Procter & Gamble PG · USD

SEGMENT INFORMATIONUnder U.S. GAAP, our operating segments are aggregated into five reportable segments: 1) Beauty, 2) Grooming, 3) Health Care, 4) Fabric & Home Care and 5) Baby, Feminine & Family Care. Our five reportable segments are comprised of:•Beauty: Hair Care (Conditioners, Shampoos, Styling Aids, Treatments); Personal Care (Antiperspirants and Deodorants, Personal Cleansing); Skin Care (Facial Moisturizers, Cleaners and Treatments);•Grooming: Grooming (Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming);•Health Care: Oral Care (Toothbrushes, Toothpastes, Other Oral Care); Personal Health Care (Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care); •Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and•Baby, Feminine & Family Care: Baby Care (Baby Wipes, Taped Diapers and Pants); Feminine Care (Adult Incontinence, Menstrual Care); Family Care (Paper Towels, Tissues, Toilet Paper).While none of our reportable segments are highly seasonal, components within certain reportable segments, such as Appliances (Grooming) and Personal Health Care (Health), are seasonal. The accounting policies of the segments are generally the same as those described in Note 1. Differences between these policies and U.S. GAAP primarily reflect income taxes, which are reflected in the segments using applicable blended statutory rates. Adjustments to arrive at our effective tax rate are included in Corporate. In addition, capital expenditures in the segments are on an accrual basis consistent with the balance sheet. Adjustments to move from an accrual to cash basis, for purposes of the cash flow statement, are reflected in Corporate.Corporate includes certain operating and non-operating activities that are not reflected in the operating results used internally to measure and evaluate the businesses, as well as items to adjust management reporting principles to U.S. GAAP. Operating activities in Corporate include the results of incidental businesses managed at the corporate level. Operating elements also include certain employee benefit costs, the costs of certain restructuring-type activities to maintain a competitive cost structure, including manufacturing and workforce optimization, asset impairment charges and other general Corporate items.

COMMITMENTS AND CONTINGENCIESGuaranteesIn 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. 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.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 ArrangementsWe do not have off-balance sheet financing arrangements, including variable interest entities, that have a material impact on our financial statements. Purchase CommitmentsWe 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: Fiscal years ending June 3020262027202820292030ThereafterPurchase obligations$893 $585 $365 $248 $130 $397 Such amounts represent minimum commitments under take-or-pay agreements with suppliers and are in line with expected usage. These amounts include purchase commitments related 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.LitigationWe are 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, patent and trademark matters, labor and employment matters and tax.

SHORT-TERM AND LONG-TERM DEBTAs of June 3020252024DEBT DUE WITHIN ONE YEARCurrent portion of long-term debt$5,377$3,838Commercial paper4,1083,327Other2726TOTAL$9,513$7,191Weighted average interest rate of debt due within one year (1)3.0 %3.7 %(1)Weighted average interest rate of debt due within one year includes the effects of interest rate swaps discussed in Note 9.As of June 3020252024LONG-TERM DEBT0.50% EUR note due October 2024$—$5340.63% EUR note due October 2024—8550.55% USD note due October 20251,0001,0004.10% USD note due January 20266506502.70% USD note due February 20266006001.00% USD note due April 20261,0001,0003.25% EUR note due August 20267626952.45% USD note due November 20268758751.90% USD note due February 2027 1,0001,0002.80% USD note due March 20275005004.88% EUR note due May 20271,1721,0692.85% USD note due August 20277507503.95% USD note due January 20286006003.15% EUR note due April 20287626951.20% EUR note due October 20289378554.35% USD note due January 20296006001.80% GBP note due May 20295144744.15% USD note due October 2029500—1.25% EUR note due October 20295865343.00% USD note due March 20301,5001,5004.05% USD note due May 2030700—0.35% EUR note due May 20305865341.20% USD note due October 20301,2501,2501.95% USD note due April 20311,0001,0003.25% EUR note due August 20317626952.30% USD note due February 20328508504.05% USD note due January 20338508504.55% USD note due January 20347507503.20% EUR note due April 20349969094.55% USD note due October 2034500—4.60% USD note due May 2035550—5.55% USD note due March 20377167161.88% EUR note due October 20385865343.55% USD note due March 20405165160.90% EUR note due November 2041703641All other long-term debt4,7495,076Current portion of long-term debt(5,377)(3,838)TOTAL$24,995$25,269Weighted average interest rate of long-term debt (1)3.3%3.2%(1)Weighted average interest rate of long-term debt includes the effects of interest rate swaps discussed in Note 9.Long-term debt maturities during the next five fiscal years are as follows:Fiscal years ending June 3020262027202820292030Debt maturities$5,377$4,606$2,142$2,027$3,996Credit FacilitiesWe maintain bank credit facilities to support our ongoing commercial paper program. The current facility is an $8.0 billion facility split between a $3.2 billion five-year facility and a $4.8 billion 364-day facility, which expire in October 2029 and October 2025, respectively.

INCOME TAXESIncome 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. We have elected to account for the tax effects of Global Intangible Low-Taxed Income (GILTI) as a current period expense when incurred. Earnings before income taxes consisted of the following:Fiscal years ended June 30202520242023United States$13,911 $12,246 $12,107 International6,256 6,515 6,246 TOTAL$20,167 $18,761 $18,353 Income taxes consisted of the following:Fiscal years ended June 30202520242023CURRENT TAX EXPENSEU.S. federal$2,215 $1,954 $2,303 International1,330 1,708 1,412 U.S. state and local407 368 353 TOTAL3,953 4,031 4,068 DEFERRED TAX EXPENSE/(BENEFIT)U.S. federal9 (133)(224)International and other141 (111)(229)TOTAL149 (244)(453)TOTAL TAX EXPENSE$4,102 $3,787 $3,615 A reconciliation of the U.S. federal statutory income tax rate to our actual effective income tax rate is provided below:Fiscal years ended June 30202520242023U.S. federal statutory income tax rate21.0 %21.0 %21.0 %Country mix impacts of foreign operations(0.4)%0.1 %(0.5)%State income taxes, net of federal benefit1.7 %1.8 %1.6 %Excess tax benefits from the exercise of stock options(1.4)%(1.5)%(1.0)%Foreign derived intangible income deduction (FDII)(0.8)%(1.1)%(0.8)%Changes in uncertain tax positions0.1 %0.1 %0.1 %Other0.2 %(0.2)%(0.7)%EFFECTIVE INCOME TAX RATE20.3 %20.2 %19.7 %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. Excess tax benefits from the exercise of stock options reflect the excess of actual tax benefits received on employee exercises of stock options and other share-based payments (which generally equals the income taxable to the employee) over the amount of tax benefits that were calculated and recognized based on the grant date fair values of such instruments. Changes in uncertain tax positions represent changes in our net liability related to prior year tax positions.Prior to the passage of the 2017 U.S.

SHARE-BASED COMPENSATIONThe Company has two primary share-based compensation programs under which we annually grant stock option, restricted stock unit (RSU) and performance stock unit (PSU) awards to certain managers and directors. In our main long-term incentive program, managers can elect to receive stock options or RSUs. All options vest after three years and have a 10-year life. Exercise prices on options are set equal to the market price of the underlying shares on the date of the grant. RSUs vest and settle in shares of common stock three years from the grant date. Senior-level executives participate in an additional long-term incentive program that awards PSUs, which are paid in shares after the end of a three-year performance period subject to pre-established performance goals. The program includes a Relative Total Shareholder Return (R-TSR) modifier under which the number of shares ultimately granted is also impacted by the Company's actual shareholder return relative to our consumer products competitive peer set.In addition to these long-term incentive programs, we award RSUs to the Company's non-employee directors and make other minor stock option and RSU grants to employees for which the terms are not substantially different from our long-term incentive awards.The Company's share-based compensation plan was approved by shareholders in 2019. Under the 2019 plan, a maximum of 150 million shares of common stock was authorized for issuance and a total of 58 million shares remain available for grant.The Company recognizes share-based compensation expense based on the fair value of the awards at the date of grant. The expense is recognized on a straight-line basis over the requisite service period. Awards to employees eligible for retirement prior to the award becoming fully vested are recognized as compensation expense ratably from the grant date through the date the employee first becomes eligible to retire and/or is no longer required to provide services to earn the award. Share-based compensation expense is included as part of Cost of products sold and SG&A in the Consolidated Statements of Earnings and includes an estimate of forfeitures, which is based on historical data.

LEASESThe Company determines whether a contract contains a lease at the inception of a contract by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We lease certain real estate, machinery, equipment, vehicles and office equipment for varying periods. Many of these leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain that the Company will exercise such options. The incremental borrowing rate utilized to calculate our lease liabilities is based on the information available at commencement date, as most of the leases do not provide an implicit borrowing rate. Our operating lease agreements do not contain any material guarantees or restrictive covenants. The Company does not have any material finance leases or sublease activities. Short-term leases, defined as leases with initial terms of 12 months or less, are not reflected on the Consolidated Balance Sheets. Lease expense for such short-term leases is not material. The most significant assets in our leasing portfolio relate to real estate and vehicles. For purposes of calculating lease liabilities for such leases, we have combined lease and non-lease components.The components of the Company’s total operating lease cost for the fiscal years ended June 30, 2025, 2024 and 2023, were as follows:Fiscal years ended June 30202520242023Operating lease cost$276 $252 $229 Variable lease cost (1)81 91 79 Total lease cost$357 $343 $308 (1)Includes primarily costs for utilities, common area maintenance, property taxes and other operating costs associated with operating leases that are not included in the lease liability and are recognized in the period in which they are incurred.Supplemental balance sheet and other information related to leases is as follows:As of June 3020252024Operating leases:Right-of-use assets (Other noncurrent assets)$925$875Current lease liabilities (Accrued and other liabilities)255243Noncurrent lease liabilities (Other noncurrent liabilities)701666Total operating lease liabilities$956$909Weighted average remaining lease term:Operating leases6.0 years6.0 yearsWeighted average discount rate:Operating leases4.6 %4.

The Company’s management is responsible for implementing its strategic plans, including identifying, evaluating, managing and mitigating the risks inherent in them, such as cybersecurity risks. Within management, the Company’s CISO has specific responsibility for cybersecurity risk management, reporting to the CIO. The Company’s CISO has over 15 years of experience in cybersecurity, information security and information risk management, including several years each in security engineering and in operations, as well as running incident response organizations. The CISO's organization includes a dedicated team of centralized information security experts and a network of security professionals embedded in each business unit and function. The CISO also leads the design and development of the Company’s cybersecurity program, relying on functional experts within the central Information Security organization as well as on information security experts within each of the Company’s Organizational Units. These embedded experts are responsible for the execution of the Company’s overall information security strategy and report security risks in their area of responsibility to their Organization Unit leader and to the CISO. Experts within the Company’s central Information Security organization help develop the Company’s cybersecurity strategies, policies and standards and similarly report security risks within the central enterprise to the CISO.A central team within the Company leads enterprise-wide incident investigations and response, assisting and consulting on cyber security incidents impacting individual Organizational Units. Alerts of potential incidents can arise from security tool alerts, employee reports, threat intelligence sources, threat hunting activities or external entities, among other sources. The Company's Security Operations Center initially responds to incident alerts and notifies central experts to any potentially significant cybersecurity incidents. Members of the Security Operations Center and relevant response teams work to contain and eradicate potential and identified threats and support the system’s recovery efforts, advised as needed by the Legal department and other Company experts. Incidents are communicated to the CISO and other members of management, including the Company’s Ethics & Compliance Committee, as well as the Audit Committee of the Board, based on documented escalation criteria.

EARNINGS PER SHAREBasic net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred dividends by the weighted average number of common shares outstanding during the period. Diluted net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble by the diluted weighted average number of common shares outstanding during the period. The diluted shares include the dilutive effect of stock options and other unvested stock-based awards based on the treasury stock method (see Note 7) and the assumed conversion of preferred stock (see Note 8).Net earnings per common share were calculated as follows:Fiscal years ended June 30202520242023CONSOLIDATED AMOUNTSNet earnings attributable to P&G (Diluted)$15,974 $14,879 $14,653 Less: Preferred dividends291 284 282 Net earnings attributable to P&G available to common shareholders (Basic)$15,682 $14,595 $14,371 SHARES IN MILLIONSBasic weighted average common shares outstanding2,350.12,360.12,368.2Add effect of dilutive securities:Stock options and other unvested equity awards (1)33.338.339.4Convertible preferred shares (2)71.073.676.3Diluted weighted average common shares outstanding2,454.42,471.92,483.9NET EARNINGS PER COMMON SHAREBasic$6.67 $6.18 $6.07 Diluted$6.51 $6.02 $5.90 (1)For the years ended June 30, 2025, 2024 and 2023, the weighted average of stock options that were antidilutive and not included in the diluted net earnings per share calculation were 6 million, 4 million and 19 million, respectively.(2)An overview of preferred shares can be found in Note 8.