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Section 1: 10-Q (FY 1920 Q3 JFM 10-Q)

pg-20200331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
xTrueQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2020
OR
oFalseTRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
403669343_pg-20200331_g1.jpg
THE PROCTER & GAMBLE COMPANY
(Exact name of registrant as specified in its charter)
 

OhioOH1-43431-0411980
(State of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)
One Procter & Gamble PlazaCincinnatiOH
One Procter & Gamble Plaza, Cincinnati, Ohio45202
(Address of principal executive offices)(Zip Code)
(513) 983-1100
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, without Par ValuePGNYSE
4.125% EUR notes due December 2020PG20ANYSE
0.275% Notes due 2020PG20NYSE
2.000% Notes due 2021PG21NYSE
2.000% Notes due 2022PG22BNYSE
1.125% Notes due 2023PG23ANYSE
0.500% Notes due 2024PG24ANYSE
0.625% Notes due 2024PG24BNYSE
1.375% Notes due 2025PG25NYSE
4.875% EUR notes due May 2027PG27ANYSE
1.200% Notes due 2028PG28NYSE
1.250% Notes due 2029PG29BNYSE
1.800% Notes due 2029PG29ANYSE
6.250% GBP notes due January 2030PG30NYSE
5.250% GBP notes due January 2033PG33NYSE
1.875% Notes due 2038PG38NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 þ
Accelerated filer
 ¨
Non-accelerated filer
 ¨
Smaller reporting company
 ¨
False
Emerging growth company
 ¨
False
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o  No þ False
There were 2,475,642,613 shares of Common Stock outstanding as of March 31, 2020.


PART I. FINANCIAL INFORMATION 

Item 1.Financial Statements


THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended March 31Nine Months Ended March 31
Amounts in millions except per share amounts2020 20192020 2019
NET SALES$17,214  $16,462  $53,252  $50,590  
Cost of products sold8,716  8,427  26,308  25,830  
Selling, general and administrative expense5,045  4,806  14,719  14,081  
OPERATING INCOME3,453  3,229  12,225  10,679  
Interest expense(100) (131) (308) (398) 
Interest income39  52  133  168  
Other non-operating income, net 106  128  323  685  
EARNINGS BEFORE INCOME TAXES3,498  3,278  12,373  11,134  
Income taxes541  502  2,056  1,931  
NET EARNINGS2,957  2,776  10,317  9,203  
Less: Net earnings attributable to noncontrolling interests40  31  90  65  
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE$2,917  $2,745  $10,227  $9,138  
NET EARNINGS PER SHARE (1)
Basic$1.15  $1.07  $4.03  $3.58  
Diluted$1.12  $1.04  $3.89  $3.48  
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING2,613.3  2,637.7  2,630.3  2,624.3  
(1) Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
Three Months Ended March 31Nine Months Ended March 31
Amounts in millions2020201920202019
NET EARNINGS$2,957  $2,776  $10,317  $9,203  
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation(1,164) 73  (1,312) (314) 
Unrealized gains/(losses) on investment securities(6) 54  (12) 107  
Unrealized gains on defined benefit retirement plans185  64  327  314  
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX(985) 191  (997) 107  
TOTAL COMPREHENSIVE INCOME1,972  2,967  9,320  9,310  
Less: Total comprehensive income attributable to noncontrolling interests29  34  73  65  
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE$1,943  $2,933  $9,247  $9,245  

See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Amounts in millionsMarch 31, 2020June 30, 2019
Assets
CURRENT ASSETS
Cash and cash equivalents$15,393  $4,239  
Available-for-sale investment securities  6,048  
Accounts receivable4,640  4,951  
INVENTORIES
Materials and supplies1,325  1,289  
Work in process635  612  
Finished goods3,370  3,116  
Total inventories5,330  5,017  
Prepaid expenses and other current assets1,777  2,218  
TOTAL CURRENT ASSETS27,140  22,473  
PROPERTY, PLANT AND EQUIPMENT, NET20,459  21,271  
GOODWILL39,617  40,273  
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET23,834  24,215  
OTHER NONCURRENT ASSETS7,510  6,863  
TOTAL ASSETS$118,560  $115,095  
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable$10,464  $11,260  
Accrued and other liabilities9,731  9,054  
Debt due within one year12,701  9,697  
TOTAL CURRENT LIABILITIES32,896  30,011  
LONG-TERM DEBT23,310  20,395  
DEFERRED INCOME TAXES6,309  6,899  
OTHER NONCURRENT LIABILITIES10,104  10,211  
TOTAL LIABILITIES72,619  67,516  
SHAREHOLDERS’ EQUITY
Preferred stock900  928  
Common stock – shares issued –March 20204,009.2  
June 20194,009.2  4,009  4,009  
Additional paid-in capital63,976  63,827  
Reserve for ESOP debt retirement(1,080) (1,146) 
Accumulated other comprehensive income/(loss)(15,916) (14,936) 
Treasury stock(105,823) (100,406) 
Retained earnings99,474  94,918  
Noncontrolling interest401  385  
TOTAL SHAREHOLDERS’ EQUITY45,941  47,579  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$118,560  $115,095  

See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 2020
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumu-lated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
DECEMBER 31, 2019
2,469,453  $4,009  $911  $64,019  ($1,112) ($14,942) ($105,761) $98,414  $370  $45,908  
Net earnings2,917  40  2,957  
Other comprehensive income/(loss)(974) (11) (985) 
Dividends and dividend equivalents ($0.7459 per share):
Common(1,850) (1,850) 
Preferred, net of tax benefits(64) (64) 
Treasury stock purchases(7,313) (901) (901) 
Employee stock plans12,234  (44) 829  785  
Preferred stock conversions1,269  (11) 1  10    
ESOP debt impacts32  57  89  
Noncontrolling interest, net  2  2  
BALANCE
MARCH 31, 2020
2,475,643  $4,009  $900  $63,976  ($1,080) ($15,916) ($105,823) $99,474  $401  $45,941  

Nine Months Ended March 31, 2020
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumu-lated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
JUNE 30, 2019
2,504,751  $4,009  $928  $63,827  ($1,146) ($14,936) ($100,406) $94,918  $385  $47,579  
Net earnings10,227  90  10,317  
Other comprehensive income/(loss)(980) (17) (997) 
Dividends and dividend equivalents
($2.2377 per share)
Common(5,587) (5,587) 
Preferred, net of tax benefits(193) (193) 
Treasury stock purchases(61,346) (7,405) (7,405) 
Employee stock plans28,965  145  1,964  2,109  
Preferred stock conversions3,273  (28) 4  24    
ESOP debt impacts66  109  175  
Noncontrolling interest, net  (57) (57) 
BALANCE
MARCH 31, 2020
2,475,643  $4,009  $900  $63,976  ($1,080) ($15,916) ($105,823) $99,474  $401  $45,941  

See accompanying Notes to Consolidated Financial Statements.



Three Months Ended March 31, 2019  
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumu-lated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
DECEMBER 31, 2018
2,501,580  $4,009  $946  $63,679  ($1,178) ($15,156) ($99,480) $101,170  $453  $54,443  
Net earnings2,745  31  2,776  
Other comprehensive income/(loss)188  3  191  
Dividends and dividend equivalents
($0.7172 per share):
Common(1,799) (1,799) 
Preferred, net of tax benefits(64) (64) 
Treasury stock purchases(12,945) (1,250) (1,250) 
Employee stock plans18,197  (57) 1,235  1,178  
Preferred stock conversions1,498  (13) 2  11    
ESOP debt impacts33  51  84  
Noncontrolling interest, net  (7) (7) 
BALANCE
MARCH 31, 2019
2,508,330  $4,009  $933  $63,624  ($1,145) ($14,968) ($99,484) $102,103  $480  $55,552  

Nine Months Ended March 31, 2019  
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumu-lated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
JUNE 30, 2018
2,498,093  $4,009  $967  $63,846  ($1,204) ($14,749) ($99,217) $98,641  $590  $52,883  
Impact of adoption of new accounting standards(326) (200) (27) (553) 
Net earnings9,138  65  9,203  
Other comprehensive income/(loss)107    107  
Dividends and dividend equivalents ($2.1516 per share):
Common(5,380) (5,380) 
Preferred, net of tax benefits(195) (195) 
Treasury stock purchases(37,282) (3,253) (3,253) 
Employee stock plans43,586  (110) 2,957  2,847  
Preferred stock conversions3,933  (34) 5  29    
ESOP debt impacts59  99  158  
Noncontrolling interest, net(117) (148) (265) 
BALANCE
MARCH 31, 2019
2,508,330  $4,009  $933  $63,624  ($1,145) ($14,968) ($99,484) $102,103  $480  $55,552  



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31
Amounts in millions20202019
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD$4,239  $2,569  
OPERATING ACTIVITIES
Net earnings10,317  9,203  
Depreciation and amortization2,199  2,004  
Share-based compensation expense325  299  
Deferred income taxes(588) (24) 
Loss (gain) on sale of assets11  (370) 
Changes in:
Accounts receivable135  (549) 
Inventories(533) (601) 
Accounts payable, accrued and other liabilities738  1,441  
Other operating assets and liabilities(58) (537) 
Other51  225  
TOTAL OPERATING ACTIVITIES12,597  11,091  
INVESTING ACTIVITIES
Capital expenditures(2,415) (2,533) 
Proceeds from asset sales28  22  
Acquisitions, net of cash acquired(58) (3,943) 
Purchases of short-term investments   (159) 
Proceeds from sales and maturities of investment securities6,151  2,535  
Change in other investments(2) (59) 
TOTAL INVESTING ACTIVITIES3,704  (4,137) 
FINANCING ACTIVITIES
Dividends to shareholders(5,761) (5,561) 
Increases/(reductions) in short-term debt3,020  (1,832) 
Additions to long-term debt4,951  2,368  
Reductions to long-term debt(1,534) (1,002) 
Treasury stock purchases(7,405) (3,253) 
Impact of stock options and other1,761  2,590  
TOTAL FINANCING ACTIVITIES(4,968) (6,690) 
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(179) (95) 
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH11,154  169  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$15,393  $2,738  


See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. In the opinion of management, the accompanying unaudited Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries (the "Company," "Procter & Gamble," "P&G," "we" or "our") contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.
2. New Accounting Pronouncements and Policies
On July 1, 2019, we adopted ASU 2016-02, "Leases (Topic 842)." The new accounting standard requires the recognition of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. We elected the optional transition method and adopted the new guidance on a modified retrospective basis with no restatement of prior period amounts. As allowed under the new accounting standard, we elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The adoption did not have a material impact on our financial statements, resulting in an increase of approximately 1% to each of our total assets and total liabilities on our balance sheet as of July 1, 2019. See Note 10 for further information.
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The standard simplifies the accounting for goodwill impairment by requiring a goodwill impairment to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and the estimated fair value of the specified reporting units in their entirety. This eliminates the second step of the current impairment model that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those estimated fair values and a residual measurement approach. It also specifies that any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We will adopt the standard effective July 1, 2020. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any.
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating our contracts and the optional expedients provided by the new standard.
No other new accounting pronouncement issued or effective during the fiscal year had, or is expected to have, a material impact on our Consolidated Financial Statements.
3. Segment Information
Under U.S. GAAP, our operating segments are aggregated into five reportable segments: 1) Beauty, 2) Grooming, 3) Health Care, 4) Fabric & Home Care and 5) Baby, Feminine & Family Care. Our five reportable segments are comprised of:
Beauty: Hair Care (Conditioner, Shampoo, Styling Aids, Treatments); Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care);
Grooming: Shave Care (Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care); Appliances
Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care);
Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and
Baby, Feminine & Family Care: Baby Care (Baby Wipes, Taped Diapers and Pants); Feminine Care (Adult Incontinence, Feminine Care); Family Care (Paper Towels, Tissues, Toilet Paper).



Amounts in millions of dollars unless otherwise specified.


Our operating segments are comprised of similar product categories. Operating segments that individually accounted for 5% or more of consolidated net sales are as follows:
% of Net sales by operating segment (1)
Three Months Ended March 31Nine Months Ended March 31
2020201920202019
Fabric Care23 22 23 23 
Baby Care11 12 11 12 
Home Care11 11 10 10 
Skin and Personal Care9 10 10 10 
Hair Care9 9 9 9 
Family Care9 8 9 9 
Oral Care8 8 8 8 
Shave Care7 8 7 8 
Feminine Care7 6 6 6 
Personal Health Care5 5 5 4 
Other1 1