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What changed in Procter & Gamble's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Procter & Gamble's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+281 added−319 removedSource: 10-K (2023-08-04) vs 10-K (2022-08-05)

Top changes in Procter & Gamble's 2023 10-K

281 paragraphs added · 319 removed · 246 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Company announced an ambition to reduce greenhouse gas emissions, purchase renewable electricity for our operations, reduce our use of virgin petroleum-based plastic in our packaging, increase the recyclability or reusability of our packaging and increase responsible sourcing of key forest-based commodities such as wood pulp and palm oil.
Biggest changeThe Company has also declared goals towards using renewable electricity for our operations, reducing use of virgin petroleum-based plastic in packaging, increasing the recyclability or reusability of packaging, responsible sourcing of key forest-based commodities, improving efficiency of water usage in our operations and driving a global portfolio of water restoration projects to address water scarcity.
Additional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 to our Consolidated Financial Statements. Unless the context indicates otherwise, the terms the "Company," "P&G," "we," "our" or "us" as used herein refer to The Procter & Gamble Company (the registrant) and its subsidiaries.
Additional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); and Notes 1 and 2 to our Consolidated Financial Statements. Unless the context indicates otherwise, the terms "Company," "P&G," "we," "our" or "us" as used herein refer to The Procter & Gamble Company (the registrant) and its subsidiaries.
The markets in which our products are sold are highly competitive. Our products compete against similar products of many large and small companies, including well-known global competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands.
The markets in which our products are sold are highly competitive. Our products compete against similar products from many large and small companies, including well-known global competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands.
Reports can also be accessed through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference. The information contained on our website is not incorporated by reference into this report. Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.
Reports can also be accessed through links from our website at: www.pginvestor.com. P&G includes the website link solely as a textual reference and the information on our website is not incorporated by reference into this report. Copies of these reports are also available, without charge, by contacting EQ Shareowner Services, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.
We do not expect that the Company’s expenditures for compliance with current government regulations, including current environmental regulations, will have a material effect on our total capital expenditures, earnings or competitive position in fiscal year 2023 as compared to prior periods. Human Capital . Our employees are a key source of competitive advantage.
We do not expect that the Company’s expenditures for compliance with current government regulations, including current environmental regulations, will have a material effect on our total capital expenditures, earnings or competitive position in fiscal year 2024 as compared to prior periods. Human Capital . Our employees are a key source of competitive advantage.
Our Board of Directors, through the Compensation and Leadership Development Committee (C&LD Committee), provides oversight of the Company’s policies and strategies relating to talent including diversity, equality and inclusion as well as the Company’s compensation principles and practices. The C&LD Committee also evaluates and approves the Company’s compensation plans, policies and programs applicable to our senior executives.
Our Board of Directors, through the Compensation and Leadership Development Committee (C&LD Committee), provides oversight of the Company’s policies and strategy relating to talent including diversity, equality and inclusion as well as the Company’s compensation principles and practices. The C&LD Committee also evaluates and approves the Company’s compensation plans, policies and programs applicable to our senior executives.
We believe this combination provides the most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important differentiating factors. Government Regulation . Our Company is subject to a wide variety of laws and regulations across the countries in which we do business.
We believe this combination provides the 2 The Procter & Gamble Company most efficient method of marketing for these types of products. Product quality, performance, value and packaging are also important differentiating factors. Government Regulation . Our Company is subject to a wide variety of laws and regulations across the countries in which we do business.
We utilize our marketing and online presence to deliver superior brand messaging to our consumers. We work collaboratively with our customers to deliver superior retail execution, both in-store and online. In conjunction with the above vectors, we provide superior value to consumers and our retail customers in each price tier in which we compete.
We utilize our marketing and online presence to deliver superior brand messaging to our consumers. We partner with our customers to deliver superior retail execution, both in-store and online. In conjunction with the above vectors, we provide superior value to consumers and our retail customers in each price tier in which we compete.
We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. We support our products with advertising, promotions and other marketing vehicles to build awareness 2 The Procter & Gamble Company and trial of our brands and products in conjunction with our sales force.
We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. We support our products with advertising, promotions and other marketing vehicles to build awareness and trial of our brands and products in conjunction with our sales force.
The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures. 49% of our employees are in manufacturing roles and 26% of our employees are located in the United States. 41% of our global employees are women. As of June 30, 2022, 28% of our U.S. employees identify as multicultural.
The total number of employees is an estimate of total Company employees excluding interns, co-ops, contractors and employees of joint ventures. 49% of our employees are in manufacturing roles and 27% of our employees are located in the United States. 41% of our global employees are women and 30% of our U.S. employees identify as multicultural.
Sales to Walmart Inc. and its affiliates represent approximately 15% of our total sales in 2022, 2021 and 2020. No other customer represents more than 10% of our total sales. Our top ten customers accounted for approximately 39% of our total sales in 2022, 39% in 2021 and 38% in 2020. Sources and Availability of Materials .
Sales to Walmart Inc. and its affiliates represent approximately 15% of our total sales in 2023, 2022 and 2021. No other customer represents more than 10% of our total sales. Our top ten customers accounted for 40% of our total net sales in 2023 and 39% in 2022 and 2021. Sources and Availability of Materials .
Compensation and Benefits Our compensation plans are based on the principles of paying for performance, paying competitively versus peer companies that we compete with for talent and in the marketplace and focusing on long-term success through a combination of short-term and long-term incentive programs.
Our total rewards programs are based on the principles of paying for performance, paying competitively versus peer companies that we compete with for talent in the marketplace and focusing on long-term success through a combination of short-term and long-term incentive programs.
The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble. Today, our products are sold in approximately 180 countries and territories.
The Company was incorporated in Ohio in 1905, having first been established as a New Jersey corporation in 1890, and was built from a business founded in Cincinnati in 1837 by William Procter and James Gamble.
Employees As of June 30, 2022, the Company had approximately 106,000 employees, an increase of five percent versus the prior year due primarily to business growth.
Employees As of June 30, 2023, the Company had approximately 107,000 employees, an increase of 1% versus the prior year due primarily to business growth.
References to our sustainability reports and website are for informational purposes only and neither the sustainability reports nor the other information on our website is incorporated by reference into this Annual Report on Form 10-K.
References to our sustainability reports and website are for informational purposes only and neither the sustainability reports nor the other information on our website is incorporated by reference into this Annual Report on Form 10-K. Additional detailed information on our sustainability efforts can be found on our website at https://pginvestor.com/esg.
We also offer competitive benefit programs, including retirement plans and health insurance in line with local country practices with flexibility to accommodate the needs of a diverse workforce. Sustainability . Environmental sustainability is a key focus area and integrated into P&G’s business strategies. The Company has declared its focus on developing irresistibly superior products and packages that are sustainable.
We also offer competitive benefit programs, including retirement plans and health insurance in line with local country practices with flexibility to accommodate the needs of a diverse workforce. Sustainability . Environmental sustainability is integrated into our business strategy to offer consumers irresistibly superior products that are more sustainable.
The markets and industry segments in which we offer our products are highly competitive. Our products are sold in approximately 180 countries and territories through numerous channels as well as direct-to-consumer.
We rely on the continued growth and success of existing brands and products, as well as the creation of new innovative products and brands. We offer products in markets and industry segments that are highly competitive. Our products are sold in approximately 180 countries and territories through numerous channels as well as direct-to-consumer.
We aspire to achieve equal gender representation globally and at key management and leadership levels. Within the U.S. workforce, our aspiration is to achieve 40% multicultural representation overall as well as at management and leadership levels.
We aspire to achieve equal gender representation globally and at key management and leadership levels. Within the U.S. workforce, our aspiration is to achieve 40% multicultural representation overall as well as at management and leadership levels. Compensation and Benefits Market-competitive compensation and reward programs are critical elements of our employee value equation to attract and retain the best talent.
Financial Information about Segments Information about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements. Narrative Description of Business Business Model . Our business model relies on the continued growth and success of existing brands and products, as well as the creation of new innovative products and brands.
Financial Information about Segments Information about our reportable segments can be found in the MD&A and Note 2 to our Consolidated Financial Statements. Narrative Description of Business Business Model . Our business model is built to deliver balanced top- and bottom-line growth and value creation.
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For additional information on the potential impacts of global legal and regulatory requirements on our business, see “Item 1A. Risk Factors” herein.
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Our aim is to deliver balanced top- and bottom-line growth, value creation and key sustainability objectives. In 2021, the Company announced a 2040 net zero ambition and published a Climate Transition Action The Procter & Gamble Company 3 Plan, which describes the Company’s ongoing efforts toward reducing greenhouse gas emissions across scopes 1 and 2 and elements of scope 3.
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The Procter & Gamble Company 3 Additional detailed information on our sustainability efforts including our TCFD (Task Force on Climate-Related Financial Disclosures), SASB (Sustainability Accounting Standards Board) and CDP (Carbon Disclosure Project) reports can be found on our website at https://pginvestor.com/esg.
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This includes a long-term objective of net zero emissions for scopes 1 and 2, elements of scope 3 and interim goals to help us pace our progress.
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We use the standards and guidelines of the Global Reporting Initiative, Sustainability Accounting Standards Board (SASB) industry specific standards and the Task Force on Climate-related Financial Disclosures (TCFD) to inform our sustainability and related disclosures included in this Annual Report, our Proxy Statement and our sustainability reports.
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The “materiality” thresholds in those standards and guidelines may differ from the concept of “materiality” for purposes of the federal securities laws and disclosures required by the Commission’s rules in this Annual Report.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; • Inability to meet our customers’ needs and achieve cost targets due to disruptions in our manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other essential manufacturing and supply elements such as raw materials or other finished product components, transportation, or other manufacturing and distribution capability; • Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; • Periods of disruption that limit the ability to access the financial markets or which increase the cost of liquidity; or • Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale and support of our products, which could adversely impact our results of operations and cash flows.
Biggest changeIf prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows; or • Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, or otherwise prevent our third-party partners, suppliers or customers from sufficiently staffing operations.
These impacts include, but are not limited to: • Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling or similar pantry-loading activity.
These impacts may include, but are not limited to: • Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling or similar pantry-loading activity.
The loss or disruption of such manufacturing and supply arrangements, including for issues such as labor disputes or controversies, loss or impairment of key manufacturing sites, discontinuity or disruptions in our internal information and data systems or those of our suppliers, inability to procure sufficient raw or input materials (including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, results of operations or cash flows.
The loss or disruption of such manufacturing and supply arrangements, including for issues such as labor disputes or controversies, loss or impairment of key manufacturing sites, discontinuity or disruptions in our internal information and data systems or those of our suppliers, cybersecurity incidents, inability to procure sufficient raw or input materials (including water, recycled materials and materials that meet our labor standards), significant changes in trade policy, natural disasters, increasing severity or frequency of extreme weather events due to climate change or otherwise, acts of war or terrorism, disease outbreaks or other external factors over which we have no control, have at times interrupted and could, in the future, interrupt product supply and, if not effectively managed and remedied, could have an adverse impact on our business, financial condition, results of operations or cash flows.
Despite our efforts to manage and remedy these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects.
Despite efforts to manage and remedy these impacts, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects.
A disruption to one or more of these top-tier partners could impact our ability to draw on existing credit facilities or otherwise adversely affect our cash flows or the cash flows of our customers and vendors. Changing political conditions could adversely impact our business and financial results.
A disruption to one or more of these top-tier partners could impact our ability to draw on existing credit facilities or otherwise adversely affect our cash flows or the cash flows of our customers and vendors. Changing political and geopolitical conditions could adversely impact our business and financial results.
If the IT/OT systems, networks or service providers we rely upon fail to function properly or cause operational outages or aberrations, or if we or one of our third-party providers suffer significant unavailability of key operations, or inadvertent disclosure of, lack of integrity of, or loss of our sensitive business or stakeholder information, due to any number of causes, including catastrophic events, natural disasters, power outages, computer and telecommunications failures, improper data handling, viruses, phishing attempts, cyber-attacks, malware and ransomware attacks, security breaches, security incidents or employee error or malfeasance, and our business continuity plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and be exposed to reputational, competitive, operational, financial and business harm as well as litigation and regulatory action.
If the IT/OT systems, networks or service providers we rely upon fail to function properly or cause operational outages or aberrations, or if we or one of our third-party providers suffer significant unavailability of key operations, or inadvertent disclosure of, lack of integrity of, or loss of our sensitive business or stakeholder information, The Procter & Gamble Company 7 including personal information, due to any number of causes, including catastrophic events, natural disasters, power outages, computer and telecommunications failures, improper data handling, viruses, phishing attempts, cyber-attacks, malware and ransomware attacks, security breaches, security incidents or employee error or malfeasance, and our business continuity plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and be exposed to reputational, competitive, operational, financial and business harm as well as litigation and regulatory action.
Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.
Our results of operations and cash flows have been, and in the future could also be, impacted by acquisitions or joint 8 The Procter & Gamble Company venture activities, if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, or 2) we are not able to deliver the expected cost and growth synergies associated with such acquisitions and joint ventures, including as a result of integration and collaboration challenges, which could also result in an impairment of goodwill and intangible assets.
An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately The Procter & Gamble Company 9 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax.
An outgrowth of the original Base Erosion and Profit Shifting (BEPS) project is a project undertaken by the approximately 140 member countries of the expanded Organisation for Economic Co-operation and Development (OECD) Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of this project extends beyond pure digital businesses and, as proposed, would likely impact a large portion of multinational businesses by potentially redefining jurisdictional taxation rights in market countries and establishing a global minimum tax.
The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows. We must successfully manage the demand, supply and operational challenges associated with the effects of a disease outbreak, including epidemics, pandemics or similar widespread public health concerns.
The costs and operational consequences of responding to the above items and implementing remediation measures could be significant and could adversely impact our results of operations and cash flows. We must successfully manage the demand, supply and operational challenges associated with the effects of any future disease outbreak, including epidemics, pandemics or similar widespread public health concerns.
These disruptions have included and may in the future include: a slow-down, recession or inflationary pressures in the general economy; reduced market growth rates; tighter credit markets for our suppliers, vendors or customers; a significant shift in government policies; significant social unrest; the deterioration of economic relations between countries or regions, including potential negative consumer sentiment toward non-local products or sources; or the inability to conduct day-to-day transactions through our financial intermediaries to pay funds to or collect funds from our customers, vendors and suppliers.
These disruptions have included and may in the future include: a slow-down, 4 The Procter & Gamble Company recession or inflationary pressures in the general economy; reduced market growth rates; tighter credit markets for our suppliers, vendors or customers; a significant shift in government policies; significant social unrest; the deterioration of economic relations between countries or regions; potential negative consumer sentiment toward non-local products or sources; or the inability to conduct day-to-day transactions through our financial intermediaries to pay funds to or collect funds from our customers, vendors and suppliers.
Results of elections, referendums, sanctions or other political processes in certain markets in which our products are manufactured, sold or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, tariffs, import and export controls and the general movement of goods, services, capital and people between countries and other matters.
Results of elections, referendums, sanctions or other political processes and pressures in certain markets in which our products are manufactured, sold or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, tariffs, import and export controls and the general movement of goods, materials, services, capital, data and people between countries.
While the Company has many programs and initiatives to further these goals, our ability to achieve these goals is impacted in part by the actions and efforts of third parties including local and other governmental authorities, suppliers, vendors and customers.
While the Company has many programs and 6 The Procter & Gamble Company initiatives to further these goals, our ability to achieve these goals is impacted in part by the actions and efforts of third parties including local and other governmental authorities, suppliers, vendors and customers.
In addition, such events could result in unauthorized disclosure of confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our partners, our employees, customers and suppliers.
In addition, such events could result in unauthorized disclosure of confidential information or stakeholder information, including personal information, and we may suffer financial and reputational damage because of lost or misappropriated information belonging to us or to our partners, our employees, customers and suppliers.
We also have businesses and maintain local currency cash balances in a number of countries with currency exchange, import authorization, pricing or other controls or restrictions, such as Nigeria, Turkey, Argentina and Egypt.
We also have businesses and maintain local currency cash balances in a number of countries with currency exchange, import authorization, pricing or other controls or restrictions, such as Egypt, Argentina and Pakistan.
We hold assets, incur liabilities, generate sales and pay expenses in a variety of currencies other than the U.S. dollar, and our operations outside the U.S. generate more than fifty percent of our annual net sales.
We hold assets, incur liabilities, generate sales and pay expenses in a variety of currencies other than the U.S. dollar, and our operations outside the U.S. generate more than 50% of our annual net sales.
Further, failure of these third parties to meet their obligations to the Company or substantial disruptions in the relationships between the 6 The Procter & Gamble Company Company and these third parties could adversely impact our operations and financial results.
Further, failure of these third parties to meet their obligations to the Company or substantial disruptions in the relationships between the Company and these third parties could adversely impact our operations and financial results.
Additionally, we could The Procter & Gamble Company 7 be exposed to potential liability, litigation, governmental inquiries, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs. Periodically, we also upgrade our IT/OT systems or adopt new technologies.
Additionally, we could be exposed to potential liability, litigation, governmental inquiries, investigations or regulatory enforcement actions; and we could be subject to payment of fines or other penalties, legal claims by our suppliers, customers or employees and significant remediation costs. Periodically, we also upgrade our IT/OT systems or adopt new technologies.
Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and a more than doubling of U.S. residual taxation of non-U.S. earnings.
Tax Act were broad and complex. Under the current U.S. presidential administration, comprehensive federal income tax reform has been proposed, including an increase in the U.S. Federal corporate income tax rate, elimination of certain investment incentives and an increase in U.S. taxation of non-U.S. earnings.
Changes in the political conditions in markets in which we manufacture, sell or distribute our products may be difficult to predict and may adversely affect our business and financial results.
Changes in the political conditions in markets in which we manufacture, sell or distribute our products, as well as changing geopolitical conditions, may be difficult to predict and may adversely affect our business and financial results.
If these programs are not executed as planned or suffer negative publicity, the Company's reputation and results of operations or cash flows could be adversely impacted. We rely on third parties in many aspects of our business, which creates additional risk.
Consumer or broader stakeholder perceptions of these programs and initiatives widely vary and could adversely affect our business. If these programs are not executed as planned or suffer negative publicity, the Company's reputation and results of operations or cash flows could be adversely impacted. We rely on third parties in many aspects of our business, which creates additional risk.
Inflation pressures could also result in increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.
Inflation pressures could also result in increases in these input costs. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share.
Our business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, packaging content or corporate responsibility after consumer purchase, marketing, antitrust and competition, privacy, data protection, environmental (including increasing focus on the climate, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery, anti-corruption, trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters.
Our business is subject to a wide variety of laws and regulations across the countries in which we do business, including those laws and regulations involving intellectual property, product liability, product composition or formulation, packaging content or corporate responsibility for packaging and product disposal, marketing, antitrust and competition, privacy, data protection, environmental (including increasing focus on the climate, water and waste impacts of consumer packaged goods companies' operations and products), employment, healthcare, anti-bribery and anti-corruption (including interactions with health care professionals and government officials as well as corresponding internal controls and record-keeping requirements), trade (including tariffs, sanctions and export controls), tax, accounting and financial reporting or other matters.
Additionally, these and other economic conditions may cause our suppliers, distributors, contractors or other third-party partners to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results of operations could be adversely affected. 4 The Procter & Gamble Company Customers may also suffer financial hardships due to economic conditions such that their accounts become uncollectible or are subject to longer collection cycles.
Additionally, these and other economic conditions may cause our suppliers, distributors, contractors or other third-party partners to suffer financial or operational difficulties that they cannot overcome, resulting in their inability to provide us with the materials and services we need, in which case our business and results of operations could be adversely affected.
Our costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-derived materials like resins and paper-based The Procter & Gamble Company 5 materials like pulp) and raw and packaging materials and the costs of labor, transportation (including trucks and containers), energy, pension and healthcare.
Our businesses face cost fluctuations and pressures that could affect our business results. Our costs are subject to fluctuations, particularly due to changes in the prices of commodities (including certain petroleum-derived materials like resins and paper-based materials like pulp) and raw and packaging materials and the costs of labor, transportation (including trucks and containers), energy, pension and healthcare.
These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, including our compliance and ethics programs, may alter the environment in which we do business and may increase the ongoing costs of compliance, which could adversely impact our results of operations and cash flows.
These and other rapidly changing laws, regulations, policies and related interpretations as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business, may increase the ongoing costs and complexities of compliance including by requiring investments in technology or other compliance systems, and may ultimately result in the need to cease manufacturing, sales or other business activities in certain jurisdictions, which could adversely impact our results of operations and cash flows.
BUSINESS OPERATIONS RISKS Our business results depend on our ability to manage disruptions in our global supply chain. Our ability to meet our customers’ needs and achieve cost targets depends on our ability to maintain key manufacturing and supply arrangements, including execution of supply chain optimizations and certain sole supplier or sole manufacturing plant arrangements.
Our ability to meet our customers’ needs and achieve cost targets depends on our ability to maintain key manufacturing and supply arrangements, including execution of supply chain optimizations and certain sole supplier or sole manufacturing plant The Procter & Gamble Company 5 arrangements.
We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives. Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures.
Specifically, our financial results have been, and in the future could be, adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands or dissolution of joint ventures.
We must successfully manage ongoing acquisition, joint venture and divestiture activities. 8 The Procter & Gamble Company As a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities.
We must successfully manage ongoing acquisition, joint venture and divestiture activities. As a company that manages a portfolio of consumer brands, our ongoing business model includes a certain level of acquisition, joint venture and divestiture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against our business objectives.
As a result, we experience ongoing competitive pressures in the environments in which we operate, which may result in challenges in maintaining sales and profit margins. To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms.
To address these challenges, we must be able to successfully respond to competitive factors and emerging retail trends, including pricing, promotional incentives, product delivery windows and trade terms.
Our business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as travel restrictions or recommendations or mandates from governmental authorities as a result of the COVID-19 virus, the threat of the virus or the emergence of any variants.
Our business may be negatively impacted by the fear of exposure to or actual effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern.
The ability to achieve our business objectives depends on how well we can compete with our local and global competitors in new and existing markets and channels. The consumer products industry is highly competitive. Across all of our categories, we compete against a wide variety of global and local competitors.
Failure to manage these fluctuations and to anticipate consumer reaction to our management of these fluctuations could adversely impact our results of operations or cash flows. The ability to achieve our business objectives depends on how well we can compete with our local and global competitors in new and existing markets and channels. The consumer products industry is highly competitive.
We may not be able to operate our manufacturing sites and source raw materials from our suppliers or ship finished products to our customers.
Within Ukraine, there is a possibility of physical damage and destruction of our two manufacturing facilities, our distribution centers or those of our customers. We may not be able to operate our manufacturing sites and source raw materials from our suppliers or ship finished products to our customers.
The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, new or increased tariffs, trade barriers and market contraction, could adversely affect the Company’s results of operations and cash flows. The war between Russia and Ukraine has adversely impacted and could continue to adversely impact our business and financial results.
The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, new or increased tariffs, trade barriers and market contraction, could adversely affect the Company’s results of operations and cash flows. The Company operates a global business with sales, manufacturing, distribution and research and development organizations globally that contribute to our overall growth.
Additionally, our business, operations or employees have been and could continue to be adversely affected (including by the need to de-consolidate or even exit certain businesses in particular countries) by political volatility, labor market disruptions or other crises or vulnerabilities in individual countries or regions, including political instability or upheaval or acts of war (such as the Russia-Ukraine War) and the related government and other entity responses, broad economic instability or sovereign risk related to a default by or deterioration in the creditworthiness of local governments, particularly in emerging markets.
Additionally, our business, operations or employees have been and could continue to be adversely affected (including by the need to de-consolidate or even exit certain businesses in particular countries) by geopolitical conflicts, political volatility, trade controls, labor market disruptions or other crises or vulnerabilities in individual countries or regions.
In addition, if we are unable to generate sufficient sales, income and cash flow, it could affect the Company’s ability to achieve expected share repurchase and dividend payments. Disruptions in credit markets or to our banking partners or changes to our credit ratings may reduce our access to credit or overall liquidity.
Customers may also suffer financial hardships due to economic conditions such that their accounts become uncollectible or are subject to longer collection cycles. In addition, if we are unable to generate sufficient sales, income and cash flow, it could affect the Company’s ability to achieve expected share repurchase and dividend payments.
The war between Russia and Ukraine has negatively impacted, and the situation it generates may continue to negatively impact, our operations. Beginning in March 2022, the Company reduced its product portfolio, discontinued new capital investments and suspended media, advertising and promotional activity in Russia.
Beginning in March 2022, the Company 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 overall situation will evolve.
Removed
Future impacts to the Company are difficult to predict due to the high level of uncertainty as to how the overall situation will evolve. Within Ukraine, there is a possibility of physical damage and destruction of our two manufacturing facilities, our distribution centers or those of our customers.
Added
This could include political instability, upheaval or acts of war (such as the Russia-Ukraine War) and the related government and other entity responses, broad economic instability or sovereign risk related to a default by or deterioration in the creditworthiness of local governments, particularly in emerging markets.
Removed
Our businesses face cost fluctuations and pressures that could affect our business results.
Added
Disruptions in credit markets or to our banking partners or changes to our credit ratings may reduce our access to credit or overall liquidity.
Removed
In the case of COVID-19, the emergence of variants may continue to occur across regions and countries where we operate, leading to varied government responses and the potential for decreased vaccine effectiveness, resulting in further volatility and disparity in our results and operations across geographies.
Added
If geopolitical tensions and trade controls were to increase or disrupt our business in markets where we have significant sales or operations, including disruptions due to governmental responses to such conflicts (such as the imposition of sanctions, retaliatory tariffs, increased business licensing requirements or limitations on profits), such disruptions could adversely impact our business, financial condition, results of operations and cash flows.
Removed
Recent pronouncements related to this project suggest an implementation of the proposed 15% global minimum tax in the near to mid-term. Continued negotiations on important details of this project are ongoing, and ultimate enactment and timing in the EU, US and other jurisdictions remains uncertain.
Added
The war between Russia and Ukraine has adversely impacted and could continue to adversely impact our business and financial results. The war between Russia and Ukraine has negatively impacted, and the situation it generates may continue to negatively impact, our operations.
Added
BUSINESS OPERATIONS RISKS Our business results depend on our ability to manage disruptions in our global supply chain.
Added
Across all of our categories, we compete against a wide variety of global and local competitors. As a result, we experience ongoing competitive pressures in the environments in which we operate, which may result in challenges in maintaining sales and profit margins.
Added
In December 2022, the European Union (EU) approved a directive requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. In The Procter & Gamble Company 9 addition, several non-EU countries have recently proposed and/or adopted legislation consistent with the global minimum tax framework.
Added
Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own or lease our principal regional shared service centers in Costa Rica, the United Kingdom and the Philippines. Management believes that the Company's sites are adequate to support the business and that the properties and equipment have been well maintained.
Biggest changeWe own or lease our principal regional general offices in Switzerland, Panama, Singapore, China and the United Arab Emirates. We own or lease our principal regional shared service centers in Costa Rica, the United Kingdom and the Philippines. Management believes that the Company's sites are adequate to support the business and that the properties and equipment have been well maintained.
Item 2. Properties. In the U.S., we own and operate 23 manufacturing sites located in 17 different states. In addition, we own and operate 81 manufacturing sites in 35 other countries. Many of the domestic and international sites manufacture products for multiple businesses.
Item 2. Properties. In the U.S., we own and operate 24 manufacturing sites located in 18 different states. In addition, we own and operate 80 manufacturing sites in 34 other countries. Many of the domestic and international sites manufacture products for multiple businesses.
Beauty products are manufactured at 22 of these locations; Grooming products at 17; Health Care products at 20; Fabric & Home Care products at 38; and Baby, Feminine & Family Care products at 37. We own our Corporate headquarters in Cincinnati, Ohio. We own or lease our principal regional general offices in Switzerland, Panama, Singapore, China and Dubai.
Beauty products are manufactured at 23 of these locations; Grooming products at 17; Health Care products at 20; Fabric & Home Care products at 37; and Baby, Feminine & Family Care products at 37. We own our Corporate headquarters in Cincinnati, Ohio.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest change(10) Ms. Grabowski previously served as Senior Vice President - Human Resources, North America Selling and Market Operations (2015 - 2018). (11) Ms.
Biggest change(10) Mr. Purushothaman previously served as Senior Vice President - Human Resources, Global Total Rewards, Employee and Labor Relations and Corporate Services (2020 - 2022) and as Senior Vice President - Human Resources, Beauty, Grooming, and Family Care (2015 - 2020). (11) Ms.
Item 4. Mine Safety Disclosure. Not applicable. 10 The Procter & Gamble Company INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions held by the Executive Officers of the Company on August 5, 2022, are: Name Position Age First Elected to Officer Position Jon R.
Item 4. Mine Safety Disclosure. Not applicable. 10 The Procter & Gamble Company INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions held by the Executive Officers of the Company on August 4, 2023, are: Name Position Age First Elected to Officer Position Jon R.
Francisco Chief Executive Officer - Baby, Feminine and Family Care and Executive Sponsor for Gender Equality 54 2018 (6) R.
Francisco Chief Executive Officer - Baby, Feminine and Family Care and Executive Sponsor for Gender Equality 55 2018 (6) R.
Moeller Chairman of the Board, President and Chief Executive Officer 58 2009 (1) Shailesh Jejurikar Chief Operating Officer 55 2018 (2) Andre Schulten Chief Financial Officer 51 2021 (3) Gary A. Coombe Chief Executive Officer - Grooming 58 2014 (4) Jennifer L. Davis Chief Executive Officer - Health Care 51 2022 (5) Ma. Fatima D.
Moeller Chairman of the Board, President and Chief Executive Officer 59 2009 (1) Shailesh Jejurikar Chief Operating Officer 56 2018 (2) Andre Schulten Chief Financial Officer 52 2021 (3) Gary A. Coombe Chief Executive Officer - Grooming 59 2014 (4) Jennifer L. Davis Chief Executive Officer - Health Care 52 2022 (5) Ma. Fatima D.
Pritchard Chief Brand Officer 62 2008 ( ) Susan Street Whaley Chief Legal Officer and Secretary 48 2022 (11) All the Executive Officers named above have been employed by the Company for more than the past five years. (1) Mr.
Pritchard Chief Brand Officer 63 2008 (( ) Balaji Purushothaman Chief Human Resources Officer 54 2023 (10) Susan Street Whaley Chief Legal Officer and Secretary 49 2022 (11) All the Executive Officers named above have been employed by the Company for more than the past five years. (1) Mr.
Alexandra Keith Chief Executive Officer - Beauty and Executive Sponsor for Corporate Sustainability 54 2017 (7) Sundar Raman Chief Executive Officer - Fabric and Home Care 47 2021 (8) Victor Aguilar Chief Research, Development and Innovation Officer 55 2020 (9) M. Tracey Grabowski Chief Human Resources Officer 54 2018 (10) Marc S.
Alexandra Keith Chief Executive Officer - Beauty and Executive Sponsor for Corporate Sustainability 55 2017 (7) Sundar Raman Chief Executive Officer - Fabric and Home Care 48 2021 (8) Victor Aguilar Chief Research, Development and Innovation Officer 56 2020 (9) Marc S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCumulative Value of $100 Investment, through June 30 Company Name/Index 2017 2018 2019 2020 2021 2022 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
Biggest changeCumulative Value of $100 Investment, through June 30 Company Name/Index 2018 2019 2020 2021 2022 2023 P&G $ 100 $ 145 $ 162 $ 188 $ 205 $ 222 S&P 500 100 110 119 167 149 179 S&P 500 Consumer Staples 100 116 121 149 159 169 Item 6. Intentionally Omitted.
Shareholder Return 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).
Shareholder Return The following graph compares the cumulative total return of P&G’s common stock for the five-year period ended June 30, 2023, 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).
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.
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 133 consecutive years since its incorporation in 1890 and has increased its dividend for 67 consecutive years since 1956.
The graph and table assume $100 was invested on June 30, 2017, and that all dividends were reinvested.
The graph and table assume $100 was invested on June 30, 2018, and that all dividends were reinvested.
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.
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 $7.4 billion. The share repurchase plan ended on June 30, 2023.
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.
As of June 30, 2023, there were approximately five 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.
(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.
(3) On April 21, 2023, the Company stated that in fiscal year 2023 the Company expected to reduce outstanding shares through direct share repurchases at a value of $7.4 to $8.0 billion, notwithstanding any purchases under the Company's compensation and benefit plans.
ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Shares that May Yet Be Purchased Under Our Share Repurchase Program 4/1/2022 - 4/30/2022 3,772,818 $159.03 3,772,818 (3) 5/1/2022 - 5/31/2022 — — — (3) 6/1/2022 - 6/30/2022 5,319,017 140.93 4,620,153 (3) Total 9,091,835 $148.44 8,392,971 (3) (1) All transactions are reported on a trade date basis and were made in the open market with large financial institutions.
ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Shares that May Yet Be Purchased Under Our Share Repurchase Program 4/1/2023 - 4/30/2023 — — — (3) 5/1/2023 - 5/31/2023 — — — (3) 6/1/2023 - 6/30/2023 914,324 $149.95 — (3) Total 914,324 $149.95 — (3) (1) All transactions are reported on a trade date basis and were made in the open market with large financial institutions.
(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.
(in dollars; split-adjusted) 1956 1963 1973 1983 1993 2003 2013 2023 Dividends per share $ 0.01 $ 0.02 $ 0.05 $ 0.14 $ 0.28 $ 0.82 $ 2.29 $ 3.68 12 The Procter & Gamble Company Common Stock Information P&G trades on the New York Stock Exchange under the stock symbol PG.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 32 Management's Report and Reports of Independent Registered Public Accounting Firm 33 Consolidated Statements of Earnings 37 Consolidated Statements of Comprehensive Income 38 Consolidated Balance Sheets 39 Consolidated Statements of Shareholders' Equity 40 Consolidated Statements of Cash Flows 41 Notes to Consolidated Financial Statements 42 Note 1: Summary of Significant Accounting Policies 42 Note 2: Segment Information 44 Note 3: Supplemental Financial Information 45 Note 4: Goodwill and Intangible Assets 47 Note 5: Income Taxes 48 Note 6: Earnings Per Share 49 Note 7: Stock-based Compensation 50 Note 8: Postretirement Benefits and Employee Stock Ownership Plan 51 Note 9: Risk Management Activities and Fair Value Measurements 57 Note 10: Short-term and Long-term Debt 60 Note 11: Accumulated Other Comprehensive Income/(Loss) 60 Note 12: Leases 62 Note 13: Commitments and Contingencies 62
Biggest changeFinancial Statements and Supplementary Data 31 Management's Report and Reports of Independent Registered Public Accounting Firm 31 Consolidated Statements of Earnings 35 Consolidated Statements of Comprehensive Income 35 Consolidated Balance Sheets 36 Consolidated Statements of Shareholders' Equity 37 Consolidated Statements of Cash Flows 38 Notes to Consolidated Financial Statements 39 Note 1: Summary of Significant Accounting Policies 39 Note 2: Segment Information 41 Note 3: Supplemental Financial Information 44 Note 4: Goodwill and Intangible Assets 45 Note 5: Income Taxes 46 Note 6: Earnings Per Share 48 Note 7: S hare -based Compensation 49 Note 8: Postretirement Benefits and Employee Stock Ownership Plan 51 Note 9: Risk Management Activities and Fair Value Measurements 56 Note 10: Short-term and Long-term Debt 59 Note 11: Accumulated Other Comprehensive Income/(Loss) 60 Note 12: Leases 60 Note 13: Commitments and Contingencies 61
Item 6. Intentionally Omitted 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 32 Item 8.
Item 6. Intentionally Omitted 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 30 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

170 edited+23 added−67 removed97 unchanged
Biggest changeNon-Operating Items • 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.
Biggest changeOperating margin decreased 10 basis points to 22.1% as the increase in gross margin was more than fully offset by the increase in SG&A as a percentage of net sales as discussed above. 20 The Procter & Gamble Company Non-Operating Items • Interest expense was $756 million, an increase of $317 million versus the prior year due to higher interest rates and an increase in short-term debt in the current year. • Interest income was $307 million, an increase of $256 million versus the prior year due to higher interest rates. • Other non-operating income increased $98 million to $668 million due primarily to a prior year unrealized loss on equity investments and a current year gain on divestiture of minor brands.
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).
They have direct profit responsibility for markets (referred to as Focus Markets) representing the large majority of the Company's sales and earnings 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).
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.
We believe that these measures provide useful perspective on 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.
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.
The Procter & Gamble Company 13 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 and geopolitical 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; (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.
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.
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, Australia and Africa, with more than half our sales generated outside the United States.
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.
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 drivers of changes in net sales.
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.
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, impacts related to employee benefits, asset impairments and restructuring activities including manufacturing and workforce optimization.
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.
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 an SCF Bank. These participating suppliers negotiate their receivables sales arrangements directly with the respective SCF Bank.
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.
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 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.
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.
For additional information on risk factors that could impact our business results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.
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.
A 100 basis-point change in the discount rate would impact annual after-tax OPRB expense by approximately $30 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.
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 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 The Procter & Gamble Company 19 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).
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.
GAAP measure. 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.
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.
We do not believe such purchase obligations will adversely affect our liquidity position. CRITICAL 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.
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.
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, 2023.
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.
The projected payments beyond fiscal year 2026 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.
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.
Our global home care market share is about 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.
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.
Our costs are subject to fluctuations, particularly due to changes in commodity and input material prices, transportation costs, other broader inflationary impacts and our own productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp.
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.
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 EPS growth of mid-to-high single digits; and • Adjusted free cash flow productivity of 90% or greater.
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.
On June 30, 2023, 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 SBUs are responsible for global brand strategy, new product upgrades and innovation, marketing plans and supply chain.
The SBUs are responsible for global brand strategy, product upgrades and innovation, marketing plans and supply chain.
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.
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, legislative restrictions or policies, restrictions on access to financial institutions and supply and transportation challenges.
Clean, Swiffer Baby, Feminine & Family Care 25% 23% Baby Care ( Baby Wipes, Taped Diapers and Pants ) Luvs, Pampers Feminine Care ( Adult Incontinence, Feminine Care ) Always, Always Discreet, Tampax Family Care ( Paper Towels, Tissues, Toilet Paper ) Bounty, Charmin, Puffs (1) Percent of Net sales and Net earnings for the year ended June 30, 2022 (excluding results held in Corporate).
Clean, Swiffer Baby, Feminine & Family Care 25% 23% Baby Care ( Baby Wipes, Taped Diapers and Pants ) Luvs, Pampers Feminine Care ( Adult Incontinence, Feminine Care ) Always, Always Discreet, Tampax Family Care ( Paper Towels, Tissues, Toilet Paper ) Bounty, Charmin, Puffs (1) Percent of Net sales and Net earnings for the fiscal year ended June 30, 2023 (excluding results held in Corporate).
The Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Company's Board of Directors. Revenue Recognition Our revenue is primarily generated from the sale of finished product to customers.
The Company has discussed the selection of critical accounting policies and the effect of estimates with the Audit Committee of the Company's Board of Directors. Revenue Recognition Our revenue is primarily generated from the sale of finished product to customers.
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.
Based on our interest rate exposure as of and during the fiscal year ended June 30, 2023, 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.
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.
Based on our currency rate exposure on derivative and other instruments as of and during the fiscal year ended June 30, 2023, 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.
This measure is used in assessing achievement of management goals for at-risk compensation.
This measure is used in assessing the achievement of management goals for at-risk compensation.
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.
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 rates, which may result in an impairment of the Gillette indefinite-lived intangible asset.
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.
In certain of these jurisdictions, we may take tax positions that management believes are supportable but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.
A 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 benefit expense by approximately $130 million. The average discount rate on the OPRB plan of 5.6% reflects the higher interest rates generally applicable in the U.S., which is where most of the plan participants receive benefits.
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.
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 Charmin toilet paper brands.
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.
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 30 The Procter & Gamble Company supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.
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.
Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings, was 95% in 2023. 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.
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.
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 4.2% represents a weighted average of local rates in countries where such plans exist.
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.
The following tables provide a numerical reconciliation of organic sales growth to reported net sales growth: Fiscal year ended June 30, 2023 Net Sales Growth Foreign Exchange Impact Acquisition & Divestiture Impact/Other (1) Organic Sales Growth Beauty 2 % 5 % (1) % 6 % Grooming (3) % 7 % 1 % 5 % Health Care 4 % 4 % — % 8 % Fabric & Home Care 3 % 5 % — % 8 % Baby, Feminine & Family Care 2 % 4 % — % 6 % TOTAL COMPANY 2 % 5 % — % 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.
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.
The Procter & Gamble Company 25 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.
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 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.
The MD&A is organized in the following sections: • Overview • Summary of 2022 Results • Economic Conditions and Uncertainties • Results of Operations • Segment Results • Cash Flow, Financial Condition and Liquidity • Significant Accounting Policies and Estimates • Other Information Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per share and operating cash flow.
The MD&A is organized in the following sections: • Overview • Summary of 2023 Results • Economic Conditions and Uncertainties • Results of Operations • Segment Results • Cash Flow, Financial Condition and Liquidity • Critical Accounting Policies and Estimates • Other Information Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per common share (diluted EPS) and operating cash flow.
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.
While periods of significant macroeconomic pressures may cause short-term results to deviate from the long-term growth algorithm, we intend to maintain a disciplined approach to investing in our business. The Procter & Gamble Company 17 SUMMARY OF 2023 RESULTS Amounts in millions, except per share amounts 2023 2022 Change vs.
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.
Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation, deferred income taxes and gain on sale of assets) generated approximately $17.5 billion of operating cash flow. Working capital and other impacts used $656 million of operating cash flow as summarized below. • An increase in Accounts receivable used $307 million of cash primarily due to sales growth.
North America market shares are over 40% for Bounty and over 25% for Charmin. Enterprise Markets 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.
North America market shares are over 40% for Bounty and over 25% for Charmin. 16 The Procter & Gamble Company Enterprise Markets 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.
Net Sales Change Drivers 2022 vs. 2021 (1) Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix Other (2) 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.
Net Sales Change Drivers 2023 vs. 2022 (1) Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix Other (2) Net Sales Growth Beauty (1) % (2) % (5) % 8 % (1) % 1 % 2 % Grooming (3) % (3) % (7) % 9 % (2) % — % (3) % Health Care (1) % (1) % (4) % 5 % 4 % — % 4 % Fabric & Home Care (4) % (4) % (5) % 11 % 1 % — % 3 % Baby, Feminine & Family Care (3) % (3) % (4) % 8 % 1 % — % 2 % TOTAL COMPANY (3) % (3) % (5) % 9 % 1 % — % 2 % (1) Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
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.
Also inherent in determining our annual tax rate are judgements and The Procter & Gamble Company 27 assumptions regarding the recoverability of certain deferred tax balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.
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.
For 2023, the average return on assets assumptions for pension plan assets and OPRB assets was 5.9% 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 $135 million.
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.
Adjusted Free Cash Flow. Adjusted free cash flow is defined as operating cash flow less capital spending and excluding payments for the transitional tax resulting from the U.S. Tax Act. Adjusted free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion.
Reportable Segments % of Net Sales (1) % of Net Earnings (1) Product Categories (Sub-Categories) Major Brands Beauty 18% 22% Hair Care ( Conditioner, Shampoo, Styling Aids, Treatments ) Head & Shoulders, Herbal Essences, Pantene, Rejoice Skin and Personal Care ( Antiperspirant and Deodorant, Personal Cleansing, Skin Care ) Olay, Old Spice, Safeguard, Secret, SK-II Grooming 8% 10% Grooming (2) (Shave Care - Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care; Appliances) Braun, Gillette, Venus Health Care 14% 14% Oral Care ( Toothbrushes, Toothpaste, Other Oral Care ) Crest, Oral-B Personal Health Care ( Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care ) Metamucil, Neurobion, Pepto-Bismol, Vicks Fabric & Home 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.
Reportable Segments % of Net Sales (1) % of Net Earnings (1) Product Categories (Sub-Categories) Major Brands Beauty 18% 21% Hair Care ( Conditioners, Shampoos, Styling Aids, Treatments ) Head & Shoulders, Herbal Essences, Pantene, Rejoice Skin and Personal Care ( Antiperspirants and Deodorants, Personal Cleansing, Skin Care ) Olay, Old Spice, Safeguard, Secret, SK-II Grooming (2) 8% 10% Grooming ( Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming ) Braun, Gillette, Venus Health Care 14% 14% Oral Care ( Toothbrushes, Toothpastes, Other Oral Care ) Crest, Oral-B Personal Health Care ( Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care ) Metamucil, Neurobion, Pepto-Bismol, Vicks Fabric & Home Care 35% 32% 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.
These fluctuations have significantly impacted our historical net sales, costs and net earnings and could do so in the future.
These fluctuations have significantly impacted our historical net sales, net earnings and cash flows and could do so in the future.
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 provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and accompanying Notes.
Additionally, within these strategies of superiority, productivity, constructive disruption and organization, we have declared four focus areas to strengthen our performance going forward.
Additionally, within this strategy of superiority, productivity, constructive disruption and organization, we have declared four focus areas to strengthen our performance going forward.
Our net earnings and cash flows could be affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies.
Our net sales, gross margin, operating margin, net earnings and cash flows could be affected by changes in U.S. or foreign government legislative, regulatory or enforcement policies.
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.
Organic sales growth is net sales growth excluding the impacts of acquisitions and divestitures and foreign exchange from year-over-year comparisons. Core EPS is diluted EPS excluding certain items that are not judged by management to be part of the Company's sustainable results or trends.
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.
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 2027 and 26 The Procter & Gamble Company November 2023, respectively. Both facilities can be extended for certain periods of time as specified in the terms of the credit agreement.
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.
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. Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment.
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.
As of June 30, 2023, approximately 3% of our global suppliers have elected to participate in the SCF. Payments to those suppliers during fiscal year 2023 were approximately $18 billion, which equals approximately 29% of our total Cost of goods sold and SG&A for the year.
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.
Net sales increased mid-single digits in Health Care, increased low single digits in Fabric & Home Care, Baby, Feminine & Family Care and Beauty and decreased low single digits in Grooming. On a regional basis, volume decreased double digits in Europe, mid-single digits in Greater China and low single digits in Asia Pacific, IMEA and North America.
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.
We believe this strategy is 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.
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.
Adjusted free cash flow is operating cash flow less 14 The Procter & Gamble Company capital spending and excluding payments for the transitional tax resulting from 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.
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.
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, including changes resulting from the current work being led by the OECD/G20 Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of the OECD project extends beyond pure digital businesses and, as proposed, is likely to impact most large multinational businesses by both redefining jurisdictional taxation rights and establishing a 15% global minimum tax.
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 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 nearly 5% global market share. Grooming: We are the global market leader in the blades and razors market.
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 is one of the measures used to evaluate senior management and determine their at-risk compensation. Adjusted free cash flow was $14.0 billion in 2023, an increase of 2% versus the prior year. The increase was primarily driven by the increase in operating cash flows as discussed above.
The following table provides a numerical reconciliation of adjusted free cash flow ($ millions): Operating Cash Flow Capital Spending Adjustments to Operating Cash Flow (1) Adjusted Free Cash Flow 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.
The following table provides a numerical reconciliation of adjusted free cash flow ($ millions): Operating Cash Flow Capital Spending Adjustments to Operating Cash Flow (1) Adjusted Free Cash Flow 2023 $ 16,848 $ (3,062) $ 225 $ 14,011 2022 $ 16,723 $ (3,156) $ 225 $ 13,792 (1) Adjustments to Operating Cash Flow include transitional tax payments resulting from the U.S.
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 sales increased 3% to $765 million due to an increase in net sales of the incidental businesses managed at the corporate level.
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.
Volatility in the market price of these commodities and input materials has a direct impact on our costs. Disruptions in our manufacturing, supply and distribution operations due to energy shortages, natural disasters, labor or freight constraints have impacted our costs and could do so in the future.
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 have the number one or number two market share position in the markets in which we compete, primarily behind our Pampers brand. We are a global market leader in the feminine care category with over 25% global market share, primarily behind our Always and Tampax brands.
For a detailed discussion of the fiscal 2021 year-over-year changes, please refer to the MD&A in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended June 30, 2021 . Net Sales Net sales increased 5% to $80.2 billion in fiscal 2022 on a 2% increase in unit volume versus the prior year.
For a detailed discussion of the fiscal 2022 year-over-year changes, please refer to the MD&A in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended June 30, 2022 . Net Sales Net sales increased 2% to $82.0 billion in fiscal 2023.
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.
Net earnings increased 1% to $3.2 billion due to the increase in net sales, partially offset by a 20 basis-point decrease in net earnings margin. Net earnings margin decreased due to a reduction in gross margin, partially offset by a reduction in SG&A as a percentage of net sales.
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.
We performed a sensitivity analysis for the Gillette indefinite-lived intangible asset as part of our annual impairment testing during the three months ended December 31, 2022, utilizing reasonably possible changes in the assumptions for the discount rate, the short-term and residual growth rates and the royalty rates to demonstrate the potential impacts to the estimated fair values.
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.
In the past three years, weakening of certain foreign currencies versus the U.S. dollar has resulted in significant foreign exchange impacts leading to lower net sales, net earnings and cash flows. Certain countries that recently had and are currently experiencing significant exchange rate fluctuations include Argentina, Brazil, the United Kingdom, Japan, Russia and Turkey.
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.
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.
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.
Net earnings decreased 2% to $1.5 billion due to the decrease in net sales, partially offset by a 20 basis-point increase in net earnings margin. Net earnings margin increased as a decrease in gross margin was more than fully offset by a decrease in SG&A as a percentage of net sales.
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.
Interest Rate Exposure on Financial Instruments. Interest rate swaps are used to manage exposures to interest rates on underlying debt obligations. Certain interest rate swaps denominated in foreign currencies are designated to hedge exposures to currency exchange rate movements on our investments in foreign operations. These currency interest rate swaps are designated as hedges of the Company's foreign net investments.
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.
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. During the fiscal years ended June 30, 2023 and 2022, we did not have any financial commodity hedging activity.
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.
As of June 30, 2023 and 2022, the amounts due to suppliers participating in the SCF and included in Accounts payable were approximately $6 billion. Although difficult to project due to market and other dynamics, we anticipate incremental cash flow benefits from the extended payment terms with suppliers could increase at a slower rate in fiscal 2024.
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.
As a result, the residual growth rates 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.
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.
Guarantees and Other Off-Balance Sheet Arrangements We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on our financial condition or liquidity. Contractual Commitments The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2023.
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.
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.
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.
SG&A as a percentage of net sales decreased due to the positive scale impacts of the net sales increase and lower marketing spending, partially offset by increased overhead spending.
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.
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.
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%.
Positive impacts of favorable mix (due to the disproportionate growth of North America and respiratory products, both of which have higher than category-average selling prices), higher pricing (driven primarily by North America, Europe and Latin America) and a unit volume increase were partially offset by unfavorable foreign exchange.
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.
If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may adversely impact our net sales, gross margin, operating margin, net earnings and cash flows. 18 The Procter & Gamble Company Foreign Exchange. We have significant translation and transaction exposure to the fluctuation of exchange rates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. The information required by this item is incorporated by reference to the section entitled Other Information under Management's Disclosure and Analysis and Note 9 to the Consolidated Financial Statements. The Procter & Gamble Company 33
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. The information required by this item is incorporated by reference to the section entitled Other Information in the MD&A and Note 9 to the Consolidated Financial Statements. The Procter & Gamble Company 31

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