Item 1. Financial Statements

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Item 1. Financial Statements

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS


	Three Months Ended March 31				Nine Months Ended March 31
Amounts in millions except per share amounts	2024		2023		2024		2023
NET SALES	$	20,195	$	20,068	$	63,507	$	61,453
Cost of products sold	9,855		10,404		30,500		32,147
Selling, general and administrative expense	5,880		5,416		17,006		15,334
Indefinite-lived intangible asset impairment charge	—		—		1,341		—
OPERATING INCOME	4,460		4,248		14,660		13,972
Interest expense	(233)		(222)		(705)		(516)
Interest income	104		83		366		191
Other non-operating income, net	260		179		570		473
EARNINGS BEFORE INCOME TAXES	4,592		4,288		14,891		14,120
Income taxes	812		864		3,061		2,774
NET EARNINGS	3,781		3,424		11,830		11,346
Less: Net earnings attributable to noncontrolling interests	27		27		88		77
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE	$	3,754	$	3,397	$	11,742	$	11,269

NET EARNINGS PER COMMON SHARE (1)
Basic	$	1.56	$	1.41	$	4.89	$	4.67
Diluted	$	1.52	$	1.37	$	4.75	$	4.53

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended March 31				Nine Months Ended March 31
Amounts in millions	2024		2023		2024		2023
NET EARNINGS	$	3,781	$	3,424	$	11,830	$	11,346
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation	(211)		259		(128)		(74)
Unrealized gains/(losses) on investment securities	—		1		(2)		(2)
Unrealized gains/(losses) on defined benefit postretirement plans	7		(19)		(23)		(8)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX	(204)		241		(153)		(84)
TOTAL COMPREHENSIVE INCOME	3,577		3,665		11,677		11,262
Less: Total comprehensive income attributable to noncontrolling interests	26		28		85		70
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE	$	3,551	$	3,637	$	11,592	$	11,192

See accompanying Notes to Consolidated Financial Statements.

2 The Procter & Gamble Company

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


Amounts in millions			March 31, 2024		June 30, 2023
Assets
CURRENT ASSETS
Cash and cash equivalents			$	6,828	$	8,246
Accounts receivable			6,124		5,471
INVENTORIES
Materials and supplies			1,676		1,863
Work in process			971		956
Finished goods			4,431		4,254
Total inventories			7,077		7,073
Prepaid expenses and other current assets			2,428		1,858
TOTAL CURRENT ASSETS			22,458		22,648
PROPERTY, PLANT AND EQUIPMENT, NET			22,027		21,909
GOODWILL			40,567		40,659
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET			22,193		23,783
OTHER NONCURRENT ASSETS			12,353		11,830
TOTAL ASSETS			$	119,598	$	120,829

Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable			$	13,691	$	14,598
Accrued and other liabilities			10,921		10,929
Debt due within one year			7,729		10,229
TOTAL CURRENT LIABILITIES			32,340		35,756
LONG-TERM DEBT			24,253		24,378
DEFERRED INCOME TAXES			6,284		6,478
OTHER NONCURRENT LIABILITIES			6,386		7,152
TOTAL LIABILITIES			69,264		73,764
SHAREHOLDERS’ EQUITY
Preferred stock			801		819
Common stock – shares issued –	March 2024	4,009.2
	June 2023	4,009.2	4,009		4,009
Additional paid-in capital			67,395		66,556
Reserve for ESOP debt retirement			(737)		(821)
Accumulated other comprehensive loss			(12,370)		(12,220)
Treasury stock			(132,172)		(129,736)
Retained earnings			123,132		118,170
Noncontrolling interest			275		288
TOTAL SHAREHOLDERS’ EQUITY			50,333		47,065
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	119,598	$	120,829

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company 3

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Three Months Ended March 31, 2024
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
Shares	Amount
BALANCE DECEMBER 31, 2023	2,353,021	$4,009	$809	$66,935	($782)	($12,167)	($131,887)	$121,617	$294	$48,829
Net earnings								3,754	27	3,781
Other comprehensive income/(loss)						(203)			(1)	(204)
Dividends and dividend equivalents ($0.9407 per share):
Common								(2,221)		(2,221)
Preferred								(69)		(69)
Treasury stock purchases	(6,046)						(977)			(977)
Employee stock plans	12,201			459			685			1,144
Preferred stock conversions	959		(8)	1			7			—
ESOP debt impacts					45			51		97
Noncontrolling interest, net				—					(46)	(46)
BALANCE MARCH 31, 2024	2,360,135	$4,009	$801	$67,395	($737)	($12,370)	($132,172)	$123,132	$275	$50,333


	Nine Months Ended March 31, 2024
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
Shares	Amount
BALANCE JUNE 30, 2023	2,362,120	$4,009	$819	$66,556	($821)	($12,220)	($129,736)	$118,170	$288	$47,065
Net earnings								11,742	88	11,830
Other comprehensive income/(loss)						(150)			(3)	(153)
Dividends and dividend equivalents ($2.8221 per share):
Common								(6,671)		(6,671)
Preferred								(209)		(209)
Treasury stock purchases	(22,768)						(3,493)			(3,493)
Employee stock plans	18,552			836			1,041			1,878
Preferred stock conversions	2,232		(18)	3			15			—
ESOP debt impacts					85			99		184
Noncontrolling interest, net				—					(98)	(98)
BALANCE MARCH 31, 2024	2,360,135	$4,009	$801	$67,395	($737)	($12,370)	($132,172)	$123,132	$275	$50,333

See accompanying Notes to Consolidated Financial Statements.

4 The Procter & Gamble Company


	Three Months Ended March 31, 2023
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
Shares	Amount
BALANCE DECEMBER 31, 2022	2,359,144	$4,009	$831	$66,145	($870)	($12,506)	($129,012)	$115,858	$270	$44,725
Net earnings								3,397	27	3,424
Other comprehensive income/(loss)						240			1	241
Dividends and dividend equivalents ($0.9133 per share):
Common								(2,160)		(2,160)
Preferred								(69)		(69)
Treasury stock purchases	(9,406)						(1,351)			(1,351)
Employee stock plans	6,290			170			353			523
Preferred stock conversions	941		(9)	1			8			—
ESOP debt impacts					49			56		105
Noncontrolling interest, net				—					(17)	(17)
BALANCE MARCH 31, 2023	2,356,969	$4,009	$822	$66,316	($821)	($12,266)	($130,002)	$117,082	$281	$45,421


	Nine Months Ended March 31, 2023
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
Shares	Amount
BALANCE JUNE 30, 2022	2,393,877	$4,009	$843	$65,795	($916)	($12,189)	($123,382)	$112,429	$265	$46,854
Net earnings								11,269	77	11,346
Other comprehensive income/(loss)						(77)			(7)	(84)
Dividends and dividend equivalents ($2.7399 per share):
Common								(6,517)		(6,517)
Preferred								(210)		(210)
Treasury stock purchases	(52,021)						(7,353)			(7,353)
Employee stock plans	12,742			518			715			1,233
Preferred stock conversions	2,371		(21)	3			18			—
ESOP debt impacts					95			111		206
Noncontrolling interest, net				—					(54)	(54)
BALANCE MARCH 31, 2023	2,356,969	$4,009	$822	$66,316	($821)	($12,266)	($130,002)	$117,082	$281	$45,421

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company 5

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended March 31
Amounts in millions	2024		2023
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	$	8,246	$	7,214
OPERATING ACTIVITIES
Net earnings	11,830		11,346
Depreciation and amortization	2,135		2,008
Share-based compensation expense	433		406
Deferred income taxes	(206)		(360)
Gain on sale of assets	(51)		(4)
Indefinite-lived intangible asset impairment charge	1,341		—
Changes in:
Accounts receivable	(692)		(301)
Inventories	(47)		(503)
Accounts payable and accrued and other liabilities	56		(609)
Other operating assets and liabilities	(1,196)		(839)
Other	490		363
TOTAL OPERATING ACTIVITIES	14,092		11,507
INVESTING ACTIVITIES
Capital expenditures	(2,539)		(2,328)
Proceeds from asset sales	77		9
Acquisitions, net of cash acquired	(21)		(714)
Other investing activity	(503)		331
TOTAL INVESTING ACTIVITIES	(2,986)		(2,702)
FINANCING ACTIVITIES
Dividends to shareholders	(6,863)		(6,710)
Additions to short-term debt with original maturities of more than three months	2,961		13,778
Reductions in short-term debt with original maturities of more than three months	(7,523)		(9,134)
Net additions/(reductions) to other short-term debt	2,331		(387)
Additions to long-term debt	1,598		2,569
Reductions in long-term debt	(2,335)		(1,877)
Treasury stock purchases	(3,490)		(7,353)
Impact of stock options and other	965		861
TOTAL FINANCING ACTIVITIES	(12,356)		(8,253)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(168)		(170)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(1,418)		382
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	6,828	$	7,596

See accompanying Notes to Consolidated Financial Statements.

6 The Procter & Gamble Company

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries ("the Company," "Procter & Gamble," "P&G," "we" or "our") should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023. We have prepared these statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) for interim financial information. Note that certain columns and rows may not add due to rounding. In the opinion of management, the accompanying Consolidated Financial Statements contain all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

2. New Accounting Pronouncements and Policies

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, “Segment Reporting: Improvements to Reportable Segment Disclosures.” This guidance requires disclosure of incremental segment information on an annual and interim basis. This amendment is effective for our fiscal year ending June 30, 2025 and our interim periods within the fiscal year ending June 30, 2026. We are currently assessing the impact of this guidance on our disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes: Improvements to Income Tax Disclosures.” This guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and disclosures of income taxes paid by jurisdiction. This amendment is effective for our fiscal year ending June 30, 2026. We are currently assessing the impact of this guidance on our disclosures.

No other new accounting pronouncement issued or effective during the fiscal year had, or is expected to have, a material impact on our Consolidated Financial Statements.

3. Segment Information

Under U.S. GAAP, our operating segments are aggregated into five reportable segments: 1) Beauty, 2) Grooming, 3) Health Care, 4) Fabric & Home Care and 5) Baby, Feminine & Family Care. Our five reportable segments are comprised of:

Beauty: Hair Care (Conditioners, Shampoos, Styling Aids, Treatments); Skin and Personal Care (Antiperspirants and Deodorants, Personal Cleansing, Skin Care);
Grooming: Grooming (Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming);
Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, 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).

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 7

Our operating segments are comprised of similar product categories. Operating segments that individually accounted for 5% or more of consolidated net sales are as follows:


	% of Net sales by operating segment (1)
	Three Months Ended March 31				Nine Months Ended March 31
	2024		2023		2024		2023
Fabric Care	23	%	23	%	23	%	23	%
Home Care	13	%	12	%	12	%	12	%
Baby Care	9	%	10	%	9	%	10	%
Family Care	9	%	9	%	9	%	8	%
Hair Care	9	%	9	%	9	%	9	%
Skin and Personal Care	9	%	9	%	9	%	10	%
Grooming	8	%	8	%	8	%	8	%
Oral Care	8	%	8	%	8	%	8	%
Personal Health Care	6	%	6	%	7	%	6	%
Feminine Care	6	%	6	%	6	%	6	%
Total	100	%	100	%	100	%	100	%

(1)% of Net sales by operating segment excludes sales recorded in Corporate.

The following is a summary of reportable segment results:


		Three Months Ended March 31						Nine Months Ended March 31
		Net Sales		Earnings/(Loss) Before Income Taxes		Net Earnings/(Loss)		Net Sales		Earnings/(Loss) Before Income Taxes		Net Earnings/(Loss)
Beauty	2024	$	3,550	$	753	$	587	$	11,496	$	3,114	$	2,426
	2023	3,494		763		608		11,262		3,179		2,530
Grooming	2024	1,539		379		303		4,997		1,450		1,165
	2023	1,495		382		308		4,763		1,381		1,116
Health Care	2024	2,873		687		525		9,119		2,508		1,933
	2023	2,828		667		523		8,636		2,354		1,826
Fabric & Home Care	2024	7,169		1,692		1,301		22,230		5,741		4,446
	2023	7,016		1,538		1,174		21,130		4,619		3,517
Baby, Feminine & Family Care	2024	4,936		1,299		997		15,268		4,144		3,174
	2023	5,062		1,206		925		15,061		3,373		2,578
Corporate	2024	128		(218)		68		398		(2,066)		(1,314)
	2023	173		(268)		(114)		601		(786)		(221)
Total Company	2024	$	20,195	$	4,592	$	3,781	$	63,507	$	14,891	$	11,830
	2023	20,068		4,288		3,424		61,453		14,120		11,346

4. Goodwill and Intangible Assets

Goodwill is allocated by reportable segment as follows:


	Beauty		Grooming		Health Care		Fabric & Home Care		Baby, Feminine & Family Care		Total Company
Goodwill at June 30, 2023	$	13,888	$	12,703	$	7,718	$	1,821	$	4,529	$	40,659
Acquisitions and divestitures	—		—		—		—		—		—
Translation and other	(32)		(19)		(24)		(6)		(11)		(92)
Goodwill at March 31, 2024	$	13,856	$	12,685	$	7,695	$	1,815	$	4,518	$	40,567

Goodwill decreased from June 30, 2023, due to currency translation.

Amounts in millions of dollars except per share amounts or as otherwise specified.

8 The Procter & Gamble Company

Identifiable intangible assets at March 31, 2024, were comprised of:


	Gross Carrying Amount		Accumulated Amortization
Intangible assets with determinable lives	$	9,046	$	(6,499)
Intangible assets with indefinite lives	19,645		—
Total identifiable intangible assets	$	28,691	$	(6,499)

Intangible assets with determinable lives consist of brands, patents, technology and customer relationships. The intangible assets with indefinite lives primarily consist of brands. The amortization expense of determinable-lived intangible assets for the three months ended March 31, 2024 and 2023, was $83 and $82, respectively. For the nine months ended March 31, 2024 and 2023, amortization expense was $255 and $241, respectively.

Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. We use the 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. When appropriate, the market approach, which leverages comparable company revenue and earnings multiples, is weighted with the income approach to estimate fair value. If the resulting fair value is less than the asset's carrying value, that difference represents an impairment. Our annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the three months ended December 31. Most of our goodwill reporting units have fair value cushions that significantly exceed their underlying carrying values.

During the three months ended December 31, 2023, we determined that the fair value of the Gillette indefinite-lived intangible asset was less than its carrying amount. As a result, we recorded a non-cash impairment charge of $1.3 billion ($1.0 billion after tax) to reduce the carrying amount to be equivalent to the estimated fair value as of December 31, 2023. Following the impairment charge, the carrying value of the Gillette indefinite-lived intangible asset is $12.8 billion. The impairment charge arose due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of a new restructuring program focused primarily in certain Enterprise Markets, including Argentina and Nigeria.

While we have concluded that no triggering event has occurred during the quarter ended March 31, 2024, the Gillette indefinite-lived intangible asset is susceptible to further impairment risk. Adverse changes in the business or in the macroeconomic environment, including foreign currency devaluation, increasing global inflation, market contraction from an economic recession and the Russia-Ukraine War, could reduce the underlying cash flows used to estimate the fair value of the Gillette indefinite-lived intangible asset and trigger a further impairment charge. Further reduction of the Gillette business activities in Russia could reduce the estimated fair value. The Russia business accounted for approximately 4% of Gillette net sales in the fiscal year ended June 30, 2023.

The most significant assumptions utilized in the determination of the estimated fair value of the Gillette indefinite-lived intangible asset are the net sales growth rates (including residual growth rates), discount rate and royalty rates.

Net sales growth rates could be negatively impacted by reductions or changes in demand for our Gillette products, which may be caused by, among other things: changes in the use and frequency of grooming products, shifts in demand away from one or more of our higher priced products to lower priced products or potential supply chain constraints. In addition, relative global and country/regional macroeconomic factors, including the Russia-Ukraine War, could result in additional and prolonged devaluation of other countries' currencies relative to the U.S. dollar. The residual growth rates represent the expected rate at which the Gillette brand is expected to grow beyond the shorter-term business planning period. The residual growth rates utilized in our fair value estimates are consistent with the brand operating plans and approximate expected long-term category market growth rates. The residual growth rate depends on overall market growth rates, the competitive environment, inflation, relative currency exchange rates and business activities that impact market share. As a result, the residual growth rate could be adversely impacted by a sustained deceleration in category growth, grooming habit changes, devaluation of currencies against 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.

The royalty rate used to determine the estimated fair value for the Gillette indefinite-lived intangible asset is driven by historical and estimated future profitability of the underlying Gillette business. The royalty rate may be impacted by significant adverse changes in long-term operating margins.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 9

We performed a sensitivity analysis for the Gillette indefinite-lived intangible asset as part of our annual impairment testing during the three months ended December 31, 2023, utilizing reasonably possible changes in the assumptions for the discount rate, the short-term and residual growth rates and the royalty rate to demonstrate the potential impacts to estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our short-term and residual growth rates or a 50 basis-point decrease in our royalty rate, which may result in an additional impairment of the Gillette indefinite-lived intangible asset.


	Approximate Percent Change in Estimated Fair Value
	+25 bps Discount Rate		-25 bps Growth Rates		-50 bps Royalty Rate
Gillette indefinite-lived intangible asset	(5)	%	(5)	%	(4)	%

5. Earnings Per Share

Basic net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred dividends by the weighted average number of common shares outstanding during the period. 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 period. The diluted shares include the dilutive effect of stock options and other share-based awards based on the treasury stock method and the assumed conversion of preferred stock.

Net earnings per common share were calculated as follows:


CONSOLIDATED AMOUNTS	Three Months Ended March 31				Nine Months Ended March 31
	2024		2023		2024		2023
Net earnings	$	3,781	$	3,424	$	11,830	$	11,346
Less: Net earnings attributable to noncontrolling interests	27		27		88		77
Net earnings attributable to P&G (Diluted)	3,754		3,397		11,742		11,269
Less: Preferred dividends	69		69		209		210
Net earnings attributable to P&G available to common shareholders (Basic)	$	3,685	$	3,328	$	11,533	$	11,059

SHARES IN MILLIONS
Basic weighted average common shares outstanding	2,360.5		2,359.1		2,359.5		2,370.2
Add: Effect of dilutive securities
Convertible preferred shares (1)	73.3		76.0		73.9		76.7
Stock options and other unvested equity awards (2)	38.1		38.1		38.4		39.1
Diluted weighted average common shares outstanding	2,472.0		2,473.2		2,471.8		2,486.0

NET EARNINGS PER COMMON SHARE
Basic	$	1.56	$	1.41	$	4.89	$	4.67
Diluted	$	1.52	$	1.37	$	4.75	$	4.53

(1)An overview of preferred shares can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

(2)Excludes approximately 6 million and 21 million for the three months ended March 31, 2024 and 2023, respectively, and 6 million and 20 million for the nine months ended March 31, 2024 and 2023, respectively, of weighted average stock options outstanding because the exercise price of these options was greater than their average market value or their effect was antidilutive.

6. Share-Based Compensation and Postretirement Benefits

The following table provides a summary of our share-based compensation expense and postretirement benefit impacts:


	Three Months Ended March 31				Nine Months Ended March 31
	2024		2023		2024		2023
Share-based compensation expense	$	158	$	156	$	433	$	406
Net periodic benefit cost for pension benefits	52		45		160		132
Net periodic benefit credit for other retiree benefits	(156)		(131)		(467)		(395)

Amounts in millions of dollars except per share amounts or as otherwise specified.

10 The Procter & Gamble Company

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. There have been no significant changes in our risk management policies or activities during the nine months ended March 31, 2024.

The Company has not changed its valuation techniques used in measuring the fair value of any financial assets and liabilities during the period. 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. Also, 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 nine months ended March 31, 2024 and 2023.

Cash equivalents were $5.4 billion and $6.8 billion as of March 31, 2024 and June 30, 2023, respectively, and are classified as Level 1 within the fair value hierarchy. The Company had no other material investments in debt or equity securities during the periods presented.

The fair value of long-term debt was $26.4 billion and $26.9 billion as of March 31, 2024 and June 30, 2023, respectively. This includes the current portion of long-term debt instruments ($3.4 billion and $3.9 billion as of March 31, 2024 and June 30, 2023, 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.

Disclosures about Financial Instruments

The notional amounts and fair values of financial instruments used in hedging transactions as of March 31, 2024 and June 30, 2023, are as follows:


	Notional Amount				Fair Value Asset				Fair Value (Liability)
	March 31, 2024		June 30, 2023		March 31, 2024		June 30, 2023		March 31, 2024		June 30, 2023
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts	$	3,030	$	4,044	$	—	$	—	$	(323)	$	(445)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts	$	10,926	$	11,005	$	79	$	26	$	(108)	$	(631)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS	$	13,956	$	15,049	$	79	$	26	$	(432)	$	(1,076)

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts	$	3,956	$	3,489	$	12	$	7	$	(23)	$	(42)

TOTAL DERIVATIVES AT FAIR VALUE	$	17,912	$	18,538	$	91	$	33	$	(455)	$	(1,118)

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 $2.7 billion and $3.6 billion as of March 31, 2024 and June 30, 2023, 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 $10.5 billion and $11.8 billion as of March 31, 2024 and June 30, 2023, respectively.

Derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. Derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities. Changes in the fair value of net investment hedges are recognized in the Foreign currency translation component of Other comprehensive income (OCI). All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.

Certain 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 was $363 and $1,088 as of March 31, 2024 and June 30, 2023, respectively. The Company has not been required to post collateral as a result of these contractual features.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 11

Before tax gains on our financial instruments in hedging relationships are categorized as follows:


	Amount of Gain/(Loss) Recognized in OCI on Derivatives
	Three Months Ended March 31				Nine Months Ended March 31
	2024		2023		2024		2023
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)
Foreign exchange contracts	$	269	$	(266)	$	67	$	(571)

(1) For the derivatives in net investment hedging relationships, the amount of gain excluded from effectiveness testing, which was recognized in earnings, was $53 and $64 for the three months ended March 31, 2024 and 2023, respectively. The amount of gain excluded from effectiveness testing was $182 and $179 for the nine months ended March 31, 2024 and 2023, 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 Accumulated other comprehensive income (AOCI) for such instruments was $262 and $(242) for the three months ended March 31, 2024 and 2023, respectively. The amount of gain/(loss) recognized in Accumulated other comprehensive income (AOCI) for such instruments was $102 and $(406) for the nine months ended March 31, 2024 and 2023, respectively.


	Amount of Gain/(Loss) Recognized in Earnings
	Three Months Ended March 31				Nine Months Ended March 31
	2024		2023		2024		2023
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts	$	(7)	$	39	$	122	$	(141)
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts	$	(84)	$	38	$	(27)	$	(13)

The gains/(losses) on the derivatives in fair value hedging relationships are fully offset by the mark-to-market impact of the related exposure. These are both recognized in Interest expense. The gains/(losses) on derivatives not designated as hedging instruments are substantially offset by the currency mark-to-market of the related exposure. These are both recognized in Selling, general and administrative expense (SG&A).

8. 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:


	Investment Securities		Postretirement Benefit Plans		Foreign Currency Translation		Total AOCI
Balance at June 30, 2023	$	13	$	67	$	(12,300)	$	(12,220)
OCI before reclassifications (1)	(2)		(3)		(128)		(133)
Amounts reclassified to the Consolidated Statement of Earnings (2)			(19)				(19)
Net current period OCI	(2)		(23)		(128)		(153)
Less: OCI attributable to noncontrolling interests			—		(3)		(3)
Balance at March 31, 2024	$	11	$	44	$	(12,425)	$	(12,370)

(1)Net of tax (benefit)/expense of $0, $(3) and $40 for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively. Income tax effects within foreign currency translation include impacts from items such as net investment hedge transactions.

(2)Net of tax (benefit)/expense of $0, $(3) and $0 for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively.

Postretirement benefit plan amounts are reclassified from AOCI into Other non-operating income, net and included in the computation of net periodic postretirement costs.

9. Commitments and Contingencies

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.

Amounts in millions of dollars except per share amounts or as otherwise specified.

12 The Procter & Gamble Company

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.

Income Tax Uncertainties

The Company is present in approximately 70 countries and over 150 taxable jurisdictions and, at any point in time, has 30–40 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 ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitations. Such adjustments are reflected in the tax provision as appropriate. We have tax years open ranging from 2010 and forward. We are generally not able to reliably estimate the timing and ultimate settlement amounts until the close of an audit. Based on information currently available, we anticipate that over the next 12-month period, audit activity could be completed related to uncertain tax positions in multiple jurisdictions for which we have accrued existing liabilities of approximately $90, including interest and penalties.

Additional information on the Commitments and Contingencies of the Company can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

10. Supplier Finance Programs

The Company has an ongoing program to negotiate extended payment terms with its suppliers consistent with market practices. The Company also supports a Supply Chain Finance program (“SCF”) with several global financial institutions. Under SCF, the Company maintains an accounts payable system to facilitate participating suppliers' ability to sell receivables from the Company to a SCF bank. These participating suppliers negotiate their sales of receivables arrangements directly with the respective SCF bank. The Company is not party to those agreements, but the SCF banks allow the suppliers to utilize the Company’s creditworthiness in establishing credit spreads and associated costs. Under this model, this arrangement 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 chooses to participate in SCF, the supplier selects which individual Company invoices to sell to the SCF bank. The Company’s obligations to its suppliers, including the amounts due and scheduled payment dates, are not impacted by the supplier’s decisions to finance amounts under these arrangements. The Company does not provide any form of guarantee under these financing arrangements. Our payment terms for suppliers under this program generally range from 60 to 180 days. All outstanding amounts related to suppliers participating in SCF are recorded within Accounts payable in our Consolidated Balance Sheets, and the associated payments are included in operating activities within our Consolidated Statements of Cash Flows. The amount due to suppliers participating in SCF and included in Accounts payable was approximately $5.2 billion as of March 31, 2024, $5.7 billion as of June 30, 2023, and $5.8 billion as of June 30, 2022.

11. 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. Consistent with our historical policies for restructuring-type activities, the restructuring program charges will be funded by and included within Corporate for management and segment reporting.

In December 2023, the Company announced a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. In connection with this announcement, the Company expects to record incremental restructuring charges of $1.0 to $1.5 billion after tax, consisting primarily of foreign currency translation losses to be recognized as non-cash charges upon the substantial liquidation of operations in the affected markets.

For the three months ended March 31, 2024, the Company incurred charges of $70 including $44 in Costs of products sold, $25 in SG&A and $1 in Other non-operating income. For the nine months ended March 31, 2024, the Company incurred charges of $252 including $154 in Costs of products sold, $93 in SG&A and $5 in Other non-operating income.

Amounts in millions of dollars except per share amounts or as otherwise specified.

The Procter & Gamble Company 13

The following table presents restructuring activity for the nine months ended March 31, 2024:


	Separation Costs		Asset-Related Costs		Other Costs		Total
RESERVE JUNE 30, 2023	$	155	$	—	$	19	$	174
Costs incurred for the six months ended December 31, 2023	109		42		30		181
Costs incurred for the three months ended March 31, 2024	37		11		22		70
Costs incurred for the nine months ended March 31, 2024	146		52		53		252

Costs paid/settled for the nine months ended March 31, 2024	(190)		(52)		(52)		(294)
RESERVE MARCH 31, 2024	$	112	$	—	$	19	$	131

Separation Costs

Employee separation costs relate to severance packages that are primarily voluntary and the amounts calculated are based on salary levels and past service periods.

Asset-Related Costs

Asset-related costs consist of both asset write-downs and accelerated depreciation for manufacturing consolidations. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or for disposal. These assets are 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.

Other Costs

Other restructuring-type charges are incurred as a direct result of the restructuring plan. Such charges include asset removal and termination of contracts related to supply chain and overhead optimization.

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