pg-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)


x			True			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023


o			False			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

THE PROCTER & GAMBLE COMPANY

(Exact name of registrant as specified in its charter)

Ohio

1-434

31-0411980

(State of Incorporation)

(Commission File Number)

(I.R.S. Employer Identification Number)

One Procter & Gamble Plaza

Cincinnati

One Procter & Gamble Plaza, Cincinnati, Ohio

45202

(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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, without Par Value	PG	NYSE
1.125% Notes due 2023	PG23A	NYSE
0.500% Notes due 2024	PG24A	NYSE
0.625% Notes due 2024	PG24B	NYSE
1.375% Notes due 2025	PG25	NYSE
0.110% Notes due 2026	PG26D	NYSE
3.250% EUR Notes due 2026	PG26E	NYSE
4.875% EUR notes due May 2027	PG27A	NYSE
1.200% Notes due 2028	PG28	NYSE
1.250% Notes due 2029	PG29B	NYSE
1.800% Notes due 2029	PG29A	NYSE
6.250% GBP notes due January 2030	PG30	NYSE
0.350% Notes due 2030	PG30C	NYSE
0.230% Notes due 2031	PG31A	NYSE
3.250% EUR Notes due 2031	PG31B	NYSE
5.250% GBP notes due January 2033	PG33	NYSE
1.875% Notes due 2038	PG38	NYSE
0.900% Notes due 2041	PG41	NYSE

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

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 2,356,886,211 shares of Common Stock outstanding as of September 30, 2023.


FORM 10-Q TABLE OF CONTENTS			Page
PART I	Item 1.	Financial Statements	1
		Consolidated Statements of Earnings	1
		Consolidated Statements of Comprehensive Income	1
		Consolidated Balance Sheets	2
		Consolidated Statements of Shareholders' Equity	3
		Consolidated Statements of Cash Flows	4
		Notes to Consolidated Financial Statements	5
		Note 1: Basis of Presentation	5
		Note 2: New Accounting Pronouncements and Policies	5
		Note 3: Segment Information	5
		Note 4: Goodwill and Intangible Assets	6
		Note 5: Earnings Per Share	8
		Note 6: Share-Based Compensation and Postretirement Benefits	8
		Note 7: Risk Management Activities and Fair Value Measurements	8
		Note 8: Accumulated Other Comprehensive Income/(Loss)	10
		Note 9: Commitments and Contingencies	10
		Note 10: Suppl ier Finance Programs	11
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
	Item 4.	Controls and Procedures	16
PART II	Item 1.	Legal Proceedings	16
	Item 1A.	Risk Factors	16
	Item 2.	Unregistered Sales of Equity Securities , Use of Proceed s, and Issuer Purchases of Equity Securities	16
	Item 5.	Other Information	17
	Item 6.	Exhibits	17
		Signature	17

The Procter & Gamble Company 1

PART I. FINANCIAL INFORMATION


Item 1.			Financial Statements

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS


	Three Months Ended September 30
Amounts in millions except per share amounts	2023		2022
NET SALES	$	21,871	$	20,612
Cost of products sold	10,501		10,846
Selling, general and administrative expense	5,604		4,827
OPERATING INCOME	5,767		4,939
Interest expense	(225)		(123)
Interest income	128		42
Other non-operating income, net	132		139
EARNINGS BEFORE INCOME TAXES	5,802		4,997
Income taxes	1,246		1,034
NET EARNINGS	4,556		3,963
Less: Net earnings attributable to noncontrolling interests	35		24
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE	$	4,521	$	3,939

NET EARNINGS PER COMMON SHARE (1)
Basic	$	1.89	$	1.62
Diluted	$	1.83	$	1.57

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended September 30
Amounts in millions	2023		2022
NET EARNINGS	$	4,556	$	3,963
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation	(409)		(712)
Unrealized losses on investment securities	(1)		(2)
Unrealized gains on defined benefit postretirement plans	45		87
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX	(366)		(627)
TOTAL COMPREHENSIVE INCOME	4,190		3,336
Less: Total comprehensive income attributable to noncontrolling interests	33		19
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE	$	4,157	$	3,317

See accompanying Notes to Consolidated Financial Statements.

2 The Procter & Gamble Company

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


Amounts in millions			September 30, 2023		June 30, 2023
Assets
CURRENT ASSETS
Cash and cash equivalents			$	9,733	$	8,246
Accounts receivable			6,215		5,471
INVENTORIES
Materials and supplies			1,759		1,863
Work in process			972		956
Finished goods			4,386		4,254
Total inventories			7,117		7,073
Prepaid expenses and other current assets			1,875		1,858
TOTAL CURRENT ASSETS			24,940		22,648
PROPERTY, PLANT AND EQUIPMENT, NET			21,636		21,909
GOODWILL			40,239		40,659
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET			23,637		23,783
OTHER NONCURRENT ASSETS			12,079		11,830
TOTAL ASSETS			$	122,531	$	120,829

Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable			$	14,435	$	14,598
Accrued and other liabilities			10,912		10,929
Debt due within one year			11,811		10,229
TOTAL CURRENT LIABILITIES			37,158		35,756
LONG-TERM DEBT			24,069		24,378
DEFERRED INCOME TAXES			6,814		6,478
OTHER NONCURRENT LIABILITIES			6,477		7,152
TOTAL LIABILITIES			74,517		73,764
SHAREHOLDERS’ EQUITY
Preferred stock			812		819
Common stock – shares issued –	September 2023	4,009.2
	June 2023	4,009.2	4,009		4,009
Additional paid-in capital			66,822		66,556
Reserve for ESOP debt retirement			(782)		(821)
Accumulated other comprehensive loss			(12,583)		(12,220)
Treasury stock			(131,029)		(129,736)
Retained earnings			120,443		118,170
Noncontrolling interest			321		288
TOTAL SHAREHOLDERS’ EQUITY			48,014		47,065
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	122,531	$	120,829

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company 3

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Three Months Ended September 30, 2023
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
	Shares	Amount
BALANCE JUNE 30, 2023	2,362,120	$4,009	$819	$66,556	($821)	($12,220)	($129,736)	$118,170	$288	$47,065
Net earnings								4,521	35	4,556
Other comprehensive income/(loss)						(363)			(2)	(366)
Dividends and dividend equivalents ($0.9407 per share):
Common								(2,225)		(2,225)
Preferred								(70)		(70)
Treasury stock purchases	(9,843)						(1,508)			(1,508)
Employee stock plans	3,721			265			209			474
Preferred stock conversions	888		(7)	1			6			—
ESOP debt impacts					39			48		87
Noncontrolling interest, net				—					—	—
BALANCE SEPTEMBER 30, 2023	2,356,886	$4,009	$812	$66,822	($782)	($12,583)	($131,029)	$120,443	$321	$48,014


	Three Months Ended September 30, 2022
Dollars in millions; shares in thousands	Common Stock		Preferred Stock	Additional Paid-In Capital	Reserve for ESOP Debt Retirement	Accumulated Other Comprehensive Income/(Loss)	Treasury Stock	Retained Earnings	Noncontrolling Interest	Total Shareholders' Equity
	Shares	Amount
BALANCE JUNE 30, 2022	2,393,877	$4,009	$843	$65,795	($916)	($12,189)	($123,382)	$112,429	$265	$46,854
Net earnings								3,939	24	3,963
Other comprehensive income/(loss)						(622)			(5)	(627)
Dividends and dividend equivalents ($0.9133 per share):
Common								(2,189)		(2,189)
Preferred								(71)		(71)
Treasury stock purchases	(28,189)						(4,000)			(4,000)
Employee stock plans	3,011			159			169			328
Preferred stock conversions	998		(9)	1			8			—
ESOP debt impacts					46			55		101
Noncontrolling interest, net				—					(25)	(25)
BALANCE SEPTEMBER 30, 2022	2,369,697	$4,009	$834	$65,955	($870)	($12,811)	($127,205)	$114,163	$259	$44,334

See accompanying Notes to Consolidated Financial Statements.

4 The Procter & Gamble Company

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended September 30
Amounts in millions	2023		2022
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	$	8,246	$	7,214
OPERATING ACTIVITIES
Net earnings	4,556		3,963
Depreciation and amortization	702		663
Share-based compensation expense	125		105
Deferred income taxes	102		(130)
Gain on sale of assets	(3)		(1)
Changes in:
Accounts receivable	(830)		(740)
Inventories	(142)		(893)
Accounts payable and accrued and other liabilities	857		1,495
Other operating assets and liabilities	(671)		(454)
Other	208		62
TOTAL OPERATING ACTIVITIES	4,904		4,070
INVESTING ACTIVITIES
Capital expenditures	(925)		(890)
Proceeds from asset sales	3		5
Acquisitions, net of cash acquired	—		(2)
Other investing activity	(300)		55
TOTAL INVESTING ACTIVITIES	(1,222)		(832)
FINANCING ACTIVITIES
Dividends to shareholders	(2,290)		(2,255)
Additions to short-term debt with original maturities of more than three months	2,179		2,975
Reductions in short-term debt with original maturities of more than three months	(1,906)		(265)
Net additions to other short-term debt	2,172		1,727
Reductions in long-term debt	(1,004)		(1,877)
Treasury stock purchases	(1,500)		(4,000)
Impact of stock options and other	312		188
TOTAL FINANCING ACTIVITIES	(2,038)		(3,507)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(156)		(235)
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	1,487		(504)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	9,733	$	6,710

See accompanying Notes to Consolidated Financial Statements.

The Procter & Gamble Company 5

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

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

2. New Accounting Pronouncements and Policies

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". This guidance requires annual and interim disclosures for entities that use supplier finance programs in connection with the purchase of goods and services. This ASU was effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We adopted this ASU effective July 1, 2023, except for the amendment on rollforward information, which will be adopted July 1, 2024. See Note 10, Supplier Finance Programs, for the disclosure.

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

3. Segment Information

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

•Beauty: Hair Care (Conditioners, Shampoos, Styling Aids, Treatments); Skin and Personal Care (Antiperspirants and Deodorants, Personal Cleansing, Skin Care);

•Grooming: Grooming (Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming);

•Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care);

•Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and

•Baby, Feminine & Family Care: Baby Care (Baby Wipes, Taped Diapers and Pants); Feminine Care (Adult Incontinence, Feminine Care); Family Care (Paper Towels, Tissues, Toilet Paper).

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 September 30
	2023		2022
Fabric Care	23	%	23	%
Home Care	12	%	12	%
Skin and Personal Care	10	%	10	%
Baby Care	9	%	10	%
Hair Care	9	%	9	%
Family Care	8	%	8	%
Grooming	8	%	8	%
Oral Care	8	%	8	%
Feminine Care	7	%	6	%
Personal Health Care	6	%	6	%
Total	100	%	100	%

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

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

6 The Procter & Gamble Company

The following is a summary of reportable segment results:


		Three Months Ended September 30
		Net Sales		Earnings/(Loss) Before Income Taxes		Net Earnings/(Loss)
Beauty	2023	$	4,097	$	1,249	$	971
	2022	3,961		1,271		1,011
Grooming	2023	1,724		533		421
	2022	1,625		503		404
Health Care	2023	3,074		889		689
	2022	2,757		800		617
Fabric & Home Care	2023	7,646		2,031		1,569
	2022	7,082		1,543		1,172
Baby, Feminine & Family Care	2023	5,186		1,408		1,075
	2022	4,934		1,055		805
Corporate	2023	144		(308)		(168)
	2022	253		(175)		(46)
Total Company	2023	$	21,871	$	5,802	$	4,556
	2022	20,612		4,997		3,963

4. Goodwill and Intangible Assets

Goodwill is allocated by reportable segment as follows:


	Beauty		Grooming		Health Care		Fabric & Home Care		Baby, Feminine & Family Care		Total Company
Goodwill at June 30, 2023	$	13,888	$	12,703	$	7,718	$	1,821	$	4,529	$	40,659
Acquisitions and divestitures	—		—		—		—		—		—
Translation and other	(152)		(109)		(100)		(14)		(44)		(420)
Goodwill at September 30, 2023	$	13,736	$	12,594	$	7,618	$	1,807	$	4,485	$	40,239

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

Identifiable intangible assets at September 30, 2023, were comprised of:


	Gross Carrying Amount		Accumulated Amortization
Intangible assets with determinable lives	$	8,990	$	(6,308)
Intangible assets with indefinite lives	20,955		—
Total identifiable intangible assets	$	29,945	$	(6,308)

Intangible assets with determinable lives consist of brands, patents, technology and customer relationships. The intangible assets with indefinite lives primarily consist of brands. The amortization expense of determinable-lived intangible assets for the three months ended September 30, 2023 and 2022, was $87 and $80, respectively.

Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. We use the income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. If the resulting fair value is less than the asset's carrying value, that difference represents an impairment. Our annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the three months ended December 31.

Most of our goodwill reporting units have fair value cushions that significantly exceed their underlying carrying values. The Gillette indefinite-lived intangible asset is most susceptible to future impairment risk. Based on our latest annual impairment testing performed during the three months ended December 31, 2022, the Gillette indefinite-lived intangible asset's fair value exceeded its carrying value by approximately 5%. As of September 30, 2023, the carrying value of the Gillette indefinite-lived intangible asset was $14.1 billion. We concluded that no triggering event has occurred during the quarter ended September 30, 2023. Adverse changes in the business or in the macroeconomic environment, including foreign currency devaluation, increasing global inflation, market contraction from an economic recession and the Russia-Ukraine War, could reduce the underlying cash flows used to estimate the fair value of the Gillette indefinite-lived intangible asset and trigger a future

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

The Procter & Gamble Company 7

impairment charge. Further reduction of the Gillette business activities in Russia could reduce the estimated fair value by up to 5%.

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

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

The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other country specific factors, such as further devaluation of currencies against the U.S. dollar. Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S.

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

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 estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our short-term and residual growth rates or a 50 basis-point decrease in our royalty rates, which may result in an impairment of the Gillette indefinite-lived intangible asset.


	Approximate Percent Change in Estimated Fair Value
	+25 bps Discount Rate		-25 bps Growth Rates		-50 bps Royalty Rate
Gillette indefinite-lived intangible asset	(6)	%	(6)	%	(4)	%

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

8 The Procter & Gamble Company

5. Earnings Per Share

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

Net earnings per common share were calculated as follows:


CONSOLIDATED AMOUNTS	Three Months Ended September 30
	2023		2022
Net earnings	$	4,556	$	3,963
Less: Net earnings attributable to noncontrolling interests	35		24
Net earnings attributable to P&G (Diluted)	4,521		3,939
Less: Preferred dividends	70		71
Net earnings attributable to P&G available to common shareholders (Basic)	$	4,450	$	3,868

SHARES IN MILLIONS
Basic weighted average common shares outstanding	2,360.0		2,385.5
Add: Effect of dilutive securities
Convertible preferred shares (1)	74.6		77.4
Stock options and other unvested equity awards (2)	40.6		40.7
Diluted weighted average common shares outstanding	2,475.2		2,503.6

NET EARNINGS PER COMMON SHARE (3)
Basic	$	1.89	$	1.62
Diluted	$	1.83	$	1.57

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

(2)Excludes approximately 1 million and 18 million for the three months ended September 30, 2023 and 2022, respectively of weighted average stock options outstanding because the exercise price of these options was greater than their average market value or their effect was antidilutive.

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

6. Share-Based Compensation and Postretirement Benefits

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


	Three Months Ended September 30
	2023		2022
Share-based compensation expense	$	125	$	105
Net periodic benefit cost for pension benefits	57		43
Net periodic benefit credit for other retiree benefits	(156)		(132)

7. Risk Management Activities and Fair Value Measurements

As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. There have been no significant changes in our risk management policies or activities during the three months ended September 30, 2023.

The Company has not changed its valuation techniques used in measuring the fair value of any financial assets and liabilities during the period. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were no transfers between levels during the periods presented. Also, there was no significant activity within the Level 3 assets and liabilities during the periods presented. There were no significant assets or liabilities that were remeasured at fair value on a non-recurring basis during the periods presented.

Cash equivalents were $8.1 billion and $6.8 billion as of September 30, 2023 and June 30, 2023, respectively, and are classified as Level 1 within the fair value hierarchy. The Company had no other material investments in debt or equity securities during the periods presented.

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

The Procter & Gamble Company 9

The fair value of long-term debt was $25.1 billion and $26.9 billion as of September 30, 2023 and June 30, 2023, respectively. This includes the current portion of long-term debt instruments ($3.0 billion and $3.9 billion as of September 30, 2023 and June 30, 2023, respectively). Certain long-term debt (debt designated as a fair value hedge) is recorded at fair value. All other long-term debt is recorded at amortized cost but is measured at fair value for disclosure purposes. We consider our debt to be Level 2 in the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.

Disclosures about Financial Instruments

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


	Notional Amount				Fair Value Asset				Fair Value (Liability)
	September 30, 2023		June 30, 2023		September 30, 2023		June 30, 2023		September 30, 2023		June 30, 2023
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts	$	2,961	$	4,044	$	—	$	—	$	(434)	$	(445)
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Foreign currency interest rate contracts	$	13,207	$	11,005	$	211	$	26	$	(230)	$	(631)
TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS	$	16,168	$	15,049	$	211	$	26	$	(664)	$	(1,076)

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts	$	4,310	$	3,489	$	4	$	7	$	(34)	$	(42)

TOTAL DERIVATIVES AT FAIR VALUE	$	20,478	$	18,538	$	216	$	33	$	(698)	$	(1,118)

The fair value of the interest rate derivative asset/(liability) directly offsets the cumulative amount of the fair value hedging adjustment included in the carrying amount of the underlying debt obligation. The carrying amount of the underlying debt obligation, which includes the unamortized discount or premium and the fair value adjustment, was $2.5 billion and $3.6 billion as of September 30, 2023 and June 30, 2023, respectively. In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $11.5 billion and $11.8 billion as of September 30, 2023 and June 30, 2023, respectively. The increase in the derivative instruments designated as net investment hedges is primarily driven by the Company's decision to leverage favorable interest rate spreads in the foreign currency swap market.

Derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. Derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities. Changes in the fair value of net investment hedges are recognized in the Foreign currency translation compone

SEC Form 10-Q filed by Procter & Gamble Company