UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-K

(Mark one)
[x]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 20132016

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

For the transition period from to

Commission File No. 1-434
THE PROCTER & GAMBLE COMPANY
One Procter & Gamble Plaza, Cincinnati, Ohio 45202
Telephone (513) 983-1100
IRS Employer Identification No. 31-0411980
State of Incorporation: Ohio
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, without Par Value New York Stock Exchange, NYSE Euronext-Paris

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer þAccelerated filer oNon-accelerated filer oSmaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo þ

The aggregate market value of the voting stock held by non-affiliates amounted to $185$215 billion on December 31, 2012.2015.

There were 2,738,760,5422,668,751,125 shares of Common Stock outstanding as of July 31, 2013.2016.

Documents Incorporated by Reference
Portions of the Proxy Statement for the 20132016 Annual Meeting of Shareholders which will be filed within one hundred and twenty days of the fiscal year ended June 30, 2013 (20132016 (2016 Proxy Statement) are incorporated by reference into Part III of this report to the extent described herein.


FORM 10-K TABLE OF CONTENTSPage
PART IItem 1.
Business
1
Item 1A.
Risk Factors
2
Item 1B.
Unresolved Staff Comments
6
Item 2.
Properties
6
Item 3.
Legal Proceedings
6
Item 4.
Mine Safety Disclosure
6
Executive Officers of the Registrant
7
PART IIItem 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
8
Item 6.
Selected Financial Data
10
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
11
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
30
Item 8.
Financial Statements and Supplementary Data
31
Management's Report and Reports of Independent Registered Public Accounting Firm
31
Consolidated Statements of Earnings
34
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
43
Note 4: Goodwill and Intangible Assets
44
Note 5: Income Taxes
46
Note 6: Earnings Per Share
48
Note 7: Stock-based Compensation
48
Note 8: Postretirement Benefits and Employee Stock Ownership Plan
50
Note 9: Risk Management Activities and Fair Value Measurements
54
Note 10: Short-term and Long-term Debt
57
Note 11: Accumulated Other Comprehensive Income/(Loss)
58
Note 12: Commitments and Contingencies
59
Note 13: Discontinued Operations
59
Note 14: Quarterly Results (Unaudited)
64
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
65
Item 9A.
Controls and Procedures
65
Item 9B.
Other Information
65
PART IIIItem 10.
Directors, Executive Officers and Corporate Governance
65
Item 11.
Executive Compensation
65
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
66
Item 13.
Certain Relationships and Related Transactions and Director Independence
67
Item 14.
Principal Accountant Fees and Services
67
PART IVItem 15.
Exhibits and Financial Statement Schedules
67
Signatures
70
Exhibit Index
71

The Procter & Gamble Company13 1

PART I

Item 1. Business.Business.
Additional information required by this item is incorporated herein by reference to Management's Discussion and Analysis (MD&A); Noteand Notes 1 to our Consolidated Financial Statements and Note 122 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.
The Procter & Gamble Company is focused on providing branded consumer packaged goods of superior quality and value to improve the lives of the world's consumers. The Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, we sell our products are sold in more than 180 countries and territories.
Throughout this Form 10-K, we incorporate by reference information from other documents filed with the Securities and Exchange Commission (SEC).
The Company's annual reportAnnual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are filed electronically with the SEC. The SEC maintains an internet site that contains these reports at: www.sec.gov. You can also access these reports through links from our website at: www.pg.com/investors.www.pginvestor.com.
Copies of these reports are also available, without charge, by contacting Computershare Inc., 250 Royall Street, Canton, MA 02021.Wells Fargo, 1100 Centre Pointe Curve, Suite 101, Mendota, MN 55120-4100.
Financial Information about Segments
As of June 30, 2013,2016 the Company has five reportable segments under U.S. GAAP: Beauty; Grooming; Health Care; Fabric Care and& Home Care; and Baby, Care andFeminine & Family Care. Many of the factors necessary for understanding these businesses are similar. Operating margins of the individual businesses vary due to the nature of materials and processes used to manufacture the products, the capital intensity of the businesses and differences in selling, general and administrative expenses as a percentage of net sales. Net sales growth by business is also expected to vary slightly due to the underlying growth of the markets and product categories in which they operate. While none of our reportable segments are highly seasonal, components within certain reportable segments, such as Batteries (Fabric Care and Home Care), Appliances (Grooming) and Prestige Fragrances (Beauty), are seasonal. In addition, anticipation or occurrence of natural disasters, such as hurricanes, can drive unusually high demand for batteries.
Additional information about our reportable segments can be found in the MD&A and Note 122 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 products. The markets and industry segments in which we offer our products are highly competitive. Our products are sold in more than 180 countries180 countries
and territories around the world primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons,distributors, baby stores, specialty beauty stores, e-commerce, and high-frequency stores and pharmacies. We utilize our superior marketing and online presence to win with consumers at the neighborhood stores which serve many consumers in developing markets."zero moment of truth" - when they are searching for information about a brand or product. We work collaboratively with our customers to improve the in-store presence of our products and win the "first moment of truth" - when a consumer is shopping in the store. We must also win the "second moment of truth" - when a consumer uses the product, evaluates how well it met his or her expectations and decides whether it was a good value. We believe we must continue to provide new, innovative products and branding to the consumer in order to grow our business. Research and product development activities, designed to enable sustained organic growth, continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, we believe these activities demonstrate our commitment to future growth.
Key Product Categories. Information on key product categories can be found in Note 122 to our Consolidated Financial Statements.
Key Customers. Our customers include mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores distributors and e-commerce retailers.pharmacies. Sales to Wal-Mart Stores, Inc. and its affiliates represent approximately 14%15% of our total revenue in 20132016, 2015 and 2012, and 15% in 2011.2014. No other customer represents more than 10% of our net sales. Our top ten customers account for approximately 30%, 31% and 32%35% of our total unit volumesales in 2013, 20122016, 2015 and 2011, respectively.2014. The nature of our business results in no material backlog orders or contracts with the government. We believe our practices related to working capital items for customers and suppliers are consistent with the industry segments in which we compete.
Sources and Availability of Materials. Almost all of the raw and packaging materials used by the Company are purchased from others, some of which are single-source suppliers. We produce certain raw materials, primarily chemicals, for further use in the manufacturing process. In addition, fuel, natural gas and derivative products are important commodities consumed in our manufacturing process and in the distributiontransportation of input materials and of finished product to customers. The prices we pay for materials and


14The Procter & Gamble Company

other commodities are subject to fluctuation. When prices for these items change, we may or may not pass the change to our customers. The Company purchases a substantial variety of other raw and packaging materials, none of which is material to our business taken as a whole.
Trademarks and Patents. We own or have licenses under patents and registered trademarks which are used in connection with our activity in all businesses. Some of these patents or licenses cover significant product formulation and processes used to manufacture our products. The trademarks are important to the overall marketing and branding of our products. All major products and trademarks in each business are registered.


2 The Procter & Gamble Company

In part, our success can be attributed to the existence and continued protection of these trademarks, patents and licenses.
Competitive Condition. 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. 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 an extensive sales force. 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 competitivedifferentiating factors.
Research and Development Expenditures. Research and development expenditures enable us to develop technologies and obtain patents across all categories in order to meet the needs and improve the lives of our consumers. Total researchResearch and development expenses were $1.9 billion in 2016, $2.0 billion in 2013, 20122015 and 2011.$1.9 billion in 2014 (reported in Net earnings from continuing operations).
Expenditures for Environmental Compliance.Expenditures for compliance with federal, state and local environmental laws and regulations are fairly consistent from year to year and are not material to the Company. No material change is expected in fiscal year 2014.2017.
Employees. Total number of employees is an estimate of total Company employees excluding interns, co-ops and employees of joint ventures.ventures as of the years ended June 30. The number of employees includes manufacturing and non-manufacturing employees. A discussion of progress on non-manufacturing enrollment objectives is included in Note 3 to our Consolidated Financial Statements. Historical numbers includeThe number of employees includes employees of discontinued operations.
 Total Number of Employees
2016105,000
2015110,000
2014118,000
2013121,000
2012126,000
2011129,000
 Total Number of Employees
2013121,000
2012126,000
2011129,000
2010127,000
2009132,000
2008135,000
Financial Information about Foreign and Domestic Operations
Operations. Net sales in the United StatesU.S. account for approximately 36%41% of total net sales. No other individual country exceeds 10% of total net sales. Operations outside the United StatesU.S. are generally characterized by the same conditions discussed in the description of the business above and may be affected by additional factors including changing currency values, different rates of inflation, economic growth and political and economic uncertainties and disruptions.
Our sales by geography for the fiscal years ended June 30 were as follows:
 2013 2012 2011
North America (1)
39% 39% 41%
Western Europe18% 19% 20%
Asia18% 18% 16%
Latin America10% 10% 9%
CEEMEA (2)
15% 14% 14%
 2016 2015 2014
North America (1)
44% 41% 39%
Europe23% 24% 26%
Asia Pacific9% 8% 8%
Greater China8% 9% 9%
IMEA (2)
8% 8% 8%
Latin America8% 10% 10%
(1) 
North America includes results for the United States, Canada and CanadaPuerto Rico only.
(2) 
CEEMEAIMEA includes Central and Eastern Europe,India, Middle East and Africa.
Net sales and total assets in the United States and internationally were as follows (in billions):
 United StatesInternational
Net Sales (for the year ended June 30)
2013$30.3$53.9
2012$29.5$54.2
2011$29.9$51.2
   
Assets (June 30)
2013$68.3$71.0
2012$68.0$64.2
2011$70.3$68.1
Net Sales (years ended June 30)United States International
2016$27.0 $38.3
2015$26.8 $43.9
2014$26.7 $47.7
Total Assets (years ended June 30)
2016$64.4 $62.7
2015$65.0 $64.5
2014$68.8 $75.5

Item 1A. Risk Factors.
We discuss our expectations regarding future performance, events and outcomes, such as our business outlook and objectives in this Form 10-K, other quarterly reports, press releases and other written and oral communications. All statements, except for historical and present factual information, are “forward-looking statements” and are based on financial data and business plans available only as of the


The Procter & Gamble Company15

time the statements are made, which may become out of dateoutdated or incomplete. We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain, and investors must recognize that events could significantly differ from our expectations.
The following discussion of “risk factors” identifies the most significant factors that may adversely affect our business, operations, financial position or future financial performance. This information should be read in conjunction with the MD&A and the Consolidated Financial Statements and related Notes incorporated in this report. The following discussion of risks is not all inclusive, but is designed to highlight what we believe are important factors to consider when evaluating our expectations. These and other factors could cause our future results to differ from those in the forward-looking statements and from historical trends.

A change
The Procter & Gamble Company 3

Our business is subject to numerous risks as a result of our having significant operations and sales in consumerinternational markets, including foreign currency fluctuations, currency exchange or pricing controls and localized volatility.
We are a global company, with operations in approximately 70 countries and products sold in more than 180 countries and territories around the world. We hold assets, incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U.S. dollar, and our operations outside the U.S. generate a significant portion of our net revenue. Fluctuations in exchange rates for foreign currencies, such as the recent volatility in the Russian ruble, may reduce the U.S. dollar value of revenues, profits and cash flows we receive from non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely impact our business results or financial condition. Moreover, discriminatory or conflicting fiscal policies in different countries could adversely affect our results. See also the Results of Operations and Cash Flow, Financial Condition and Liquidity sections of the MD&A and Note 9 to our Consolidated Financial Statements.
We also have sizable businesses and maintain local currency cash balances in a number of foreign countries with exchange, import authorization, pricing or other controls, including Argentina, Egypt, Nigeria and Ukraine. Our results of operations and financial condition could be adversely impacted if we are unable to successfully manage such controls, continue existing business operations and repatriate earnings from overseas, or if new or increased tariffs, quotas, exchange or price controls, trade barriers or similar restrictions are imposed on our business outside the U.S.
Additionally, our business, operations or employees may be adversely affected by political volatility, labor market disruptions or other crises or vulnerabilities in individual countries or regions, including political instability or upheaval, broad economic instability or sovereign risk related to a default by or deterioration in the credit worthiness of local governments, particularly in emerging markets.
Uncertain global economic conditions may adversely impact demand for our products and/or lack ofcause our customers and other business partners to suffer financial hardship, which could adversely impact our business.
Our business could be negatively impacted by reduced demand for our products related to one or more significant local, regional or global economic disruptions, such as: a slow-down in the general economy; reduced market growth rates; tighter credit markets for our suppliers, vendors or customers; 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. Additionally, economic conditions may cause our suppliers, distributors, contractors or other third party partners to suffer financial 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. Customers may also suffer financial hardships due to economic
conditions such that their accounts become uncollectible or are subject to longer collection cycles. If we are unable to generate sufficient income and cash flow, it could affect the Company’s ability to achieve expected share repurchase and dividend payments.
Disruptions in credit markets or changes to our credit ratings may reduce our access to credit.
A disruption in the credit markets or a downgrade of our current credit rating could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, which could adversely affect our liquidity and capital resources or significantly increase our cost of capital.
Disruption in our global supply chain may negatively impact our business results.
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 our previously-announced supply chain simplifications and certain sole supplier or sole manufacturing plant arrangements. The loss or disruption of such manufacturing and supply arrangements, including for issues such as labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw or input materials, natural disasters, acts of war or terrorism or other external factors over which we have a significantno control, could interrupt product supply and, if not effectively managed and remedied, have an adverse impact on our business.business, financial condition or results of operations.
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 and raw materials and the costs of labor, transportation, energy, pension and healthcare. Therefore, our business results are dependent, 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 financial results.
Our ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation.
We are a consumer products company and relythat relies on continued global demand for our brands and products. To achieveAchieving our business goals, we must developresults depends, in part, on successfully developing, introducing and sellmarketing new products that appealand on making significant improvements to consumers. This is dependentour equipment and manufacturing processes. The success of such innovation depends on a number of factors, including our ability to develop effective sales, advertisingcorrectly anticipate customer and marketing programs.consumer acceptance and trends, to obtain, maintain and enforce necessary intellectual property protections and to avoid infringing upon the intellectual property rights of others. We expectmust also be able to achievesuccessfully respond to technological advances made by, and intellectual property rights granted to, competitors. Failure to continually innovate, improve and


4 The Procter & Gamble Company

respond to competitive moves could compromise our financial targets, in part, by focusing on the most profitable businesses, biggest innovationscompetitive position and most important emerging markets. We also expect to achieveadversely impact our financial targets, in part, by achieving disproportionate growth in developing regions. If demand for our products and/or market growth rates in either developed or developing markets falls substantially below expected levels or our market share declines significantly in these businesses, our volume, and consequently our results, could be negatively impacted. This could occur due to, among other things, unforeseen negative economic or political events, changes in consumer trends and habits or negative consumer responses to pricing actions.results.
The ability to achieve our business objectives is dependent 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. As a result, there arewe experience ongoing competitive pressures in the environments in which we operate, as well as challenges in maintaining profit margins. This includes, among other things, increasing competition from mid- and lower-tier value products in both developed and developing markets. To address these challenges, we must be able to successfully respond to competitive factors, including pricing, promotional incentives and trade terms. In addition, the emergence of newevolving sales channels and business models may affect customer and consumer preferences as well as market dynamics.dynamics, which, for example, may be seen in the growing consumer preference for shopping online. Failure to
effectively compete in these new channels could negatively impact results.
Our ability to meet our growth targets depends on successful product, marketing and operations innovation and our ability to successfully respond to competitive innovation.factors and effectively compete in growing sales channels and business models, particularly e-commerce, could negatively impact our results.
AchievingA significant change in customer relationships or in customer demand for our business results depends, in part,products could have a significant impact on the successful development, introductionour business.
We sell most of our products via retail customers, which include mass merchandisers, grocery stores, membership club stores, drug stores, department stores, distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores and marketing of new products and improvements to our equipment and manufacturing processes. Successful innovation dependspharmacies. Our success is dependent on our ability to correctly anticipate customer and consumer acceptance, to obtain and maintain necessary intellectual property protections and to avoid infringing the intellectual property rights of others. We must also be able to successfully respond to technological advances made by competitors and intellectual property rights granted to competitors. Failure to do so could compromisemanage relationships with our competitive position and impact our results.
Our businesses face cost fluctuations and pressures that could affect our business results.
Our costs are subject to fluctuations, particularly due to changes in commodity prices, raw materials, labor costs, energy costs, pension and healthcare costs and foreign exchange and interest rates. Therefore, our success is dependent, 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. In addition, our financial projections include cost savings described in our announced productivity plan. Failure to deliver these savings could adversely impact our results.
We face risks that are inherent in global manufacturing that could negatively impact our business results.
We need to maintain key manufacturing and supply arrangements, including any key sole supplier and sole manufacturing plant arrangements, to achieve our cost targets. While we have business continuity and contingency plans for key manufacturing sites and the supply of raw materials, it may be impracticable to have a sufficient alternative source, particularly when the input materials are in limited supply. In addition, our strategy for global growthretail trade customers, which includes increased presence in emerging markets. Some emerging markets have greater political volatility and greater vulnerability to infrastructure and labor disruptions than established markets. Any significant disruption of manufacturing, such as labor disputes, loss or impairment of key manufacturing sites, natural disasters, acts of war or terrorism and other external factors over which we have no control, could interrupt product supply and, if not remedied, have an adverse impact on our business.




16The Procter & Gamble Company

We face risks associated with having significant international operations.
We are a global company, with manufacturing operations in more than 40 countries and a significant portion of our revenue is outside the U.S. Our international operations are subject to a number of risks, including, but not limited to:
compliance with U.S. laws affecting operations outside of the United States, such as the Foreign Corrupt Practices Act;
compliance with a variety of local regulations and laws;
changes in tax laws and the interpretation of those laws;
changes in exchange controls and other limits on our ability to repatriate earnings from overseas;
discriminatory or conflicting fiscal policies;
difficulties enforcing intellectual propertyoffer trade terms that are mutually acceptable and contractual rights in certain jurisdictions;
greater risk of uncollectible accountsare aligned with our pricing and longer collection cycles;
effectiveprofitability targets. Continued consolidation among our retail customers could create significant cost and immediate implementation of control environment processes across our diverse operations and employee base; and
imposition of increased or new tariffs, quotas, trade barriers or similar restrictions on our sales outside the United States.
We have sizable businesses and maintain local currency cash balances in a number of foreign countries with exchange, import authorization or pricing controls, including, but not limited to, Venezuela, Argentina, China, India and Egypt. Our results of operations and/or financial condition could be adversely impacted if we are unable to successfully manage these and other risks of international operations in an increasingly volatile environment.
Fluctuations in exchange rates may have an adverse impactmargin pressure on our business, results or financial condition.
We hold assets and incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U.S. dollar. Because our consolidated financial statements are presented in U.S. dollars, the financial statements of our subsidiaries outside the United States are translated into U.S. dollars. Our operations outside of the U.S. generate a significant portion of our net revenue. Fluctuations in exchange rates may therefore adversely impact our business results or financial condition. See also the Results of Operationsperformance could suffer if we cannot reach agreement with a key customer based on our trade terms and Cash Flow, Financial Condition and Liquidity sections of the MD&A and Note 5 to our Consolidated Financial Statements.
We face risks related to changes in the global and political economic environment, including the global capital and credit markets.
principles. Our business is impacted by global economic conditions, which continue to be volatile.  Our products are sold in more than 180 countries and territories around the world. If the global economy experiences significant disruptions, our business could be negatively impacted by reduced demand for our products related to: a slow-down in the general
economy; supplier, vendor or customer disruptions resulting from tighter credit markets; and/or temporary interruptions in our ability to conduct day-to-day transactions through our financial intermediaries involving the payment to or collection of funds from our customers, vendors and suppliers.
Our objective is to maintain credit ratings that provide us with ready access to global capital and credit markets. Any downgrade of our current credit ratings by a credit rating agency could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us. 
We could also be negatively impacted by political issuesif a key customer were to significantly reduce the inventory level of our products or crises in individual countries or regions, including sovereign risk related toexperience a default by or deterioration in the credit worthiness of local governments. For example, we could be adversely impacted by continued instability in the banking and governmental sectors of certain countries in the European Union or the dynamics associated with the federal and state debt and budget challenges in the United States.
Consequently, our success will depend, in part, on our ability to manage continued global and/or economic uncertainty, especially in our significant geographies, as well as any political or economicbusiness disruption. These risks could negatively impact our overall liquidity and financing costs, as well as our ability to collect receipts due from governments, including refunds of value added taxes, and/or create significant credit risks relative to our local customers and depository institutions.
If the reputation of the Company or one or more of our brands erodes significantly, it could have a material impact on our financial results.
The Company's reputation, isand the reputation of our brands, form the foundation of our relationships with key stakeholders and other constituencies, such asincluding consumers, customers and suppliers. In addition, many of our brands have worldwide recognition. This recognition is the result of the large investments we have made in our products over many years. The quality and safety of our products isare critical to our business. Our Company also devotes significant timeMany of our brands have worldwide recognition, and resources to programs designed to protect and preserve our reputation, such as social responsibility and environmental sustainability. If we are unable to effectively manage real or perceived issues, including concerns about safety, quality, efficacy or similar matters, these issues could negatively impact sentiments toward the Company or our products, our ability to operate freely could be impaired and our financial results could suffer. Our financial success is directly dependent on the success of our brands and thebrands. The success of theseour brands can suffer if our marketing plans or product initiatives do not have the desired impact on a brand's image or its ability to attract consumers. Our results could also be negatively impacted if one of our brands suffers a substantial impedimentharm to its reputation due to a significant product recall, product-related litigation, changing consumer perceptions of certain ingredients, allegations of product tampering or the distribution and sale of counterfeit


The Procter & Gamble Company17

counterfeit products. In addition, given the association of our individual products withAdditionally, negative or inaccurate postings or comments on social media or networking websites about the Company an issue withor one of our productsits brands could negatively affectgenerate adverse publicity that could damage the reputation of our other products,brands or the Company as a whole, thereby potentially hurting results.
Our ability to successfully manage ongoing organizational change could impact our business results.
We recently experienced a CEO transition, as well as other senior leadership changes, and we continue to execute a number of significant business and organizational changes, including acquisitions, divestitures and workforce optimization projects to support our growth strategies. We expect these types of changes, which may include many staffing adjustments as well as employee departures, to continue for the foreseeable future. Successfully managing these changes, including retention of particularly key employees, is critical to our business success. Further, ongoing business and organizational changes are likely to result in more reliance on third parties for various services and that reliance may increase reputational, operational and compliance risks, including the risk of corruption. We are generally a build-from-within company and our success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing organization capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense. Finally, our financial targets assume a consistent level of productivity improvement.Company. If we are unable to deliver expected productivity improvements, while continuingeffectively manage real or perceived issues, including concerns about safety, quality, ingredients, efficacy or similar matters, sentiments toward the Company or our products could be negatively impacted and our financial results could suffer. Our Company also devotes significant time and resources to invest in business growth,programs that are consistent with our corporate values and are designed to protect and preserve our reputation, such as social responsibility and environmental sustainability. If these programs are not executed as planned or suffer negative publicity, the Company's reputation and financial results could be adversely impacted.
Our abilityWe rely on third parties in many aspects of our business, which creates additional risk.
Due to successfully manage ongoing acquisition,the scale and scope of our business, we must rely on relationships with third parties, including our suppliers, distributors, contractors, joint venture partners or external business partners, for certain functions. If we are unable to effectively manage our third party relationships and divestiture activities could impactthe agreements under which our business results.
As a company that manages a portfolio of consumer brands, our ongoing business model involves 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. Specifically,third party partners operate, our financial results could be adversely impacted if: 1) changes in the cash flows or other market-based assumptions cause the value of acquired assets to fall below book value, 2)suffer. Additionally, while we are unable to offset the dilutive impacts from the loss of revenue associated with divested brands, or 3) we are not able to deliver the expected costhave policies and growth synergies associated with our acquisitions and joint ventures, which could also have an impact on goodwill and intangible assets. Additionally, joint venturesprocedures for managing these relationships, they inherently involve a lesser degree of control over business operations, governance and compliance, thereby potentially increasing theour financial, legal, reputational and operational and/risk.
An information security incident, including a cybersecurity breach, or compliance risks associated with each joint venture.

Our business is subject to changes in legislation, regulation and enforcement, and our ability to manage and resolve pending legal matters in the United States and abroad.
Changes in laws, regulations and related interpretations, including changes in accounting standards, taxation requirements and increased enforcement actions and penalties may alter the environment in which we do business. As a U.S. based multinational company we are subject to tax regulations in the United States and multiple foreign jurisdictions, some of which are interdependent. For example, certain income that is earned and taxed in countries outside the United States is not taxed in the United States, provided those earnings are indefinitely reinvested outside the United States. If these or other tax regulations should change, our financial results could be impacted.
In addition, our ability to manage regulatory, environmental, tax and legal matters (including, but not limited to, product liability, patent and other intellectual property matters) and to resolve pending legal matters without significant liability may materially impact our results of operations and financial position.  Furthermore, if pending legal matters, including the competition law and antitrust investigations described in Note 11 to our Consolidated Financial Statements result in fines or costs in excess of the amounts accrued to date, that could materially impact our results of operations and financial position.
There are increasing calls in the United States from members of leadership in both major U.S. political parties for “comprehensive tax reform” which may significantly change the income tax rules that are applicable to U.S. domiciled corporations, such as P&G.  It is very difficult to assess whether the overall effect of such potential legislation would be cumulatively positive or negative for our earnings and cash flows, but such changes could significantly impact our financial results.
A significant change in customer relationships or in customer demand for our products could have a significant impact on our business.
We sell most of our products via retail customers, which consist of mass merchandisers, grocery stores, membership club stores, drug stores, high-frequency stores, distributors and e-commerce retailers. Our success is dependent on our ability to successfully manage relationships with our retail trade customers. This includes our ability to offer trade terms that are acceptable to our customers and are aligned with our pricing and profitability targets. Our business could suffer if we cannot reach agreement with a key customer based on our trade terms and principles. Our business would be negatively impacted if a key customer were to significantly reduce the inventory level of our products or experience a significant business disruption. 
Consolidation among our retail customers could also create significant cost and margin pressure and lead to more complexity across broader geographic boundaries for both us


18The Procter & Gamble Company

and our key retailers. This would be particularly challenging if major customers are addressing local trade pressures, local law and regulation changes or financial distress.
A failure of one or more key information technology systems, networks, hardware, processes, associated sites or service providers could have a material adverse impact on our business or reputation.
We rely extensively on information technology (IT) systems, networks and services, including internet sites, data hosting and processing facilities and tools, physical security systems and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business. The various uses of these IT systems, networks and services include, but are not limited to:
ordering and managing materials from suppliers;
converting materials to finished products;
shipping products to customers;
marketing and selling products to consumers;
collecting, andtransferring, storing, and/or processing customer, consumer, employee, vendor, investor, regulatory, and other stakeholder information and personal data;
processing transactions;
summarizing and reporting results of operations;
hosting, processing and sharing, as appropriate, confidential and proprietary research, business plans and financial information;


The Procter & Gamble Company 5

collaborating via an online and efficient means of global business communications;
complying with regulatory, legal orand tax requirements;
providing data security; and
handling other processes necessary to manage our business.
Increased ITNumerous and evolving information security threats, and more sophisticated computer crime, including advanced persistent cybersecurity threats, pose a potential risk to the security of our IT systems, networks and services, as well as to the confidentiality, availability and integrity of our data.data and the availability and integrity of our critical business operations. As cybersecurity threats rapidly evolve in sophistication and become more prevalent across the industry globally, the Company is continually increasing its sensitivity and attention to these threats. We continue to assess potential threats and make investments seeking to address these threats, including monitoring of networks and systems and upgrading skills, employee training and security policies for the Company and its third-party providers. However, because the techniques used in these attacks change frequently and may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures. Our IT databases and systems and our third party providers' databases and systems have been, and will likely continue to be, subject to computer viruses or other malicious codes, unauthorized access attempts, denial of service attacks, phishing and other cyber-attacks. To date, we have seen no material impact on our business or operations from these attacks; however, we cannot guarantee that our security efforts or the security efforts of our third party providers will prevent breaches or breakdowns to our or our third-party providers’ databases or systems. If the IT 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 a loss, significant unavailability of or disclosure of our business or stakeholder information, due to any number of causes, ranging from catastrophic events toor power outages to improper data handling or security breaches, and our business continuity plans do not effectively address these failures on a timely basis, we may suffer interruptionsbe exposed to reputational, competitive and business harm as well as litigation and regulatory action. The costs and operational consequences of responding to breaches and implementing remediation measures could be significant.
We must successfully manage compliance with legislation, regulation and enforcement, as well as pending legal matters in the U.S. and abroad.
Our business is subject to a wide variety of laws and regulations across all of the countries in which we do business, including those laws and regulations involving intellectual property, product liability, marketing, antitrust, privacy, environmental, employment, anti-bribery or anti-corruption (such as the U.S. Foreign Corrupt Practices Act), tax or other matters. Rapidly changing laws, regulations and related interpretations, including changes in accounting standards, as well as increased enforcement actions, create challenges for the Company, including our compliance and ethics programs and
 
may alter the environment in which we do business, which could adversely impact our abilityfinancial results. If we are unable to continue to meet these challenges and comply with all laws, regulations and related interpretations, it could negatively impact our reputation and our business results. Failure to successfully manage operationsregulatory and reputational, competitive and/legal matters and resolve such matters without significant liability or business harm, whichdamage to our reputation may materially adversely impact our results of operations and/and financial position. Furthermore, if pending legal matters result in fines or costs in excess of the amounts accrued to date, that may also materially impact our results of operations and financial condition.position.
Changes in applicable tax regulations could negatively affect our financial results.
The Company is subject to taxation in the U.S. and numerous foreign jurisdictions. Because the U.S. maintains a worldwide corporate tax system, the foreign and U.S. tax systems are somewhat interdependent. For example, certain income that is earned and taxed in countries outside the U.S. is not taxed in the U.S., provided those earnings are indefinitely reinvested outside the U.S. If those same foreign earnings are instead repatriated to the U.S., additional residual U.S. taxation will likely occur, due to the U.S.’s worldwide tax system and higher U.S. corporate tax rate. The U.S. is considering corporate tax reform that may significantly change the corporate tax rate and the U.S. international tax rules. Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are evolving as a result of the Base Erosion and Profit Shifting project (“BEPS") undertaken by the G8, G20 and Organization for Economic Cooperation and Development ("OECD"). As these and other tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.
If we are unable to successfully execute our portfolio optimization strategy, as well as successfully manage ongoing acquisition, joint venture and divestiture activities, it could adversely impact our business.
In August 2014, the Company announced a plan to significantly streamline our product portfolio by divesting, discontinuing or consolidating about 100 non-strategic brands, resulting in a portfolio of about 65 brands. The Company has announced the Beauty Brands transaction with Coty and completed a series of other transactions that will substantially complete this plan.  Our ability to successfully execute our portfolio optimization strategy could impact our results.
In addition, 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


6 The Procter & Gamble Company

objectives. Specifically, our financial results could be adversely impacted by the dilutive impacts from the loss of earnings associated with divested brands. Our financial results could also be impacted in the event of 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, which could also have an impact on goodwill and intangible assets.
Our business results depend on our ability to successfully manage productivity improvements and ongoing organizational change.
Our financial projections assume certain ongoing productivity improvements and cost savings, including staffing adjustments as well as employee departures. Failure to deliver these planned productivity improvements and cost savings, while continuing to invest in business growth, could adversely impact our financial results. Additionally, successfully executing management transitions at leadership levels of the Company and retention of key employees is critical to our business success. We are generally a build-from-within company and our success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing and retaining organizational capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense, as well as continuing the development and execution of robust leadership succession plans.
The United Kingdom’s departure from the European Union could adversely impact our business and financial results.
On June 23, 2016, the United Kingdom held a referendum in which a majority of voters voted for the United Kingdom to exit theEuropean Union (“Brexit”), the announcement of which resulted in significant currency exchangerate fluctuations and volatility in global stock markets. It is expected that the British government will commence negotiations to determine the terms of Brexit. Giventhe lack of comparable precedent, the implications of Brexit or how such implications might affect the Company are unclear. Brexit could, among other things, disrupt trade and the free movement of goods, services andpeople between the United Kingdom and the European Union or other countries as well as create legal and global economic uncertainty. These and other potential implications of Brexit could adversely affect the Company’s business and financial results.


Item 1B. Unresolved Staff Comments.
None.

Item 2. Properties.
In the U.S., we own and operate 3224 manufacturing sites located in 2118 different states or territories. In addition, we own and operate 10297 manufacturing sites in 4038 other countries. Many of the domestic and international sites manufacture products for multiple businesses. Beauty products are manufactured at 3934 of these locations; Grooming products at 15;21; Health Care products at 17; Fabric Care and& Home Care products at 59;46; and Baby, Care andFeminine & Family Care products at 36; and Health Care products at 35.42. Management believes that the Company's production facilitiesmanufacturing sites are adequate to support the business and that the properties and equipment have been well maintained.

Item 3. Legal Proceedings.
The Company is subject, from time to time, to certain legal proceedings and claims arising out of our business, which cover a wide range of matters, including antitrust and trade regulation, product liability, advertising, contracts, environmental issues, patent and trademark matters, labor and employment matters and tax. See Note 1112 to our Consolidated Financial Statements for information on certain legal proceedings for which there are contingencies.
In March 2013, the Republic of Turkey Ministry of Environmental and Urban Planning notified the Company that it was imposing a fine on the Company based on alleged waste management violations at a Wella facility in Turkey. The Company paid the fine ($790,000) and the matter is currently on appeal.
This item should be read in conjunction with the Company's Risk Factors in Part I, Item 1A for additional information.

Item 4. Mine Safety Disclosure.
Not Applicable.applicable.





The Procter & Gamble Company19 7


Executive Officers of the RegistrantEXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions held by the Executive Officers of the Company on August 8, 2013,9, 2016, are:
Name  Position  Age  
First Elected to
Officer Position
A. G. Lafley  
Chairman of the Board, President and
Chief Executive Officer
  66
  2013
   Director since May 23, 2013      
    
Werner Geissler  Vice Chairman - Global Operations  60
  2007
    
Giovanni Ciserani Group President - Global Fabric and Home Care 51
 2013
    
Melanie Healey Group President - North America and Global Hyper, Super and Mass Channel 52
 2013
    
Deborah A. Henretta Group President - Global Beauty 52
 2013
    
Martin Riant Group President - Global Baby, Feminine and Family Care 54
 2013
       
David Taylor Group President - Global Health and Grooming 55
 2013
       
Filippo Passerini  
Group President - Global Business Services and
Chief Information Officer
  56
  2003
       
Jon Moeller  Chief Financial Officer  49
  2009
       
Bruce Brown  Chief Technology Officer  55
  2008
    
Robert L. Fregolle, Jr.    Global Customer Business Development Officer  56
  2009
    
Deborah P. Majoras  Chief Legal Officer and Secretary  49
  2010
    
Mark F. Biegger  Global Human Resources Officer  51
  2012
    
Marc S. Pritchard  Global Brand Building Officer  53
  2008
    
Valarie Sheppard  Senior Vice President & Comptroller  49
  2005
       
Yannis Skoufalos Global Product Supply Officer 56
 2011

Name Position Age 
First Elected to
Officer Position
       
David S. Taylor Chairman of the Board, President and Chief Executive Officer 58 2013
       
Jon R. Moeller Chief Financial Officer 52 2009
       
Steven D. Bishop Group President - Global Health Care 52 2016
       
Giovanni Ciserani Group President - Global Fabric and Home Care and Global Baby and Feminine Care 54 2013
       
Mary Lynn Ferguson-McHugh Group President - Global Family Care and Global Brand Creation and Innovation, P&G Ventures 56 2016
       
Patrice Louvet Group President - Global Beauty 51 2016
       
Charles E. Pierce Group President - Global Grooming 59 2016
       
Carolyn M. Tastad Group President - North America Selling and Market Operations 55 2014
       
Mark F. Biegger Chief Human Resources Officer 54 2012
       
Gary A. Coombe President - Europe Selling and Market Operations 52 2014
       
Kathleen B. Fish Chief Technology Officer 59 2014
       
Deborah P. Majoras Chief Legal Officer and Secretary 52 2010
       
Juan Fernando Posada President - Latin America Selling and Market Operations 54 2015
       
Matthew Price President - Greater China Selling and Market Operations 50 2015
       
Marc S. Pritchard Chief Brand Officer 56 2008
       
Mohamed Samir President - India, Middle East and Africa (IMEA) Selling and Market Operations 49 2014
       
Jeffrey K. Schomburger Global Sales Officer 54 2015
       
Valarie L. Sheppard Senior Vice President, Comptroller and Treasurer 52 2005
       
Yannis Skoufalos Global Product Supply Officer 59 2011
       
Magesvaran Suranjan President - Asia Pacific Selling and Market Operations 46 2015
All the Executive Officers named above excluding Mr. Lafley, have been employed by the Company for more than the past five years. Mr. Lafley is Chairman of the Board, President and Chief Executive Officer of the Company and was appointed to this position on May 23, 2013. Mr. Lafley originally joined the Company in 1977 and held positions of increasing responsibility, in the U.S. and internationally, until he was elected President and Chief Executive Officer in 2000, a position he held until June 30, 2009. On July 1, 2002, Mr. Lafley was elected Chairman of the Board, a position he held until January 2010. During the past five years, in addition to his roles as a Company employee, Mr. Lafley served as a consultant to the Company and as a member of the boards of directors of public companies Dell, Inc. and General Electric Company. He no longer serves on these boards. Since his retirement from the Company, he served as a Senior Advisor at Clayton, Dubilier & Rice, LLC, a private equity partnership, and was appointed by President Obama to serve on The President's Council on Jobs and Competitiveness.  Mr. Lafley consulted with a number of Fortune 50 companies on business and innovation strategy. He also advised on CEO succession and executive leadership development, and coached experienced, new and potential CEOs. He currently serves on the board of directors of Legendary Pictures, LLC (a film production company).




208 The Procter & Gamble Company

PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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
4/1/2013 - 4/30/2013 4,408,128  $79.40 4,408,128  
5/1/2013 - 5/31/2013 4,435,478  $78.91 4,435,478 See note (3)
6/1/2013 - 6/30/2013 3,861,882  $77.68 3,861,882  
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
4/1/2016 - 4/30/2016 — — — 
(3) 
5/1/2016 - 5/31/2016 6,152,153 $81.27 6,152,153 
(3) 
6/1/2016 - 6/30/2016 — — — 
(3) 
Total 6,152,153 $81.27 6,152,153 
(3) 
(1
(1)
)
The total number of shares purchased was 12,705,488 for the quarter.three months ended June 30, 2016 was 6,152,153. All transactions were made in the open market with large financial institutions. This table excludes shares withheld from employees to satisfy minimum tax withholding requirements on option exercises and other equity-based transactions. The Company administers cashless exercises through an independent third party and does not repurchase stock in connection with cashless exercises.


(2)
(2)
Average price paid per share is calculated on a settlement basis and excludes commission.
(3)
(3)
On April 24, 2013,26, 2016, the Company stated that in fiscal year 2013 share repurchases2016 the Company planned to reduce Company shares outstanding by approximately $8 to $9 billion, through a combination of direct share repurchases and shares that were estimatedexchanged in the Duracell transaction (see Note 13 to be approximately $6 billion. This does not includeour Consolidated Financial Statements), notwithstanding any purchases under the Company's compensation and benefit plans. The share repurchases were authorized pursuant to a resolution issued by the Company's Board of Directors and were financed through a combination of operating cash flows and issuance of long-term and short-term debt. The total dollar value of the shares purchased under the share repurchase plan and exchanged in the Duracell transaction was $6.0$8.2 billion. The share repurchase plan expiredended on June 30, 2013.2016.
Additional information required by this item can be found in Part III, Item 12 of this Form 10-K.
Shareholder Return Performance GraphsSHAREHOLDER RETURN PERFORMANCE GRAPHS

Market and Dividend Information

P&G has been paying a dividend for 123126 consecutive years since its original incorporation in 1890 and has increased its dividend for 5760 consecutive years. Over the past five years, the dividend has increased at an annual compound average rate of over 9%5%. Nevertheless, as in the past, further dividends will be considered after reviewing dividend yields, profitability expectations and financing needs and will be declared at the discretion of the Company's Board of Directors.
(in dollars; split-adjusted)1956196619761986199620062016
Dividends per share$0.01$0.03$0.06$0.16$0.40$1.15$2.66


(in dollars; split-adjusted)19561970198419982013
Dividends per Share$0.01$0.04$0.15$0.51$2.29

The Procter & Gamble Company21 9

QUARTERLY DIVIDENDSQuarterly Dividends
Quarter Ended2012-2013
 2011 - 2012
2015 - 2016 2014 - 2015
September 30$0.5620
 $0.5250
$0.6629 $0.6436
December 310.5620
 0.5250
0.6629 0.6436
March 310.5620
 0.5250
0.6629 0.6436
June 300.6015
 0.5620
0.6695 0.6629

COMMON STOCK PRICE RANGECommon Stock Price Range
2012-2013  2011 - 2012
Quarter EndedHigh  Low  High  Low2015 - 2016 2014 - 2015
High Low High Low
September 30$69.97
  $60.78
  $65.14
  $57.56
$82.55
 $65.02
 $85.40
 $77.29
December 3170.99
  65.84
  66.98
  61.00
81.23
 71.30
 93.89
 81.57
March 3177.82
  68.35
  67.95
  62.56
83.87
 74.46
 91.78
 80.82
June 3082.54
  75.10
  67.92
  59.08
84.80
 79.10
 84.20
 77.10

P&G trades on the New York Stock Exchange and NYSE Euronext-Paris under the stock symbol PG. There were approximately 2.9 million common stock shareowners, including shareowners of record, participants in the P&G Shareholder Investment Program, participants in P&G stock ownership plans and beneficial owners with accounts at banks and brokerage firms, as ofJune 30, 2016.
SHAREHOLDER RETURN

Shareholder Return
The following graph compares the cumulative total return of P&G’s common stock for the 5-yearfive-year period endingended June 30, 2013,2016, against the cumulative total return of the S&P 500 Stock Index (broad market comparison) and the S&P 500 Consumer Staples Index (line of business comparison). The graph and table assume $100 was invested on June 30, 2008,2011, and that all dividends were reinvested.

Cumulative Value of $100 Investment, through June 30Cumulative Value of $100 Investment, through June 30
Company Name/Index200820092010201120122013
201120122013201420152016
P&G$100
$86
$105
$114
$114
$148
$100
$100
$129
$136
$140
$156
S&P 500 Index100
74
84
110
116
140
100
105
127
158
170
177
S&P 500 Consumer Staples Index100
90
102
129
148
174
100
115
135
155
170
202

2210 The Procter & Gamble Company

Item 6. Selected Financial Data.
The information required by this item is incorporated by reference to Note 1 and Note 122 to our Consolidated Financial Statements.

Financial Summary (Unaudited)
Amounts in millions, except per share amounts2013 2012 2011 2010 2009 20082016 2015 2014 2013 2012 2011
Net sales$84,167
 $83,680
 $81,104
 $77,567
 $75,295
 $77,714
$65,299
 $70,749
 $74,401
 $73,910
 $73,138
 $70,464
Gross profit41,739
 41,289
 41,245
 40,525
 37,644
 39,534
32,390
 33,693
 35,371
 35,858
 35,254
 35,110
Operating income14,481
 13,292
 15,495
 15,732
 15,188
 15,743
13,441
 11,049
 13,910
 13,051
 12,495
 13,849
Net earnings from continuing operations11,402
 9,317
 11,698
 10,851
 10,645
 11,224
10,027
 8,287
 10,658
 10,346
 8,864
 10,509
Net earnings from discontinued operations—
 1,587
 229
 1,995
 2,877
 930
Net earnings/(loss) from discontinued operations577
 (1,143) 1,127
 1,056
 2,040
 1,418
Net earnings attributable to Procter & Gamble11,312
 10,756
 11,797
 12,736
 13,436
 12,075
10,508
 7,036
 11,643
 11,312
 10,756
 11,797
Net Earnings margin from continuing operations13.5% 11.1% 14.4% 14.0% 14.1% 14.4%
Basic net earnings per common share (1):
           
Net earnings margin from continuing operations15.4% 11.7% 14.3% 14.0% 12.1% 14.9%
Basic net earnings per common share: (1)
           
Earnings from continuing operations$4.04
 $3.24
 $4.04
 $3.63
 $3.51
 $3.56
$3.59
 $2.92
 $3.78
 $3.65
 $3.08
 $3.62
Earnings from discontinued operations—
 0.58
 0.08
 0.69
 0.98
 0.30
Earnings/(loss) from discontinued operations0.21
 (0.42) 0.41
 0.39
 0.74
 0.50
Basic net earnings per common share4.04
 3.82
 4.12
 4.32
 4.49
 3.86
$3.80
 $2.50
 $4.19
 $4.04
 $3.82
 $4.12
Diluted net earnings per common share (1):
           
Diluted net earnings per common share: (1)
           
Earnings from continuing operations$3.86
 $3.12
 $3.85
 $3.47
 $3.35
 $3.36
$3.49
 $2.84
 $3.63
 $3.50
 $2.97
 $3.46
Earnings from discontinued operations—
 0.54
 0.08
 0.64
 0.91
 0.28
Earnings/(loss) from discontinued operations0.20
 (0.40) 0.38
 0.36
 0.69
 0.47
Diluted net earnings per common share3.86
 3.66
 3.93
 4.11
 4.26
 3.64
$3.69
 $2.44
 $4.01
 $3.86
 $3.66
 $3.93
Dividends per common share$2.29
 $2.14
 $1.97
 $1.80
 $1.64
 $1.45
$2.66
 $2.59
 $2.45
 $2.29
 $2.14
 $1.97
Research and development expense$2,023
 $2,029
 $1,982
 $1,931
 $1,844
 $1,927
$1,879
 $1,991
 $1,910
 $1,867
 $1,874
 $1,812
Advertising expense9,729
 9,345
 9,210
 8,475
 7,453
 8,426
7,243
 7,180
 7,867
 8,188
 7,839
 7,713
Total assets139,263
 132,244
 138,354
 128,172
 134,833
 143,992
127,136
 129,495
 144,266
 139,263
 132,244
 138,354
Capital expenditures4,008
 3,964
 3,306
 3,067
 3,238
 3,046
3,314
 3,736
 3,848
 4,008
 3,964
 3,306
Long-term debt19,111
 21,080
 22,033
 21,360
 20,652
 23,581
18,945
 18,327
 19,807
 19,111
 21,080
 22,033
Shareholders' equity68,709
 64,035
 68,001
 61,439
 63,382
 69,784
$57,983
 $63,050
 $69,976
 $68,709
 $64,035
 $68,001
(1)
Basic net earnings per common share and Diluted net earnings per common share are calculated based on Net earnings attributable to Procter & Gamble.
(1) Basic net earnings per common share and diluted net earnings per common share are calculated based on net earnings attributable to Procter & Gamble.



The Procter & Gamble Company23 11

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis
Forward-Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including, without limitation, in the following sections: “Management's Discussion and Analysis” and “Risk Factors.” These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Forward-looking statements are based on current expectations and assumptions, thatwhich are subject to risks and uncertainties whichthat may cause actual results to differ materially from those expressed or implied in the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled "Economic Conditions Challenges and Risks"Uncertainties" and the section titled “Risk Factors” (Item 1A of this Form 10-K). Forward-looking statements are made as of the date of this report, and we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise.
The followingpurpose of Management's Discussion and Analysis (MD&A) is intended to provide the reader with an understanding of P&G'sProcter & Gamble's financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and accompanying Notes.notes. The MD&A is organized in the following sections:
Overview
Summary of 20132016 Results
Economic Conditions Challenges and RisksUncertainties
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 and net earnings. We also refer to a number of financial measures that are not defined under
accounting principles generally accepted in the United States of America (U.S. GAAP), including organic sales growth, core earnings per share (Core EPS), adjusted free cash flow and adjusted free
cash flow productivity. Organic sales growth is net sales growth excluding the impacts of the Venezuela deconsolidation, acquisitions, divestitures and foreign exchange acquisitions and divestitures.from year-over-year comparisons. Core EPS is diluted net earnings per share from continuing operations excluding certain specified charges and gains. Freeitems that are not judged to be part of the Company's sustainable results or trends. Adjusted free cash flow is operating cash flow less capital spending. Freespending and certain divestiture impacts. Adjusted free cash flow productivity is the ratio of adjusted free cash flow to net earnings.earnings excluding certain one-time items. We believe these measures provide our investors with additional information about our underlying results and trends, as well as insight to some of the metrics used to evaluate management. The explanation at the end of the MD&A provides more details on the use and the derivation of these measures.
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 market consumption in the MD&A are based on a combination of vendor-reported consumption and market size data, as well as internal estimates. All market share references represent the percentage of sales in dollar terms on a constant currency basis of our products, relative to all product sales in the category and are measured on an annual basis versus the prior 12 month period. References to competitive activity include promotional and product initiatives from our competitors.category.
OVERVIEW
P&G is a global leader in retailfast-moving consumer goods, focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world. Our products are sold in more than 180 countries and territories primarily through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salonsdistributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores and high-frequency stores. We continue to expand our presence in other channels, including perfumeries, pharmacies and e-commerce.pharmacies. We have on-the-ground operations in approximately 70 countries.
Our market environment is highly competitive with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands. Additionally, many of the product segments in which we compete are differentiated by price tiers (referred to as super-premium, premium, mid-tier and value-tier products). We are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position.



2412 The Procter & Gamble Company

ORGANIZATIONAL STRUCTURE
Our organizational structure is comprised of Global Business Units (GBUs), GlobalSelling and Market Operations (SMOs), Global Business Services (GBS) and Corporate Functions (CF).
Global Business Units
Our GBUs are organized into ten product categories. Under U.S. GAAP, the GBUs underlying the ten product categories are aggregated into five reportable segments: Beauty; Grooming; Health Care; Fabric Care and& Home Care; and Baby, Care andFeminine & Family Care. The GBUs are responsible for developing overall brand strategy, new product upgrades and innovations and marketing plans. The following provides additional detail on our reportable segments and the keyten product categories and brand composition within each segment.
Reportable Segment
% of
Net Sales*
% of Net
Earnings*
GBUs (Categories)Billion Dollar Brands
Beauty24%21%Beauty Care (Antiperspirant and Deodorant, Cosmetics, Personal Cleansing, Skin Care); Hair Care and Color; Prestige (SK-II, Fragrances); Salon ProfessionalHead & Shoulders, Olay, Pantene, SK-II, Wella
Grooming9%16%Shave Care (Blades and Razors, Pre- and Post-Shave Products); Braun and AppliancesFusion, Gillette, Mach3, Prestobarba
Health Care15%17%Feminine Care (Feminine Care, Incontinence); Oral Care (Toothbrush, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Other Personal Health Care, Vitamins/Minerals/Supplements)Always, Crest, Oral-B, Vicks
Fabric Care and Home Care32%27%Fabric Care (Bleach and Laundry Additives, Fabric Enhancers, Laundry Detergents); Home Care (Air Care, Dish Care, Surface Care); Personal Power (Batteries); Pet Care; ProfessionalAce, Ariel, Dawn, Downy, Duracell, Febreze, Gain, Iams, Tide
Baby Care and Family Care20%19%Baby Care (Baby Wipes, Diapers and Pants); Family Care (Paper Towels, Tissues, Toilet Paper)Bounty, Charmin, Pampers
 Reportable Segments
% of
Net Sales 1
% of Net
Earnings 1
Product Categories (Sub-Categories)Major Brands
 Beauty18%20%
Hair Care (Conditioner, Shampoo, Styling Aids, Treatments)
Head & Shoulders, Pantene, Rejoice
 
Skin and Personal Care (Antiperspirant and Deodorant, Personal Cleansing, Skin Care)
Olay, Old Spice, Safeguard, SK-II
 Grooming11%15%
Grooming 2 (Shave Care - Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care; Appliances)
Braun, Fusion, Gillette, Mach3, Prestobarba, Venus
 
 Health Care11%12%
Oral Care (Toothbrushes, Toothpaste, Other Oral Care)
Crest, Oral-B
 
Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care)
Prilosec, Vicks
 Fabric & Home Care32%27%
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, Febreze, Mr. Clean, Swiffer
 Baby, Feminine & Family Care28%26%
Baby Care (Baby Wipes, Diapers and Pants)
Luvs, Pampers
 
Feminine Care (Adult Incontinence, Feminine Care)
Always, Tampax
 
Family Care (Paper Towels, Tissues, Toilet Paper)
Bounty, Charmin
(1)
Percent of Net sales and Net earnings from continuing operations for the year ended June 30, 2016 (excluding results held in Corporate).
(2)
The Grooming product category is comprised of the Shave Care and Appliances GBUs.
*Percent of net sales and net earnings from continuing operations for the year ended June 30, 2013 (excluding results held in Corporate).

Recent Developments: As of June 30, 2015, the Company deconsolidated our Venezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of accounting. This change resulted in a fiscal 2015 one-time after-tax charge of $2.1 billion ($0.71 per share). Beginning in fiscal 2016, our financial results only include sales of finished goods to our Venezuelan subsidiaries to the extent we receive cash payments from Venezuela (expected to be largely through the DIPRO and DICOM exchange market). Accordingly, we no longer include the results of our Venezuelan subsidiaries' operations in reporting periods following fiscal 2015 (see Note 1 to the Consolidated Financial Statements and additional discussion in the MD&A under "Venezuela Impacts" in Results of Operations).
In August 2014, the Company announced a plan to significantly streamline our product portfolio by divesting, discontinuing or consolidating about 100 non-strategic brands. The resulting portfolio of about 65 key brands are in 10 category-based businesses where P&G has leading market positions, strong brands and consumer-meaningful product technologies.
During fiscal 2012, we2016, the company completed the divestiture of our snacksits Batteries business. The Batteries business tohad historically been part of the Company’s Fabric & Home Care reportable segment. The Kellogg Company. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of our snacksthe Batteries business are presented as discontinued operations in 2012 and, as such, have beenare excluded from both continuing operations and from segment results for all periods presented. Additionally, the Batteries balance sheet positions as of June 30, 2015 are presented as held for sale in the Consolidated Balance Sheets.
On July 9, 2015, the Company announced the signing of a definitive agreement to divest four product categories, to Coty Inc. ("Coty"). Coty's offer was $12.5 billion. The divestiture was initially comprised of 43 of the Company's beauty brands ("Beauty Brands"), including the global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands. Subsequent to signing, two of the fine fragrance brands, Dolce Gabbana and Christina Aguilera, were excluded from the divestiture. While the ultimate form of the transaction has not yet been decided, the Company’s current preference is for a Reverse


The Procter & Gamble Company 13

Morris Trust split-off transaction in which P&G shareholders could elect to participate in an exchange offer to exchange their P&G shares for Coty shares. The Company expects to complete this transaction in October 2016. The results of the Beauty Brands are now presented as discontinued operations and, as such, are excluded from both continuing operations and segment results for all periods presented. Additionally, the Beauty Brands' balance sheet positions as of June 30, 2016 and June 30, 2015 are presented as held for sale in the Consolidated Balance Sheets.
During fiscal 2015, the Company completed the divestiture of its Pet Care business. The gain on the transaction was not material. The results of the Pet Care business are presented as discontinued operations and, as such, are excluded from both continuing operations and segment results for all periods presented.
With these transactions and other recent minor brand divestitures, the Company will have substantially completed the strategic portfolio reshaping program.
Beauty: We are a global market leader in the beauty category. Most of the beauty markets in which we compete are highly fragmented with a large number of global and local competitors. We compete in beauty care, hairskin and personal care and colorin hair care. In skin and prestige. In beautypersonal care, we offer a wide variety of products, ranging from deodorants to cosmeticspersonal cleansing to skin care, such as our Olay brand, which is one of the top facial skin care brandbrands in the world with approximately 10%over 7% global market share. In hair care, and color, we compete in both the retail and salon professional channels.channel. We are the global market leader in the retail hair care and color market with over 20% global market share primarily behind our Pantene and Head & Shoulders brands. In the prestige channel, we compete primarily with our prestige fragrances and the SK-II brand. We are the global market leader in prestige fragrances, primarily behind our Dolce & Gabbana, Gucci and Hugo Boss fragrance brands.

Grooming: We compete in Shave Care and Appliances. In Shave Care, we are the global market leader in the blades and razors market globally and in nearly all of the geographies in which we compete.market. Our global blades and razors market share is approximately 70%nearly 65%, primarily behind the Gillette franchise including Fusion, Mach3, Prestobarba and Venus. Our electronic hair removal devices,appliances, such as electric razors and epilators, are sold under the Braun brand in a number of markets around the world where we compete against both global and regional competitors. We hold over 20% of the male shavers market and over 40%nearly 45% of the female epilators market.
Health Care: We compete in oral care, feminine 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 approximatelynearly 20% global market share. We are the global market leader in the feminine care category with over 30% global market share.share behind our Oral-B and Crest brands. In personal health care, we are the global market leadera top ten competitor in a large, highly fragmented industry, primarily behind respiratory treatments (Vicks brand), nonprescription heartburn medications behind our Prilosec(Prilosec OTC brandbrand) and in respiratory treatments behind our Vicks brand.digestive wellness products (Metamucil, Pepto Bismol, and Align brands). Nearly all of our sales outside the U.SU.S. in personal health care are generated through the PGT Healthcare partnership with Teva Pharmaceuticals Ltd.


The Procter & Gamble Company25

Fabric Care and& Home Care: This segment is comprised of a variety of fabric care products including:including laundry detergents, additives and fabric enhancers; and home care products including dishwashing liquids and detergents, surface cleaners and air fresheners; batteries; and pet care.
fresheners. In fabric care, we generally have the number one or number two market share position in the markets in which we compete and are the global market leader with over 25%nearly 30% global market share, primarily behind our Tide, Ariel and Downy brands. Our global home care market share is approximately 20%nearly 25% across the categories in which we compete. In batteries, we have over 25% global battery market share, behind our Duracell brand. In pet care, we compete in several markets primarily in the premium pet care segment, with the Iams and Eukanuba brands. The vast majority of our pet care business is in North America, where we have over 5% market share.
Baby, Care andFeminine & Family Care: In baby care, we compete mainly in diapers, pants and baby wipes with approximately 35%nearly 30% global market share. We are the number one or number two baby care competitor in most of the key markets in which we compete, primarily behind Pampers, the Company's largest brand, with annual net sales of more than $10nearly $9 billion. We are the global market leader in the feminine care category with over 25% global market share, primarily behind Always. We also compete in the adult incontinence category in certain markets, achieving over 10% market share in the markets where we compete. Our family care business is predominantly a North American business comprised largely of the Bounty paper towel and Charmin toilet paper brands. U.S. market shares are approximately 45%over 40% for Bounty and over 25% for Charmin.
Fiscal Year 2014 Changes to Global Business Unit Structure
We recently announced a number of changes to our GBU structure, which will result in changes to our reportable segments. Effective July 1, 2013, as part of our plan to improve business performance, we organized our Global Business Units into four industry-based sectors, comprised of 1) Global Baby, FeminineSelling and Family Care, 2) Global Beauty, 3) Global Health and Grooming, and 4) Global Fabric and Home Care. Under U.S. GAAP, the GBUs underlying these sectors will be aggregated into five reportable segments: 1) Global Baby, Feminine and Family Care, 2) Global Beauty, 3) Global Health, 4) Grooming and 5) Global Fabric and Home Care. As a result, Feminine Care will transition from Health Care to Global Baby, Feminine and Family Care. Additionally, Pet Care will transition from Fabric Care and Home Care to Global Health.
These changes will be reflected in our segment reporting beginning in fiscal year 2014, at which time our historical segment reporting will also be restated to reflect the new structure. The segment discussions in MD&A and the accompanying Consolidated Financial Statements reflect the organizational structure that existed through June 30, 2013.
GlobalMarket Operations
Global Operations is comprised of our Market Development Organization (MDO), which isOur SMOs are responsible for developing
and executing go-to-market plans at the local level. The MDO includesSMOs include dedicated retail customer, trade channel and country-specific teams. It isOur SMOs are organized along five geographic regions:under six regions comprised of North America, Western Europe, Central & Eastern Europe/Middle East/Africa (CEEMEA), Latin America, and Asia which is comprised of Japan,Pacific, Greater China and ASEAN/Australia/India/Korea (AAIK)India, Middle East and Africa (IMEA). Throughout the MD&A, we reference business results in developing markets, which we define as the aggregate of CEEMEA, Latin America, AAIK and Greater China, and developed markets, which are comprised of North America, Western Europe and Japan.Japan, and developing markets which are all other markets not included in developed.
Global Business Services
GBS provides technology, processes and standard data tools to enable the GBUs and the MDOSMOs to better understand the business and better serve consumers and customers. The GBS organization is responsible for providing world-class solutions at a low cost and with minimal capital investment.
Corporate Functions
CF provides Company-levelcompany-level strategy and portfolio analysis, corporate accounting, treasury, tax, external relations, governance, human resources and legal, as well as other centralized functional support.
STRATEGIC FOCUS
WeP&G aspires to serve the world’s consumers better than our best competitors in every category and in every country in which we compete, and, as a result, deliver total shareholder return in the top one-third of our peer group.  Delivering and sustaining leadership levels of shareholder value creation requires balanced top-line growth, bottom-line growth and strong cash generation.
Our strategic choices are focused on strategieswinning with consumers.  The consumers who purchase and use our products are at the center of everything we do.  We increase the number of users - and the usage - of our brands when we win at the zero, first and second moments of truth:  when consumers research our


14 The Procter & Gamble Company

categories and brands, purchase them in a store or online and use them in their homes.
Winning with consumers around the world and against our best competitors requires innovation.  Innovation has always been, and continues to be, P&G’s lifeblood.  Innovation requires consumer insights and technology advancements that welead to product improvements, improved marketing and merchandising programs and game-changing inventions that create new brands and categories. 
Productivity improvement is critical to delivering our balanced top-line growth, bottom-line growth and value creation objectives.  Productivity improvement and sales growth reinforce and fuel each other.  We are driving productivity improvement across all elements of cost, including cost of goods sold, marketing and promotional expenses and non-manufacturing overhead.  Productivity improvements and cost savings are being reinvested in product and packaging improvements, brand awareness-building advertising and trial-building sampling programs, increased sales coverage and R&D programs.
We are improving operational effectiveness and organizational culture through enhanced clarity of roles and responsibilities, accountability and incentive compensation programs.
The Company has undertaken an effort to focus and strengthen its business portfolio to compete in categories and with brands that are structurally attractive and that play to P&G's strengths. The ongoing portfolio of businesses consists of 10 product categories. These are categories where P&G has leading market positions, strong brands and consumer-meaningful product technologies.
We believe these strategies are right for the long-term health of the Company with theand our objective of delivering total shareholder return in the top one-third of our peer group.
We are focusing our resources on our leading, most profitable categories and markets.
We will focus on our core markets, such as the U.S., to strengthen and grow these businesses.
We will focus our developing market investments on the categories and countries with the largest size of prize and highest likelihood of winning.
We will focus the portfolio, allocating resources to businesses where we can create disproportionate value.
To create flexibility to fund our growth efforts and deliver our financial commitments, we are working to make productivity a core strength for P&G. We have taken significant steps to accelerate cost savings, including a five-year cost savings initiative which was announced in February 2012. The cost savings program covers all elements of costs including cost of goods sold, marketing expense and non-manufacturing overhead.
Innovation has always been - and continues to be - P&G's lifeblood. To consistently win with consumers around the world across price tiers and preferences and to consistently win versus our best competitors, each P&G product category needs a full portfolio of innovation, including a mix of commercial programs, product improvements and game-changing innovations.


26The Procter & Gamble Company

Finally, we are focused on improving operating discipline in everything we do. Executing better than our competitors is how we win with customers and consumers and generate leadership returns for our shareholders.
Given current market growth rates, the Company expects the consistent delivery of the following long-term annual financial targets will result in total shareholder returns in the top third of the competitive peer group:
Grow organicOrganic sales modestlygrowth above market growth rates in the categories and geographies in which we compete,compete;
Deliver Core EPS growth of highmid-to-high single digits,digits; and
GenerateAdjusted free cash flow productivity of 90% or greater.






In periods with significant macroeconomic pressures, we intend to maintain a disciplined approach to investing so as not to sacrifice the long-term health of our businesses to meet short-term objectives in any given year.



SUMMARY OF 20132016 RESULTS
Amounts in millions, except per share amounts2013 Change vs. Prior Year 2012 Change vs. Prior Year 20112016 Change vs. Prior Year 2015 Change vs. Prior Year 2014
Net sales$84,167
 1% $83,680
 3% $81,104
$65,299
 (8)% $70,749
 (5)% $74,401
Operating income14,481
 9% 13,292
 (14)% 15,495
13,441
 22 % 11,049
 (21)% 13,910
Net earnings from continuing operations11,402
 22% 9,317
 (20)% 11,698
10,027
 21 % 8,287
 (22)% 10,658
Net earnings from discontinued operations—
 (100)% 1,587
 593% 229
Net earnings/(loss) from discontinued operations577
 N/A
 (1,143) N/A
 1,127
Net earnings attributable to Procter & Gamble11,312
 5% 10,756
 (9)% 11,797
10,508
 49 % 7,036
 (40)% 11,643
Diluted net earnings per common share3.86
 5% 3.66
 (7)% 3.93
3.69
 51 % 2.44
 (39)% 4.01
Diluted net earnings per share from continuing operations3.86
 24% 3.12
 (19)% 3.85
3.49
 23 % 2.84
 (22)% 3.63
Core earnings per common share4.05
 5% 3.85
 (1)% 3.87
Core EPS3.67
 (2)% 3.76
 (2)% 3.85
Cash flow from operating activities15,435
 6 % 14,608
 5 % 13,958

Net sales increased 1%decreased 8% to $84.2 billion.$65.3 billion including a negative 6% impact from foreign exchange.
◦Organic sales increased 3%.1%, as increased pricing was partially offset by a reduction in organic volume.
◦Unit volume increased 2% due todecreased 3%. Volume decreased low single-digit increasessingle digits in both developingGrooming, Health Care, Fabric & Home Care and developed regions.Baby, Feminine & Family Care. Volume decreased mid-single digits in Beauty. Organic volume declined 1%.
Net earnings from continuing operations increased $1.7 billion or 21% in fiscal 2016 due to a $2.1 billion after-tax charge in the prior year related to the deconsolidation of our Venezuelan subsidiaries and improved gross margin, partially offset by the earnings impact of the decline in net sales. Foreign exchange impacts negatively affected net earnings from continuing operations by $880 million or approximately 11%.
Net earnings from discontinued operations increased $1.7 billion due primarily to the net impact of a gain on the sale of our Batteries business in fiscal 2016 and higher impairment charges on that business in the prior period.
Net earnings attributable to Procter & Gamble were $11.3$10.5 billion, an increase of $556 million$3.5 billion or 5%49% versus the prior year period.due to the aforementioned increases in net earnings from both continuing and discontinued operations.
◦Net earnings from continuing operations increased $2.1 billion, or 22%, to $11.4 billion. The combination of the net year-over-year impact of acquisition and divestiture gains and the net year-over-year decline in impairment charges drove $1.9 billion of the increase. The remaining increase was largely due to net sales growth and gross margin expansion.
◦Net earnings from discontinued operations decreased $1.6 billion due to the gain on the sale of the snacks business and the earnings of the snacks business prior to the divestiture in the prior year period.
Diluted net earnings per share increased 5%51% to $3.86.$3.69.
◦Diluted net earnings per share from continuing operations increased 24%23% to $3.86.$3.49.
◦Core EPS increased 5%decreased 2% to $4.05.$3.67.
Cash flow from operating activities was $14.9$15.4 billion.
◦FreeAdjusted free cash flow was $10.9$12.1 billion.
◦FreeAdjusted free cash flow productivity was 95%115%.


The Procter & Gamble Company 15

ECONOMIC CONDITIONS CHALLENGES AND RISKSUNCERTAINTIES
We discuss expectations regarding future performance, events and outcomes, such as our business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications. All such statements, except for historical and present factual information, are "forward-looking statements" and are based on financial data and our business plans available only as of the time the statements are made, which may become out-of-date or incomplete. We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Forward-looking statements are inherently uncertain and investors must recognize that events could be significantly different from our expectations. For more information on risks that could impact our results, refer to Item 1A Risk Factors in this Form 10-K.
Ability to Achieve Business PlansGlobal Economic Conditions.. We are a consumer products companyCurrent macroeconomic factors remain dynamic, and rely on continued demand for our brands and products. To achieve business goals, we must develop and sell products that appeal to consumers and retail


The Procter & Gamble Company27

trade customers. Our continued success is dependent on leading-edge innovation with respect to both products and operations, on the continued positive reputationsany causes of our brands and our ability to successfully maintain trademark protection. This means we must be able to obtain patents and trademarks, and respond to technological advances and patents granted to competition. Our success is also dependent on effective sales, advertising and marketing programs. Our ability to innovate and executemarket size contraction, such as reduced GDP in these areas will determine the extent to which we are able to grow existing net sales and volume profitably, especially with respect to the product categories and geographic markets (including developing markets) in which we have chosen to focus. There are high levels of competitive activitycommodity-producing economies as commodity prices decline, greater political unrest in the environmentsMiddle East and Eastern Europe, further economic instability in which we operate. To address these challenges, we must respond to competitive factors, including pricing, promotional incentives, trade termsthe European Union, political instability in certain Latin American markets and product initiatives. We must manage each of these factors, as well as maintain mutually beneficial relationships witheconomic slowdowns in Japan and China, could reduce our key customers,sales or erode our operating margin, in order to effectively compete and achieveeither case reducing our business plans.
As a company that manages a portfolio of consumer brands, our ongoing business model involves a certain level of ongoing acquisition, divestiture and joint venture activities. We must be able to successfully manage the impacts of these activities, while at the same time delivering against base business objectives.
Daily conduct of our business also depends on our ability to maintain key information technology systems, including systems operated by third-party suppliers and to maintain security over our data.earnings.
Cost PressuresChanges in Costs.. Our costs are subject to fluctuations, particularly due to changes in commodity prices rawand our own productivity efforts. We have significant exposures to certain commodities, in particular certain oil-derived materials labor costs, foreign exchangelike resins, and interest rates. Therefore, our success is dependent,volatility in part,the market price of these commodity input materials has a direct impact on our continued abilitycosts. If we are unable to manage thesecommodity fluctuations through pricing actions, cost savings projects and sourcing decisions and certain hedging transactions, as well as through consistent productivity improvements.improvements, it may adversely impact our gross margin, operating margin and net earnings. Sales could also be adversely impacted following pricing actions if there is a negative impact on consumption of our products. We also must manage our debt and currency exposure, especially in certain countries with currency exchange controls, such as Venezuela, China, India, Egypt and Argentina. We needstrive to maintain key manufacturing and supply arrangements, including sole supplier and manufacturing plant arrangements, and successfully manage any disruptions at Company manufacturing sites. We must implement, achieve and sustain cost improvement plans, including our outsourcing projects, supply chain optimization and those related to general overhead and workforce optimization. Successfully managingAs discussed later in the MD&A, we initiated certain non-manufacturing overhead reduction projects along with manufacturing and other supply chain cost improvements projects in 2012. If we are not successful in executing these changes, including identifying, developingthere could be a negative impact on our operating margin and retaining key employees, is critical to our success.net earnings.
Global Economic ConditionsForeign Exchange.. Demand for our products We have both translation and transaction exposure to the fluctuation of exchange rates. Translation exposures relate to exchange rate impacts of measuring income statements of foreign subsidiaries that do not use the U.S. dollar as their functional currency. Transaction exposures relate to 1) the impact from input costs that are denominated in a currency other than the local reporting currency and 2) the revaluation of transaction-related working capital balances denominated in currencies other than the functional currency. In 2016, 2015 and 2014, the U.S. dollar has strengthened versus a correlationnumber of foreign currencies leading to global macroeconomic factors. The current macroeconomic factors remain dynamic. Economic changes, terrorist activity, political unrestlower sales and natural disasters may result in business interruption, inflation,
 
deflation or decreased demand for our products. Our success will depend, in part,earnings from these foreign exchange impacts. Certain countries experiencing significant exchange rate fluctuations, like Argentina, Brazil, Canada, Egypt, Mexico, Nigeria, Russia and Turkey have had, and could have, a significant impact on our abilitysales, costs and earnings. Increased pricing in response to these fluctuations in foreign currency exchange rates may offset portions of the currency impacts, but could also have a negative impact on consumption of our products, which would affect our sales.
Government Policies. Our net earnings could be affected by changes in U.S. or foreign government tax policies. For example, the U.S. may consider corporate tax reform that could significantly impact the corporate tax rate and change the U.S. tax treatment of international earnings. Additionally, we attempt to carefully manage continued global political and/our debt and currency exposure in certain countries with currency exchange, import authorization and pricing controls, such as Argentina, Egypt, Nigeria and Ukraine. Changes in government policies in these areas might cause an increase or economic uncertainty, especiallydecrease in our significant geographic markets, due to terroristsales, operating margin and other hostile activities or natural disasters. We could also be negatively impacted by a global, regional or national economic crisis, including sovereign risk in the event of a deterioration in the credit worthiness of, or a default by local governments, resulting in a disruption of credit markets. Such events could negatively impact our ability to collect receipts due from governments, including refunds of value added taxes, create significant credit risks relative to our local customers and depository institutions and/or negatively impact our overall liquidity. Additionally, changes in exchange controls and other limits could impact our ability to repatriate earnings from overseas.net earnings.
Regulatory Environment. Changes in laws, regulations and the related interpretations may alter the environment in which we do business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards and tax laws or the enforcement thereof. Our ability to manage regulatory, tax and legal matters (including, but not limited to, product liability, patent and other intellectual property matters) and to resolve pending legal matters within current estimates may impact our results.
RESULTS OF OPERATIONS
The key metrics included in our discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative expensescosts (SG&A), other non-operating items and income taxes. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, the level of initiatives and other activities by competitors, geographic expansion and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as pricing actions (which can also indirectly impact volume), changes in product and geographic mix and foreign currency impacts on sales outside the U.S.
Most of our cost of products sold and SG&A are to some extent variable in nature. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, product and geographic mix (for example, gross margins in developed markets are generally higher than in developing markets 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 to a lesser extent scale impacts (for costs that are fixed or less variable in nature). The primary drivers of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we domay achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. Overhead costs are also variable in nature, but on a relative basis, less so than marketing costs due to our


28The Procter & Gamble Company

ability to leverage our organization and systems infrastructures to support business growth. Accordingly, we generally experience more scale-related impacts for these costs.

In February and November 2012,
16 The Procter & Gamble Company

The Company is in the Company made announcements related tomidst of a productivity and cost savings plan to reduce costs in the areas of supply chain, research and development, marketing and overhead expenses. The plan is designed to accelerate cost reductions by streamlining management decision making, manufacturing and other work processes in order to help fund the Company's growth strategy. The Company expects to incur in excess of $3.5 billion in before-tax restructuring costs over a five-year period (fiscal 2012 through fiscal 2016) as part of this plan. Overall, the costs are expected to deliver in excess of $2.0 billion in before-tax annual savings.
Net Sales
Fiscal year 20132016 compared with fiscal year 20122015
Net sales increased 1%decreased 8% to $84.2$65.3 billion in 20132016 on a 2% increase3% decrease in unit volume.volume versus the prior year period. Volume decreased low single digits in BabyGrooming, Health Care, and Family Care grew mid-single digits. Volume in Fabric Care and& Home Care and Baby, Feminine & Family Care and decreased mid-single digits in Health Care grewBeauty. Volume increased low single digits. Beautydigits in developed regions and declined high single digits in developing regions, in part due to increased pricing to address foreign exchange devaluations and due to the Venezuela deconsolidation and minor brand divestitures. Organic volume wasdeclined mid-single digits in linedeveloping markets. Unfavorable foreign exchange reduced net sales by
6%, while higher pricing drove a 1% favorable impact on net sales. Organic volume decreased 1% and organic sales grew 1% driven by higher pricing.
Fiscal year 2015 compared with fiscal year 2014
Net sales decreased 5% to $70.7 billion in 2015 on a 1% decrease in unit volume versus the prior year. Grooming volume decreased low single digits.year period. Volume grew low single digits in bothFabric & Home Care. Volume decreased low single digits in Baby, Feminine & Family Care, Grooming, Health Care and Beauty. Volume increased low single digits in developed regions and declined low single digits in developing regions. The impact of overall global market growth was partially offset by market share declinesregions due, in certain categories. Price increases added 1%part, to net sales, driven by price increases across all business segments, primarily executed in prior
periodsincreased pricing to offset cost increases and devaluing developing market currencies. Foreignaddress foreign exchange devaluations. Unfavorable foreign exchange reduced net sales by 6%, while higher pricing drove a 2%. favorable impact on net sales. Favorable product mix impact of 1% was offset by acquisition and divestiture activity. Organic volume decreased 1% and organic sales growth was 3%grew 2% driven by both volume and price increases.higher pricing.
Fiscal year 2012 compared with fiscal year 2011
Net sales increased 3% to $83.7 billion in 2012 on unit volume that was consistent with the prior year period. Difficult macroeconomic conditions caused a slowdown in market growth in fiscal 2012, particularly in developed markets. In addition, we initiated a number of price increases across each reportable segment in fiscal 2012, in large part to recover the rising cost of commodities and currency devaluations. These factors negatively impacted volume growth in 2012, but the price increases led to higher overall sales. Volume grew low single digits in Beauty, Grooming, Health Care, and Baby Care and Family Care. Fabric Care and Home Care volume decreased low single digits. Volume grew mid-single digits in developing regions and was down low single digits in developed regions. The impact of overall global market growth was partially offset by market share declines in certain categories. Price increases added 4% to net sales, driven by price increases across all business segments and regions, primarily to help offset commodity costs and devaluing currencies in certain developing markets. Mix reduced net sales by 1% due to unfavorable geographic mix across the Beauty, Grooming, Health Care and Fabric Care and Home Care reportable segments and unfavorable product mix. Foreign exchange was neutral to net sales. Organic sales growth was 3% driven by price increases.

Operating Costs
Comparisons as a percentage of net sales; Years ended June 302013 
Basis Point
Change
  2012 
Basis Point
Change
  20112016 Basis Point Change 2015 Basis Point Change 2014
Gross margin49.6% 30
  49.3% (160)  50.9%49.6% 200
 47.6% 10
 47.5%
Selling, general and administrative expense32.0% 50
  31.5% (30)  31.8%29.0% (10) 29.1% 30
 28.8%
Goodwill and indefinite-lived intangible asset and impairment charges0.4% (150)  1.9% 190
  —%
Operating margin17.2% 130
  15.9% (320)  19.1%20.6% 500
 15.6% (310) 18.7%
Earnings from continuing operations before income taxes17.6% 230
  15.3% (320)  18.5%20.5% 490
 15.6% (260) 18.2%
Net earnings from continuing operations13.5% 240
  11.1% (330)  14.4%15.4% 370
 11.7% (260) 14.3%
Net earnings attributable to Procter & Gamble13.4% 50
 12.9% (170) 14.6%16.1% 620
 9.9% (570) 15.6%

Fiscal year 20132016 compared with fiscal year 20122015
Gross margin expanded 30increased 200 basis points in 2013 to 49.6% of net sales driven by higher pricing andin 2016. Gross margin increased primarily due to:
a 210 basis point positive impact from manufacturing cost savings,
a 110 basis point benefit from lower commodity costs and
a 70 basis point benefit of higher pricing.
These impacts were partially offset by:
a 70 basis point negative impact from unfavorable foreign exchange,
a 70 basis point decrease due to unfavorable product mix caused by the disproportionate decline of higher margin segments like Beauty and by product form mix within the segments,
a 20 basis point decrease from negative scale impacts due to lower volume and
a 20 basis point decline due to incremental restructuring activity.
Total SG&A decreased 8% to $18.9 billion primarily due to reduced overhead spending and a decrease in foreign exchange transaction charges. SG&A as a percentage of net sales declined 10 basis points to 29.0%, as the negative scale
impacts of lower net sales and inflationary impacts were more than offset by cost savings efforts, mainly in overhead spending, and lower foreign exchange transactional charges.
Marketing spending as a percentage of net sales increased 90 basis points due to the negative scale impacts from reduced sales.
Overhead costs as a percentage of net sales decreased 20 basis points, as 90 basis points of productivity savings were partially offset by wage inflation, increased sales personnel in certain businesses, investments in research and development and the negative mixscale impacts from reduced sales.
Lower foreign exchange transactional charges reduced SG&A as a percentage of net sales by approximately 70 basis points. A pre-deconsolidation balance sheet remeasurement charge in Venezuela in the base period drove 20 basis points of this decline. The balance of the reduction relates to lower transactional charges from revaluing receivables and higher commodity costs. payables from transactions denominated in a currency other than a local entity’s functional currency.



The Procter & Gamble Company 17

Fiscal year 2015 compared with fiscal year 2014
Gross margin was positively impacted by 70increased 10 basis points from higher pricing and approximately 160to 47.6% of net sales in 2015. Gross margin benefited from:
a 200 basis pointspoint impact from manufacturing cost savings. Gross margin was negatively impacted by 160savings and
a 90 basis pointspoint benefit from negativehigher pricing.
These impacts were partially offset by:
a 110 basis point impact from unfavorable geographic and product mix, behind disproportionate growth
primarily from declines in the higher than average margin Beauty and Grooming segments as well as within the Fabric & Home Care and Grooming segments,
a 50 basis point impact from unfavorable foreign exchange,
in developing regionsa 40 basis point impact from costs related to initiatives and mid-tier products, both of which have lower gross margins than the Company average. Gross margin was also reduced by capacity investments,
a 30 basis point impact from higher restructuring costs and to a lesser extent by foreign exchange
smaller impacts from lower volume scale and higher commodity costs.
Total SG&A increased 2%decreased 4% to $27.0$20.6 billion, in 2013, drivenas reduced overhead and marketing spending was partially offset by a charge for the balance sheet impact from the devaluation of the officialincreased foreign exchange rate in Venezuelatransaction charges. SG&A as a percentage of net sales increased 30 basis points to 29.1%, as the negative scale impacts of lower net sales and an increase in marketing spending,inflationary impacts were partially


The Procter & Gamble Company29

offset by reduced overhead costscost savings efforts.
Marketing spending as a resultpercentage of the productivity and cost savings plan. SG&Anet sales decreased 60 basis points behind lower spending due to efficiency efforts.
Overhead spending as a percentage of net sales increased 50 basis points to 32.0% largely due to a 40 basis point impact from the Venezuela devaluation charge and a 10 basis point increase in marketing spending as a percentageproductivity savings of net sales. Overhead costs as a percentage of net sales declined 20 basis points, as a 70-basis point benefit from our productivity and cost savings plan and 20 basis points of lower restructuring costs were largely offset by the impact of foreign exchange. This was due to a higher portion of SG&A spending in strengthening currencies as compared to net sales, higher employee wages and benefit costs and increased merchandising investments.
In fiscal 2013 we incurred impairment charges of $308 million ($290 million after-tax) related to the carrying value of goodwill in our Appliances business and the related Braun trade name intangible asset. In fiscal 2012 we incurred impairment charges of $1.6 billion ($1.5 billion after-tax) related to the carrying values of goodwill in our Appliances and Salon Professional businesses and our Koleston Perfect and Wella indefinite-lived intangible assets, which are part of our Salon Professional business. See Note 2 to our Consolidated Financial Statements for more details, including factors leading to the impairment charges. Since goodwill is included in Corporate for internal management and segment reporting, the goodwill impairment charges are included in the Corporate segment. The indefinite-lived intangible asset impairments are also included in the Corporate segment for management and segment reporting.
Fiscal year 2012 compared with fiscal year 2011
Gross margin contracted 160 basis points in 2012 to 49.3% of net sales. The reduction in gross margin was driven mainly by a 230-basis point impact from higher commodity and energy costs. Gross margin was also negatively impacted by 20060 basis points from reduced overhead spending were more than offset by wage inflation, investments in research and development, the negative geographicscale impacts of lower net sales and product mix and by 30higher restructuring costs.
Increased foreign exchange transaction charges added approximately 40 basis points from the impact of increased restructuring spending due to the productivity and cost savings plan. The negative mix resulted from disproportionate growth in developing regions, as developing regions have lower relative gross margins than developed regions. These impacts were partially offset by a 200-basis point impact from increased pricing and a 140-basis point impact from manufacturing cost savings.
Total SG&A increased 3% to $26.4 billion in 2012, driven by higher marketing spending to support initiative activity and a $510 million increase in restructuring spending from our productivity and cost savings plan, partially offset by a reduction in competition law fines (see Item 3 of this Form 10-K and Note 11 to our Consolidated Financial Statements), which were $303 million in 2011 compared to $75 million in 2012. SG&A as a percentage of net sales, decreased 30 basis points to 31.5%, as reduced competition law finescurrent year foreign currency transaction charges (from revaluing receivables and the impact of increased scale leverage on marketing and overhead costs from higher salespayables denominated in a currency other than a local entity’s functional currency) were partially offset by 60 basis pointslower year-on-year charges for Venezuela remeasurement and devaluation.
During fiscal 2015, the Company incurred a $2.0 billion ($2.1 billion after tax) charge related to the deconsolidation of incremental restructuring costs.its Venezuelan subsidiaries. See the “Venezuela Impacts” later in the Results of Operations section.
Non-Operating Items
Fiscal year 20132016 compared with fiscal year 20122015
Interest expense decreased 13%was $579 million in 2013 to $6672016, a decrease of $47 million versus the prior year due to lower interest rates on floating-rate debt. average debt balances.
Interest income increased 13%was $182 million in 20132016, an increase of $33 million versus the prior year primarily due to $87increasing cash, cash equivalents and investment securities balances.
Other non-operating income, which primarily includes divestiture gains and investment income, decreased $115 million to $325 million, due primarily to lower gains on minor brand divestitures. In 2016, we had approximately $300 million in minor brand divestiture gains, including Escudo and certain hair care brands in Europe and IMEA. The prior year acquisition and divestiture activities included approximately $450 million in divestiture gains, including Zest, Camay, Fekkai and Wash & Go hair care brands and Vaposteam.
Fiscal year 2015 compared with fiscal year 2014
Interest expense was $626 million in 2015 a decrease of $83 million versus the prior year due to lower average debt balances and a decrease in weighted average interest rates.
Interest income was $149 million in 2015, an increase of $50 million versus the prior year due to an increase in cash, cash equivalents and debtinvestment securities. Other non-operating income, net primarily includes divestiture gains and investment income.
Other non-operating income increased $757$231 million to $942$440 million, primarily due to minor brand divestiture gains. In 2015, we had approximately $450 million in 2013 mainly due to netminor brand divestiture gains, including Zest, Camay, Fekkai and Wash & Go hair care brands and Vaposteam. The prior year acquisition and divestiture activities. A holding gain of $631activities included approximately $150 million resulting from the purchase of the balance of P&G's Baby Care and Feminine Care joint venture in Iberia and a gain of approximately $250 million fromdivestiture gains, primarily related to the sale of our Italian bleach business, bothbusinesses in the current year, were partially offset by a $130 million divestiture gain from the PUR water filtrationEurope, IMEA and Latin America, our Pert hair care business in the prior year period.Latin America and MDVIP.
Income Taxes
Fiscal year 20122016 compared with fiscal year 2011
In 2012, interest expense decreased 7% to $769 million, due to lower interest rates on floating-rate debt and a decrease in average debt outstanding. Interest income increased 24% in 2012 to $77 million, due to an increase in cash, cash equivalents and debt securities. Other non-operating income, net decreased $86 million to $185 million in 2012 mainly behind the impact of minor brand divestitures. A divestiture gain from the sale of the PUR water filtration brand in fiscal 2012 was less than the Zest and Infasil divestiture gains in fiscal 2011.
Income Taxes
Fiscal year 2013 compared with fiscal year 20122015
The effective tax rate on continuing operations decreased 390increased 30 basis points to 23.2%25.0% in 2013. The primary drivers of this rate decline were as follows:
Approximately 210 basis points due to the non-deductibility of impairment charges related to our Appliances and Salon Professional businesses, which were higher in the base period versus the current year.
Approximately 100 basis points due to the tax impacts from acquisition and divestiture activity (primarily the non-taxable gain on the purchase of the balance of the Baby Care and Feminine Care joint venture in Iberia).
Approximately 50 basis points due to the net impact of favorable discrete adjustments related to uncertain income tax positions. The current year net benefit was $275, or 180 basis points, versus a net benefit of 130 basis points in the prior year.
Approximately 20 basis points from the impact of the Venezuela currency devaluation.





30The Procter & Gamble Company

Fiscal year 2012 compared with fiscal year 2011
In 2012, the effective tax rate on continuing operations increased 510 basis points to 27.1% primarily2016 mainly due to a 250-basis260 basis point negative impact from the non-deductibilityunfavorable geographic mix of impairment chargesearnings, a 130 basis point impact in fiscal 2012the current year from the establishment of valuation allowances on deferred tax assets related to net operating loss carryforwards and the net impact of favorable discrete adjustments related to uncertain income tax positions which drove 250(which netted to 55 basis points in the current year versus 85 basis points in the prior year), partially offset by a 400 basis point decrease related to the prior year non-deductibility of the tax rate difference. The net benefit from favorable discrete adjustments was $165 million in fiscal 2012, which netted to 130 basis points, versus 380 basis points of net benefits in fiscal 2011.Venezuelan deconsolidation charge.
Net Earnings
Fiscal year 20132015 compared with fiscal year 20122014
The effective tax rate on continuing operations increased 360 basis points to 24.7% in 2015 mainly due to the non-deductibility of the $2.0 billion Venezuelan deconsolidation charge. The rate increase caused by lower favorable discrete adjustments related to uncertain income tax positions (the net benefit was 80 basis points in fiscal 2015 versus 170 basis points in fiscal 2014) was largely offset by a decrease related to favorable geographic earnings mix.
Net Earnings
Fiscal year 2016 compared with fiscal year 2015
Net earnings from continuing operations increased $2.1$1.7 billion or 22%21% to $11.4$10.0 billion in 2013. The combination of the net year-over-year impact of acquisition and divestiture gains and the net year-over-year decline in impairment charges drove $1.9 billion of the increase. Earnings also increasedprimarily due to the increasebase period charge of $2.1 billion after-tax related to the deconsolidation of


18 The Procter & Gamble Company

Venezuelan subsidiaries. Earnings also declined due to the impact of the decline in net sales in fiscal 2016, partially offset by improved gross margin and the 30-basis point gross margin expansionreduction in SG&A. Foreign exchange impacts reduced net earnings by about $880 million in 2016 due to weakening of certain key currencies against the current year.U.S. dollar, primarily in Argentina, Brazil, Canada, Mexico and Russia. This impact includes both transactional charges as discussed above in Operating Costs and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars.
Net earnings from discontinued operations decreased $1.6improved $1.7 billion in 20132016 to $577 million. Batteries drove a $2.1 billion improvement due primarily to a $1.8 billion reduction in after-tax impairment charges in the Batteries business ($350 million in the current year compared to $2.1 billion in the base period) and a $422 million after-tax gain in the current period from the sale of the Batteries business. This was partially offset by a decrease in the earnings of the Beauty Brands (see Note 4 to the gain on the divestiture of the snacks business and the earnings from the snacks business prior to the divestiture in the prior year period. Consolidated Financial Statements).
Net earnings attributable to Procter & Gamble increased $556 million,$3.5 billion, or 5%49% to $11.3$10.5 billion.
Diluted net earnings per share from continuing operations increased 24%$0.65, or 23%, to $3.86$3.49 due to the increase in net earnings and a reductiondecline in shares outstanding. Thethe average number of shares outstanding decreased due to $6.0 billion of treasury share repurchases under our publicly announced share repurchase program, partially offset by shares issued under share-based compensation plans.outstanding. Diluted net earnings per share from discontinued operations was $0.54 in the prior year period (zero in the current period) due towere $0.20 primarily resulting from the gain on the divestituresale of the snacks business and earningsBatteries business. This was an improvement of $0.60 per share versus the snacks business prior to the divestiture.year. Diluted net earnings per share increased 5%$1.25, or 51%, to $3.86.$3.69.
Core EPS increased 5%decreased 2% to $4.05 primarily$3.67. Core EPS in fiscal year 2016 represents diluted net earnings per share from continuing operations excluding charges for certain European legal matters and incremental restructuring related to our productivity and cost savings plan. The decline was driven by reduced net sales and foreign exchange impacts, partially offset by gross margin expansion.
Fiscal year 2015 compared with fiscal year 2014
Net earnings from continuing operations decreased $2.4 billion or 22% to $8.3 billion due to increasedthe $2.1 billion after-tax charge related to the deconsolidation of Venezuelan subsidiaries and the decline in net sales, gross margin expansionpartially offset by reduced SG&A. Foreign exchange impacts negatively affected net earnings by approximately $1.3 billion in 2015 due to the weakening of certain key currencies against the U.S. dollar, primarily in Russia, Ukraine, Venezuela and Argentina, partially offset by lower after-tax charges related to balance sheet remeasurement charges in Venezuela.
Net earnings from discontinued operations decreased $2.3 billion in 2015 due primarily to $2.1 billion of after-tax impairment charges in our Batteries business (see Note 4 to the Consolidated Financial Statements) and the absence of fiscal 2015 earnings from our divested Pet Care business. Net earnings attributable to Procter & Gamble decreased $4.6 billion, or 40% to $7.0 billion.
Diluted net earnings per share from continuing operations decreased $0.79, or 22%, to $2.84 due to the decrease in net earnings. We had a diluted net loss per share from discontinued operations of $0.40 due primarily to the impairment charges on the Batteries business. This was a reduction in shares outstanding.of $0.78 per share versus the prior year. Diluted net earnings per share decreased $1.57, or 39%, to $2.44.
Core EPS decreased 2% to $3.76. Core EPS represents diluted net earnings per share from continuing operations excluding the current period chargecharges for theVenezuelan deconsolidation, balance sheet impactremeasurement charges from the devaluation of the official foreign exchange ratepolicy changes and devaluation in Venezuela, the current year holding gain on the purchase of the balance of our Iberian joint venture and charges in both years for certain European legal matters and incremental restructuring related to our productivity and cost savings plan and impairments of goodwill and indefinite-lived intangible assets.
Fiscal year 2012 compared with fiscal year 2011
In 2012,plan. The decline was driven by reduced net earnings from continuing operations decreased 20% to $9.3 billion as an increase in net sales, was more than
offset by the impact of impairment charges, incremental restructuring charges and an increase in income taxes. Operating margin declined 320 basis points due primarily to a 190-basis point impact from goodwill and intangible assets impairment charges in our Appliances and Salon Professional businesses and an 85-basis point impact from incremental restructuring charges. The impact of higher commodity costs and negative product mix was largely offset by higher pricing, manufacturing cost savings and increased scale leverage.
Net earnings from discontinued operations increased $1.4 billion in 2012 due to the gain on the divestiture of the snacks business. Net earnings attributable to Procter & Gamble declined 9% to $10.8 billion.
Diluted net earnings per share from continuing operations decreased 19% in 2012 to $3.12 due to the decline in net earnings, partially offset by minor brand divestiture gains.
Venezuela Impacts
There are a reductionnumber of currency and other operating controls and restrictions in shares outstanding. The reductionVenezuela, which have evolved over time and may continue to evolve in the numberfuture. These evolving conditions resulted in an other-than-temporary lack of shares outstanding was driven by treasury share repurchases of $4.0 billion, which were made under our publicly announced share repurchase program, partially offset by shares issued under share-based compensation plans. Diluted net earnings per share from discontinued operations increased $0.46 due toexchangeability between the gain on the divestiture of the snacks business, partially offset by a decrease in the earnings of the snacks business prior to the divestiture. Diluted net earnings per share decreased 7% from the prior year to $3.66 in fiscal 2012. Core EPS in 2012 decreased 1% to $3.85.
Venezuela Currency Impacts
Venezuela is a highly inflationary economy under U.S. GAAP. As a result, theVenezuelan bolivar and U.S. dollar is the functional currencyand restricted our Venezuelan operations’ ability to pay dividends or pay for our subsidiaries in Venezuela. Any currency remeasurement adjustments for non-dollar denominated monetary assetscertain raw and liabilities held by these subsidiaries and other transactional foreign exchange gains and losses are reflected in earnings.
The Venezuelan government has established one official exchange rate for qualifying dividends and importedpackage materials, finished goods and services. That rate was equal to 4.3 Bolivares Fuertes (VEF) to oneservices denominated in U.S. dollar through February 12, 2013. Effective February 13, 2013, the Venezuelan government devalued its currency relative to the U.S. dollar from 4.3 to 6.3 (official rate). The remeasurement of our balance sheets in 2013 to reflect the impact of the devaluationdollars. For accounting purposes, this resulted in a lack of control over our Venezuelan subsidiaries. Therefore, in accordance with the applicable accounting standards for consolidation, effective June 30, 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of accounting. This resulted in a write-off of all of the net after-tax chargeassets of $236 million ($0.08 per share).  There will also be an ongoing impactour Venezuelan subsidiaries, along with Venezuela related assets held by other subsidiaries. Beginning with the first quarter of fiscal 2016, our financial results only include sales of finished goods to translating our income statement at the new exchange rates.  Moving from the 4.3 rateVenezuelan subsidiaries to the 6.3 rate will reduce future total Company reported net sales by less than 1% on a going basis.  This does not impactextent we receive payments from Venezuela. Accordingly, we no longer include the results of our organic sales growth rate, which excludes the impact of foreign currency changes.  VersusVenezuelan subsidiaries’ operations in our existing business plans, the exchange rate change reduced our reported earnings per share by approximately $0.04 per share in 2013.financial results.



The Procter & Gamble Company31

Transactions at the official exchange rate are subject to CADIVI (Venezuelan government's Foreign Exchange Administrative Commission). Our overall results in Venezuela are reflected in our Consolidated Financial Statements at the official rate, which is currently the rate expected to be applicable to dividend repatriations.
In addition to the official exchange rate, there had been a parallel exchange market (SITME) that was controlled by the Central Bank of Venezuela as the only legal intermediary to execute foreign exchange transactions outside of CADIVI. The published rate was 5.3 through February 12, 2013. The notional amount of transactions that ran through this foreign exchange rate for nonessential goods was restrictive, which for us essentially eliminated our ability to access any foreign exchange rate other than the official CADIVI rate to pay for imported goods and/or manage our local monetary asset balances. When the government devalued its currency in February, 2013, it also eliminated SITME, but established a new exchange rate market program, referred to as SICAD.  As of June 30, 2013, there is little official information available on the new auction process or the underlying auction rates. 
As of June 30, 2013, we had net monetary assets denominated in local currency of $913 million. Local currency balances decreased 14% since June 30, 2012 due to the impact of the February 2013 devaluation and an increase in payments by the government through CADIVI, partially offset by an increase in the net amount of indirect value added taxes (VAT) receivable from the government from goods receipts and shipments. Prior to the February 2013 devaluation, a portion of our net monetary assets denominated in local currency was remeasured using the SITME rate because we planned to use that amount of the net assets (largely cash) to satisfy U.S. dollar denominated liabilities that do not qualify for official rate dollars. The remaining net monetary asset balances had been reflected within our Consolidated Financial Statements at the 4.3 official exchange rate. However, as noted in the preceding paragraph, the parallel SITME market was eliminated at the time of the February 2013 devaluation, and there is little information available on the SICAD mechanism.  Accordingly, all of our net monetary assets are measured at the official 6.3 exchange rate at June 30, 2013.
Additionally, the Venezuelan government enacted a price control law during the second half of fiscal 2012 that negatively impacted the net selling prices of certain products sold in Venezuela.
Depending on the ultimate transparency and liquidity of the SICAD market, it is possible that we may remeasure a 19

portion of our net monetary balances (the amount of the net assets needed to satisfy U.S. dollar denominated liabilities that do not qualify for official rate dollars, approximately $240 million as of June 30, 2013) at the SICAD rate. This would result in an additional devaluation charge. Over time, we intend to restore net sales and profit to levels achieved prior to the devaluation. However, our ability to do so will be impacted by several factors. These include the Company's ability to mitigate the effect of the recently enacted price controls, any potential future devaluation, any further Venezuelan government price or exchange controls, economic conditions and the availability of raw materials and utilities. In addition, depending on the future availability of U.S. dollars at the official rate, our local U.S. dollar needs, our overall repatriation plans, the creditworthiness of the local depository institutions and other creditors and our ability to collect amounts due from customers and the government, including VAT receivable, we may have exposure for our local monetary assets. We also have devaluation exposure for the differential between the current and potential future official exchange rates.
SEGMENT RESULTS
Segment results reflect information on the same basis we use for internal management reporting and performance evaluation. The results of these reportable segments do not include certain non-business unit specific costs such as interest expense, investing activities and certain restructuring and asset impairment costs. These costs are reported in our Corporate segment and are included as part of our Corporate segment discussion. Additionally, as described in Note 122 to the Consolidated Financial Statements, we have investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions and, therefore, do not consolidate these companies for U.S. GAAP purposes ("unconsolidated entities"). Given that certain of these investments are managed as integral parts of the Company's business units, they are accounted for as if they were consolidated subsidiaries for management and segment reporting purposes. This means pre-tax earningsapply blended statutory tax rates in the business units include 100% of each pre-tax income statement component. In determining after-tax earnings in the business units, we eliminate the share of earnings applicable to other ownership interests, in a manner similar to noncontrolling interest, and apply the statutory tax rates.segments. Eliminations to adjust each line itemsegment results to U.S. GAAParrive at our effective tax rate are included in our Corporate segment.Corporate. All references to net earnings throughout the discussion of segment results refer to net earnings from continuing operations.



32The Procter & Gamble Company


Net Sales Change Drivers (2013 vs. 2012)
 
Volume with
Acquisitions
& Divestitures
 
Volume
Excluding
Acquisitions
& Divestitures
 
Foreign
Exchange
 Price Mix Other 
Net Sales
Growth
Beauty0% 0% -2% 2% -1% -1% -2%
Grooming-1% 0% -4% 2% 0% -1% -4%
Health Care3% 3% -3% 1% 1% 1% 3%
Fabric Care and Home Care3% 3% -2% 1% -1% 0% 1%
Baby Care and Family Care4% 4% -2% 1% -1% 0% 2%
TOTAL COMPANY2% 2% -2% 1% 0% 0% 1%

Net Sales Change Drivers (2012 vs. 2011)Net Sales Change Drivers 2016 vs. 2015*
Volume with
Acquisitions
& Divestitures
 
Volume
Excluding
Acquisitions
& Divestitures
 
Foreign
Exchange
 Price Mix Other 
Net Sales
Growth
Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix Other** Net Sales Growth
Beauty2% 2% 0% 3% -3% 0% 2%(5)% (2)% (6)% 2% — % —% (9)%
Grooming1% 1% -1% 2% -1% 0% 1%(2)% (2)% (9)% 5% (2)% —% (8)%
Health Care1% 0% 0% 3% -1% 0% 3%(2)% (2)% (6)% 2% 1 % —% (5)%
Fabric Care and Home Care-1% -1% 0% 5% -1% 0% 3%
Baby Care and Family Care1% 1% 0% 5% 0% 0% 6%
Fabric & Home Care(1)% 1 % (6)% —% — % —% (7)%
Baby, Feminine & Family Care(3)% (2)% (6)% —% — % —% (9)%
TOTAL COMPANY0% 0% 0% 4% -1% 0% 3%(3)% (1)% (6)% 1% — % —% (8)%
 Net Sales Change Drivers 2015 vs. 2014*
 Volume with Acquisitions & Divestitures Volume Excluding Acquisitions & Divestitures Foreign Exchange Price Mix Other** Net Sales Growth
Beauty(3)% (2)% (5)% 2% —% — % (6)%
Grooming(3)% (3)% (8)% 4% —% — % (7)%
Health Care(1)% (1)% (5)% 2% 3% — % (1)%
Fabric & Home Care1 % 1 % (6)% 1% —% (1)% (5)%
Baby, Feminine & Family Care(1)% (1)% (6)% 2% 2% — % (3)%
TOTAL COMPANY(1)% (1)% (6)% 2% 1% (1)% (5)%
* Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
** Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.

BEAUTY
($ millions)2013  Change vs 2012 2012  
Change vs
2011
2016 Change vs. 2015 2015 Change vs. 2014
Volumen/a  0% n/a  +2%N/A (5)% N/A (3)%
Net sales$19,956  -2% $20,318  +2%$11,477 (9)% $12,608 (6)%
Net earnings$2,474  +4% $2,390  -6%$1,975 (9)% $2,181 (5)%
% of Net Sales12.4% 60 bps 11.8% (100) bps
% of net sales17.2% (10) bps 17.3% 10 bps
Fiscal year 20132016 compared with fiscal year 20122015
Beauty net sales decreased 9% to $11.5 billion during the fiscal year on a 5% decrease in unit volume. Unfavorable foreign exchange reduced net sales by 6%. Price increases had a 2% positive impact on net sales. Organic sales were unchanged on organic volume that decreased 2%. Global market share of the Beauty segment decreased 1.0 points. Volume decreased low single digits in developed markets and decreased high single digits in developing markets.
Volume in Hair Care was down mid-single digits. Developed markets declined mid-single digits due to $20.0competitive activity while developing markets declined mid-single digits driven by increased pricing, the Venezuela deconsolidation and minor brand divestitures. Global market share of the hair care category decreased more than a point.
Volume in Skin and Personal Care decreased high single digits, while organic volume decreased low single digits, with the difference attributable to the Camay and Zest brand divestitures and the Venezuela deconsolidation. Organic volume was unchanged in developed regions as commercial innovation was offset by ongoing competitive activity. Organic volume declined mid-single digits in developing regions primarily due to increased pricing and competitive activity. Global market share of the skin and personal care category decreased nearly a point.


20 The Procter & Gamble Company

Net earnings decreased 9% to $2.0 billion primarily due to the reduction in net sales, along with a 10 basis-point decrease in net earnings margin. Net earnings margin decreased due to an increase in SG&A as a percentage of net sales, largely offset by gross margin expansion. Gross margin improved due to productivity savings, increased pricing and lower commodity costs, partially offset by negative mix. SG&A as a percentage of net sales increased as lower marketing and overhead spending from the Company's focus on efficiencies was more than offset by the negative scale impacts from the reduction in sales.
Fiscal year 2015 compared with fiscal year 2014
Beauty net sales decreased 6% to $12.6 billion in 20132015 on a 3% decrease in unit volume. Organic sales were unchanged on a 2% decline in organic volume. Unfavorable foreign exchange reduced net sales by 5%. Increased pricing was a benefit of 2%. Global market share of the Beauty segment decreased 0.6 points. Volume decreased low single digits in developed markets and was down mid-single digits in developing markets.
Volume in Hair Care decreased low single digits in both developed and developing markets following minor divestitures and competitive activity. Global market share of the hair care category was down more than half a point.
Volume in Skin and Personal Care was down mid-single digits, driven by a high single-digits decline in developing markets, primarily due to decreases in skin care and personal cleansing due to ongoing competitive activity. Volume was unchanged in developed markets. Global market share of the skin and personal care category was down half a point.
Net earnings decreased 5% to $2.2 billion primarily due to lower volume that wasand the currency-driven reduction in linenet sales. Net earnings margin increased 10 basis points primarily due to a reduction in SG&A as a percent of sales, behind lower spending from the Company's focus on marketing efficiencies.
GROOMING
($ millions)2016 Change vs. 2015 2015 Change vs. 2014
VolumeN/A (2)% N/A (3)%
Net sales$6,815 (8)% $7,441 (7)%
Net earnings$1,548 (13)% $1,787 (9)%
% of net sales22.7% (130) bps 24.0% (40) bps
Fiscal year 2016 compared with fiscal year 2015
Grooming net sales decreased 8% to $6.8 billion during the priorfiscal year period.on a 2% decrease in unit volume. Unfavorable foreign exchange reduced net sales by 9%. Price increases in Shave Care contributed 5% to net sales. Unfavorable product mix decreased net sales by 2% due to a higher relative mix of disposable razors, which have lower than segment average selling prices compared to system razor cartridges. Organic sales increased 2%. Global market share of the Grooming segment decreased 1.1 points. Volume decreased low single digits in developed and developing regions.
Shave Care volume decreased low single digits in both developed and developing regions due to competitive activity and increased pricing. Global market share of the shave care category decreased more than half a point.
Volume in Appliances was up mid-single digits due to a mid-single-digit increase in developed regions from product innovation. Volume in developing regions increased low single digits due to growth from product innovation, partially offset by reductions due to increased pricing. Global market share of the Appliances category decreased more than half a point.
Net earnings decreased 13% to $1.5 billion due to the reduction in net sales and a 130 basis-point decrease in net earnings margin. Net earnings margin decreased due to increased SG&A as a percentage of net sales partially offset by a lower tax rate. Gross margin was unchanged as the benefits of increased pricing and productivity efforts were largely offset by unfavorable foreign exchange impacts and negative product mix caused by an increase in the proportion of disposable razor sales compared to system razor cartridges. SG&A as a percentage of net sales increased due to increased marketing spending and the negative scale impact of lower net sales. The tax rate declined due to the geographic mix of earnings.
Fiscal year 2015 compared with fiscal year 2014
Grooming net sales decreased 7% to $7.4 billion in 2015 on a 3% decrease in unit volume. Organic sales increased 1%. Price increases in blades and razors and appliances contributed 4% to net sales while unfavorable foreign exchange reduced net sales by 8%. Global market share of the Grooming segment decreased 0.1 points versus year ago. Volume decreased low single digits in both developed and developing regions.
Shave Care volume decreased low single digits due to a mid-single-digit decline in developed regions from lower trade inventory levels and a low-single digit decrease in developing regions following increased pricing. Global market share of the shave care category was up slightly.
Volume in Appliances increased mid-single digits due to mid-single-digit growth in developed markets and low single-digit growth in developing markets behind product innovation and market growth. Global market share of the Appliances category was flat.
Net earnings decreased 9% to $1.8 billion due to the decline in net sales and a 40 basis-point decrease in net earnings margin. Net earnings margin decreased due to higher SG&A spending as a percent of sales. Decreased spending due to marketing efficiencies and overhead reductions did not keep pace with the currency-driven reduction in net sales. Gross margin was unchanged as negative geographic mix from a disproportionate decline in developed regions was offset by manufacturing cost savings.


The Procter & Gamble Company 21

HEALTH CARE
($ millions)2016 Change vs. 2015 2015 Change vs. 2014
VolumeN/A (2)% N/A (1)%
Net sales$7,350 (5)% $7,713 (1)%
Net earnings$1,250 7% $1,167 8%
% of net sales17.0% 190 bps 15.1% 120 bps
Fiscal year 2016 compared with fiscal year 2015
Health Care net sales were down 5% to $7.4 billion during the fiscal year on a 2% decrease in unit volume. Unfavorable foreign exchange reduced net sales by 6%. Price increases contributed 2% to net sales, growth. Unfavorablemainly in developing markets. Favorable geographic mix reducedincreased net sales 1%, primarily driven by 1% due to disproportionate growtha decline in Oral Care volume in developing regions, which have lower than segment average selling prices. Organic sales increased 2%. Global market share of the Health Care segment decreased 0.7 points. Volume was up low single digits in developed regions and declined high single digits in developing regions.
Oral Care volume declined low single digits due to a high single-digit decrease in developing regions caused by increased pricing, competitive activity and reduced customer inventory. Volume in developed regions increased low single digits driven by product innovation. Global market share of the oral care category was down less than a point.
Volume in Personal Health Care decreased mid-single digits primarily due to a mid-single-digit decrease in developed regions driven by competitive activity and a weak cough/cold season. Volume in developing markets decreased low single digits due to increased pricing. Global market share of the personal health care category decreased half a point.
Net earnings increased 7% to $1.3 billion as the reduction in net sales was more than offset by a 190 basis-point increase in net earnings margin. Gross margin increased primarily due to manufacturing cost savings and increased pricing. SG&A as a percentage of net sales decreased primarily due to reduced marketing spending from the focus on productivity and cost savings efforts.
Fiscal year 2015 compared with fiscal year 2014
Health Care net sales declined 1% to $7.7 billion in 2015 on a 1% decline in unit volume. Organic sales increased 4%. Favorable geographic and product mix increased net sales 3%, primarily driven by Oral Care growth in developed markets, which has higher average sales prices. Increased pricing added 2% to net sales. Unfavorable foreign exchange reduced net sales by 2%. The mix impact of minor brand divestitures reduced net sales by 1%5%. Global market share of the BeautyHealth Care segment decreased 0.50.3 points. Volume increased low single digits in developed regions but decreased mid-single digits in developing markets andregions.
Oral Care volume decreased low single digits as a mid-single-digit decline in developing regions due to competitive activity and following increased pricing was
partially offset by a low single-digit increase in developed regions. regions from product innovation. Global market share of the oral care category was flat.
Volume in HairPersonal Health Care and Color was in line with the prior year perioddecreased low single digits due to a low single-digit increase in developing regions from market growth and innovation offset by a low single-digit declinedecrease in developed regions from reduced shipments as a result of price gaps versus competition.competitive activity. Volume in developing markets was unchanged. Global market share of the hairpersonal health care and color category was down more than half a point. Volume in Beauty Care was in line with the prior year period. A low
single-digit volume increase in personal cleansing and a mid-single-digit increase in deodorants, driven by innovation and market growth in developing regions, was offset by a mid-single-digit decline in facial skin care, where global market share decreased about a point. Volume in Salon Professional was in line with the prior year period due to mid-single-digit growth in developing markets behind new innovations, offset by a low single-digit decline in developed regions from market contraction. Volume in Prestige was in line with the prior year period due to minor brand divestitures and market contraction in Western Europe, offset by innovation and market growth in developing markets. Organic volume in Prestige increased low single digits.
Net earnings increased 4%8% to $2.5$1.2 billion as lowerthe reduction in net sales werewas more than offset by a 60-basis point120 basis-point increase in net earnings margin. Net earnings margin increased due to gross margin expansion a decrease inand reduced SG&A as a percentage of sales and a lower effective tax rate. Gross margin increased behind manufacturing cost savings and higher pricing. SG&A as a percentage of net sales declined largely due to reduced overhead spending. The effective tax rate declined due to the geographic mix of earnings.
Fiscal year 2012 compared with fiscal year 2011
Beauty net sales increased 2% to $20.3 billion in 2012 on unit volume growth of 2%. Organic sales also grew 2% on 2% organic volume growth. Price increases contributed 3% to net sales growth. Mix negatively impacted net sales by 3% behind a decrease in Salon Professional and


The Procter & Gamble Company33

disproportionate growth in developing regions, which have lower than segment average selling prices. Global market share of the Beauty segment decreased 0.3 points. Volume increased mid-single digits in developing regions while developed region volume decreased low single digits. Volume in Hair Care and Color grew mid-single digits behind high single-digit growth in developing regions led by Pantene initiatives and Head & Shoulders geographic expansion. Volume in developed regions was down low single digits due to competitive activity. Global market share of the hair care category was unchanged. Volume in Beauty Care decreased mid-single digits due to the Zest and Infasil divestitures and the impact of competitive activity in North America and Western Europe which contributed to about half a point of global share loss. Volume in Salon Professional was down high single digits mainly due to market contraction in Europe and the impact of competitive activity. Volume in Prestige Products increased mid-single digits driven by initiative activity, partially offset by minor brand divestitures.
Net earnings decreased 6% to $2.4 billion as higher net sales were more than offset by a 100-basis point decrease in net earnings margin. Net earnings margin decreased due to gross margin contraction partially offset by lower SG&Aspending as a percentage of net sales. Gross margin decreasedincreased primarily due to anthe impact of higher pricing and manufacturing cost savings. SG&A declined as a percentage of net sales due to a focus on marketing spending efficiencies.
FABRIC & HOME CARE
($ millions)2016 Change vs. 2015 2015 Change vs. 2014
VolumeN/A (1)% N/A 1%
Net sales$20,730 (7)% $22,274 (5)%
Net earnings$2,778 5% $2,634 (5)%
% of net sales13.4% 160 bps 11.8% —
Fiscal year 2016 compared with fiscal year 2015
Fabric & Home Care net sales for the fiscal year were down 7% to $20.7 billion on unit volume that declined 1%. Unfavorable foreign exchange reduced net sales by 6%. Organic sales increased 1% on a 1% increase in commodity costsorganic volume, which excludes minor brand divestitures and unfavorable geographicthe Venezuela deconsolidation. Global market share of the Fabric & Home Care segment decreased 0.2 points. Volume increased mid-single digits in developed regions and was down high single digits in developing regions.
Fabric Care volume declined low single digits due to a double-digit decrease in developing regions driven by increased pricing, reduced distribution of less profitable brands, minor brand divestitures and the Venezuela deconsolidation. Organic volume in developing regions decreased high single digits. Volume in developed markets increased mid-single digits due to innovation and increased marketing. Global market share of the fabric care category was flat.
Home Care volume increased low single digits. Developed market volume increased low single digits as benefits from product mix,innovation more than offset impacts from competitive activity. This was partially offset by a low single-digit decrease in developing regions following increased pricing. Global market share of the home care category was down slightly.
Net earnings increased 5% to $2.8 billion behind a 160 basis-point increase in net earnings margin, which more than offset the reduction in net sales. Net earnings margin increased due to gross margin expansion, partially offset by increased SG&A as a percentage of net sales. Increased gross margin was driven by manufacturing cost savings and higher pricing. lower commodity costs.


22 The Procter & Gamble Company

SG&A as a percentage of net sales decreasedincreased due to an increase in marketing spending and the negative scale leverageimpacts from increasedthe reduction in net sales.
GROOMING
($ millions)2013  Change vs 2012 2012  
Change vs
2011
Volumen/a  -1% n/a  +1%
Net sales$8,038  -4% $8,339  +1%
Net earnings$1,837  +2% $1,807  +2%
% of Net Sales22.9% 120 bps 21.7% 10 bps
Fiscal year 20132015 compared with fiscal year 20122014
GroomingFabric & Home Care net sales decreased 4%5% to $8.0$22.3 billion in 20132015 on a 1% decreaseincrease in unit volume. Organic sales were upincreased 2% on organic volume that was in line with the prior year period. Price increases contributed 2% to net sales growth.. Unfavorable foreign exchange reduced net sales by 4%. The6%, while pricing added 1% to net sales, mix was neutral, and minor brand divestitures had a negative impact of the Braun household appliances business divestiture reduced net sales byabout 1%. Global market share of the GroomingFabric & Home Care segment increased 0.4decreased 0.1 points. Volume increased low single digits in developingdeveloped regions and decreased mid-single digitswas unchanged in developeddeveloping regions. Shave
Fabric Care volume increased low single digits due to low single-digit growth in developingdeveloped regions primarily behind market growth and innovation expansion, partially offset by a low single-digit decreaseproduct innovation. Volume was unchanged in developed regions primarily due to market contraction in Western Europe.developing regions. Global market share of the blades and razorsfabric care category was up less than half a point. Volume in Appliances decreased double digitsflat.
Home Care volume was unchanged as decreases due to
the sale of the Braun household appliances business, competitive activity, mainly in developed markets, were offset by increases from product innovation and market contraction. Organic volume in Appliances declined high single digits.expanded distribution. Global market share of the applianceshome care category decreasedwas down nearly half a point.
Net earnings increased 2%decreased 5% to $1.8$2.6 billion due to a 120-basis point increase inthe net earnings margin, partially offset by the decrease in net sales. Net earnings margin increased primarily due to gross margin expansion.sales reduction. Gross margin increased duewas unchanged as negative product mix impacts from investments to pricing andexpand new innovations globally were offset by manufacturing cost savings. SG&A as a percentagepercent of net sales decreased nominallywas unchanged as increasedlower spending due to marketing spending was offset byand overhead efficiencies kept pace with reduced overhead costs.sales.
BABY, FEMININE & FAMILY CARE
($ millions)2016 Change vs. 2015 2015 Change vs. 2014
VolumeN/A (3)% N/A (1)%
Net sales$18,505 (9)% $20,247 (3)%
Net earnings$2,650 (10)% $2,938 —%
% of net sales14.3% (20) bps 14.5% 50 bps
Fiscal year 20122016 compared with fiscal year 20112015
GroomingBaby, Feminine & Family Care net sales increased 1%decreased 9% to $8.3$18.5 billion in 2012during the fiscal year on a 1% increase3% decline in unit volume. Organic sales were up 2%. Price increases contributed 2% to net sales growth. Unfavorable geographic and product mix decreasedforeign exchange reduced net sales by 6%. Organic sales declined 1% mainly due to disproportionate growthon a 2% decline in developing markets, which have lower than segment average selling prices. Unfavorable foreign exchange decreased net sales growth by 1%.organic volume. Global market share of the GroomingBaby, Feminine & Family Care segment decreased 0.21.1 points. Volume grew mid-single digits in developing regions due to initiative activity and market growth and decreasedincreased low single digits in developed regions primarilyand decreased double digits in developing regions.
Volume in Baby Care was down mid-single digits due to a high single-digit decrease in developing regions caused by price increases in the previous fiscal year, the Venezuela deconsolidation and competitive activity. VolumeOrganic volume in Shave Caredeveloping markets was down mid-single digits. Volume was up low single digits due to mid-single-digit growth in developingdeveloped regions behind initiatives, Fusion ProGlide geographic expansionas product innovation and market growth partiallymore than offset by a low single-digit decrease in developed regions due to market contraction and the impact of competitive activity. Global market share of the blades and razors baby care
category was unchanged. decreased less than two points, primarily attributable to developing markets.
Volume in Appliances decreased mid-singleFeminine Care declined low single digits due to a mid-single-digit decrease in developing regions caused by competitive activity and price increases in the previous fiscal year, partially offset by market contraction in Western Europe and the impact of competitive activity.growth. In developed regions, volume was unchanged. Global market share of the dry shavefeminine care category was down over 2 points.decreased more than half a point.
Volume in Family Care decreased low single digits due to a double-digit decline in developing regions driven by the discontinuation of non-strategic products. Volume in developed regions increased low single digits due to product innovation and increased merchandising. In the U.S., all-outlet share of the family care category decreased nearly half a point.
Net earnings increased 2%decreased 10% to $1.8$2.7 billion primarily due to higher net sales and a 10-basis point increasethe reduction in net earnings margin. The netsales. Net earnings margin increasedecreased 20 basis points as higher gross margin was drivenmore than offset by a decreasean increase in SG&A as a percentage of net sales largelyand a higher tax rate. Gross margin increased driven by manufacturing cost savings and lower commodity costs, partially offset by gross margin contraction.negative product mix. SG&A as a percentage of net sales decreasedincreased due to reductionsthe negative scale impact from the reduction in both overhead and marketing spending. Gross margin decreased primarilynet sales. The higher tax rate versus the prior year was due to an increase in commodity costs and unfavorablethe geographic and product mix partially offset by price increases.of earnings.








34The Procter & Gamble Company

HEALTH CARE
($ millions)2013  Change vs 2012 2012  
Change vs
2011
Volumen/a  +3% n/a  +1%
Net sales$12,830  +3% $12,421  +3%
Net earnings$1,898  +4% $1,826  +2%
% of Net Sales14.8% 10 bps 14.7% (20) bps
Fiscal year 20132015 compared with fiscal year 20122014
HealthBaby, Feminine & Family Care net sales increasedwere down 3% to $12.8$20.2 billion in 20132015 on a 3% increase1% decline in unit volume. Organic sales were up 5%3%. Price increases, contributed 1% to net sales growth. Favorable product mix, partially offset by unfavorable geographic mix,primarily in Baby Care, increased net sales by 1%2%. Favorable geographic mix from higher developed market volume in both Feminine Care and Baby Care and from product mix in Feminine Care increased net sales by 2%. Unfavorable foreign exchange reduced net sales by 3%. The mix impact from acquisitions and divestitures increased net sales by 1%6%. Global market share of the health careBaby, Feminine & Family Care segment decreased 0.30.6 points. Volume increased mid-single digits in developing regions and increased low single digits in developed regions and decreased high single digits in developing regions. Oral
Volume in Baby Care volume increased mid-singledecreased low single digits due to geographic expansion, innovation and market growth. Global market share of the oral care category was down slightly. Volume in Personal Health Care increased mid-single digits partially due to a net increase from prior year acquisition and divestiture activity (the addition of the PGT Healthcare partnership and New Chapter VMS, partially offset by the divestiture of the PuR business). Organic volume increased low single digits primarily due to the launch of ZzzQuil and geographic expansion for Vicks. Volume in Feminine Care increased low single digits with mid-single-digit growthdecrease in developing markets behind market growth and innovationregions following increased pricing, partially offset by a low single-digit decreaseincrease in developed regions from product innovation. Global market share of the baby care category decreased less than a point.
Volume in Feminine Care decreased low single digits as high single-digit decline in developing regions due to increased promotional activity from competition and market contraction.increased pricing was partially offset by a mid-single-digit increase in developed regions from product innovation, including the entry into the female adult incontinence category. Global market share of the feminine care category was down halfflat.
Volume in Family Care was unchanged as low single-digit growth in developed regions was offset by a double-digit decline in developing regions due to discontinuation of lower priced product offerings. In the U.S., all-outlet share of the family care category decreased less than a point.


The Procter & Gamble Company 23

Net earnings increased 4% to $1.9were unchanged at $2.9 billion due to higheras the reduction in net sales andwas offset by a 10-basis point50 basis-point increase in net earnings margin. Net earnings margin increased due to a reduction in overhead spending,higher gross margin, partially offset by an increase in marketing spending and gross margin contraction. Gross margin decreased due to increased commodity costs and supply chain investments, partially offset by higher pricing and manufacturing cost savings.
Fiscal year 2012 compared with fiscal year 2011
Health Care net sales increased 3% to $12.4 billion in 2012 on 1% growth in unit volume. Organic sales were up 2% on flat organic volume. Price increases contributed 3% to net sales growth. Mix negatively impacted net sales by 1% due to disproportionate growth in certain developing countries and products with lower than segment average selling prices. Global market share of the Health Care segment decreased 0.1 points. Volume increased mid-single digits in developing regions and decreased low single digits in developed regions. Oral Care volume was in line with the
prior year period as the expansion of Oral-B toothpaste in Western Europe and Latin America was offset by the impact of competitive activity in developed markets and Asia and lost volume following price increases in Asia. Global market share of the oral care category was down slightly. Volume in Personal Health Care increased low single digits driven by the addition of the PGT Healthcare partnership. Organic volume was down low single digits as the benefits from market growth were more than offset by lower shipments of Prilosec OTC in North America. All-outlet value share of the U.S. personal health care market was down slightly. Volume in Feminine Care was up low single digits driven by mid-single-digit growth in developing markets due to market growth and initiative activity in India, Brazil and CEEMEA. Feminine Care global market share was down about half a point.
Net earnings increased 2% to $1.8 billion behind higher net sales partially offset by a 20-basis point decrease in net earnings margin. Net earnings margin decreased due to gross margin contraction, partially offset by lower SG&A as a percentagepercent of net sales. Gross margin declined due to higher commodity costs and unfavorable product and geographic mix, partially offset by manufacturing cost savings and price increases. SG&A as a percentage of net sales decreased primarily due to scale leverage from increased sales.
FABRIC CARE AND HOME CARE
($ millions)2013  Change vs 2012 2012  
Change vs
2011
Volumen/a  +3% n/a  -1%
Net sales$27,448  +1% $27,254  +3%
Net earnings$3,126  +7% $2,915  -6%
% of Net Sales11.4% 70 bps 10.7% (100) bps
Fiscal year 2013 compared with fiscal year 2012
Fabric Care and Home Care net sales increased 1% in 2013 to $27.4 billion on a 3%The increase in unit volume. Organic sales were up 3%. Price increases contributed 1% to net sales growth. Unfavorable product mix decreased net sales by 1%gross margin was driven by a reduction in Pet Care volume, which has higher than segment average selling prices. Unfavorable foreign exchange reduced net sales by 2%. Global market share of the Fabric Care and Home Care segment decreased 0.3 points. Volume increased mid-single digits in developing regions and low single digits in developed regions. Fabric Care volume increased low single digits behind low single-digit growth in developed regions and mid-single-digit growth in developing regions, driven primarily by Asia. Overall growth due to innovation and market growth was partially offset by the impacts of competitive activity. Global market share of the fabric care category decreased more than half a point. Home Care volume increased mid-single digits driven by a high single-digit increase in developing markets, behind innovation and distribution expansion, and a low single-digit increase in developed markets primarily due to the impact of reduced


The Procter & Gamble Company35

pricing in North America. Global market share of the home care category was unchanged. Batteries volume increased low single digits due to a mid-single-digit increase in developing regions from market growth and geographic expansion, partially offset by a low single-digit decrease in developed markets due to market contraction and share losses, primarily behind higher pricing in Western Europe to improve the margin structure. Global market share of the batteries category was unchanged. Pet Care volume decreased mid-single digits due to competitive activity and the impact of product recalls for Natura in developed markets. Volume was in line with the prior year in developing regions. Global market share of the pet care category was down less than half a point.
Net earnings increased 7% to $3.1 billion due to a 70-basis point increase in net earnings margin and the increase in net sales. Net earnings margin increased mainly due to gross margin expansion. Gross margin increased due to higher pricing and manufacturing cost savings, partially offset by higher commodity costs and the impact from product recalls on the Natura brand.foreign exchange. SG&A as a percentagepercent of net sales was nearly unchanged,increased as increased marketing spending was largely offset by reduced overhead costs.
Fiscal year 2012 comparedreductions did not keep pace with fiscal year 2011
Fabric Care and Home Care net sales increased 3% to $27.3 billion in 2012. Unit volume decreased 1%. Organic sales were up 3%. Price increases contributed 5% to net sales growth. Mix negatively impacted net sales growth by 1% due to disproportionate growth of mid-tier product lines and developing regions, which have lower than segment average selling prices. Global market share of the Fabric Care and Home Care segment decreased 0.3 points. Volume in developing regions grew mid-single digits, while volume in developed regions decreased mid-single digits. Fabric Care volume decreased low single digits mainly due to the impact of price increases in North America, partially offset by growth in Asia. Global market share of the fabric care category decreased half a point. Home Care volume increased low single digits driven by initiative activity and distribution expansion in developing regions, partially offset by a low single-digitcurrency-driven decline in developed regions due to the impact of price increases. Global market share of the home care category was unchanged. Batteries volume decreased low single digits due to market contraction and distribution losses in developed markets, partially offset by market growth and distribution expansion in developing regions. Global market share of the batteries category increased about half a point. Pet Care volume decreased high single digits due mainly to market contraction and customer inventory reductions. Global market share of the pet care category was down about half a point.
Net earnings decreased 6% to $2.9 billion as net sales growth was more than offset by a 100-basis point decrease in net earnings margin. Net earnings margin decreased primarily due to gross margin contraction. Gross margin decreased mainly due to higher commodity costs and
unfavorable product and geographic mix, partially offset by manufacturing cost savings and higher pricing. SG&A as a percentage of net sales decreased nominally as higher marketing costs were largely offset by overhead scale leverage from increased sales.
BABY CARE AND FAMILY CARE
($ millions)2013  Change vs 2012 2012  
Change vs
2011
Volumen/a  +4% n/a  +1%
Net sales$16,790  +2% $16,493  +6%
Net earnings$2,242  +6% $2,123  +7%
% of Net Sales13.4% 50 bps 12.9% 20 bps
Fiscal year 2013 compared with fiscal year 2012
Baby Care and Family Care net sales increased 2% to $16.8 billion in 2013 on 4% volume growth. Organic sales were up 4%. Pricing added 1% to net sales growth. Product mix reduced net sales by 1% due to disproportionate growth of Family Care, which has lower than segment average selling prices. Unfavorable foreign exchange reduced net sales by 2%. Global market share of the Baby Care and Family Care segment decreased 0.3 points. Volume increased mid-single digits in developing regions and low single digits in developed regions. Volume in Baby Care increased low single digits as a mid-single-digit increase in developing regions from market growth, distribution expansion and innovation, was partially offset by a low single-digit decrease in developed regions due to market contraction and competitive promotional activity, primarily in Western Europe. Global market share of the baby care category decreased nearly half a point. Volume in Family Care increased mid-single digits primarily due to market growth and innovation on Charmin and Bounty. In the U.S., all-outlet share of the family care category was flat.
Net earnings increased 6% to $2.2 billion due to the increase in net sales and a 50-basis point increase in net earnings margin. Net earnings margin increased due to gross margin expansion. The increase in gross margin was driven by the impact of higher pricing and manufacturing and commodity cost savings, partially offset by unfavorable product and geographic mix.
Fiscal year 2012 compared with fiscal year 2011
Baby Care and Family Care net sales increased 6% to $16.5 billion in 2012 on 1% volume growth. Organic sales were up 6%. Pricing added 5% to net sales growth. Global market share of the Baby Care and Family Care segment increased 0.2 points. Volume grew double digits in developing regions and decreased low single digits in developed regions. Volume in Baby Care was up mid-single digits behind market size growth and distribution expansion in developing regions, partially offset by declines in North America and Western Europe from diaper market contraction. Global market share of the baby care category increased more than half a point. Volume in Family Care decreased low single


36The Procter & Gamble Company

digits primarily due to competitive activity and the impact of a price increase in North America. In the U.S., all-outlet share of the family care category was down half a point.
Net earnings increased 7% to $2.1 billion due to sales growth and a 20-basis point increase in net earnings margin. Net earnings margin increased mainly due to a decrease in SG&A as a percentage of net sales, partially offset by a lower gross margin. The reduction in gross margin was driven primarily by higher commodity costs and unfavorable geographic and product mix, partially offset by the impact of higher pricing. SG&A as a percentage of net sales decreased due to scale leverage from increased sales.
CORPORATE
($ millions)2016 Change vs. 2015 2015 Change vs. 2014
Net sales$422 (9)% $466 (37)%
Net loss$(174) N/A $(2,420) N/A
($ millions)2013  Change vs 2012 2012  
Change vs
2011
Net sales$(895)  -22% $(1,145)  -9%
Net earnings$(175)  N/A $(1,744)  N/A
Corporate includes certain operating and non-operating activities not allocated to specific business units.segments. These include: the incidental businesses managed at the corporate level; financing and investing activities; other general corporate items; the historical results ofgains and losses related to certain divested brands and categories; certain asset impairment charges; and certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization.optimization; certain significant asset impairment and deconsolidation charges; and certain balance sheet impacts from significant foreign exchange devaluations. Corporate also includes reconciling items to adjust the accounting policies used in the segments to U.S. GAAP. The most significant reconciling items includeitem includes income taxes (toto adjust from blended statutory rates that are reflected in the segments to the overall Company effective tax rate), adjustments for unconsolidated entities (to eliminate net sales, cost of products sold and SG&A for entities that are consolidated in the segments but accounted for using the equity method for U.S. GAAP) and noncontrolling interest adjustments for subsidiaries where we do not have 100% ownership. Since certain unconsolidated entities and less than 100%-owned subsidiaries are managed as integral parts of the related segments, they are accounted for similar to a wholly-owned subsidiary for management and segment purposes. This means our segment results recognize 100% of each income statement component through before-tax earnings in the segments,rate.
Fiscal year 2016 compared with eliminations for unconsolidated entities and noncontrolling interests in Corporate. In determining segment net earnings, we apply the statutory tax rates (with adjustments to arrive at the Company's effective tax rate in Corporate) and eliminate the share of earnings applicable to other ownership interests, in a manner similar to noncontrolling interest.fiscal year 2015
Corporate net sales primarily reflectdecreased $44 million during the adjustment to eliminate the sales of unconsolidated entities included in business segment results. Accordingly, Corporate net sales are generally negative. Negative net sales in Corporate for 2013 decreased by $250 million due to 1) the purchase of the balance of our Iberian joint venture (after which this business is consolidated for both segment and consolidated
results and the underlying sales no longer need to be eliminated) and 2) smaller adjustments required to eliminate reduced sales of the remaining unconsolidated entities.fiscal year. Corporate net earnings from continuing operations improved $1.6by approximately $2.2 billion during the fiscal year, primarily due to reduced net after-tax goodwill and intangible asset impairment charges (which totaled $1.5the $2.1 billion Venezuela deconsolidation charge in the prior fiscal year as compared to $290 million in the current period), along with the current year net after-tax holding gain related to the purchase of the balance of our Iberian joint venture, partially offset by the current year charge for the impact of the Venezuela devaluation.and lower foreign currency transactional charges. Additional discussion of thethese items impacting net earnings in Corporate are included in the Results of Operations section.
In 2012, negative netFiscal year 2015 compared with fiscal year 2014
Net sales in Corporate decreased by $108$271 million due to adjustments required to eliminate the lower net sales of unconsolidated entities. Corporate net earnings declined $2.2 billionin 2015 primarily due to the prior year divestiture of the MDVIP business. Corporate net after tax goodwillexpenses from continuing operations increased $2.0 billion in 2015, primarily due to the charge related to the deconsolidation of the Venezuelan subsidiaries, increased foreign exchange transactional charges and intangible asset impairment charges of $1.5 billion, incremental after-tax restructuring charges, of $587 million and the impact of lower net discrete tax adjustments in 2012. Additional discussion of the items impacting net earnings in Corporate are included in the Results of Operations section above.which were partially offset by gains on minor brand divestitures.
Productivity and Cost Savings Plan
In February and November 2012, the Company made announcements related toinitiated a productivity and cost savings plan to reduce costs and better leverage scale in the areas of supply chain, research and development, marketing and overheads. The plan was designed to accelerate cost reductions by streamlining management decision making, manufacturing
and other work processes to fund the Company's growth strategy.
As part of this plan, the Company expects to incur in excess of $3.5approximately $5.5 billion in before-tax restructuring costs over a five-yearsix-year period (from fiscal 2012 through fiscal 2016)2017). Approximately 55% of the costs have been incurred throughThrough the end of fiscal 2013.2016, 89% of the expected costs have been incurred. Savings generated from the restructuring costs are difficult to estimate, given the nature of the activities, the corollary benefits achieved, the timing of the execution and the degree of reinvestment. Overall, thethese costs and other non-manufacturing enrollment reductions are expected to deliver in excess of $2approximately $3.0 billion in annual before-tax annualgross savings. The cumulative before-tax savings realized as a result of restructuring costs incurred through 20132016 were approximately $940 million.$2.4 billion.
Restructuring accruals of $323$315 million as of June 30, 2013,2016 are classified as current liabilities. Approximately 86%During fiscal 2016, 51% of the restructuring charges incurred during fiscal 2013 either have been or will be settled with cash. Consistent with our historical policies for ongoing restructuring-type activities, the resulting charges are funded by and included within Corporate for segment reporting.
In addition to our restructuring programs, we have additional ongoing savings efforts in our supply chain, marketing and overhead areas that yield additional benefits to our operating margins.
Refer to Note 3 to our Consolidated Financial Statements for more details on the restructuring program.program and to the Operating Costs section of the MD&A for more information about the total benefit to operating margins from our total savings efforts.



The Procter & Gamble Company37


CASH FLOW, FINANCIAL CONDITION AND LIQUIDITY
We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and readyto readily access to capital markets at competitive rates.
Operating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund shareholder dividends. Other discretionary uses include share repurchases and acquisitions to complement our portfolio of businesses, brands and geographies. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations.
Operating Cash Flow
Fiscal year 20132016 compared with fiscal year 20122015
Operating cash flow was $14.9$15.4 billion in 2013,2016, a 12%6% increase from the prior year. Net earnings, adjusted for non-cash items (depreciation and amortization, share-based compensation, deferred income taxes, loss/(gain) on sale of businesses and impairment charges) generated $13.6 billion of operating cash


24 The Procter & Gamble Company

flow. Working capital and other impacts generated $1.8 billion of operating cash flow.
Reduced accounts receivable generated $35 million of cash due to improved collection results partially offset by sales mix. The number of days sales outstanding increased 1 day due to foreign exchange impacts.
Lower inventory generated $116 million of cash mainly due to supply chain optimizations and lower commodity costs. Inventory days on hand increased 4 days primarily due to foreign exchange impacts.
Accounts payable, accrued and other liabilities increased, generating $1.3 billion in operating cash flow, of which approximately $0.8 billion was driven by extended payment terms with our suppliers. The balance was primarily driven by an increase in fourth quarter marketing activity versus the prior year. These items, along with the impact of foreign exchange, drove a 24 day increase in days payable outstanding. Although difficult to project due to market and other dynamics, we anticipate similar cash flow benefits from the extended payment terms with suppliers over the next fiscal year.
Other operating assets and liabilities generated $204 million of cash.
Fiscal year 2015 compared with fiscal year 2014
Operating cash flow was $14.6 billion in 2015, a 5% increase from the prior year. Operating cash flows resulted primarily from net earnings, adjusted for non-cash items (depreciation and amortization, stock-basedshare-based compensation, asset impairments, deferred income taxes, andimpairment charges, gains on sale of businesses and purchase of businesses)the Venezuela deconsolidation charge) and a decrease in working capital. Increasedcapital, partially offset by the impact of other operating assets and liabilities.
Reduced accounts receivable used $415generated $349 million of cash primarilydue to fund growth. In addition, accounts receivablechanges in customer terms and improved collection results. The number of days sales outstanding increased twodecreased 5 days due to the timing and mix of sales late in the period and foreign exchange impacts. Increased inventory used $225 million of cash to support product initiatives and to build stock to support capacity expansions and manufacturing sourcing changes, partially offset by inventory management improvement efforts. Inventory days on hand increased by one day primarily due to foreign exchange impacts. Increased accounts payable, accruedimpacts and other liabilitiesimprovements in collection results and customer terms.
Lower inventory generated $1.3 billion of cash primarily due to an increase in marketing accruals from increased advertising and other marketing costs.
Fiscal year 2012 compared with fiscal year 2011
Operating cash flow was $13.3 billion in 2012, in line with the prior year. Operating cash flows resulted primarily from net earnings, adjusted for non-cash items (depreciation and amortization, stock-based compensation, asset impairments, deferred income taxes and gains on sale of businesses), partially offset by working capital increases. Increased accounts receivable used $427 million of cash to fund growth. However, accounts receivable days sales outstanding were down two days primarily due to the impact of foreign exchange. Inventory generated $77$313 million of cash mainly due to an increase in inventory management improvement efforts, partially offset by inventory to support product initiativessupply chain optimizations and to build stock to support capacity
expansions and manufacturing sourcing changes.lower commodity costs. Inventory days on hand declined by 10decreased 7 days primarily due to inventory management improvement effortsforeign exchange impacts, supply chain optimizations and the impact of foreign exchange. lower commodity costs.
Accounts payable, accrued and other liabilities used $22increased, generating $928 million in operating cash flow primarily driven by extended payment terms.
Other operating assets and liabilities utilized $976 million of cash primarily due primarily to the payment of fines related to violationselimination of the European competition laws. Cash flow from discontinued operations contributed approximately $200 million to operating cash flow.deferred tax impacts associated with the Pet Care divestiture.
Adjusted Free Cash Flow. We view adjusted free cash flow as an important measure because it is a factor impacting the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investment. It is defined as operating cash flow less capital expenditures and excluding certain divestiture impacts (tax payments in the prior year for the Pet Care divestiture) and is one of the measures used to evaluate senior management and determine their at-risk compensation.
Fiscal year 20132016 compared with fiscal year 20122015
FreeAdjusted free cash flow was $10.9$12.1 billion in 2013,2016, an increase of 17%4% versus the prior year. The increase was driven by the increase in operating cash flows and decrease in capital spending. Adjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings excluding the impairment charges and gain on the sale of the Batteries business, was 115% in 2016.
Fiscal year 2015 compared with fiscal year 2014
Adjusted free cash flow was $11.6 billion in 2015, an increase of 15% versus the prior year. The increase was driven by the increase in operating cash flows. FreeAdjusted free cash flow productivity, defined as the ratio of adjusted free cash flow to net earnings excluding impairment charges on the Batteries business and the Venezuelan deconsolidation charge, was 95%102% in 2013.2015.
Investing Cash Flow
Fiscal year 20122016 compared with fiscal year 2011
Free cash flow was $9.3 billion in 2012, a decrease of 7% versus the prior year. Free cash flow decreased primarily due to higher capital spending to support geographic expansion. Free cash flow productivity, defined as the ratio of free cash flow to net earnings, was 85% in 2012.
Investing Cash Flows
Fiscal year 2013 compared with fiscal year 20122015
Net investing activities consumed $6.3$5.6 billion in cash in 20132016 mainly due to capital spending, divestiture transactions and net purchases of short-term investments, partially offset by sales or maturities of short-term investments.
Fiscal year 2015 compared with fiscal year 2014
Net investing activities consumed $2.9 billion in cash paid for acquisitions and investments in 2015 mainly due to capital spending, net purchases of available-for-sale securities and a reduction in cash due to Venezuela deconsolidation, partially offset by asset sales.
Fiscal year 2012 compared with fiscal year 2011
Net investing activities consumed $1.1 billion in cash in 2012 mainly due to capital spending, partially offset by proceeds from asset sales of $2.9 billion. These proceeds were primarily related to cash received from the sale of our snacks business in 2012.
Capital Spending. We manage capital spending to support our business growth plans and have cost controls to deliver our cash generation targets. Capital expenditures, primarily to support capacity expansion, innovation and cost savings,efficiencies, were $4.0$3.3 billion in both 20132016 and 2012.$3.7 billion in 2015. Capital spending as a percentage of net sales increased 10decreased 20 basis points to 4.8%5.1% in 2013.2016. Capital spending as a percentage of net sales increased 60 basis points to 4.7%was 5.3% in 2012.2015.
Acquisitions. Acquisitions used $1.1 billion of cashAcquisition activity was not material in 2013 primarily for the acquisition of our partner's interest in a joint venture in Iberia. Acquisitions used $134 million of2016 or 2015.


38The Procter & Gamble Company

cash in 2012 primarily for the acquisition of New Chapter, a vitamins supplement business.
Proceeds from Divestitures and Other Asset Sales.Proceeds from asset sales in 2016 contributed $432 million in cash, primarily from plant asset sales and other minor brand divestitures. Proceeds from asset sales contributed $584 million$4.5 billion in cash in 2013 mainly due to the divestitures of our bleach business in Italy and the Braun household appliances business. Proceeds2015 primarily from asset sales contributed $2.9 billion to cash in 2012 mainly due to the sale of our snacks business.Pet Care business, the sale of our Chinese battery venture, and other minor brand divestitures.
Financing Cash FlowsFlow
Dividend Payments. Our first discretionary use of cash is dividend payments. Dividends per common share increased 7%3% to $2.29$2.66 per share in 2013.2016. Total dividend payments to common and preferred shareholders were $6.5$7.4 billion in 20132016 and $6.1$7.3 billion in 2012.2015. In April 2013,2016, the Board of Directors declared an increase in our quarterly dividend from $0.5620$0.6629 to $0.6015$0.6695 per share on Common Stock and Series A and B ESOP Convertible Class A Preferred Stock. This represents a 7%1% increase compared to the prior quarterly dividend and is the 57th60th consecutive year that our dividend has increased. We


The Procter & Gamble Company 25

have paid a dividend infor 126 years, every year since our incorporation in 1890.
Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and the overall cost of capital. Total debt was $31.5$30.6 billion as of June 30, 20132016 and $29.8$30.3 billion as of June 30, 2012. Our total debt increased in 2013 mainly due to debt issuances and an increase in commercial paper outstanding, partially offset by bond maturities.2015.
Treasury Purchases. Total share repurchases were $6.0 billion in 2013 and $4.0 billion in 2012.2016 and $4.6 billion in 2015. In addition, the cash infusion of $1.7 billion in the Batteries divestiture was reflected as a purchase of treasury stock.
Liquidity
At June 30, 2013,2016, our current assets exceeded current liabilities by $3.0 billion largely due to current assets and current liabilities of the Beauty Brands business held for sale. Excluding current assets and current liabilities of the Beauty Brands business held for sale, our current liabilities exceeded current assets by $6.0$1.8 billion, largely due to short-term borrowings under our commercial paper program. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. Additionally, a portion of our cash is held off-shore by foreign subsidiaries. The Company regularly assesses its cash needs and the available sources to fund these needsneeds. As of June 30, 2016, $11.0 billion of the Company’s cash, cash equivalents and wemarketable securities is held off-shore by foreign subsidiaries. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S. We do not expect restrictions or taxes on repatriation of cash held outside of the United StatesU.S. to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. Of the June 30, 2016 balance of off-shore cash, cash equivalents and marketable securities, the majority relates to various Western European countries. As of June 30, 2016, we did not have material cash, cash equivalents and marketable securities balances in any country subject to exchange controls that significantly restrict our ability to access or repatriate the funds.
We utilize short- and long-term debt to fund discretionary items, such as acquisitions and share repurchases. We have strong short- and long-term debt ratings, which have enabled, and should continue to enable, us to refinance our debt as it becomes due at favorable rates in commercial paper and bond markets. In addition, we have agreements with a diverse group of financial institutions that, if needed, should provide
sufficient credit funding to meet short-term financing requirements.
On June 30, 2013,2016, our short-term credit ratings were P-1 (Moody's) and A-1+ (Standard & Poor's), while our long-term credit ratings arewere Aa3 (Moody's) and AA- (Standard & Poor's), bothall with a stable outlook.
We maintain bank credit facilities to support our ongoing commercial paper program. The current facility is an $11.0$8.0 billion facility split between a $7.0$3.2 billion 5-yearfive-year facility and a $4.0$4.8 billion 364-day facility, which expire in August 2018November 2020 and August 2014,November 2016, respectively. The 364-day facility can be extended for certain periods of time as specified in and in accordance with, the terms of the credit agreement. These facilities are currently undrawn and we anticipate that they will remain largely undrawn for the foreseeable future.undrawn. These credit facilities do not have cross-default or ratings triggers, nor do they have material adverse events clauses, except at the time of signing. In addition to these credit facilities, we have an automatically effective registration statement on Form S-3 filed with the SEC that is available for registered offerings of short- or long-term debt securities. For additional details on debt see Note 10 to the Consolidated Financial Statements.
Guarantees and Other Off-Balance Sheet Arrangements
We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on financial condition or liquidity.


26 The Procter & Gamble Company39

Contractual Commitments
The following table provides information on the amount and payable date of our contractual commitments as of June 30, 2013.2016.
($ millions)Total  
Less Than
1 Year
  1-3 Years  3-5 Years  
After
5 Years
Amounts in millionsTotal Less Than 1 Year 1-3 Years 3-5 Years After 5 Years
RECORDED LIABILITIES                      
Total debt$31,441
 $12,393
 $6,004
 $2,609
 $10,435
$30,221
 $11,635
 $3,660
 $3,467
 $11,459
Capital leases31
 5
 18
 8
 —
45
 16
 21
 5
 3
Uncertain tax positions(1)
46
 46
 —
 —
 —
247
 247
 —
 —
 —
OTHER                  
Interest payments relating to long-term debt8,220
 865
 1,382
 1,169
 4,804
6,439
 684
 1,249
 979
 3,527
Operating leases(2)
1,512
 254
 437
 302
 519
1,563
 237
 464
 360
 502
Minimum pension funding(3)
722
 263
 459
 —
 —
640
 215
 425
 —
 —
Purchase obligations(4)
2,183
 1,114
 625
 210
 234
1,794
 881
 391
 234
 288
TOTAL CONTRACTUAL COMMITMENTS44,155
 14,940
 8,925
 4,298
 15,992
$40,949
 $13,915
 $6,210
 $5,045
 $15,779
(1) 
As of June 30, 2013,2016, the Company's Consolidated Balance Sheet reflects a liability for uncertain tax positions of $2.0$1.2 billion, including $447$343 million of interest and penalties. Due to the high degree of uncertainty regarding the timing of future cash outflows of liabilities for uncertain tax positions beyond one year, a reasonable estimate of the period of cash settlement beyond twelve months from the balance sheet date of June 30, 2013,2016, cannot be made.
(2) 
Operating lease obligations are shown net of guaranteed sublease income.
(3) 
Represents future pension payments to comply with local funding requirements. These future pension payments assume the Company continues to meet its future statutory funding requirements. These amounts do not include expected future discretionary contributions, including the July 2013 contribution to a foreign pension plan of approximately $1 billion. Considering the current economic environment in which the Company operates, the Company believes its cash flows are adequate to meet the future statutory funding requirements. The projected payments beyond fiscal year 20162019 are not currently determinable.
(4) 
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 future purchases in line with expected usage to obtain favorable pricing. Approximately 20% relates toThis includes service contracts for information technology, human resources management and facilities management activities that have been outsourced. While the amounts listed represent contractual obligations, we do not believe it is likely that the full contractual amount would be paid if the underlying contracts were canceled prior to maturity. In such cases, we generally are able to negotiate new contracts or cancellation penalties, resulting in a reduced payment. The amounts do not include other contractual purchase obligations that are not take-or-pay arrangements. Such contractual purchase obligations are primarily purchase orders at fair value that are part of normal operations and are reflected in historical operating cash flow trends. We do not believe such purchase obligations will adversely affect our liquidity position.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
In preparing our financial statements in accordance with U.S. GAAP, there are certain accounting policies that may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. These include income taxes, certain employee benefits and acquisitions, goodwill and intangible assets. We believe these accounting policies, and others set forth in Note 1 to the Consolidated Financial Statements, should be reviewed as they are integral to understanding the results of operations and financial condition of the Company.
The Company has discussed the selection of significant accounting policies and the effect of estimates with the Audit Committee of the Company's Board of Directors.

Income Taxes
Our annual tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.
Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or credit in future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally represent tax expense recognized in our financial statements for which payment has been deferred, the tax effect of


40The Procter & Gamble Company

expenditures for which a deduction has already been taken in our tax return but has not yet been recognized in our financial statements or assets recorded at fair value in business combinations for which there was no corresponding tax basis adjustment.
InherentAlso inherent in determining our annual tax rate are judgments and assumptions regarding business plans, planning opportunities and expectations about future outcomes. Realizationthe recoverability of
certain deferred tax assets,balances, primarily net operating loss and other carryforwards, and our ability to uphold certain tax positions.
Realization of net operating losses and other carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods.periods, which involves business plans, planning opportunities and expectations about future outcomes. Although realization is not assured, management believes it is more likely than not that our deferred tax assets, net of valuation allowances, will be realized.
We operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain of these jurisdictions, we may take tax positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority. These interpretational differences with the respective governmental taxing authorities can be impacted by the local economic and fiscal environment.
Our operating principles are that our tax structure is based on our business operating model, such that profits are earned in line with the business substance and functions of the various legal entities. However, we may have income tax exposure related to the determination of the appropriate transfer prices


The Procter & Gamble Company 27

for our various cross-border transactions. We obtain advance rulings with tax authorities to support our positions, where possible, to help manage these exposures. Nonetheless, many of the underlying transactions are subject to audit, resulting in uncertainty until the ultimate audit resolution. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review these tax uncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We have a number of audits in process in various jurisdictions. Although the resolution of these tax positions is uncertain, based on currently available information, we believe that the ultimate outcomes will not have a material adverse effect on our financial position, results of operations or cash flows.
Because there are a number of estimates and assumptions inherent in calculating the various components of our tax provision, certain changes or future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate. For additional details on the Company's income taxes, see Note 105 to the Consolidated Financial Statements.
Employee Benefits
We sponsor various post-employment benefits throughout the world. These include pension plans, both defined contribution plans and defined benefit plans, and other post-employment benefit (OPEB) plans, consisting primarily of health care and life insurance for retirees. For accounting purposes, the defined benefit pension and OPEB plans require assumptions to estimate the projected and accumulated benefit obligations, including the following variables: discount rate; expected salary increases; certain employee-related factors, such as turnover, retirement age and mortality; expected return on assetsassets; and health care cost trend rates. These and other assumptions affect the annual expense and obligations recognized for the underlying plans. Our assumptions reflect our historical experiences and
management's best judgment regarding future expectations. As permitted by U.S. GAAP, the net amount by which actual results differ from our assumptions is deferred. If this net deferred amount exceeds 10% of the greater of plan assets or liabilities, a portion of the deferred amount is included in expense for the following year. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.
The expected return on plan assets assumption impacts our defined benefit expense, since many of our defined benefit pension plans and our primary OPEB plan are partially funded. The process for setting the expected rates of return is described in Note 98 to the Consolidated Financial Statements. For 2013,2016, the average return on assets assumptions for pension plan assets and OPEB assets were 7.3%was 7.2% and 8.3%, respectively. A change in the rate of return of 100 basis points for both pension and OPEB assets would impact annual after-tax benefit expense by approximately $100 million.
Since pension and OPEB liabilities are measured on a discounted basis, the discount rate impacts our plan obligations and expenses. Discount rates used for our U.S. defined benefit pension and OPEB plans are based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our international plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans and OPEB plans of 4.0%2.1% and 4.8%3.6%, respectively, represents a weighted average of local rates in countries where such plans exist. A 100-basis100 basis point change in the pension discount rate would impact annual after-tax defined benefit pension expense by approximately $160$200 million. A change in the OPEB discount rate of 100 basis points would impact annual after-tax OPEB expense by approximately $65$86 million. For additional details on our defined benefit pension and OPEB plans, see Note 98 to the Consolidated Financial Statements.
Acquisitions, Goodwill and Intangible Assets
Our Consolidated Financial Statements reflect the operations of an acquired business starting from the completion of the transaction. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill.
Significant judgment is required to estimate the fair value of intangible assets and in assigning their respective useful lives. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant tangible and intangible assets. The fair value estimates are based on available historical information and on future expectations


The Procter & Gamble Company41

and assumptions deemed reasonable by management, but are inherently uncertain.
We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Determining the useful life of an intangible asset also requires judgment. Certain brand intangible assets are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired intangible assets (e.g., certain trademarks or brands, customer relationships, patents and technologies) are expected to have determinable useful lives. Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. Our estimates of the useful lives of determinable-lived intangible assets are primarily based on these same factors. All of our acquired technology and customer-related intangible assets are expected to have determinable useful lives.


28 The Procter & Gamble Company

The costs of determinable-lived intangible assets are amortized to expense over their estimated lives. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately from our impairment testing of indefinite-lived intangible assets. We test goodwill for impairment by reviewing the book value compared to the fair value at the reporting unit level. We test individual indefinite-lived intangible assets by comparing the book values of each asset to the estimated fair value. We determine the fair value of our reporting units and indefinite-lived intangible assets based on the income approach. Under the income approach, we calculate the fair value of our reporting units and indefinite-lived intangible assets based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. We believe such assumptions and estimates are also comparable to those that would be used by other marketplace participants. When certain events or changes in operating conditions occur, an impairment test is performed and
indefinite-lived brands may be adjusted to a determinable life.
With the exceptionMost of our Appliancesgoodwill reporting units are comprised of a combination of legacy and Salon Professionalacquired businesses alland as a result have fair value cushions that, at a minimum, exceed two times their underlying carrying values. Certain of our continuing goodwill reporting units, in particular Shave Care and Appliances, are comprised entirely of acquired businesses and as a result have fair value cushions that are not as high. While both of these wholly-acquired reporting units have fair value cushions that currently exceed the underlying carrying values, that significantly exceed recorded values. However, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill andShave Care cushion, as well as certain of the related indefinite-lived intangible assets, including discounthave been reduced to below 20% due in large part to significant currency devaluations in a number of countries relative to the U.S. dollar that began in recent years and tax rates or future cash flow projections, couldcontinued during fiscal 2016. As a result, in significantly different estimates of the fair values. A significant reduction in the estimated fair values could result inthis unit is more susceptible to impairment charges that could materially affect the financial statementsrisk from adverse changes in any given year. The recorded value of goodwill and intangible assets from recently impaired businesses and recently acquired businesses are derived from more recent business operating plans and macroeconomic environmentalenvironment conditions, and therefore are more susceptibleincluding any further significant devaluation of major currencies relative to anthe U.S. dollar. Any such adverse change thatchanges in the future could require an impairment charge.
For example,reduce the Gillette intangible and goodwill amounts represent values as of a more recent acquisition date and, as such, the amounts are more susceptibleunderlying cash flows used to an impairment risk if business operating results or macroeconomic conditions deteriorate. Gillette indefinite-lived intangible assets represent approximately 89% of the $26.8 billion of indefinite-lived intangible assets at June 30, 2013. Goodwill allocated to stand-alone reporting units consisting primarily of businesses purchased as part of the Gillette acquisition represents 42% of the $55.2 billion of goodwill at June 30, 2013. This includes the Shave Care and Appliances businesses, which are components of the Grooming segment, and the Batteries business, which is part of the Fabric Care and Home Care segment.
The results of our impairment testing during fiscal 2012 indicated that the estimatedestimate fair values of our Appliances and Salon Professional reporting units were less than their respective carrying amounts. Therefore, we recorded a non-cash before- and after-tax impairment charge of $1.3 billioncould result in fiscal 2012. Additionally, our impairment testing for indefinite-lived intangible assets during fiscal 2012 indicated a decline in the fair value that could trigger future impairment charges of our Koleston Perfectthe business unit's goodwill and Wella trade nameindefinite-lived intangibles.
The business unit valuations used to test goodwill and intangible assets below their respective carrying values. This resulted infor impairment are dependent on a non-cash, before-tax impairment chargenumber of $246 million ($173 million after-tax) to reduce the carrying amounts of these assets to their estimated fair values.
During the fourth quarter of fiscal 2013, the estimated fair value of our Appliances reporting units declined further, below the carrying amount resulting from the fiscal 2012 impairment. Therefore, we recorded an additional non-cash beforesignificant estimates and after-tax impairment charge of $259 million in fiscal 2013. Additionally, our fourth quarter 2013 impairment testing for Appliances indicated a decline in the fair value of our Braun trade name intangible asset below its carrying value. This resulted in a non-cash, before-tax impairment charge of $49 million ($31 million after-tax) to reduce the carrying amount of this asset to its estimated fair value.


42The Procter & Gamble Company

The Appliances business was acquired as part of the Gillette acquisition in 2005 and the Salon Professional business consists primarily of operations acquired in the Wella acquisition in 2004. Both businesses are stand-alone reporting units. These businesses represent some of our more discretionary consumer spending categories. Because of this, their operations and underlying fair values were disproportionately impacted by the economic downturn that began in fiscal 2009, which led to a reduction in home and personal grooming appliance purchases and in visits to hair salons that drove the fiscal 2012 impairment. The additional impairment of the Appliances business in fiscal 2013 was due to the devaluation of currency in Japan, a key country that generates a significant portion of the earnings of the Appliances business, relative to the currencies in which the underlying net assets are recorded. As of June 30, 2013, the Appliances business has remaining goodwill of $313 million, while the Salon Professional business has remaining goodwill of $424 million. As a result of the impairments, the estimated fair value of our Appliances business approximates its carrying value, while the estimated fair value of the Salon Professional business now slightly exceeds its carrying value. Our fiscal 2013 valuations of the Appliances and Salon Professional businesses has them returning to sales and earningsassumptions, including macroeconomic conditions, overall category growth rates, consistent with our long-termcompetitive activities, cost containment and margin expansion and Company business plans. FailureWe believe these estimates and assumptions are reasonable. Changes to, or a failure to, achieve these business plans or a further deterioration of the macroeconomic conditions could result in a valuation that would trigger an additional impairment of the goodwill and intangible assets of these businesses.
See Note 4 to the Consolidated Financial Statements for additional discussion on goodwill and intangible asset impairment testing results.
New Accounting Pronouncements
During fiscal 2013, the Company adopted ASU 2011-05, "Comprehensive Income (Topic 220) - Presentation of Comprehensive Income" (ASU 2011-05), and ASU 2013-02, “Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (ASU 2013-02). This guidance eliminates the optionRefer to present the components of other comprehensive income as part of the statement of shareholders' equity and requires entities to present the components of net earnings and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. We chose to present net earnings and other comprehensive income in two separate but consecutive statements. This guidance also requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component and to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. We chose to present the requirements in the notes to the financial statements (see Note 61 to the Consolidated Financial Statements). The adoptionStatements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of this guidance had no impact on our consolidated financial position, results of operations or cash flows.
June 30, 2016.
No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the Consolidated Financial Statements.
OTHER INFORMATION
Hedging and Derivative Financial Instruments
As a multinational company with diverse product offerings, we are exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices. We evaluate exposures on a centralized basis to take advantage of natural exposure correlation and netting. Except within financing operations, we leverage the Company's broadly diversified portfolio of exposures as a natural hedge and prioritize operational hedging activities over financial market instruments. To the extent we choose to further manage volatility associated with the net exposures, we enter into various financial transactions which we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices. See Note 59 to the Consolidated Financial Statements includesfor a detailed discussion of our accounting policies for financialderivative instruments.
Derivative positions can beare monitored using techniques including market valuation, sensitivity analysis and value-at-risk modeling. The tests for interest rate, currency rate and commodity derivative positions discussed below are based on the CorporateManager™ value-at-risk model using a one-year horizon and a 95% confidence level. The model incorporates the impact of correlation (the degree to which exposures move together over time) and diversification (from holding multiple currency, commodity and interest rate instruments) and assumes that financial returns are normally distributed. Estimates of volatility and correlations of market factors are drawn from the RiskMetrics™ dataset as of June 30, 2013.2016. In cases where data is unavailable in RiskMetrics™, a reasonable proxy is included.
Our market risk exposures relative to interest rates, currency rates and commodity prices, as discussed below, have not changed materially versus the previous reporting period. In addition, we are not aware of any facts or circumstances that would significantly impact such exposures in the near term.
Interest Rate Exposure on Financial Instruments. Interest rate swaps are used to hedge exposures to interest rate movement on underlying debt obligations. Certain interest rate swaps denominated in foreign currencies are designated to hedge exposures to currency exchange rate movements on our investments in foreign operations. These currency interest rate swaps are designated as hedges of the Company's foreign net investments.


The Procter & Gamble Company 29

Based on our interest rate exposure as of and during the year ended June 30, 2013,2016, 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


The Procter & Gamble Company43

historical interest rate movements, would not materially affect our financial statements.
Currency Rate Exposure on Financial Instruments. Because we manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to the impact on revenue and expenses of movements in currency exchange rates. Corporate policy prescribes the range of allowable hedging activity. To manage the exchange rate risk associated with the financing of our financing operations, we primarily use forward contracts with maturities of less than 18 months. In addition, we enter into certain currency swaps with maturities of up to five years to hedge our exposure to exchange rate movements on intercompany financing transactions.
Based on our currency rate exposure on derivative and other instruments as of and during the year ended June 30, 2013,2016, we believe, at a 95% confidence level based on historical currency rate movements, the impact on such instruments of a near-term change in currency rates would not materially affect our financial statements.
Commodity Price Exposure on Financial Instruments. We use raw materials that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. In addition to fixed price contracts, weWe may use futures, options and swap contracts to manage the volatility related to the above exposures.
As of and during the yearyears ended June 30, 2013,2016 and June 30, 2015, we did not have materialany commodity hedging activity.
Measures Not Defined By U.S. GAAP
Our discussion of financial results includes several "non-GAAP" financial measures. We believe that these measures provide ouruseful perspective of underlying business trends (i.e. trends excluding non-recurring or unusual items) and results and provide a supplemental measure of year-on-year results. The non-GAAP measures described below are used by management in making operating decisions, allocating financial resources and for business strategy purposes. These measures may be useful to investors with additionalas they provide supplemental information about business performance and provide investors a view of our underlyingbusiness results and trends, as well as insight to somethrough the eyes of the metricsmanagement. These measures are also used to evaluate management. When usedsenior management and are a factor in MD&A, we have provideddetermining their at-risk compensation. These non-GAAP measures are not intended to be considered by the comparableuser in place of the related GAAP measure, but rather as supplemental information to our business results. These non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the discussion.items or events being adjusted. These measures include:
Organic Sales Growth. Organic sales growth is a non-GAAP measure of sales growth excluding the impacts of the Venezuela deconsolidation, acquisitions, divestitures and
foreign exchange from year-over-year comparisons. We believe this measure provides investors with a more completesupplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Organic salesbasis, and this measure is also oneused in assessing achievement of the measures used to evaluate senior management and is a factor in determining theirgoals for at-risk compensation.





The following tables provide a numerical reconciliation of organic sales growth to reported net sales growth:
Year ended June 30, 2013
Net Sales
Growth
 
Foreign
Exchange
Impact
 
Acquisition/
Divestiture
Impact*
 
Organic
Sales
Growth
Year ended June 30, 2016Net Sales GrowthForeign Exchange ImpactAcquisition/Divestiture Impact*Organic Sales Growth
Beauty-2 % 2% 1 % 1%(9)%6%3%— %
Grooming-4 % 4% 2 % 2%(8)%9%1%2 %
Health Care3 % 3% -1 % 5%(5)%6%1%2 %
Fabric Care and Home Care1 % 2% 0 % 3%
Baby Care and Family Care2 % 2% 0 % 4%
Fabric & Home Care(7)%6%2%1 %
Baby, Feminine & Family Care(9)%6%2%(1)%
TOTAL COMPANY1 % 2% 0 % 3%(8)%6%3%1 %
        
Year ended June 30, 2012
Net Sales
Growth

 
Foreign
Exchange
Impact

 
Acquisition/
Divestiture
Impact*

 
Organic
Sales
Growth

Year ended June 30, 2015Net Sales GrowthForeign Exchange ImpactAcquisition/Divestiture Impact*Organic Sales Growth
Beauty2 % 0% 0 % 2%(6)%5%1%— %
Grooming1 % 1% 0 % 2%(7)%8%—%1 %
Health Care3 % 0% -1 % 2%(1)%5%—%4 %
Fabric Care and Home Care3 % 0% 0 % 3%
Baby Care and Family Care6 % 0% 0 % 6%
Fabric & Home Care(5)%6%1%2 %
Baby, Feminine & Family Care(3)%6%—%3 %
TOTAL COMPANY3 % 0% 0 % 3%(5)%6%1%2 %
* Acquisition/Divestiture Impact includes rounding impacts necessary to reconcile net sales to organic sales.
*Acquisition/Divestiture Impact also includes the impact of the Venezuela deconsolidation and the rounding impacts necessary to reconcile net sales to organic sales.
Core EPS. ThisCore EPS is a measure of the Company's diluted net earnings per share from continuing operations excluding certain items that are not judgedadjusted as indicated. Management views these non-GAAP measures as a useful supplemental measure of Company performance over time. The table below provides a reconciliation of revised diluted net earnings per share to be partCore EPS, including the following reconciling items:
Incremental restructuring: While the Company has and continues to have an ongoing level of the Company's sustainable results or trends. This includesrestructuring activities, beginning in 2012 we began a charge in 2013 for the balance sheet impact from the devaluation of the official foreign exchange rate in Venezuela, a holding gain in 2013 on the purchase of the balance of our Iberian joint venture, impairment charges in 2013 and 2012 for goodwill and indefinite-lived intangible assets, charges in 2013 and 2012 related to incremental restructuring due to increased focus on$10 billion strategic productivity and cost savings initiative that includes incremental restructuring activities. This results in incremental restructuring charges to accelerate productivity efforts and cost savings. The charges include only the incremental portion of the restructuring costs.
Venezuela deconsolidation charge: For accounting purposes, evolving conditions resulted in a significant benefitlack of control over our Venezuelan subsidiaries. Therefore, in 2011 from


30 The Procter & Gamble Company

accordance with the settlementapplicable accounting standards for consolidation, effective June 30, 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of U.S. tax litigation primarilyaccounting. The charge was incurred to write off our net assets related to Venezuela.
Charges for certain European legal matters: Several countries in Europe issued separate complaints alleging that the valuationCompany, along with several other companies, engaged in violations of technology donations and chargescompetition laws in 2013, 2012 and 2011prior periods. The Company established Legal Reserves related to pending European legal matters. these charges. Management does not view these charges as indicative of underlying business results.
Venezuela Balance Sheet Remeasurement & Devaluation Impacts: Venezuela is a highly inflationary economy under U.S. GAAP. Prior to deconsolidation, the government enacted episodic changes to currency exchange mechanisms and rates, which resulted in currency remeasurement charges for non-dollar denominated monetary assets and liabilities held by our Venezuelan subsidiaries.
We do not view thesethe above items to be part of our sustainable results. We believe the Core EPS measure provides an important perspective of underlying business trendsresults, and results andtheir exclusion from core earnings measures provides a more comparable measure of year-on-year earnings per share growth. Core EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.results.
Years ended June 30201620152014
Diluted net earnings per share - continuing operations$3.49$2.84$3.63
Incremental restructuring charges0.180.170.11
Venezuela balance sheet devaluation impacts—0.040.09
Charges for European legal matters—0.010.02
Venezuelan deconsolidation—0.71—
Rounding—(0.01)—
CORE EPS$3.67$3.76$3.85
Core EPS Growth(2)%(2)%5%


*All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction.
44The Procter & Gamble Company

The table below provides a reconciliation of reported diluted net earnings per share from continuing operations to Core EPS:
Years ended June 302013 2012 2011
Diluted net earnings per share - continuing operations$3.86
 $3.12
 $3.85
Venezuela balance sheet devaluation Impacts0.08
 —
 —
Gain on purchase of balance of Iberian JV(0.21)    
Impairment charges0.10
 0.51
 —
Incremental restructuring charges0.18
 0.20
 —
Settlement from U.S. tax litigation—
 —
 (0.08)
Charges for pending European legal matters0.05
 0.03
 0.10
Rounding(0.01) (0.01) —
CORE EPS4.05
 3.85
 3.87
Core EPS Growth5% (1)%  
Note - All reconciling items are presented net of tax. Tax effects are calculated consistent with the nature of the underlying transaction. The significant adjustment to an income tax reserve was tax expense. There was no tax impact on EPS due to the charges for pending European legal matters.
Adjusted Free Cash Flow. FreeAdjusted free cash flow is defined as operating cash flow less capital spending.spending excluding tax payments related to the divestiture of the discontinued Pet business. Adjusted free cash flow represents the cash that the Company is able to generate after taking into account planned maintenance and asset expansion. We view adjusted free cash flow as an important measure because it is one factor used in determining the amount of cash available for dividends, share repurchases, acquisitions and other discretionary investment. Free
The following table provides a numerical reconciliation of adjusted free cash flow is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation.($ millions):
 
Operating
Cash  Flow
Capital
Spending
Free
Cash  Flow
Divestiture impacts*
Adjusted Free
Cash Flow
2016$15,435
$(3,314)$12,121
$—
$12,121
201514,608
(3,736)10,872
729
11,601
201413,958
(3,848)10,110
—
10,110
*Divestiture impacts relate to tax payments for the Pet Care divestiture in fiscal 2015.
Adjusted Free Cash Flow Productivity. FreeAdjusted free cash flow productivity is defined as the ratio of adjusted free cash flow to net earnings. Freeearnings excluding Batteries impairments, the gain on the sale of the Batteries business and Venezuela charges. We view adjusted free cash flow productivity as a useful measure to help investors understand P&G’s ability to generate cash. Adjusted free cash flow productivity is also one of the measures used by management in making operating decisions, in allocating financial resources and for budget planning purposes. The Company's long-term target is to evaluate senior management and is a factor in determining their at-risk compensation.generate annual adjusted free cash flow productivity at or above 90 percent.
The following table provides a numerical reconciliation of free cash flow andadjusted free cash flow productivity ($ millions):
 
Operating
Cash Flow
Capital
Spending
Free
Cash Flow
Net
Earnings
Free
Cash Flow
Productivity
2013$14,873
$(4,008)$10,865
$11,402
95%
201213,284
(3,964)9,320
10,904
85%
201113,330
(3,306)10,024
11,927
84%
 
Net
Earnings
Gain on Batteries Sale / Impairment & Decon- solidation ChargesNet Earnings Excluding Batteries Gain/Impairment & Deconsolid- ation ChargesAdjusted Free Cash Flow
Adjusted Free
Cash Flow
Productivity
2016$10,604
$(72)$10,532
$12,121
115%
20157,144
4,187
11,331
11,601
102%
201411,785
—
11,785
10,100
86%


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is incorporated by reference to the sectionsection entitled Other Information under Management's Disclosure and Analysis, and Note 59 to the Consolidated Financial Statements.


The Procter & Gamble Company45 31

Item 8. Financial Statements and Supplementary Data.

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
At The Procter & Gamble Company, we take great pride in our long history of doing what's right. If you analyze what's made our Company successful over the years, you may focus on our brands, our marketing strategies, our organization design and our ability to innovate. But if you really want to get at what drives our Company's success, the place to look is our people. Our people are deeply committed to our Purpose, Values and Principles. It is this commitment to doing what's right that unites us.
This commitment to doing what's right is embodied in our financial reporting. High-quality financial reporting is our responsibility, one we execute with integrity, and within both the letter and spirit of the law.
High-quality financial reporting is characterized by accuracy, objectivity and transparency. Management is responsible for maintaining an effective system of internal controls over financial reporting to deliver those characteristics in all material respects. The Board of Directors, through its Audit Committee, provides oversight. We have engaged Deloitte & Touche LLP to audit our Consolidated Financial Statements, on which they have issued an unqualified opinion.
Our commitment to providing timely, accurate and understandable information to investors encompasses:
Communicating expectations to employees. Every employee, from senior management on down, is required to be trained on the Company's Worldwide Business Conduct Manual, which sets forth the Company's commitment to conduct its business affairs with high ethical standards. Every employee is held personally accountable for compliance and is provided several means of reporting any concerns about violations of the Worldwide Business Conduct Manual, which is available on our website at www.pg.com.
Maintaining a strong internal control environment. Our system of internal controls includes written policies and procedures, segregation of duties and the careful selection and development of employees. The system is designed to provide reasonable assurance that transactions are executed as authorized and appropriately recorded, that assets are safeguarded and that accounting records are sufficiently reliable to permit the preparation of financial statements conforming in all material respects with accounting principles generally accepted in the United States of America. We monitor these internal controls through control self-assessments conducted by business unit management. In addition to performing financial and compliance audits around the world, our Global Internal Audit organization provides training and continuously improves internal control processes. Appropriate actions are taken by management to correct any identified control deficiencies.
Executing financial stewardship. We maintain specific programs and activities to ensure that employees understand their fiduciary responsibilities to shareholders. This ongoing effort encompasses financial discipline in strategic and daily business decisions and brings particular focus to maintaining accurate financial reporting and effective controls through process improvement, skill development and oversight.
Exerting rigorous oversight of the business. We continuously review business results and strategic choices. Our Global Leadership Council is actively involved - from understanding strategies to reviewing key initiatives, financial performance and control assessments. The intent is to ensure we remain objective, identify potential issues, continuously challenge each other and ensure recognition and rewards are appropriately aligned with results.
Engaging our Disclosure Committee. We maintain disclosure controls and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized and reported timely and accurately. Our Disclosure Committee is a group of senior-level executives responsible for evaluating disclosure implications of significant business activities and events. The Committee reports its findings to the CEO and CFO, providing an effective process to evaluate our external disclosure obligations.
Encouraging strong and effective corporate governance from our Board of Directors. We have an active, capable and diligent Board that meets the required standards for independence, and we welcome the Board's oversight. Our Audit Committee comprises independent directors with significant financial knowledge and experience. We review significant accounting policies, financial reporting and internal control matters with them and encourage their independent discussions with external auditors. Our corporate governance guidelines, as well as the charter of the Audit Committee and certain other committees of our Board, are available on our website at www.pg.com.
P&G has a strong history of doing what's right. Our employees embrace our Purpose, Values and Principles. We take responsibility for the quality and accuracy of our financial reporting. We present this information proudly, with the expectation that those who use it will understand our Company, recognize our commitment to performance with integrity and share our confidence in P&G's future.
/s/ A. G. Lafley
A. G. Lafley
Chairman of the Board, President and Chief Executive Officer
/s/ Jon R. Moeller
Jon R. Moeller
Chief Financial Officer


46The Procter & Gamble Company

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting of The Procter & Gamble Company (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.
Strong internal controls is an objective that is reinforced through our Worldwide Business Conduct Manual, which sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law. Our people are deeply committed to our Purpose, Values, and Principles, which unite us in doing what’s right. Our system of internal controls includes written policies and procedures, segregation of duties, and the careful selection and development of employees. Additional key elements of our internal control structure include our Global Leadership Council, which is actively involved in oversight of the business strategies, initiatives, results and controls, our Disclosure Committee, which is responsible for evaluating disclosure implications of significant business activities and events, our Board of Directors, which provides strong and effective corporate governance, and our Audit Committee, which reviews significant accounting policies, financial reporting and internal control matters.
The Company's internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually for critical financial reporting areas of the Company and is audited by the internal audit function.our Global Internal Audit organization. Management takes the appropriate action to correct any identified control deficiencies. Global Internal Audit also performs financial and compliance audits around the world, provides training, and continuously improves our internal control processes.
Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.
Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2013,2016, using criteria established in Internal Control - Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting as of June 30, 2013,2016, based on these criteria.
Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of June 30, 2013,2016, as stated in their report which is included herein.
/s/ A. G. Lafley
A. G. Lafley
/s/ David S. Taylor
David S. Taylor
Chairman of the Board, President and Chief Executive Officer
/s/ Jon R. Moeller
Jon R. Moeller
Chief Financial Officer
August 9, 2016

/s/ Jon R. Moeller
32 The Procter & Gamble Company

Jon R. Moeller
Chief Financial Officer
August 8, 2013



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
The Procter & Gamble Company
Cincinnati, Ohio
We have audited the accompanying Consolidated Balance Sheets of The Procter & Gamble Company and subsidiaries (the "Company") as of June 30, 20132016 and 2012,2015, and the related Consolidated Statements of Earnings, Comprehensive Income, Shareholders' Equity, and Cash Flows for each of the three years in the period ended June 30, 2013.2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such Consolidated Financial Statements present fairly, in all material respects, the financial position of theThe Procter & Gamble Company and subsidiaries at June 30, 20132016 and 2012,2015, and the results of itstheir operations and their cash flows for each of the three years in the period ended June 30, 2013,2016, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 and Note 13 to the Consolidated Financial Statements, on July 1, 2015, the Company adopted the new accounting guidance in ASU 2011-05,2014-08, Comprehensive Income (Topic 220) - Presentation of Comprehensive Income,Financial Statements (Topic 205) and ASU 2013-02, Comprehensive IncomeProperty, Plant, and Equipment (Topic 220) -360): Reporting Discontinued Operations and Disclosures of Amounts Reclassified outDisposals of Accumulated Other Comprehensive IncomeComponents of an Entity.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of June 30, 2013,2016, based on the criteria established in Internal Control - Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 8, 20139, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/ Deloitte & Touche LLP
/s/ Deloitte & Touche LLP
Cincinnati, Ohio
August 9, 2016
August 8, 2013



The Procter & Gamble Company47 33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
The Procter & Gamble Company
Cincinnati, Ohio
We have audited the internal control over financial reporting of The Procter & Gamble Company and subsidiaries (the "Company") as of June 30, 2013,2016, based on criteria established in Internal Control - Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2013,2016, based on the criteria established in Internal Control - Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Financial Statements of the Company as of and for the year ended June 30, 20132016 of the Company and our report dated August 8, 20139, 2016 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company'sCompany’s adoption on July 1, 2015 of the new accounting guidance in ASU 2011-05,2014-08, Comprehensive Income (Topic 220) - Presentation of Comprehensive IncomeFinancial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, and ASU 2013-02, Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income..
/s/ Deloitte & Touche LLP
Cincinnati, Ohio
August 8, 2013
/s/ Deloitte & Touche LLP
Cincinnati, Ohio
August 9, 2016




48
34 The Procter & Gamble Company

Consolidated Statements of Earnings
Amounts in millions except per share amounts; Years ended June 302013 2012  20112016 2015 2014
NET SALES$84,167
 $83,680
  $81,104
$65,299
 $70,749
 $74,401
Cost of products sold42,428
 42,391
  39,859
32,909
 37,056
 39,030
Selling, general and administrative expense26,950
 26,421
  25,750
18,949
 20,616
 21,461
Goodwill and indefinite-lived intangible asset impairment charges308
 1,576
 —
Venezuela deconsolidation charge—
 2,028
 —
OPERATING INCOME14,481
 13,292
  15,495
13,441
 11,049
 13,910
Interest expense667
 769
  831
579
 626
 709
Interest income87
 77
 62
182
 149
 99
Other non-operating income, net942
 185
  271
325
 440
 209
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES14,843
 12,785
  14,997
13,369
 11,012
 13,509
Income taxes on continuing operations3,441
 3,468
  3,299
3,342
 2,725
 2,851
NET EARNINGS FROM CONTINUING OPERATIONS11,402
 9,317
  11,698
10,027
 8,287
 10,658
NET EARNINGS FROM DISCONTINUED OPERATIONS—
 1,587
  229
NET EARNINGS/(LOSS) FROM DISCONTINUED OPERATIONS577
 (1,143) 1,127
NET EARNINGS11,402
 10,904
  11,927
10,604
 7,144
 11,785
Less: Net earnings attributable to noncontrolling interests90
 148
 130
96
 108
 142
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE$11,312
 $10,756
 $11,797
$10,508
 $7,036
 $11,643
       
BASIC NET EARNINGS PER COMMON SHARE (1):
      
BASIC NET EARNINGS PER COMMON SHARE: (1)
     
Earnings from continuing operations$4.04
 $3.24
  $4.04
$3.59
 $2.92
 $3.78
Earnings from discontinued operations—
 0.58
  0.08
Earnings/(loss) from discontinued operations0.21
 (0.42) 0.41
BASIC NET EARNINGS PER COMMON SHARE4.04
 3.82
  4.12
$3.80
 $2.50
 $4.19
DILUTED NET EARNINGS PER COMMON SHARE (1):
      
DILUTED NET EARNINGS PER COMMON SHARE: (1)
     
Earnings from continuing operations$3.86
 $3.12
  $3.85
$3.49
 $2.84
 $3.63
Earnings from discontinued operations—
 0.54
  0.08
Earnings/(loss) from discontinued operations0.20
 (0.40) 0.38
DILUTED NET EARNINGS PER COMMON SHARE3.86
 3.66
  3.93
$3.69
 $2.44
 $4.01
DIVIDENDS PER COMMON SHARE$2.29
 $2.14
  $1.97
$2.66
 $2.59
 $2.45
(1) 
Basic net earnings per common share and dilutedDiluted net earnings per common share are calculated on netNet earnings attributable to Procter & Gamble.



See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company49 35

Consolidated Statements of Comprehensive Income

Amounts in millions; Years ended June 30 2013 2012 20112016 2015 2014
NET EARNINGS $11,402
 $10,904
 $11,927
$10,604
 $7,144
 $11,785
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX           
Financial statement translation 710
 (5,990) 6,493
(1,679) (7,220) 1,044
Unrealized gains/(losses) on cash flow hedges (net of $92, $441 and $713 tax, respectively) 144
 724
 (1,181)
Unrealized gains/(losses) on investment securities (net of $5, $3 and $2 tax, respectively) (24) (3) 3
Defined benefit retirement plans (net of $637, $993 and $302 tax, respectively) 1,004
 (2,010) 453
Unrealized gains/(losses) on hedges (net of $5, $739 and $(209) tax, respectively)1
 1,234
 (347)
Unrealized gains/(losses) on investment securities (net of $7, $0 and $(4) tax, respectively)28
 24
 9
Unrealized gains/(losses) on defined benefit retirement plans (net of $(621), $328 and $(356) tax, respectively)(1,477) 844
 (869)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX 1,834
 (7,279) 5,768
(3,127) (5,118) (163)
TOTAL COMPREHENSIVE INCOME 13,236
 3,625
 17,695
7,477
 2,026
 11,622
Less: Total comprehensive income attributable to noncontrolling interests 94
 124
 143
96
 108
 150
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE $13,142
 $3,501
 $17,552
$7,381
 $1,918
 $11,472

See accompanying Notes to Consolidated Financial Statements.
5036 The Procter & Gamble Company

Consolidated Balance Sheets
Amounts in millions; June 30   
Amounts in millions; Years ended June 302016 2015
Assets2013 2012   
CURRENT ASSETS      
Cash and cash equivalents$5,947
 $4,436
$7,102
 $6,836
Available-for-sale investment securities6,246
 4,767
Accounts receivable6,508
 6,068
4,373
 4,568
INVENTORIES      
Materials and supplies1,704
 1,740
1,188
 1,266
Work in process722
 685
563
 525
Finished goods4,483
 4,296
2,965
 3,188
Total inventories6,909
 6,721
4,716
 4,979
Deferred income taxes948
 1,001
1,507
 1,356
Prepaid expenses and other current assets3,678
 3,684
2,653
 2,708
Current assets held for sale7,185
 4,432
TOTAL CURRENT ASSETS23,990
 21,910
33,782
 29,646
   
PROPERTY, PLANT AND EQUIPMENT, NET21,666
 20,377
19,385
 19,655
GOODWILL55,188
 53,773
44,350
 44,622
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET31,572
 30,988
24,527
 25,010
NONCURRENT ASSETS HELD FOR SALE—
 5,204
OTHER NONCURRENT ASSETS6,847
 5,196
5,092
 5,358
TOTAL ASSETS$139,263
 $132,244
$127,136
 $129,495
  
Liabilities and Shareholders' Equity      
CURRENT LIABILITIES      
Accounts payable$8,777
 $7,920
$9,325
 $8,138
Accrued and other liabilities8,828
 8,289
7,449
 8,091
Current liabilities held for sale2,343
 1,543
Debt due within one year12,432
 8,698
11,653
 12,018
TOTAL CURRENT LIABILITIES30,037
 24,907
30,770
 29,790
LONG-TERM DEBT19,111
 21,080
18,945
 18,327
DEFERRED INCOME TAXES10,827
 10,132
9,113
 9,179
NONCURRENT LIABILITIES HELD FOR SALE—
 717
OTHER NONCURRENT LIABILITIES10,579
 12,090
10,325
 8,432
TOTAL LIABILITIES70,554
 68,209
69,153
 66,445
SHAREHOLDERS' EQUITY      
Convertible Class A preferred stock, stated value $1 per share (600 shares authorized)1,137
 1,195
1,038
 1,077
Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized)—
 —
—
 —
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2013 - 4,009.2, 2012- 4,008.4)4,009
 4,008
Common stock, stated value $1 per share (10,000 shares authorized; shares issued: 2016 - 4,009.2, 2015 - 4,009.2 )4,009
 4,009
Additional paid-in capital63,538
 63,181
63,714
 63,852
Reserve for ESOP debt retirement(1,352) (1,357)(1,290) (1,320)
Accumulated other comprehensive income/(loss)(7,499) (9,333)(15,907) (12,780)
Treasury stock, at cost (shares held: 2013 - 1,266.9, 2012 - 1,260.4)(71,966) (69,604)
Treasury stock, at cost (shares held: 2016 - 1,341.2, 2015 - 1,294.7)(82,176)
(77,226)
Retained earnings80,197
 75,349
87,953
 84,807
Noncontrolling interest645
 596
642
 631
TOTAL SHAREHOLDERS' EQUITY68,709
 64,035
57,983
 63,050
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$139,263
 $132,244
$127,136
 $129,495

See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company51 37

Consolidated Statements of Shareholders' Equity
Dollars in millions/Shares in thousands
Common
Shares
Outstanding

Common Stock
Preferred
Stock

Additional
Paid-In
Capital

Reserve 
for
ESOP  Debt
Retirement

Accumulated
Other
Comprehensive
Income/ (loss)

Treasury
Stock

Retained
Earnings

Non-
controlling
Interest

Total
BALANCE JUNE 30, 20102,843,471
$4,008
$1,277
$61,697
$(1,350)$(7,822)$(61,309)$64,614
$324
$61,439
Dollars in millions; Shares in thousandsCommon Shares OutstandingCommon StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt Retirement
Accumu-lated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal
BALANCE JUNE 30, 20132,742,327

$4,009

$1,137

$63,538

($1,352)
($7,499)
($71,966)
$80,197

$645

$68,709
Net earnings  11,797
130
11,927
  11,643
142
11,785
Other comprehensive income  5,768
 5,768
  (163) (163)
Dividends to shareholders:    
Common  (5,534) (5,534)  (6,658) (6,658)
Preferred, net of tax benefits  (233) (233)  (253) (253)
Treasury purchases(112,729) (7,039) (7,039)(74,987) (6,005) (6,005)
Employee plan issuances29,729

 702
 1,033
 1,735
40,288
 364
 2,144
 2,508
Preferred stock conversions5,266
 (43)6
 37
 —
3,178
 (26)4
 22
 —
ESOP debt impacts  (7) 38
 31
  12
 61
 73
Noncontrolling interest, net  

 (93)(93)  5
 (25)(20)
BALANCE JUNE 30, 20112,765,737
4,008
1,234
62,405
(1,357)(2,054)(67,278)70,682
361
68,001
BALANCE JUNE 30, 20142,710,806

$4,009

$1,111

$63,911

($1,340)
($7,662)
($75,805)
$84,990

$762

$69,976
Net earnings  10,756
148
10,904
  7,036
108
7,144
Other comprehensive loss  (7,279) (7,279)  (5,118) (5,118)
Dividends to shareholders:    
Common  (5,883) (5,883)  (7,028) (7,028)
Preferred, net of tax benefits  (256) (256)  (259) (259)
Treasury purchases(61,826) (4,024) (4,024)(54,670) (4,604) (4,604)
Employee plan issuances39,546

 550
 1,665
 2,215
54,100
 156
 3,153
 3,309
Preferred stock conversions4,576
 (39)6
 33
 —
4,335
 (34)4
 30
 —
ESOP debt impacts  

 50
 50
  20
 68
 88
Noncontrolling interest, net  220
 87
307
  (219) (239)(458)
BALANCE JUNE 30, 20122,748,033
4,008
1,195
63,181
(1,357)(9,333)(69,604)75,349
596
64,035
BALANCE JUNE 30, 20152,714,571

$4,009

$1,077

$63,852

($1,320)
($12,780)
($77,226)
$84,807

$631

$63,050
Net earnings  11,312
90
11,402
  10,508
96
10,604
Other comprehensive income  1,834
 1,834
Other comprehensive loss  (3,127) (3,127)
Dividends to shareholders:    
Common  (6,275) (6,275)  (7,181) (7,181)
Preferred, net of tax benefits  (244) (244)  (255) (255)
Treasury purchases(84,234) (5,986) (5,986)
Treasury purchases (1)
(103,449) (8,217) (8,217)
Employee plan issuances70,923
1
 352
 3,573
 3,926
52,089
 (144) 3,234
 3,090
Preferred stock conversions7,605
 (58)7
 51
 —
4,863
 (39)6
 33
 —
ESOP debt impacts  5
 55
 60
  30
 74
 104
Noncontrolling interest, net  (2)  (41)(43)   (85)(85)
BALANCE JUNE 30, 20132,742,327
$4,009
$1,137
$63,538
$(1,352)$(7,499)$(71,966)$80,197
$645
$68,709
BALANCE JUNE 30, 20162,668,074

$4,009

$1,038

$63,714

($1,290)
($15,907)
($82,176)
$87,953

$642

$57,983
(1)
Includes $4,213 of treasury shares acquired in the divestiture of the Batteries business (see Note 13).



See accompanying Notes to Consolidated Financial Statements.
5238 The Procter & Gamble Company

Consolidated Statements of Cash Flows
Amounts in millions; Years ended June 302013 2012 20112016 2015 2014
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR$4,436
 $2,768
 $2,879
$6,836
 $8,548
 $5,930
OPERATING ACTIVITIES          
Net earnings11,402
 10,904
 11,927
10,604
 7,144
 11,785
Depreciation and amortization2,982
 3,204
 2,838
3,078
 3,134
 3,141
Share-based compensation expense346
 377
 414
335
 337
 360
Deferred income taxes(307) (65) 128
(815) (803) (44)
Gain on sale and purchase of businesses(916) (2,106) (203)
Goodwill and indefinite-lived intangible asset impairment charges308
 1,576
 —
Gain on sale of businesses(41) (766) (154)
Venezuela deconsolidation charge—
 2,028
 —
Goodwill and intangible asset impairment charges450
 2,174
 —
Change in accounts receivable(415) (427) (426)35
 349
 87
Change in inventories(225) 77
 (501)116
 313
 8
Change in accounts payable, accrued and other liabilities1,253
 (22) 358
1,285
 928
 1
Change in other operating assets and liabilities68
 (444) (1,221)204
 (976) (1,557)
Other377
 210
 16
184
 746
 331
TOTAL OPERATING ACTIVITIES14,873
 13,284
 13,330
15,435
 14,608
 13,958
INVESTING ACTIVITIES          
Capital expenditures(4,008) (3,964) (3,306)(3,314) (3,736) (3,848)
Proceeds from asset sales584
 2,893
 225
432
 4,498
 577
Cash related to deconsolidated Venezuela operations—
 (908) —
Acquisitions, net of cash acquired(1,145) (134) (474)(186) (137) (24)
Purchases of available-for-sale investment securities(1,605) —
 —
Purchases of short-term investments(2,815) (3,647) (568)
Proceeds from sales of short-term investments1,354
 1,203
 24
Cash transferred in Batteries divestiture(143) —
 —
Restricted cash related to Beauty Brands divestiture(996) —
 —
Change in other investments(121) 112
 73
93
 (163) (261)
TOTAL INVESTING ACTIVITIES(6,295) (1,093) (3,482)(5,575) (2,890) (4,100)
FINANCING ACTIVITIES          
Dividends to shareholders(6,519) (6,139) (5,767)(7,436) (7,287) (6,911)
Change in short-term debt3,406
 (3,412) 151
(418) (2,580) 3,304
Additions to long-term debt2,331
 3,985
 1,536
3,916
 2,138
 4,334
Reductions of long-term debt(3,752) (2,549) (206)(2,213) (3,512) (4,095)
Treasury stock purchases(5,986) (4,024) (7,039)(4,004) (4,604) (6,005)
Treasury stock from cash infused in Batteries divestiture(1,730) —
 —
Impact of stock options and other3,449
 1,729
 1,203
2,672
 2,826
 2,094
TOTAL FINANCING ACTIVITIES(7,071) (10,410) (10,122)(9,213) (13,019) (7,279)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS4
 (113) 163
(381) (411) 39
CHANGE IN CASH AND CASH EQUIVALENTS1,511
 1,668
 (111)266
 (1,712) 2,618
CASH AND CASH EQUIVALENTS, END OF YEAR$5,947
 $4,436
 $2,768
$7,102
 $6,836
 $8,548
  
SUPPLEMENTAL DISCLOSURE          
Cash payments for:          
Interest$683
 $740
 $806
$569
 $678
 $686
Income taxes3,780
 4,348
 2,992
3,730
 4,558
 3,320
Divestiture of Batteries business in exchange for shares of P&G stock (1)
4,213
 —
 —
Assets acquired through non-cash capital leases are immaterial for all periods.

 

 

     
(1)
Includes $1,730 from cash infused into the Batteries business pursuant to the divestiture agreement (see Note 13).



See accompanying Notes to Consolidated Financial Statements.
The Procter & Gamble Company53 39

Notes to Consolidated Financial Statements

NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Procter & Gamble Company's (the "Company," "Procter & Gamble," "we" or "us") business is focused on providing branded consumer packaged goods of superior quality and value. Our products are sold in more than 180 countries and territories primarily through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons,distributors, baby stores, specialty beauty stores, e-commerce, high-frequency stores and e-commerce.pharmacies. We have on-the-ground operations in approximately 70 countries.
Basis of Presentation
The Consolidated Financial Statements include the Company and its controlled subsidiaries. Intercompany transactions are eliminated. Prior year amounts have been reclassified to conform with current year presentation for amounts related to segment reporting (see Note 2) and discontinued operations (see Note 13).
There are a number of currency and other operating controls and restrictions in Venezuela, which have evolved over time and may continue to evolve in the future. These evolving conditions resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar and U.S. dollar and restricted our Venezuelan operations’ ability to pay dividends and satisfy certain other obligations denominated in U.S. dollars. For accounting purposes, this resulted in a lack of control over our Venezuelan subsidiaries. Therefore, in accordance with the applicable accounting standards for consolidation, effective June 30, 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investment in those subsidiaries using the cost method of accounting. This resulted in a write-off of all of the net assets of our Venezuelan subsidiaries, along with Venezuela related assets held by other subsidiaries. Beginning with the first quarter of fiscal 2016, our financial results only include sales of finished goods to our Venezuelan subsidiaries to the extent we receive payments from Venezuela. Accordingly, we no longer include the results of our Venezuelan subsidiaries’ operations in our financial results.
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, consumer and trade promotion accruals, restructuring reserves, pensions, post-employment benefits, stock options, valuation of acquired intangible assets, useful lives for depreciation and amortization of long-lived assets,
future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, deferred tax assets, uncertain income tax positions and contingencies. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the financial statements in any individual year. However, in regard to ongoing impairment testing of goodwill and indefinite-lived intangible assets, significant deterioration in future cash flow projections or other assumptions used in estimating fair values versus those anticipated at the time of the initial valuations, could result in impairment charges that materially affect the financial statements in a given year.
Revenue Recognition
Sales are recognized when revenue is realized or realizable and has been earned. Revenue transactions represent sales of inventory. The revenue recorded is presented net of sales and other taxes we collect on behalf of governmental authorities. The revenue includes shipping and handling
costs, which generally are included in the list price to the customer. Our policy is to recognize revenue when title to the product, ownership and risk of loss transfer to the customer, which can be on the date of shipment or the date of receipt by the customer. A provision for payment discounts and product return allowances is recorded as a reduction of sales in the same period that the revenue is recognized.
Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are offered through various programs to customers and consumers. Sales are recorded net of trade promotion spending, which is recognized as incurred, generally at the time of the sale. Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included as accrued marketing and promotion in the accruedAccrued and other liabilities line item in the Consolidated Balance Sheets.
Cost of Products Sold
Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacturemanufacturing of product, as well as manufacturing labor, depreciation expense and direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity.
Selling, General and Administrative Expense
Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, selling expenses, research and development costs, administrative and other indirect overhead costs, depreciation and amortization expense on non-manufacturing assets and other miscellaneous operating items. Research and development costs are charged to expense as incurred and were $2.0$1.9 billion in 2013, 20122016, $2.0 billion in 2015 and 2011$1.9 billion in 2014 (reported in Net earnings from continuing operations). Advertising costs, charged to expense as incurred, include worldwide television,


Amounts in millions of dollars except per share amounts or as otherwise specified.
40 The Procter & Gamble Company

print, radio, internet and in-store advertising expenses and were $9.7$7.2 billion in 2013, $9.32016, $7.2 billion in 20122015 and $9.2$7.9 billion in 20112014 (reported in Net earnings from continuing operations). Non-advertising related components of the Company's total marketing spending include costs associated with consumer promotions, product sampling and sales aids, which are included in SG&A, as well as coupons and customer trade funds, which are recorded as reductions to netNet sales.
Other Non-Operating Income, Net
Other non-operating income, net, primarily includes net acquisition and divestiture gains and investment income.




Amounts in millions of dollars except per share amounts or as otherwise specified.
54The Procter & Gamble Company

Currency Translation
Financial statements of operating subsidiaries outside the U.S. generally are measured using the local currency as the functional currency. Adjustments to translate those statements into U.S. dollars are recorded in otherOther comprehensive income (OCI). Currency translation adjustments in accumulated OCI were a gain of $353 at June 30, 2013 and a loss of $357 at June 30, 2012. For subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Re-measurement adjustments for financial statements in highly inflationary economies and other transactional exchange gains and losses are reflected in earnings.
Cash Flow Presentation
The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles net earnings to cash flow from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in net earnings. The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. Cash flows from foreign currency transactions and operations are translated at an average exchange rate for the period. Cash flows from hedging activities are included in the same category as the items being hedged. Cash flows from derivative instruments designated as net investment hedges are classified as financing activities. Realized gains and losses from non-qualifying derivative instruments used to hedge currency exposures resulting from intercompany financing transactions are also classified as financing activities. Cash flows from other derivative instruments used to manage interest, commodity or other currency exposures are classified as operating activities. Cash payments related to income taxes are classified as operating activities. Cash flows from the Company's discontinued operations are included in the Consolidated Statements of Cash Flows.
Cash Equivalents
Highly liquid investments with remaining stated maturities of three months or less when purchased are considered cash equivalents and recorded at cost.
Investments
Investment securities consist of readily marketable debt and equity securities. Unrealized gains or losses forfrom investments classified as trading, if any, are charged to earnings. Unrealized gains or losses on securities classified as available-for-sale are generally recorded in OCI. If an available-for-sale security is other than temporarily impaired, the loss is charged to either earnings or OCI depending on our intent and ability to retain the security until we recover the full cost basis and the extent of the loss attributable to the creditworthiness of the issuer. Investment securities are
included as other current assets or otherAvailable-for-sale investment securities and Other noncurrent assets in the Consolidated Balance Sheets.
Investments in certain companies over which we exert significant influence, but do not control the financial and operating decisions, are accounted for as equity method
investments. Other investments that are not controlled, and over which we do not have the ability to exercise significant influence, are accounted for under the cost method. Both equity and cost method investments are included as otherOther noncurrent assets in the Consolidated Balance Sheets.
Inventory Valuation
Inventories are valued at the lower of cost or market value. Product-related inventories are primarily maintained on the first-in, first-out method. Minor amounts of product inventories, including certain cosmetics and commodities, are maintained on the last-in, first-out method. The cost of spare part inventories is maintained using the average-cost method.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets' estimated useful lives using the straight-line method. Machinery and equipment includes office furniture and fixtures (15-year life), computer equipment and capitalized software (3- to 5-year lives) and manufacturing equipment (3- to 20-year lives). Buildings are depreciated over an estimated useful life of 40 years. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually or more often if indicators of a potential impairment are present. Our annual impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangible assets. The annual evaluation for impairment of goodwill and indefinite-lived intangible assets is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. We believe such assumptions are also comparable to those that would be used by other marketplace participants.
We have acquired brands that have been determined to have indefinite lives. Those assets are evaluated annually for impairment. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. WhenIn addition, when certain events or changes in operating conditions occur, an additional impairment assessment is performed and


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company55

indefinite-lived brandsassets may be adjusted to a determinable life.
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangible assets with contractual terms are generally amortized over their respective legal or contractual lives. Customer relationships, brands and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 30 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and remaining lives of intangible assets with determinable lives may be adjusted.
For additional details on goodwill and intangible assets see Note 4.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 41

Fair Values of Financial Instruments
Certain financial instruments are required to be recorded at fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any such changes would have a material impact on our financial condition, results of operations or cash flows. Other financial instruments, including cash equivalents, othercertain investments and short-term debt, are recorded at cost, which approximates fair value. The fair values of long-term debt and financial instruments are disclosed in Note 5.9.



New Accounting Pronouncements and Policies
OtherIn May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This guidance outlines a single, comprehensive model for accounting for revenue from contracts with customers. We will adopt the standard no later than July 1, 2018. While we are currently assessing the impact of the new standard, we do not expect this new guidance to have a material impact on our Consolidated Financial Statements.
On July 1, 2015, the Company adopted ASU 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity". The guidance included new reporting and disclosure requirements for discontinued operations. For additional details on discontinued operations, see Note 13.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. We will adopt the standard no later than July 1, 2019. We are currently assessing the impact that the new standard will have on our Consolidated Financial Statements. For additional details on our operating leases, see Note 12.
In March 2016, the FASB issued ASU 2016-09, “Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The standard amends several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as described below,well as classification in the statement of cash flows. We will adopt the standard no later than July 1, 2017. While we are currently assessing the impact of the new standard, we do not expect the new guidance to have a material impact on our Consolidated Financial Statements.
No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on theour Consolidated Financial Statements.
During fiscal 2013, the Company adopted ASU 2011-05, "Comprehensive Income (Topic 220) - Presentation of Comprehensive Income", and ASU 2013-02, “Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income”. This guidance eliminates the option to present the components of OCI as part of the statement of shareholders' equity and requires entities to present the components of net earnings and OCI in either a single continuous statement of comprehensive income or two separate but consecutive statements. We chose to present net earnings and OCI in two separate but consecutive statements. This guidance also requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income (AOCI) by component and to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income. We chose to present the requirements in the notes to the financial statements (see Note 6). The adoption of this guidance had no impact on our consolidated financial position, results of operations or cash flows.

NOTE 2
GOODWILL AND INTANGIBLE ASSETSSEGMENT INFORMATION
On July 9, 2015, the Company announced the signing of a definitive agreement to divest four product categories, initially comprised of 43 of its beauty brands (“Beauty Brands”), which will be merged with Coty Inc. ("Coty"). The transaction
includes the global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands and is expected to close in October 2016. In February 2016, the Company completed the divestiture of its Batteries business to Berkshire Hathaway. The Company completed the divestiture of its Pet Care business in the previous fiscal year. Each of these businesses are reported as discontinued operations for all periods presented (see Note 13).
Under U.S. GAAP, our remaining Global Business Units (GBUs) 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, 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, Diapers and Pants); Feminine Care (Adult Incontinence, Feminine Care); Family Care (Paper Towels, Tissues, Toilet Paper).
The changeaccounting policies of the segments are generally the same as those described in Note 1. Differences between these policies and U.S. GAAP primarily reflect income taxes, which are reflected in the net carrying amountsegments using applicable blended statutory rates. Adjustments to arrive at our effective tax rate are included in Corporate.
Corporate includes certain operating and non-operating activities that are not reflected in the operating results used internally to measure and evaluate the businesses, as well as items to adjust management reporting principles to U.S. GAAP. Operating activities in Corporate include the results of goodwillincidental businesses managed at the corporate level. Operating elements also include certain employee benefit costs, the costs of certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization and other general Corporate items. The non-operating elements in Corporate primarily include interest expense, certain acquisition and divestiture gains and interest and investing income.
Total assets for the reportable segments include those assets managed by the reportable segment, was as follows:
primarily inventory, fixed assets and intangible assets. Other assets, primarily cash, accounts receivable, investment securities and goodwill, are included in Corporate.
 BeautyGroomingHealth CareFabric Care and Home CareBaby Care and Family CareCorporateTotal Company
GOODWILL at JUNE 30, 2011 - Gross$18,039
$22,650
$8,179
$6,735
$1,553
$406
$57,562
Accumulated impairment losses at June 30, 2011—
—
—
—
—
—
—
GOODWILL at JUNE 30, 2011 - Net18,039
22,650
8,179
6,735
1,553
406
57,562
Acquisitions and divestitures(3)(12)474
34
—
(92)401
Goodwill impairment charges(431)(899)—
—
—
—
(1,330)
Translation and other(1,176)(1,059)(314)(212)(94)(5)(2,860)
GOODWILL at JUNE 30, 2012 - Gross16,860
21,579
8,339
6,557
1,459
309
55,103
Accumulated impairment losses at June 30, 2012(431)(899)—
—
—
—
(1,330)
GOODWILL at JUNE 30, 2012 - Net16,429
20,680
8,339
6,557
1,459
309
53,773
Acquisitions and divestitures(21)(40)624
(11)463
—
1,015
Goodwill impairment charges—
(259)—
—
—
—
(259)
Translation and other255
236
96
40
32
—
659
GOODWILL at JUNE 30, 2013 - Gross17,094
21,775
9,059
6,586
1,954
309
56,777
Accumulated impairment losses at June 30, 2013(431)(1,158)—
—
—
—
(1,589)
GOODWILL at JUNE 30, 2013 - Net16,663
20,617
9,059
6,586
1,954
309
55,188


Amounts in millions of dollars except per share amounts or as otherwise specified.
5642 The Procter & Gamble Company

In October 2012, the Company acquired our partner's interest in a joint venture in Iberia that operates in our Baby Care and Family Care and Health Care reportable segments. We paid $1.1 billion for our partner's interest and the transaction wasOur business units are comprised of similar product categories. Nine business units individually accounted for 5% or more of consolidated net sales as a business combination. The total enterprise value of $1.9 billion was allocated to indefinite-lived intangible assets of $0.2 billion, defined-life intangible assets of $0.9 billion and goodwill of $1.1 billion. These were partially offset by $0.3 billion of deferred tax liabilities on the intangible assets. The Company recognized a $0.6 billion holding gain on its previously held investment, which was included in other non-operating income, net in the Consolidated Statement of Earnings in fiscal 2013. In addition to these items and the impairment discussed below, the remaining net increase in goodwill since June 30, 2012 was primarily due to currency translation across all reportable segments.follows:
During the fourth quarter of fiscal 2013, the estimated fair value of our Appliances reporting unit declined below its carrying amount. As a result, we recorded a non-cash before and after-tax impairment charge of $259 in fiscal 2013 to reduce the carrying amount of goodwill to estimated fair value.
The same factors that led to the decline in the fair value of the reporting unit led to a decline in the fair value of our Braun trade name intangible asset below its respective carrying value. This resulted in a non-cash before-tax impairment charge of $49 ($31 after-tax) to reduce the carrying amount of this asset to its fair value.
% of Sales by Business Unit*
Years ended June 302016 2015 2014
Fabric Care22% 22% 22%
Baby Care14% 15% 15%
Hair Care10% 11% 11%
Home Care10% 9% 9%
Shave Care9% 9% 10%
Family Care8% 8% 7%
Oral Care8% 8% 7%
Skin and Personal Care8% 7% 7%
Feminine Care6% 6% 6%
All Other5% 5% 6%
TOTAL100% 100% 100%
The results of our goodwill impairment testing during fiscal 2012 determined that the estimated fair values of our Appliances and Salon Professional reporting units were less than their respective carrying amounts. As a result, we recorded a non-cash before and after-tax impairment charge of $1.3 billion in fiscal 2012 to reduce the carrying amount of goodwill to estimated fair value; $899 of the impairment related to Appliances and $431 related to Salon Professional.
Our impairment testing for indefinite-lived intangible assets during fiscal 2012 also indicated a decline in the fair value of our Koleston Perfect and Wella trade name intangible assets below their respective carrying values. This resulted in a non-cash before-tax impairment charge of $246 ($173 after-tax) to reduce the carrying amounts of these assets to their respective fair values.
All of the fiscal 2013 and 2012 goodwill and indefinite-lived intangible asset impairment charges are included in Corporate for segment reporting.
The goodwill and intangible asset valuations are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion and Company business plans. We believe these estimates and assumptions are reasonable. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows
*% of sales by business unit excludes sales held in Corporate.
 
used to estimate fair value, we may need to record additional non-cash impairment chargesThe Company had net sales in the future.U.S. of $27.0 billion, $26.8 billion and $26.7 billion for the years ended June 30, 2016, 2015 and 2014, respectively. Long-lived assets in the U.S. totaled $8.5 billion and $8.3 billion as of June 30, 2016 and 2015, respectively. Long-lived assets consists of property, plant and equipment. No other country's net sales or long-lived assets exceed 10% of the Company totals.
Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 15% of consolidated net sales in 2016, 2015 and 2014. No other customer represents more than 10% of our consolidated net sales.


The fiscal 2013 declines in fair values of the Appliances reporting unit and the Braun trade name intangible asset were primarily driven by currency impacts. Specifically, currency in Japan, a country that generates a significant portion of the Appliances earnings, devalued approximately 20% in the second half of fiscal 2013 relative to the currencies in which the underlying net assets are recorded. This sustained reduction in the yen reduced the underlying category market size and the projected future cash flows of the business, which in turn triggered the impairment.
Global Segment Results  Net Sales 
Earnings/(Loss)
from
Continuing
Operations
Before
Income Taxes
 Net Earnings/(Loss) from Continuing Operations 
Depreciation
and
Amortization
 
Total
Assets
 
Capital
Expenditures
BEAUTY  (1)
2016 $11,477
 $2,636
 $1,975
 $218
 $3,888
 $435
 2015 12,608
 2,895
 2,181
 247
 4,004
 411
 2014 13,401
 3,020
 2,300
 256
 4,564
 376
GROOMING2016 6,815
 2,009
 1,548
 451
 22,819
 383
 2015 7,441
 2,374
 1,787
 540
 23,090
 372
 2014 8,009
 2,589
 1,954
 576
 23,767
 369
HEALTH CARE2016 7,350
 1,812
 1,250
 204
 5,139
 240
 2015 7,713
 1,700
 1,167
 202
 5,212
 218
 2014 7,798
 1,597
 1,083
 199
 5,879
 253
FABRIC & HOME CARE2016 20,730
 4,249
 2,778
 531
 6,919
 672
 2015 22,274
 4,059
 2,634
 547
 7,155
 986
 2014 23,506
 4,264
 2,770
 539
 7,938
 1,057
BABY, FEMININE & FAMILY CARE2016 18,505
 4,042
 2,650
 886
 9,863
 1,261
 2015 20,247
 4,317
 2,938
 924
 10,109
 1,337
 2014 20,950
 4,310
 2,940
 908
 10,946
 1,317
CORPORATE (1) (2)
2016 422
 (1,379) (174) 788
 78,508
 323
 2015 466
 (4,333) (2,420) 674
 79,925
 412
 2014 737
 (2,271) (389) 663
 91,172
 476
TOTAL COMPANY2016 $65,299
 $13,369
 $10,027
 $3,078
 $127,136
 $3,314
 2015 70,749
 11,012
 8,287
 3,134
 129,495
 3,736
 2014 74,401
 13,509
 10,658
 3,141
 144,266
 3,848
(1)
Prior year adjustments were made to total assets for the Beauty and Corporate reportable segments related to certain Beauty Brands trademarks included in the scope of the Beauty Brands transaction.
(2)
The Corporate reportable segment includes depreciation and amortization, total assets and capital expenditures of the Pet Care and Batteries businesses prior to their divestiture and of the Beauty Brands businesses.

The fiscal 2012 declines in the fair values of the Appliances and Salon Professional reporting units and the underlying Koleston Perfect and Wella trade name intangible assets were driven by a combination of similar competitive and economic factors, which resulted in a reduction in the forecasted growth rates and cash flows used to estimate fair value. The factors included: (1) a more prolonged and deeper deterioration of the macroeconomic environment than was previously expected which, due to the more discretionary nature of the Appliances and Salon Professional businesses, led to a reduction in the overall market size in the short term and a more significant and prolonged reduction in the expected underlying market growth rates and resulting sales levels in the longer term. This was particularly evident in Europe, where we have historically generated a majority of the Appliances and Salon Professional sales; (2) increasing competitive levels of innovation in Salon Professional, which negatively impacted our current and nearer-term projected market share progress; and, (3) an increasing level of competitive pricing activities, which negatively impacted overall category profitability. As a result of these factors, we reduced our current and long-term sales and earnings forecasts for these businesses.
In addition to the impairment charges discussed above, goodwill also decreased in fiscal 2012 due to currency translation across all reporting segments partially offset by the establishment of goodwill related to the business combination with Teva Pharmaceuticals Ltd. in our Health Care reportable segment.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company57 43

Identifiable intangible assets were comprised of:
 2013 2012
June 30
Gross
Carrying
Amount
Accumulated
Amortization
 
Gross
Carrying
Amount
Accumulated
Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands$4,251
$2,020
 $3,297
$1,687
Patents and technology2,976
2,032
 3,164
2,021
Customer relationships2,118
703
 2,048
642
Other348
168
 352
218
TOTAL9,693
4,923
 8,861
4,568
      
INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands26,802
—
 26,695
—
TOTAL36,495
4,923
 35,556
4,568
Amortization expense of intangible assets was as follows:
Years ended June 302013  2012  2011
Intangible asset amortization$528
  $500
  $546

Estimated amortization expense over the next five fiscal years is as follows:
Years ended June 302014 2015 2016 2017 2018
Estimated amortization expense$504
 $485
 $442
 $405
 $380
Such estimates do not reflect the impact of future foreign exchange rate changes.
NOTE 3
SUPPLEMENTAL FINANCIAL INFORMATION
The components of property, plant and equipment were as follows:
June 302013  2012
PROPERTY, PLANT AND EQUIPMENT   
Buildings$7,829
  $7,324
Machinery and equipment31,070
  29,342
Land878
 880
Construction in progress3,235
  2,687
TOTAL PROPERTY, PLANT AND EQUIPMENT43,012
 40,233
Accumulated depreciation(21,346)  (19,856)
PROPERTY, PLANT AND EQUIPMENT, NET21,666
  20,377
The June 30, 2012 construction in progress balance, which was included in machinery and equipment in fiscal 2012, is shown separately to conform with the fiscal 2013 presentation.
Years ended June 302016 2015
PROPERTY, PLANT AND EQUIPMENT
Buildings$6,885
 $6,949
Machinery and equipment29,506
 29,420
Land769
 763
Construction in progress2,706
 2,931
TOTAL PROPERTY, PLANT AND EQUIPMENT39,866
 40,063
Accumulated depreciation(20,481) (20,408)
PROPERTY, PLANT AND EQUIPMENT, NET$19,385
 $19,655
Selected components of current and noncurrent liabilities were as follows:
June 302013  2012
Years ended June 302016 2015
ACCRUED AND OTHER LIABILITIES - CURRENT    ACCRUED AND OTHER LIABILITIES - CURRENT
Marketing and promotion$3,122
  $2,880
$2,820
 $2,798
Compensation expenses1,665
  1,660
1,457
 1,390
Restructuring reserves323
 343
315
 389
Taxes payable817
  414
397
 845
Legal and environmental374
 264
158
 205
Other2,527
  2,728
2,302
 2,464
TOTAL8,828
  8,289
$7,449
 $8,091
    
OTHER NONCURRENT LIABILITIES    OTHER NONCURRENT LIABILITIES
Pension benefits$6,027
  $5,684
$6,761
 $5,247
Other postretirement benefits1,713
  3,270
1,808
 1,414
Uncertain tax positions2,002
  2,245
952
 1,016
Other837
  891
804
 755
TOTAL10,579
  12,090
$10,325
 $8,432
RESTRUCTURING PROGRAM
The Company has historically incurred an ongoing annual level of restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization. Before-tax costs incurred under the ongoing program have generally ranged from $250$250 to $500$500 annually. In February and Novemberfiscal 2012, the Company made announcements regardinginitiated an incremental restructuring program as part of a productivity and cost savings plan to reduce costs in the areas of supply chain, research and development, marketing and overheads. The productivity and cost savings plan was designed to accelerate cost reductions by streamlining management decision making, manufacturing and other work processes in order to help fund the Company's growth strategy.
The Company expects to incur in excess of $3.5approximately $5.5 billion in before-tax restructuring costs over a fivesix year period (from fiscal
2012 through fiscal 2016)2017), including costs incurred as part of the ongoing and incremental restructuring program. The Company has incurred approximately 55% of the costs under this plan as of the end of fiscal 2013, with the remainder expected to be incurred in fiscal years 2014 through 2016.
The restructuring program is being executed across the Company's centralized organization as well as across virtually all of its Market Development Organizations (MDO) and Global Business Units (GBU). The restructuring program plans included an initial targeted net reduction inincludes a non-manufacturing overhead enrollment of


Amounts in millionsreduction target of dollars except per share amounts or as otherwise specified.
58The Procter & Gamble Company

approximately 5,70025% - 30% by the end of fiscal 2013. 2017.
Through fiscal 2013,2016, the Company has reduced non-manufacturing enrollment by approximately 7,000, which is 1,300 positions above the initial target. In addition to the reduction of 5,700 employees, the restructuring program includes plans for a further non-manufacturing overhead personnel reduction of14,200, or approximately 2% - 4% annually from fiscal 2014 through fiscal 2016, roughly doubling the size of the initial enrollment reduction target. This is being done via24%. The reductions are enabled by the elimination of duplicate work, simplification through the use of technology and the optimization of various functional and business organizations and the Company's global footprint.organizations. In addition, the plan includes integration of newly acquired companies and the optimization of the supply chain and other manufacturing processes.
Restructuring costs incurred consist primarily of costs to separate employees, and asset-related costs to exit facilities. The Company is also incurringfacilities and other types of costs as outlined below.costs. The Company incurred total restructuring charges of approximately $956 million$977 and $1.1 billion$1,068 for the years ended June 30, 20132016 and June 30, 2012,2015, respectively. Approximately $600$202 and $746$338 of these charges were recorded in SG&A for the years ended June 30, 20132016 and 2015, respectively and approximately $718 and $614 of these charges were recorded in Cost of products sold for the years ended June 30, 2012,2016 and 2015, respectively. The remainder isof the charges were included in cost of products sold.Net earnings from discontinued operations. Since the inception of this restructuring program, the Company has incurred chargesapproximately $4.9 billion of approximately $2.0the total expected restructuring costs. Approximately $2.3 billion. Approximately $1.1 billion of these charges were related to separations, $487 million$1.4 billion were asset-related and $431 million$1.2 billion were related to other restructuring-type costs. The following table presents restructuring activity for the years ended June 30, 20132016 and 2012:2015:
 Separations Asset-Related Costs Other Total
RESERVE JUNE 30, 2011$121
 $—
 $30
 $151
        
Charges495
 378
 179
 1,052
Cash spent(300) —
 (182) (482)
Charges against assets—
 (378) —
 (378)
RESERVE JUNE 30, 2012316
 —
 27
 343
        
Charges595
 109
 252
 956
Cash spent(615) —
 (252) (867)
Charges against assets—
 (109) —
 (109)
RESERVE JUNE 30, 2013296
 —
 27
 323
Amounts in millionsSeparationsAsset-Related CostsOtherTotal
RESERVE JUNE 30, 2014$353
$—
$28
$381
Charges516
289
263
1,068
Cash spent(507)—
(264)(771)
Charges against assets—
(289)—
(289)
RESERVE JUNE 30, 2015362
—
27
389
Charges262
432
283
977
Cash spent(381)—
(238)(619)
Charges against assets—
(432)—
(432)
RESERVE JUNE 30, 2016$243
$—
$72
$315
Separation Costs
Employee separation charges for the years ended June 30, 20132016 and June 30, 2012 relate2015, related to severance packages for approximately 3,4502,770 and 3,3004,820 employees, respectively. For
the years ended June 30, 20132016 and June 30, 2012,2015, these severance packages includeincluded approximately 2,390920 and 2,2502,340 non-manufacturing employees, respectively. These separations are primarily in North America and Western Europe. The packages arewere predominantly voluntary and the amounts arewere calculated based on salary levels and past


Amounts in millions of dollars except per share amounts or as otherwise specified.
44 The Procter & Gamble Company

service periods. Severance costs related to voluntary separations are generally charged to earnings when the employee accepts the offer. Since its inception, the restructuring program has incurred separation charges related to approximately 6,75017,070 employees, of which approximately 4,6409,540 are non-manufacturing overhead personnel.
Asset-Related Costs
Asset-related costs consist of both asset write-downs and accelerated depreciation. Asset write-downs relate to the establishment of a new fair value basis for assets held-for-sale or disposal. These assets were written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less minor disposal costs. Charges for accelerated depreciation relate to long-lived assets that will be taken out of service prior to the end of their normal service period. These assets relate primarily to manufacturing consolidations and technology standardization.standardizations. The asset-related charges will not have a significant impact on future depreciation charges.
Other Costs
Other restructuring-type charges are incurred as a direct result of the restructuring program. Such charges primarily include employee relocation related to separations and office consolidations, termination of contracts related to supply chain redesign and the cost to change internal systems and processes to support the underlying organizational changes.
Consistent with our historical policies for ongoing restructuring-type activities, the restructuring program charges are funded by and included within Corporate for both management and segment reporting. Accordingly, 100%all of the charges under the program are included within the Corporate reportable segment. However, for informative purposes, the following table summarizes the total restructuring costs related to our reportable segments:
Years Ended June 302013 2012
Years ended June 302016 2015
Beauty$132
 $120
$72
 $63
Grooming50
 20
42
 57
Health Care58
 25
26
 32
Fabric Care and Home Care148
 184
Baby Care and Family Care88
 63
Fabric & Home Care250
 197
Baby, Feminine & Family Care225
 192
Corporate (1)
480
 640
362
 527
Total Company956
 1,052
$977
 $1,068
(1)
Corporate includes costs related to allocated overheads, including charges related to our Sales and Market Operations, Global Business Services and Corporate Functions activities and costs related to discontinued operations from our Batteries and Beauty Brands businesses.

(1)
NOTE 4
GOODWILL AND INTANGIBLE ASSETS
The change in the net carrying amount of goodwill by reportable segment was as follows:
 BeautyGroomingHealth CareFabric & Home CareBaby, Feminine & Family CareCorporateTotal Company
GOODWILL at JUNE 30, 2014 - Gross$14,065
$22,097
$6,280
$1,981
$4,910
$2,554
$51,887
Accumulated impairment losses at June 30, 2014—
(1,158)—
—
—
—
(1,158)
GOODWILL at JUNE 30, 2014 - Net14,065
20,939
6,280
1,981
4,910
2,554
50,729
Acquisitions and divestitures(136)—
(6)(3)—
(449)(594)
Goodwill impairment charges—
—
—
—
—
(2,064)(2,064)
Translation and other(1,225)(1,320)(398)(104)(361)(41)(3,449)
GOODWILL at JUNE 30, 2015 - Gross (1)
12,704
20,777
5,876
1,874
4,549
2,064
47,844
Accumulated impairment losses at June 30, 2015 (1)
—
(1,158)—
—
—
(2,064)(3,222)
GOODWILL at JUNE 30, 2015 - Net12,704
19,619
5,876
1,874
4,549
—
44,622
Acquisitions and divestitures(2)—
(2)—
—
—
(4)
Translation and other(57)(142)(34)(18)(17)—
(268)
GOODWILL at JUNE 30, 2016 - Gross12,645
20,635
5,840
1,856
4,532
—
45,508
Accumulated impairment losses at June 30, 2016—
(1,158)—
—
—
—
(1,158)
GOODWILL at JUNE 30, 2016 - Net$12,645
$19,477
$5,840
$1,856
$4,532
$—
$44,350
(1)
Balances in Corporate segment reflect the gross value of the Batteries goodwill and the corresponding impairment charges recorded against the business to reflect the value of BH's shares in P&G stock as of June 30, 2015. The Batteries business was divested in February 2016.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 45

On July 9, 2015, the Company announced the signing of a definitive agreement to divest four product categories, initially comprised of 43 of its beauty brands ("Beauty Brands"), which will be merged with Coty. The transaction includes the global salon professional hair care and color, retail hair color and cosmetics businesses and a majority of the fine fragrances business, along with select hair styling brands (see Note 13). The Beauty Brands have historically been part of the Company's Beauty reportable segment. In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Beauty Brands are presented as discontinued operations. As a result, the goodwill attributable to the Beauty Brands as of June 30, 2016, 2015 and 2014 is excluded from the preceding table and is reported as Current assets held for sale in the Consolidated Balance Sheets.
During early fiscal 2015, we determined that the estimated fair value of our Batteries reporting unit was less than its carrying amount, resulting in a series of impairment charges. The underlying fair value assessment was initially triggered by an agreement in September 2014 to sell the China-based battery joint venture and a related decision to pursue options to exit the remainder of the Batteries business. The agreement to sell the China-based battery joint venture was at a transaction value that was below the earnings multiple implied from the prior valuation of our Batteries business, which effectively eliminated our fair value cushion. As a result, the remaining business unit cash flows no longer supported the remaining carrying amount of the Batteries business. Due largely to these factors, we recorded an initial non-cash, before and after-tax impairment charge of $863 to reduce the carrying amount of goodwill for the Batteries business unit to its estimated fair value. These same factors resulted in a decline in the fair value of our Duracell trade name intangible asset below its carrying value. This resulted in a non-cash, before-tax impairment charge of $110 ($69 after tax) to reduce the carrying amount of this asset to its estimated fair value.
Later in fiscal 2015, the Company reached an agreement to divest the Batteries business via a split transaction in which the Company agreed to exchange a recapitalized Duracell Company for Berkshire Hathaway's (BH) shares of P&G stock. Based on the terms of the agreement and the value of BH's shares of P&G stock as of the transaction date and changes thereto through June 30, 2015, the Company recorded additional non-cash, before and after-tax impairment charges totaling $1.2 billion.
In February 2016, the Company completed the divestiture of its Batteries business to BH. Pursuant to the recapitalization provisions of the agreement, the Company infused additional cash into the Duracell Company to enable it to repurchase all 52.5 million shares of P&G stock owned by BH. Prior to the transaction, the Company recorded a non-cash, before-tax impairment charge of $402 ($350 after tax) during fiscal 2016, which reflected the value of BH's shares in P&G stock as of the date of the impairment charges (see Note 13).
All of the fiscal 2016 and 2015 impairment charges in the Batteries business are included as part of discontinued operations. The Batteries goodwill is included in Corporate includes costs relatedin the preceding table as of June 30, 2014. The remaining
Batteries goodwill at June 30, 2015 is reported in Current assets held for sale in the Consolidated Balance Sheet.
The remaining change in goodwill during fiscal 2016 and 2015 was primarily due to allocated overheads,currency translation across all reportable segments.
All of the goodwill and indefinite-lived intangible asset impairment charges that are not reflected in discontinued operations are included in Corporate for segment reporting.
The goodwill and intangible asset valuations are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion and Company business plans. We believe these estimates and assumptions are reasonable and are comparable to those that would be used by other marketplace participants. However, actual events and results could differ substantially from those used in our valuations. To the extent such factors result in a failure to achieve the level of projected cash flows used to estimate fair value, we may need to record additional non-cash impairment charges relatedin the future.
Identifiable intangible assets were comprised of:
 2016 2015
Years ended June 30
Gross
Carrying
Amount
Accumulated
Amortization
 
Gross
Carrying
Amount
Accumulated
Amortization
INTANGIBLE ASSETS WITH DETERMINABLE LIVES
Brands$3,409
$(2,032) $3,039
$(1,721)
Patents and technology2,624
(2,164) 2,619
(2,028)
Customer relationships1,382
(514) 1,395
(464)
Other246
(130) 252
(123)
TOTAL$7,661
$(4,840) $7,305
$(4,336)
      
INTANGIBLE ASSETS WITH INDEFINITE LIVES
Brands21,706
—
 22,041
—
TOTAL$29,367
$(4,840) $29,346
$(4,336)
Due to our MDO, Global Business Servicesthe divestiture of the Beauty Brands and Corporate Functions activities.Batteries businesses, intangible assets specific to these businesses are reported in Current assets held for sale in accordance with the accounting principles for assets held for sale as of June 30, 2016 and 2015.
Amortization expense of intangible assets was as follows:
Years ended June 302016 2015 2014
Intangible asset amortization$388
 $457
 $514
Estimated amortization expense over the next five fiscal years is as follows:
Years ending June 3020172018201920202021
Estimated amortization expense$326
$298
$281
$255
$206



Amounts in millions of dollars except per share amounts or as otherwise specified.
46 The Procter & Gamble Company

NOTE 5
INCOME TAXES
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
Earnings from continuing operations before income taxes consisted of the following:
Years ended June 302016 2015 2014
United States$8,788
 $8,496
 $8,513
International4,581
 2,516
 4,996
TOTAL$13,369
 $11,012
 $13,509
Income taxes on continuing operations consisted of the following:
Years ended June 302016 2015 2014
CURRENT TAX EXPENSE
U.S. federal$1,673
 $2,127
 $1,399
International1,483
 1,142
 1,252
U.S. state and local224
 252
 237
 3,380
 3,521
 2,888
DEFERRED TAX EXPENSE
U.S. federal33
 (607) 145
International and other(71) (189) (182)
 (38) (796) (37)
TOTAL TAX EXPENSE$3,342
 $2,725
 $2,851
A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate on continuing operations is provided below:
Years ended June 302016 2015 2014
U.S. federal statutory income tax rate35.0 % 35.0 % 35.0 %
Country mix impacts of foreign operations(9.1)% (14.0)% (10.8)%
Changes in uncertain tax positions(0.5)% (0.9)% (1.7)%
Venezuela deconsolidation charge— % 6.6 % — %
Other(0.4)% (2.0)% (1.4)%
EFFECTIVE INCOME TAX RATE25.0 % 24.7 % 21.1 %
Changes in uncertain tax positions represent changes in our net liability related to prior year tax positions. Country mix impacts of foreign operations includes the effects of foreign subsidiaries' earnings taxed at rates other than the U.S. statutory rate, the U.S. tax impacts of non-U.S. earnings repatriation and any net impacts of intercompany transactions.
Tax benefits credited to shareholders' equity totaled $899 for the year ended June 30, 2016. This primarily relates to the impact of certain adjustments to pension obligations recorded in stockholders' equity and the impact of excess tax benefits from the exercise of stock options. Tax costs charged to shareholders' equity totaled $634 for the year ended June 30, 2015. This primarily relates to the tax effects of net investment hedges and the impact of certain adjustments to pension obligations recorded in stockholders' equity, partially offset by excess tax benefits from the exercise of stock options.
We have undistributed earnings of foreign subsidiaries of approximately $49.0 billion at June 30, 2016, for which deferred taxes have not been provided. Such earnings are considered indefinitely invested in the foreign subsidiaries. If such earnings were repatriated, additional tax expense may result. However, the calculation of the amount of deferred U.S. income tax on these earnings is not practicable because of the large number of assumptions necessary to compute the tax. 
A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:
Years ended June 302016 2015 2014
BEGINNING OF YEAR$1,096
 $1,437
 $1,600
Increases in tax positions for prior years124
 87
 146
Decreases in tax positions for prior years(97) (146) (296)
Increases in tax positions for current year97
 118
 142
Settlements with taxing authorities(301) (250) (135)
Lapse in statute of limitations(39) (27) (33)
Currency translation(23) (123) 13
END OF YEAR$857
 $1,096
 $1,437
Included in the total liability for uncertain tax positions at June 30, 2016, is $589 that, depending on the ultimate resolution, could impact the effective tax rate in future periods.
The Company is present in approximately 140 taxable jurisdictions and, at any point in time, has 50-60 jurisdictional audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statute of limitations. Such adjustments are reflected in the tax provision


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company59 47

as appropriate. We have tax years open ranging from 2008 and forward. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. Based on information currently available, we anticipate that over the next 12 month period, audit activity could be completed related to uncertain tax positions in multiple jurisdictions for which we have accrued existing liabilities of approximately $250, including interest and penalties.
Accounting pronouncements require that, without discretion, we recognize the additional accrual of any possible related interest and penalties relating to the underlying uncertain tax position in income tax expense, unless the Company qualifies for a specific exception. As of June 30, 2016, 2015 and 2014, we had accrued interest of $323, $347 and $411 and accrued penalties of $20, $19 and $32, respectively, which are not included in the above table. During the fiscal years ended June 30, 2016, 2015 and 2014, we recognized $2, $15 and $(6) in interest benefit/(expense) and $(2), $13 and $2 in penalties benefit/(expense), respectively. The net benefits recognized resulted primarily from the favorable resolution of tax positions for prior years.
Deferred income tax assets and liabilities were comprised of the following:
Years ended June 302016 2015
DEFERRED TAX ASSETS   
Pension and postretirement benefits$2,226
 $1,739
Loss and other carryforwards1,077
 1,014
Stock-based compensation845
 949
Advance payments515
 281
Accrued marketing and promotion240
 266
Unrealized loss on financial and foreign exchange transactions122
 183
Fixed assets216
 139
Inventory61
 49
Accrued interest and taxes55
 48
Other764
 839
Valuation allowances(467) (324)
TOTAL$5,654
 $5,183
    
DEFERRED TAX LIABILITIES   
Goodwill and other intangible assets$9,461
 $9,530
Fixed assets1,533
 1,590
Unrealized gain on financial and foreign exchange transactions387
 353
Other105
 149
TOTAL$11,486
 $11,622
Net operating loss carryforwards were $3.2 billion and $3.1 billion at June 30, 2016 and 2015, respectively. If unused, $1.0 billion will expire between 2016 and 2035. The remainder, totaling $2.2 billion at June 30, 2016, may be carried forward indefinitely.


Amounts in millions of dollars except per share amounts or as otherwise specified.
48 The Procter & Gamble Company

NOTE 46
SHORT-TERM AND LONG-TERM DEBTEARNINGS PER SHARE
Net earnings attributable to Procter & Gamble less preferred dividends (net of related tax benefits) are divided by the weighted average number of common shares outstanding during the year to calculate Basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to stock options and other stock-based awards (see Note 7) and assume conversion of preferred stock (see Note 8).
Net earnings/(loss) attributable to Procter & Gamble and common shares used to calculate Basic and Diluted net earnings per share were as follows:
June 302013 2012
DEBT DUE WITHIN ONE YEAR   
Current portion of long-term debt$4,506
 $4,083
Commercial paper7,642
 4,574
Other284
 41
TOTAL12,432
 8,698
    
Short-term weighted average interest rates(1)
0.5% 0.6%
(1) Weighted average short-term interest rates include the effects of interest rate swaps discussed in Note 5.
June 302013 2012
LONG-TERM DEBT   
Floating rate USD notes due February 2014$2,000
 $1,000
4.50% EUR note due May 20141,960
 1,887
4.95% USD note due August 2014900
 900
0.70% USD note due August 20141,000
 1,000
3.50% USD note due February 2015750
 750
0.95% JPY note due May 20151,012
 1,261
3.15% USD note due September 2015500
 500
1.80% USD note due November 20151,000
 1,000
4.85% USD note due December 2015700
 700
1.45% USD note due August 20161,000
 1,000
5.13% EUR note due October 20171,437
 1,383
4.70% USD note due February 20191,250
 1,250
4.13% EUR note due December 2020784
 755
9.36% ESOP debentures due 2013-2021(1)
701
 757
2.30% USD note due February 20221,000
 1,000
2.00% EUR note due August 20221,307
 —
4.88% EUR note due May 20271,307
 1,258
6.25% GBP note due January 2030764
 780
5.50% USD note due February 2034500
 500
5.80% USD note due August 2034600
 600
5.55% USD note due March 20371,400
 1,400
Capital lease obligations31
 45
All other long-term debt1,714
 5,437
Current portion of long-term debt(4,506) (4,083)
TOTAL19,111
 21,080
   
Long-term weighted average interest rates(2)
3.3% 3.3%
Years ended June 302016 2015 2014
CONSOLIDATED AMOUNTSContinuing OperationsDis-continued OperationsTotal Continuing OperationsDis-continued OperationsTotal Continuing OperationsDis-continued OperationsTotal
Net earnings/(loss)$10,027
$577
$10,604
 $8,287
$(1,143)$7,144
 $10,658
$1,127
$11,785
Net earnings attributable to noncontrolling interests(96)—
(96) (98)(10)(108) (120)(22)(142)
Net earnings/(loss) attributable to P&G (Diluted)9,931
577
10,508
 8,189
(1,153)7,036
 10,538
1,105
11,643
Preferred dividends, net of tax(255)—
(255) (259)—
(259) (253)—
(253)
Net earnings/(loss) attributable to P&G available to common shareholders (Basic)$9,676
$577
$10,253
 $7,930
$(1,153)$6,777
 $10,285
$1,105
$11,390
SHARES IN MILLIONS           
Basic weighted average common shares outstanding2,698.9
2,698.9
2,698.9
 2,711.7
2,711.7
2,711.7
 2,719.8
2,719.8
2,719.8
Add: Effect of dilutive securities           
Conversion of preferred shares(1)
103.9
103.9
103.9
 108.6
108.6
108.6
 112.3
112.3
112.3
Impact of stock options and other unvested equity awards (2)
41.6
41.6
41.6
 63.3
63.3
63.3
 72.6
72.6
72.6
Diluted weighted average common shares outstanding2,844.4
2,844.4
2,844.4
 2,883.6
2,883.6
2,883.6
 2,904.7
2,904.7
2,904.7
PER SHARE AMOUNTS           
Basic net earnings/(loss) per common share (3)
$3.59
$0.21
$3.80
 $2.92
$(0.42)$2.50
 $3.78
$0.41
$4.19
Diluted net earnings/(loss) per common share (3)
$3.49
$0.20
$3.69
 $2.84
$(0.40)$2.44
 $3.63
$0.38
$4.01
(1) 
Debt issued byDespite being included currently in Diluted net earnings per common share, the actual conversion to common stock occurs when the preferred shares are sold. Shares may only be sold after being allocated to the ESOP is guaranteed byparticipants pursuant to the Company and must be recorded as debtrepayment of the Company as discussed in Note 9.ESOP's obligations through 2035.
(2) 
Weighted average long-term interest rates includeOutstanding stock options of approximately 55 million in 2016, 8 million in 2015 and 9 million in 2014 were not included in the effectsDiluted net earnings per share calculation because the options were out of interest rate swaps discussed in Note 5.the money or to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares).
(3)
Basic net earnings per common share and Diluted net earnings per common share are calculated on Net earnings/(loss) attributable to Procter & Gamble.

NOTE 7
STOCK-BASED COMPENSATION
We have stock-based compensation plans under which we annually grant stock option, restricted stock unit (RSU) and performance stock unit (PSU) awards to key managers and directors. Exercise prices on options granted have been, and continue to be, set equal to the market price of the underlying shares on the date of the grant. Since September 2002, the grants of key manager stock option awards vest after three years
 
Long-term debt maturitiesand have a 10-year life. The key manager stock option awards granted from July 1998 through August 2002 vested after three years and have a 15-year life. Key managers can elect to receive up to the entire value of their option award in RSUs. Key manager RSUs vest and are settled in shares of common stock five years from the grant date. The awards provided to the Company's directors are in the form of RSUs. In addition to our key manager and director grants, we make other minor stock option and RSU grants to employees for which the terms are not substantially different than key manager awards.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 49

Senior-level executives receive PSU awards. Under this program, the number of PSUs that will vest three years after the respective grant date is based on the Company's performance relative to pre-established performance goals during that three year period.
A total of 185 million shares of common stock were authorized for issuance under the stock-based compensation plan approved by shareholders in 2014. A total of 125 million shares remain available for grant under the 2014 plan. The disclosures below include stock-based compensation related to discontinued operations, which is not material in any period presented.
Years ended June 302016 2015 2014
STOCK-BASED COMPENSATION EXPENSE
Stock options$199
 $223
 $246
RSUs and PSUs143
 114
 114
      
Income tax benefit$85
 $109
 $127
In calculating the compensation expense for stock options granted, we utilize a binomial lattice-based valuation model. Assumptions utilized in the model, which are evaluated and revised to reflect market conditions and experience, were as follows:
Years ended June 302016 2015 2014
Interest rate0.7-1.9% 0.1-2.1% 0.1-2.8%
Weighted average interest rate1.8% 2.0% 2.5%
Dividend yield3.2% 3.1% 3.1%
Expected volatility15-17% 11-15% 15-17%
Weighted average volatility16% 15% 16%
Expected life in years8.3  8.3  8.2 
Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
A summary of options, RSUs and PSUs outstanding under the plans as of June 30, 2016 and activity during the next five fiscalyear then ended is presented below:
OptionsOptions (in thousands)Weighted Average Exercise PriceWeighted Average Contract-ual Life in YearsAggregate Intrinsic Value
Outstanding, beginning of year260,292
$63.74
  
Granted21,848
79.01
  
Exercised(50,175)49.40
  
Canceled(1,568)73.70
  
OUTSTANDING, END OF YEAR230,397
$68.02
5.1$3,440
EXERCISABLE164,578
$62.63
3.6$3,263
The weighted average grant-date fair value of options granted was $8.48, $9.38 and $10.01 per share in 2016, 2015 and 2014, respectively. The total intrinsic value of options exercised was $1,388, $1,814 and $1,152 in 2016, 2015 and 2014, respectively. The total grant-date fair value of options that vested during 2016, 2015 and 2014 was $200, $241 and $319, respectively. At June 30, 2016, there was $186 of compensation cost that has not yet been recognized related to stock option grants. That cost is expected to be recognized over a remaining weighted average period of 1.9 years. Cash received from options exercised was $2,332, $2,631 and $1,938 in 2016, 2015 and 2014, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $433, $519 and $338 in 2016, 2015 and 2014, respectively.
 RSUs PSUs
Other stock-based awardsUnits (in thousands)Weighted Average Grant Date Fair Value Units (in thousands)Weighted Average Grant Date Fair Value
Non-vested at July 1, 20155,008
$64.78
 1,188
$74.48
Granted1,855
66.32
 571
73.02
Vested(1,453)61.64
 (613)71.68
Forfeited(136)67.17
 —
—
Non-vested at June 30, 20165,274
$65.53
 1,146
$75.25
At June 30, 2016, there was $202 of compensation cost that has not yet been recognized related to restricted stock, RSUs and PSUs. That cost is expected to be recognized over a remaining weighted average period of 3.0 years. The total fair value of shares vested was $97, $79 and $95 in 2016, 2015 and 2014, respectively.
We have no specific policy to repurchase common shares to mitigate the dilutive impact of options, RSUs and PSUs. However, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to offset the impacts of such activity.


Amounts in millions of dollars except per share amounts or as otherwise specified.
50 The Procter & Gamble Company

NOTE 8
POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN
We offer various postretirement benefits to our employees.
Defined Contribution Retirement Plans
We have defined contribution plans which cover the majority of our U.S. employees, as well as employees in certain other countries. These plans are fully funded. We generally make contributions to participants' accounts based on individual base salaries and years of service. Total global defined contribution expense was $292, $305 and $311 in 2016, 2015 and 2014, respectively.
The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the expense for the Company's defined contribution plans. For the U.S. DC plan, the contribution rate is set annually. Total contributions for this plan approximated 14% of total participants' annual wages and salaries in 2016 and 2015 and 15% in 2014.
We maintain The Procter & Gamble Profit Sharing Trust (Trust) and Employee Stock Ownership Plan (ESOP) to
provide a portion of the funding for the U.S. DC plan and other retiree benefits (described below). Operating details of the ESOP are provided at the end of this Note. The fair value of the ESOP Series A shares allocated to participants reduces our cash contribution required to fund the U.S. DC plan.
Defined Benefit Retirement Plans and Other Retiree Benefits
We offer defined benefit retirement pension plans to certain employees. These benefits relate primarily to local plans outside the U.S. and, to a lesser extent, plans assumed in previous acquisitions covering U.S. employees.
We also provide certain other retiree benefits, primarily health care and life insurance, for the majority of our U.S. employees who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans require cost sharing with retirees and pay a stated percentage of expenses, reduced by deductibles and other coverages. These benefits are primarily funded by ESOP Series B shares and certain other assets contributed by the Company.

Obligation and Funded Status. The following provides a reconciliation of benefit obligations, plan assets and funded status of these defined benefit plans:
 
Pension Benefits (1)
 
Other Retiree Benefits (2)
Years ended June 302016 2015 2016 2015
CHANGE IN BENEFIT OBLIGATION       
Benefit obligation at beginning of year (3)
$15,951

$17,053

$4,904

$5,505
Service cost314
 317
 124
 156
Interest cost466
 545
 219
 240
Participants' contributions17
 19
 74
 71
Amendments8
 17
 (40) (325)
Actuarial loss/(gain)1,927
 524
 589
 (399)
Acquisitions/(divestitures)(21) 7
 (7) —
Special termination benefits6
 11
 12
 23
Currency translation and other(826) (1,908) (14) (134)
Benefit payments(557) (634) (229) (233)
BENEFIT OBLIGATION AT END OF YEAR (3)
$17,285
 $15,951
 $5,632
 $4,904
CHANGE IN PLAN ASSETS       
Fair value of plan assets at beginning of year$10,605
 $11,098
 $3,470
 $3,574
Actual return on plan assets630
 1,016
 408
 10
Acquisitions/(divestitures)(13) —
 —
 —
Employer contributions306
 262
 32
 18
Participants' contributions17
 19
 74
 71
Currency translation and other(719) (1,156) (8) (6)
ESOP debt impacts (4)
—
 —
 40
 36
Benefit payments(557) (634) (229) (233)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR$10,269
 $10,605
 $3,787
 $3,470
Reclassification of net obligation to held for sale liabilities402
 336
 16
 —
FUNDED STATUS$(6,614) $(5,010) $(1,829) $(1,434)
(1)
Primarily non-U.S.-based defined benefit retirement plans.
(2)
Primarily U.S.-based other postretirement benefit plans.
(3)
For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.
(4)
Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 51

The underfunding of pension benefits is primarily a function of the different funding incentives that exist outside of the U.S. In certain countries, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations prior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as they become due.
 Pension Benefits Other Retiree Benefits
Years ended June 302016 2015 2016 2015
CLASSIFICATION OF NET AMOUNT RECOGNIZED       
Noncurrent assets$180
 $276
 $—
 $—
Current liabilities(33) (39) (21) (20)
Noncurrent liabilities(6,761) (5,247) (1,808) (1,414)
NET AMOUNT RECOGNIZED$(6,614) $(5,010) $(1,829) $(1,434)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)  
Net actuarial loss$6,088
 $4,488
 $2,247
 $1,731
Prior service cost/(credit)270
 300
 (334) (346)
NET AMOUNTS RECOGNIZED IN AOCI$6,358
 $4,788
 $1,913
 $1,385
The accumulated benefit obligation for all defined benefit pension plans was $15,546 and $14,239 as of June 30, 2016 and 2015, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consisted of the following:
 Accumulated Benefit Obligation  Exceeds the Fair Value of Plan Assets Projected Benefit Obligation  Exceeds the Fair Value of Plan Assets
Years ended June 302016 2015 2016 2015
Projected benefit obligation$15,233
 $13,411
 $15,853
 $14,057
Accumulated benefit obligation13,587
 11,918
 14,149
 12,419
Fair value of plan assets8,082
 7,931
 8,657
 8,435
Net Periodic Benefit Cost. Components of the net periodic benefit cost were as follows:
 Pension Benefits Other Retiree Benefits
Years ended June 302016 2015 2014 2016 2015 2014
AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST          
Service cost$314
 $317
 $298
 $124
 $156
 $149
Interest cost466
 545
 590
 219
 240
 256
Expected return on plan assets(731) (732) (701) (416) (406) (385)
Prior service cost/(credit) amortization29
 30
 26
 (52) (20) (20)
Net actuarial loss amortization265
 275
 214
 78
 105
 118
Special termination benefits6
 11
 5
 12
 23
 9
GROSS BENEFIT COST/(CREDIT)349
 446
 432
 (35) 98
 127
Dividends on ESOP preferred stock—
 —
 —
 (52) (58) (64)
NET PERIODIC BENEFIT COST/(CREDIT)$349
 $446
 $432
 $(87) $40
 $63
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI      
Net actuarial loss/(gain) - current year$2,028
 $240
   $597
 $(3)  
Prior service cost/(credit) - current year8
 17
   (40) (325)  
Amortization of net actuarial loss(265) (275)   (78) (105)  
Amortization of prior service (cost)/credit(29) (30)   52
 20
  
Currency translation and other(172) (677)   (3) (34)  
TOTAL CHANGE IN AOCI1,570
 (725)   528
 (447)  
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI$1,919
 $(279)   $441
 $(407)  
Net periodic benefit costs include amounts related to discontinued operations, which are not material for any period.

Amounts in millions of dollars except per share amounts or as otherwise specified.
52 The Procter & Gamble Company

Amounts expected to be amortized from AOCI into net periodic benefit cost during the year ending June 30, 2017, are as follows:
June 302014 2015 2016 2017 2018
Debt maturities$4,506
 $3,798
 $2,379
 $1,085
 $1,531
 Pension Benefits Other Retiree Benefits
Net actuarial loss$400
 $126
Prior service cost/(credit)28
 (45)
Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each country that may have an impact on the cost of providing retirement benefits. The weighted average assumptions used to determine benefit obligations recorded on the Consolidated Balance Sheets as of June 30, were as follows: (1)
 Pension Benefits Other Retiree Benefits
 2016 2015 2016 2015
Discount rate2.1% 3.1% 3.6% 4.5%
Rate of compensation increase2.9% 3.1% N/A
 N/A
Health care cost trend rates assumed for next yearN/A
 N/A
 7.2% 6.8%
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)N/A
 N/A
 4.9% 5.0%
Year that the rate reaches the ultimate trend rateN/A
 N/A
 2021
 2021
(1)
Determined as of end of year.
The weighted average assumptions used to determine net benefit cost recorded on the Consolidated Statement of Earnings for the years ended June 30, were as follows: (1)
 Pension Benefits Other Retiree Benefits
Years ended June 302016 2015 2014 2016 2015 2014
Discount rate3.1% 3.5% 4.0% 4.5% 4.4% 4.8%
Expected return on plan assets7.2% 7.2% 7.2% 8.3% 8.3% 8.3%
Rate of compensation increase3.1% 3.2% 3.2% N/A
 N/A
 N/A
(1)
Determined as of beginning of year and adjusted for acquisitions.
Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets are 8 - 9% for equities and 5 - 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the long-term projected return of 8.5% and reflects the historical pattern of returns.
Assumed health care cost trend rates could have a significant effect on the amounts reported for the other retiree benefit plans. A one percentage point change in assumed health care cost trend rates would have the following effects:
 
One-Percentage
Point Increase
 
One-Percentage
Point Decrease
Effect on the total service and interest cost components$80
 $(59)
Effect on the accumulated postretirement benefit obligation1,057
 (809)
Plan Assets. Our investment objective for defined benefit retirement plan assets is to meet the plans' benefit obligations, while minimizing the potential for future required Company plan contributions. The investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by matching the actuarial projections of the plans' future liabilities and benefit payments with expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. Plan assets are diversified across several investment managers and are generally invested in liquid funds that are selected to track broad market equity and bond indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and with continual monitoring of investment managers' performance relative to the investment guidelines established with each investment manager.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company fully53

Our target asset allocation for the year ended June 30, 2016, and unconditionally guaranteesactual asset allocation by asset category as of June 30, 2016 and 2015, were as follows:
 Target Asset Allocation Actual Asset Allocation at June 30
 Pension Benefits 
Other Retiree
Benefits
 Pension Benefits Other Retiree Benefits
Asset Category  2016 2015 2016 2015
Cash2% 2% 2% 2% 2% 1%
Debt securities55% 3% 55% 50% 4% 5%
Equity securities43% 95% 43% 48% 94% 94%
TOTAL100% 100% 100% 100% 100% 100%
The following tables set forth the registeredfair value of the Company's plan assets as of June 30, 2016 and 2015 segregated by level within the fair value hierarchy (refer to Note 9 for further discussion on the fair value hierarchy and fair value principles). Collective funds are valued using the net asset value reported by the managers of the funds and as supported by the unit prices of actual purchase and sale transactions. Company stock listed as Level 2 in the hierarchy represents preferred shares which are valued based on the value of Company common stock. The majority of our Level 3 pension assets are insurance contracts. Their fair values are based on their cash equivalent or models that project future cash flows and discount the future amounts to a present value using market-based observable inputs, including credit risk and interest rate curves. There was no significant activity within the Level 3 pension and other retiree benefits plan assets during the years presented.
 Pension Benefits Other Retiree Benefits
Years ended June 30Fair Value Hierarchy Level 2016 2015 Fair Value Hierarchy Level 2016 2015
ASSETS AT FAIR VALUE           
Cash and cash equivalents1 & 2 $262
 $266
 1 $70
 $36
Company stock (1)
  —
 —
 2 3,545
 3,239
Collective fund - equity2 4,381
 5,054
 2 14
 17
Collective fund - fixed income2 5,498
 5,162
 2 158
 178
Other (2)
1 & 3 128
 123
   —
 —
TOTAL ASSETS AT FAIR VALUE  $10,269
 $10,605
   $3,787
 $3,470
(1)
Company stock is net of ESOP debt discussed below.
(2)
The Company's other pension and other retiree benefit plan assets measured at fair value are generally classified as Level 3 within the fair value hierarchy. There are no material other pension and other retiree benefit plan asset balances classified as Level 1 within the fair value hierarchy.

Cash Flows. Management's best estimate of cash requirements and discretionary contributions for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2017, is $217 and $37, respectively. For the defined benefit retirement plans, this is comprised of $93 in expected benefit payments from the Company directly to participants of unfunded plans and $124 of expected contributions to funded plans. For other retiree benefit plans, this is comprised of $22 in expected benefit payments from the Company directly to participants of unfunded plans and $15 of expected contributions to funded plans. Expected contributions are dependent on many variables, including the variability of the market value of the plan assets as compared to the benefit obligation and other market or regulatory conditions. In addition, we take into consideration our business investment opportunities and resulting cash requirements. Accordingly, actual funding may differ significantly from current estimates.
Total benefit payments expected to be paid to participants, which include payments funded from the Company's assets and payments from the plans are as follows:
Years ending June 30
Pension
Benefits
 
Other Retiree
Benefits
EXPECTED BENEFIT PAYMENTS  
2017$516
 $190
2018527
 207
2019537
 221
2020550
 233
2021588
 244
2022 - 20263,232
 1,365


Amounts in millions of dollars except per share amounts or as otherwise specified.
54 The Procter & Gamble Company

Employee Stock Ownership Plan
We maintain the ESOP to provide funding for certain employee benefits discussed in the preceding paragraphs.
The ESOP borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the U.S. DC plan. Principal and interest requirements of the borrowing were paid by the Trust from dividends on the preferred shares and from advances provided by the Company. The original borrowing of $1.0 billion has been repaid in full, and advances from the Company of $74 remain outstanding at June 30, 2016. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.66 per share. The liquidation value is $6.82 per share.
In 1991, the ESOP borrowed an additional $1.0 billion. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. These shares, net of the ESOP's debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and securities issuedadvances provided by its 100% finance subsidiaries.the Company, of which $718 is outstanding at June 30, 2016. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.66 per share. The liquidation value is $12.96 per share.
Our ESOP accounting practices are consistent with current ESOP accounting guidance, including the permissible continuation of certain provisions from prior accounting guidance. ESOP debt, which is guaranteed by the Company, is recorded as debt (see Note 10) with an offset to the reserve for ESOP debt retirement, which is presented within Shareholders' equity. Advances to the ESOP by the Company are recorded as an increase in the Reserve for ESOP debt retirement. Interest incurred on the ESOP debt is recorded as Interest expense. Dividends on all preferred shares, net of related tax benefits, are charged to Retained earnings.
The series A and B preferred shares of the ESOP are allocated to employees based on debt service requirements. The number of preferred shares outstanding at June 30 was as follows:
Shares in thousands2016 2015 2014
Allocated39,241
 42,044
 44,465
Unallocated6,095
 7,228
 8,474
TOTAL SERIES A45,336
 49,272
 52,939
    
Allocated23,925
 23,074
 22,085
Unallocated32,319
 34,096
 35,753
TOTAL SERIES B56,244
 57,170
 57,838
For purposes of calculating diluted net earnings per common share, the preferred shares held by the ESOP are considered converted from inception.

NOTE 59
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. We evaluate exposures on a centralized basis to take advantage of natural exposure correlation and netting. To the extent we choose to manage volatility associated with the net exposures, we enter into various financial transactions that we account for using the applicable accounting guidance for derivative instruments and hedging activities. These financial transactions are governed by our policies covering acceptable counterparty exposure, instrument types and other hedging practices.
At inception, we formally designate and document qualifying instruments as hedges of underlying exposures. We formally assess, at inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposures. Fluctuations in the value of these instruments generally are offset by changes in the fair value or cash flows of the underlying exposures being hedged. This is driven by the high degree of effectiveness between the exposure being hedged and the hedging instrument. The ineffective portion of a change in the fair value of a qualifying instrument is immediately recognized in earnings. The amount of ineffectiveness recognized was immaterial for all years presented.
Credit Risk Management
We have counterparty credit guidelines and normally enter into transactions with investment grade financial institutions.institutions, to the extent commercially viable. Counterparty exposures are monitored daily and downgrades in counterparty credit ratings are reviewed on a timely basis. We have not incurred, and do not expect to incur, material credit losses on our risk management or other financial instruments.
CertainSubstantially all of the Company's financial instruments used in hedging transactions are governed by industry standard netting and collateral agreements with counterparties. If the Company's credit rating were to fall below the levels stipulated in the agreements, the counterparties could demand either collateralization or termination of the


Amounts in millions of dollars except per share amounts or as otherwise specified.
60The Procter & Gamble Company

arrangements. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position as of June 30, 2013,2016, was not material. The Company has not been required to post collateral as a result of these contractual features.
Interest Rate Risk Management
Our policy is to manage interest cost using a mixture of fixed-rate and variable-rate debt. To manage this risk in a cost-efficient manner, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a notional amount.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 55

Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. For fair value hedges, the changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in interestInterest expense. For cash flow hedges, the effective portion of the changes in fair value of the hedging instrument is reported in OCI and reclassified into interestInterest expense over the life of the underlying debt obligation. The ineffective portion for both cash flow and fair value hedges, which was not material for any year presented, was immediately recognized in interestInterest expense.
Foreign Currency Risk Management
We manufacture and sell our products and finance our operations in a number of countries throughout the world. As a result, we are exposed to movements in foreign currency exchange rates.
To manage the exchange rate risk primarily associated with the financing of our financing operations, we have historically used a combination of forward contracts, options and currency swaps. As of June 30, 2013,2016, we had currency swaps with original maturities up to five years, which are intended to offset the effect of exchange rate fluctuations on intercompany loans denominated in foreign currencies. These swaps are accounted for as cash flow hedges. The effective portion of the changes in fair value of these instruments is reported in OCI and reclassified into SG&A and interestInterest expense in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion, which was not material for any year presented, was immediately recognized in SG&A.
The change in fair values of certain non-qualifying instruments used to manage foreign exchange exposure of intercompany financing transactions and certain balance sheet items subject to revaluation are immediately recognized in earnings, substantially offsetting the foreign currency mark-to-market impact of the related exposures.
Net Investment Hedging
We hedge certain net investment positions in foreign subsidiaries. To accomplish this, we either borrow directly in foreign currencies and designate all or a portion of the
foreign currency debt as a hedge of the applicable net investment position or we enter into foreign currency swaps that are designated as hedges of net investments. Changes in the fair value of these instruments are recognized in OCI to offset the change in the value of the net investment being hedged. Currency effectsThe ineffective portion of these hedges, reflected in OCI were after-tax gains of $156 and $740 in 2013 and 2012, respectively. Accumulated net balances were after-tax losses of $3,550 and $3,706 as of June 30, 2013 and 2012, respectively. The ineffective portion, which was not material in any year presented, was immediately recognized in interestInterest expense.
Commodity Risk Management
Certain raw materials used in our products or production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility related to anticipated purchases of certain of these materials, we have historically, on a limited basis, used futures and options with maturities generally less than one year and swap contracts with maturities up to five years. As of and during the yearyears ended June 30, 2013,2016 and 2015, we did not have materialany commodity hedging activity.
Insurance
We self-insure for most insurable risks. However, we purchase insurance for Directors and Officers Liability and certain other coverage where it is required by law or by contract or deemed to be in the best interest of the Company.contract.
Fair Value Hierarchy
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity's own assumptions or external inputs from inactive markets.
When applying fair value principles in the valuation of assets and liabilities, we are required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company has not changed its valuation techniques used in measuring the fair value of any financial assets or liabilities during the year. Our fair value estimates take into consideration the credit risk of both the Company and our counterparties.
When active market quotes are not available for financial assets and liabilities, we use industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company61

using market-based observable inputs including credit risk, interest rate curves, foreign currency rates and forward and spot prices for currencies. In circumstances where market-based observable inputs are not available, management
judgment is used to develop assumptions to estimate fair value. Generally, the fair value of our Level 3 instruments is estimated as the net present value of expected future cash flows based on external inputs.

The following table sets forth the Company's financial assets and liabilities as of June 30, 2013 and 2012 that were measured at fair value on a recurring basis during the period, segregated by level within the fair value hierarchy:
  Level 1  Level 2  Level 3  Total
June 302013  2012  2013  2012  2013  2012  2013  2012
ASSETS RECORDED AT FAIR VALUE                      
Investments:               
U.S. government securities$—
  $—
  $1,571
  $—
  $—
  $—
  $1,571
  $—
Other investments23
 9
 —
 —
 24
 24
 47
 33
Derivatives relating to:                      
Foreign currency hedges—
 —
 168
 —
 —
 —
 168
 —
Other foreign currency instruments(1)
—
  —
  19
  86
  —
  —
  19
  86
Interest rates—
  —
  191
  298
  —
  —
  191
  298
Net investment hedges—
  —
  233
  32
  —
 —
 233
  32
Commodities—
  —
  —
  3
  —
  —
  —
  3
TOTAL ASSETS RECORDED AT FAIR VALUE(2)
23
  9
  2,182
  419
  24
  24
  2,229
  452
         
LIABILITIES RECORDED AT FAIR VALUE                      
Derivatives relating to:                      
Foreign currency hedges$—
  $—
 $—
  $142
 $—
  $—
 $—
  $142
Other foreign currency instruments(1)
—
  —
 90
  23
 —
  —
 90
  23
Interest rates—
 —
 59
 —
 —
 —
 59
 —
Net investment hedges—
  —
 —
  19
 —
  —
 —
  19
Commodities—
  —
 —
  2
 —
  —
 —
  2
TOTAL LIABILITIES AT FAIR VALUE(3)
—
  —
 149
  186
  —
  —
 149
  186
LIABILITIES NOT RECORDED AT FAIR VALUE               
Long-term debt (4)
22,671
 25,829
 3,022
 2,119
 —
 —
 25,693
 27,948
TOTAL LIABILITIES RECORDED AND NOT RECORDED AT FAIR VALUE22,671
 25,829
 3,171
 2,305
 —
 —
 25,842
 28,134
(1)
Other foreign currency instruments are comprised of foreign currency financial instruments that do not qualify as hedges.
(2)
Investment securities and all derivative assets are presented in prepaid expenses and other current assets and other noncurrent assets. The amortized cost of the U.S. government securities was $1,604 as of June 30, 2013. All U.S. government securities have contractual maturities between one and five years. Fair values are generally estimated based upon quoted market prices for similar instruments.
(3)
All liabilities are presented in accrued and other liabilities or other noncurrent liabilities.
(4)
Long-term debt includes the current portion ($4,540 and $4,095 as of June 30, 2013 and 2012, respectively) of debt instruments. Long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes. Fair values are generally estimated based on quoted market prices for identical or similar instruments.
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During fiscal 2013, the Company transferred long-term debt instruments with a fair value of $455 from Level 1 to Level 2. The transferred instruments represent the Company's investment in industrial development bonds which are infrequently traded in an observable market. There were no additional transfers between levels during the periods presented. In addition, there was no significant activity within the Level 3 assets and liabilities during the periods presented.

Amounts in millions of dollars except per share amounts or as otherwise specified.
62
56 The Procter & Gamble Company

During fiscal 2013 and 2012, we recorded impairments of certain goodwill and intangible assets. Also, during fiscal 2013, we applied purchase accounting and re-measuredThe following table sets forth the Company's financial assets and liabilities at fair value related to the purchaseas of the balance of a joint venture in Iberia (see Note 2 for additional details on these items). In addition, the Company re-measured certain operating real estate assets to an estimated fair value of $8 during the year ended June 30, 2012, using comparable prices for similar assets, resulting in a $220 impairment. Except for these items, there were no significant assets or liabilities2016 and 2015 that were re-measuredmeasured at fair value on a non-recurringrecurring basis during the years presented.period:
 Fair Value Asset
Years ended June 302016 2015
Investments:   
U.S. government securities$4,839
 $3,495
Corporate bond securities1,407
 1,272
Other investments28
 30
TOTAL$6,274
 $4,797
Investment securities are presented in Available-for-sale investment securities and Other noncurrent assets. The amortized cost of the U.S. government securities with maturities less than one year was $292 and $700 as of June 30, 2016 and 2015, respectively. The amortized cost of the U.S. government securities with maturities between one and five years was $4,513 and $2,789 as of June 30, 2016 and 2015, respectively. The amortized cost of corporate bond securities with maturities of less than a year was $382 and $221 as of June 30, 2016 and 2015, respectively. The amortized cost of corporate bond securities with maturities between one and five years was $1,018 and $1,052 as of June 30, 2016 and 2015, respectively. The Company's investments measured at fair value are generally classified as Level 2 within the fair value hierarchy. There are no material investment balances classified as either Level 1 or Level 3 within the fair value hierarchy. Fair values are generally estimated based upon quoted market prices for similar instruments.
The fair value of long-term debt was $24,362 and $23,127 as of June 30, 2016 and 2015, respectively. This includes the current portion ($2,761 and $2,776 as of June 30, 2016 and 2015, respectively) of debt instruments. Certain long-term debt is recorded at fair value. Certain long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes. Long-term debt with fair value of $2,331 and $2,180 as of June 30, 2016 and 2015, respectively, is classified as Level 2 within the fair value hierarchy. All remaining long-term debt is classified as Level 1 within the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.
Disclosures about Derivative Instruments
The notional amounts and fair values of qualifying and non-qualifying financial instruments used in hedging transactions as of June 30, 20132016 and 20122015 are as follows:
Notional Amount  Fair Value Asset/(Liability)
June 302013  2012  2013 2012
Years ended June 30Notional Amount Fair Value Asset Fair Value (Liability)
2016 2015 2016 2015 2016 2015
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPSDERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPSDERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS        
Foreign currency contracts$951
  $831
  $168
 $(142)$798
 $951
 $94
 $312
 $(63) $—
    
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPSDERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPSDERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS        
Interest rate contracts$9,117
  $10,747
  $132
 $298
$4,993
 $7,208
 $371
 $172
 $—
 $(13)
    
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPSDERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPSDERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS    
Net investment hedges$1,303
  $1,768
  $233
 $13
$3,013
 $537
 $28
 $96
 $(115) $(1)
    
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTSDERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTSDERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS        
Foreign currency contracts$7,080
  $13,210
  $(71) $63
$6,482
 $6,610
 $28
 $13
 $(38) $(68)
Commodity contracts—
  125
  —
 1
TOTAL7,080
  13,335
  (71) 64
All derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. All derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities. The total notional amount of contracts outstanding at the end of the period is indicative of the level of the Company's derivative activity during the period. The decrease in the notional balance of interest rate fair value hedges is due to the maturity of fixed rate debt and underlying swaps in the current period. The increase in the notional balance of net investment hedges primarily reflects a movement into Euro cross currency swaps due to lower interest rates in the current period. All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.
 
Amount of Gain/(Loss)
Recognized in
AOCI
on Derivatives
(Effective Portion)
June 302013 2012
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
Interest rate contracts$7
 $11
Foreign currency contracts14
 22
TOTAL21
 33
    
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Net investment hedges$145
 $6
The effective portionCompany recognizes transfers between levels within the fair value hierarchy, if any, at the end of gainseach quarter. There were no transfers between levels during the periods presented. In addition, there was no significant activity within the Level 3 assets and lossesliabilities during the periods presented. Except for the impairment charges related to our Batteries business (see Note 4), there were no significant assets or liabilities that were re-measured at fair value on derivative instruments that was recognized in OCIa non-recurring basis during the years ended June 30, 20132016 and 2012 was not material. 2015.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 57

 
Amount of Gain/(Loss)
Recognized in AOCI
on Derivatives (Effective Portion)
Years ended June 302016 2015
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
Interest rate contracts$(2) $(1)
Foreign currency contracts—
 5
TOTAL$(2) $4
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Net investment hedges$(53) $60
During the next 12 months, the amount of the June 30, 2013, accumulated OCI2016 AOCI balance that will be reclassified to earnings is expected to be immaterial.
The amounts of gains and losses onincluded in earnings from qualifying and non-qualifying financial instruments used in hedging transactions for the years ended June 30, 20132016 and 20122015 were as follows:
Amount of Gain/(Loss)
Reclassified from
AOCI into Income
Amount of Gain/(Loss)
Reclassified from
AOCI into Earnings
Years ended June 302013 20122016 2015
DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS
Interest rate contracts$6
 $6
$3
 $6
Foreign currency contracts215
 5
(106) 152
Commodity contracts—
 3
TOTAL221
 14
$(103) $158
Amount of Gain/(Loss)
Recognized in Income
Amount of Gain/(Loss)
Recognized in Earnings
Years ended June 302013 20122016 2015
DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS
Interest rate contracts$(167) $135
$212
 $(9)
Debt171
 (137)(212) 9
TOTAL4
 (2)$—
 $—
   
DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS
Net investment hedges$(2) $(1)$(2) $(1)
   
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
Foreign currency contracts(1)
$(34) $(1,121)$(120) $(987)
Commodity contracts—
 2
TOTAL(34) (1,119)
(1) 
The gain or loss on non-qualifying foreign currency contracts substantially offsets the foreign currency mark-to-market impact of the related exposure.




Amounts in millions of dollars except per share amounts orNOTE 10
SHORT-TERM AND LONG-TERM DEBT
Years ended June 302016 2015
DEBT DUE WITHIN ONE YEAR
Current portion of long-term debt$2,760
 $2,772
Commercial paper8,690
 8,807
Other203
 439
TOTAL$11,653
 $12,018
Short-term weighted average interest rates (1)
0.2% 0.3%
(1)
Short-term weighted average interest rates include the effects of interest rate swaps discussed in Note 9.
Years ended June 302016 2015
LONG-TERM DEBT   
1.45% USD note due August 2016$1,000
 $1,000
0.75% USD note due November 2016500
 500
Floating rate USD note due November 2016500
 500
5.13% EUR note due October 20171,221
 1,231
1.60% USD note due November 20181,000
 1,000
4.70% USD note due February 20191,250
 1,250
1.90% USD note due November 2019550
 550
0.28% JPY note due May 2020973
 818
4.13% EUR note due December 2020666
 671
9.36% ESOP debentures due 2016-2021(1)
498
 572
1.85% USD note due February 2021600
 —
2.00% EUR note due November 2021833
 839
2.30% USD note due February 20221,000
 1,000
2.00% EUR note due August 20221,110
 1,119
3.10% USD note due August 20231,000
 1,000
1.13% EUR note due November 20231,388
 —
2.70% USD note due February 2026600
 —
4.88% EUR note due May 20271,110
 1,119
6.25% GBP note due January 2030670
 786
5.50% USD note due February 2034500
 500
5.80% USD note due August 2034600
 600
5.55% USD note due March 20371,400
 1,400
Capital lease obligations45
 52
All other long-term debt2,691
 4,592
Current portion of long-term debt(2,760) (2,772)
TOTAL$18,945 $18,327
Long-term weighted average interest rates (2)
3.1% 3.2%
(1)
Debt issued by the ESOP is guaranteed by the Company and is recorded as debt of the Company, as discussed in Note 8.
(2)
Long-term weighted average interest rates include the effects of interest rate swaps discussed in Note 9.
Long-term debt maturities during the next five fiscal years are as otherwise specified.follows:
Years ending June 3020172018201920202021
Debt maturities$2,760$1,323$2,357$2,099$1,387
The Procter & Gamble Company63 fully and unconditionally guarantees the registered debt and securities issued by its 100% owned finance subsidiaries.

NOTE 6
ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The tables below present the changes in accumulated other comprehensive income/(loss) by component and the reclassifications out of accumulated other comprehensive income/(loss):
 Changes in Accumulated Other Comprehensive Income/(Loss) by Component
 
  Hedges Investment Securities Pension and Other Retiree Benefits Financial Statement Translation Total
 Balance at June 30, 2012$(3,673) $(3) $(5,300) $(357) $(9,333)
 
OCI before reclassifications (1)
363
 (24) 731
 710
 1,780
 Amounts reclassified from AOCI(219) —
 273
 —
 54
 Net current period OCI144
 (24) 1,004
 710
 1,834
 Balance at June 30, 2013(3,529) (27) (4,296) 353
 (7,499)
(1) Net of tax of $94, $5 and $496 for gains and losses on hedges, investment securities and pension and other retiree benefit items, respectively.
Reclassifications out of Accumulated Other Comprehensive Income/(Loss)
Year ended June 302013
HEDGES (1)
 
Interest rate contracts$6
Foreign exchange contracts215
Total before-tax221
Tax (expense)/benefit(2)
Net of tax219
  
 PENSION AND OTHER RETIREE BENEFITS (2)
 
Amortization of deferred amounts2
Recognized net actuarial gains/(losses)(412)
Curtailments and settlements(4)
Total before-tax(414)
Tax (expense)/benefit141
Net of tax(273)
TOTAL RECLASSIFICATIONS, NET OF TAX(54)
(1) See Note 5 for classification of these items in the Consolidated Statement of Earnings.
(2) Reclassified from AOCI into costs of products sold and SG&A. These components are included in the computation of net periodic pension cost (see Note 9 for additional details).
NOTE 7
EARNINGS PER SHARE
Net earnings attributable to Procter & Gamble less preferred dividends (net of related tax benefits) are divided by the weighted average number of common shares outstanding during the year to calculate basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to stock options and other stock-based awards (see Note 8) and assume conversion of preferred stock (see Note 9).




Amounts in millions of dollars except per share amounts or as otherwise specified.
64
58 The Procter & Gamble Company

Net earnings attributable to Procter & Gamble and common shares used to calculate basic and diluted net earnings per share were as follows:NOTE 11
ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
The table below presents the changes in Accumulated other comprehensive income/(loss) (AOCI), including the reclassifications out of Accumulated other comprehensive income/(loss) by component:
Years ended June 302013 2012 2011
NET EARNINGS FROM CONTINUING OPERATIONS$11,402
 $9,317
 $11,698
Net earnings from discontinued operations—
 1,587
 229
NET EARNINGS11,402
 10,904
 11,927
Net earnings attributable to noncontrolling interests(90) (148) (130)
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE (Diluted)11,312
 10,756
 11,797
Preferred dividends, net of tax benefit(244) (256) (233)
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE AVAILABLE TO COMMON SHAREHOLDERS (Basic)11,068
 10,500
 11,564
      
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO PROCTER & GAMBLE AVAILABLE TO COMMON SHAREHOLDERS (Basic)$11,068
 $8,913
 $11,335
      
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO PROCTER & GAMBLE (Diluted)$11,312
 $9,169
 $11,568
      
Shares in millions; Years ended June 302013 2012 2011
Basic weighted average common shares outstanding2,742.9
 2,751.3
 2,804.0
Effect of dilutive securities     
Conversion of preferred shares(1)
116.8
 123.9
 128.5
Exercise of stock options and other unvested equity awards(2)
70.9
 66.0
 69.4
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING2,930.6
 2,941.2
 3,001.9
Changes in Accumulated Other Comprehensive Income/(Loss) by Component
 Hedges Investment Securities Pension and Other Retiree Benefits Financial Statement Translation Total
BALANCE at JUNE 30, 2014$(3,876) $(18) $(5,165) $1,397
 $(7,662)
OCI before reclassifications (1)
1,390
 26
 563
 (7,475) (5,496)
Amounts reclassified from AOCI (2) (5) (6)
(156) (2) 281
 255
 378
Net current period OCI1,234
 24
 844
 (7,220) (5,118)
BALANCE at JUNE 30, 2015(2,642) 6
 (4,321) (5,823) (12,780)
OCI before reclassifications (3)
(103) 29
 (1,710) (1,679) (3,463)
Amounts reclassified from AOCI (4) (5)
104
 (1) 233
 —
 336
Net current period OCI1
 28
 (1,477) (1,679) (3,127)
BALANCE at JUNE 30, 2016$(2,641) $34
 $(5,798) $(7,502) $(15,907)
(1) 
Despite being included currently in diluted net earnings per common share,Net of tax (benefit) / expense of $741, $1 and $219 for gains/losses on hedges, investment securities and pension and other retiree benefit items, respectively, for the actual conversion to common stock occurs when the preferred shares are sold. Shares may only be sold after being allocated to the ESOP participants pursuant to the repayment of the ESOP's obligations through 2035.period ended June 30, 2015.
(2) 
Net of tax (benefit) / expense of $(2), $(1), and $109 for gains/losses on hedges, investment securities and pension and other retiree benefit items, respectively, for the period ended June 30, 2015.
Approximately(3) 
Net of tax (benefit) / expense of $6, $7, and $(708) for gains/losses on hedges, investment securities and pension and other retiree benefit items, respectively, for the period ended June 30, 2016.
12 million(4)
Net of tax (benefit) / expense of $(1), $0, and $87 for gains/losses on hedges, investment securities and pension and other retiree benefit items, respectively, for the period ended June 30, 2016.
(5)
See Note 9 for classification of gains and losses from hedges in 2013, 67 million in 2012the Consolidated Statements of Earnings. Gains and 93 million in 2011losses on investment securities are reclassified from AOCI into Other non-operating income, net. Gains and losses on pension and other retiree benefits are reclassified from AOCI into Cost of the Company's outstanding stock options were notproducts sold and SG&A, and are included in the dilutedcomputation of net earnings per share calculation becauseperiodic pension cost (see Note 8 for additional details).
(6)
Amounts reclassified from AOCI for financial statement translation relate to the options were outforeign currency losses written off as part of the money or to do so would have been antidilutive (i.e.,deconsolidation of our Venezuelan subsidiaries in fiscal 2015. These losses were reclassified into the total proceeds upon exercise would have exceededVenezuela deconsolidation charge in the market valueConsolidated Statements of the underlying common shares).Earnings.

NOTE 8
STOCK-BASED COMPENSATION
We have stock-based compensation plans under which we annually grant stock option, restricted stock, restricted stock unit (RSU) and performance stock unit (PSU) awards to key managers and directors. Exercise prices on options granted have been, and continue to be, set equal to the market price of the underlying shares on the date of the grant. Since September 2002, the key manager stock option awards granted vest after three years and have a 10-year life. The key manager stock option awards granted from July 1998 through August 2002 vested after three years and have a 15-year life. Key managers can elect to receive up to 100% of the value of their option award in RSUs. Key manager RSUs vest and are settled in shares of common stock five years from the grant date. The awards provided to the Company's directors are in the form of restricted stock and RSUs.
In addition to our key manager and director grants, we make other minor stock option and RSU grants to employees for which the terms are not substantially different than those
described in the preceding paragraph. In 2011, we implemented a performance stock program (PSP) and granted PSUs to senior level executives. Under this program, the number of PSUs that will vest three years after the respective grant date is based on the Company's performance relative to pre-established performance goals during that three year period.
A total of 180 million shares of common stock were authorized for issuance under stock-based compensation plans approved by shareholders in 2003 and 2009. A total of 56 million shares remain available for grant under the 2003 and 2009 plans.
Total stock-based compensation expense for stock option grants was $249, $317 and $358 for 2013, 2012 and 2011, respectively. Total compensation expense for restricted stock, RSUs and PSUs was $97, $60 and $56 in 2013, 2012 and 2011, respectively. The total income tax benefit recognized in the income statement for stock options, restricted stock, RSUs and PSUs was $96, $102 and $117 in 2013, 2012 and 2011, respectively.
In calculating the compensation expense for stock options granted, we utilize a binomial lattice-based valuation model.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company65 59

Assumptions utilized in the model, which are evaluated and revised, as necessary, to reflect market conditions and experience, were as follows:
Years ended June 302013 2012 2011
Interest rate0.2-2.0%
 0.2-2.1%
 0.3-3.7%
Weighted average interest rate1.8% 1.9% 3.4%
Dividend yield2.9% 2.6% 2.4%
Expected volatility14-15%
 12-18%
 14-18%
Weighted average volatility15% 15% 16%
Expected life in years8.9
 8.5
 8.8
Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
A summary of options, RSUs and PSUs outstanding under the plans as of June 30, 2013, and activity during the year then ended is presented below:
Options in thousandsOptions
Weighted Avg.
Exercise 
Price

Weighted Avg.
Remaining
Contract-ual Life in 
Years

Aggregate
Intrinsic Value
(in 
millions)

Outstanding, beginning of year353,093
$53.83
  
Granted24,818
75.41
  
Exercised(69,933)47.09
  
Canceled(1,739)60.97
  
OUTSTANDING, END OF YEAR306,239
57.07
4.9
$6,100
EXERCISABLE223,154
52.97
3.6
5,367
The weighted average grant-date fair value of options granted was $8.19, $8.05 and $11.09 per share in 2013, 2012 and 2011, respectively. The total intrinsic value of options exercised was $1,759, $820 and $628 in 2013, 2012 and 2011, respectively. The total grant-date fair value of options that vested during 2013, 2012 and 2011 was $352, $435 and $445, respectively. At June 30, 2013, there was $233 of compensation cost that has not yet been recognized related to stock option grants. That cost is expected to be recognized over a remaining weighted average period of 1.8 years. Cash received from options exercised was $3,294, $1,735 and $1,237 in 2013, 2012 and 2011, respectively.
The actual tax benefit realized for the tax deductions from option exercises totaled $575, $239 and $188 in 2013, 2012 and 2011, respectively.
 RSUs PSUs
Other Stock-Based Awards in thousandsUnits Weighted-Average Grant-Date Fair Value
 Units Weighted-Average Grant-Date Fair Value
Non-vested at July 1, 20123,670
 $55.53
 1,261
 $58.79
Granted1,951
 62.69
 626
 67.70
Vested(952) 59.50
 —
 —
Forfeited(79) 55.31
 —
 —
Non-vested at June 30, 20134,590
 56.88
 1,887
 61.75
At June 30, 2013, there was $195 of compensation cost that has not yet been recognized related to restricted stock, RSUs and PSUs. That cost is expected to be recognized over a remaining weighted average period of 3.1 years. The total fair value of shares vested was $51, $38 and $30 in 2013, 2012 and 2011, respectively.
We have no specific policy to repurchase common shares to mitigate the dilutive impact of options, RSUs and PSUs. However, we have historically made adequate discretionary purchases, based on cash availability, market trends and other factors, to offset the impacts of such activity.
NOTE 9
POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN
We offer various postretirement benefits to our employees.
Defined Contribution Retirement Plans
We have defined contribution plans which cover the majority of our U.S. employees, as well as employees in certain other countries. These plans are fully funded. We generally make contributions to participants' accounts based on individual base salaries and years of service. Total global defined contribution expense was $314, $353 and $347 in 2013, 2012 and 2011, respectively.
The primary U.S. defined contribution plan (the U.S. DC plan) comprises the majority of the expense for the Company's defined contribution plans. For the U.S. DC plan, the contribution rate is set annually. Total contributions for this plan approximated 15% of total participants' annual wages and salaries in 2013, 2012 and 2011.
We maintain The Procter & Gamble Profit Sharing Trust (Trust) and Employee Stock Ownership Plan (ESOP) to provide a portion of the funding for the U.S. DC plan and other retiree benefits (described below). Operating details of the ESOP are provided at the end of this Note. The fair value of the ESOP Series A shares allocated to participants


Amounts in millions of dollars except per share amounts or as otherwise specified.
66The Procter & Gamble Company

reduces our cash contribution required to fund the U.S. DC plan.

Defined Benefit Retirement Plans and Other Retiree Benefits
We offer defined benefit retirement pension plans to certain employees. These benefits relate primarily to local plans outside the U.S. and, to a lesser extent, plans assumed in previous acquisitions covering U.S. employees.
We also provide certain other retiree benefits, primarily health care and life insurance, for the majority of our U.S. employees who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans require cost sharing with retirees and pay a stated percentage of expenses, reduced by deductibles and other coverages. These benefits are primarily funded by ESOP Series B shares and certain other assets contributed by the Company.
Obligation and Funded Status. The following provides a reconciliation of benefit obligations, plan assets and funded status of these defined benefit plans:
 
Pension  Benefits(1)
 
Other Retiree Benefits(2)
Years ended June 302013 2012 2013 2012
CHANGE IN BENEFIT OBLIGATION       
Benefit obligation at beginning of year(3)
$13,573
 $12,229
 $6,006
 $4,886
Service cost300
 267
 190
 142
Interest cost560
 611
 260
 276
Participants' contributions20
 22
 66
 68
Amendments104
 (44) —
 —
Actuarial loss/(gain)473
 1,911
 (1,022) 957
Acquisitions/(divestitures)51
 (17) —
 —
Special termination benefits39
 —
 18
 27
Currency translation and other(4) (847) 5
 (95)
Benefit payments(602) (559) (234) (255)
BENEFIT OBLIGATION AT END OF YEAR(3)
14,514
 13,573
 5,289
 6,006
CHANGE IN PLAN ASSETS       
Fair value of plan assets at beginning of year7,974
 7,962
 2,713
 2,975
Actual return on plan assets796
 459
 954
 (126)
Acquisitions/(divestitures)59
 —
 —
 —
Employer contributions391
 485
 23
 24
Participants' contributions20
 22
 66
 68
Currency translation and other(77) (395) —
 —
ESOP debt impacts(4)
—
 —
 31
 27
Benefit payments(602) (559) (234) (255)
FAIR VALUE OF PLAN ASSETS AT END OF YEAR8,561
 7,974
 3,553
 2,713
FUNDED STATUS(5,953) (5,599) (1,736) (3,293)
(1)
Primarily non-U.S.-based defined benefit retirement plans.
(2)
Primarily U.S.-based other postretirement benefit plans.
(3)
For the pension benefit plans, the benefit obligation is the projected benefit obligation. For other retiree benefit plans, the benefit obligation is the accumulated postretirement benefit obligation.
(4)
Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.
The underfunding of pension benefits is primarily a function of the different funding incentives that exist outside of the U.S. In certain countries, there are no legal requirements or financial incentives provided to companies to pre-fund pension obligations prior to their due date. In these instances, benefit payments are typically paid directly from the Company's cash as they become due.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company67

 Pension Benefits Other Retiree Benefits
June 302013 2012 2013 2012
CLASSIFICATION OF NET AMOUNT RECOGNIZED       
Noncurrent assets$114
 $128
 $—
 $—
Current liability(40) (43) (23) (23)
Noncurrent liability(6,027) (5,684) (1,713) (3,270)
NET AMOUNT RECOGNIZED(5,953) (5,599) (1,736) (3,293)
        
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)       
Net actuarial loss$4,049
 $4,010
 $1,772
 $3,565
Prior service cost /(credit)353
 261
 (54) (75)
NET AMOUNTS RECOGNIZED IN AOCI4,402
 4,271
 1,718
 3,490

The accumulated benefit obligation for all defined benefit pension plans was $12,652 and $11,763 as of June 30, 2013 and 2012, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and plans with projected benefit obligations in excess of plan assets consist of the following:
 
Accumulated Benefit
Obligation Exceeds the
Fair Value of Plan  Assets
  
Projected Benefit
Obligation Exceeds the
Fair Value of Plan  Assets
June 302013  2012  2013  2012
Projected benefit obligation$12,024
  $11,623
  $12,962
  $12,310
Accumulated benefit obligation10,406
  10,009
  11,149
  10,533
Fair value of plan assets6,086
  6,013
  6,895
  6,583


Amounts in millions of dollars except per share amounts or as otherwise specified.
68The Procter & Gamble Company

Net Periodic Benefit Cost. Components of the net periodic benefit cost were as follows:
 Pension Benefits Other Retiree Benefits
Years ended June 302013 2012 2011 2013 2012 2011
AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST          
Service cost$300
 $267
 $270
 $190
 $142
 $146
Interest cost560
 611
 588
 260
 276
 270
Expected return on plan assets(587) (573) (492) (382) (434) (431)
Prior service cost /(credit) amortization18
 21
 18
 (20) (20) (18)
Net actuarial loss amortization213
 102
 154
 199
 99
 96
Special termination benefits39
 —
 —
 18
 27
 3
Curtailments, settlements and other4
 6
 —
 —
 —
 —
GROSS BENEFIT COST547
 434
 538
 265
 90
 66
Dividends on ESOP preferred stock—
 —
 —
 (70) (74) (79)
NET PERIODIC BENEFIT COST/(CREDIT)547
 434
 538
 195
 16
 (13)
            
CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI           
Net actuarial loss /(gain) - current year264
 2,009
   (1,594) 1,516
  
Prior service cost/(credit) - current year104
 (44)   —
 —
  
Amortization of net actuarial loss(213) (102)   (199) (99)  
Amortization of prior service (cost) / credit(18) (21)   20
 20
  
Settlement / curtailment cost(4) (6)   —
 —
  
Currency translation and other(2) (234)   1
 (36)  
TOTAL CHANGE IN AOCI131
 1,602
   (1,772) 1,401
  
NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST AND AOCI678
 2,036
   (1,577) 1,417
  
Amounts expected to be amortized from AOCI into net periodic benefit cost during the year ending June 30, 2014, are as follows:
 Pension Benefits  Other Retiree Benefits
Net actuarial loss$210
  $118
Prior service cost/(credit)24
  (20)
Assumptions. We determine our actuarial assumptions on an annual basis. These assumptions are weighted to reflect each country that may have an impact on the cost of providing retirement benefits. The weighted average assumptions for the defined benefit and other retiree benefit calculations, as well as assumed health care trend rates, were as follows:
 Pension Benefits Other Retiree Benefits
Years ended June 302013 2012 2013 2012
ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS(1)
       
Discount rate4.0% 4.2% 4.8% 4.3%
Rate of compensation increase3.2% 3.3% —% —%
ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST(2)
      
Discount rate4.2% 5.3% 4.3% 5.7%
Expected return on plan assets7.3% 7.4% 8.3% 9.2%
Rate of compensation increase3.3% 3.5% —% —%
ASSUMED HEALTH CARE COST TREND RATES       
Health care cost trend rates assumed for next year—% —% 7.3% 8.0%
Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)—% —% 5.0% 5.0%
Year that the rate reaches the ultimate trend rate—% —% 2020
 2019
(1)
Determined as of end of year.
(2)
Determined as of beginning of year and adjusted for acquisitions.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company69

Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical rates of return of broad equity and bond indices and projected long-term rates of return obtained from pension investment consultants. The expected long-term rates of return for plan assets are 8 - 9% for equities and 5 - 6% for bonds. For other retiree benefit plans, the expected long-term rate of return reflects the fact that the assets are comprised primarily of Company stock. The expected rate of return on Company stock is based on the long-term projected return of 8.5% and reflects the historical pattern of returns.
Assumed health care cost trend rates could have a significant effect on the amounts reported for the other retiree benefit plans. A one percentage point change in assumed health care cost trend rates would have the following effects:
 
One-Percentage
Point Increase
 
One-Percentage
Point Decrease
Effect on the total service and interest cost components$91
 $(70)
Effect on the accumulated postretirement benefit obligation806
 (643)
Plan Assets. Our investment objective for defined benefit retirement plan assets is to meet the plans' benefit obligations, while minimizing the potential for future required Company plan contributions. The investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by matching the actuarial projections of the plans' future liabilities and benefit payments with expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. Plan assets are diversified across several investment managers and are generally invested in liquid funds that are selected to track broad market equity and bond indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and with continual monitoring of investment managers' performance relative to the investment guidelines established with each investment manager.
Our target asset allocation for the year ended June 30, 2013, and actual asset allocation by asset category as of June 30, 2013 and 2012, were as follows:
 Target Asset Allocation Actual Asset Allocation at June 30
     Pension Benefits 
Other Retiree 
Benefits
Asset CategoryPension Benefits 
Other Retiree
Benefits
 2013 2012 2013 2012
Cash1% 2% 1% 1% 2% 1%
Debt securities54% 8% 52% 52% 6% 9%
Equity securities45% 90% 47% 47% 92% 90%
TOTAL100% 100% 100% 100% 100% 100%
The following tables set forth the fair value of the Company's plan assets as of June 30, 2013 and 2012 segregated by level within the fair value hierarchy (refer to Note 5 for further discussion on the fair value hierarchy and fair value principles). Common collective funds are valued using the net asset value reported by the managers of the funds and as supported by the unit prices of actual purchase and sale transactions. Company stock listed as Level 2 in the hierarchy represents preferred shares which are valued based on the value of Company common stock. The majority of our Level 3 pension instruments are insurance contracts. Their fair values are based on their cash equivalent or models that project future cash flows and discount the future amounts to a present value using market-based observable inputs including credit risk and interest rate curves.
 Pension Benefits
  Level 1  Level 2  Level 3  Total
June 302013  2012  2013  2012  2013  2012  2013  2012
ASSETS AT FAIR VALUE                      
Cash and cash equivalents$71
  $60
  $—
  $—
  $—
  $—
  $71
  $60
Common collective fund - equity—
  —
  3,993
  3,727
  —
  —
  3,993
  3,727
Common collective fund - fixed income—
  —
  4,361
  4,112
  —
  —
  4,361
  4,112
Other4
  4
  —
  —
  132
 71
 136
  75
TOTAL ASSETS AT FAIR VALUE75
  64
  8,354
  7,839
  132
  71
  8,561
  7,974

Amounts in millions of dollars except per share amounts or as otherwise specified.
70The Procter & Gamble Company

 Other Retiree Benefits
  Level 1  Level 2  Level 3  Total
June 302013  2012  2013  2012  2013  2012  2013  2012
ASSETS AT FAIR VALUE                      
Cash and cash equivalents$56
  $16
  $—
  $—
  $—
  $—
  $56
  $16
Company stock—
 —
 3,270
 2,418
 —
 —
 3,270
 2,418
Common collective fund - equity—
  —
  16
  30
  —
  —
  16
  30
Common collective fund - fixed income—
  —
  200
  247
  —
  —
  200
  247
Other—
  —
  —
  —
  11
 2
 11
  2
TOTAL ASSETS AT FAIR VALUE56
  16
  3,486
  2,695
  11
  2
  3,553
  2,713

There was no significant activity within the Level 3 pension and other retiree benefits plan assets during the years presented.
Cash Flows. Management's best estimate of cash requirements and discretionary contributions for the defined benefit retirement plans and other retiree benefit plans for the year ending June 30, 2014, is approximately $1,463 and $31, respectively. For the defined benefit retirement plans, this is comprised of $90 in expected benefit payments from the Company directly to participants of unfunded plans and $1,373 of expected contributions to funded plans. This estimate includes a discretionary contribution made to a foreign pension plan for approximately $1.0 billion in July 2013. For other retiree benefit plans, this is comprised of expected contributions that will be used directly for benefit payments. Expected contributions are dependent on many variables, including the variability of the market value of the plan assets as compared to the benefit obligation and other market or regulatory conditions. In addition, we take into consideration our business investment opportunities and resulting cash requirements. Accordingly, actual funding may differ significantly from current estimates.
Total benefit payments expected to be paid to participants, which include payments funded from the Company's assets, as discussed above, as well as payments from the plans, are as follows:
Years ending June 30
Pension
Benefits
  
Other Retiree
Benefits
EXPECTED BENEFIT PAYMENTS
2014$553
  $208
2015545
  224
2016568
  237
2017596
  251
2018602
  266
2019 - 20233,392
  1,549
Employee Stock Ownership Plan
We maintain the ESOP to provide funding for certain employee benefits discussed in the preceding paragraphs.
The ESOP borrowed $1.0 billion in 1989 and the proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the U.S. DC plan. Principal and interest requirements of the borrowing were paid by the Trust from dividends on the preferred shares and from advances provided by the Company. The original borrowing of $1.0 billion has been repaid in full, and advances from the Company of $112 remain outstanding at June 30, 2013. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.29 per share. The liquidation value is $6.82 per share.
In 1991, the ESOP borrowed an additional $1.0 billion. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. These shares, net of the ESOP's debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $539 is outstanding at June 30, 2013. Each share is convertible at the option of the holder into one share of the Company's common stock. The dividend for the current year was equal to the common stock dividend of $2.29 per share. The liquidation value is $12.96 per share.
Our ESOP accounting practices are consistent with current ESOP accounting guidance, including the permissible continuation of certain provisions from prior accounting guidance. ESOP debt, which is guaranteed by the Company, is recorded as debt (see Note 4) with an offset to the reserve for ESOP debt retirement, which is presented within shareholders' equity. Advances to the ESOP by the Company are recorded as an increase in the reserve for ESOP debt retirement. Interest incurred on the ESOP debt is recorded as interest expense. Dividends on all preferred shares, net of related tax benefits, are charged to retained earnings.
The series A and B preferred shares of the ESOP are allocated to employees based on debt service requirements, net of advances made by the Company to the Trust. The


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company71

number of preferred shares outstanding at June 30 was as follows:
Shares in thousands2013  2012  2011
Allocated45,535
  50,668
  52,281
Unallocated9,843
  11,348
  13,006
TOTAL SERIES A55,378
  62,016
  65,287
    
Allocated21,278
  20,802
  20,759
Unallocated37,300
  38,743
  40,090
TOTAL SERIES B58,578
  59,545
  60,849
For purposes of calculating diluted net earnings per common share, the preferred shares held by the ESOP are considered converted from inception.
NOTE 10
INCOME TAXES
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
Earnings from continuing operations before income taxes consisted of the following:
Years ended June 30  2013  2012  2011
United States  $8,351
  $7,584
  $8,858
International  6,492
  5,201
  6,139
TOTAL  14,843
  12,785
  14,997
Income taxes on continuing operations consisted of the following:
Years ended June 302013 2012  2011
CURRENT TAX EXPENSE      
U.S. federal$1,885
 $1,913
  $1,770
International1,584
 1,374
  1,149
U.S. state and local279
 246
  256
 3,748
 3,533
  3,175
DEFERRED TAX EXPENSE      
U.S. federal180
 83
  200
International and other(487) (148)  (76)
 (307) (65)  124
TOTAL TAX EXPENSE3,441
 3,468
  3,299

A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate on continuing operations is provided below:
Years ended June 302013 2012 2011
U.S. federal statutory income tax rate35.0 % 35.0 % 35.0 %
Country mix impacts of foreign operations(7.6)% (8.1)% (8.2)%
Changes in uncertain tax positions(1.8)% (1.3)% (3.6)%
Impairment adjustments0.6 % 3.7 % — %
Holding gain on joint venture buy-out(1.4)% — % — %
Other(1.6)% (2.2)% (1.2)%
EFFECTIVE INCOME TAX RATE23.2 % 27.1 % 22.0 %
Changes in uncertain tax positions represent changes in our net liability related to prior year tax positions.
Tax costs charged to shareholders' equity totaled $503 for the year ended June 30, 2013. This primarily relates to the impact of certain adjustments to pension obligations recorded in shareholders' equity, partially offset by excess tax benefits from the exercise of stock options. Tax benefits credited to shareholders' equity totaled $661 for the year ended June 30, 2012. These primarily relate to the tax effects of net investment hedges, excess tax benefits from the exercise of stock options and the impacts of certain adjustments to pension and other retiree benefit obligations recorded in shareholders' equity.
We have undistributed earnings of foreign subsidiaries of approximately $42.0 billion at June 30, 2013, for which deferred taxes have not been provided. Such earnings are considered indefinitely invested in the foreign subsidiaries. If such earnings were repatriated, additional tax expense may result. However, the calculation of the amount of deferred U.S. income tax on these earnings is not practicable because of the large number of assumptions necessary to compute the tax. 













Amounts in millions of dollars except per share amounts or as otherwise specified.
72The Procter & Gamble Company

A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:
Years ended June 302013 2012 2011
BEGINNING OF YEAR$1,773
 $1,848
 $1,797
Increases in tax positions for prior years162
 166
 323
Decreases in tax positions for prior years(225) (188) (388)
Increases in tax positions for current year188
 178
 222
Settlements with taxing authorities(195) (49) (168)
Lapse in statute of limitations(98) (81) (94)
Currency translation(5) (101) 156
END OF YEAR1,600
 1,773
 1,848
The Company is present in approximately 150 taxable jurisdictions and, at any point in time, has 40-50 jurisdictional audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. The Company is making a concerted effort to bring its audit inventory to a more current position. We have done this by working with tax authorities to conduct audits for several open years at once. We have tax years open ranging from 2002 and forward. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described above. At this time, we are not able to make a reasonable estimate of the range of impact on the balance of uncertain tax positions or the impact on the effective tax rate related to these items.
Included in the total liability for uncertain tax positions at June 30, 2013, is $1.2 billion that, depending on the ultimate resolution, could impact the effective tax rate in future periods.
Accounting pronouncements require that, without discretion, we recognize the additional accrual of any possible related interest and penalties relating to the underlying uncertain tax position in income tax expense, unless the Company qualifies for a specific exception. As of June 30, 2013, 2012 and 2011, we had accrued interest of $413, $439 and $475 and accrued penalties of $34, $66 and $80, respectively, that are not included in the above table. During the fiscal years ended June 30, 2013, 2012 and 2011, we recognized $24, $2
and $197 in interest benefit and $32, $10 and $16 in penalties benefit, respectively. The net benefits recognized resulted primarily from the favorable resolution of tax positions for prior years.
Deferred income tax assets and liabilities were comprised of the following:
June 302013 2012
DEFERRED TAX ASSETS   
Pension and postretirement benefits$1,777
 $2,366
Stock-based compensation1,125
 1,304
Loss and other carryforwards1,062
 853
Goodwill and other intangible assets60
 78
Accrued marketing and promotion285
 238
Fixed assets135
 165
Unrealized loss on financial and foreign exchange transactions324
 363
Accrued interest and taxes15
 28
Inventory46
 58
Other879
 761
Valuation allowances(341) (375)
TOTAL5,367
 5,839
   
DEFERRED TAX LIABILITIES   
Goodwill and other intangible assets$11,941
 $11,816
Fixed assets1,718
 1,719
Other315
 286
TOTAL13,974
 13,821
Net operating loss carryforwards were $3.1 billion and $2.8 billion at June 30, 2013 and 2012, respectively. If unused, $1.4 billion will expire between 2014 and 2033. The remainder, totaling $1.7 billion at June 30, 2013, may be carried forward indefinitely.
NOTE 11
COMMITMENTS AND CONTINGENCIES
Guarantees
In conjunction with certain transactions, primarily divestitures, we may provide routine indemnifications (e.g., indemnification for representations and warranties and retention of previously existing environmental, tax and employee liabilities) for which terms range in duration and, in some circumstances, are not explicitly defined. The maximum obligation under some indemnifications is also not explicitly stated and, as a result, the overall amount of these obligations cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss on any of these matters, the loss would not have a material effect on our financial position, results of operations or cash flows.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company73

In certain situations, we guarantee loans for suppliers and customers. The total amount of guarantees issued under such arrangements is not material.
Off-Balance Sheet Arrangements
We do not have off-balance sheet financing arrangements, including variable interest entities, that have a material impact on our financial statements.
Purchase Commitments and Operating Leases
We have purchase commitments for materials, supplies, services and property, plant and equipment as part of the normal course of business. Commitments made under take-or-pay obligations are as follows: 
Years ended June 302014
 2015
 2016
 2017
 2018
 Thereafter
Years ending June 3020172018201920202021Thereafter
Purchase obligations$1,114
 $383
 $242
 $136
 $74
 $234
$881
$221
$170
$129
$105
$288
Such amounts represent future purchases in line with expected usage to obtain favorable pricing. Approximately 20% of ourThis includes purchase commitments relaterelated to service contracts for information technology, human resources management and facilities management activities that have been outsourced to third-party suppliers. Due to the proprietary nature of many of our materials and processes, certain supply contracts contain penalty provisions for early termination. We do not expect to incur penalty payments under these provisions that would materially affect our financial position, results of operations or cash flows.
We also lease certain property and equipment for varying periods. Future minimum rental commitments under non-cancelable operating leases, net of guaranteed sublease income, are as follows: 
Years ending June 3020172018201920202021Thereafter
Operating leases$237
$240
$224
$206
$154
$502
Years ended June 302014 2015 2016 2017 2018
 Thereafter
Operating leases$254
 $241
 $196
 $161
 $141
 $519
Litigation
We are subject to various legal proceedings and claims arising out of our business which cover a wide range of matters such as antitrust, trade and other governmental regulations, product liability, patent and trademark, matters, advertising, contracts, environmental, issues, labor and employments mattersemployment and income and other taxes.tax.
As previously disclosed, the Company has had a number of antitrust matters in Europe. These matters involve a number of other consumer products companies and/or retail customers. Several regulatory authorities in Europe have issued separate decisions pursuant to their investigations alleging that the Company, along with several other companies, engaged in violations of competition laws in those countries. The Company has accrued the assessed fines for each of the decisions, of which all but $16 has been paid as of June 30, 2013. Some of those are on appeal. As a
result of our initial and on-going analyses of other formal complaints, the Company has accrued liabilities for competition law violations totaling $139 as of June 30, 2013. While the ultimate resolution of these matters may result in fines or costs in excess of the amounts reserved, we do not expect any such incremental losses to materially impact our financial statements in the period in which they are accrued and paid, respectively.
With respect to other litigation and claims, while considerable uncertainty exists, in the opinion of management and our counsel, the ultimate resolution of the various lawsuits and claims will not materially affect our financial position, results of operations or cash flows.
We are also subject to contingencies pursuant to environmental laws and regulations that in the future may require us to take action to correct the effects on the environment of prior manufacturing and waste disposal practices. Based on currently available information, we do not believe the ultimate resolution of environmental remediation will have a material effect onmaterially affect our financial position, results of operations or cash flows.
NOTE 1213
SEGMENT INFORMATIONDISCONTINUED OPERATIONS
Under U.S. GAAP,On July 9, 2015, the GBUs (Categories) are aggregated into five reportable segments:
Beauty: Beauty Care (Antiperspirant and Deodorant, Cosmetics, Personal Cleansing, Skin Care); Hair Care and Color; Prestige (SKII, fragrances); Salon Professional;
Grooming: Shave Care (Blades and Razors, Pre- and Post-Shave Products); Braun and Appliances;
Health Care: Feminine Care (Feminine Care, Incontinence); Oral Care (Toothbrush, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Other Personal Health Care, Vitamins/Minerals/Supplements);
Fabric Care and Home Care: Fabric Care (Bleach and Laundry Additives, Fabric Enhancers, Laundry Detergents); Home Care (Air Care, Dish Care, Surface Care); Personal Power (Batteries); Pet Care; Professional;
Baby Care and Family Care: Baby Care (Baby Wipes, Diapers and Pants); Family Care (Paper Towels, Tissues, Toilet Paper).
Company announced the signing of a definitive agreement to divest four product categories which will be merged with Coty. The accounting policiesdivestiture was initially comprised of 43 of the Company's beauty brands (“Beauty Brands”), including the global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, are generallyalong with select hair styling brands. Subsequent to signing, the same as those describedfine fragrance brands of Dolce & Gabbana and Christina Aguilera were excluded from the divestiture. In connection with the decision to exclude these brands, the Company recorded a non-cash, before-tax impairment charge in Note 1. Differences between these policies and U.S. GAAP primarily reflect income taxes, which are reflecteddiscontinued operations of approximately $48 ($42 after tax) in fiscal 2016 in order to record the businesses using applicable blended statutory rates,Dolce & Gabbana license intangible asset at its revised estimated net realizable value. On May 11, 2016, the Company entered into a separate transaction to sell the Christina Aguilera brand prior to or concurrent with the expected close date of the Coty transaction. On June 30, 2016, Dolce & Gabbana and the treatmentShiseido Group announced the signing of certain unconsolidated investees. Certain unconsolidated investees are managed as integral partsthe worldwide license agreement for the Dolce & Gabbana beauty business. The Company will transition out of our businessesthe Dolce & Gabbana license upon the effectiveness of the new license, which is expected to occur prior to or concurrent with the expected close of the Coty transaction. In connection with this transition, the Company agreed to pay a termination payment of $83 ($76 after tax). This termination payment charge is included in discontinued operations for the year ended June 30, 2016.
While the ultimate form of the Beauty Brands transaction has not yet been decided, the Company’s current preference is for a Reverse Morris Trust split-off transaction in which P&G shareholders could elect to participate in an exchange offer to exchange their P&G shares for shares of a new corporation that would hold the Beauty Brands (excluding Dolce & Gabbana and Christina Aguilera) and then immediately exchange those shares for Coty shares. The Company expects to close the transaction in October 2016.


Amounts in millions of dollars except per share amounts or as otherwise specified.
7460 The Procter & Gamble Company

management reporting purposes. Accordingly, these partially owned operations are reflected as consolidated subsidiaries in segment results, with full recognitionCoty’s offer for the Beauty Brands, which was accepted by the Company, was $12.5 billion. The final value of the individual income statement line items through before-tax earnings. Eliminationstransaction will be determined at closing. Based on Coty’s stock price and outstanding shares and equity grants as of June 30, 2016, the value of the transaction was approximately $13.1 billion. The value is comprised of approximately 411 million shares, or 54% of the diluted equity of the newly combined company, valued at approximately $10.7 billion and the assumption of debt of $2.4 billion by the entity holding the Beauty Brands (excluding Dolce & Gabbana and Christina Aguilera) immediately prior to adjust these line itemsclose of the transaction. The assumed debt is expected to U.S. GAAP are included in Corporate. In determining after-tax earnings forvary between $3.9 billion and $1.9 billion, depending on a $22.06 to $27.06 per share collar of Coty’s stock based on the businesses, we eliminatetrading price prior to the shareclose of earnings applicablethe transaction, but will be subject to other ownership interests, in a manner similar to noncontrolling interest, and apply statutory tax rates. Adjustments to arrive at our effective tax rate are also included in Corporate.contractual valuation adjustments.
Corporate includes certain operating and non-operating activities that are not reflected in the operating results used internally to measure and evaluate the businesses, as well as eliminations to adjust management reporting principles to U.S. GAAP. Operating activities in Corporate include the results of incidental businesses managed at the corporate level along with the elimination of individual revenues and expenses generated by certain unconsolidated investees, discussed in the preceding paragraph, over which we exert significant influence, but do not control. Operating elements also include certain employee benefit costs, the costs of certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization and other general Corporate items. The non-operating elements in Corporate primarily include interest expense, acquisition and divestiture gains and interest and investing income. In addition, Corporate includes the historical results of certain divested businesses.
Total assets for the reportable segments include those assets managed by the reportable segment, primarily inventory, fixed assets and intangible assets. Other assets, primarily including cash, accounts receivable, investment securities and goodwill, are included in Corporate.
Our business units are comprised of similar product categories. In 2013, 2012 and 2011, nine business units individually accounted for 5% or more of consolidated net sales as follows:
 % of Sales by Business Unit
Years ended June 302013 2012 2011
Fabric Care20% 20% 20%
Baby Care13% 13% 12%
Hair Care and Color11% 11% 11%
Shave Care8% 9% 9%
Beauty Care7% 7% 7%
Home Care7% 7% 7%
Family Care7% 6% 7%
Oral Care6% 6% 6%
Feminine Care6% 6% 6%
All Other15% 15% 15%
 Total100% 100% 100%
The Company had net sales in the U.S. of $30.3 billion, $29.5 billion and $29.9 billion for the years ended June 30, 2013, 2012 and 2011, respectively. Assets in the U.S. totaled $68.3 billion and $68.0 billion as of June 30, 2013 and 2012, respectively. No other country's net sales or assets exceed 10% of the Company totals.
Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 14%, 14% and 15% of consolidated net sales in 2013, 2012 and 2011, respectively.


Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company75

Global Segment Results   Net Sales 
Earnings 
from
Continuing
Operations
Before
Income Taxes
 Net Earnings from Continuing Operations 
Depreciation
and
Amortization
  
Total
Assets
  
Capital
Expenditures
BEAUTY2013  $19,956
  $3,215
 $2,474
 $375
  $8,396
  $541
 2012  20,318
  3,196
 2,390
 379
  8,357
  569
 2011  19,937
  3,415
 2,542
 387
  9,544
  504
GROOMING2013  8,038
  2,458
 1,837
 603
  23,971
  378
 2012  8,339
  2,395
 1,807
 623
  24,518
  392
 2011  8,245
  2,375
 1,775
 645
  24,866
  373
HEALTH CARE2013  12,830
  2,769
 1,898
 380
  8,400
  529
 2012  12,421
  2,718
 1,826
 353
  7,501
  496
 2011  12,033
  2,720
 1,796
 359
  7,796
  409
FABRIC CARE AND HOME CARE2013  27,448
  4,825
 3,126
 695
  12,018
  1,115
 2012  27,254
  4,645
 2,915
 679
  11,419
  1,036
 2011  26,536
  4,867
 3,109
 633
  12,060
  950
BABY CARE AND FAMILY CARE2013  16,790
  3,509
 2,242
 648
  8,460
  1,278
 2012  16,493
  3,351
 2,123
 586
  7,535
  1,250
 2011  15,606
  3,181
 1,978
 549
  7,184
  912
CORPORATE(1)
2013  (895) (1,933) (175) 281
  78,018
  167
 2012  (1,145) (3,520) (1,744) 584
  72,914
  221
 2011  (1,253) (1,561) 498
 265
  76,904
  158
TOTAL COMPANY2013  84,167
  14,843
 11,402
 2,982
  139,263
  4,008
 2012  83,680
  12,785
 9,317
 3,204
  132,244
  3,964
 2011  81,104
  14,997
 11,698
 2,838
  138,354
  3,306
(1)
The Corporate reportable segment includes the total assets and capital expenditures of the snacks business prior to its divestiture effective May 31, 2012.
NOTE 13
DISCONTINUED OPERATIONS
In fiscal 2012,February 2016, the Company completed the divestiture of our global snacksits Batteries business to Berkshire Hathaway (BH) via a split transaction, in which the Company exchanged the Duracell Company, which the Company had infused with additional cash, to repurchase all 52.5 million shares of P&G stock owned by BH. During the fiscal year ended June 30, 2016, the Company recorded non-cash, before-tax goodwill and indefinite-lived asset impairment charges of $402 ($350 after tax), to reduce the Batteries carrying value to the total estimated proceeds based on the value of BH’s shares in P&G stock at the time of the impairment charges (see Note 4). The Kellogg Company (Kellogg)recorded an after-tax gain on the final transaction of $422 to reflect a subsequent increase in the final value of the BH’s shares in P&G stock. The total value of the transaction was $4.2 billion representing the value of the Duracell business and the cash infusion. The cash infusion of $1.7 billion was reflected as a purchase of treasury stock.
On July 31, 2014, the Company completed the divestiture of its Pet Care operations in North America, Latin America, and other selected countries to Mars, Incorporated (Mars) for $2.7$2.9 billion of cash. in an all-cash transaction. Under the terms of the agreement, KelloggMars acquired our branded snackspet care products, our manufacturing facilitiessites in Belgium and the United States and the majority of the employees working onin the snacksPet Care business. The Company recordedagreement included an after-tax gain onoption for Mars to acquire the
transaction of $1.4 billion, Pet Care business in several additional countries, which iswas also completed in fiscal 2015. The European Union countries were not included in net earnings from discontinuedthe agreement with Mars.
In December 2014, the Company completed the divestiture of its Pet Care operations in Western Europe to Spectrum Brands in an all-cash transaction. Under the Consolidated Statement of Earnings for the year ended June 30, 2012.
The snacks business had historically been partterms of the Company's Snacksagreement, Spectrum Brands acquired our branded pet care products, our manufacturing site in the Netherlands and the majority of the employees working in the Western Europe Pet Care reportable segment. business. The one-time after-tax impact of these transactions is not material.
In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of the snacks businessBeauty Brands, Batteries and Pet Care businesses are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all yearsperiods presented. Additionally, the Beauty Brands, Batteries and Pet Care businesses' balance sheet positions are presented as assets and liabilities held for sale in the Consolidated Balance Sheets. The Beauty Brands were historically part of the Company's Beauty reportable segment. The Batteries business was historically part of the Company's Fabric & Home Care reportable segment. The Pet Care business was historically part of the Company's Health Care reportable segment.


Following is selected financial information
On July 1, 2015, the Company adopted ASU 2014-08, which included in net earningsnew reporting and disclosure requirements for discontinued operations. The new requirements are effective for discontinued operations occurring on or after the adoption date, which includes the Beauty Brands divestiture. All other discontinued operations prior to July 1, 2015 are reported based on the previous disclosure requirements for discontinued operations, including the Batteries and Pet Care divestitures.
The following table summarizes Net earnings/(loss) from discontinued operations forand reconciles to the snacks business:Consolidated Statements of Earnings:
  Net sales
 Earnings from discontinued operations
 Income tax expense
 Gain on sale of discontinued operations
 Income tax benefit/(expense) on sale
 Net earnings from discontinued operations
Snacks2013$—
 $—
 $—
 $—
 $—
 $—
 20121,440
 266
 (96) 1,899
 (482) 1,587
 20111,455
 322
 (93) —
 —
 229
Years ended June 302016 2015 2014
Beauty Brands$336
 $643
 $660
Batteries241
 (1,835) 389
Pet Care—
 49
 78
Net earnings/(loss) from discontinued operations$577
 $(1,143) $1,127



Amounts in millions of dollars except per share amounts or as otherwise specified.
76The Procter & Gamble Company 61

NOTE 14
QUARTERLY RESULTS (UNAUDITED)The following table summarizes total assets and liabilities held for sale and reconciles to the Consolidated Balance Sheets:
Quarters Ended   Sept 30 Dec 31 Mar 31 Jun 30 Total Year
NET SALES2012-2013  $20,739
 $22,175
 $20,598
 $20,655
 $84,167
 2011-2012  21,530
 21,744
 20,194
 20,212
 83,680
OPERATING INCOME2012-2013  3,951
 4,492

3,405
 2,633
(3)14,481
 2011-2012  4,250
 2,680
(3)3,299
 3,063
 13,292
GROSS MARGIN2012-2013  50.1% 50.9% 49.8% 47.5% 49.6%
 2011-2012  49.8% 50.1% 49.3% 48.1% 49.3%
NET EARNINGS:            
Net earnings from continuing operations2012-2013  $2,853
 $4,076
(2)$2,591
 $1,882
(3)$11,402
 2011-2012  2,999
 1,672
(3)2,433
 2,213
 9,317
Net earnings from discontinued operations2012-2013  —
 —
 —
 —

—
 2011-2012  58
 41
 34
 1,454
(4)1,587
Net earnings attributable to Procter & Gamble2012-2013  2,814
 4,057
(2)2,566
 1,875
(3)11,312
 2011-2012  3,024
 1,690
(3)2,411
 3,631
 10,756
DILUTED NET EARNINGS PER COMMON SHARE: (1)
            
Earnings from continuing operations2012-2013  $0.96
 $1.39
 $0.88
 $0.64
 $3.86
 2011-2012  1.01
 0.56
 0.81
 0.74
 3.12
Earnings from discontinued operations2012-2013  —
 —
 —
 —
 —
 2011-2012  0.02
 0.01
 0.01
 0.50
 0.54
Net earnings2012-2013  0.96
 1.39
 0.88
 0.64
 3.86
 2011-2012  1.03
 0.57
 0.82
 1.24
 3.66
Years ended June 302016 2015
 Beauty Brands Beauty Brands Batteries Total
Current assets held for sale$7,185
 $922
 $3,510
 $4,432
Noncurrent assets held for sale—
 5,204
 —
 5,204
Total assets held for sale$7,185
 $6,126
 $3,510
 $9,636
        
Current liabilities held for sale$2,343
 $356
 $1,187
 $1,543
Noncurrent liabilities held for sale—
 717
 —
 717
Total liabilities held for sale$2,343
 $1,073
 $1,187
 $2,260
(1)
Diluted net earnings per share is calculated on earnings attributable to Procter & Gamble.
(2)
The Company acquired the balance of its Baby Care and Feminine Care joint venture in Iberia in October 2012 resulting in a non-operating gain of $623.
(3)
During the fourth quarter of fiscal year 2013 and the second quarter of fiscal year 2012, the Company recorded goodwill and indefinite-lived intangible assets impairment charges of $308 million and $1.6 billion, respectively. For additional details, see Note 2.
(4)
The Company divested its snacks business in May 2012. See Note 13 for details of the transaction.
The following is selected financial information included in Net earnings/(loss) from discontinued operations for the Beauty Brands:
 Beauty Brands
Years ended June 302016 2015 2014
Net sales$4,910
 $5,530
 $6,109
Cost of products sold1,621
 1,820
 1,980
Selling, general and administrative expense2,763
 2,969
 3,299
Intangible asset impairment charges48
 —
 —
Interest expense32
 —
 1
Interest income2
 2
 2
Other non-operating income/(loss), net9
 91
 (3)
Earnings from discontinued operations before income taxes$457
 $834
 $828
Income taxes on discontinued operations121
 191
 168
Net earnings/(loss) from discontinued operations$336
 $643
 $660
Included in Net earnings/(loss) from discontinued operations is $112 of transition costs that were incurred for the fiscal year ended June 30, 2016.
The following is selected financial information included in cash flows from discontinued operations for the Beauty Brands:
 Beauty Brands
Years ended June 302016 2015 2014
NON-CASH OPERATING ITEMS     
Depreciation and amortization$106
 $125
 $127
Gain on sale of businesses8
 86
 —
Goodwill and intangible asset impairment charges48
 —
 —
CASH FLOWS FROM INVESTING ACTIVITIES     
Capital expenditures$114
 $106
 $108


Amounts in millions of dollars except per share amounts or as otherwise specified.
62 The Procter & Gamble Company77

The major components of assets and liabilities of the Beauty Brands held for sale are provided below. The assets and liabilities held for sale will evolve up to the closing date for normal operational changes as well as contractual adjustments including the assumption of debt, pension plan funding and other provisions.
 Beauty Brands
Years ended June 30
2016 (1)
 2015
Cash$40
 $9
 
Restricted cash996
(2) 
—
 
Accounts receivable384
 293
 
Inventories494
 476
 
Prepaid expenses and other current assets126
 144
 
Property, plant and equipment, net629
 613
(3) 
Goodwill and intangible assets, net4,411
 4,513
(3) 
Other noncurrent assets105
 78
(3) 
Total current assets held for sale$7,185
 $922
 
Total noncurrent assets held for sale—
 5,204
 
Total assets held for sale$7,185
 $6,126
 
 
 
 
Accounts payable$148
 $118
 
Accrued and other liabilities384
 238
 
Noncurrent deferred tax liabilities370
 352
(3) 
Long-term debt996
(2) 
—
 
Other noncurrent liabilities445
 365
(3) 
Total current liabilities held for sale$2,343
 $356
 
Total noncurrent liabilities held for sale—
 717
 
Total liabilities held for sale$2,343
 $1,073
 
(1)
The Company expects the Beauty Brands transaction to close in October 2016. Therefore, for the period ended June 30, 2016, all assets and liabilities held for sale are reported as current assets and liabilities held for sale on the Consolidated Balance Sheets.
(2)
On January 26, 2016, Beauty Brands drew on its Term B loan of $1.0 billion. The proceeds will be held in restricted cash in escrow until the anticipated legal integration activities prior to close. Beauty Brands has received additional debt funding commitments with a consortium of lenders of $3.5 billion.
(3)
Amounts as of June 30, 2015, are reflected as part of the noncurrent assets and liabilities held for sale.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 63

Following is selected financial information included in Net earnings/(loss) from discontinued operations for the Batteries and Pet Care businesses:
  Net Sales Earnings Before Impairment Charges and Income Taxes Impairment Charges Income Tax (Expense)/Benefit Gain/(Loss) on Sale Before Income Taxes Income Tax (Expense)/Benefit on Sale Net Earnings/(Loss) from Discontinued Operations
Batteries2016$1,517
 $266
 $(402) $(45) $(288) $710
(1) 
$241
 20152,226
 479
 (2,174) (140) —
 —
 (1,835)
 20142,552
 548
 —
 (159) —
 —
 389
Pet Care2016—
 —
 —
 —
 —
 —
 —
 2015251
 —
 —
 (4) 195
 (142) 49
 20141,475
 130
 —
 (52) —
 —
 78
Total2016$1,517
 $266
 $(402) $(45) $(288) $710
(1) 
$241
 20152,477
 479
 (2,174) (144) 195
 (142) (1,786)
 20144,027
 678
 —
 (211) —
 —
 467
(1)
The income tax benefit of the Batteries divestiture primarily represents the reversal of underlying deferred tax balances.
The major components of assets and liabilities of the Batteries business held for sale were as follows:
 Batteries
Year ended June 302015
Cash$25
Accounts receivable245
Inventories304
Prepaid expenses and other current assets28
Property, plant and equipment, net496
Goodwill and intangible assets, net2,389
Other noncurrent assets23
Total assets held for sale$3,510
  
Accounts payable$195
Accrued and other liabilities194
Long-term debt18
Noncurrent deferred tax liabilities780
Total liabilities held for sale$1,187


Amounts in millions of dollars except per share amounts or as otherwise specified.
64 The Procter & Gamble Company

NOTE 14
QUARTERLY RESULTS (UNAUDITED)
Quarters Ended  Sep 30 Dec 31 Mar 31 Jun 30  Total Year
NET SALES2015-2016 $16,527
 $16,915
 $15,755
 $16,102
  $65,299
 2014-2015 18,771
 18,495
 16,930
 16,553
  70,749
OPERATING INCOME2015-2016 3,768
 3,853
 3,318
 2,502
  13,441
 2014-2015 3,633
 3,579
 3,025
 812
(1) 
 11,049
GROSS MARGIN2015-2016 50.7% 50.0% 49.8% 47.9%  49.6%
 2014-2015 48.1% 48.3% 47.3% 46.6%  47.6%
NET EARNINGS:            
Net earnings from continuing operations2015-2016 $2,777
 $2,905
 $2,337
 $2,008
  $10,027
 2014-2015 2,716
 2,674
 2,401
 496
(1) 
 8,287
Net earnings/(loss) from discontinued operations2015-2016 (142) 323
 446
 (50)  577
 2014-2015 (696) (276) (213) 42
  (1,143)
Net earnings attributable to Procter & Gamble2015-2016 2,601
 3,206
 2,750
 1,951
  10,508
 2014-2015 1,990
 2,372
 2,153
 521
  7,036
DILUTED NET EARNINGS PER COMMON SHARE: (2)
            
Earnings from continuing operations2015-2016 $0.96
 $1.01
 $0.81
 $0.71
  $3.49
 2014-2015 0.93
 0.92
 0.82
 0.17
  2.84
Earnings/(loss) from discontinued operations2015-2016 (0.05) 0.11
 0.16
 (0.02)  0.20
 2014-2015 (0.24) (0.10) (0.07) 0.01
  (0.40)
Net earnings2015-2016 0.91
 1.12
 0.97
 0.69
  3.69
 2014-2015 0.69
 0.82
 0.75
 0.18
  2.44
(1)
The Company recorded a one-time Venezuela deconsolidation charge of $2.0 billion before tax ($2.1 billion after tax) in the quarter-ended June 30, 2015. This impact is discussed more fully in Note 1.
(2)
Diluted net earnings per share is calculated on Net earnings attributable to Procter & Gamble.

Amounts in millions of dollars except per share amounts or as otherwise specified.
The Procter & Gamble Company 65

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
The Company's President and Chief Executive Officer, A. G. Lafley,David S. Taylor, and the Company's Chief Financial Officer, Jon R. Moeller, performed an evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of the end of the period covered by this Annual Report on Form 10-K.
Messrs. LafleyTaylor and Moeller have concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed
in reports we file or submit under the Exchange Act is (1) recorded, processed,
summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including Messrs. LafleyTaylor and Moeller, to allow their timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting that occurred during the Company's fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information.
Not applicable.




78The Procter & Gamble Company

PART III

Item 10. Directors, Executive Officers and Corporate Governance.
The Board of Directors has determined that the following members of the Audit Committee are independent and are Audit Committee financial experts as defined by SEC rules: Ms. Patricia A. Woertz (Chair) and Mr. Kenneth I. Chenault.
The information required by this item is incorporated by reference to the following sections of the 20132016 Proxy Statement filed pursuant to Regulation 14A: the section entitled Election of Directors, up to and includingDirectors; the subsectionsection entitled Nominees for Election of Directors with Terms Expiring in 2014, Corporate Governance, up to but not including the subsection entitled Board Engagement and Attendance; the subsections of the Corporate Governance section entitled Code of Ethics;Ethics, entitled Director Nominations for Inclusion in the 2017 Proxy Statement and entitled Shareholder Recommendations of Board Nominees and Committee Process for Recommending Board Nominees; and the section entitled Section 16(a) Beneficial Ownership Reporting Compliance. Pursuant to Instruction 3 of Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.

Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the following sections of the 20132016 Proxy
Statement filed pursuant to Regulation 14A: the portionsubsections of the Corporate Governance section entitled Committees of the Board and entitled Compensation Committee Interlocks and Insider Participation; and the portion beginning with the section entitled Director Compensation up to but not including the section entitled Security Ownership of Management and Certain Beneficial Owners.



66 The Procter & Gamble Company

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table gives information about the Company's common stock that may be issued upon the exercise of options, warrants and rights under all of the Company's equity compensation plans as of June 30, 2013.2016. The table includes the following plans: The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1992 Stock Plan (Belgian Version); The Procter & Gamble 1993 Non-Employee Directors' Stock Plan; The Procter & Gamble Future Shares Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors' Stock Plan; The Gillette Company 1971 Stock Option Plan; The Gillette Company 2004 Long-Term Incentive Plan; and The Procter & Gamble 2009 Stock and Incentive Compensation Plan; The Procter & Gamble 2013 Non-Employee Directors' Stock Plan; and The Procter & Gamble 2014 Stock and Incentive Compensation Plan.


Plan Category
(a)
Number of securities to be issued upon exercise of outstanding options,
warrants and rights
 
(b)
Weighted-average exercise
price of outstanding
options, warrants and
rights
 
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders (1)
     
Options291,021,000
 
$57.1208
 (2)
Restricted Stock Units (RSUs) / Performance Stock Units (PSUs)10,081,890
 N/A
 (2)
Equity compensation plans not approved by security holders (3)
     
Options15,217,784
 56.1637
 (4)
Restricted Stock Units (RSUs)42,995
 N/A
 (4)
      
GRAND TOTAL316,363,669
 57.0733
(5)56,253,893
Plan Category
(a)
Number of securities to be issued upon exercise of outstanding options,
warrants and rights
 
(b)
Weighted-average exercise
price of outstanding
options, warrants and
rights
 
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders (1)
     
Options226,562,300
 
$68.1722
 
(2) 
Restricted Stock Units (RSUs)/Performance Stock Units (PSUs)11,125,863
 N/A
 
(2) 
Equity compensation plans not approved by security holders (3)
     
Options4,030,317
 59.2781
 
(4) 
GRAND TOTAL241,718,480
 
$68.0167
(5) 
125,037,146
(1)
(1)
Includes The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 1993 Non-Employee DirectorsDirectors' Stock Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee DirectorsDirectors' Stock Plan; and The Procter & Gamble 2009 Stock and Incentive Compensation Plan; The Procter & Gamble 2013 Non-Employee Directors' Stock Plan; and The Procter & Gamble 2014 Stock and Incentive Compensation Plan.
(2)
(2)
Of the plans listed in (1), only The Procter & Gamble 20092014 Stock and Incentive Compensation Plan and The 2003 Non- Employee Directors Stock Plan allow for future grants of securities. The maximum number of shares that may be granted under these plansthis plan is 180185 million shares. Stock options and stock appreciation rights are counted on a one for one basis while full value awards (such as RSUs and PSUs) will be counted as 2.885 shares for each share awarded. Total shares available for future issuance under these plansthis plan is 56125 million.
(3)
(3)
Includes The Procter & Gamble 1992 Stock Plan (Belgian version); The Procter & Gamble Future Shares Plan;Plan and The Gillette Company 2004 Long-Term Incentive Plan.
(4)
(4)
None of the plans listed in (3) allow for future grants of securities.
(5)
(5)
Weighted average exercise price of outstanding options only.

The Procter & Gamble Company79


The Procter & Gamble 1992 Stock Plan (Belgian Version)
No further grants can be made under the plan, although unexercised stock options previously granted under this plan remain outstanding. This plan was approved by the Company's Board of Directors on February 14, 1997. Although the plan has not been submitted to shareholders for approval, it is nearly identical to The Procter & Gamble 1992 Stock Plan, approved by the Company's shareholders on October 13, 1992, except for a few minor changes designed to comply with the Belgian tax laws.
The plan was designed to attract, retain and motivate key Belgian employees. Under the plan, eligible participants were: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company's common stock. Except in the case of death of the recipient, all stock options and stock appreciation rights must vest in no less than one year from the date of grant and must expire no later than fifteen years from the date of grant. The exercise price for all stock options granted under the plan is the average price of the Company's stock on the date of grant. If a recipient of a grant leaves the Company while holding an unexercised option or right, any unexercisable portions immediately become void, except in the case of death, and any exercisable portions become void within one month of departure, except in the case of death or retirement. Any common stock awarded under the plan may be subject to restrictions on sale or transfer while the recipient is employed, as the committee administering the plan may determine.
The Procter & Gamble Future Shares Plan
On October 14, 1997, the Company's Board of Directors approved The Procter & Gamble Future Shares Plan pursuant to which options to purchase shares of the Company's common stock may be granted to employees worldwide. The purpose of this plan is to advance the interests of the Company by giving substantially all employees a stake in the Company's future growth and success and to strengthen the alignment of interests between employees and the Company's shareholders through increased ownership of shares of the Company's stock. The plan has not been submitted to shareholders for approval.
Subject to adjustment for changes in the Company's capitalization, the number of shares to be granted under the plan is not to exceed 17 million shares. Under the plan's regulations, recipients are granted options to acquire 100 shares of the Company's common stock at an exercise price equal to the average price of the Company's common stock on the date of the grant. These options vest five years after the date of grant and expire ten years following the date of grant. If a
recipient leaves the employ of the Company prior to the vesting date for a reason other than disability, retirement or special separation (as defined in the plan), then the award is forfeited.
At the time of the first grant following Board approval of the plan, each employee of the Company not eligible for an award under the 1992 Stock Plan was granted options for 100 shares. From the date of this first grant through June 30, 2003, each new employee of the Company has also received options for 100 shares. Following the grant of options on June 30, 2003, the Company suspended this part of the plan. The plan terminated on October 13, 2007.
The Gillette Company 2004 Long-Term Incentive Plan
Shareholders of The Gillette Company approved The Gillette Company 2004 Long-Term Incentive Plan on May 20, 2004, and the plan was assumed by the Company upon the merger between The Procter & Gamble Company and The Gillette Company. All options became immediately vested and exercisable on October 1, 2005 as a result of the merger. After the merger, all outstanding options became options to purchase


The Procter & Gamble Company 67

shares of The Procter & Gamble Company subject to an exchange ratio of .975 shares of P&G stock per share of Gillette stock. Only employees previously employed by The Gillette Company prior to October 1, 2005 are eligible to receive grants under this plan.
The plan was designed to attract, retain and motivate employees of The Gillette Company and, until the effective date of the merger between The Gillette Company and The Procter & Gamble Company, non-employee members of the Gillette Board of Directors. Under the plan, eligible participants are: (i) granted or offered the right to purchase stock options, (ii) granted stock appreciation rights and/or (iii) granted shares of the Company's common stock or restricted stock units (and dividend equivalents). Subject to adjustment for changes in the Company's capitalization and the addition of any shares authorized but not issued or redeemed under The Gillette Company 1971 Stock Option Plan, the number of shares to be granted under the plan is not to exceed 19,000,000 shares.
Except in the case of death of the recipient, all stock options and stock appreciation rights must expire no later than ten years from the date of grant. The exercise price for all stock options granted under the plan must be equal to or greater than the fair market value of the Company's stock on the date of grant. Any common stock awarded under the plan may be subject to restrictions on sale or transfer while the recipient is employed, as the committee administering the plan may determine.
If a recipient of a grant leaves the Company while holding an unexercised option or right: (1) any unexercisable portions immediately become void, except in the case of death, retirement, special separation (as those terms are defined in the
plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions; and (2) any exercisable portions immediately become void, except in the case of


80The Procter & Gamble Company

death, retirement, special separation, voluntary resignation that is not for Good Reason (as those terms are defined in the plan) or any grants as to which the Compensation Committee of the Board of Directors has waived the termination provisions.
Additional information required by this item is incorporated by reference to the 20132016 Proxy Statement filed pursuant to Regulation 14A, beginning with the section entitled Security Ownership of Management and Certain Beneficial Owners and up to but not including the section entitled Section 16(a) Beneficial Ownership Reporting Compliance.

Item 13. Certain Relationships and Related Transactions and Director Independence.
The information required by this item is incorporated by reference to the following sections of the 20132016 Proxy Statement filed pursuant to Regulation 14A: the sectionssubsections of the Corporate Governance section entitled Director Independence and Review and Approval of Transactions with Related Persons.

Item 14. Principal AccountingAccountant Fees and Services.
The information required by this item is incorporated by reference to the 2013following section of the 2016 Proxy Statement filed pursuant to Regulation 14A, beginning with the section entitled14A: Report of the Audit Committee, and endingwhich ends with the sectionsubsection entitled Services Provided by Deloitte.




PART IV
Item 15. Exhibits and Financial Statement Schedules.
1.Financial Statements:

1.Financial Statements:
The following Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries, management's report and the reports of the independent registered public accounting firm are incorporated by reference in Part II, Item 8 of this Form 10-K.

•Management's Report on Internal Control over Financial Reporting
•Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
•Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
•Consolidated Statements of Earnings - for years ended June 30, 2013, 20122016, 2015 and 20112014
•
Consolidated Statements of Other Comprehensive Income - for years ended June 30, 2013, 20122016, 2015 and 2011
2014
•Consolidated Balance Sheets - as of June 30, 20132016 and 20122015
•Consolidated Statements of Shareholders' Equity - for years ended June 30, 2013, 20122016, 2015 and 20112014
•Consolidated Statements of Cash Flows - for years ended June 30, 2013, 20122016, 2015 and 20112014
•Notes to Consolidated Financial Statements

2.Financial Statement Schedules:
2.Financial Statement Schedules:
These schedules are omitted because of the absence of the conditions under which they are required or because the information is set forth in the Consolidated Financial Statements or Notes thereto.

Exhibits:

68 The Procter & Gamble Company

EXHIBITS
Exhibit     (2-1) -
First, Second and Third Amendments to the Transaction Agreement dated as of July 8, 2015 among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. + **
Exhibit     (3-1) -
 Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011) (Incorporated2011 and consolidated by reference to Exhibit (3-1)the Board of the Company's Form 10-Q for the quarter ended September 30, 2011)Directors on April 8, 2016). +
  
(3-2) -
 Regulations (as amendedapproved by the Board of Directors on January 16, 2012April 8, 2016, pursuant to authority granted by shareholders at the annual meeting on October 13, 2009). +
Exhibit     (4-1) -
Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee (Incorporated by reference to Exhibit (3-2)(4-1) of the Company's Annual Report on Form 10-Q10-K for the quarter ending December 31, 2011)year ended June 30, 2015).
 
Exhibit        (4) -
Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
  
Exhibit   (10-1) -
 The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17, 2007), which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2013), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2008)2013).*
  
(10-2) -
 The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by the shareholders at the annual meeting on October 12, 1992.1992 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 2013).* +
  
(10-3) -
 The Procter & Gamble Executive Group Life Insurance Policy.Policy (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 2013).* +
   

The Procter & Gamble Company81

(10-4) -
 The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006), which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-4) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  
(10-5) -
 The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which was originally adopted by the shareholders at the annual meeting on October 11, 1994.1994 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 2013).* +
  
(10-6) -
 The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001), which was originally adoptedSummary of the Company’s Key Manager Long-Term Incentive Program +; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-6) of the Board of Directors on February 14, 1997.Company's Form 10-Q for the quarter ended September 30, 2015).* +
  
(10-7) -
 The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004), which was originally adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 2010)2015).*
 
(10-8) -
The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended in August 2007) which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended September 30, 2012).*
(10-9) -
The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended December 31, 2008).*
(10-10) -
Summary of the Company's Short Term Achievement Reward Program (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended September 30, 2012) and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended December 31, 2012).
(10-11) -
Company's Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended December 31, 2012).
(10-12) -
Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30, 2008).
(10-13) -
The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended September 30, 2012).*
(10-14) -
The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-15) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*
(10-15) -
The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-16) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012) .*
(10-16) -
The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-17) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*
(10-17) -
The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-18) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*
(10-18) -
The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-19) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*
(10-19) -
Senior Executive Recoupment Policy (Incorporated by reference to Exhibit (10-20) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*
(10-20) -
The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006 (Incorporated by reference to Exhibit (10-21) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*

82The Procter & Gamble Company

(10-21) -
The Procter & Gamble 2009 Stock and Incentive Compensation Plan which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended December 31, 2011), and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2012).*
(10-22) -
The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2012) and related correspondence (Incorporated by reference to Exhibit (10-5) of the Company Form 10-Q for the quarter ended December 31, 2012).*
(10-23) -
The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended March 31, 2012) and related terms and conditions (Incorporated by reference to Exhibit (10-24) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012). *
Exhibit      (11) -
Computation of Earnings Per Share. +
Exhibit      (12) -
Computation of Ratio of Earnings to Fixed Charges. +
Exhibit      (21) -
Subsidiaries of the Registrant. +
Exhibit      (23) -
Consent of Independent Registered Public Accounting Firm. +
Exhibit      (31) -
Rule 13a-14(a)/15d-14(a) Certifications. +
Exhibit      (32) -
Section 1350 Certifications. +
Exhibit   (99-1) -
Summary of Directors and Officers Insurance Program. +
101.INS (1)           
XBRL Instance Document
101.SCH (1)          
XBRL Taxonomy Extension Schema Document
101.CAL (1)          
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)          
XBRL Taxonomy Definition Linkbase Document
101.LAB (1)          
XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)          
XBRL Taxonomy Extension Presentation Linkbase Document
(1)Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
*
Compensatory plan or arrangement
+
Filed herewith.



The Procter & Gamble Company83

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.
THE PROCTER & GAMBLE COMPANY
By/s/    A.G. LAFLEY
(A.G. Lafley)
Chairman of the Board, President and Chief Executive Officer
August 8, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
SignatureTitleDate
/S/   A.G. LAFLEY ___      
(A.G. Lafley)
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)August 8, 2013
/S/    JON R. MOELLER   
(Jon R. Moeller)
Chief Financial Officer
(Principal Financial Officer)
August 8, 2013
/S/    VALARIE L. SHEPPARD      
(Valarie L. Sheppard)
Senior Vice President & Comptroller (Principal Accounting Officer)August 8, 2013
/S/    ANGELA F. BRALY  
(Angela F. Braly)
DirectorAugust 8, 2013
/S/    KENNETH I. CHENAULT        
(Kenneth I. Chenault)
DirectorAugust 8, 2013
/S/    SCOTT D. COOK__  
(Scott D. Cook)
DirectorAugust 8, 2013
/S/    SUSAN DESMOND-HELLMANN  
(Susan Desmond-Hellmann)
DirectorAugust 8, 2013
/S/    TERRY J. LUNDGREN        
(Terry J. Lundgren)
DirectorAugust 8, 2013
/S/    W. JAMES MCNERNEY, JR.  
(W. James McNerney, Jr.)
DirectorAugust 8, 2013
/S/    JOHNATHAN A. RODGERS  
(Johnathan A. Rodgers)
DirectorAugust 8, 2013
/S/    MARGARET C. WHITMAN
(Margaret C. Whitman)
DirectorAugust 8, 2013
/S/    MARY AGNES WILDEROTTER
(Mary Agnes Wilderotter)
DirectorAugust 8, 2013
/S/    PATRICIA A. WOERTZ        
(Patricia A. Woertz)
DirectorAugust 8, 2013
/S/    ERNESTO ZEDILLO        
(Ernesto Zedillo)
DirectorAugust 8, 2013

84The Procter & Gamble Company

EXHIBIT INDEX
Exhibit     (3-1) -
Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011) (Incorporated by reference to Exhibit (3-1) of the Company's Form 10-Q for the quarter ended September 30, 2011).
(3-2) -
Regulations (as amended by the Board of Directors on January 16, 2012 pursuant to authority granted by shareholders at the annual meeting on October 13, 2009) (Incorporated by reference to Exhibit (3-2) of the Company's Form 10-Q for the quarter ending December 31, 2011).
Exhibit        (4) -
Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit   (10-1) -
The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17, 2007) which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2013), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2008).*
(10-2) -
The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by the shareholders at the annual meeting on October 12, 1992.*
(10-3) -
The Procter & Gamble Executive Group Life Insurance Policy.*
(10-4) -
The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006), which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-4) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2012).*
(10-5) -
The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which was originally adopted by the shareholders at the annual meeting on October 11, 1994.*
(10-6) -
The Procter & Gamble 1992 Stock Plan (Belgian Version) (as amended December 11, 2001), which was originally adopted by the Board of Directors on February 14, 1997.*
(10-7) -
The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004), which was originally adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 2010).*
  
(10-8) -
 The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended in August 2007), which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended September 30, 2012).*
   
(10-9) -
 The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-2)(10-4) of the Company's Form 10-Q for the quarter ended December 31, 2008)2013).*
  
(10-10) -
 Summary of the Company's Short Term Achievement Reward Program (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended September 30, 2012) and+; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-4)(10-2) of the Company's Form 10-Q for the quarter ended December 31, 2012)September 30, 2015).*
   
(10-11) -
 Company's FormForms of Separation Agreement & Release (Incorporated by reference to Exhibit (10-3)(10-1) of the Company's Form 10-Q for the quarter ended DecemberMarch 31, 2012)2015).*
  
(10-12) -
 Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-3)(10-1) of the Company's Form 10-Q for the quarter ended September 30, 2008)2013).*
   
(10-13) -
 The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended September 30, 2012).*
  
(10-14) -
 The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-15) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  

The Procter & Gamble Company85

(10-15) -
 The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-16) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012) .*.*
   
(10-16) -
 The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-17) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  
(10-17) -
 The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-18) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  
(10-18) -
 The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-19) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  

The Procter & Gamble Company 69

(10-19) -
 Senior Executive Recoupment Policy (Incorporated by reference to Exhibit (10-20) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  
(10-20) -
 The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006 (Incorporated by reference to Exhibit (10-21) of the Company’sCompany's Annual Report on Form 10-K for the year ended June 30, 2012).*
  
(10-21) -
 The Procter & Gamble 2009 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended December 31, 2011), and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2012).*
  
(10-22) -
 The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company’s Form 10-Q for the quarter ended December 31, 2012) and related correspondence (Incorporated by reference to Exhibit (10-5)(10-2) of the Company Form 10-Q for the quarter ended December 31, 2012)2013).*
   
(10-23) -
 The Procter & Gamble Performance Stock Program Summary +; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended September 30, 2015).*
(10-24) -
The Procter & Gamble 2013 Non-Employee Directors' Stock Plan (Incorporated by reference to Exhibit 10-3 of the Company's Form 10-Q for the quarter ended December 31, 2013).*
(10-25) -
The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 14, 2014 +; and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended March 31, 2012)2015).*
(10-26) -
The Procter & Gamble 2014 Stock and relatedIncentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-24)(10-9) of the Company’s Annual Report onCompany's Form 10-K10-Q for the yearquarter ended JuneSeptember 30, 2012)2015), and The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Related correspondence (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2015).*
   
Exhibit      (11)(10-27) -
 ComputationSummary of Earnings per Share.the Company’s Retirement Plan Restoration Program +; and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8) of the Company's Form 10-Q for the quarter ended September 30, 2015).*
   
Exhibit      (12) -
 Computation of Ratio of Earnings to Fixed Charges. +
   
Exhibit      (21) -
 Subsidiaries of the Registrant. +
  
Exhibit      (23) -
 Consent of Independent Registered Public Accounting Firm. +
  
Exhibit      (31) -
 Rule 13a-14(a)/15d-14(a) Certifications. +
  
Exhibit      (32) -
 Section 1350 Certifications. +
  
Exhibit   (99-1) -
 Summary of Directors and Officers Insurance Program. +
   
101.INS (1)
 XBRL Instance Document
101.SCH (1)
  XBRL Taxonomy Extension Schema Document
101.CAL (1)
  XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)
  XBRL Taxonomy Definition Linkbase Document
101.LAB (1)
  XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)
  XBRL Taxonomy Extension Presentation Linkbase Document
   
(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
*
 Compensatory plan or arrangementarrangement.
+
Filed herewith.
**
Schedules and similar attachments of the Third Amendment have been omitted pursuant to Item 601(b)(2) of Regulation S-K. These exhibits and attachments consist of (I) Attachment to Schedule 1.05(b)(ii) Excluded Trademarks, (II) Attachment 3-C to Schedule 1.05(a)(vii) Additional Caldera Domain Names, (III) Parent Shared Technology License Agreement, (IV) Section 1.05(a)(xx) Acquired Codes, (V) Section 5.21(k) Shared Codes and (VI) Exhibit R Galleria Business Acquired Plans. The Company agrees to furnish supplementally to the SEC, upon request, a copy of all omitted schedules and attachments.

70 The Procter & Gamble Company

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio.
THE PROCTER & GAMBLE COMPANY
By/s/ DAVID S. TAYLOR
(David S. Taylor)
Chairman of the Board, President and Chief Executive Officer
August 9, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
SignatureTitleDate
/s/ DAVID S. TAYLOR
(David S. Taylor)
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)August 9, 2016
/s/ JON R. MOELLER
(Jon R. Moeller)
Chief Financial Officer
(Principal Financial Officer)
August 9, 2016
/s/ VALARIE L. SHEPPARD
(Valarie L. Sheppard)
Senior Vice President, Comptroller & Treasurer (Principal Accounting Officer)August 9, 2016
/s/ FRANCIS S. BLAKE
(Francis S. Blake)
DirectorAugust 9, 2016
/s/ ANGELA F. BRALY
(Angela F. Braly)
DirectorAugust 9, 2016
/s/ KENNETH I. CHENAULT
(Kenneth I. Chenault)
DirectorAugust 9, 2016
/s/ SCOTT D. COOK
(Scott D. Cook)
DirectorAugust 9, 2016
/s/ SUSAN DESMOND-HELLMANN
(Susan Desmond-Hellmann)
DirectorAugust 9, 2016
/s/ TERRY J. LUNDGREN
(Terry J. Lundgren)
DirectorAugust 9, 2016
/s/ W. JAMES MCNERNEY, JR.
(W. James McNerney, Jr.)
DirectorAugust 9, 2016
/s/ MARGARET C. WHITMAN
(Margaret C. Whitman)
DirectorAugust 9, 2016
/s/ PATRICIA A. WOERTZ
(Patricia A. Woertz)
DirectorAugust 9, 2016
/s/ ERNESTO ZEDILLO
(Ernesto Zedillo)
DirectorAugust 9, 2016

The Procter & Gamble Company 71

EXHIBIT INDEX
Exhibit     (2-1) -
First, Second and Third Amendments to the Transaction Agreement dated as of July 8, 2015 among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. + **
Exhibit     (3-1) -
Amended Articles of Incorporation (as amended by shareholders at the annual meeting on October 11, 2011 and consolidated by the Board of Directors on April 8, 2016). +
(3-2) -
Regulations (as approved by the Board of Directors on April 8, 2016, pursuant to authority granted by shareholders at the annual meeting on October 13, 2009). +
Exhibit     (4-1) -
Indenture, dated as of September 3, 2009, between the Company and Deutsche Bank Trust Company Americas, as Trustee (Incorporated by reference to Exhibit (4-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 2015).
Exhibit   (10-1) -
The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended on August 17, 2007), which was originally adopted by shareholders at the annual meeting on October 9, 2001 (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2013), and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2013).
(10-2) -
The Procter & Gamble 1992 Stock Plan (as amended December 11, 2001), which was originally adopted by the shareholders at the annual meeting on October 12, 1992 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 2013).
(10-3) -
The Procter & Gamble Executive Group Life Insurance Policy (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 2013).
(10-4) -
The Procter & Gamble Deferred Compensation Plan for Directors (as amended December 12, 2006), which was originally adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-5) -
The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended September 10, 2002), which was originally adopted by the shareholders at the annual meeting on October 11, 1994 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 2013).
(10-6) -
Summary of the Company’s Key Manager Long-Term Incentive Program +; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-6) of the Company's Form 10-Q for the quarter ended September 30, 2015).
(10-7) -
The Procter & Gamble Future Shares Plan (as adjusted for the stock split effective May 21, 2004), which was originally adopted by the Board of Directors on October 14, 1997 (Incorporated by reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 2015).
(10-8) -
The Procter & Gamble 2003 Non-Employee Directors' Stock Plan (as amended in August 2007), which was originally adopted by the shareholders at the annual meeting on October 14, 2003, and related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended September 30, 2012).
(10-9) -
The Procter & Gamble Company Executive Deferred Compensation Plan (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended December 31, 2013).
(10-10) -
Summary of the Company's Short Term Achievement Reward Program +; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended September 30, 2015).
(10-11) -
Company's Forms of Separation Agreement & Release (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2015).
(10-12) -
Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended September 30, 2013).
(10-13) -
The Gillette Company 2004 Long-Term Incentive Plan (as amended on August 14, 2007) (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended September 30, 2012).
(10-14) -
The Gillette Company Executive Life Insurance Program (Incorporated by reference to Exhibit (10-15) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-15) -
The Gillette Company Personal Financial Planning Reimbursement Program (Incorporated by reference to Exhibit (10-16) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-16) -
The Gillette Company Senior Executive Financial Planning Program (Incorporated by reference to Exhibit (10-17) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-17) -
The Gillette Company Estate Preservation (Incorporated by reference to Exhibit (10-18) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-18) -
The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-19) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).

72 The Procter & Gamble Company

(10-19) -
Senior Executive Recoupment Policy (Incorporated by reference to Exhibit (10-20) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-20) -
The Gillette Company Deferred Compensation Plan (for salary deferrals prior to January 1, 2005) as amended through August 21, 2006 (Incorporated by reference to Exhibit (10-21) of the Company's Annual Report on Form 10-K for the year ended June 30, 2012).
(10-21) -
The Procter & Gamble 2009 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 13, 2009 (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended December 31, 2011), and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2009 Stock and Incentive Compensation Plan, The Procter & Gamble 2001 Stock and Incentive Compensation Plan, The Procter & Gamble 1992 Stock Plan, The Procter & Gamble 1992 Stock Plan (Belgium Version), The Gillette Company 2004 Long-Term Incentive Plan and the Gillette Company 1971 Stock Option Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2012).
(10-22) -
The Procter & Gamble 2009 Stock and Incentive Compensation Plan - Additional terms and conditions and related correspondence (Incorporated by reference to Exhibit (10-2) of the Company Form 10-Q for the quarter ended December 31, 2013).
(10-23) -
The Procter & Gamble Performance Stock Program Summary +; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-4) of the Company's Form 10-Q for the quarter ended September 30, 2015).
(10-24) -
The Procter & Gamble 2013 Non-Employee Directors' Stock Plan (Incorporated by reference to Exhibit 10-3 of the Company's Form 10-Q for the quarter ended December 31, 2013).
(10-25) -
The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 14, 2014 +; and the Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-2) of the Company's Form 10-Q for the quarter ended March 31, 2015).
(10-26) -
The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-9) of the Company's Form 10-Q for the quarter ended September 30, 2015), and The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Related correspondence (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2015).
(10-27) -
Summary of the Company’s Retirement Plan Restoration Program +; related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-8) of the Company's Form 10-Q for the quarter ended September 30, 2015).
Exhibit      (12) -
Computation of Ratio of Earnings to Fixed Charges. +
Exhibit      (21) -
Subsidiaries of the Registrant. +
Exhibit      (23) -
Consent of Independent Registered Public Accounting Firm. +
Exhibit      (31) -
Rule 13a-14(a)/15d-14(a) Certifications. +
Exhibit      (32) -
Section 1350 Certifications. +
Exhibit   (99-1) -
Summary of Directors and Officers Insurance Program. +
101.INS (1)
XBRL Instance Document
101.SCH (1)
XBRL Taxonomy Extension Schema Document
101.CAL (1)
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1)
XBRL Taxonomy Definition Linkbase Document
101.LAB (1)
XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1)
XBRL Taxonomy Extension Presentation Linkbase Document
(1)Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
+
Filed herewith.
**
Schedules and similar attachments of the Third Amendment have been omitted pursuant to Item 601(b)(2) of Regulation S-K. These exhibits and attachments consist of (I) Attachment to Schedule 1.05(b)(ii) Excluded Trademarks, (II) Attachment 3-C to Schedule 1.05(a)(vii) Additional Caldera Domain Names, (III) Parent Shared Technology License Agreement, (IV) Section 1.05(a)(xx) Acquired Codes, (V) Section 5.21(k) Shared Codes and (VI) Exhibit R Galleria Business Acquired Plans. The Company agrees to furnish supplementally to the SEC, upon request, a copy of all omitted schedules and attachments.