTHER NONCURRENT ASSETS6,863
 5,313
OTHER NONCURRENT ASSETS8,328  6,863  
TOTAL ASSETS$115,095
 $118,310
TOTAL ASSETS$120,700  $115,095  
   
Liabilities and Shareholders' Equity   Liabilities and Shareholders' Equity
CURRENT LIABILITIES   CURRENT LIABILITIES
Accounts payable$11,260
 $10,344
Accounts payable$12,071  $11,260  
Accrued and other liabilities9,054
 7,470
Accrued and other liabilities9,722  9,054  
Debt due within one year9,697
 10,423
Debt due within one year11,183  9,697  
TOTAL CURRENT LIABILITIES30,011
 28,237
TOTAL CURRENT LIABILITIES32,976  30,011  
LONG-TERM DEBT20,395
 20,863
LONG-TERM DEBT23,537  20,395  
DEFERRED INCOME TAXES6,899
 6,163
DEFERRED INCOME TAXES6,199  6,899  
OTHER NONCURRENT LIABILITIES10,211
 10,164
OTHER NONCURRENT LIABILITIES11,110  10,211  
TOTAL LIABILITIES67,516
 65,427
TOTAL LIABILITIES73,822  67,516  
SHAREHOLDERS' EQUITY   SHAREHOLDERS' EQUITY
Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)928
 967
Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)897  928  
Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)—
 —
Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)—  —  
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2019 - 4,009.2, 2018 - 4,009.2)4,009
 4,009
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2020 - 4,009.2, 2019 - 4,009.2)Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2020 - 4,009.2, 2019 - 4,009.2)4,009  4,009  
Additional paid-in capital63,827
 63,846
Additional paid-in capital64,194  63,827  
Reserve for ESOP debt retirement(1,146) (1,204)Reserve for ESOP debt retirement(1,080) (1,146) 
Accumulated other comprehensive income/(loss)(14,936) (14,749)Accumulated other comprehensive income/(loss)(16,165) (14,936) 
Treasury stock, at cost (shares held: 2019 - 1,504.5, 2018 -1,511.2)(100,406)
(99,217)
Treasury stock, at cost (shares held: 2020 - 1,529.5, 2019 - 1,504.5)Treasury stock, at cost (shares held: 2020 - 1,529.5, 2019 - 1,504.5)(105,573) (100,406) 
Retained earnings94,918
 98,641
Retained earnings100,239  94,918  
Noncontrolling interest385
 590
Noncontrolling interest357  385  
TOTAL SHAREHOLDERS' EQUITY47,579
 52,883
TOTAL SHAREHOLDERS' EQUITY46,878  47,579  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$115,095
 $118,310
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$120,700  $115,095  

See accompanying Notes to Consolidated Financial Statements.
3840 The Procter & Gamble Company

Consolidated Statements of Shareholders' Equity
Dollars in millions except per share amounts; shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumu-lated
Other
Comp-rehensive
Income/(Loss)		Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE JUNE 30, 20172,553,297  $4,009  $1,006  $63,641  ($1,249) ($14,632) ($93,715) $96,124  $594  $55,778  
Net earnings9,750  111  9,861  
Other comprehensive income/(loss)(117) (2) (119) 
Dividends and dividend equivalents ($2.7860 per share):
 Common(7,057) (7,057) 
 Preferred, net of tax benefits(265) (265) 
Treasury stock purchases(81,439) (7,004) (7,004) 
Employee stock plans21,655  199  1,469  1,668  
Preferred stock conversions4,580  (39) 6  33  —  
ESOP debt impacts45  89  134  
Noncontrolling interest, net(113) (113) 
BALANCE JUNE 30, 20182,498,093  $4,009  $967  $63,846  ($1,204) ($14,749) ($99,217) $98,641  $590  $52,883  
Impact of adoption of new accounting standards(326) (200) (27) (553) 
Net earnings3,897  69  3,966  
Other comprehensive income/(loss)139  1  140  
Dividends and dividend equivalents ($2.8975 per share):
 Common(7,256) (7,256) 
 Preferred, net of tax benefits(263) (263) 
Treasury stock purchases(53,714) (5,003) (5,003) 
Employee stock plans55,734  93  3,781  3,874  
Preferred stock conversions4,638  (39) 6  33  —  
ESOP debt impacts58  99  157  
Noncontrolling interest, net(118) (248) (366) 
BALANCE JUNE 30, 20192,504,751  $4,009  $928  $63,827  ($1,146) ($14,936) ($100,406) $94,918  $385  $47,579  
Net earnings13,027  76  13,103  
Other comprehensive income/(loss)(1,229) (16) (1,245) 
Dividends and dividend equivalents ($3.0284 per share):
 Common(7,551) (7,551) 
 Preferred, net of tax benefits(263) (263) 
Treasury stock purchases(61,346) (7,405) (7,405) 
Employee stock plans32,603  362  2,212  2,574  
Preferred stock conversions3,738  (31) 5  26  —  
ESOP debt impacts66  108  174  
Noncontrolling interest, net(88) (88) 
BALANCE JUNE 30, 20202,479,746  $4,009  $897  $64,194  ($1,080) ($16,165) ($105,573) $100,239  $357  $46,878  
Dollars in millions; shares in thousandsCommon StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumu-lated
Other
Comp-rehensive
Income/(Loss)		Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE JUNE 30, 20162,668,074

$4,009

$1,038

$63,714

($1,290)
($15,907)
($82,176)
$87,953

$642

$57,983
Net earnings       15,326
85
15,411
Other comprehensive income/(loss)     1,275
   1,275
Dividends and dividend equivalents ($2.6981 per share):          
 Common       (6,989) (6,989)
 Preferred, net of tax benefits       (247) (247)
Treasury stock purchases (1)
(164,866)     (14,625)  (14,625)
Employee stock plans45,848
  (77)  3,058
  2,981
Preferred stock conversions4,241
 (32)4
  28
  —
ESOP debt impacts    41
  81
 122
Noncontrolling interest, net        (133)(133)
BALANCE JUNE 30, 20172,553,297

$4,009

$1,006

$63,641

($1,249)
($14,632)
($93,715)
$96,124

$594

$55,778
Net earnings       9,750
111
9,861
Other comprehensive income/(loss)     (117)  (2)(119)
Dividends and dividend equivalents ($2.7860 per share):          
 Common       (7,057) (7,057)
 Preferred, net of tax benefits       (265) (265)
Treasury stock purchases(81,439)     (7,004)  (7,004)
Employee stock plans21,655
  199
  1,469
  1,668
Preferred stock conversions4,580
 (39)6
  33
  —
ESOP debt impacts    45
  89
 134
Noncontrolling interest, net        (113)(113)
BALANCE JUNE 30, 20182,498,093

$4,009

$967

$63,846

($1,204)
($14,749)
($99,217)
$98,641

$590

$52,883
Impact of adoption of new accounting standards     (326) (200)(27)(553)
Net earnings       3,897
69
3,966
Other comprehensive income/(loss)     139
  1
140
Dividends and dividend equivalents ($2.8975 per share):          
 Common       (7,256) (7,256)
 Preferred, net of tax benefits       (263) (263)
Treasury stock purchases(53,714)     (5,003)  (5,003)
Employee stock plans55,734
  93
  3,781
  3,874
Preferred stock conversions4,638
 (39)6
  33
  —
ESOP debt impacts    58
  99
 157
Noncontrolling interest, net   (118)    (248)(366)
BALANCE JUNE 30, 20192,504,751

$4,009

$928

$63,827

($1,146)
($14,936)
($100,406)
$94,918

$385

$47,579
(1)    Includes $9,421 of treasury shares received as part of the share exchange in the Beauty Brands transaction (see Note 13).


See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company 3941

Consolidated Statements of Cash Flows
Amounts in millions; Years ended June 30202020192018
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR$4,239  $2,569  $5,569  
OPERATING ACTIVITIES
Net earnings13,103  3,966  9,861  
Depreciation and amortization3,013  2,824  2,834  
Loss on early extinguishment of debt—  —  346  
Share-based compensation expense558  515  395  
Deferred income taxes(596) (411) (1,844) 
Loss/(gain) on sale of assets7  (678) (176) 
Goodwill and indefinite-lived intangible impairment charges—  8,345  —  
Change in accounts receivable634  (276) (177) 
Change in inventories(637) (239) (188) 
Change in accounts payable, accrued and other liabilities1,923  1,856  1,385  
Change in other operating assets and liabilities(710) (973) 2,000  
Other108  313  431  
TOTAL OPERATING ACTIVITIES17,403  15,242  14,867  
INVESTING ACTIVITIES
Capital expenditures(3,073) (3,347) (3,717) 
Proceeds from asset sales30  394  269  
Acquisitions, net of cash acquired(58) (3,945) (109) 
Purchases of short-term investments—  (158) (3,909) 
Proceeds from sales and maturities of investment securities6,151  3,628  3,928  
Change in other investments(5) (62) 27  
TOTAL INVESTING ACTIVITIES3,045  (3,490) (3,511) 
FINANCING ACTIVITIES
Dividends to shareholders(7,789) (7,498) (7,310) 
Increases/(reductions) in short-term debt2,345  (2,215) (3,437) 
Additions to long-term debt4,951  2,367  5,072  
Reductions of long-term debt (1)
(2,447) (969) (2,873) 
Treasury stock purchases(7,405) (5,003) (7,004) 
Impact of stock options and other1,978  3,324  1,177  
TOTAL FINANCING ACTIVITIES(8,367) (9,994) (14,375) 
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(139) (88) 19  
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH11,942  1,670  (3,000) 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR$16,181  $4,239  $2,569  
SUPPLEMENTAL DISCLOSURE
Cash payments for interest$434  $497  $529  
Cash payment for income taxes3,550  3,064  2,830  
Assets acquired through non-cash finance leases are immaterial for all periods.
Amounts in millions; Years ended June 302019 2018 2017 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR$2,569
 $5,569
 $8,098
 
OPERATING ACTIVITIES      
Net earnings3,966
 9,861
 15,411
 
Depreciation and amortization2,824
 2,834
 2,820
 
Loss on early extinguishment of debt—
 346
 543
 
Share-based compensation expense515
 395
 351
 
Deferred income taxes(411) (1,844) (601) 
Gain on sale of assets(678) (176) (5,490) 
Goodwill and indefinite-lived intangible impairment charges8,345
 —
 —
 
Change in accounts receivable(276) (177) (322) 
Change in inventories(239) (188) 71
 
Change in accounts payable, accrued and other liabilities1,856
 1,385
 (149) 
Change in other operating assets and liabilities(973) 2,000
 (43) 
Other313
 431
 162
 
TOTAL OPERATING ACTIVITIES15,242
 14,867
 12,753
 
INVESTING ACTIVITIES      
Capital expenditures(3,347) (3,717) (3,384) 
Proceeds from asset sales394
 269
 571
 
Acquisitions, net of cash acquired(3,945) (109) (16) 
Purchases of short-term investments(158) (3,909) (4,843) 
Proceeds from sales and maturities of short-term investments3,628
 3,928
 1,488
 
Cash transferred at closing related to the Beauty Brands divestiture—
 —
 (475) 
Change in other investments(62) 27
 (26) 
TOTAL INVESTING ACTIVITIES(3,490) (3,511) (6,685) 
FINANCING ACTIVITIES      
Dividends to shareholders(7,498) (7,310) (7,236) 
Change in short-term debt(2,215) (3,437) 2,727
 
Additions to long-term debt2,367
 5,072
 3,603
 
Reductions of long-term debt (1)
(969) (2,873) (4,931) 
Treasury stock purchases(5,003) (7,004) (5,204) 
Impact of stock options and other3,324
 1,177
 2,473
 
TOTAL FINANCING ACTIVITIES(9,994) (14,375) (8,568) 
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(88) 19
 (29) 
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH1,670
 (3,000) (2,529) 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR$4,239
 $2,569
 $5,569
 
       
SUPPLEMENTAL DISCLOSURE      
Cash payments for interest$497
 $529
 $518
 
Cash payment for income taxes3,064
 2,830
 3,714
 
Divestiture of Beauty business in exchange for shares of P&G stock and assumption of debt    11,360
 
Assets acquired through non-cash capital leases are immaterial for all periods.      
(1)(1) Includes early extinguishment of debt costs of $346 in 2018.
Includes early extinguishment of debt costs of $346 and $543 in 2018 and 2017 respectively.


See accompanying Notes to Consolidated Financial Statements.
4042 The Procter & Gamble Company

Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Procter & Gamble Company's (the "Company," "Procter & Gamble," "we" or "us") business is focused on providing branded consumer packaged goods of superior quality and value. Our products are sold in more than 180 countries and territories primarily through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and pharmacies.professional channels. We have on-the-ground operations in approximately 70 countries.
Basis of Presentation
The Consolidated Financial Statements include the Company and its controlled subsidiaries. Intercompany transactions are eliminated.
Because of a lack of control over VenezuelaVenezuelan subsidiaries caused by a number of currency and other operating controls and restrictions, our Venezuelan subsidiaries are not consolidated for any year presented. We account for those subsidiaries using theat cost, method of accounting.less impairments, plus or minus observable price changes.
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, consumer and trade promotion accruals, restructuring reserves, pensions, post-employment benefits, stock options, valuation of acquired intangible assets, useful lives for depreciation and amortization of long-lived assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, deferred tax assets and liabilities, uncertain income tax positions and contingencies. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the financial statements in any individual year. However, in regard to ongoing impairment testing of goodwill and indefinite-lived intangible assets, significant deterioration in future cash flow projections or other assumptions used in estimating fair values versus those anticipated at the time of the initial valuations, could result in impairment charges that materially affect the financial statements in a given year.
Revenue Recognition
Our revenue is primarily generated from the sale of finished product to customers. Those sales predominantly contain a
single performance obligation and revenue is recognized at a single point in time when ownership, risks and rewards transfer, which can be on the date of shipment or the date of receipt by the customer. A provision for payment discounts and product
return allowances is recorded as a reduction of sales in the same period the revenue is recognized. The revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities. The revenue includes shipping and handling costs, which generally are included in the list price to the customer.
Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are offered through various programs to customers and consumers. Sales are recorded net of trade promotion spending, which is recognized as incurred at the time of the sale. Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included as accrued marketing and promotion in the Accrued and other liabilities line item in the Consolidated Balance Sheets.
Cost of Products Sold
Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacturing of product, as well as manufacturing labor, depreciation expense and direct overhead expenseexpenses necessary to acquire and convert the purchased materials and supplies into finished product.products. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity.
Selling, General and Administrative Expense
Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, selling expenses, research and development costs, administrative and other indirect overhead costs, depreciation and amortization expense on non-manufacturing assets and other miscellaneous operating items. Research and development costs are charged to expense as incurred and were $1.8 billion in 2020, $1.9 billion in 2019 $1.9 billion in 2018 and $1.9 billion in 2017 (reported in Net earnings from continuing operations).2018. Advertising costs, charged to expense as incurred, include worldwide television, print, radio, internet and in-store advertising expenses and were $7.3 billion in 2020, $6.8 billion in 2019 $7.1 billion in 2018 and $7.1 billion in 2017 (reported in Net earnings from continuing operations).2018. Non-advertising related components of the Company's total marketing spending reported in SG&A include costs associated with consumer promotions, product sampling and sales aids.
Other Non-Operating Income/(Expense),Income, Net
Other non-operating income/(expense),income, net primarily includes net acquisition and divestiture gains, net non-service components of netcosts related to defined benefit costs,plans, investment income and other non-operating items.
Currency Translation
Financial statements of operating subsidiaries outside the U.S. generally are measured using the local currency as the functional currency. Adjustments to translate those
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 43
statements into U.S. dollars are recorded in Other comprehensive income (OCI). For subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Re-measurement adjustments for financial statements in highly inflationary economies and other transactional exchange gains and losses are reflected in earnings.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 41

Cash Flow Presentation
The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles net earnings to cash flowflows from operating activities. Cash flows from foreign currency transactions and operations are translated at an averagemonthly exchange raterates for theeach period. Cash flows from hedging activities are included in the same category as the items being hedged. Cash flows from derivative instruments designated as net investment hedges are classified as financing activities. Realized gains and losses from non-qualifying derivative instruments used to hedge currency exposures resulting from intercompany financing transactions are also classified as financing activities. Cash flows from other derivative instruments used to manage interest rates, commodity or other currency exposures are classified as operating activities. Cash payments related to income taxes are classified as operating activities. Cash flows from the Company's discontinued operations are included in the Consolidated Statements of Cash Flows. See Note 13 for significant cash flow items related to discontinued operations.
Investments
Investment securities have primarily consistconsisted of readily marketable debt securities. Unrealized gains or losses from investmentsdebt securities classified as trading, if any, are charged to earnings. Unrealized gains or losses on debt securities classified as available-for-sale are recorded in OCI. If an available-for-sale security is other than temporarily impaired, the loss is charged to either earnings or OCI depending on our intent and ability to retain the security until we recover the full cost basis and the extent of the loss attributable to the creditworthiness of the issuer. InvestmentDebt securities are included as Available-for-sale investment securities and Other noncurrent assets in the Consolidated Balance Sheets.
InvestmentsIn addition to debt securities, we hold minor equity investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions,decisions. These are accounted for as equity method investments. Other equity investments that are not controlled, and over which we do not have the ability to exercise significant influence, and for which there is a readily determinable market value, are accounted for under therecorded at fair value, with gains and losses recorded through net earnings. Equity investments without readily determinable fair values are measured at cost, method. Both equity and cost methodless impairments, plus or minus observable price changes. Equity investments are included as Other noncurrent assets in the Consolidated Balance Sheets.
Inventory Valuation
Inventories are valued at the lower of cost or marketnet realizable value. Product-related inventories are maintained on the first-in, first-out method. The cost of spare part inventories is maintained using the average-cost method.

Property, Plant and Equipment
Property, plant and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets' estimated useful lives using the straight-line method. Machinery and equipment includes office furniture and fixtures (15-year life), computer equipment and capitalized software (3- to 5-year lives) and manufacturing equipment (3- to 20-year lives). Buildings are depreciated over an estimated useful life of 40 years. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating
conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually or more often if indicators of a potential impairment are present. Our annual impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangible assets.
We have acquired brands that have been determined to have indefinite lives. Those assets are evaluated annually for impairment. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. In addition, when certain events or changes in operating conditions occur, an additional impairment assessment is performed and indefinite-lived assets may be adjusted to a determinable life.
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangible assets with contractual terms are generally amortized over their respective legal or contractual lives. Customer relationships, brands and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 30 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and remaining lives of intangible assets with determinable lives may be adjusted.
For additional details on goodwill and intangible assets see Note 4.
Fair Values of Financial Instruments
Certain financial instruments are required to be recorded at fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. Other financial instruments, including cash equivalents, certain investments and short-term debt, are recorded at cost, which approximates fair value. The fair values of long-term debt and financial instruments are disclosed in Note 9.
New Accounting Pronouncements and Policies
On July 1, 2018, we adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." This guidance outlines a single, comprehensive model of accounting for revenue from contracts with customers. We adopted the standard using the modified retrospective transition method, under which prior periods were not revised to reflect the impacts of the new standard. Our revenue is primarily generated from the sale of finished product to customers. Those sales predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Accordingly, the timing of revenue recognition is not

Amounts in millions of dollars except per share amounts or as otherwise specified.
4244 The Procter & Gamble Company

materially impacted by the new standard. Trade promotions, consisting primarily of customer pricing allowances, in-store merchandising funds, advertisingNew Accounting Pronouncements and other promotional activities, and consumer coupons, are offered through various programs to customers and consumers.  The adoption of the new standard accelerated the accrual timing for certain portions of our customer and consumer promotional spending, which resulted in a cumulative reduction to Retained earnings of $534, net of tax, on the date of adoption. The provisions of the new standard also impact the classification of certain payments to customers, moving such payments from expense to a deduction from net sales. Had this standard been effective and adopted during fiscal 2018, the impact would have been to reclassify $309 for the year ended June 30, 2018, with no impact to operating income. We elected certain practical expedients included in the guidance related to shipping and handling costs, which was not material to our Consolidated Financial Statements. This new guidance does not have any other material impacts on our Consolidated Financial Statements, including financial disclosures.Policies
On July 1, 2018,2019, we adopted ASU 2017-07, "Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost2016-02, "Leases (Topic 715)842)." This guidance requires an entity to disaggregate the current service cost component from the other components of net benefit costs in the face of the income statement. ItThe new accounting standard requires the service cost component to be presented with other current compensation costsrecognition of right-of-use assets and lease liabilities for the related employees in theall long-term leases, including operating section of the income statement, with other components of net benefit cost presented outside of income from operations. We adopted the standard retrospectively, using the practical expedient which allows entities to use information previously disclosed in their pension and other postretirement benefit plans footnote as the basis to apply the retrospective presentation requirements. As such, prior periods’ results have been revised to report the other components of net defined benefit costs, previously reported in Cost of products sold and SG&A, in Other non-operating income, net.
On July 1, 2018, we adopted ASU 2016-18, "Statement of Cash Flows: Restricted Cash (Topic 230)." This guidance requires the Statement of Cash Flows to present changes in the total of cash, cash equivalents and restricted cash. Prior to the adoption of this ASU, the relevant accounting guidance did not require the Statement of Cash Flows to include changes in restricted cash. We currently have no significant restricted cash balances. Historically, we had restricted cash balances and changes related to divestiture activity. Such balances were presented as Current assets held for saleleases, on the balance sheets, with changes presented as Investing activities onsheet. We elected the Statements of Cash Flow. In accordance with ASU 2016-08, such balances are now included inoptional transition method and adopted the beginning and ending balances of Cash, cash equivalents and restricted cash for all periods presented.
On July 1, 2018, we early adopted ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220)." Thisnew guidance permits companies to make an election to reclassify stranded
tax effects from the recently enacted U.S. Tax Cuts and Jobs Act included in Accumulated other comprehensive income/(loss) (AOCI) to Retained earnings.  ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The reclassification from the adoption of this standard resulted in an increase of $326 to Retained earnings and a decrease of $326 to AOCI.
On July 1, 2018, we adopted ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity transfers of Assets other than Inventory." We adopted this standard on a modified retrospective basis.basis with no restatement of prior period amounts. As allowed under the new accounting standard, we elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The standard eliminates the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. The adoption of ASU 2016-16 did not have a material impact on our Consolidated Financial Statements, including the cumulative effect adjustment required upon adoption.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) Targeted Improvements”. The updated guidance provides an optional transition method, which allows for the application of the standard as of the adoption date with no restatement of prior period amounts. We plan to adopt the standard on July 1, 2019 under the optional transition method described above. We are currently in the process of implementing lease accounting software as well as assessing the impact that the new standard will have on our Consolidated Financial Statements. The impact of the standard will consist primarily of a balance sheet gross up of our operating leases to show equal and offsetting lease assets and lease liabilities. Subject to the completion of our assessment, we expect the adoption of the standard to resultfinancial statements, resulting in an increase of approximately 1% to each of our total assets and total liabilities on our balance sheet as of approximately 1%.July 1, 2019. See Note 12 for further information.
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The standard simplifies the accounting for goodwill impairment by requiring a goodwill impairment to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the estimated fair value of the specified reporting units in their entirety. This eliminates the second step of the current impairment model that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those estimated fair values and a residual measurement approach. ItThe new standard also specifies that any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We will adopt the standard no later thaneffective July 1, 2020. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any.
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating our contracts and the optional expedients provided by the new standard.
No other new accounting pronouncementpronouncements issued or effective during the fiscal year or in future years had, or isare expected to have, a material impact on our Consolidated Financial Statements.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 43

NOTE 2
SEGMENT INFORMATION
During fiscal 2017, the Company completed the divestiture of four product categories, comprised of 43 of its beauty brands. The transactions included the global salon professional hair care and color, retail hair color, cosmetics and the fragrance businesses, along with select hair styling brands. This business is reported as discontinued operations for the year ended June 30, 2017 (see Note 13).
Under U.S. GAAP, our Global Business Units (GBUs)operating segments are aggregated into five5 reportable segments: 1) Beauty, 2) Grooming, 3) Health Care, 4) Fabric & Home Care and 5) Baby, Feminine & Family Care. Our five5 reportable segments are comprised of:
•
•Beauty: Hair Care (Conditioner, Shampoo, Styling Aids, Treatments); Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care);
•Grooming: Shave Care (Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care); Appliances
•Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care);
•Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and
•: Hair Care (Conditioner, Shampoo, Styling Aids, Treatments); Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care);
•
Grooming: Shave Care (Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care); Appliances
•
Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care);
•
Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and
•
Baby, Feminine & Family Care: Baby Care (Baby Wipes, Taped Diapers and Pants); Feminine Care (Adult Incontinence, Feminine Care); Family Care (Paper Towels, Tissues, Toilet Paper).
While none of our reportable segments are highly seasonal, components within certain reportable segments, such as Appliances (Grooming) and Personal Health Care (Health), are seasonal.
The accounting policies of the segments are generally the same as those described in Note 1. Differences between these policies and U.S. GAAP primarily reflect income taxes, which are reflected in the segments using applicable blended statutory rates. Adjustments to arrive at our effective tax rate are included in Corporate, including the impacts from the U.S. Tax Act in fiscal 2018 (see Note 5).
Corporate includes certain operating and non-operating activities that are not reflected in the operating results used internally to measure and evaluate the businesses, as well as items to adjust management reporting principles to U.S. GAAP. Operating activities in Corporate include the results of incidental businesses managed at the corporate level. Operating elements also include certain employee benefit costs, the costs of certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization, certain significant asset impairment charges and other general Corporate items. The non-operating elements in Corporate primarily include interest expense, certain pension and other postretirement benefit
costs, certain acquisition and divestiture gains, interest and investing income and other financing costs.
Total assets for the reportable segments include those assets managed by the reportable segment, primarily inventory,
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 45
fixed assets and intangible assets. Other assets, primarily cash, accounts receivable, investment securities, leased assets and goodwill, are included in Corporate.
Our business unitsoperating segments are comprised of similar product categories. Nine business unitsOperating segments that individually accounted for 5% or more of consolidated net sales are as follows:
% of Net sales by operating segment (1)
Years ended June 30202020192018
Fabric Care22%22%22%
Baby Care11%12%13%
Home Care11%10%10%
Skin and Personal Care10%10%9%
Hair Care9%10%10%
Family Care9%9%8%
Oral Care8%8%8%
Shave Care7%8%8%
Feminine Care6%6%6%
Personal Health Care5%4%4%
All Other2%1%2%
TOTAL100%100%100%
(1) % of Net sales by operating segment excludes sales held in Corporate.
% of Sales by Business Unit (1)
Years ended June 302019 2018 2017
Fabric Care22% 22% 22%
Baby Care12% 13% 14%
Hair Care10% 10% 10%
Home Care10% 10% 10%
Skin and Personal Care10% 9% 8%
Family Care9% 8% 8%
Oral Care8% 8% 8%
Shave Care8% 8% 9%
Feminine Care6% 6% 6%
All Other5% 6% 5%
TOTAL100% 100% 100%
(1)
% of sales by business unit excludes sales held in Corporate.
Net sales and long-lived assets in the United States and internationally were as follows (in billions):
Years ended June 30202020192018
NET SALES
United States$31.3  $28.6  $27.3  
International$39.7  $39.1  $39.5  
LONG-LIVED ASSETS (1)
United States$9.9  $10.0  $9.7  
International$10.8  $11.3  $10.9  
Years ended June 30 2019 2018 2017
NET SALES      
United States $28.6
 $27.3
 $27.3
International $39.1
 $39.5
 $37.8
LONG-LIVED ASSETS (1)
      
United States $10.0
 $9.7
 $8.8
International $11.3
 $10.9
 $11.1
(1)(1) Long-lived assets consists of property, plant and equipment.
Long-lived assets consists of property, plant and equipment.
No country, other country'sthan the United States, exceeds 10% of the consolidated net sales or long-lived assets exceed 10% of the Company totals.assets.
Our largest customer, Walmart Inc. and its affiliates, accounted for consolidated net sales of approximately 15%, 15% in 2020, 2019 and 16% in 2019, 2018 and 2017, respectively.2018. No other customer represents more than 10% of our consolidated net sales.


Global Segment ResultsNet SalesEarnings/(Loss)
Before
Income Taxes		Net Earnings/(Loss)Depreciation
and
Amortization		Total
Assets		Capital
Expenditures
BEAUTY2020$13,359  $3,437  $2,737  $320  $5,531  $397  
201912,897  3,282  2,637  272  5,362  634  
201812,406  3,042  2,320  236  4,709  766  
GROOMING20206,069  1,613  1,329  406  20,589  305  
20196,199  1,777  1,529  429  20,882  367  
20186,551  1,801  1,432  447  22,609  364  
HEALTH CARE20209,028  2,156  1,652  350  7,726  338  
20198,218  1,984  1,519  294  7,708  363  
20187,857  1,922  1,283  230  5,254  330  
FABRIC & HOME CARE202023,735  5,426  4,154  605  7,745  887  
201922,080  4,601  3,518  557  7,620  984  
201821,441  4,191  2,708  534  7,295  1,020  
BABY, FEMININE & FAMILY CARE202018,364  4,534  3,465  839  8,628  764  
201917,806  3,593  2,734  861  9,271  819  
201818,080  3,527  2,251  899  9,682  1,016  
CORPORATE (1)
2020395  (1,332) (234) 493  70,481  382  
2019484  (9,168) (7,971) 411  64,252  180  
2018497  (1,157) (133) 488  68,761  221  
TOTAL COMPANY2020$70,950  $15,834  $13,103  $3,013  $120,700  $3,073  
201967,684  6,069  3,966  2,824  115,095  3,347  
201866,832  13,326  9,861  2,834  118,310  3,717  
(1) The Corporate reportable segment includes the $8.3 billion non-cash before-tax ($8.0 billion after-tax) goodwill and intangible asset impairment charge in fiscal 2019. For additional details on goodwill and intangible assets see Note 4.
Amounts in millions of dollars except per share amounts or as otherwise specified.
4446 The Procter & Gamble Company

Global Segment Results  Net Sales 
Earnings/(Loss)
from Continuing
Operations
Before
Income Taxes
 Net Earnings/(Loss) from Continuing Operations 
Depreciation
and
Amortization
 
Total
Assets
 
Capital
Expenditures
BEAUTY2019 $12,897
 $3,282
 $2,637
 $272
 $5,362
 $634
 2018 12,406
 3,042
 2,320
 236
 4,709
 766
 2017 11,429
 2,546
 1,914
 220
 4,184
 599
GROOMING2019 6,199
 1,777
 1,529
 429
 20,882
 367
 2018 6,551
 1,801
 1,432
 447
 22,609
 364
 2017 6,642
 1,985
 1,537
 433
 22,759
 341
HEALTH CARE2019 8,218
 1,984
 1,519
 294
 7,708
 363
 2018 7,857
 1,922
 1,283
 230
 5,254
 330
 2017 7,513
 1,898
 1,280
 209
 5,194
 283
FABRIC & HOME CARE2019 22,080
 4,601
 3,518
 557
 7,620
 984
 2018 21,441
 4,191
 2,708
 534
 7,295
 1,020
 2017 20,717
 4,249
 2,713
 513
 6,886
 797
BABY, FEMININE & FAMILY CARE2019 17,806
 3,593
 2,734
 861
 9,271
 819
 2018 18,080
 3,527
 2,251
 899
 9,682
 1,016
 2017 18,252
 3,868
 2,503
 874
 9,920
 1,197
CORPORATE (1)
2019 484
 (9,168) (7,971) 411
 64,252
 180
 2018 497
 (1,157) (133) 488
 68,761
 221
 2017 505
 (1,289) 247
 571
 71,463
 167
TOTAL COMPANY2019 $67,684
 $6,069
 $3,966
 $2,824
 $115,095
 $3,347
 2018 66,832
 13,326
 9,861
 2,834
 118,310
 3,717
 2017 65,058
 13,257
 10,194
 2,820
 120,406
 3,384

(1)
The Corporate reportable segment includes the $8.3 billion one-time, non-cash before-tax ($8.0 billion after-tax) goodwill and intangible asset impairment charge in fiscal 2019. For additional details on goodwill and intangible assets see Note 4. The Corporate reportable segment also includes depreciation and amortization, total assets and capital expenditures of the Beauty Brands business prior to their divestiture in fiscal 2017.
NOTE 3
SUPPLEMENTAL FINANCIAL INFORMATION
The components of property, plant and equipment were as follows:
As of June 302019 2018As of June 3020202019
PROPERTY, PLANT AND EQUIPMENTPROPERTY, PLANT AND EQUIPMENTPROPERTY, PLANT AND EQUIPMENT
Buildings$7,746
 $7,188
Buildings$7,700  $7,746  
Machinery and equipment32,263
 30,595
Machinery and equipment33,260  32,263  
Land805
 841
Land777  805  
Construction in progress2,579
 3,223
Construction in progress2,034  2,579  
TOTAL PROPERTY, PLANT AND EQUIPMENT43,393
 41,847
TOTAL PROPERTY, PLANT AND EQUIPMENT43,771  43,393  
Accumulated depreciation(22,122) (21,247)Accumulated depreciation(23,079) (22,122) 
PROPERTY, PLANT AND EQUIPMENT, NET$21,271
 $20,600
PROPERTY, PLANT AND EQUIPMENT, NET$20,692  $21,271  

Selected components of current and noncurrent liabilities were as follows:
As of June 3020202019
ACCRUED AND OTHER LIABILITIES - CURRENT
Marketing and promotion$3,531  $4,299  
Compensation expenses1,921  1,623  
Restructuring reserves472  468  
Taxes payable693  341  
Other3,105  2,323  
TOTAL$9,722  $9,054  
OTHER NONCURRENT LIABILITIES
Pension benefits$6,223  $5,622  
Other postretirement benefits965  1,098  
U.S. Tax Act transitional tax payable2,121  2,343  
Uncertain tax positions580  472  
Long term operating leases652  —  
Other569  676  
TOTAL$11,110  $10,211  
As of June 302019 2018
ACCRUED AND OTHER LIABILITIES - CURRENT
Marketing and promotion$4,299
 $3,208
Compensation expenses1,623
 1,298
Restructuring reserves468
 513
Taxes payable341
 268
Other2,323
 2,183
TOTAL$9,054
 $7,470
    
OTHER NONCURRENT LIABILITIES
Pension benefits$5,622
 $4,768
Other postretirement benefits1,098
 1,495
Uncertain tax positions472
 581
U.S. Tax Act transitional tax payable2,343
 2,654
Other676
 666
TOTAL$10,211
 $10,164


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 45

RESTRUCTURING PROGRAM
The Company has historically incurred an ongoing annual level of restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Before-tax costs incurred under the ongoing program have generally ranged from $250 to $500 annually. In fiscal 2012, the Company initiated an incremental restructuring program (covering fiscal 2012 through 2017) as part of a productivity and cost savings plan to reduce costs in the areas of supply chain, research and development, marketing activities and overhead expenses. The productivity and cost savings plan was designed to accelerate cost reductions by streamlining management decision making, manufacturing and other work processes in order to help fund the Company's growth strategy.
In fiscal 2017, the Company announced specific elements of anotheran additional incremental multi-year productivity and cost savings plan to further reduce costs in the areas of supply chain, certain marketing activities and overhead expenses. This program is expected to resultresulting in incremental targeted enrollment reductions, along with further optimization of the supply chain and other manufacturing processes.
Restructuring costs incurred consist primarily of costs to separate employees, asset-related costs to exit facilities and other costs. The Company incurred total restructuring charges of $754$782 and $1,070$754 for the years ended June 30, 2020 and 2019, respectively. Of the charges incurred for fiscal year 2020, $155 were recorded in SG&A, $614 in Costs of products sold, and 2018, respectively.$13 in Other non-operating income/(expense), net. Of the charges incurred for fiscal year 2019, $213 were recorded in SG&A, $521 in Costs of products sold, and $20 in Other non-operating income/(expense), net. Of the charges incurred for fiscal year 2018, $237 were recorded in SG&A, $819 in Costs of products sold, and $14 in Other non-operating income/(expense), net. The following table presents restructuring activity for the years ended June 30, 20192020 and 2018:2019:
SeparationsAsset-Related CostsOtherTotal
RESERVE JUNE 30, 2018$259  $—  $254  $513  
Charges260  252  242  754  
Cash spent(239) —  (308) (547) 
Charges against assets—  (252) —  (252) 
RESERVE JUNE 30, 2019280  —  188  468  
Charges221  372  189  782  
Cash spent(216) —  (190) (406) 
Charges against assets—  (372) —  (372) 
RESERVE JUNE 30, 2020$285  $—  $187  $472  
Amounts in millionsSeparationsAsset-Related CostsOtherTotal
RESERVE JUNE 30, 2017$228
$—
$49
$277
Charges310
366
394
1,070
Cash spent(279)—
(189)(468)
Charges against assets—
(366)—
(366)
RESERVE JUNE 30, 2018259
—
254
513
Charges260
252
242
754
Cash spent(239)—
(308)(547)
Charges against assets—
(252)—
(252)
RESERVE JUNE 30, 2019$280
$—
$188
$468




Separation Costs
Employee separation charges for the years ended June 30, 20192020 and 20182019 relate to severance packages for approximately 1,8101,200 and 2,7201,810 employees, respectively. The packages were primarily voluntary and the amounts were calculated based on salary levels and past service periods. Severance costs related to voluntary separations are generally charged to earnings when the employee accepts the offer.
Asset-Related Costs
Asset-related costs consist of both asset write-downs and accelerated depreciation. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or for disposal. These assets were written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less minor disposal costs. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period. These assets relate primarily to
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 47
manufacturing consolidations and technology standardizations. The asset-related charges will not have a significant impact on future depreciation charges.
Other Costs
Other restructuring-type charges are incurred as a direct result of the restructuring program. Such charges primarily include asset removal and termination of contracts related to supply chain optimization.
Consistent with our historical policies for ongoing restructuring-type activities, the restructuring program charges are funded by and included within Corporate for both management and segment reporting. Accordingly, all of the charges under the program are included within the Corporate reportable segment.
However, for informativeinformation purposes, the following table summarizes the total restructuring costs related to our reportable segments:
Years ended June 30202020192018
Beauty$54  $49  $60  
Grooming102  65  38  
Health Care136  23  21  
Fabric & Home Care75  84  115  
Baby, Feminine & Family Care192  226  547  
Corporate (1)
223  307  289  
Total Company$782  $754  $1,070  
(1) Corporate includes costs related to allocated overheads, including charges related to our Enterprise Markets, Global Business Services and Corporate Functions activities.
Years ended June 30201920182017
Beauty$49
$60
$90
Grooming65
38
45
Health Care23
21
15
Fabric & Home Care84
115
144
Baby, Feminine & Family Care226
547
231
Corporate (1)
307
289
229
Total Company$754
$1,070
$754
(1)
Corporate includes costs related to allocated overheads, including charges related to our Sales and Market Operations, Global Business Services and Corporate Functions activities, along with costs related to discontinued operations from our Beauty Brands business in 2017.

Amounts in millions of dollars except per share amounts or as otherwise specified.
46 The Procter & Gamble Company

NOTE 4
GOODWILL AND INTANGIBLE ASSETS
The change in the net carrying amount of goodwill by reportable segment was as follows:
BeautyGroomingHealth CareFabric & Home CareBaby, Feminine & Family CareCorporateTotal Company
BALANCE AT JUNE 30, 2018 - NET (1)
$12,992  $19,820  $5,929  $1,865  $4,569  $—  $45,175  
Acquisitions and divestitures132  —  2,084  6  57  —  2,279  
Goodwill impairment charges—  (6,783) —  —  —  —  (6,783) 
Translation and other(139) (156) (41) (16) (46) —  (398) 
BALANCE AT JUNE 30, 2019 - NET (1)
12,985  12,881  7,972  1,855  4,580  —  40,273  
Acquisitions and divestitures(1) —  (46) —  5  —  (42) 
Translation and other(82) (66) (140) (14) (28) —  (330) 
BALANCE AT JUNE 30, 2020 - NET (1)
$12,902  $12,815  $7,786  $1,841  $4,557  $—  $39,901  
 BeautyGroomingHealth CareFabric & Home CareBaby, Feminine & Family CareCorporateTotal Company
Balance at June 30, 2017 - Net (1)
$12,791
$19,627
$5,878
$1,857
$4,546
$—
$44,699
Acquisitions and divestitures82
—
—
—
—
—
82
Translation and other119
193
51
8
23
—
394
Balance at June 30, 2018 - Net (1)
12,992
19,820
5,929
1,865
4,569
—
45,175
Acquisitions and divestitures132
—
2,084
6
57
—
2,279
Goodwill impairment charges—
(6,783)—
—
—
—
(6,783)
Translation and other(139)(156)(41)(16)(46)—
(398)
Balance at June 30, 2019 - Net (1)
$12,985
$12,881
$7,972
$1,855
$4,580
$—
$40,273
(1) 
Grooming goodwill balance is net of $1.2 billion accumulated impairment losses as of June 30, 2018 and $7.9 billion as of June 30, 2019 and 2020.
(1)
Grooming goodwill balance is net of $1.2 billion accumulated impairment losses as of June 30, 2017 and 2018 and $7.9 billion as of June 30, 2019.

Goodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and underlying indefinite-lived intangible assets to their respective carrying values. We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability). Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion, Company business plans, the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and
circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
During fiscal 2019, we determined that the estimated fair value of our Shave Care reporting unit was less than its carrying value. Therefore, we conducted step two of the goodwill impairment test. Step two requires that we allocate the fair value of the reporting unit to identifiable assets and liabilities of the reporting unit, including previously unrecognized intangible assets. Any residual fair value after this allocation is compared to the goodwill balance and any excess goodwill is charged to expense. We also determined that the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded non-cash impairment charges for both items. As previously disclosed, the fair values of the Shave Care reporting unit and the related Gillette indefinite-lived intangible asset have been reduced in recent years, including further reductions during the year and quarter ending June 30, 2019. These reductions were due in large part to significant currency devaluations in a number of countries relative to the U.S. dollar, a deceleration of category growth

caused by changing grooming habits, primarily in the developed markets, and an increased competitive market environment in the U.S. and certain other markets, which collectively have resulted in reduced cash flow projections. A non-cash before and after-tax impairment charge of $6.8 billion was recognized to reduce the carrying amount of goodwill for the Shave Care reporting unit. Following the impairment charge, the carrying value of the Shave Care goodwill is $12.6 billion. Additionally, a non-cash, before-tax impairment charge of $1.6 billion ($1.2 billion after-tax) was recognized to reduce the carrying amount of the Gillette indefinite-lived intangible asset to its estimated fair value as of June 30, 2019. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $14.1 billion.
We believe the estimates and assumptions utilized in our impairment testing are reasonable and are comparable to those that would be used by other marketplace participants. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record additional non-cash impairment charges in the future.
The change in goodwill during fiscal 2020 primarily reflects opening balance sheet adjustments from the prior year acquisition of the over-the-counter (OTC) healthcare business of Merck KGaA (Merck OTC) in the Health Care reportable segment (see Note 14) and currency translation across all reportable segments.
Amounts in millions of dollars except per share amounts or as otherwise specified.
48 The Procter & Gamble Company
During fiscal 2019, we determined that the estimated fair value of our Shave Care reporting unit was less than its carrying value. We also determined that the estimated fair value of the Gillette indefinite-lived intangible asset was less than its carrying value. As a result, we recorded non-cash impairment charges for both assets. These reductions were due in large part to significant currency devaluations in a number of countries relative to the U.S. dollar, a deceleration of category growth caused by changing grooming habits, primarily in the developed markets, and an increased competitive market environment in the U.S. and certain other markets, which collectively resulted in reduced cash flow projections. A non-cash, before and after-tax impairment charge of $6.8 billion was recognized to reduce the carrying amount of goodwill for the Shave Care reporting unit. Additionally, a non-cash, before-tax impairment charge of $1.6 billion ($1.2 billion after-tax) was recognized to reduce the carrying amount of the Gillette indefinite-lived intangible asset to its estimated fair value as of June 30, 2019.
During fiscal 2019, the Company completed the acquisition of the over the counter (OTC) healthcare business of Merck KGaA (Merck OTC),OTC, which is included in the Health Care reportable segment (see Note 14), along with other minor acquisitions in the Beauty, the Baby, Feminine & Family Care and the Fabric & Home Care reportable segments. GoodwillThese goodwill increases due to acquisitions were partially offset by the divestiture of the Teva portion of the PGT business in the Health Care reportable segment and currency translation.
The changetranslation in goodwill during fiscal 2018 was primarily due to acquisitions of two brands within the Beauty reportable segment and currency translation across all reportable segments.2019.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 47

Identifiable intangible assets were comprised of:
20202019
As of June 30Gross
Carrying
Amount		Accumulated
Amortization		Gross
Carrying
Amount		Accumulated
Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands$3,820  $(2,347) $3,836  $(2,160) 
Patents and technology2,776  (2,513) 2,776  (2,434) 
Customer relationships1,752  (778) 1,787  (691) 
Other143  (92) 145  (91) 
TOTAL$8,491  $(5,730) $8,544  $(5,376) 
INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands21,031  —  21,047  —  
TOTAL$29,522  $(5,730) $29,591  $(5,376) 
 2019 2018
As of June 30
Gross
Carrying
Amount
Accumulated
Amortization
 
Gross
Carrying
Amount
Accumulated
Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands$3,836
$(2,160) $3,146
$(2,046)
Patents and technology2,776
(2,434) 2,617
(2,350)
Customer relationships1,787
(691) 1,372
(616)
Other145
(91) 241
(144)
TOTAL$8,544
$(5,376) $7,376
$(5,156)
      
INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands21,047
—
 21,682
—
TOTAL$29,591
$(5,376) $29,058
$(5,156)

Amortization expense of intangible assets was as follows:
Years ended June 30202020192018
Intangible asset amortization$360  $349  $302  
Years ended June 302019 2018 2017
Intangible asset amortization$349
 $302
 $325

Estimated amortization expense over the next five fiscal years is as follows:
Years ending June 3020212022202320242025
Estimated amortization expense$310  $291  $280  $268  $250  
Years ending June 3020202021202220232024
Estimated amortization expense$359
$309
$290
$278
$267

NOTE 5
INCOME TAXES
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "U.S.U.S. Tax Act")Act). The U.S. Tax Act significantly revised the future ongoing U.S. corporate income tax by, among other things, lowering the U.S. corporate income tax rates and implementing a hybrid territorial tax system. As the Company has a June 30 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ended June 30, 2018, and 21% for subsequent fiscal years. However, the U.S. Tax Act eliminated the domestic manufacturing deduction and moved to a hybrid territorial system, which also largely eliminated the ability to credit certain foreign taxes that existed prior to enactment of the U.S. Tax Act.
There arewere also certain transitional impacts of the U.S. Tax Act. As part of the transition to the new hybrid territorial tax system,
the U.S. Tax Act imposed a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. In addition, the reduction of the U.S. corporate tax rate caused us to adjust our U.S. deferred tax assets and liabilities to the lower federal base rate of 21%. These transitional impacts resulted in a provisional net charge of $602 for the fiscal year ended June 30, 2018, comprised of an estimated repatriation tax charge of $3.8 billion (comprised of U.S. repatriation taxes and foreign withholding taxes) and an estimated net deferred tax benefit of $3.2 billion. The transitional impact was finalized during the fiscal year ended June 30, 2019, with no significant impact on income tax expense.
Any legislative changes, as well as any other new or proposed Treasury regulations to address questions that arise because of the U.S. Tax Act, may result in additional income tax impacts which could be material in the period any such changes are enacted.
The Global Intangible Low-Taxed Income ("GILTI")(GILTI) provision of the U.S. Tax Act requires the Company to include in its U.S. Income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary's tangible assets. An accounting policy election is available to account for the tax effects of GILTI either as a current period expense when incurred, or to recognize deferred taxes for book and tax basis differences expected to reverse as GILTI in future years. We have elected to account for the tax effects of GILTI as a current period expense when incurred.
Earnings from continuing operations before income taxes consisted of the following:
Years ended June 302019 2018 2017
United States$1,659
 $9,277
 $9,031
International4,410
 4,049
 4,226
TOTAL$6,069
 $13,326
 $13,257

Income taxes on continuing operations consisted of the following:
Years ended June 302019 2018 2017
CURRENT TAX EXPENSE
U.S. federal$1,064
 $3,965
 $1,531
International1,259
 1,131
 1,243
U.S. state and local191
 213
 241
 2,514
 5,309
 3,015
DEFERRED TAX EXPENSE
U.S. federal(296) (1,989) 28
International and other(115) 145
 20
 (411) (1,844) 48
TOTAL TAX EXPENSE$2,103
 $3,465
 $3,063


Amounts in millions of dollars except per share amounts or as otherwise specified.
48 The Procter & Gamble Company 49

Earnings before income taxes consisted of the following:
Years ended June 30202020192018
United States$10,338  $1,659  $9,277  
International5,496  4,410  4,049  
TOTAL$15,834  $6,069  $13,326  

Income taxes consisted of the following:
Years ended June 30202020192018
CURRENT TAX EXPENSE
U.S. federal$1,266  $1,064  $3,965  
International1,769  1,259  1,131  
U.S. state and local292  191  213  
3,327  2,514  5,309  
DEFERRED TAX EXPENSE/(BENEFIT)
U.S. federal39  (296) (1,989) 
International and other(635) (115) 145  
(596) (411) (1,844) 
TOTAL TAX EXPENSE$2,731  $2,103  $3,465  

A reconciliation of the U.S. federal statutory income tax rate to our actual effective income tax rate on continuing operations is provided below:
Years ended June 30202020192018
U.S. federal statutory income tax rate21.0 %21.0 %28.1 %
Country mix impacts of foreign operations(0.1)%(0.5)%(4.7)%
State income taxes, net of federal benefit1.4 %2.6 %1.4 %
Excess tax benefits from the exercise of stock options(1.6)%(3.8)%(0.4)%
Tax benefit from simplification of legal entity structure(1.4)%— %— %
Foreign derived intangible income deduction (FDII)(1.0)%(2.2)%— %
Changes in uncertain tax positions0.1 %(0.3)%(0.3)%
Goodwill impairment— %22.8 %— %
Net transitional impact of U.S. Tax Act— %— %4.5 %
Other(1.2)%(4.9)%(2.6)%
EFFECTIVE INCOME TAX RATE17.2 %34.7 %26.0 %
Years ended June 302019 2018 2017
U.S. federal statutory income tax rate21.0 % 28.1 % 35.0 %
Country mix impacts of foreign operations(0.5)% (4.7)% (6.8)%
Changes in uncertain tax positions(0.3)% (0.3)% (2.0)%
Excess tax benefits from the exercise of stock options(3.8)% (0.4)% (1.3)%
Goodwill impairment22.8 % — % — %
Net transitional impact of U.S. Tax Act— % 4.5 % — %
Other(4.5)% (1.2)% (1.8)%
EFFECTIVE INCOME TAX RATE34.7 % 26.0 % 23.1 %

Country mix impacts of foreign operations includes the effects of foreign subsidiaries' earnings taxed at rates other than the U.S. statutory rate, the U.S. tax impacts of non-U.S. earnings repatriation and any net impacts of intercompany transactions. Changes in uncertain tax positions represent changes in our net liability related to prior year tax positions.
Excess tax benefits from the exercise of stock options reflect the excess of actual tax benefits received on employee exerciseexercises of stock options and other share-based payments (which generally equals the income taxable to the employee) over the amount of tax benefits that were calculated at the grant dates of such instruments.
Tax benefits credited to shareholders' equity totaled $18 for the year ended June 30, 2020. This primarily relates to the tax effects of certain adjustments to pension obligations and unrealized foreign exchange losses recorded in stockholders' equity, partially offset by the tax effects of net investment hedges. Tax costs charged to shareholders' equity totaled $80 for the year ended June 30, 2019. This primarily relates to the tax effects of Net Investmentnet investment hedges and certain adjustments to pension obligations recorded in stockholders' equity. Tax benefits credited to shareholders' equity totaled $342 for the year ended June 30, 2018. This primarily relates to the tax effects of Net Investment hedges, partially offset by the impact of certain adjustments to pension obligations recorded in stockholders' equity.
Prior to the passage of the U.S. Tax Act, the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely invested and accordingly, no deferred taxes were provided. Pursuant to the provisions of the U.S. Tax Act, these earnings were subjected to a one-time transition tax, for which a provisional charge has been recorded.tax. This charge included taxes for all U.S. income taxes and for the related foreign withholding taxes for the portion of those earnings which are no longer considered indefinitely invested. We have not provided deferred taxes on approximately $27$19 billion of earnings that are considered permanently reinvested.


A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:
Years ended June 30202020192018
BEGINNING OF YEAR$466  $470  $465  
Increases in tax positions for prior years60  85  26  
Decreases in tax positions for prior years(21) (94) (38) 
Increases in tax positions for current year82  71  87  
Settlements with taxing authorities(83) (37) (45) 
Lapse in statute of limitations(12) (27) (20) 
Currency translation(7) (2) (5) 
END OF YEAR$485  $466  $470  
Years ended June 302019 2018 2017
BEGINNING OF YEAR$470
 $465
 $857
Increases in tax positions for prior years85
 26
 87
Decreases in tax positions for prior years(94) (38) (147)
Increases in tax positions for current year71
 87
 75
Settlements with taxing authorities(37) (45) (381)
Lapse in statute of limitations(27) (20) (22)
Currency translation(2) (5) (4)
END OF YEAR$466
 $470
 $465

Included in the total liability for uncertain tax positions at June 30, 20192020 is $159$278 that, depending on the ultimate resolution, could impact the effective tax rate in future periods.
The Company is present in approximately 70 countries and over 150 taxable jurisdictions and, at any point in time, has 40-50 jurisdictional audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an
Amounts in millions of dollars except per share amounts or as otherwise specified.
50 The Procter & Gamble Company
ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and the closing of statutes of limitation. Such adjustments are reflected in the tax provision as appropriate. We have tax years open ranging from 2008 and forward. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. Based on information currently available, we anticipate that over the next 12 month12-month period, audit activity could be completed related to uncertain tax positions in multiple jurisdictions for which we have accrued existing liabilities of approximately $140,$60, including interest and penalties.
We recognize the additional accrual of any possible related interest and penalties relating to the underlying uncertain tax position in income tax expense. As of June 30, 2020, 2019 2018 and 2017,2018, we had accrued interest of $141, $133 $99 and $100$99 and accrued penalties of $17, $15$17 and $20,$15, respectively, which are not included in the above table. During the fiscal years ended June 30, 2020, 2019 2018 and 2017,2018, we recognized $39, $40 $22 and $(62)$22 in interest expense/(benefit)expense and $1, $2 $5 and $0$5 in penalties expense, respectively. The net benefits recognized resulted primarily from the favorable resolution of tax positions for prior years.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 49

Deferred income tax assets and liabilities were comprised of the following:
As of June 302019 2018
DEFERRED TAX ASSETS   
Pension and postretirement benefits$1,591
 $1,478
Loss and other carryforwards1,007
 1,067
Stock-based compensation421
 476
Fixed assets232
 223
Accrued marketing and promotion334
 223
Unrealized loss on financial and foreign exchange transactions73
 61
Inventory41
 35
Accrued interest and taxes15
 17
Advance payments—
 4
Other931
 699
Valuation allowances(442) (457)
TOTAL$4,203
 $3,826
    
DEFERRED TAX LIABILITIES   
Goodwill and intangible assets$6,506
 $6,168
Fixed assets1,413
 1,276
Foreign withholding tax on earnings to be repatriated239
 244
Unrealized gain on financial and foreign exchange transactions147
 169
Other351
 161
TOTAL$8,656
 $8,018

As of June 3020202019
DEFERRED TAX ASSETS
Pension and postretirement benefits$1,602  $1,591  
Loss and other carryforwards875  1,007  
Stock-based compensation398  421  
Accrued marketing and promotion353  334  
Fixed assets218  232  
Lease liabilities190  —  
Unrealized loss on financial and foreign exchange transactions64  73  
Inventory27  41  
Accrued interest and taxes20  15  
Other829  931  
Valuation allowances(486) (442) 
TOTAL$4,090  $4,203  
DEFERRED TAX LIABILITIES
Goodwill and intangible assets$5,775  $6,506  
Fixed assets1,485  1,413  
Lease right-of-use assets185  —  
Unrealized gain on financial and foreign exchange transactions169  147  
Foreign withholding tax on earnings to be repatriated118  239  
Other366  351  
TOTAL$8,098  $8,656  
Net operating loss carryforwards were $3.5$2.9 billion at June 30, 20192020 and $3.5 billion at June 30, 2018.2019. If unused, $1.0 billionapproximately $900 will expire between 20192020 and 2037.2039. The remainder, totaling $2.5$2.0 billion at June 30, 2019,2020, may be carried forward indefinitely.


NOTE 6
EARNINGS PER SHARE
Basic net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred dividends (net of related tax benefits) by the weighted average number of common shares outstanding during the year. For fiscal years 20182020 and 2017,2018, Diluted net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble by the diluted weighted average number of common shares outstanding during the year. The diluted shares are determined using the treasury stock method on the basis of the weighted average number of common shares outstanding plusinclude the dilutive effect of stock options and other stock-based awards based on the treasury stock method (see Note 7) and the assumed conversion of preferred stock (see Note 8).

For fiscal year 2019, Diluted net earnings per common share do not include the assumed conversion of preferred stock because to do so would have been antidilutive, due to the lower Net earnings driven by the Shave Care impairment charges (see Note 4). Therefore, Diluted net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred dividends (net of related tax benefit) by the diluted weighted average number of common shares outstanding during the year. The diluted shares are determined using the treasury stock method on the basis of the weighted average number of common shares outstanding plusinclude the dilutive effect of stock options and other stock-based awards.awards based on the treasury stock method.

Amounts in millions of dollars except per share amounts or as otherwise specified.
50 The Procter & Gamble Company 51

Net earnings per share were calculated as follows:
Years ended June 30202020192018
CONSOLIDATED AMOUNTS
Net earnings$13,103  $3,966  $9,861  
Less: Net earnings attributable to noncontrolling interests76  69  111  
Net earnings attributable to P&G13,027  3,897  9,750  
Less: Preferred dividends, net of tax263  263  265  
Net earnings attributable to P&G available to common shareholders (Basic)$12,764  $3,634  $9,485  
Net earnings attributable to P&G available to common shareholders (Diluted)$13,027  $3,634  $9,750  
SHARES IN MILLIONS
Basic weighted average common shares outstanding2,487.1  2,503.62,529.3
Add: Effect of dilutive securities
Impact of stock options and other unvested equity awards (1)
52.7  35.932.5
Conversion of preferred shares (2)
86.0  —94.9
Diluted weighted average common shares outstanding2,625.8  2,539.52,656.7
NET EARNINGS PER SHARE (3)
Basic$5.13  $1.45  $3.75  
Diluted$4.96  $1.43  $3.67  
Years ended June 302019 2018 2017
CONSOLIDATED AMOUNTSTotal Total Continuing OperationsDiscontinued OperationsTotal
Net earnings$3,966
 $9,861
 $10,194
$5,217
$15,411
Less: Net earnings attributable to noncontrolling interests69
 111
 85
—
85
Net earnings attributable to P&G3,897
 9,750
 10,109
5,217
15,326
Less: Preferred dividends, net of tax263
 265
 247
—
247
Net earnings attributable to P&G available to common shareholders (Basic)$3,634
 $9,485
 $9,862
$5,217
$15,079
        
Net earnings attributable to P&G available to common shareholders (Diluted)$3,634
 $9,750
 $10,109
$5,217
$15,326
        
SHARES IN MILLIONS       
Basic weighted average common shares outstanding2,503.6
 2,529.3
 2,598.1
2,598.1
2,598.1
Add: Effect of dilutive securities       
Impact of stock options and other unvested equity awards (1)
35.9
 32.5
 43.0
43.0
43.0
Conversion of preferred shares (2)
—
 94.9
 99.3
99.3
99.3
Diluted weighted average common shares outstanding2,539.5
 2,656.7
 2,740.4
2,740.4
2,740.4
        
NET EARNINGS PER SHARE (3)
       
Basic$1.45
 $3.75
 $3.79
$2.01
$5.80
Diluted$1.43
 $3.67
 $3.69
$1.90
$5.59
(1)Weighted average outstanding stock options of approximately 6 million in 2020, 13 million in 2019 and 48 million in 2018 were not included in the Diluted net earnings per share calculation because the options were out of the money or to do so would have been antidilutive (i.e., the assumed proceeds upon exercise would have exceeded the market value of the underlying common shares).
(2)Despite being included in Diluted net earnings per common share, the actual conversion to common stock occurs when the preferred shares are sold. Shares may only be sold after being allocated to the ESOP participants pursuant to the repayment of the ESOP's obligations through 2035. In fiscal year 2019, weighted average outstanding preferred shares of 90 million were not included in the Diluted net earnings per share calculation because to do so would have been antidilutive, due to lower Net earnings driven by the Shave Care impairment charges (see Note 4).
(3)Net earnings per share are calculated on Net earnings attributable to Procter & Gamble.
(1)
Weighted average outstanding stock options of approximately 13 million in 2019, 48 million in 2018 and 20 million in 2017 were not included in the Diluted net earnings per share calculation because the options were out of the money or to do so would have been antidilutive (i.e., the assumed proceeds upon exercise would have exceeded the market value of the underlying common shares).
(2)
Despite being included in Diluted net earnings per common share, the actual conversion to common stock occurs when the preferred shares are sold. Shares may only be sold after being allocated to the ESOP participants pursuant to the repayment of the ESOP's obligations through 2035. In fiscal year 2019, weighted average outstanding preferred shares of 90 million were not included in the Diluted net earnings per share calculation because to do so would have been antidilutive, due to lower Net earnings driven by the Shave Care impairment charges (see Note 4).
(3)
Net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

NOTE 7
STOCK-BASED COMPENSATION
We haveThe Company has two primary stock-based compensation programs under which we annually grant stock option, restricted stock unit (RSU) and performance stock unit (PSU) awards to key managers and directors.
In our main long-term incentive program, key managers can elect to receive options or RSUs. All options vest after three years and have a 10-year life. Exercise prices on options are set equal to the market price of the underlying shares on the date of the grant. Effective in fiscal year 2017, RSUs vest and settle in shares of common stock three years from the grant date. RSUs granted prior to fiscal year 2017 vest and settle in shares of common stock five years from the grant date.
Senior-level executives participate in an additional long-term incentive program that awards PSUs, which are paid in shares after the end of a three-year performance period subject to pre-established performance goals. Effective in fiscal year 2019, we added a Relative Total Shareholder Return (R-TSR) modifier to the PSU,PSUs, under which the number of shares ultimately granted is also impacted by the Company's actual
shareholder return relative to our consumer products competitive peer set.
In addition to these long-term incentive programs, we award RSUs to the Company's non-employee directors and make other minor stock option and RSU grants to employees for which the terms are not substantially different from our long-term incentive awards.
A total of 185150 million shares of common stock were newly authorized for issuance under the stock-based compensation plan approved by shareholders in 2019. Additionally, the number of shares available for award under the 2019 plan includes 37 million previously authorized but not awarded under the shareholders approved plan in 2014 plus any shares of which 41Common Stock subject to outstanding awards under the 2014 Plan that are forfeited, cancelled or otherwise terminated without the issuance of shares of Common Stock as set forth in the 2019 Plan. A total of 166 million shares remain available for grant.grant under the 2019 plan.
The Company recognizes stock-based compensation expense based on the fair value of the awards at the date of grant. The fair value is amortized on a straight-line basis over the requisite service period. Awards to employees eligible for retirement prior to the award becoming fully vested are recognized as compensation expense from the grant date through the date the employee first becomes eligible to retire and is no longer required to provide services to earn the
Amounts in millions of dollars except per share amounts or as otherwise specified.
52 The Procter & Gamble Company
award. Stock-based compensation expense is included as part of Cost of products sold and SG&A in the Consolidated Statement of Earnings and

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 51

includes an estimate of forfeitures, which is based on historical data. Total expense and related tax benefit were as follows:
Years ended June 30202020192018
Stock options$249  $246  $220  
RSUs and PSUs309  269  175  
Total stock-based expense$558  $515  $395  
Income tax benefit$97  $101  $87  
Years ended June 302019 2018 
2017 (1)
Stock options$246
 $220
 $216
RSUs and PSUs269
 175
 150
Total stock-based expense$515
 $395
 $366
      
Income tax benefit$101
 $87
 $111

(1)
Includes amounts related to discontinued operations, which are not material.
We utilize an industry standard lattice-based valuation model to calculate the fair value for stock options granted. Assumptions utilized in the model, which are evaluated and revised to reflect market conditions and experience, were as follows:
Years ended June 30202020192018
Interest rate1.1-1.4 %2.5-2.7 %1.9-2.9 %
Weighted average interest rate1.3 %2.6 %2.8 %
Dividend yield2.4 %3.0 %3.1 %
Expected volatility17 %17 %18 %
Expected life in years9.29.29.2
Years ended June 302019 2018 2017
Interest rate2.5-2.7% 1.9-2.9% 0.8-2.6%
Weighted average interest rate2.6% 2.8% 2.6%
Dividend yield3.0% 3.1% 3.2%
Expected volatility17% 18% 15%
Expected life in years9.2  9.2  9.6 

Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
A summary of options outstanding under the plans as of June 30, 20192020 and activity during the year then ended is presented below:
OptionsOptions (in thousands)Weighted Average Exercise PriceWeighted Average Contract-ual Life in YearsAggregate Intrinsic Value
Outstanding, beginning of year205,654
$74.21
  
Granted13,451
95.78
  
Exercised(53,670)62.99
  
Forfeited/expired(694)81.58
  
OUTSTANDING, END OF YEAR164,741
$79.59
5.6$4,951
EXERCISABLE110,504
$75.07
4.2$3,822

OptionsOptions (in thousands)Weighted Average Exercise PriceWeighted Average Contract-ual Life in YearsAggregate Intrinsic Value
Outstanding, beginning of year164,741  $79.59  
Granted14,277  115.01  
Exercised(28,722) 70.34  
Forfeited/expired(424) 83.23  
OUTSTANDING, END OF YEAR149,872  $84.71  5.5$5,241  
EXERCISABLE102,702  $79.54  4.2$4,111  

The following table provides additional information on stock options:
Years ended June 30202020192018
Weighted average grant-date fair value of options granted$15.60  $13.60  $11.89  
Intrinsic value of options exercised1,455  1,770  500  
Grant-date fair value of options that vested217  180  209  
Cash received from options exercised2,019  3,381  1,245  
Actual tax benefit from options exercised298  221  127  
Years ended June 302019 2018 2017
Weighted average grant-date fair value of options granted$13.60
 $11.89
 $10.45
Intrinsic value of options exercised1,770
 500
 1,334
Grant-date fair value of options that vested180
 209
 246
Cash received from options exercised3,381
 1,245
 2,630
Actual tax benefit from options exercised221
 127
 421

At June 30, 2019,2020, there was $174$171 of compensation cost that has not yet been recognized related to stock option grants. That cost is expected to be recognized over a remaining weighted average period of 1.92.0 years.
A summary of non-vested RSUs and PSUs outstanding under the plans as of June 30, 20192020 and activity during the year then ended is presented below:
RSUsPSUs
RSU and PSU awardsUnits (in thousands)Weighted Average Grant Date Fair ValueUnits (in thousands)Weighted Average Grant Date Fair Value
Non-vested at July 1, 20195,493  $84.00  1,295  $92.98  
Granted1,516  114.44  562  123.52  
Vested(2,376) 88.61  (799) 79.64  
Forfeited(135) 84.61  (10) 94.94  
Non-vested at June 30, 20204,498  $92.15  1,048  $117.02  
 RSUs PSUs
RSU and PSU awardsUnits (in thousands)Weighted Average Grant Date Fair Value Units (in thousands)Weighted Average Grant Date Fair Value
Non-vested at July 1, 20185,376
$77.17
 1,385
$84.08
Granted1,970
96.74
 555
112.83
Vested(1,685)78.40
 (642)91.40
Forfeited(168)79.67
 (3)92.72
Non-vested at June 30, 20195,493
$84.00
 1,295
$92.98

At June 30, 2019,2020, there was $261$251 of compensation cost that has not yet been recognized related to RSUs and PSUs. That cost is expected to be recognized over a remaining weighted average period of 2.01.9 years. The total grant date fair value of shares vested was $264, $205 and $175 in 2020, 2019 and $163 in 2019, 2018, and 2017, respectively.
The Company settles equity issuances with treasury shares. We have no specific policy to repurchase common shares to
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 53
mitigate the dilutive impact of options, RSUs and PSUs. However, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to offset the impacts of such activity.
NOTE 8
POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN
We offer various postretirement benefits to our employees.
Defined Contribution Retirement Plans
We have defined contribution plans, which cover the majority of our U.S. employees, as well as employees in certain other countries. These plans are fully funded. We generally make contributions to participants' accounts based on individual base salaries and years of service. Total global defined contribution

Amounts in millions of dollars except per share amounts or as otherwise specified.
52 The Procter & Gamble Company

expense was $317, $272 and $292 in 2020, 2019 and $270 in 2019, 2018, and 2017, respectively.
The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the expense for the Company's defined contribution plans. For the U.S. DC plan, the contribution rate is set annually. Total contributions for this plan approximated 14% of total participants' annual wages and salaries in 2020, 2019 2018 and 2017.2018.
We maintain The Procter & Gamble Profit Sharing Trust (Trust) and Employee Stock Ownership Plan (ESOP) to provide a portion of the funding for the U.S. DC plan and other retiree benefits (described below). Operating details of the ESOP are provided at the end of this Note. The fair value of the ESOP Series A shares allocated to participants reduces our cash contribution required to fund the U.S. DC plan.

Defined Benefit Retirement Plans and Other Retiree Benefits
We offer defined benefit retirement pension plans to certain employees. These benefits relate primarily to local plans outside the U.S. and, to a lesser extent, plans assumed in previous acquisitions covering U.S. employees.
We also provide certain other retiree benefits, primarily health care, and life insurance, for the majority of our U.S. employees who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans require cost sharing with retirees and pay a stated percentage of expenses, reduced by deductibles and other coverages. These benefits are primarily funded by ESOP Series B shares and certain other assets contributed by the Company.
Amounts in millions of dollars except per share amounts or as otherwise specified.
54 The Procter & Gamble Company

Obligation and Funded Status. The following provides a reconciliation of benefit obligations, plan assets and funded status of these defined benefit plans:
Pension Benefits (1)
Other Retiree Benefits (2)
Years ended June 302020201920202019
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year (3)
$17,037  $15,658  $4,964  $4,778  
Service cost247  259  100  101  
Interest cost276  339  160  187  
Participants' contributions11  12  74  76  
Amendments3  9  (136) —  
Net actuarial loss/(gain)951  1,587  (85) 37  
Acquisitions—  49  —  —  
Special termination benefits11  13  2  8  
Currency translation and other(218) (283) (64) 20  
Benefit payments(557) (606) (245) (243) 
BENEFIT OBLIGATION AT END OF YEAR (3)
$17,761  $17,037  $4,770  $4,964  
 
Pension Benefits (1)
 
Other Retiree Benefits (2)
Years ended June 302019 2018 2019 2018
CHANGE IN BENEFIT OBLIGATION       
Benefit obligation at beginning of year (3)
$15,658

$16,160

$4,778

$5,187
Service cost259
 280
 101
 112
Interest cost339
 348
 187
 177
Participants' contributions12
 13
 76
 73
Amendments9
 12
 —
 (231)
Net actuarial loss/(gain)1,587
 (722) 37
 (308)
Acquisitions/(divestitures)49
 —
 —
 —
Special termination benefits13
 8
 8
 7
Currency translation and other(283) 148
 20
 5
Benefit payments(606) (589) (243) (244)
BENEFIT OBLIGATION AT END OF YEAR (3)
$17,037
 $15,658
 $4,964
 $4,778
CHANGE IN PLAN ASSETS       CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year$11,267
 $10,829
 $3,259
 $3,831
Fair value of plan assets at beginning of year$11,382  $11,267  $5,096  $3,259  
Actual return on plan assets739
 553
 1,918
 (481)Actual return on plan assets664  739  595  1,918  
Acquisitions/(divestitures)4
 —
 —
 —
AcquisitionsAcquisitions—  4  —  —  
Employer contributions178
 406
 31
 33
Employer contributions180  178  33  31  
Participants' contributions12
 13
 76
 73
Participants' contributions11  12  74  76  
Currency translation and other(212) 55
 (1) (3)Currency translation and other(196) (212) 2  (1) 
ESOP debt impacts (4)
—
 —
 56
 50
ESOP debt impacts (4)
—  —  63  56  
Benefit payments(606) (589) (243) (244)Benefit payments(557) (606) (245) (243) 
FAIR VALUE OF PLAN ASSETS AT END OF YEAR$11,382
 $11,267
 $5,096
 $3,259
FAIR VALUE OF PLAN ASSETS AT END OF YEAR$11,484  $11,382  $5,618  $5,096  
FUNDED STATUS$(5,655) $(4,391) $132
 $(1,519)FUNDED STATUS$(6,277) $(5,655) $848  $132  
(1)Primarily non-U.S.-based defined benefit retirement plans.
(1)
(2)Primarily U.S.-based other postretirement benefit plans.
(3)For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.
(4)Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.

Primarily non-U.S.-based defined benefit retirement plans.
(2)
Primarily U.S.-based other postretirement benefit plans.
(3)
For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.
(4)
Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.
The underfunding of pension benefits is primarily a function of the different funding incentives that exist outside of the U.S. In certain countries, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations prior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as they become due.

Pension BenefitsOther Retiree Benefits
As of June 302020201920202019
CLASSIFICATION OF NET AMOUNT RECOGNIZED
Noncurrent assets$12  $19  $1,843  $1,257  
Current liabilities(66) (52) (30) (27) 
Noncurrent liabilities(6,223) (5,622) (965) (1,098) 
NET AMOUNT RECOGNIZED$(6,277) $(5,655) $848  $132  
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)
Net actuarial loss$5,662  $5,062  $572  $874  
Prior service cost/(credit)198  214  (511) (424) 
NET AMOUNTS RECOGNIZED IN AOCI$5,860  $5,276  $61  $450  

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 5355

 Pension Benefits Other Retiree Benefits
As of June 302019 2018 2019 2018
CLASSIFICATION OF NET AMOUNT RECOGNIZED       
Noncurrent assets$19
 $420
 $1,257
 $—
Current liabilities(52) (43) (27) (24)
Noncurrent liabilities(5,622) (4,768) (1,098) (1,495)
NET AMOUNT RECOGNIZED$(5,655) $(4,391) $132
 $(1,519)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)  
Net actuarial loss$5,062
 $3,787
 $874
 $2,366
Prior service cost/(credit)214
 244
 (424) (478)
NET AMOUNTS RECOGNIZED IN AOCI$5,276
 $4,031
 $450
 $1,888

The accumulated benefit obligation for all defined benefit pension plans was $15,790$16.5 billion and $14,370$15.8 billion as of June 30, 20192020 and 2018,2019, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consisted of the following:
Accumulated Benefit Obligation 
Exceeds the Fair Value of Plan Assets		Projected Benefit Obligation
Exceeds the Fair Value of Plan Assets
As of June 302020201920202019
Projected benefit obligation$12,095  $11,604  $17,635  $16,304  
Accumulated benefit obligation11,196  10,711  16,377  15,096  
Fair value of plan assets5,994  6,026  11,347  10,630  
 Accumulated Benefit Obligation  Exceeds the Fair Value of Plan Assets Projected Benefit Obligation  Exceeds the Fair Value of Plan Assets
As of June 302019 2018 2019 2018
Projected benefit obligation$11,604
 $8,467
 $16,304
 $8,962
Accumulated benefit obligation10,711
 7,573
 15,096
 7,974
Fair value of plan assets6,026
 3,740
 10,630
 4,150

Net Periodic Benefit Cost. Components of the net periodic benefit cost were as follows:
Pension BenefitsOther Retiree Benefits
Years ended June 30202020192018202020192018
AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST
Service cost$247  $259  $280  $100  $101  $112  
Interest cost276  339  348  160  187  177  
Expected return on plan assets(740) (732) (751) (473) (447) (451) 
Amortization of net actuarial loss340  225  295  68  66  69  
Amortization of prior service cost/(credit)25  26  28  (48) (48) (41) 
Amortization of net actuarial loss/prior service cost due to settlements and curtailments7  9  —  —  —  —  
Special termination benefits11  13  8  2  8  7  
GROSS BENEFIT COST/(CREDIT)166  139  208  (191) (133) (127) 
Dividends on ESOP preferred stock—  —  —  (19) (28) (37) 
NET PERIODIC BENEFIT COST/(CREDIT)$166  $139  $208  $(210) $(161) $(164) 
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI
Net actuarial loss/(gain) - current year$1,027  $1,580  $(207) $(1,434) 
Prior service cost/(credit) - current year3  9  (136) —  
Amortization of net actuarial loss(340) (225) (68) (66) 
Amortization of prior service (cost)/credit(25) (26) 48  48  
Amortization of net actuarial loss/prior service costs due to settlements and curtailments(7) (9) —  —  
Currency translation and other(74) (84) (26) 14  
TOTAL CHANGE IN AOCI584  1,245  (389) (1,438) 
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI$750  $1,384  $(599) $(1,599) 
 Pension Benefits Other Retiree Benefits 
Years ended June 302019 2018 2017 2019 2018 2017 
AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST 
Service cost$259
 $280
 $310
(1) 
$101
 $112
 $133
(1) 
Interest cost339
 348
 300
 187
 177
 175
 
Expected return on plan assets(732) (751) (675) (447) (451) (431) 
Amortization of net actuarial loss225
 295
 375
 66
 69
 122
 
Amortization of prior service cost/(credit)26
 28
 28
 (48) (41) (45) 
Amortization of net actuarial loss/prior service cost due to settlements and curtailments9
 —
 186
(2) 
—
 —
 16
(2) 
Special termination benefits13
 8
 4
 8
 7
 21
(2) 
GROSS BENEFIT COST/(CREDIT)139
 208
 528
 (133) (127) (9) 
Dividends on ESOP preferred stock—
 —
 —
 (28) (37) (45) 
NET PERIODIC BENEFIT COST/(CREDIT)$139
 $208
 $528
 $(161) $(164) $(54) 
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI 
Net actuarial loss/(gain) - current year$1,580
 $(524)   $(1,434) $624
   
Prior service cost/(credit) - current year9
 12
   —
 (231)   
Amortization of net actuarial loss(225) (295)   (66) (69)   
Amortization of prior service (cost)/credit(26) (28)   48
 41
   
Amortization of net actuarial loss/prior service costs due to settlements and curtailments(9) —
   —
 —
   
Currency translation and other(84) 73
   14
 (3)   
TOTAL CHANGE IN AOCI1,245
 (762)   (1,438) 362
   
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI$1,384
 $(554)   $(1,599) $198
   

(1)
Service cost includes amounts related to discontinued operations in fiscal year ended June 30, 2017, which are not material.
(2)
For fiscal year ended June 30, 2017, amortization of net actuarial loss/prior service cost due to settlement and curtailments and $18 of the special termination benefits are included in Net earnings from discontinued operations.

Amounts in millions of dollars except per share amounts or as otherwise specified.
54 The Procter & Gamble Company


The service cost component of the net periodic benefit cost is included in the Consolidated Statements of Earnings in Cost of products sold and SG&A, unless otherwise noted.&A. All other components are included in the Consolidated Statements of Earnings in Other non-operating income/(expense), net, unless otherwise noted.
Amounts expected to be amortized from AOCI into net periodic benefit cost during the year ending June 30, 2020,2021, are as follows:
Pension BenefitsOther Retiree Benefits
Net actuarial loss$401  $47  
Prior service cost/(credit)25  (59) 
 Pension Benefits Other Retiree Benefits
Net actuarial loss$344
 $68
Prior service cost/(credit)25
 (48)

Amounts in millions of dollars except per share amounts or as otherwise specified.
56 The Procter & Gamble Company
Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each country that may have an impact on the cost of providing retirement benefits. The weighted average assumptions used to determine benefit obligations recorded on the Consolidated Balance Sheets as of June 30, were as follows: (1)
Pension BenefitsOther Retiree Benefits
As of June 302020201920202019
Discount rate1.5 % 1.9 % 3.1 % 3.7 %
Rate of compensation increase2.5 %2.6 %N/AN/A
Health care cost trend rates assumed for next yearN/AN/A6.6 %6.6 %
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)N/AN/A4.9 %4.9 %
Year that the rate reaches the ultimate trend rateN/AN/A20262026
(1)Determined as of end of fiscal year.
 Pension Benefits Other Retiree Benefits
As of June 302019 2018 2019 2018
Discount rate1.9% 2.5% 3.7% 4.2%
Rate of compensation increase2.6% 2.6% N/A
 N/A
Health care cost trend rates assumed for next yearN/A
 N/A
 6.6% 6.6%
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)N/A
 N/A
 4.9% 4.9%
Year that the rate reaches the ultimate trend rateN/A
 N/A
 2026
 2025
(1)
Determined as of end of fiscal year.
The weighted average assumptions used to determine net benefit cost recorded on the Consolidated Statement of Earnings for the years ended June 30, were as follows: (1)
Pension BenefitsOther Retiree Benefits
Years ended June 30202020192018202020192018
Discount rate1.9 %2.5 %2.4 %3.7 %4.2 %3.9 %
Expected return on plan assets6.6 %6.6 %6.8 %8.4 %8.3 %8.3 %
Rate of compensation increase2.6 %2.6 %3.0 %N/AN/AN/A
(1) Determined as of beginning of fiscal year.
 Pension Benefits Other Retiree Benefits
Years ended June 302019 2018 2017 2019 2018 2017
Discount rate2.5% 2.4% 2.1% 4.2% 3.9% 3.6%
Expected return on plan assets6.6% 6.8% 6.9% 8.3% 8.3% 8.3%
Rate of compensation increase2.6% 3.0% 2.9% N/A
 N/A
 N/A

(1)
Determined as of beginning of fiscal year.
For plans that make up the majority of our obligation, the Company calculates the benefit obligation and the related impacts on service and interest costs using specific spot rates along the corporate bond yield curve. For the remaining plans, the Company determines these amounts utilizing a single weighted-averageweighted average discount rate derived from the corporate bond yield curve used to measure the plan obligations.
Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets are 88% - 9% for equities and 55% - 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the long-term projected return of 8.5% and reflects the historical pattern of returns.
Assumed health care cost trend rates could have a significant effect on the amounts reported for the other retiree benefit plans. A one percentage point change in assumed health care cost trend rates would have the following effects:
One-Percentage
Point Increase		One-Percentage
Point Decrease
Effect on the total service and interest cost components$56  $(43) 
Effect on the accumulated postretirement benefit obligation669  (543) 
 
One-Percentage
Point Increase
 
One-Percentage
Point Decrease
Effect on the total service and interest cost components$60
 $(45)
Effect on the accumulated postretirement benefit obligation755
 (619)

Plan Assets. Our investment objective for defined benefit retirement plan assets is to meet the plans' benefit obligations and to improve plan self-sufficiency for future benefit obligations. The investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by assessing different investment risks and matching the actuarial projections of the plans' future liabilities and benefit payments with current as well as expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. Plan assets are diversified across several investment managers and are generally

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 55

invested in liquid funds that are selected to track broad market equity and bond indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and with continual monitoring of investment managers' performance relative to the investment guidelines established with each investment manager.Ourmanager.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 57
Our target asset allocation for the year ended June 30, 2019,2020, and actual asset allocation by asset category as of June 30, 20192020 and 2018,2019, were as follows:
Target Asset AllocationActual Asset Allocation at June 30
Pension BenefitsOther Retiree
Benefits		Pension BenefitsOther Retiree Benefits
Asset Category2020201920202019
Cash— %2 %1 %1 %3 %3 %
Debt securities67 %3 %66 %63 %2 %2 %
Equity securities33 %95 %33 %36 %95 %95 %
TOTAL100 %100 %100 %100 %100 %100 %
 Target Asset Allocation Actual Asset Allocation at June 30
 Pension Benefits 
Other Retiree
Benefits
 Pension Benefits Other Retiree Benefits
Asset Category  2019 2018 2019 2018
Cash—% 2% 1% 2% 3% 1%
Debt securities67% 3% 63% 59% 2% 4%
Equity securities33% 95% 36% 39% 95% 95%
TOTAL100% 100% 100% 100% 100% 100%

The following tables settable sets forth the fair value of the Company's plan assets as of June 30, 20192020 and 20182019 segregated by level within the fair value hierarchy (refer to Note 9 for further discussion on the fair value hierarchy and fair value principles). Company stock listed as Level 1 in the hierarchy represents Company common stock; Level 2 represents preferred shares which are valued based on the value of Company common stock. The majority of our Level 3 pension assets are insurance contracts. Their fair values are based on their cash equivalent or models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, including credit risk and interest rate curves. There was no significant activity within the Level 3 pension and other retiree benefits plan assets during the years presented. Investments valued using net asset value as a practical expedient are primarily equity and fixed income collective funds. These assets are not valued using the fair value hierarchy, but rather valued using the net asset value reported by the managers of the funds and as supported by the unit prices of actual purchase and sale transactions.
Pension BenefitsOther Retiree Benefits
As of June 30Fair Value Hierarchy Level20202019Fair Value Hierarchy Level20202019
ASSETS AT FAIR VALUE
Cash and cash equivalents1$61  $47  1$121  $111  
Company common stock—  —  1217  179  
Company preferred stock (1)
—  —  25,139  4,657  
Fixed income securities (2)
21,991  265  212  1  
Insurance contracts (3)
3115  113  —  —  
TOTAL ASSETS IN THE FAIR VALUE HIERARCHY2,167  425  5,489  4,948  
Investments valued at net asset value (4)
9,317  10,957  129  148  
TOTAL ASSETS AT FAIR VALUE$11,484  11,382  $5,618  5,096  
(1)Company preferred stock is valued based on the value of Company common stock and is presented net of ESOP debt discussed below.
(2)Fixed income securities, classified as Level 2, are estimated by using pricing models or quoted prices of securities with similar characteristics.
(3)Fair values of insurance contracts are valued based on either their cash equivalent value or models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, including credit risk and interest rate curves. The activity for Level 3 assets is not significant for all years presented.
(4)Investments valued using net asset value as a practical expedient are primarily equity and fixed income collective funds.
 Pension Benefits Other Retiree Benefits
As of June 30Fair Value Hierarchy Level 2019 2018 Fair Value Hierarchy Level 2019 2018
ASSETS AT FAIR VALUE           
Cash and cash equivalents1 $47
 $136
 1 $111
 $5
Company stock (1)
  —
  —
 1 & 2 4,836
 3,092
Other (2)
1, 2 & 3 378
 400
 1 1
  4
TOTAL ASSETS IN THE FAIR VALUE HEIRARCHY  425
 536
   4,948
 3,101
Investments valued at net asset value  10,957
  10,731
   148
  158
TOTAL ASSETS AT FAIR VALUE  $11,382
 11,267
   $5,096
  3,259
(1)
Company stock is net of ESOP debt discussed below.
(2)
The Company's other pension plan assets measured at fair value are generally classified as Level 3 within the fair value hierarchy. There are no material other pension plan asset balances classified as Level 1 or Level 2 within the fair value hierarchy.

Cash Flows. Management's best estimate of cash requirements and discretionary contributions for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2020,2021, is $156$197 and $39,$44, respectively. For the defined benefit retirement plans, this is comprised of $94 in expected benefit payments from the Company directly to participants of unfunded plans and $62 of expected contributions to funded plans. For other retiree benefit plans, this is comprised of $27 in expected benefit payments from the Company directly to participants of unfunded plans and $12 of expected contributions to funded plans. Expected contributions are dependent on many variables, including the variability of the market value of the plan assets as compared to the benefit obligation and other market or regulatory conditions. In addition, we take into consideration our business investment opportunities and resulting cash requirements.
Accordingly, actual funding may differ significantly from current estimates.
Total benefit payments expected to be paid to participants, which include payments funded from the Company's assets and payments from the plans are as follows:
Years ending June 30Pension
Benefits		Other Retiree
Benefits
EXPECTED BENEFIT PAYMENTS
2021$559  $196  
2022534  205  
2023556  214  
2024573  221  
2025608  225  
2026 - 20303,258  1,199  
Years ending June 30
Pension
Benefits
 
Other Retiree
Benefits
EXPECTED BENEFIT PAYMENTS  
2020$518
 $191
2021536
 203
2022549
 214
2023574
 224
2024583
 233
2025 - 20293,220
 1,283



Amounts in millions of dollars except per share amounts or as otherwise specified.
5658 The Procter & Gamble Company

Employee Stock Ownership Plan
We maintain the ESOP to provide funding for certain employee benefits discussed in the preceding paragraphs.
The ESOP borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the U.S. DC plan. Principal and interest requirements of the borrowing were paid by the Trust from dividends on the preferred shares and from advances provided by the Company. The original borrowing of $1.0 billion has been repaid in full, and advances from the Company of $42$33 remain outstanding at June 30, 2019.2020. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.90$3.03 per share. The liquidation value is $6.82 per share.
In 1991, the ESOP borrowed an additional $1.0 billion. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. These shares, net of the ESOP's debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $876$928 are outstanding at June 30, 2019.2020. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.90$3.03 per share. The liquidation value is $12.96 per share.
Our ESOP accounting practices are consistent with current ESOP accounting guidance, including the permissible continuation of certain provisions from prior accounting guidance. ESOP debt, which is guaranteed by the Company, is recorded as debt (see Note 10) with an offset to the Reserve for ESOP debt retirement, which is presented within Shareholders' equity. Advances to the ESOP by the Company are recorded as an increase in the Reserve for ESOP debt retirement. Interest incurred on the ESOP debt is recorded as Interest expense. Dividends on all preferred shares, net of related tax benefits, are charged to Retained earnings.
The series A and B preferred shares of the ESOP are allocated to employees based on debt service requirements. The number of preferred shares outstanding at June 30 was as follows:
Shares in thousands202020192018
Allocated29,591  31,600  34,233  
Unallocated2,479  3,259  4,117  
TOTAL SERIES A32,070  34,859  38,350  
Allocated27,894  26,790  25,895  
Unallocated24,418  26,471  28,512  
TOTAL SERIES B52,312  53,261  54,407  
Shares in thousands2019 2018 2017
Allocated31,600
 34,233
 36,488
Unallocated3,259
 4,117
 5,060
TOTAL SERIES A34,859
 38,350
 41,548
    
Allocated26,790
 25,895
 25,378
Unallocated26,471
 28,512
 30,412
TOTAL SERIES B53,261
 54,407
 55,790

For purposes of calculating diluted net earnings per common share, the preferred shares held by the ESOP are considered converted from inception.

NOTE 9
RISK MANAGEMENT ACTIVITIES AND FAIR VALUE MEASUREMENTS
As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. We evaluate exposures on a centralized basis to take advantage of natural exposure correlation and netting. To the extent we choose to manage volatility associated with the net exposures, we enter into various financial transactions that we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices.
If the Company elects to do so and if the instrument meets certain specified accounting criteria, management designates derivative instruments as cash flow hedges, fair value hedges or net investment hedges. We record derivative instruments at fair value and the accounting for changes in the fair value depends on the intended use of the derivative, the resulting designation and the effectiveness of the instrument in offsetting the risk exposure it is designed to hedge. We generally have a high degree of effectiveness between the exposure being hedged and the hedging instrument.
Credit Risk Management
We have counterparty credit guidelines and normally enter into transactions with investment grade financial institutions, to the extent commercially viable. Counterparty exposures are monitored daily and downgrades in counterparty credit ratings are reviewed on a timely basis. We have not incurred, and do not expect to incur, material credit losses on our risk management or other financial instruments.
Substantially all of the Company's financial instruments used in hedging transactions are governed by industry standard netting and collateral agreements with counterparties. If the Company's credit rating were to fall below the levels stipulated in the agreements, the counterparties could demand either collateralization or termination of the arrangements. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position as of June 30, 2019,2020, was not material. The Company has not been required to post collateral as a result of these contractual features.
Interest Rate Risk Management
Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk in a cost-efficient manner, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a notional amount.
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 59
We designate certain interest rate swaps on fixed rate debt that meet specific accounting criteria as fair value hedges. For fair value hedges, the changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in earnings. Historically, we had certain interest

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 57

rate swaps designated as cash flow hedges. For the years ended June 30, 2019 and 2018, we did not have any such contracts outstanding.
Foreign Currency Risk Management
We manufacture and sell our products and finance our operations in a number of countries throughout the world. As a result, we are exposed to movements in foreign currency exchange rates. We leverage the Company’s diversified portfolio of exposures as a natural hedge. In certain cases, we enter into non-qualifying foreign currency contracts to hedge certain balance sheet items subject to revaluation. The change in fair value of these instruments and the underlying exposure are both immediately recognized in earnings.
To manage exchange rate risk related to our intercompany financing, we primarily use forward contracts and currency swaps. The change in fair value of these non-qualifying instruments is immediately recognized in earnings, substantially offsetting the foreign currency mark-to-market impact of the related exposure.
Historically, we had utilized foreign currency swaps to offset the effect of exchange rate fluctuations on intercompany loans denominated in foreign currencies; these swaps were accounted for as cash flow hedges. For the years ended June 30, 2019 and 2018, we did not have any such contracts outstanding.
Net Investment Hedging
We hedge certain net investment positions in foreign subsidiaries. To accomplish this, we either borrow directly in foreign currencies and designate all or a portion of the foreign currency debt as a hedge of the applicable net investment position or we enter into foreign currency swaps that are designated as hedges of net investments. Changes in the fair value of these instruments are recognized in the Foreign Currency Translation component of OCI and offset the change in the value of the net investment being hedged. The time value component of the net investment hedge currency swaps is excluded from the assessment of hedge effectiveness. Changes in the fair value of the swap, including changes in the fair value of the excluded time value component, are recognized in OCI and offset the value of the underlying net assets. The time value component is subsequently reported in income on a systematic basis.
Commodity Risk Management
Certain raw materials used in our products or production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility related to anticipated purchases of certain of these materials, we have historically, on a limited basis, used futures and options with maturities generally less than one year and swap contracts with maturities up to five years. As of and during the years ended June 30, 20192020 and 2018,2019, we did not have any financial commodity hedging activity.activity to manage such exposures.



Insurance
We self-insure for most insurable risks. However, we purchase insurance for Directors and Officers Liability and certain other coverage where it is required by law or by contract.
Fair Value Hierarchy
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
•Level 1: Quoted market prices in active markets for identical assets or liabilities.
•Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
•Level 3: Unobservable inputs reflecting the reporting entity's own assumptions or external inputs from inactive markets.
When applying fair value principles in the valuation of assets and liabilities, we are required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company has not changed its valuation techniques used in measuring the fair value of any financial assets or liabilities during the year.
When active market quotes are not available for financial assets and liabilities, we use industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including credit risk, interest rate curves and forward and spot prices for currencies. In circumstances where market-based observable inputs are not available, management judgment is used to develop assumptions to estimate fair value. Generally, the fair value of our Level 3 instruments is estimated as the net present value of expected future cash flows based on external inputs.
The following table sets forth the Company's financial assetsAssets and Liabilities Measured at Fair Value
Other investments had a fair value of $67 and $169 as of June 30, 2020 and 2019, respectively, and 2018 thatare presented in Other noncurrent assets. During the year ended June 30, 2020, the Company sold all of its existing U.S. government securities and corporate bond securities. Such securities had fair values of $3.6 billion and $2.4 billion, respectively, and were measured at fair value on a recurring basis during the period:
 Fair Value Asset
As of June 302019 2018
Investments:   
U.S. government securities$3,648
 $5,544
Corporate bond securities2,400
 3,737
Other investments169
 141
TOTAL$6,217
 $9,422

Investment securities are presented in Available-for-sale investment securities and Other noncurrent assets. The amortized cost of the U.S. government securities with maturities less than one year was $100 and $2,003 as ofat June 30, 2019 and 2018, respectively. The amortized cost of the U.S. government securities with maturities between one and five years was $3,556 and $3,659 as of June 30, 2019 and 2018, respectively. The amortized cost of corporate bond securities with maturities of less than a year was $1,347 and $1,291 as of June 30, 2019 and 2018, respectively. The amortized cost of corporate bond securities with maturities between one and five years was $1,057 and $2,503 as of

Amounts in millions of dollars except per share amounts or as otherwise specified.
58 The Procter & Gamble Company

June 30, 2019 and 2018, respectively.2019. The Company's investments measured at fair value are generally classified as Level 2 within the fair value hierarchy. Within cashCash equivalents were $14.6 billion and cash equivalents, we have money market funds of $2,956 and $1,516$3.0 billion as of June 30, 2020 and 2019, respectively and 2018, respectively. These funds are classified as Level 1 within the fair value hierarchy. There are no other material investment balances classified as Level 1 or Level 3 within the fair value hierarchy, or using net asset value as a practical expedient. Fair values are generally estimated based upon quoted market prices for similar instruments.
The fair value of long-term debt was $25,378$29.0 billion and $23,402$25.4 billion as of June 30, 20192020 and 2018,2019, respectively. This includes the current portion of long-term debt instruments ($3,3902.5 billion and $1,769$3.4 billion as of June 30, 20192020 and 2018,2019, respectively). Certain long-term debt (debt designated as a fair value hedge) is recorded at fair value. All other long-term debt is recorded at amortized cost, but is measured at fair value for disclosure purposes. We consider our debt to be Level 2 in the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.
Amounts in millions of dollars except per share amounts or as otherwise specified.
60 The Procter & Gamble Company
Disclosures about Financial Instruments
The notional amounts and fair values of financial instruments used in hedging transactions as of June 30, 20192020 and 20182019 are as follows:
Notional AmountFair Value AssetFair Value (Liability)
As of June 30202020192020201920202019
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts$7,114  $7,721  $269  $177  $—  $(1) 
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts$3,856  $3,157  $26  $35  $(41) $(24) 
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS$10,970  $10,878  $295  $212  $(41) $(25) 
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts$5,986  $6,431  $23  $27  $(25) $(20) 
TOTAL DERIVATIVES AT FAIR VALUE$16,956  $17,309  $318  $239  $(66) $(45) 
 Notional Amount Fair Value Asset Fair Value (Liability)
As of June 302019 2018 2019 2018 2019 2018
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS      
Interest rate contracts$7,721
 $4,587
 $177
 $125
 $(1) $(53)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS      
Foreign currency interest rate contracts$3,157
 $1,848
 $35
 $41
 $(24) $(75)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS$10,878
 $6,435
 $212
 $166
 $(25) $(128)
            
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS      
Foreign currency contracts$6,431
 $7,358
 $27
 $30
 $(20) $(56)
            
TOTAL DERIVATIVES AT FAIR VALUE$17,309
 $13,793
 $239
 $196
 $(45) $(184)

All derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. All derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities.
The fair value of the interest rate derivative asset/liability directly offsets the cumulative amount of the fair value hedging adjustment included in the carrying amount of the underlying debt obligation. The carrying amount of the underlying debt obligation, which includes the unamortized discount or premium and the fair value adjustment, was $7,860$7.4 billion and $4,639$7.9 billion as of June 30, 20192020 and 2018,2019, respectively. In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $17,154$16.0 billion and $15,012$17.2 billion as of June 30, 2020 and 2019, and 2018, respectively. The increase in the notional balance of interest rate fair value hedges is due to additional swaps in the current period driven by the favorable Euro swap curve.  The increase in the notional balance of the net investment hedges, including the debt instruments designated as net investment hedges, is primarily driven by the increase in foreign currency net assets as a result of the Merck acquisition. 
All of the Company's derivative assets and liabilities are measured at fair value that is derived from observable market data, including interest rate yield curves and foreign exchange rates, and are classified as Level 2 within the fair value hierarchy. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were no transfers between levels during the periods presented. In addition, there was no significant activity within the Level 3 assets and liabilities during the periods presented. Except for the impairment of the Gillette indefinite-lived intangible asset discussed in Note 4, there were no significant assets or liabilities that were re-measured at fair value on a non-recurring basis during the years ended June 30, 20192020 and 2018.2019.



Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 59

Before tax gains/(losses) on our financial instruments in hedging relationships are categorized as follows:
Amount of Gain/(Loss) Recognized in OCI on Derivatives
Years ended June 3020202019
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign currency interest rate contracts$66  $47  
 Amount of Gain/(Loss) Recognized in OCI on Derivatives
Years ended June 302019 2018
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign currency interest rate contracts$47
 $(187)
(1) For the derivatives in net investment hedging relationships, the amount of gain/(loss) excluded from effectiveness testing, which was recognized in earnings, was $70$69 and $138$70 for the fiscal year ended June 30, 20192020 and 2018,2019, respectively.
(2) In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The amount of gain/(loss) recognized in AOCI for such instruments was $189 and $299, as of June 30, 2020 and 2019, respectively.

(2)
In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The amount of gain/(loss) recognized in AOCI for such instruments was $299 and $(391), as of June 30, 2019 and 2018, respectively.
Amount of Gain/(Loss) Recognized in EarningsAmount of Gain/(Loss) Recognized in Earnings
Years ended June 302019 2018Years ended June 3020202019
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPSDERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPSDERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts$104
 $(106)Interest rate contracts$93  $104  
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTSDERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTSDERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts$54
 $(1)Foreign currency contracts$(83) $54  

The gain/(loss) on the derivatives in fair value hedging relationships is fully offset by the mark-to-market impact of the related exposure. These are both recognized in the Consolidated Statement of Earnings in Interest Expense. The gain/(loss) on derivatives not designated as hedging instruments is substantially offset by the currency mark-to-market of the related exposure. These are both recognized in the Consolidated Statements of Earnings in SG&A. To the extent we have any derivatives used for cash flow hedging relationships, the gain/(loss) reclassified from AOCI into earnings on such derivatives would be recognized

Amounts in the same period during which the related item affects earnings, typically in SG&A.millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 61

NOTE 10
SHORT-TERM AND LONG-TERM DEBT 
As of June 3020202019
DEBT DUE WITHIN ONE YEAR
Current portion of long-term debt$2,508  $3,388  
Commercial paper8,545  6,183  
Other130  126  
TOTAL$11,183  $9,697  
Short-term weighted average interest rates (1)
0.7 %0.5 %
(1)Short-term weighted average interest rates include the effects of interest rate swaps discussed in Note 9.


As of June 302019 2018
DEBT DUE WITHIN ONE YEAR
Current portion of long-term debt$3,388
 $1,772
Commercial paper6,183
 7,761
Other126
 890
TOTAL$9,697
 $10,423
Short-term weighted average interest rates (1)
0.5% 0.7%
(1)
Short-term weighted average interest rates include the effects of interest rate swaps discussed in Note 9.
As of June 3020202019
LONG-TERM DEBT
1.90% USD note due October 2020$600  $600  
4.13% EUR note due December 2020674  682  
9.36% ESOP debentures due 2020-2021 (1)
119  228  
1.85% USD note due February 2021600  600  
1.70% USD note due November 2021875  875  
2.00% EUR note due November 2021843  852  
2.30% USD note due February 20221,000  1,000  
2.15% USD note due August 20221,250  1,250  
2.00% EUR note due August 20221,124  1,137  
3.10% USD note due August 20231,000  1,000  
1.13% EUR note due November 20231,405  1,421  
0.50% EUR note due October 2024562  568  
0.63% EUR note due October 2024899  909  
2.45% USD note due March 2025750  —  
2.70% USD note due February 2026600  600  
2.45% USD note due November 2026875  875  
2.80% USD note due March 2027500  —  
4.88% EUR note due May 20271,124  1,137  
2.85% USD note due August 2027750  750  
1.20% EUR note due October 2028899  909  
1.25% EUR note due October 2029562  568  
3.00% USD note due March 20301,500  —  
5.55% USD note due March 2037763  763  
1.88% EUR note due October 2038562  568  
3.55% USD note due March 20401,000  —  
3.50% USD note due October 2047600  600  
3.60% USD note due March 20501,250  —  
Finance lease obligations—  33  
All other long-term debt3,359  5,858  
Current portion of long-term debt(2,508) (3,388) 
TOTAL$23,537  $20,395  
Long-term weighted average interest rates (2)
2.3 %2.4 %
As of June 302019 2018
LONG-TERM DEBT   
1.75% USD note due October 2019$600
 $600
1.90% USD note due November 2019550
 550
0.28% JPY note due May 2020929
 903
1.90% USD note due October 2020600
 600
4.13% EUR note due December 2020682
 698
9.36% ESOP debentures due 2019-2021 (1)
228
 327
1.85% USD note due February 2021600
 600
1.70% USD note due November 2021875
 875
2.00% EUR note due November 2021852
 873
2.30% USD note due February 20221,000
 1,000
2.15% USD note due August 20221,250
 1,250
2.00% EUR note due August 20221,137
 1,164
3.10% USD note due August 20231,000
 1,000
1.13% EUR note due November 20231,421
 1,455
0.50% EUR note due October 2024568
 582
0.63% EUR note due October 2024909
 —
2.70% USD note due February 2026600
 600
2.45% USD note due November 2026875
 875
4.88% EUR note due May 20271,137
 1,164
2.85% USD note due August 2027750
 750
1.20% EUR note due October 2028909
 —
1.25% EUR note due October 2029568
 582
5.55% USD note due March 2037763
 763
1.88% EUR note due October 2038568
 —
3.50% USD note due October 2047600
 600
Capital lease obligations33
 107
All other long-term debt3,779
 4,717
Current portion of long-term debt(3,388) (1,772)
TOTAL$20,395
 $20,863
Long-term weighted average interest rates (2)
2.4% 2.5%
(1)Debt issued by the ESOP is guaranteed by the Company and is recorded as debt of the Company, as discussed in Note 8.
(2)Long-term weighted average interest rates include the effects of interest rate swaps discussed in Note 9.
(1)

Debt issued by the ESOP is guaranteed by the Company and is recorded as debt of the Company, as discussed in Note 8.
(2)
Long-term weighted average interest rates include the effects of interest rate swaps discussed in Note 9.
Long-term debt maturities during the next five fiscal years are as follows:
Years ending June 3020202021202220232024
Debt maturities$3,388$2,009$2,840$2,465$2,461

Years ending June 3020212022202320242025
Debt maturities$2,508$2,830$2,425$2,481$2,743
The Procter & Gamble Company fully and unconditionally guarantees the registered debt and securities issued by its 100% owned finance subsidiaries.

Amounts in millions of dollars except per share amounts or as otherwise specified.
6062 The Procter & Gamble Company

NOTE 11
ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The table below presents the changes in Accumulated other comprehensive income/(loss) attributable to Procter & Gamble (AOCI), including the reclassifications out of AOCI by component:
Changes in Accumulated Other Comprehensive Income/(Loss) by Component
Investment SecuritiesPost-retirement BenefitsForeign Currency TranslationTotal AOCI
BALANCE at JUNE 30, 2018$(173) $(4,058) $(10,518) $(14,749) 
OCI before reclassifications (1)
167  (43) (213) (89) 
Amounts reclassified from AOCI into the Consolidated Statement of Earnings (2)
17  212  —  229  
Net current period OCI184  169  (213) 140  
Reclassification to retained earnings in accordance with ASU 2018-02 (3)
—  (308) (18) (326) 
Less: Other comprehensive income/(loss) attributable to non-controlling interests—  1  —  1  
BALANCE at JUNE 30, 201911  (4,198) (10,749) (14,936) 
OCI before reclassifications (4)
(10) (453) (1,083) (1,546) 
Amounts reclassified from AOCI into the Consolidated Statement of Earnings (5)
(2) 303  —  301  
Net current period OCI(12) (150) (1,083) (1,245) 
Less: Other comprehensive income/(loss) attributable to non-controlling interests—  2  (18) (16) 
BALANCE at JUNE 30, 2020$(1) $(4,350) $(11,814) $(16,165) 
Changes in Accumulated Other Comprehensive Income/(Loss) by Component
 Investment Securities Pension and Other Retiree Benefits Foreign Currency Translation Total AOCI
BALANCE at JUNE 30, 2017$(25) $(4,397) $(10,210) $(14,632)
OCI before reclassifications (1)
(141) 74
 (305) (372)
Amounts reclassified from AOCI into the Consolidated Statement of Earnings (2)
(7) 260
 —
 253
Net current period OCI(148) 334
 (305) (119)
Less: Other comprehensive income/(loss) attributable to non-controlling interests—
 (5) 3
 (2)
BALANCE at JUNE 30, 2018(173) (4,058) (10,518) (14,749)
OCI before reclassifications (3)
167
 (43) (213) (89)
Amounts reclassified from AOCI into the Consolidated Statement of Earnings (4)
17
 212
 —
 229
Net current period OCI184
 169
 (213) 140
Reclassification to retained earnings in accordance with ASU 2018-02 (5)
—
 (308) (18) (326)
Less: Other comprehensive income/(loss) attributable to non-controlling interests

 1
 —
 1
BALANCE at JUNE 30, 2019$11
 $(4,198) $(10,749) $(14,936)
(1)Net of tax benefit)/expense of $0, $(44) and $78 for gains/losses on investment securities, postretirement benefit items and foreign currency translation, respectively, for the period ended June 30, 2019.
(1)
(2)Net of tax (benefit)/expense of $0, $66 and $0 for gains/losses on investment securities, postretirement benefit items and foreign currency translation, respectively, for the period ended June 30, 2019.
(3)Adjustment made to early adopt ASU 2018-02: "Reclassification of Certain Effects from Accumulated Other Comprehensive Income."
(4)Net of tax (benefit)/expense of $(1), $(131) and $59 for gains/losses on investment securities, postretirement benefit items and foreign currency translation, respectively, for the period ended June 30, 2020.
(5)Net of tax (benefit)/expense of $0, $89 and $0 for gains/losses on investment securities, postretirement benefit items and foreign currency translation, respectively, for the period ended June 30, 2020.

Net of tax (benefit) / expense of $0, $(23) and $(279) for gains/losses on investment securities, pension and other retiree benefit items and foreign currency translation, respectively, for the period ended June 30, 2018.
(2)
Net of tax (benefit) / expense of $0, $91 and $0 for gains/losses on investment securities, pension and other retiree benefit items and foreign currency translation, respectively, for the period ended June 30, 2018.
(3)
Net of tax (benefit) / expense of $0, $(44) and $78 for gains/losses on investment securities, pension and other retiree benefit items and foreign currency translation, respectively, for the period ended June 30, 2019.
(4)
Net of tax (benefit) / expense of $0, $66, $0 for gains/losses on investment securities, pension and other retiree benefit items and foreign currency translation, respectively, for the period ended June 30, 2019.
(5)
Adjustment made to early adopt ASU 2018-02: "Reclassification of Certain Effects from Accumulated Other Comprehensive Income," as discussed in Note 1.
The below provides additional details on amounts reclassified from AOCI into the Consolidated Statement of Earnings:
•Investment securities: amounts reclassified from AOCI into Other non-operating income, net.
Pension and other retiree•Postretirement benefits: amounts reclassified from AOCI into Other non-operating income, net and included in the computation of net periodic postretirement costs (see Note 8 for additional details).
Foreign currency translation: this number includes financial statement translation

NOTE 12
LEASES
The Company determines whether a contract contains a lease at the inception of a contract by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We lease certain real estate, machinery, equipment, vehicles and net investment hedges. See Note 9office equipment for classificationvarying periods. Many of gainsthese leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain that the Company will exercise such options. The incremental borrowing rate utilized to calculate our lease liabilities is based on the information available at commencement date,
as most of the leases do not provide an implicit borrowing rate. Our operating lease agreements do not contain any material guarantees or restrictive covenants. The Company does not have any material finance leases or sublease activities.
The Company incurred lease expense for operating leases of $347, $341 and losses from hedges$340 during the years ended June 30, 2020, 2019 and 2018, respectively. Total cash paid for amounts included in the measurement of lease liabilities during the year ended June 30, 2020 was $271. Short-term leases, defined as leases with initial terms of 12 months or less, are not reflected on the Consolidated StatementsBalance Sheets. Lease expense for such short-term leases is not material. The most significant assets in our leasing portfolio relate to real estate and vehicles. For purposes of Earnings.calculating lease liabilities for
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 63
such leases, we have combined lease and non-lease components.
The right-of-use assets obtained in exchange for new lease liabilities were $126 for the year ended June 30, 2020.
Supplemental balance sheet and other information related to leases is as follows:
June 30, 2020
Operating leases:
Other noncurrent assets$850 
Accrued and other liabilities239 
Other noncurrent liabilities652 
Total operating lease liabilities$891 
Weighted average remaining lease term:
Operating leases6.5 years
Weighted average discount rate:
Operating leases4.3 %


At June 30, 2020, future payments of operating lease liabilities were as follows:
Operating Leases
June 30, 2020
1 year$239 
2 years191 
3 years161 
4 years134 
5 years86 
Over 5 years212 
Total lease payments1,023 
Less: Interest(132)
Present value of lease liabilities$891 

As of June 30, 2019, minimum lease payments under non-cancelable operating leases by fiscal year were expected to be:
Operating Leases
June 30, 2019
2020$263  
2021209  
2022165  
2023141  
2024121  
After 2024244  
Total lease payments$1,143  

NOTE 1213
COMMITMENTS AND CONTINGENCIES
Guarantees
In conjunction with certain transactions, primarily divestitures, we may provide routine indemnifications (e.g., indemnification for representations and warranties and retention of previously existing environmental, tax and employee liabilities) for which terms range in duration and, in some circumstances, are not explicitly defined. The maximum obligation under some indemnifications is also not explicitly stated and, as a result, the overall amount of these obligations cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have not
made significant payments for these indemnifications. We believe that if we were to incur a loss on any of these matters, the loss would not have a material effect on our financial position, results of operations or cash flows.
In certain situations, we guarantee loans for suppliers and customers. The total amount of guarantees issued under such arrangements is not material.
Off-Balance Sheet Arrangements
We do not have off-balance sheet financing arrangements, including variable interest entities, that have a material impact on our financial statements.



Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 61

Purchase Commitments and Operating Leases
We have purchase commitments for materials, supplies, services and property, plant and equipment as part of the normal course of business. Commitments made under take-or-pay obligations are as follows: 
Years ending June 3020202021202220232024There-after
Purchase obligations$633
$221
$176
$87
$106
$268

Years ending June 3020212022202320242025There-after
Purchase obligations$782  $257  $155  $92  $53  $238  
Such amounts represent minimum commitments under take-or-pay agreements with suppliers and are in line with expected usage. These amounts include purchase commitments related to service contracts for information technology, human resources management and facilities management activities that have been outsourced to third-partythird-
Amounts in millions of dollars except per share amounts or as otherwise specified.
64 The Procter & Gamble Company
party suppliers. Due to the proprietary nature of many of our materials and processes, certain supply contracts contain penalty provisions for early termination. We do not expect to incur penalty payments under these provisions that would materially affect our financial position, results of operations or cash flows.
We also lease certain property and equipment for varying periods. Future minimum rental commitments under non-cancelable operating leases are as follows:
Years ending June 3020202021202220232024There-after
Operating leases$255
$213
$162
$166
$134
$288

Litigation
We are subject, from time to time, to certain 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, patent and trademark matters, labor and employment matters and tax.
While considerable uncertainty exists, in the opinion of management and our counsel, the ultimate resolution of the various lawsuits and claims will not materially affect our financial position, results of operations or cash flows.
We are also subject to contingencies pursuant to environmental laws and regulations that in the future may require us to take action to correct the effects on the environment of prior manufacturing and waste disposal practices. Based on currently available information, we do not believe the ultimate resolution of environmental remediation will materially affect our financial position, results of operations or cash flows.
NOTE 13
DISCONTINUED OPERATIONS
During the year ended June 30, 2017, the Company completed the divestiture of four product categories to Coty, Inc. (“Coty”). The divestiture included 41 of the Company's beauty brands (“Beauty Brands”), including the global salon professional hair care and color, retail hair color, cosmetics and a majority of the fine fragrance businesses, along with select hair styling brands. The form of the divestiture transaction was a Reverse Morris Trust split-off, in which P&G shareholders were given the election to exchange their P&G shares for shares of a new
corporation that held the Beauty Brands (Galleria Co.), and then immediately exchange those shares for Coty shares. The value P&G received in the transaction was $11.4 billion. The value was comprised of 105 million shares of common stock of the Company, which were tendered by shareholders of the Company and exchanged for the Galleria Co. shares, valued at approximately $9.4 billion, and the assumption of $1.9 billion of debt by Galleria Co. The shares tendered in the transaction were reflected as an addition to treasury stock and the cash received related to the debt assumed by Coty was reflected as an investing activity in the Consolidated Statement of Cash Flows. The Company recorded an after-tax gain on the final transaction of $5.3 billion, net of transaction and related costs.
Two of the fine fragrance brands, Dolce & Gabbana and Christina Aguilera, were excluded from the divestiture. These brands were subsequently divested at amounts that approximated their adjusted carrying values.
In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Beauty Brands are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for the year ended June 30, 2017. The Beauty Brands were historically part of the Company's Beauty reportable segment.

The following is selected financial information included in Net earnings from discontinued operations for the Beauty Brands:
 Beauty Brands
Years ended June 302017
Net sales$1,159
Cost of products sold450
Selling, general and administrative expense783
Interest expense14
Other non-operating income/(expense), net16
Loss from discontinued operations before income taxes(72)
Income taxes on discontinued operations46
Gain on sale of business before income taxes5,197
Income tax expense/(benefit) on sale of business (1)
(138)
Net earnings from discontinued operations$5,217
(1)
The income tax benefit of the Beauty Brands divestiture represents the reversal of underlying deferred tax balances partially offset by current tax expense related to the transaction.

Amounts in millions of dollars except per share amounts or as otherwise specified.
62 The Procter & Gamble Company

The following is selected financial information included in cash flows from discontinued operations for the Beauty Brands:
 Beauty Brands
Years ended June 302017
NON-CASH OPERATING ITEMS 
Depreciation and amortization$24
Deferred income tax benefit(649)
Gain on sale of businesses5,210
Net increase in accrued taxes93
CASH FLOWS FROM OPERATING ACTIVITIES
Cash taxes paid$418
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures$38

NOTE 14
MERCK ACQUISITION
On November 30, 2018, we completed our acquisition of the over the counter (OTC)OTC healthcare business of Merck KGaA (Merck OTC)OTC for $3.7 billion (based on exchange rates at the time of closing) in an all-cash transaction. This business primarily sells OTC consumer healthcare products, mainly in Europe, Latin America and Asia markets. The results of Merck OTC, which are not material to the Company, are reported in our consolidated financial statements beginning December 1, 2018.
During the quarter ended December 31, 2019, we completed the allocation of the purchase price to the individual assets acquired and liabilities assumed. The allocation is based on the final determination of fair values of the assets and
liabilities acquired. The following table presents the preliminary allocation of purchase price related to the Merck OTC business as of the date of acquisition. The preliminary allocation of the purchase price is based on the best estimates of management and is subject to revision based on final determination of fair values of the assets and liabilities acquired, which will be completed as we complete our analysis of the underlying assets and acquired liabilities, such as pensions, litigation cases, environmental issues, and tax positions.
Amounts in millionsNovember 30, 2018
Current assets$419
Property, plant and equipment121
Intangible assets2,143
Goodwill2,138
Other non-current assets143
Total Assets Acquired$4,964
  
Current liabilities$233
Deferred income taxes767
Non-current liabilities87
Total Liabilities Acquired$1,087
  
Noncontrolling Interest (1)
$169
  
Net Assets Acquired$3,708
acquisition:
Amounts in millionsNovember 30, 2018
Current assets$421 
Property, plant and equipment119 
Intangible assets2,134 
Goodwill2,083 
Other non-current assets209 
Total Assets Acquired$4,966 
Current liabilities$232 
Deferred income taxes763 
Non-current liabilities94 
Total Liabilities Acquired$1,089 
Noncontrolling Interest (1)
Represents a 48% minority ownership interest in the Merck India company.$169 
Net Assets Acquired$3,708 
We have preliminarily estimated(1)Represents a 48% minority ownership interest in the fair valueMerck India company.
The acquisition resulted in $2.1 billion in goodwill, of which approximately $180 million was expected to be deductible for tax purposes as of the acquisition date. All of this goodwill was allocated to the Health Care Segment.
The purchase price allocation to Merck OTC’s identifiable intangible assets as $2.1 billion. The preliminary allocation ofOTC's identifiable intangible assets and their average useful lives is as follows:
Amounts in millionsEstimated Fair Value Avg Remaining
Useful Life
Intangible Assets with Determinable Lives
   Brands$701
 14
   Patents and technology162
 10
   Customer relationships334
 20
   Total$1,197
 15
    
Intangible Assets with Indefinite Lives
   Brands946
  
Total Intangible Assets$2,143
  

Amounts in millionsFair ValueAverage
Useful Life
Intangible Assets with Determinable Lives
   Brands$701  14
   Patents and technology162  10
   Customer relationships325  20
   Total$1,188  15
Intangible Assets with Indefinite Lives
   Brands946  
Total Intangible Assets$2,134  

The majority of the intangible valuation relates to brand intangibles. Our preliminary assessment as to brand intangibles that have an indefinite life and those that have a definite life was based on a number of factors, including competitive environment, market share, brand history, product life cycles, operating plan and the macroeconomic environment of the countries in which the brands are sold. The indefinite-lived brand intangibles include Neurobion and Dolo Neurobion. The definite-lived brand intangibles primarily include regional or local brands. The definite-lived brand intangibles have estimated lives ranging from 10 to 20 years. The technology intangibles are related to R&D and manufacturing know-how; these intangibles have a 10-year estimated life.know-how. The customer relationships intangibles have a 20-year estimated life and reflect the historical and projected attrition rates forare related to Merck OTC’s relationships with health care professionals, retailers and distributors.
The acquisition resulted in $2.1 billion in goodwill, of which approximately $180 million is expected to be deductible for tax purposes. All of this goodwill was allocated to the Health Care Segment.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 6365

NOTE 15
QUARTERLY RESULTS (UNAUDITED)
Quarters EndedSep 30Dec 31Mar 31Jun 30Total Year
NET SALES2019-2020$17,798  $18,240  $17,214  $17,698  $70,950  
2018-201916,690  17,438  16,462  17,094  67,684  
OPERATING INCOME2019-20204,290  4,482  3,453  3,481  15,706  
2018-20193,554  3,896  3,229  (5,192) 5,487  
GROSS MARGIN2019-202051.0 %51.4 %49.4 %49.5 %50.3 %
2018-201949.2 %48.9 %48.8 %47.7 %48.6 %
NET EARNINGS/(LOSS):
Net earnings/(loss)2019-20203,617  3,743  2,957  2,786  13,103  
2018-20193,211  3,216  2,776  (5,237) 3,966  
Net earnings/(loss) attributable to Procter & Gamble2019-20203,593  3,717  2,917  2,800  13,027  
2018-20193,199  3,194  2,745  (5,241) 3,897  
DILUTED NET EARNINGS/(LOSS) PER COMMON SHARE (1) (2)
2019-2020$1.36  $1.41  $1.12  $1.07  $4.96  
2018-20191.22  1.22  1.04  (2.12) 1.43  
Quarters Ended  Sep 30 Dec 31 Mar 31 Jun 30 Total Year
NET SALES2018-2019 $16,690
 $17,438
 $16,462
 $17,094
 $67,684
 2017-2018 16,653
 17,395
 16,281
 16,503
 66,832
OPERATING INCOME2018-2019 3,554
 3,896
 3,229
 (5,192) 5,487
 2017-2018 3,648
 3,919
 3,209
 2,587
 13,363
GROSS MARGIN2018-2019 49.2% 48.9% 48.8% 47.7% 48.6%
 2017-2018 50.3% 49.9% 48.5% 45.0% 48.5%
NET EARNINGS/(LOSS):           
Net earnings/(loss)2018-2019 3,211
 3,216
 2,776
 (5,237) 3,966
 2017-2018 2,870
 2,561
 2,540
 1,890
 9,861
Net earnings/(loss) attributable to Procter and Gamble2018-2019 3,199
 3,194
 2,745
 (5,241) 3,897
 2017-2018 2,853
 2,495
 2,511
 1,891
 9,750
DILUTED NET EARNINGS/(LOSS) PER COMMON SHARE (1) (2)
2018-2019 $1.22
 $1.22
 $1.04
 $(2.12) $1.43
 2017-2018 1.06
 0.93
 0.95
 0.72
 3.67
(1)
Diluted net earnings/(loss) per share is calculated on Net earnings/(loss) attributable to Procter & Gamble.
(2)Diluted net earnings/(loss) per share in each quarter is computed using the weighted average number of shares outstanding during that quarter while Diluted net earnings/(loss) per share for the full year is computed using the weighted average number of shares outstanding during the year.  In the quarter ended June 30, 2019, the Company reported a Net loss attributable to P&G, driven by the Shave Care impairment charges discussed in Note 4.  This caused certain of our equity instruments to be antidilutive for the full year (preferred shares) and for the quarter ended June 30, 2019 (preferred shares and equity awards). Because these securities were dilutive during the first three quarters of this fiscal year, the sum of the four quarters' Diluted net earnings/(loss) per share will not equal the full-year Diluted net earnings per common share.
(1)
Diluted net earnings per share is calculated on Net earnings attributable to Procter & Gamble.
(2)
Diluted net earnings/(loss) per share in each quarter is computed using the weighted average number of shares outstanding during that quarter while Diluted net earnings/(loss) per share for the full year is computed using the weighted average number of shares outstanding during the year.  In the quarter ended June 30, 2019, the Company reported a Net loss attributable to P&G, driven by the Shave Care impairment charges discussed in Note 4.  This caused certain of our equity instruments to be antidilutive for the full year (preferred shares) and for the quarter ended June 30, 2019 (preferred shares and equity awards). Because these securities were dilutive during the first three quarters of this fiscal year, the sum of the four quarters' Diluted net earnings/(loss) per share will not equal the full-year Diluted net earnings per common share.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
The Company's Chairman of the Board, President and Chief Executive Officer, David S. Taylor, and the Company's Vice Chairman, Chief Operating Officer and Chief Financial Officer, Jon R. Moeller, performed an evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this Annual Report on Form 10-K.
Messrs. Taylor and Moeller have concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed in reports
we file or
submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including Messrs. Taylor and Moeller, to allow their timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting that occurred during the Company's fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information.
Not applicable.




Amounts in millions of dollars except per share amounts or as otherwise specified.
6466 The Procter & Gamble Company

PART III

Item 10. Directors, Executive Officers and Corporate Governance.
The Board of Directors has determined that the following membermembers of the Audit Committee isare independent and is anare Audit Committee financial expertexperts as defined by SEC rules: Ms. Patricia A. Woertz (Chair). and Ms. Christine M. McCarthy.
The information required by this item is incorporated by reference to the following sections of the 20192020 Proxy Statement filed pursuant to Regulation 14A: the section entitled Election of Directors; the subsection of the Corporate Governance section entitled Board Meetings and Committees of the Board; the subsection of the Corporate Governance section entitled Code of Ethics; the subsections of the Other Matters section entitled Director Nominations for Inclusion in the 20202021 Proxy Statement and entitled Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees;
Board Nominees; and the section entitled Delinquent Section 16(a) Reports. Pursuant to the Instruction to Item 401 of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the following sections of the 20192020 Proxy Statement filed pursuant to Regulation 14A: the subsections of the Corporate Governance section entitled Board Meetings and Committees of the Board and entitled Compensation Committee Interlocks and Insider Participation; and the portion beginning with the section entitled Director Compensation up to but not including the section entitled Security Ownership of Management and Certain Beneficial Owners.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table gives information about the Company's common stock that may be issued upon the exercise of options, warrants and rights under all of the Company's equity compensation plans as of June 30, 2019.2020. The table includes the following plans: The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors' Stock Plan; The Procter & Gamble 2009 Stock and Incentive Compensation Plan; and The Procter & Gamble 2014 Stock and Incentive Compensation Plan; and The Procter & Gamble 2019 Stock and Incentive Compensation Plan.
Plan Category(a)
Number of securities to be issued upon exercise of outstanding options,
warrants and rights		(b)
Weighted average exercise
price of outstanding
options, warrants and
rights		(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders
Options149,915,111  $84.7316  
(1)
Restricted Stock Units (RSUs)/Performance Stock Units (PSUs)9,814,991  N/A
(1)
TOTAL159,730,102  $84.7316  
(2)
(1)Of the plans listed above, only The Procter & Gamble 2019 Stock and Incentive Compensation Plan (the “2019 Plan”) allows for future grants of securities. The maximum number of shares that may be granted under the 2019 Plan is approximately 187 million shares (inclusive of unissued shares that were carried over from the Procter & Gamble Company 2014 Stock and Incentive Compensation Plan), plus any shares of Common Stock subject to outstanding awards under the 2014 Plan that are forfeited, cancelled or otherwise terminated without the issuance of shares of Common Stock as set forth in the 2019 Plan. Stock options and stock appreciation rights are counted on a one-for-one basis while full value awards (such as RSUs and PSUs) will be counted as five shares for each share awarded. Total shares available for future issuance under this plan is 166 million.
(2)Weighted average exercise price of outstanding options only.

Plan Category
(a)
Number of securities to be issued upon exercise of outstanding options,
warrants and rights
 
(b)
Weighted-average exercise
price of outstanding
options, warrants and
rights
 
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders     
Options164,812,514
 
$79.5921
 
(1) 
Restricted Stock Units (RSUs)/Performance Stock Units (PSUs)11,579,025
 N/A
 
(1) 
TOTAL176,391,539
 
$79.5921
(2) 
 

(1)
The Procter & Gamble Company 67
Of the plans listed above, only The Procter & Gamble 2014 Stock and Incentive Compensation Plan allow for future grants of securities. The maximum number of shares that may be granted under this plan is 185 million shares. Stock options and stock appreciation rights are counted on a one for one basis while full value awards (such as RSUs and PSUs) will be counted as 5 shares for each share awarded. Total shares available for future issuance under this plan is 41 million.
(2)
Weighted average exercise price of outstanding options only.
Additional information required by this item is incorporated by reference to the 20192020 Proxy Statement filed pursuant to Regulation 14A, beginning with the subsection of the Beneficial Ownership section entitled Security Ownership of Management and Certain Beneficial Owners and up to but not including the subsection entitled Delinquent Section 16(a) Reports.
Item 13. Certain Relationships and Related Transactions and Director Independence.
The information required by this item is incorporated by reference to the following sections of the 20192020 Proxy Statement filed pursuant to Regulation 14A: the subsections
of the Corporate Governance section entitled Director Independence and Review and Approval of Transactions with Related Persons, and Compensation Committee Interlocks and Insider Participation.Persons.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated by reference to the following section of the 20192020 Proxy Statement

The Procter & Gamble Company 65

filed pursuant to Regulation 14A: Report of the Audit Committee, which ends with the subsection entitled Services Provided by Deloitte.



PART IV
Item 15. Exhibits and Financial Statement Schedules.
1.Financial Statements:
1.Financial Statements:
The following Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries, management's report and the reports of the independent registered public accounting firm are incorporated by reference in Part II, Item 8 of this Form 10-K.
•Management's Report on Internal Control over Financial Reporting
•Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
•Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
•Consolidated Statements of Earnings - for years ended June 30, 2020, 2019 and 2018
•
Consolidated Statements of Earnings - for years ended June 30, 2019, 2018 and 2017
Consolidated Statements of Other Comprehensive Income - for years ended June 30, 2020, 2019 2018 and 20172018
•Consolidated Balance Sheets - as of June 30, 20192020 and 20182019
•Consolidated Statements of Shareholders' Equity - for years ended June 30, 2020, 2019 2018 and 20172018
•Consolidated Statements of Cash Flows - for years ended June 30, 2020, 2019 2018 and 20172018
•Notes to Consolidated Financial Statements
2.Financial Statement Schedules:
2.Financial Statement Schedules:
These schedules are omitted because of the absence of the conditions under which they are required or because the information is set forth in the Consolidated Financial Statements or Notes thereto.
EXHIBITS
Exhibit     (3-1) -
Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011 and consolidated by the Board of Directors on April 8, 2016) (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016).
(3-2) -
Regulations (as approved by the Board of Directors on April 8, 2016, pursuant to authority granted by shareholders at the annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016).
Exhibit     (4-1) -
Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee (Incorporated by reference to Exhibit (4-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 2015).
     (4-2) -
The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any other instrument defining the rights of holders of the Company’s long-term debt.
     (4-3) -
Description of the Company’s Common Stock+Stock (Incorporated by reference to Exhibit (4-3) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).
     (4-4) -
Description of the Company’s 0.625% Notes due 2024, 1.200% Notes due 2028, and 1.875% Notes due 2038. +2038 (Incorporated by reference to Exhibit (4-4) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).
     (4-5) -
Description of the Company’s 4.125% EUR notes due December 2020, 4.875% EUR notes due May 2027, 6.250% GBP notes due January 2030, and 5.250% GBP notes due January 2033. +2033 (Incorporated by reference to Exhibit (4-5) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).
     (4-6) -
Description of the Company’s 0.500% Notes due 2024 and 1.250% Notes due 2029. +2029 (Incorporated by reference to Exhibit (4-6) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).

68 The Procter & Gamble Company
     (4-7) -
Description of the Company’s 1.375% Notes due 2025 and 1.800% Notes due 2029. +2029 (Incorporated by reference to Exhibit (4-7) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).
     (4-8) -
Description of the Company’s 1.125% Notes due 2023. +
     (4-9) -
Description2023 (Incorporated by reference to Exhibit (4-8) of the Company’s 0.275% Notes due 2020. +Annual report on Form 10-K for the year ended June 30, 2019).
     (4-10)     (4-9) -
Description of the Company’s 2.000% Notes due 2021. +2021 (Incorporated by reference to Exhibit (4-10) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).
     (4-11)(4-10) -
Description of the Company’s 2.000% Notes due 2022. +2022 (Incorporated by reference to Exhibit (4-11) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019).
Exhibit   (10-1) -
The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended), which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018;2018); and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2013).

66 The Procter & Gamble Company

*
(10-2) -
The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference to Exhibit (10-2) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).*
(10-3) -
The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).*
(10-4) -
Summary of the Company’s Retirement Plan Restoration Program (Incorporated by reference to Exhibit (10-27)(10-5) of the Company's Annual Report on Form 10-K10-Q for the yearquarter ended June 30, 2016)December 31, 2019); and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8) of the Company's Form 10-Q for the quarter ended September 30, 2015). *
(10-5) -
The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which was originally adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-5) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-6) -
Summary of the Company’s Long-Term Incentive Program (Incorporated by reference to Exhibit (10-2)(10-3) of the Company's Form 10-Q for the quarter ended December 31, 2018)2019); related correspondence and terms and conditions. +
(10-7) -
The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended), which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8)(10-6) of the Company’s Annual Reportreport on Form 10-K for the year ended June 30, 2018)2019).*
(10-8)(10-6) -
The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2018) +.March 31, 2020).*
(10-9)(10-7) -
Summary of the Company's Short Term Achievement Reward Program (Incorporated by reference to Exhibit (10-10)(10-4) of the Company’s Annual Report on Form 10-K10-Q for the yearquarter ended June 30, 2018)December 31, 2019); related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2015).*
(10-10)(10-8) -
Company's Forms of Separation Agreement & Release +;(Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2020) ; Company's Form of Separation Letter and Release (Incorporated by reference to Exhibit (10-2))(10-6) of the Company's Form 10-Q for the quarter ended MarchDecember 31, 2018)2019).*
(10-11)(10-9) -
Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30, 2018).*
(10-12)(10-10) -
The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-13) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-13) -
The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-14) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *
(10-14)(10-11) -
The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-15) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *
(10-15)(10-12) -
The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-16) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *
(10-16)(10-13) -
The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-17) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *
(10-17)(10-14) -
The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-18) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017). *
(10-18)(10-15) -
Senior Executive Recoupment Policy (Incorporated by reference to Exhibit (10-19) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).*
(10-19)(10-16) -
The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006 (Incorporated by reference to Exhibit (10-20) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017). *
(10-20)(10-17) -
The Procter & Gamble 2009 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-21) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017), and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-21) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018). *

The Procter & Gamble Company 69
(10-21)(10-18) -
The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions and related correspondence (Incorporated by reference to Exhibit (10-2) of the Company Form 10-Q for the quarter ended December 31, 2013). *
(10-22)(10-19) -
The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit (10-1)(10-3) of the Company's Form 10-Q for the quarter ended DecemberMarch 31, 2018)2020); related correspondence and terms and conditions. +

The Procter & Gamble Company 67

conditions (Incorporated by reference to Exhibit (10-22) of the Company's Annual Report on Form 10-K for the year ended June 30, 2019).*
(10-23)(10-20) -
The Procter & Gamble 2013 Non-Employee Directors' Stock Plan (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended December 31, 2013). *
(10-24)(10-21) -
The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 14, 2014 (Incorporated by reference to Exhibit (10-25) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016); and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2019 Stock and Incentive Compensation Plan and The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2017)2019). *
(10-25)(10-22) -
The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-26) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017), and The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Related correspondence (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2016). *
(10-23) -The Procter & Gamble 2019 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 8, 2019 (Incorporated by reference to Exhibit (10-1) of the Company’s Current Report on Form 8-K filed October 11, 2019); and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2019 Stock and Incentive Compensation Plan and The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company Form 10-Q for the quarter ended December 31, 2019). *
(10-24) -The Procter & Gamble 2019 Stock and Incentive Compensation Plan - Additional terms and conditions. * +
(10-25) -The Procter & Gamble 2019 Stock and Incentive Compensation Plan - Related correspondence. * +
Exhibit      (21) -
Subsidiaries of the Registrant. +
Exhibit      (23) -
Consent of Independent Registered Public Accounting Firm. +
Exhibit      (31) -
Rule 13a-14(a)/15d-14(a) Certifications. +
Exhibit      (32) -
Section 1350 Certifications. +
Exhibit   (99-1) -
Summary of Directors and Officers Insurance Program. +
101.INS (1)
Inline XBRL Instance Document
101.SCH (1)
Inline XBRL Taxonomy Extension Schema Document
101.CAL (1)
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)
Inline XBRL Taxonomy Definition Linkbase Document
101.LAB (1)
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
(1)
(1)Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
*
Compensatory plan or arrangement.
+
Filed herewith.


Item 16. Form 10-K Summary.
Not applicable.

6870 The Procter & Gamble Company

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.
THE PROCTER & GAMBLE COMPANY
THE PROCTER & GAMBLE COMPANY
By
By/s/ DAVID S. TAYLOR
(David S. Taylor)

Chairman of the Board, President and Chief Executive Officer
August 6, 201906, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
SignatureTitleDate
/s/ DAVID S. TAYLOR
(David S. Taylor)
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)August 6, 201906, 2020
/s/ JON R. MOELLER
(Jon R. Moeller)
Vice Chairman, Chief Operating Officer and Chief Financial Officer

(Principal Financial Officer)
August 6, 201906, 2020
/s/ VALARIE L. SHEPPARD
(Valarie L. Sheppard)
Controller and Treasurer and Group Executive Vice President - Company Transition Leader (Principal Accounting Officer)August 6, 201906, 2020
/s/ FRANCIS S. BLAKE
(Francis S. Blake)
DirectorAugust 6, 201906, 2020
/s/ ANGELA F. BRALY
(Angela F. Braly)
DirectorAugust 6, 201906, 2020
/s/ AMY L. CHANG
(Amy L. Chang)
DirectorAugust 6, 201906, 2020
/s/ SCOTT D. COOK
(Scott D. Cook)
DirectorAugust 6, 201906, 2020
/s/ JOSEPH JIMENEZ
(Joseph Jimenez)
DirectorAugust 6, 201906, 2020
/s/ TERRY J. LUNDGREN
(Terry J. Lundgren)
DirectorAugust 6, 201906, 2020
/s/ CHRISTINE M. MCCARTHY
(Christine M. McCarthy)
DirectorAugust 06, 2020
/s/ W. JAMES MCNERNEY, JR.
(W. James McNerney, Jr.)
DirectorAugust 6, 201906, 2020
/s/ NELSON PELTZ
(Nelson Peltz)
DirectorAugust 6, 201906, 2020
/s/ MARGARET C. WHITMAN
(Margaret C. Whitman)
DirectorAugust 6, 201906, 2020
/s/ PATRICIA A. WOERTZ
(Patricia A. Woertz)
DirectorAugust 6, 201906, 2020


The Procter & Gamble Company 6971

EXHIBIT INDEX
Exhibit     (3-1) -

Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011 and consolidated by the Board of Directors on April 8, 2016) (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016).
(3-2) -

Regulations (as approved by the Board of Directors on April 8, 2016, pursuant to authority granted by shareholders at the annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016).
Exhibit   (4-1) -

Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee (Incorporated by reference to Exhibit (4-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 2015).
     (4-2) -
The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any other instrument defining the rights of holders of the Company’s long-term debt.
     (4-3) -

Description of the Company’s Common Stock (Incorporated by reference to Exhibit (4-3) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019)+
     (4-4) -

Description of the Company’s 0.625% Notes due 2024, 1.200% Notes due 2028, and 1.875% Notes due 2038 (Incorporated by reference to Exhibit (4-4) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
     (4-5) -

Description of the Company’s 4.125% EUR Notesnotes due December 2020, 4.875% EUR Notesnotes due May 2027, 6.250% GBP Notesnotes due January 2030, and 5.250% GBP Notesnotes due January 2033 (Incorporated by reference to Exhibit (4-5) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
     (4-6) -

Description of the Company’s 0.500% Notes due 2024 and 1.250% Notes due 2029 (Incorporated by reference to Exhibit (4-6) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
     (4-7) -

Description of the Company’s 1.375% Notes due 2025 and 1.800% Notes due 2029 (Incorporated by reference to Exhibit (4-7) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
     (4-8) -

Description of the Company’s 1.125% Notes due 2023 (Incorporated by reference to Exhibit (4-8) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
     (4-9) -

Description of the Company’s 0.275% Notes due 2020. +
(4-10) -

Description of the Company’s 2.000% Notes due 2021 (Incorporated by reference to Exhibit (4-10) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
     (4-11)(4-10) -

Description of the Company’s 2.000% Notes due 2022 (Incorporated by reference to Exhibit (4-11) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). +
Exhibit (10-1) -

The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended), which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018;2018); and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2013).
(10-2) -

The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference to Exhibit (10-2) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-3) -

The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to Exhibit (10-3) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-4) -

Summary of the Company’s Retirement Plan Restoration Program (Incorporated by reference to Exhibit (10-27)(10-5) of the Company's Annual Report on Form 10-K10-Q for the yearquarter ended June 30, 2016)December 31, 2019); and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8) of the Company's Form 10-Q for the quarter ended September 30, 2015).
(10-5) -

The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which was originally adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-5) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-6) -

Summary of the Company’s Long-Term Incentive Program (Incorporated by reference to Exhibit (10-2)(10-3) of the Company's Form 10-Q for the quarter ended December 31, 2018)2019); related correspondence and terms and conditions. +
(10-7) -

The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended), which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8)(10-6) of the Company’s Annual Reportreport on Form 10-K for the year ended June 30, 2018)2019).
(10-8)(10-6) -

The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2018)March 31, 2020).
(10-9)(10-7) -

Summary of the Company's Short Term Achievement Reward Program (Incorporated by reference to Exhibit (10-4) of the Company’s Form 10-Q for the quarter ended December 31, 2019); related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2015).
(10-8) -
Company's Forms of Separation Agreement & Release (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2020) ; Company's Form of Separation Letter and Release (Incorporated by reference to Exhibit (10-6) of the Company's Form 10-Q for the quarter ended December 31, 2019).

72 The Procter & Gamble Company
(10-9) -
Summary of the Company's Short Term Achievement Reward Program (Incorporated by reference to Exhibit (10-10) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018); related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2015).
(10-10) -

Company's Forms of Separation Agreement & Release +; Company's Form of Separation Letter and Release (Incorporated by reference to Exhibit (10-2)) of the Company's Form 10-Q for the quarter ended March 31, 2018).
(10-11) -

Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30, 2018).
(10-12) -

The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-13) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).

70 The Procter & Gamble Company

(10-13)(10-10) -

The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-14) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).
(10-14)(10-11) -

The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-15) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).
(10-15)(10-12) -

The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-16) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).
(10-16)(10-13) -

The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-17) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).
(10-17)(10-14) -

The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-18) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).
(10-18)(10-15) -

Senior Executive Recoupment Policy (Incorporated by reference to Exhibit (10-19) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-19)(10-16) -

The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006 (Incorporated by reference to Exhibit (10-20) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017).
(10-20)(10-17) -

The Procter & Gamble 2009 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-21) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017), and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-21) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).
(10-21)(10-18) -

The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions and related correspondence (Incorporated by reference to Exhibit (10-2) of the Company Form 10-Q for the quarter ended December 31, 2013).
(10-22)(10-19) -

The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit (10-1)(10-3) of the Company's Form 10-Q for the quarter ended DecemberMarch 31, 2018)2020); related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-22) of the Company's Annual Report on Form 10-K for the year ended June 30, 2019). +
(10-23)(10-20) -

The Procter & Gamble 2013 Non-Employee Directors' Stock Plan (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended December 31, 2013).
(10-24)(10-21) -

The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 14, 2014 (Incorporated by reference to Exhibit (10-25) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016); and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2019 Stock and Incentive Compensation Plan and The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2017)2019).
(10-25)(10-22) -

The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-26) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017), and The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Related correspondence (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2016).
Exhibit    (10-23)(21) -

SubsidiariesThe Procter & Gamble 2019 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 8, 2019 (Incorporated by reference to Exhibit (10-1) of the RegistrantCompany’s Current Report on Form 8-K filed October 11, 2019); and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2019 Stock and Incentive Compensation Plan and The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company Form 10-Q for the quarter ended December 31, 2019).
(10-24) -
The Procter & Gamble 2019 Stock and Incentive Compensation Plan - Additional terms and conditions. +
(10-25) -
The Procter & Gamble 2019 Stock and Incentive Compensation Plan - Related correspondence. +
Exhibit    (23)(21) -

Subsidiaries of the Registrant. +
Exhibit    (23) -
Consent of Independent Registered Public Accounting Firm. +
Exhibit    (31) -

Rule 13a-14(a)/15d-14(a) Certifications. +
Exhibit    (32) -

Section 1350 Certifications. +

The Procter & Gamble Company 73
Exhibit (99-1) -

Summary of Directors and Officers Insurance Program. +
101.INS (1)
Inline XBRL Instance Document
101.SCH (1)
Inline XBRL Taxonomy Extension Schema Document
101.CAL (1)
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)
Inline XBRL Taxonomy Definition Linkbase Document
101.LAB (1)
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
(1(1))Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
+
+
Filed herewith.