Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of
Shares Purchased (1)
Average Price Paid per Share (2)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
|Approximate Dollar Value of Shares that May Yet Be Purchased Under Our Share Repurchase Program|
|4/1/2022 - 4/30/2022||3,772,818||$159.03||3,772,818|
|5/1/2022 - 5/31/2022||—||—||—|
|6/1/2022 - 6/30/2022||5,319,017||140.93||4,620,153|
(1)All transactions are reported on a trade date basis and 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 for open market transactions excludes commission.
(3)On April 20, 2022, the Company stated that in fiscal year 2022 the Company expected to reduce outstanding shares through direct share repurchases at a value of approximately $10 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 debt. The total value of the shares purchased under the share repurchase plan was $10 billion. The share repurchase plan ended on June 30, 2022.
Additional information required by this item can be found in Part III, Item 12 of this Form 10-K.
SHAREHOLDER RETURN PERFORMANCE GRAPHS
Market and Dividend Information
P&G has been paying a dividend for 132 consecutive years since its incorporation in 1890 and has increased its dividend for 66 consecutive years since 1956. Over the past ten years, the dividend has increased at an annual compound average rate of 5%. Nevertheless, as in the past, further dividends will be considered after reviewing dividend yields, profitability and cash flow expectations and financing needs and will be declared at the discretion of the Company's Board of Directors.
|(in dollars; split-adjusted)||1956||1962||1972||1982||1992||2002||2012||2022|
|Dividends per share||$||0.01||$||0.02||$||0.05||$||0.13||$||0.26||$||0.76||$||2.14||$||3.52|
12 The Procter & Gamble Company
Common Stock Information
P&G trades on the New York Stock Exchange under the stock symbol PG. As of June 30, 2022, there were approximately 5 million common stock shareowners, including shareowners of record, participants in P&G stock ownership plans and beneficial owners with accounts at banks and brokerage firms.
The following graph compares the cumulative total return of P&G’s common stock for the five-year period ended June 30, 2022, 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, 2017, and that all dividends were reinvested.
|Cumulative Value of $100 Investment, through June 30|
|P&G||$||100 ||$||93 ||$||134 ||$||150 ||$||174 ||$||189 |
|S&P 500 Stock Index||100 ||114 ||126 ||136 ||191 ||171 |
|S&P 500 Consumer Staples Index||100 ||96 ||112 ||116 ||143 ||152 |
Item 6. Intentionally Omitted.
The Procter & Gamble Company 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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,” “Risk Factors” and "Notes 4, 8 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, 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 to our banking partners 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 various factors, including ones outside of our control, such as natural disasters, acts of war (including the Russia-Ukraine 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, evolving digital marketing and selling platform requirements 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, packaging content, supply chain practices 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 and potential implications such as exchange rate fluctuations and market contraction; (13) the ability to successfully manage current and expanding 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, privacy and data protection, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates; (14) the ability to manage changes in applicable tax laws and regulations; (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; (17) the ability to successfully manage the demand, supply and operational challenges, as well as governmental responses or mandates, associated with a disease outbreak, including epidemics, pandemics or similar widespread public health concerns (including COVID-19); (18) the ability to manage the uncertainties, sanctions and economic effects from the war between Russia and Ukraine; and (19) the ability to successfully achieve our ambition of reducing our greenhouse gas emissions and delivering progress towards our environmental sustainability priorities. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from those projected herein is included in the section titled "Economic Conditions and Uncertainties" and the section titled "Risk Factors" (Part I, Item 1A) of this Form 10-K.
Purpose, Approach and Non-GAAP Measures
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,
14 The Procter & Gamble Company
and should be read in conjunction with, our Consolidated Financial Statements and accompanying Notes. The MD&A is organized in the following sections:
•Summary of 2022 Results
•Economic Conditions and Uncertainties
•Results of Operations
•Cash Flow, Financial Condition and Liquidity
•Significant Accounting Policies and Estimates
Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per share and operating cash flow. 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), consisting 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 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. Adjusted free cash flow productivity is the
ratio of adjusted free cash flow to net earnings excluding certain one-time items. 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 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 relative to all product sales in the category. The Company measures quarter and 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 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, divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales.
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 approximately 180 countries and territories primarily through mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to individual 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.
Our organizational structure is comprised of Sector Business Units (SBUs), Enterprise Markets (EMs), Corporate Functions (CF) and Global Business Services (GBS).
Sector Business Units
The Company's ten product categories are organized into five SBUs and five reportable segments (under U.S. GAAP): Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The SBUs are responsible for global brand strategy, new product upgrades and innovation, marketing plans and supply chain. They have direct profit responsibility for markets representing the large majority of the Company's sales and earnings (referred to as Focus Markets) and are also responsible for innovation plans, supply plans and operating frameworks to drive growth and value creation in the remaining markets (referred to as Enterprise Markets). 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).
The Procter & Gamble Company 15
The following provides additional detail on our reportable segments and the ten product categories and brand composition within each segment.
Net Sales (1)
% of Net
|Product Categories (Sub-Categories)||Major Brands|
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|
Grooming (2) (Shave Care - Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care; Appliances)
|Braun, Gillette, Venus|
Oral Care (Toothbrushes, Toothpaste, Other Oral Care)
Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory,
Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care)
|Metamucil, Neurobion, Pepto-Bismol, Vicks|
|Fabric & Home Care||35%||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 Care||25%||23%|
Baby Care (Baby Wipes, Taped Diapers and Pants)
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 for the year ended June 30, 2022 (excluding results held in Corporate).
(2) The Grooming product category is comprised of the Shave Care and Appliances operating segments.
Sector Business Units
Beauty: We are a global market leader amongst the beauty categories in which we compete, including hair care and skin and personal care. We are a global market leader in the retail hair care market with more than 20% global market share primarily behind our Pantene and Head & Shoulders brands. 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 approximately 6% global market share.
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 more than 60%, primarily behind our Gillette and Venus brands. Our appliances, such as electric shavers and epilators, are sold primarily under the Braun brand in a number of markets around the world where we compete against both global and regional competitors. We hold over 25% of the male electric shavers market and over 65% 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 Crest and Oral-B brands. In personal health care, we are a global market leader among the categories in which we compete, including respiratory treatments, digestive wellness, vitamins
and analgesics behind our Vicks, Metamucil, Pepto-Bismol and Neurobion brands.
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 35% global market share, primarily behind our Tide, Ariel and Downy brands. Our global home care market share is nearly 25% across the categories in which we compete, primarily behind our Cascade, Dawn, Febreze and Swiffer brands.
Baby, Feminine & Family Care: In baby care, we are a global market leader and compete mainly in taped diapers, pants and baby wipes with more than 20% 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 over $7 billion. We are a global market leader in the feminine care category with over 20% global market share, primarily behind our Always and Tampax brands. We also compete in the adult incontinence category in certain markets behind Always Discreet, with over 10% market share in the key markets in which we compete. Our family care business is predominantly a North American business comprised primarily of the Bounty paper towel and
16 The Procter & Gamble Company
Charmin toilet paper brands. North America market shares are over 40% for Bounty and over 25% for Charmin.
Enterprise Markets are responsible for sales and profit delivery in specific countries, supported by SBU-agreed innovation and supply chain plans, along with scaled services like planning, distribution and customer management.
Corporate Functions provides company-level strategy and portfolio analysis, corporate accounting, treasury, tax, external relations, governance, human resources, information technology and legal services.
Global Business Services
Global Business Services provides scaled services in technology, process and data tools to enable the SBUs, the EMs and CF to better serve consumers and customers. The GBS organization is responsible for providing world-class services and solutions that drive value for P&G.
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- and bottom-line growth and strong cash generation.
The Company competes in daily-use product categories where performance plays a significant role in the consumer's choice of brands, and therefore, play to P&G's strengths. Our focused 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 delighting and winning with consumers. Our consumers are at the center of everything we do. We win with consumers by delivering irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. Winning with consumers around the world and against our best competitors requires superior innovation. Innovation has always been, and continues to be, P&G’s lifeblood. Superior products delivered with superior execution drive market growth, value creation for retailers and build share growth for P&G.
Ongoing productivity improvement is crucial to delivering our balanced top- and bottom-line growth, cash generation and value creation objectives. Productivity improvement enables investments to strengthen the superiority of our brands via product and packaging innovation, more efficient
and effective supply chains, equity and awareness-building brand advertising and other programs and expansion of sales coverage and R&D programs. Productivity improvements also enable us to mitigate challenging cost environments (including periods of increasing commodity and negative foreign exchange impacts). Our objective is to drive productivity improvements across all elements of the statement of earnings and balance sheet, including cost of goods sold, marketing and promotional spending, overhead costs and capital spending.
We act with agility and are constructively disrupting our highly competitive 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.
Additionally, within these strategies of superiority, productivity, constructive disruption and organization, we have declared four focus areas to strengthen our performance going forward. These are 1) leveraging environmental sustainability as an additional driver of superior performing products and packaging innovations, 2) increasing digital acumen to drive consumer and customer preference, reduce cost and enable rapid and efficient decision making, 3) developing next-level supply chain capabilities to enable flexibility, agility, resilience and a new level of productivity adapting to a new reality and 4) delivering employee value equation for all gender identities, races, ethnicities, sexual orientations, ages and abilities for all roles to ensure we continue to attract, retain and develop the best talent.
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 growth algorithm 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 earnings per share (EPS) growth of mid-to-high single digits; and
•Adjusted free cash flow productivity of 90% or greater.
During periods of significant macroeconomic pressures, we intend to maintain a disciplined approach to investing in our business, which may cause short-term results to deviate from the long-term growth algorithm.
The Procter & Gamble Company 17
SUMMARY OF 2022 RESULTS
|Amounts in millions, except per share amounts||2022||2021||Change vs. Prior Year|
|Net sales||$||80,187 ||$||76,118 ||5 ||%|
|Operating income||17,813 ||17,986 ||(1)||%|
|Net earnings||14,793 ||14,352 ||3 ||%|
|Net earnings attributable to Procter & Gamble||14,742 ||14,306 ||3 ||%|
|Diluted net earnings per common share||5.81 ||5.50 ||6 ||%|
|Core earnings per share||5.81 ||5.66 ||3 ||%|
|Cash flow from operating activities||16,723 ||18,371 ||(9)||%|
•Net sales increased 5% to $80.2 billion on a 2% increase in unit volume. Unfavorable foreign exchange had a negative 2% impact on net sales. Net sales growth was driven by a high single digit increase in Health Care, mid-single digit increases in Fabric & Home Care and Baby, Feminine & Family Care and low single digit increases in Beauty and Grooming. Excluding the impact of acquisitions and divestitures and foreign exchange, Organic sales increased 7% on a 2% increase in organic volume. Organic sales increased double digits in Health Care, increased high single digits in Fabric & Home Care, increased mid-single digits in Baby, Feminine & Family Care and in Grooming and increased low single digits in Beauty.
•Operating income decreased $0.2 billion, or 1% versus year ago to $17.8 billion, as the increase in net sales was more than offset by a decrease in operating margin.
•Net earnings increased $0.4 billion or 3% versus year ago to $14.8 billion, due to a prior year loss on early debt extinguishment, lower taxes and interest expense in the current year. Foreign exchange impacts negatively affected net earnings by approximately $274 million.
•Net earnings attributable to Procter & Gamble were $14.7 billion, an increase of $0.4 billion or 3% versus the prior year primarily due to the increase in net earnings.
•Diluted net earnings per share (EPS) increased 6% to $5.81 due to the increase in net earnings, a reduction in shares outstanding and due to the prior year loss on early debt extinguishment. Net earnings per share increased 3% versus the prior year core net earnings per share due to the increase in net earnings and a reduction in shares outstanding.
•Cash flow from operating activities was $16.7 billion.
◦ Adjusted free cash flow, which is operating cash flow less capital expenditures and certain other impacts, was $13.8 billion.
◦ Adjusted free cash flow productivity, which is the ratio of adjusted free cash flow to net earnings, was 93%.
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, 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 macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. Global economic conditions continue to be volatile due to the COVID-19 pandemic, resulting in market size contractions in certain countries due to economic slowdowns and government restrictions on movement. Other macroeconomic factors also remain dynamic, and any causes of market size contraction, such as greater political unrest or instability in the Middle East, Central and Eastern Europe (including the ongoing Russia-Ukraine War), certain Latin American markets, the Hong Kong market in Greater China and the Korean peninsula could reduce our sales or erode our operating margin and consequently reduce our net earnings and cash flows.
Changes in Costs. Our costs are subject to fluctuations, particularly due to changes in commodity prices, transportation costs, other broader inflationary impacts 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. 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, including energy shortages, port congestions, labor constraints and freight container and truck shortages have impacted our costs and could do so in the future. If we are unable to manage these impacts through pricing actions, cost savings projects and sourcing decisions, as well as through
18 The Procter & Gamble Company
consistent productivity improvements, it may adversely impact our gross margin, operating margin, net earnings and cash flows. Net sales could also be adversely impacted following pricing actions if there is a negative impact on the consumption of our products. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. 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 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 the past three years, a number of foreign currencies have weakened versus the U.S. dollar, leading to lower sales and earnings from these foreign exchange impacts. Certain countries that recently had and are currently experiencing significant exchange rate fluctuations include Argentina, Turkey, Brazil and Russia. These fluctuations have significantly impacted our historical net sales, costs and net earnings and could do so in the future. 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 the consumption of our products, which would negatively affect our net sales, gross margin, operating margin, net earnings and cash flows.
Government Policies. Our net earnings and cash flows could be affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies. For example, our net earnings and cash flows could be affected by any future legislative or regulatory changes in U.S. or non-U.S. tax policy, or any significant change in global tax policy adopted under the current work being led by the OECD for the G20 focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of the OECD project extends beyond pure digital businesses, and if agreed and enacted by most countries, is likely to impact most large multinational businesses by both redefining jurisdictional taxation rights and broadly establishing a 15% minimum tax on their foreign operations. Our net sales, gross margin, operating margin, net earnings and cash flows may also be impacted by changes in U.S. and foreign government policies related to environmental and climate change matters. 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, Turkey, Argentina and Egypt. Further, our net sales, gross margin, operating margin, net earnings and cash flows could be affected by changes to
international trade agreements in North America and elsewhere. Changes in government policies in these areas might cause an increase or decrease in our net sales, gross margin, operating margin, net earnings and cash flows.
COVID-19 Pandemic. Because we sell products that are essential to the daily lives of consumers, the pandemic has not had a materially negative impact to our consolidated net sales, net earnings and cash flows.
However, the continued evolution of the pandemic may result in economic recessions or a slowdown of economic growth in certain countries or regions. It could also lead to volatility in consumer access to our products (due to governmental actions or key material, transportation and labor shortages impacting our ability to produce and ship products) or could impact consumers’ movements and access to our products. There could also be reduced demand due to consumption decreases and consumer pantry destocking (particularly, in home cleaning, health and hygiene products) as economic activity resumes following slowdowns or relaxation of governmental restrictions. Net, the uncertainty in the timing and extent of demand volatility, the relaxation and reimplementation of movement restrictions, the timing and impact of potential consumer pantry destocking, the future economic trends due to a resurgence of positive cases and governmental actions in response to the pandemic may result in heightened volatility and negative impacts to net sales, net earnings and cash flows during and subsequent to the pandemic.
While we have been able to broadly maintain our operations, we experienced some disruption in our supply chain in certain markets due primarily to the restriction of employee movements, key material and labor shortages and transportation constraints. We intend to continue to work with our suppliers and government authorities to implement employee safety measures to minimize disruption to the manufacturing and distribution of our products. The continued evolution of the pandemic and uncertainty with regards to the disruptions caused either by resurgence of positive cases or governmental actions in response to the pandemic could result in an unforeseen disruption to our supply chain and impact our operations (for example, the closure of a key manufacturing or distribution facility or the inability of a key material or transportation supplier to source and transport materials).
The pandemic has not had a material negative impact on the Company’s liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs and continue to maintain access to capital markets enabled by our strong short- and long-term credit ratings.
Russia-Ukraine War. The war between Russia and Ukraine has negatively impacted our operations in both countries. Our Ukraine business includes two manufacturing sites. We have approximately 500 employees including both manufacturing and non-manufacturing personnel. Our operations in Ukraine accounted for less than 1% of consolidated net sales and net earnings in fiscal 2022. Additionally, net assets of our Ukraine subsidiary, along
The Procter & Gamble Company 19
with Ukraine related assets held by other subsidiaries, account for less than 1% of net assets as of June 30, 2022.
Our Russia business includes two manufacturing sites with a net book value of approximately $350 million as of June 30, 2022. We have approximately 2,400 employees, including both manufacturing and non-manufacturing personnel. In fiscal 2022, our operations in Russia accounted for less than 2% of consolidated net sales and less than 1% of net earnings. Additionally, net assets of our Russia subsidiaries, along with Russia related assets held by other subsidiaries, account for less than 2% of net assets as of June 30, 2022. Beginning in March 2022, the Company has reduced its product portfolio, discontinued new capital investments and suspended media, advertising and promotional activity in Russia.
Future impacts to the Company are difficult to predict due to the high level of uncertainty as to how the war will evolve, what its duration will be and its ultimate resolution. Within Ukraine, there is a possibility of physical damage and destruction of our two manufacturing facilities. We may not be able to operate our manufacturing sites and source raw materials from our suppliers or ship finished products to our customers. Ultimately, these could result in impairments of our manufacturing plants and fixed assets or write-downs of other operating assets and working capital.
Within Russia, we may not be able to continue our reduced operations at current levels due to sanctions and counter-sanctions, monetary, currency or payment controls, restrictions on access to financial institutions and supply and transportation challenges. Our suppliers, distributors and retail customers are also impacted by the war and their ability to successfully maintain their operations could also impact our operations or negatively impact the sales of our products.
More broadly, there could be additional negative impacts to our net sales, earnings and cash flows should the situation escalate beyond its current scope, including, among other potential impacts, economic recessions in certain neighboring countries or globally due to inflationary pressures and supply chain cost increases or the geographic proximity of the war relative to the rest of Europe.
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.
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), operating margin, other non-operating items, income taxes and net earnings. 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 in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and
geographic mix and foreign exchange impacts on sales outside the U.S.
For most of our categories, our cost of products sold and SG&A are variable in nature to some extent. 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 North America are generally higher than the 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 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 systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.
Net sales increased 5% to $80.2 billion in fiscal 2022 on a 2% increase in unit volume versus the prior year. Unfavorable foreign exchange decreased net sales by 2%. Favorable pricing had a 4% positive impact on net sales. Mix increased net sales by 1% due to positive geographic mix from the disproportionate growth of the North America region and positive category mix from the disproportionate growth of the Personal Health Care category, both of which have higher than Company-average selling prices. This was partially offset by the disproportionate growth of the Fabric Care business, which has lower than Company-average selling prices. Excluding the net impacts of foreign exchange and acquisitions and divestitures, organic sales grew 7% on a 2% increase in organic volume. Net sales increased high single digits in Health Care, increased mid-single digits in Fabric & Home Care and in Baby, Feminine & Family Care and increased low single digits in Beauty and Grooming.
On a regional basis, volume increased mid-single digits in North America and Latin America, increased low single digits in Asia Pacific and IMEA. Volume in Europe was unchanged and decreased mid-single digits in Greater China.
20 The Procter & Gamble Company
|Comparisons as a percentage of net sales; Years ended June 30||2022||2021||Basis Point Change|
|Gross margin||47.4 ||%||51.2 ||%||(380)|
|Selling, general and administrative expense||25.2 ||%||27.6 ||%||(240)|
|Operating margin||22.2 ||%||23.6 ||%||(140)|
|Earnings before income taxes||22.4 ||%||23.1 ||%||(70)|
|Net earnings||18.4 ||%||18.9 ||%||(50)|
|Net earnings attributable to Procter & Gamble||18.4 ||%||18.8 ||%||(40)|
Gross margin decreased 380 basis points to 47.4% of net sales in fiscal 2022. The decrease in gross margin was due to:
•390 basis points of increased commodity costs,
•a 130 basis-point decline from unfavorable mix, due primarily to negative product mix resulting from the launch and growth of premium-priced products that are profit-accretive but have lower than Company-average gross margin, and
•40 basis points of net manufacturing cost increases, as 60 basis points of increased transportation costs and 20 basis points of product and packaging investments were partially offset by 40 basis points of productivity savings net of inflation and other cost increases.
These impacts were partially offset by a 180 basis-point increase due to higher pricing.
Total SG&A decreased 4% to $20.2 billion, due to decreased overhead costs, marketing spending and other operating costs. SG&A as a percentage of net sales decreased 240 basis points to 25.2% primarily due to the positive scale impacts of the net sales increase and, to a lesser extent, a decrease in overhead costs and marketing spending.
•Marketing spending as a percentage of net sales decreased 120 basis points due primarily to the positive scale impacts of the net sales increase and, to a lesser extent, due to increased media and production cost savings and decreased media spending.
•Overhead costs as a percentage of net sales decreased 110 basis points due to the positive scale impacts of the net sales increase and productivity savings.
•Other net operating expenses as a percentage of net sales decreased approximately 10 basis points due primarily to gains from the divestiture of a minor business and sale of real estate, partially offset by increased foreign exchange transactional charges.
Productivity-driven cost savings delivered 70 basis points of benefit to SG&A as a percentage of net sales.
Operating margin decreased 140 basis points to 22.2% due to the decrease in gross margin partially offset by the decrease in SG&A as a percentage of net sales as discussed above.
•Interest expense was $439 million in fiscal 2022, a decrease of $63 million versus the prior year driven primarily by lower average interest rates on fixed rate debt.
•Interest income was $51 million in fiscal 2022, an increase of $6 million versus the prior year.
•Other non-operating income increased $484 million to $570 million, due primarily to a prior year loss on early-debt extinguishment and a current year increase in net non-operating benefits on post-retirement benefit plans, partially offset by unrealized gains on equity investments in the prior year and unrealized losses on equity investments in the current year.
The effective tax rate decreased 70 basis points to 17.8% in 2022 due to:
•a 45 basis-point decrease from higher excess tax benefits of share-based compensation (a 200 basis-point benefit in the current year versus a 155 basis-point benefit in the prior year),
•a 30 basis-point decrease from discrete impacts related to uncertain tax positions (35 basis-point favorable impact in the current year versus a 5 basis-point favorable impact in the prior year), and
•a 15 basis-point decrease from higher current year deductions for foreign-derived intangible income versus prior year.
These decreases were partially offset by a 20 basis-point increase due to unfavorable geographic mix impacts of current year earnings.
Operating income decreased 1% or $0.2 billion, to $17.8 billion as the increase in net sales was more than fully offset by the decrease in operating margin, both of which are discussed above.
Earnings before income taxes increased 2%, or $0.4 billion, to $18.0 billion, as the decrease in operating income was more than fully offset by a prior year loss on early-debt extinguishment and lower interest expense. Net earnings increased 3%, or $0.4 billion, to $14.8 billion due to the increase in earnings before income taxes and the decrease in the effective income tax rate discussed above. Foreign
The Procter & Gamble Company 21
exchange impacts reduced net earnings by approximately $274 million in fiscal 2022 due to a weakening of certain currencies against the U.S. dollar. 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 increased $0.4 billion, or 3%, to $14.7 billion.
Diluted net EPS increased $0.31, or 6%, to $5.81 due primarily to the increase in net earnings and, to a lesser extent, a reduction in shares outstanding. Net earnings per share increased 3% versus the prior year core EPS due to the prior year loss on early debt extinguishment.
Segment results reflect information on the same basis we use for internal management reporting and performance evaluation. The results of these reportable segments do not include certain non-business unit specific costs which are reported in our Corporate segment and are included as part of our Corporate segment discussion. Additionally, we apply blended statutory tax rates in the segments. Eliminations to adjust segment results to arrive at our consolidated effective tax rate are included in Corporate. See Note 2 to the Consolidated Financial Statements for additional information on items included in the Corporate segment.
Net Sales Change Drivers 2022 vs. 2021 (1)
|Volume with Acquisitions & Divestitures||Volume Excluding Acquisitions & Divestitures||Foreign Exchange||Price||Mix|
|Net Sales Growth|
|Beauty||— ||%||— ||%||— ||%||3 ||%||(1)||%||— ||%||2 ||%|
|Grooming||— ||%||— ||%||(3)||%||5 ||%||— ||%||— ||%||2 ||%|
|Health Care||4 ||%||4 ||%||(1)||%||3 ||%||3 ||%||— ||%||9 ||%|
|Fabric & Home Care||3 ||%||3 ||%||(2)||%||5 ||%||— ||%||— ||%||6 ||%|
|Baby, Feminine & Family Care||1 ||%||1 ||%||(1)||%||4 ||%||1 ||%||— ||%||5 ||%|
|TOTAL COMPANY||2 ||%||2 ||%||(2)||%||4 ||%||1 ||%||— ||%||5 ||%|
(1)Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
(2)Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.
|($ millions)||2022||2021||Change vs. 2021|
|% of net sales||21.4%||22.3%||(90) bps|
Beauty net sales increased 2% to $14.7 billion in fiscal 2022 on unit volume that was unchanged. Higher pricing increased net sales by 3%. Foreign exchange had no impact on net sales. Unfavorable mix decreased net sales by 1% due to the disproportionate decline of SK-II, which has higher than segment-average selling prices. Organic sales also increased 2%. Global market share of the Beauty segment increased 0.1 points.
•Hair Care net sales increased low single digits. A negative impact of a low single digit decrease in volume was more than offset by increased pricing and favorable mix (due to a higher proportion of premium products, which have higher than category-average selling prices). Organic sales also increased low single digits. Volume decreased mid-single digits in Greater China (due to pandemic-related lockdowns and market slowdown in traditional retailers where our shares are disproportionately higher versus social commerce) and IMEA (due to competitive activity) and decreased low
single digits in Europe (as a result of portfolio reduction in Russia and higher pricing in certain markets) and Asia Pacific (due to competitive activity). This was offset by a low single digit volume increase in North America (due to acquisitions). Excluding the impacts of acquisitions, volume was unchanged in North America. Global market share of the hair care category decreased less than a point.
•Skin and Personal Care net sales increased low single digits. Positive impacts of a low single digit increase in volume and increased pricing were partially offset by negative category mix due to the decline of SK-II brand (which has higher than category-average selling prices). Organic sales increased low single digits. Volume increased mid-teens in Latin America (due to innovation) and increased mid-single digits in North America (due to innovation in personal care and acquisitions) and in Greater China (due to innovation and market growth). Global market share of the skin and personal care category increased half a point.
Net earnings decreased 2% to $3.2 billion in fiscal 2022 as the increase in net sales was more than offset by a 90 basis-point decrease in net earnings margin. Net earnings margin decreased due primarily to a reduction in gross margin, partially offset by a reduction in SG&A as a percentage of sales. The gross margin reduction was driven by increased commodity and transportation costs and negative product mix caused by the decline of SK-II (which has higher than
22 The Procter & Gamble Company
segment-average gross margins), partially offset by increased pricing. SG&A as a percentage of net sales decreased as the positive scale benefit of the net sales increase and increased cost savings in marketing spending were partially offset by an increase in overhead costs.
|($ millions)||2022||2021||Change vs. 2021|
|% of net sales||22.6%||22.2%||40 bps|
Grooming net sales increased 2% to $6.6 billion in fiscal 2022 on unit volume that was unchanged. Higher pricing increased net sales by 5%. Unfavorable foreign exchange decreased net sales by 3%. Mix had a neutral impact to net sales. Organic sales increased 5%. Global market share of the Grooming segment increased 1.2 points.
•Shave Care net sales increased mid-single digits. Positive impacts of a low single digit volume increase and increased pricing were partially offset by unfavorable foreign exchange. Organic sales increased high single digits. Volume increased low single digits in North America (due to innovation), Europe (due to innovation and market growth versus the prior year that was negatively impacted by the pandemic), IMEA (due to market growth) and Latin America (due to innovation). This was partially offset by a high teens decline in Greater China (due to pandemic-related shutdowns and market slowdown in traditional retailers where our shares are disproportionately higher versus social commerce retailers). Global market share of the shave care category increased nearly half a point.
•Appliances net sales decreased mid-single digits. Negative impacts of a high single digit decline in volume and unfavorable foreign exchange were partially offset by increased pricing (net of increased trade spending) and positive mix (due to a higher proportion of premium shavers and epilators, which have higher than category-average selling prices). Organic sales decreased low single digits. Volume declined double digits in Europe, mid-single digits in North America and low single digits in Asia Pacific, all due to market declines versus the prior year that benefited from pandemic-related consumption increases. Excluding the impact of a divestiture, volume declined high single digits in Europe. Global market share of the appliances category increased less than a point.
Net earnings increased 4% to $1.5 billion in fiscal 2022 due to the increase in net sales and a 40 basis-point increase in net earnings margin. The net earnings margin increased due to a reduction in SG&A as a percentage of net sales, partially offset by a decrease in gross margin and a higher effective tax rate. The gross margin decrease was driven by negative product mix (due to the launch and growth of premium-priced, profit-accretive products that have lower than segment-average gross margins) and increased commodity and transportation costs, partially offset by increased pricing
and manufacturing cost savings. SG&A as a percentage of net sales decreased due primarily to the positive scale impacts of the net sales increase. The higher effective tax rate was driven by disproportionate growth in North America, which has higher than segment-average tax rates.
|($ millions)||2022||2021||Change vs. 2021|
|% of net sales||18.5%||18.6%||(10) bps|
Health Care net sales increased 9% to $10.8 billion in fiscal 2022 on a 4% increase in unit volume. Unfavorable foreign exchange impacts decreased net sales by 1%. Favorable mix increased net sales by 3% due to the disproportionate growth in North America and the Personal Health Care category, both of which have higher than segment-average selling prices. Higher pricing increased net sales by 3%. Organic sales increased 10%. Global market share of the Health Care segment decreased 0.2 points.
•Oral Care net sales increased low single digits. A negative impact of a low single digit volume decrease and unfavorable foreign exchange were more than fully offset by the positive impacts from favorable mix (due to growth in North America and a higher proportion of premium tier products, both of which have higher than category-average selling prices) and increased pricing. Organic sales increased mid-single digits. Volume decreased low teens in Greater China (due to slowdown of the power brush market and pandemic-related lockdowns) and mid-single digits in Europe (as a result of supply constraints primarily due to the global chip shortage). This was partially offset by a double digit increase in Asia Pacific (due to distribution gains and market growth), a mid-single digit increase in IMEA (due to market growth and innovation) and low single digit increases in North America and Latin America (both due to market growth and innovation). Global market share of the oral care category increased half a point.
•Personal Health Care net sales increased high-teens. This was due primarily to a low teens increase in volume, increased pricing, increased trade spend efficiencies and positive mix (due to the disproportionate growth in North America and respiratory products, both of which have higher than category-average selling prices), partially offset by unfavorable foreign exchange impacts. Organic sales increased about 20%. Volume increased high teens in North America, increased high single digits in Europe (both due to stronger respiratory seasons and innovation) and increased mid-single digits in IMEA (due to innovation, increased marketing spending and distribution gains). Global market share of the personal health care category increased less than half a point.
The Procter & Gamble Company 23
Net earnings increased 8% to $2.0 billion in fiscal 2022 due primarily to the increase in net sales. Net earnings margin decreased slightly as a decrease in gross margin and a higher effective tax rate were mostly offset by a decrease in SG&A as a percentage of net sales. The decrease in gross margin was driven primarily by increased commodity and transportation costs and other cost increases associated with the global chip shortage, partially offset by increased pricing. SG&A as a percentage of net sales decreased due to the positive scale impacts of the net sales increase and overhead productivity, partially offset by an increase in media spending. The higher effective tax rate was driven by disproportionate growth in North America, which has higher than segment-average tax rates.
FABRIC & HOME CARE
|($ millions)||2022||2021||Change vs. 2021|
|% of net sales||15.9%||17.8%||(190) bps|
Fabric & Home Care net sales increased 6% to $27.6 billion in fiscal 2022 on a 3% increase in unit volume. Unfavorable foreign exchange decreased net sales by 2%. Higher pricing increased net sales by 5%. Mix had a neutral impact to net sales. Organic sales increased 8%. Global market share of the Fabric & Home Care segment increased 1.5 points.
•Fabric Care net sales increased high single digits. The positive impacts of a mid-single digit increase in volume, increased pricing, increased trade spend efficiencies and positive mix (due to the disproportionate growth in North America and growth of fabric enhancers and premium forms, all of which have higher than category-average selling prices) were partially offset by unfavorable foreign exchange. Organic sales increased double digits. Volume increased high single digits in North America and increased low single digits in Asia Pacific, both due to market growth and innovation. Global market share of the fabric care category increased more than a point.
•Home Care net sales were unchanged. Negative impacts of a low single digit decrease in volume, increased trade spending and unfavorable foreign exchange were offset by increased pricing. Organic sales increased low single digits. Volume decreased 20% in IMEA (due to market contraction and competitive activity) and decreased low single digits in North America (due to market contraction versus a prior year that benefited from pandemic-related consumption increases). Global market share of the home care category increased more than a point.
Net earnings decreased 5% to $4.4 billion in fiscal 2022 as the increase in net sales was more than offset by a 190 basis-point reduction in net earnings margin. Net earnings margin decreased due primarily to a reduction in gross margin, partially offset by a reduction in SG&A as a percentage of net sales. The gross margin decrease was primarily driven
by an increase in commodity and transportation costs, and unfavorable mix caused by the growth of premium-priced, profit-accretive products that have lower than segment-average gross margins, partially offset by increased pricing. SG&A as a percentage of net sales declined due to the positive scale benefits of the net sales increase and a reduction in marketing spending.
BABY, FEMININE & FAMILY CARE
|($ millions)||2022||2021||Change vs. 2021|
|% of net sales||16.5%||19.3%||(280) bps|
Baby, Feminine & Family Care net sales increased 5% to $19.7 billion in fiscal 2022 on a 1% increase in unit volume. Higher pricing increased net sales by 4%. Favorable mix increased net sales by 1% due to the disproportionate growth in North America and growth of premium tier products, both of which have higher than segment-average selling prices. Unfavorable foreign exchange decreased net sales by 1%. Organic sales increased 6%. Global market share of the Baby, Feminine & Family Care segment increased 0.8 points.
•Baby Care net sales increased mid-single digits on unit volume that was unchanged. Positive impacts of increased pricing and favorable mix (due to a higher proportion of sales in North America and the growth of premium pants and taped diaper products, all of which have higher than category-average selling prices) were partially offset by unfavorable foreign exchange. Organic sales increased high single digits. Volume increased high single digits in Latin America (due to innovation) and increased low single digits in North America (due to market growth and better on-shelf availability versus competitors), Europe (due to market growth) and IMEA (due to market growth versus a prior year impacted by pandemic-related contraction). This increase was fully offset by a mid-teens decline in Greater China (due to competitive activity) and a mid-single digit decline in Asia Pacific (due to market decline). Global market share of the baby care category increased nearly half a point.
•Feminine Care net sales increased high single digits. Positive impacts of a low single digit increase in volume, increased pricing and positive mix (due to a higher proportion of sales in North America and the growth of premium products, including adult incontinence, both of which have higher than category-average selling prices) were partially offset by unfavorable foreign exchange. Organic sales increased double digits. The volume increase was driven by a high single digit increase in North America (due to innovation, distribution gains and market growth) partially offset by a low single digit decrease in IMEA (due to market decline). Market share of the feminine care category increased more than a point.
24 The Procter & Gamble Company
•Net sales in Family Care, which is predominantly a North American business, increased low single digits. Positive impacts of a low single digit increase in volume (due to increased promotional activity and innovation) and increased pricing were partially offset by increased promotional spending (versus the prior year with low promotional activity due to the pandemic) and unfavorable mix (due to disproportionate growth in the club channel, which have lower than category-average selling prices). Organic sales also increased low single digits. North America's share of the family care category increased nearly a point.
Net earnings in fiscal 2022 decreased 10% to $3.3 billion as the increase in net sales was more than offset by a 280 basis-point decrease in net earnings margin. Net earnings margin decreased primarily due to a decrease in gross margin, partially offset by lower SG&A as a percentage of net sales. Gross margin decreased primarily due to an increase in commodity and transportation costs partially offset by increased pricing. SG&A as a percentage of net sales decreased due to the positive scale benefits of the net sales increase and reductions in both marketing and overhead costs.
|($ millions)||2022||2021||Change vs. 2021|
Corporate includes certain operating and non-operating activities not allocated to specific business segments. These include but are not limited to incidental businesses managed at the corporate level, gains and losses related to certain divested brands or businesses, impacts from various financing and investing activities and other impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization. Corporate also includes reconciling items to adjust the accounting policies used within the reportable segments to U.S. GAAP. The most notable ongoing reconciling item is income taxes, which adjusts the blended statutory rates that are reflected in the reportable segments to the overall Company effective tax rate.
Corporate net sales increased 69% to $744 million in fiscal 2022 due to an increase in the net sales of the incidental businesses managed at the corporate level. Corporate net earnings improved by $872 million to $485 million in fiscal 2022 due primarily to the prior year loss on the early debt extinguishment, a current year gain on the divestiture of a minor business, net sales growth, current year tax benefits (primarily higher excess tax benefits of share-based compensation) and lower restructuring charges, partially offset by increased commodity costs tied to the aforementioned incidental businesses.
Restructuring Program to Deliver Productivity and Cost Savings
The Company has historically had an ongoing restructuring program with annual spending in the range of $250 to $500 million. Savings generated from the Company's
restructuring program are difficult to estimate, given the nature of the activities, the timing of the execution and the degree of reinvestment. In fiscal 2022, the Company incurred before tax restructuring costs within the range of our historical annual ongoing level of $250 to $500 million.
Restructuring accruals of $147 million as of June 30, 2022, are classified as current liabilities. Approximately 65% of the restructuring charges incurred in fiscal 2022 either have been or will be settled with cash. Consistent with our historical policies for ongoing restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.
In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins.
CASH FLOW, FINANCIAL CONDITION AND LIQUIDITY
We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and to readily access capital markets at competitive rates.
Operating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.
Cash Flow Analysis
|Net cash provided by operating activities||$||16,723 ||$||18,371 |
|Net cash provided/(used) by investing activities||(4,424)||(2,834)|
|Net cash used in financing activities||(14,876)||(21,531)|
|Adjusted Free Cash Flow||13,792 ||15,809 |
|Adjusted Free Cash Flow Productivity||93 ||%||107 ||%|
Operating Cash Flow
Operating cash flow was $16.7 billion in 2022, a 9% decrease versus the prior year. Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation, deferred income taxes and gain on sale of assets) generated approximately $17.6 billion of operating cash flow. Working capital and other impacts used $918 million of operating cash flow as summarized below.
•An increase in accounts receivable used $694 million of cash primarily due to sales growth. The number of days
The Procter & Gamble Company 25
sales outstanding increased approximately 1 day versus prior year.
•Higher inventory used $1.2 billion of cash, due to business growth and increased safety stock levels to strengthen supply chain sufficiency amidst business growth and commodity cost increases. Inventory days on hand increased approximately 1 day primarily due to these same factors.
•Accounts payable, accrued and other liabilities generated $1.4 billion of cash. Accounts payable increased in line with the increase in inventory and, to a lesser extent, the impact of extended payment terms with suppliers (see Extended Payment Terms and Supply Chain Financing below); partially offset by lower marketing spending. Days payable outstanding increased approximately 1 day versus prior year due to these same factors.
•Other net operating assets and liabilities used $406 million of cash primarily driven by the current portion of transitional tax payments due related to the U.S. Tax Act and pension related contributions, partially offset by other impacts.
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 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. 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 $13.8 billion in 2022, a decrease of 13% versus the prior year. The decrease was primarily driven by the decrease in operating cash flows as discussed above. Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings was 93% in 2022.
Extended Payment Terms and Supply Chain Financing. Beginning in fiscal 2014, in response to evolving market practices, the Company began a program to negotiate extended payment terms with its suppliers. At the same time, the Company initiated a Supply Chain Finance program (the "SCF") with a number of global financial institutions (the "SCF Banks"). Under the SCF, qualifying suppliers may elect to sell their receivables from the Company to a 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, they elect 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 to the SCF Bank under the SCF.
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 services and 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, 2022, approximately 3% of our global suppliers have elected to participate in the SCF. Payments to those suppliers during fiscal year 2022 total approximately $15 billion, which equals approximately 25% of our total Cost of goods sold and SG&A for the year. 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 associated payments are included in operating activities within our Consolidated Statements of Cash Flows. As of June 30, 2022 and 2021, the amount due to suppliers participating in the SCF and included in Accounts payable were approximately $6 billion and $5 billion, respectively.
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 a slower rate in fiscal 2023. Future changes in our suppliers’ financing policies or economic developments, such as changes in interest rates, general market liquidity or the Company’s credit-worthiness 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 used $4.4 billion of cash in 2022, primarily due to capital spending and acquisitions. Net investing activities used $2.8 billion in cash in 2021, mainly due to capital spending.
Capital Spending. Capital expenditures, primarily to support capacity expansion, innovation and cost efficiencies, were $3.2 billion in 2022 and $2.8 billion in 2021. Capital spending as a percentage of net sales increased 20 basis points to 3.9% in 2022.
26 The Procter & Gamble Company
Acquisitions. Acquisition activity used cash of $1.4 billion in 2022, primarily related to Beauty acquisitions of Farmacy Beauty, Ouai and TULA. Acquisition activity used $34 million in 2021, primarily related to a minor Health Care acquisition.
Proceeds from Divestitures and Other Asset Sales. Proceeds from asset sales were $110 million in 2022 and $42 million in 2021, primarily from fixed asset sales and minor brand divestitures.
Investment Securities. Investments provided net cash of $3 million in 2022 primarily from the sale of other investments and used cash of $55 million in 2021 primarily from the purchase of investment securities.
Financing Cash Flow
Net financing activities consumed $14.9 billion of cash in 2022, mainly due to treasury stock purchases and dividends to shareholders, partially offset by a net debt increase and the impact of proceeds received from stock option exercises. Net financing activities consumed $21.5 billion in cash in 2021, mainly due to treasury stock purchases, dividends to shareholders and a net debt reduction, partially offset by the impact of stock options.
Dividend Payments. Our first discretionary use of cash is dividend payments. Dividends per common share increased 9% to $3.5227 per share in 2022. Total dividend payments to common and preferred shareholders were $8.8 billion in 2022 and $8.3 billion in 2021. In April 2022, the Board of Directors declared a 5% increase in our quarterly dividend from $0.8698 to $0.9133 per share on Common Stock and Series A and B Employee Stock Ownership Plan (ESOP) Convertible Class A Preferred Stock. This is the 66th consecutive year that our dividend has increased. We have paid a dividend for 132 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 $31.5 billion as of June 30, 2022, and $32.0 billion as of June 30, 2021. We generated $1.9 billion from net debt increases, primarily due to issuance of bonds. In 2021, we used $3.9 billion for net debt reductions, including $512 million for early debt extinguishment costs related to the early retirement of $2.3 billion of debt.
Treasury Purchases. Total share repurchases were $10.0 billion in 2022 and $11.0 billion in 2021.
Impact of Stock Options and Other. The exercise of stock options and other financing activities generated $2.0 billion and $1.6 billion of cash in 2022 and 2021, respectively.
At June 30, 2022, our current liabilities exceeded current assets by $11.4 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, 2022, the Company had $5.8 billion of cash and cash equivalents related to foreign subsidiaries, primarily in various Western European and Asian countries. We did not have material cash and cash equivalents 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.
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 funding to meet short-term financing requirements.
On June 30, 2022, our short-term credit ratings were P-1 (Moody's) and A-1+ (Standard & Poor's), while our long-term 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 five-year facility and a $4.8 billion 364-day facility, which expire in November 2026 and November 2022, respectively. Both facilities can be extended for certain periods of time as specified in the terms of the credit agreement. These facilities are currently undrawn and we anticipate that they will remain undrawn. These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing. In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities. For additional details on debt, see Note 10 to the Consolidated Financial Statements.
Guarantees and Other Off-Balance Sheet Arrangements
We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity.
The Procter & Gamble Company 27
The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2022.
|($ millions)||Total||Less Than 1 Year||1-3 Years||3-5 Years||After 5 Years|
|Total debt||$||31,925 ||$||8,656 ||$||4,190 ||$||6,508 ||$||12,571 |
|Leases||885 ||206 ||314 ||156 ||209 |
U.S. Tax Act transitional charge (1)
|1,886 ||225 ||983 ||678 ||— |
|Interest payments relating to long-term debt||4,813||568||988||868||2,389|
Minimum pension funding (2)
|493 ||160 ||333 ||— ||— |
Purchase obligations (3)
|TOTAL CONTRACTUAL COMMITMENTS||$||42,787 ||$||10,897 ||$||7,634 ||$||8,662 ||$||15,594 |
(1)Represents the U.S. federal tax liability associated with the repatriation provisions of the U.S. Tax Act.
(2) 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 2025 are not currently determinable.
(3) 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 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.
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.
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 judgements 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
28 The Procter & Gamble Company
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 in the jurisdictions where those functions are performed. 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 considering changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have several 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 several estimates and assumptions inherent in calculating the various components of our tax provision, certain 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.
We sponsor various postretirement benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other postretirement benefit (OPRB) plans, consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPRB 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 OPRB plan are partially funded. The process for setting the expected rates of return is described in Note 8 to the Consolidated Financial Statements. For 2022, the average return on assets assumptions for pension plan assets and OPRB assets was 5.5% and 8.4%, respectively. A change in the rate of return of 100 basis points for both pension and OPRB assets would impact annual after-tax benefit/expense by approximately $125 million.
Since pension and OPRB 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 OPRB 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 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 3.7% 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 $135 million. The average discount rate on the OPRB plan of 5.0% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits. A 100 basis point change in the discount rate would impact annual after-tax OPRB expense by approximately $10 million. See Note 8 to the Consolidated Financial Statements for additional details on our defined benefit pension and OPRB 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
The Procter & Gamble Company 29
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. If the fair value of the reporting unit or indefinite-lived intangible 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 three 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 as our legacy businesses. The Appliances reporting unit has a fair value that significantly exceeds the underlying carrying value.
Based on our annual impairment testing during the three months ended December 31, 2021, the Shave Care reporting unit's fair value exceeded its carrying value by more than 30% and the Gillette indefinite-lived intangible asset's fair value exceeded its 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 period. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit and brand operating plans and approximates expected long-term category market growth rates. The residual growth rate is dependent 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. Another key assumption in our fair value determination of the Gillette indefinite-lived intangible asset is the royalty rate, which 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.
While management can and has implemented strategies to address these events in the past, changes in operating plans or adverse changes in the business or in the macroeconomic environment 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 intangible assets.
The duration and severity of the pandemic and the Russia-Ukraine War could result in a slow-down or a recession or drive inflationary pressures or foreign currency devaluations in the general economy. These could trigger additional future impairment charges for the Shave Care reporting unit goodwill and the Gillette indefinite-lived intangible asset. While we have concluded that a triggering event did not occur during the quarter ended June 30, 2022, the Gillette indefinite-lived intangible asset is most susceptible to future impairment risk. Our assessment of the Gillette intangible asset assumes the net sales growth rates will continue to recover from the impact of the pandemic. There continues to be a high level of uncertainty relating to geopolitical and macroeconomic factors as a result of the Russia-Ukraine War and the COVID-19 pandemic. Accordingly, there
30 The Procter & Gamble Company
continues to be risk related to this key assumption. The continued evolution of the pandemic and the Russia-Ukraine War could impact the 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, 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, 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 or by disruption in the supply chain or operations due to the evolving Russia-Ukraine War. 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. 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. As of June 30, 2022, the carrying values of the Shave Care goodwill and the Gillette indefinite-lived intangible asset were $12.3 billion and $14.1 billion, respectively.
We performed a sensitivity analysis for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset during our annual impairment testing, utilizing reasonably possible changes in the assumptions for the shorter-term and residual growth rates, the discount rate and the royalty 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 in the discount rate, a 25 basis point decrease in our shorter-term and residual growth rates, or a 50 basis point decrease in our royalty rate, some of which would result in an impairment of the Gillette indefinite-lived intangible asset.
|Approximate Percent Change in Estimated Fair Value|
|+25 bps Discount Rate||-25 bps|
|-50 bps Royalty Rate|
|Shave Care goodwill reporting unit||(6)%||(6)%||N/A|
|Gillette indefinite-lived intangible asset||(6)%||(6)%||(3)%|
In light of the Russia-Ukraine War, we performed an additional sensitivity analysis for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset for a range of outcomes, including reduced future cash flows and no future cash flows in Ukraine and Russia. Under these scenarios, the Shave Care reporting unit fair value continued to exceed its carrying value by approximately 30% and the Gillette indefinite-lived intangible asset’s fair value exceeded or approximated its carrying value. However, if
the impact of the war were to extend beyond its current scope, there could be a triggering event for the Gillette indefinite-lived intangible asset that may cause us to perform an additional impairment assessment for that asset in a future period that may result in an impairment charge.
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, 2022.
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 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, 2022. 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
The Procter & Gamble Company 31
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, 2022, 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, 2022, 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, 2022, and June 30, 2021, we did not have any financial 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 measure. 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 measures, 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 acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. This measure is used in assessing achievement of management goals for at-risk compensation.
The following tables provide a numerical reconciliation of organic sales growth to reported net sales growth:
|Year ended June 30, 2022||Net Sales Growth||Foreign Exchange Impact|
Acquisition & Divestiture Impact/Other (1)
|Organic Sales Growth|
|Beauty||2 ||%||— ||%||— ||%||2 ||%|
|Grooming||2 ||%||3 ||%||— ||%||5 ||%|
|Health Care||9 ||%||1 ||%||— ||%||10 ||%|
|Fabric & Home Care||6 ||%||2 ||%||— ||%||8 ||%|
|Baby, Feminine & Family Care||5 ||%||1 ||%||— ||%||6 ||%|
|TOTAL COMPANY||5 ||%||2 ||%||— ||%||7 ||%|
(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.
Adjusted Free Cash Flow. Adjusted free cash flow is defined as operating cash flow less capital spending and transitional tax payments resulting from the U.S. Tax Act beginning in 2019. Adjusted free cash flow represents the cash that the Company is able to generate 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):
Adjustments to Operating
Cash Flow (1)
|2022||$||16,723 ||$||(3,156)||$||225 ||$||13,792 |
|2021||$||18,371 ||$||(2,787)||$||225 ||$||15,809 |
(1) Adjustments to Operating Cash Flow include transitional tax payments resulting from the U.S. Tax Act of $225 in 2022 and 2021.
32 The Procter & Gamble Company
Adjusted Free Cash Flow Productivity. Adjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings excluding the charges for early debt extinguishment (which are not considered part of our ongoing operations). We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Adjusted free cash flow productivity is used by management in making operating decisions, in allocating financial resources and for budget planning purposes. This measure is used in assessing the achievement of management goals for at-risk compensation.
The Company's long-term target is to generate annual adjusted free cash flow productivity at or above 90 percent.
The following table provides a numerical reconciliation of adjusted free cash flow productivity ($ millions):
|Adjusted Free Cash Flow||Net|
|Early Debt Extinguishment Charges||Net Earnings Excluding Adjustments||Adjusted Free|
|2022||$||13,792 ||$||14,793 ||$||— ||$||14,793 ||93 ||%|
|2021||$||15,809 ||$||14,352 ||$||427 ||$||14,779 ||107 ||%|
Core EPS. Core EPS is a measure of the Company's diluted net earnings per share from continuing operations adjusted as indicated. Management views this non-GAAP measure as a useful supplemental measure of Company performance over time. Core EPS is also used in assessing the achievement of management goals for at-risk compensation. The table below provides a reconciliation of diluted net earnings per share to Core EPS, including the following reconciling items:
•Charges for early debt extinguishment: During fiscal year 2021 the Company recorded after tax charges of $427 million ($512 million before tax), due to the early extinguishment of certain long-term debt. These charges represent the difference between the reacquisition price and the par value of the debt extinguished.
We do not view the above items to be indicative of underlying business results and its exclusion from Core earnings measures provides a more comparable measure of year-on-year results. This item is also excluded when evaluating senior management in determining their at-risk compensation.
|THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES|
(Amounts in Millions Except Per Share Amounts)
Reconciliation of Non-GAAP Measures
|Twelve Months Ended June 30, 2022||Twelve Months Ended June 30, 2021|
|AS REPORTED (GAAP)||AS REPORTED (GAAP)||EARLY DEBT EXTINGUISHMENT||NON-GAAP (CORE)|
|NET EARNINGS ATTRIBUTABLE TO P&G||$||14,742 ||$||14,306 ||$||427 ||$||14,733 |
DILUTED NET EARNINGS PER COMMON SHARE (1)
|$||5.81 ||$||5.50 ||$||0.16 ||$||5.66 |
(1) Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.
CHANGE IN CURRENT YEAR REPORTED (GAAP) VERSUS NON-GAAP (CORE)(1)
|CORE EPS||3 ||%|
(1) Change versus year ago is calculated based on As Reported (GAAP) values for the twelve months ended June 30, 2022, versus the Non-GAAP (Core) values for the twelve months ended June 30, 2021.
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.
Global Internal Audit performs audits of internal controls over financial reporting as well as broader financial, operational and compliance audits around the world, provides training and continually improves our internal control processes. The Company’s internal control over financial reporting also includes a robust Control Self-Assessment Program that is conducted annually on critical financial reporting areas of the Company. Management takes the appropriate action to correct any identified control deficiencies.
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, 2022, 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, 2022, 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, 2022, as stated in their report which is included herein.
|/s/ Jon R. Moeller|
|(Jon R. Moeller)|
|Chairman of the Board, President and Chief Executive Officer|
|/s/ Andre Schulten|
|Chief Financial Officer|
|August 5, 2022|
34 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 the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of The Procter & Gamble Company and subsidiaries (the "Company") as of June 30, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2022, 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, 2022, 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 5, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
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 Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Intangible Assets — Gillette Indefinite Lived Intangible Asset — Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of indefinite lived intangible assets for impairment involves the comparison of the fair value of each 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 rate. 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 assessment of the Gillette brand indefinite lived intangible asset (the “Gillette brand”) as of December 31, 2021. Because the estimated fair value exceeds the carrying value, no impairment was recorded. As of June 30, 2022, the carrying value of Gillette indefinite lived intangible asset was $14.1 billion.
We identified the Company’s impairment evaluation of the Gillette indefinite lived intangible asset as a critical audit matter because of the significant judgments made by management to estimate the fair value of the indefinite lived intangible asset. 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 rate, 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 rate for the Gillette indefinite lived intangible asset included the following, among others:
The Procter & Gamble Company 35
•We tested the effectiveness of controls over 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 and earnings, and the selection of royalty rates and discount rate.
•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 rate by:
•Testing the source information underlying the determination of net sales and earnings growth rates, royalty rates, and discount rate and the mathematical accuracy of the calculations.
•Developing a range of independent estimates for the discount rate and comparing the discount rate selected by management to that range.
/s/ Deloitte & Touche LLP
|August 5, 2022|
|We have served as the Company’s auditor since 1890.|
36 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, 2022, 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, 2022, 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, 2022, of the Company and our report dated August 5, 2022, expressed an unqualified opinion on those financial statements.
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
|August 5, 2022|
The Procter & Gamble Company 37
Consolidated Statements of Earnings
|Amounts in millions except per share amounts; Years ended June 30||2022||2021||2020|
|NET SALES||$||80,187 ||$||76,118 ||$||70,950 |
|Cost of products sold||42,157 ||37,108 ||35,250 |
|Selling, general and administrative expense||20,217 ||21,024 ||19,994 |
|OPERATING INCOME||17,813 ||17,986 ||15,706 |
|Interest income||51 ||45 ||155 |
|Other non-operating income, net||570 ||86 ||438 |
|EARNINGS BEFORE INCOME TAXES||17,995 ||17,615 ||15,834 |
|Income taxes||3,202 ||3,263 ||2,731 |
|NET EARNINGS||14,793 ||14,352 ||13,103 |
|Less: Net earnings attributable to noncontrolling interests||51 ||46 ||76 |
|NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE||$||14,742 ||$||14,306 ||$||13,027 |
NET EARNINGS PER COMMON SHARE: (1)
|Basic||$||6.00 ||$||5.69 ||$||5.13 |
|Diluted||$||5.81 ||$||5.50 ||$||4.96 |
(1)Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings attributable to Procter & Gamble.
See accompanying Notes to Consolidated Financial Statements.
38 The Procter & Gamble Company
Consolidated Statements of Comprehensive Income
Amounts in millions; Years ended June 30
|NET EARNINGS||$||14,793 ||$||14,352 ||$||13,103 |
|OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX|
Foreign currency translation (net of tax of $515, $(266) and $59, respectively)
Unrealized gains/(losses) on investment securities (net of tax of $1, $5 and $(1), respectively)
|5 ||16 ||(12)|
Unrealized gains/(losses) on defined benefit postretirement plans (net of tax of $1,022, $445 and $(42), respectively)
|2,992 ||1,386 ||(150)|
|TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX||1,547 ||2,425 ||(1,245)|
|TOTAL COMPREHENSIVE INCOME||16,340 ||16,777 ||11,858 |
|Less: Comprehensive income attributable to noncontrolling interests||43 ||50 ||60 |
|TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE||$||16,297 ||$||16,727 ||$||11,798 |
See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company 39
Consolidated Balance Sheets
|Amounts in millions except stated values; As of June 30||2022||2021|
|Cash and cash equivalents||$||7,214 ||$||10,288 |
|Accounts receivable||5,143 ||4,725 |
|Materials and supplies||2,168 ||1,645 |
|Work in process||856 ||719 |
|Finished goods||3,900 ||3,619 |
|Total inventories||6,924 ||5,983 |
|Prepaid expenses and other current assets||2,372 ||2,095 |
|TOTAL CURRENT ASSETS||21,653 ||23,091 |
|PROPERTY, PLANT AND EQUIPMENT, NET||21,195 ||21,686 |
|GOODWILL||39,700 ||40,924 |
|TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET||23,679 ||23,642 |
|OTHER NONCURRENT ASSETS||10,981 ||9,964 |
|TOTAL ASSETS||$||117,208 ||$||119,307 |
|Liabilities and Shareholders' Equity|
|Accounts payable||$||14,882 ||$||13,720 |
|Accrued and other liabilities||9,554 ||10,523 |
|Debt due within one year||8,645 ||8,889 |
|TOTAL CURRENT LIABILITIES||33,081 ||33,132 |
|LONG-TERM DEBT||22,848 ||23,099 |
|DEFERRED INCOME TAXES||6,809 ||6,153 |
|OTHER NONCURRENT LIABILITIES||7,616 ||10,269 |
|TOTAL LIABILITIES||70,354 ||72,653 |
Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)
|843 ||870 |
Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)
|— ||— |
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2022 - 4,009.2, 2021 - 4,009.2)
|4,009 ||4,009 |
|Additional paid-in capital||65,795 ||64,848 |
|Reserve for ESOP debt retirement||(916)||(1,006)|
|Accumulated other comprehensive loss||(12,189)||(13,744)|
Treasury stock, at cost (shares held: 2022 - 1,615.4, 2021 - 1,579.5)
|Retained earnings||112,429 ||106,374 |
|Noncontrolling interest||265 ||276 |
|TOTAL SHAREHOLDERS' EQUITY||46,854 ||46,654 |
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||$||117,208 ||$||119,307 |
See accompanying Notes to Consolidated Financial Statements.
40 The Procter & Gamble Company
Consolidated Statements of Shareholders' Equity
Dollars in millions except per share amounts; shares in thousands
|Common Stock||Preferred Stock||Additional Paid-In Capital||Reserve for ESOP Debt Retirement||Accumulated|
|Treasury Stock||Retained Earnings||Non-controlling Interest||Total Share-holders' Equity|
|BALANCE JUNE 30, 2019||2,504,751 ||$4,009 ||$928 ||$63,827 ||($1,146)||($14,936)||($100,406)||$94,918 ||$385 ||$47,579 |
|Net earnings||13,027 ||76 ||13,103 |
|Other comprehensive income/(loss)||(1,229)||(16)||(1,245)|
Dividends and dividend equivalents ($3.0284 per share):
|Treasury stock purchases||(61,346)||(7,405)||(7,405)|
|Employee stock plans||32,603 ||362 ||2,212 ||2,574 |
|Preferred stock conversions||3,738 ||(31)||5 ||26 ||— |
|ESOP debt impacts||66 ||108 ||174 |
|Noncontrolling interest, net||(88)||(88)|
|BALANCE JUNE 30, 2020||2,479,746 ||$4,009 ||$897 ||$64,194 ||($1,080)||($16,165)||($105,573)||$100,239 ||$357 ||$46,878 |
|Net earnings||14,306 ||46 ||14,352 |
|Other comprehensive income/(loss)||2,421 ||4 ||2,425 |
Dividends and dividend equivalents ($3.2419 per share):
|Treasury stock purchases||(81,343)||(11,009)||(11,009)|
|Employee stock plans||28,001 ||650 ||1,586 ||2,236 |
|Preferred stock conversions||3,302 ||(27)||4 ||23 ||— |
|ESOP debt impacts||74 ||120 ||194 |
|Noncontrolling interest, net||(131)||(131)|
|BALANCE JUNE 30, 2021||2,429,706 ||$4,009 ||$870 ||$64,848 ||($1,006)||($13,744)||($114,973)||$106,374 ||$276 ||$46,654 |
|Net earnings||14,742 ||51 ||14,793 |
|Other comprehensive income/(loss)||1,555 ||(8)||1,547 |
Dividends and dividend equivalents ($3.5227 per share):
|Treasury stock purchases||(67,088)||(10,003)||(10,003)|
|Employee stock plans||28,042 ||945 ||1,571 ||2,516 |
|Preferred stock conversions||3,217 ||(27)||4 ||23 ||— |
|ESOP debt impacts||90 ||108 ||198 |
|Noncontrolling interest, net||(2)||(54)||(56)|
|BALANCE JUNE 30, 2022||2,393,877 ||$4,009 ||$843 ||$65,795 ||($916)||($12,189)||($123,382)||$112,429 ||$265 ||$46,854 |
See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company 41
Consolidated Statements of Cash Flows
|Amounts in millions; Years ended June 30||2022||2021||2020|
|CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR||$||10,288 ||$||16,181 ||$||4,239 |
|Net earnings||14,793 ||14,352 ||13,103 |
|Depreciation and amortization||2,807 ||2,735 ||3,013 |
|Loss on early extinguishment of debt||— ||512 ||— |
|Share-based compensation expense||528 ||540 ||558 |
|Deferred income taxes||(402)||(258)||(596)|
|Loss/(gain) on sale of assets||(85)||(16)||7 |
|Change in accounts receivable||(694)||(342)||634 |
|Change in inventories||(1,247)||(309)||(637)|
|Change in accounts payable, accrued and other liabilities||1,429 ||1,391 ||1,923 |
|Change in other operating assets and liabilities||(635)||(369)||(710)|
|Other||229 ||135 ||108 |
|TOTAL OPERATING ACTIVITIES||16,723 ||18,371 ||17,403 |
|Proceeds from asset sales||110 ||42 ||30 |
|Acquisitions, net of cash acquired||(1,381)||(34)||(58)|
|Purchases of investment securities||— ||(55)||— |
|Proceeds from sales and maturities of investment securities||— ||— ||6,151 |
|Change in other investments||3 ||— ||(5)|
|TOTAL INVESTING ACTIVITIES||(4,424)||(2,834)||3,045 |
|Dividends to shareholders||(8,770)||(8,263)||(7,789)|
|Additions to short-term debt with original maturities of more than three months||10,411 ||7,675 ||14,371 |
|Reductions in short-term debt with original maturities of more than three months||(11,478)||(7,577)||(12,984)|
|Additions/(reductions) in other short-term debt||917 ||(3,431)||958 |
|Additions to long-term debt||4,385 ||4,417 ||4,951 |
Reductions of long-term debt (1)
|Treasury stock purchases||(10,003)||(11,009)||(7,405)|
|Impact of stock options and other||2,005 ||1,644 ||1,978 |
|TOTAL FINANCING ACTIVITIES||(14,876)||(21,531)||(8,367)|
|EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH||(497)||101 ||(139)|
|CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH||(3,074)||(5,893)||11,942 |
|CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR||$||7,214 ||$||10,288 ||$||16,181 |
|Cash payments for interest||$||451 ||$||531 ||$||434 |
|Cash payments for income taxes||3,818 ||3,822 ||3,550 |
(1) Includes early extinguishment of debt costs of $512 in 2021.
See accompanying Notes to Consolidated Financial Statements.
42 The Procter & Gamble Company
Notes to Consolidated Financial Statements
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 approximately 180 countries and territories primarily through mass merchandisers, e-commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. 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 Venezuelan 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 at cost, less impairments, plus or minus observable price changes.
Beginning in fiscal year 2022, the Company began to present increases and reductions in short-term debt with maturities of more than three months separately within the Consolidated Statements of Cash Flows. The presentation for the twelve months ended June 30, 2021, and June 30, 2020, have been revised to align with the current period presentation. This change had no impact on total financing activities, and we have concluded the change is not material.
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, postretirement 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, regarding
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.
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 expenses necessary to acquire and convert the purchased materials and supplies into finished 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 $2.0 billion in 2022, $1.9 billion in 2021 and $1.8 billion in 2020. Advertising costs, charged to expense as incurred, include worldwide television, print, radio, internet and in-store advertising expenses and were $7.9 billion in 2022, $8.2 billion in 2021 and $7.3 billion in 2020. 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.
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 43
Other Non-Operating Income, Net
Other non-operating income, net primarily includes net acquisition and divestiture gains, net non-service impacts related to postretirement benefit plans, investment income and other non-operating items.
Financial statements of operating subsidiaries outside the U.S. generally are measured using the local currency as the functional currency. Adjustments to translate those 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.
Cash Flow Presentation
The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles net earnings to cash flows from operating activities. Cash flows from foreign currency transactions and operations are translated at monthly exchange rates for each 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.
The Company holds minor equity investments in certain companies over which we exert significant influence, but do not control the financial and operating 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 recorded at fair value, with gains and losses recorded through net earnings. Equity investments without readily determinable fair values are measured at cost, less impairments, plus or minus observable price changes. Equity investments are included as Other noncurrent assets in the Consolidated Balance Sheets.
The Company also holds highly-liquid investments, primarily money market funds and time deposits. Such investments are considered cash equivalents and are included within Cash and cash equivalents in the Consolidated Balance Sheets.
Inventories are valued at the lower of cost or net 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. We evaluate several 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.
Amounts in millions of dollars except per share amounts or as otherwise specified.
44 The Procter & Gamble Company
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 certain 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
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." The amendments were effective upon issuance and provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. We have completed our evaluation of significant contracts. Most contracts reviewed will mature prior to the termination of LIBOR or will be modified to apply a new reference rate, primarily the Secured Overnight Financing Rate (SOFR) where applicable. As a result, the guidance has not had, and is not expected to have, a material impact on the Company's Consolidated Financial Statements.
In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance". This guidance requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model. These amendments are effective for annual periods beginning after December 15, 2021, with early adoption permitted. We plan to adopt the standard for the fiscal year ending June 30, 2023. We are currently assessing the impact of this guidance and do not expect a material impact at this time.
No other new accounting pronouncements issued or effective during the fiscal year or in future years had, or are expected to have, a material impact on our Consolidated Financial Statements.
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 (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. In addition, capital expenditures in the segments are on an accrual basis consistent with the balance sheet. Adjustments to move from an accrual to cash basis, for purposes of the cash flow statement, are reflected in Corporate.
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, 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, fixed assets and intangible assets. Other assets, primarily cash, accounts receivable, investment securities and goodwill, are included in Corporate.
Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 45
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)
|Years ended June 30||2022||2021||2020|
|Skin and Personal Care||9%||10%||10%|
|Personal Health Care||6%||5%||5%|
(1) % of Net sales by operating segment excludes sales recorded in Corporate.
Net sales and long-lived assets in the United States and internationally were as follows (in billions):
|Years ended June 30||2022||2021||2020|
|United States||$||36.5 ||$||33.7 ||$||31.3 |
|International||$||43.7 ||$||42.4 ||$||39.7 |
LONG-LIVED ASSETS (1)
|United States||$||10.7 ||$||10.1 ||$||9.9 |
|International||$||10.5 ||$||11.6 ||$||10.8 |
(1) Long-lived assets consists of property, plant and equipment.
No country, other than the United States, exceeds 10% of the Company's consolidated net sales or long-lived assets.
Our largest customer, Walmart Inc. and its affiliates, accounted for consolidated net sales of approximately 15% in 2022, 2021 and 2020. No other customer represents more than 10% of our consolidated net sales.
|Global Segment Results||Net Sales||Earnings/(Loss)|
|BEAUTY||2022||$||14,740 ||$||3,946 ||$||3,160 ||$||348 ||$||6,055 ||$||331 |
|2021||14,417 ||4,018 ||3,210 ||333 ||5,587 ||386 |
|2020||13,359 ||3,437 ||2,737 ||320 ||5,531 ||397 |
|GROOMING||2022||6,587 ||1,835 ||1,490 ||361 ||20,482 ||260 |
|2021||6,440 ||1,728 ||1,427 ||378 ||20,668 ||291 |
|2020||6,069 ||1,613 ||1,329 ||406 ||20,589 ||305 |
|HEALTH CARE||2022||10,824 ||2,618 ||2,006 ||376 ||7,888 ||410 |
|2021||9,956 ||2,398 ||1,851 ||372 ||7,976 ||364 |
|2020||9,028 ||2,156 ||1,652 ||350 ||7,726 ||338 |
|FABRIC & HOME CARE||2022||27,556 ||5,729 ||4,386 ||672 ||8,567 |