The Procter & Gamble Company (PG) 10-Q 28 Jan 10 2010 Q2 Quarterly report Financial data

Statement Of Income Alternative

Statement Of Income Alternative (USD $)
In Millions, except Per Share data	3 Months Ended Dec. 31, 2009	3 Months Ended Dec. 31, 2008		6 Months Ended Dec. 31, 2009	6 Months Ended Dec. 31, 2008
Net Sales	$21,027	$19,763	[1]	$40,834	$40,746	[1]
Cost of products sold	9,736	9,799	[1]	19,134	20,357	[1]
Selling, general and administrative expense	6,636	5,909	[1]	12,597	11,948	[1]
Operating Income	4,655	4,055	[1]	9,103	8,441	[1]
Interest expense	224	354	[1]	511	693	[1]
Other non-operating income, net	53	67	[1]	76	347	[1]
Earnings from Continuing Operations Before Income Taxes	4,484	3,768	[1]	8,668	8,095	[1]
Income taxes	1,335	955	[1]	2,492	2,167	[1]
Net Earnings from Continuing Operations	3,149	2,813	[1]	6,176	5,928	[1]
Net Earnings from Discontinued Operations	1,510	2,191	[1]	1,790	2,424	[1]
Net Earnings	$4,659	$5,004	[1]	$7,966	$8,352	[1]
Per Common Share
Basic net earnings from continuing operations	1.06	0.94	[1]	2.08	1.96	[1]
Basic net earnings from discontinued operations	0.52	0.74	[1]	0.61	0.81	[1]
Basic net earnings	1.58	1.68	[1]	2.69	2.77	[1]
Diluted net earnings from continuing operations	1.01	0.89	[1]	1.98	1.85	[1]
Diluted net earnings from discontinued operations	0.48	0.69	[1]	0.58	0.76	[1]
Diluted net earnings	1.49	1.58	[1]	2.56	2.61	[1]
Dividends	0.44	0.4	[1]	0.88	0.8	[1]
Diluted Weighted Average Common Shares Outstanding	3118.5	3170.8	[1]	3114.5	3205.1	[1]
[1]Certain amounts for prior periods were reclassified to conform with the fiscal 2010 presentation

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Millions	Dec. 31, 2009	Jun. 30, 2009
CURRENT ASSETS
Cash and cash equivalents	$4,130	$4,781	[1]
Accounts receivable	6,544	5,836	[1]
Inventories
Materials and supplies	1,788	1,557	[1]
Work in process	640	672	[1]
Finished goods	4,436	4,651	[1]
Total inventories	6,864	6,880	[1]
Deferred income taxes	1,217	1,209	[1]
Prepaid expenses and other current assets	3,006	3,199	[1]
TOTAL CURRENT ASSETS	21,761	21,905	[1]
PROPERTY, PLANT AND EQUIPMENT
Buildings	6,945	6,724	[1]
Machinery and equipment	29,859	29,042	[1]
Land	883	885	[1]
Total property, plant and equipment	37,687	36,651	[1]
Accumulated depreciation	(18,041)	(17,189)	[1]
NET PROPERTY, PLANT AND EQUIPMENT	19,646	19,462	[1]
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill	56,979	56,512	[1]
Trademarks and other intangible assets, net	32,624	32,606	[1]
NET GOODWILL AND OTHER INTANGIBLE ASSETS	89,603	89,118	[1]
OTHER NON-CURRENT ASSETS	4,283	4,348	[1]
TOTAL ASSETS	135,293	134,833	[1]
CURRENT LIABILITIES
Accounts payable	5,433	5,980	[1]
Accrued and other liabilities	10,463	8,601	[1]
Debt due within one year	7,780	16,320	[1]
TOTAL CURRENT LIABILITIES	23,676	30,901	[1]
LONG-TERM DEBT	22,309	20,652	[1]
DEFERRED INCOME TAXES	11,045	10,752	[1]
OTHER NON-CURRENT LIABILITIES	9,316	9,146	[1]
TOTAL LIABILITIES	66,346	71,451	[1]
SHAREHOLDERS' EQUITY
Preferred stock	1,301	1,324	[1]
Common stock - shares issued - 31-Dec 4,007.4 30-Jun 4,007.3	4,007	4,007	[1]
Additional paid-in capital	61,370	61,118	[1]
Reserve for ESOP debt retirement	(1,347)	(1,340)	[1]
Accumulated other comprehensive income (loss)	(2,236)	(3,358)	[1]
Treasury stock	(57,074)	(55,961)	[1]
Retained earnings	62,616	57,309	[1]
Noncontrolling interest	310	283	[1]
TOTAL SHAREHOLDERS' EQUITY	68,947	63,382	[1]
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$135,293	$134,833	[1]
[1]Certain amounts for prior periods were reclassified to conform with the fiscal 2010 presentation

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (USD $)
Share data in Millions	Dec. 31, 2009	Jun. 30, 2009
Common stock, shares issued	4007.4	4007.3	[1]
[1]Certain amounts for prior periods were reclassified to conform with the fiscal 2010 presentation

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Millions	6 Months Ended Dec. 31, 2009		6 Months Ended Dec. 31, 2008
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$4,781	[1]	$3,313
OPERATING ACTIVITIES
Net earnings	7,966		8,352	[1]
Depreciation and amortization	1,529		1,503
Share-based compensation expense	205		223
Deferred income taxes	(7)		192
Gain on sale of businesses	(2,637)		(2,304)
Changes in:
Accounts receivable	(826)		(775)
Inventories	48		(825)
Accounts payable, accrued and other liabilities	1,313		(668)
Other operating assets and liabilities	312		(150)
Other	(54)		92
TOTAL OPERATING ACTIVITIES	7,849		5,640
INVESTING ACTIVITIES
Capital expenditures	(1,274)		(1,421)
Proceeds from asset sales	3,039		1,017
Acquisitions, net of cash acquired	(70)		(323)
Change in investments	(49)		52
TOTAL INVESTING ACTIVITIES	1,646		(675)
FINANCING ACTIVITIES
Dividends to shareholders	(2,672)		(2,493)
Change in short-term debt	(2,902)		4,096
Additions to long-term debt	1,495		2,912
Reductions of long-term debt	(5,169)		(2,183)
Treasury stock purchases	(1,414)		(5,243)
Impact of stock options and other	318		551
TOTAL FINANCING ACTIVITIES	(10,344)		(2,360)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	198		(265)
CHANGE IN CASH AND CASH EQUIVALENTS	(651)		2,340
CASH AND CASH EQUIVALENTS, END OF PERIOD	$4,130		$5,653
[1]Certain amounts for prior periods were reclassified to conform with the fiscal 2010 presentation

Organization, Consolidation and

Organization, Consolidation and Presentation of Financial Statements Disclosure
	6 Months Ended Dec. 31, 2009 USD / shares
Organization, Consolidation and Presentation of Financial Statements Disclosure	1. These statements should be read in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended June30, 2009. The results of operations for the three-month and six-month periods ended December31, 2009 are not necessarily indicative of annual results. For the quarter ended December31, 2009, the Company has evaluated subsequent events for potential recognition and disclosure through January28, 2010, the date of financial statement issuance.

Comprehensive Income

Comprehensive Income
	6 Months Ended Dec. 31, 2009 USD / shares
Comprehensive Income	2. Comprehensive Income - Total comprehensive income is comprised primarily of net earnings, net currency translation gains and losses, impacts of net investment and cash flow hedges, net unrealized gains and losses on investment securities and defined benefit and other retiree benefit plan activities. Total comprehensive income for the three months ended December31, 2009 and 2008 was $4,386 million and $2,644 million, respectively. For the six months ended December31, 2009 and 2008, total comprehensive income was $9,088 million and $2,392 million, respectively.

Segment Information

Segment Information
	6 Months Ended Dec. 31, 2009 USD / shares
Segment Information	3. Segment Information - Effective July1, 2009, we implemented a number of changes to the organization structure of the Beauty GBU, which resulted in changes to the components of our reportable segment structure. Female blades and razors were formerly included in the Grooming reportable segment and are now included in the Beauty reportable segment. Certain male-focused brands and businesses, such as Old Spice and Gillette personal care, moved from the Beauty reportable segment to the Grooming reportable segment. In addition, the Beauty GBU was renamed the Beauty and Grooming GBU. These changes have been reflected in our segment reporting for all periods presented. As discussed in Note 10, certain divested businesses are presented as discontinued operations and are excluded from segment results for all periods presented. Following is a summary of segment results. Three Months Ended December31 Six Months Ended December31 Amounts in millions Net Sales Earningsfrom Continuing Operations Before Income Taxes NetEarnings from Continuing Operations Net Sales Earningsfrom Continuing Operations Before Income Taxes NetEarnings from Continuing Operations Beauty and Grooming GBU Beauty 2009 $ 5,217 $ 1,137 $ 876 $ 10,138 $ 2,164 $ 1,653 2008 4,898 1,054 821 10,079 2,072 1,609 Grooming 2009 2,095 613 433 3,953 1,102 784 2008 2,038 550 394 4,128 1,160 837 Health and Well-Being GBU Health Care 2009 3,071 790 534 6,050 1,620 1,084 2008 2,930 723 495 6,031 1,480 998 Snacks and Pet Care 2009 835 143 98 1,590 256 172 2008 791 103 63 1,598 193 118 Household Care GBU Fabric Care and Home Care 2009 6,311 1,433 965 12,441 2,943 1,974 2008 5,797 1,024 658 12,280 2,285 1,484 Baby Care and Family Care 2009 3,817 925 579 7,406 1,810 1,136 2008 3,466 665 418 7,238 1,472 932 Corporate 2009 (319 ) (557 ) (336 ) (744 ) (1,227 ) (627 ) 2008 (157 ) (351 ) (36 ) (608 ) (567 ) (50 ) Total 2009 21,027 4,484 3,149 40,834 8,668 6,176 2008 19,763 3,768 2,813 40,746 8,095 5,928

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets
	6 Months Ended Dec. 31, 2009 USD / shares
Goodwill and Other Intangible Assets	4. Goodwill and Other Intangible Assets - Goodwill as of December31, 2009 is allocated by reportable segment and global business unit as follows (amounts in millions): SixMonthsEnded December31,2009 BEAUTY GROOMING GBU Beauty, beginning of year $ 18,668 Acquisitions and divestitures 21 Translation and other 178 Goodwill, December31, 2009 18,867 Grooming, beginning of year 21,391 Acquisitions and divestitures (19 ) Translation and other 143 Goodwill, December31, 2009 21,515 HEALTH WELL-BEING GBU Health Care, beginning of year 8,404 Acquisitions and divestitures (249 ) Translation and other 41 Goodwill, December31, 2009 8,196 Snacks and Pet Care, beginning of year 2,055 Acquisitions and divestitures Translation and other 4 Goodwill, December31, 2009 2,059 HOUSEHOLD CARE GBU Fabric Care and Home Care, beginning of year 4,408 Acquisitions and divestitures (3 ) Translation and other 31 Goodwill, December31, 2009 4,436 Baby Care and Family Care, beginning of year 1,586 Acquisitions and divestitures (1 ) Translation and other 24 Goodwill, December31, 2009 1,609 CORPORATE Corporate, beginning of year Acquisitions and divestitures 297 Translation and other Goodwill, December31, 2009 297 GOODWILL, beginning of year 56,512 Acquisitions and divestitures 46 Translation and other 421 Goodwill, December31, 2009 $ 56,979 The increase in goodwill from June30, 2009 is primarily due to the acquisition of MDVIP, a physicians network focused on preventative medicine, and currency translation, partially offset by the divestiture of the pharmaceuticals business. Identifiable intangible assets as of December31, 2009 are comprised of (amounts in millions): GrossCarrying Amount Accumulated Amortization Amortizable intangible assets with determinable lives $ 8,738 $ 3,367 Intangible assets with indefinite lives 27,253 Total identifiable intangible assets $ 35,991 $ 3,367 Amortizable intangible assets consist principally of brands, patents, technology and customer relationships. The non-amortizable intangible assets consist primarily of brands. The amortization of intangible assets for the three months ended December31, 2009 and 2008 was $143 million and $150 million, respectively. For the six months ended December31, 2009 and 2008, the amortization of intangible assets was $288 million and $310 million, respectively.

Disclosure of Compensation Rela

Disclosure of Compensation Related Costs, Share-based Payments
	6 Months Ended Dec. 31, 2009 USD / shares
Disclosure of Compensation Related Costs, Share-based Payments	5. Pursuant to applicable accounting guidance for share-based payments, companies must recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. Total share-based compensation for the three months and six months ended December31, 2009 and 2008 are summarized in the following table (amounts in millions): ThreeMonthsEnded December31 SixMonthsEnded December31 2009 2008 2009 2008 Share-Based Compensation Stock options $ 98 $ 90 $ 191 $ 197 Other share-based awards 8 7 14 26 Total share-based compensation $ 106 $ 97 $ 205 $ 223 Assumptions utilized in the model are evaluated and revised, as necessary, to reflect market conditions and experience.

Postretirement Benefits

Postretirement Benefits
	6 Months Ended Dec. 31, 2009 USD / shares
Postretirement Benefits	6. Postretirement Benefits - The Company offers various postretirement benefits to its employees. The components of net periodic benefit cost are as follows: Pension Benefits OtherRetireeBenefits ThreeMonthsEnded December31 ThreeMonthsEnded December31 Amounts in millions 2009 2008 2009 2008 Service cost $ 57 $ 53 $ 26 $ 23 Interest cost 150 136 64 61 Expected return on plan assets (113 ) (117 ) (107 ) (111 ) Amortization of deferred amounts 4 4 (6 ) (6 ) Recognized net actuarial loss 23 6 5 1 Gross benefit cost (credit) 121 82 (18 ) (32 ) Dividends on ESOP preferred stock (28 ) (26 ) Net periodic benefit cost (credit) $ 121 $ 82 $ (46 ) $ (58 ) Pension Benefits OtherRetireeBenefits SixMonthsEnded December31 SixMonthsEnded December31 Amounts in millions 2009 2008 2009 2008 Service cost $ 112 $ 112 $ 52 $ 46 Interest cost 297 288 127 123 Expected return on plan assets (224 ) (249 ) (214 ) (222 ) Amortization of deferred amounts 8 8 (11 ) (12 ) Recognized net actuarial loss 46 14 9 2 Gross benefit cost (credit) 239 173 (37 ) (63 ) Dividends on ESOP preferred stock (56 ) (52 ) Net periodic benefit cost (credit) $ 239 $ 173 $ (93 ) $ (115 ) For the year ending June30, 2010, the expected return on plan assets is 7.1% and 9.3% for pension and other retiree benefit plans, respectively.

Risk Management Activities and

Risk Management Activities and Fair Value Measurements
	6 Months Ended Dec. 31, 2009 USD / shares
Risk Management Activities and Fair Value Measurements	7. 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 netting and correlation. To the extent we choose to manage volatility associated with the net exposures, 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. At inception, we formally designate and document qualifying instruments as hedges of underlying exposures. We formally assess, both at inception and at least quarterly, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposure. Fluctuations in the value of these instruments generally are offset by changes in the fair value or cash flows of the underlying exposures being hedged. This offset is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument. The ineffective portion of a change in the fair value of a qualifying instrument is immediately recognized in earnings. The amount of ineffectiveness recognized is immaterial for all periods presented. For additional details on the Companys risk management activities, refer to the Companys Annual Report on Form 10-K for the fiscal year ended June30, 2009. Fair Value Hierarchy Accounting guidance on fair value measurement for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three 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 entitys own assumptions or external inputs from inactive markets. In valuing assets and liabilities, we are required to maximize the use of quoted market prices and minimize the use of unobservable inputs. We calculate the fair value of our Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments where available or based on other observable instruments. The fair value of our Level 3 instruments is calculated as the net present value of expected cash flows based on externally provided inputs. These calculations take into consideration the credit risk of both the Company and our counterparties. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the period. The following table sets forth the Companys financial assets and liabilities as of December31 and June30, 2009 that are measured at fair value on a recurring basis during the period, segregated by level wit

New Accounting Pronouncements a

New Accounting Pronouncements and Policies
	6 Months Ended Dec. 31, 2009 USD / shares
New Accounting Pronouncements and Policies	8. New Accounting Pronouncements and Policies In December2007, the Financial Accounting Standards Board (FASB) issued new accounting guidance on business combinations. The new guidance revises the method of accounting for a number of aspects of business combinations including acquisition costs, contingencies (including contingent assets, contingent liabilities and contingent purchase price), and post-acquisition exit activities of acquired businesses. The Company adopted the new guidance beginning July1, 2009, and the adoption of the new guidance did not have a material effect on our financial position, results of operations or cash flows. In December 2007, the FASB also issued new accounting guidance on noncontrolling interests in consolidated financial statements. The new accounting guidance requires that a noncontrolling interest in the equity of a subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interest and changes in ownership interests in a subsidiary, and requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners. The Company retrospectively adopted the presentation and disclosure requirements of the new guidance on July1, 2009. The adoption of the new guidance did not have a material effect on our financial position, results of operations or cash flows. Noncontrolling interests of $283 million at June30, 2009 were reclassified from liabilities to shareholders equity in the Consolidated Balance Sheet. Net expense for income attributable to the noncontrolling interest totaling $33 million and $11 million for the three months ended December31, 2009 and 2008, respectively, and $61 million and $32 million for the six months ended December31, 2009 and 2008, respectively, are not presented separately in the Consolidated Statements of Earnings due to immateriality, but are reflected within other non-operating income, net. Net earnings represent net income attributable to the Companys common shareholders. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the Consolidated Financial Statements.

Commitments and Contingencies

Commitments and Contingencies
	6 Months Ended Dec. 31, 2009 USD / shares
Commitments and Contingencies	9. Commitments and Contingencies Litigation We are subject to various legal proceedings and claims arising out of our business which cover a wide range of matters such as governmental regulations, antitrust and trade regulations, product liability, patent and trademark matters, income taxes and other actions. As previously disclosed, the Company is subject to a variety of investigations into potential competition law violations in Europe, as detailed in Part 2, Item1, Legal Proceedings of this 10-Q. We believe these matters involve a number of other consumer products companies and/or retail customers. The Companys policy is to comply with all laws and regulations, including all antitrust and competition laws, and to cooperate with investigations by relevant regulatory authorities, which the Company is doing. Competition and antitrust law inquiries often continue for several years and, if violations are found, can result in substantial fines. In response to the actions of the European Commission and national authorities, the Company launched its own internal investigations into potential violations of competition laws. The Company has identified violations in certain European countries and appropriate actions were taken. In December 2009, the authorities in France and Italy issued separate complaints pursuant to their investigations alleging that the Company, along with several other companies, engaged in violations of competition laws in France and Italy, respectively. The Company will have the opportunity to respond to these complaints. As a result of our initial analysis of these complaints, the Company recorded charges totaling $267 million during the current quarter for potential fines for competition law violations. The remaining matters are in various stages of the investigatory process. It is still too early for us to reasonably estimate the total amount of fines to which the Company will be subject as a result of these various competition law issues. However, the ultimate resolution of these matters will likely result in fines or other costs in excess of amounts accrued to date that could materially impact our income statement and cash flows in the period in which they are accrued and paid, respectively. In other industries, these fines have amounted to hundreds of millions of dollars. We will continue to monitor developments for all of these investigations, and will record additional charges as appropriate. With respect to other litigation and claims, 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 have a material adverse effect on our financial position, results of operations or cas

Discontinued Operations

Discontinued Operations
	6 Months Ended Dec. 31, 2009 USD / shares
Discontinued Operations	10. Discontinued Operations In October 2009, the Company completed the divestiture of our global pharmaceuticals business to Warner Chilcott plc (Warner Chilcott) for $2.8 billion of cash, net of assumed and transferred liabilities. Under the terms of the agreement, Warner Chilcott acquired our portfolio of branded pharmaceutical products, our prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany. In addition, the majority of the 2,300 employees working on the pharmaceuticals business were transferred to Warner Chilcott. The Company recorded an after-tax gain on the transaction of $1,464 million, which is included in net earnings from discontinued operations in the Consolidated Statements of Earnings for the three-month and six-month periods ended December31, 2009. The pharmaceuticals business had historically been part of the Companys Health Care reportable segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of the pharmaceuticals business are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. In November 2008, the Company completed the divestiture of our coffee business through the merger of its Folgers coffee subsidiary into The J.M. Smucker Company (Smucker) in an all-stock reverse Morris Trust transaction. In connection with the merger, 38.7million shares of common stock of the Company were tendered by shareholders and exchanged for all shares of Folgers common stock, resulting in an increase of treasury stock of $2,466 million. Pursuant to the merger, a Smucker subsidiary merged with and into Folgers and Folgers became a wholly owned subsidiary of Smucker. The Company recorded an after-tax gain on the transaction of $2,011 million, which is included in net earnings from discontinued operations in the Consolidated Statements of Earnings for the three-month and six-month periods ended December31, 2008. The coffee business had historically been part of the Companys Snacks, Coffee and Pet Care reportable segment, as well as the coffee portion of our away-from-home business, which was included in the Fabric Care and Home Care reportable segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of Folgers are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Following is selected financial information included in net earnings from discontinued operations for the pharmaceuticals and coffee businesses: Three months ended December31 2009 2008 Amounts in millions Pharma Coffee Total Pharma Coffee Total Net sales $ 196 $ $ 196 $ 605 $ 223 $ 828 Earnings from discontinued operations 70 70 219 51 270 Income tax expense (24 ) (24 ) (70 ) (20 ) (90 ) Gain on sale o

Document Information

Document Information
	6 Months Ended Dec. 31, 2009 USD / shares
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2009-12-31

Entity Information

Entity Information (USD $)
	6 Months Ended Dec. 31, 2009
Entity [Text Block]
Trading Symbol	PG
Entity Registrant Name	PROCTER & GAMBLE CO
Entity Central Index Key	0000080424
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	2,904,592,954