$ Amounts in millions except per share amounts: Years ended June 30 NET SALES Cost of products sold Selling, general and administrative expense Goodwill and indefinite-lived intangible asset impairment charges OPERATING INCOME Interest expense Interest income Other non-operating income, net EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGS FROM DISCONTINUED OPERATIONS NET EARNINGS Less: Net earnings attributable to noncontrolling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE 2014 2013 83,062 $ 82,581 42,460 41391 25,314 26,552 308 15,288 14330 709667 10087 206 942 14,885 14,692 3,178 3,391 11,707 11301 101 11,785 11,402 14290 11,643 $ 11312 2012 82,006 41,411 25,984 1.576 13,035 769 77 185 12,528 3,378 9,150 1,754 10,904 148 10,756 $ $ $ $ $ 4.16 0.03 4.19 4.00 0.04 .04 3.18 0.64 3.82 4 BASIC NET EARNINGS PER COMMON SHARE": Earnings from continuing operations Earnings from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE": Earnings from continuing operations Earnings from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE DIVIDENDS PER COMMON SHARE $ $ $ 3.98 0.03 4.01 2.45 3.83 0.03 3.86 2.29 3.06 0.60 3.66 2.14 $ $ 2014 11,785 2013 11,402 $ $ $ 2012 10,904 (5.990) 724 Amounts in millions; Years ended June 30 NET EARNINGS OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX Financial statement translation Unrealized gains/(losses) on hedges (net of $209. $92 and $441 tax, respectively) Unrealized gains (losses) on investment securities (net of $4, $5 and $3 tax, respectively) Defined benefit retirement plans (net of $356, 5637 and $993 tax, respectively) TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX TOTAL COMPREHENSIVE INCOME Less: Total comprehensive income attributable to noncontrolling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE 1,044 710 (347) 144 (24) (869) 1,004 (163) 1,834 11,622 13.236 15094 11,472 $ 13,142 $ (2,010) (7,279) 3,625 124 3,501 $ 2014 2013 $ $ 5,947 8,558 2,128 6,386 6,508 Amounts in millions: June 30 Assets CURRENT ASSETS Cash and cash equivalents Available for sale investment securities Accounts receivable INVENTORIES Materials and supplies Work in process Finished goods Total inventories Deferred income taxes Prepaid expenses and other current assets Assets held for sale TOTAL CURRENT ASSETS 1,704 1,742 684 4,333 722 6,759 4,483 6,909 948 3,678 1,092 3,845 2,849 31,617 23,990 21,666 PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS 22,304 53,704 30,843 5,798 144,266 31,572 6,847 139,263 $ $ $ $ 8,777 8,828 8,461 8,999 660 15,606 33,726 19,811 10,218 10,535 74,290 12,432 30,037 19,111 10,827 10,579 70,554 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable Accrued and other liabilities Liabilities held for sale Debt due within one year TOTAL CURRENT LIABILITIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER NONCURRENT LIABILITIES TOTAL LIABILITIES SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) 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: 2014-4009.2, 2013 - 4,009.2) Additional paid-in capital Reserve for ESOP debt retirement Accumulated other comprehensive income/loss) Treasury stock, at cost (shares held: 2014 - 1.298.4.2013 - 1.266.9) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,111 1,137 4,009 63,911 (1,340) (7,662) (75,805) 84,990 762 69,976 144,266 4,009 63,538 (1,352) (7,499) (71,966) 80,197 645 68,709 139,263 $ $ Reserve for Accumulated Common Additional ESOP Other Non- Shares Common Preferred Paid-In Debt Comprehensive Treasury Retained controlling Outstanding Stock Stock Capital Retirement Income (Loss) Stock Earnings Interest Total 2,765,737 $ 4,008 $ 1.234 $ 62,405 $ (1.357) $ (2,054) $ (67,278) $ 70,682 $ 361 $ 68,001 10,756 148 10,904 (7,279) (7,279) (5,883) (256) (5,883) (256) (4,024) 2.215 (61,826) 39,546 4,576 (4,024) 1,665 33 550 6 (39) 50 220 63,181 2,748,033 4,0081,195 (1,357) (9,333) (69,604) 75,349 11,312 87 5 96 90 50 307 64,035 11,402 1,834 1,834 Dollars in millions/Shares in thousands BALANCE JUNE 30, 2011 Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2012 Net earnings Other comprehensive income Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2013 Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2014 (6,275) (244) (6,275) (244) (5,986) (84.234) 70,923 7,605 (5,986) 3,573 51 352 7 3.926 (58) 5 (2) 63,538 2,742,327 4,009 1,137 (1.352) (7,499) (71,966) 5560 (41) (43) 80,197 645 68,709 11,643 142 11,785 (163) (163) (6,658) (253) (6,658) (253) (6,005) 2,508 (74,987) 40,288 3,178 364 (6,005) 2,144 22 (26) 12 61 73 (25) (20) 762 $69,976 2,710,806 $ 4,009 $ 1,111 $ 63,911 $ (1,340) $ (7,662) $ (75,805) $84,990 $ 2014 5,947 2013 4,436 $ $ $ 2012 2,768 11,785 3,141 360 (44) (154) 10,904 3,204 377 (65) (2,106) 11,402 2,982 346 (307) (916) 308 (415) (225) 1,253 68 377 14,873 1,576 (427) 77 (22) 87 8 1 (1,557) 331 13,958 (444) 210 13.284 Amounts in millions: Years ended June 30 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR OPERATING ACTIVITIES Net earnings Depreciation and amortization Share-based compensation expense Deferred income taxes Gain on sale and purchase of businesses Goodwill and indefinite-lived intangible asset impairment charges Change in accounts receivable Change in inventories Change in accounts payable, accrued and other liabilities Change in other operating assets and liabilities Other TOTAL OPERATING ACTIVITIES INVESTING ACTIVITIES Capital expenditures Proceeds from asset sales Acquisitions, net of cash acquired Purchases of available-for-sale investment securities Proceeds from sales of available-for-sale investment securities Change in other investments TOTAL INVESTING ACTIVITIES FINANCING ACTIVITIES Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Treasury stock purchases Impact of stock options and other TOTAL FINANCING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, END OF YEAR (3,848) 570 (24) (568) 24 (261) (4,107) (4,008) 584 (1,145) (1,605) (3.964) 2,893 (134) - (121) (6,295) 112 (1,093) (6,911) (6,519) 3,304 3,406 4,334 2.331 (4,095) (3,752) (6,005) (5,986) 2,094 3,449 (7,279) (7,071) 394 2,611 1,511 8,558 $ 5,947 (6,139) (3,412) 3,985 (2.549) (4,024) 1,729 (10,410) (113) $ $ 4,436 SUPPLEMENTAL DISCLOSURE Cash payments for: Interest $ $ 686 3,320 683 $ 3,780 740 4.348 Income taxes Assets acquired through non-cash capital leases are immaterial for all periods. (a) What investments does P&G report in 2014, and how are these investments accounted for in its financial statements? (b) How are P&G's investments valued? How does P&G determine fair value? (c) How does P&G use derivative financial instruments? $ Amounts in millions except per share amounts: Years ended June 30 NET SALES Cost of products sold Selling, general and administrative expense Goodwill and indefinite-lived intangible asset impairment charges OPERATING INCOME Interest expense Interest income Other non-operating income, net EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes on continuing operations NET EARNINGS FROM CONTINUING OPERATIONS NET EARNINGS FROM DISCONTINUED OPERATIONS NET EARNINGS Less: Net earnings attributable to noncontrolling interests NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE 2014 2013 83,062 $ 82,581 42,460 41391 25,314 26,552 308 15,288 14330 709667 10087 206 942 14,885 14,692 3,178 3,391 11,707 11301 101 11,785 11,402 14290 11,643 $ 11312 2012 82,006 41,411 25,984 1.576 13,035 769 77 185 12,528 3,378 9,150 1,754 10,904 148 10,756 $ $ $ $ $ 4.16 0.03 4.19 4.00 0.04 .04 3.18 0.64 3.82 4 BASIC NET EARNINGS PER COMMON SHARE": Earnings from continuing operations Earnings from discontinued operations BASIC NET EARNINGS PER COMMON SHARE DILUTED NET EARNINGS PER COMMON SHARE": Earnings from continuing operations Earnings from discontinued operations DILUTED NET EARNINGS PER COMMON SHARE DIVIDENDS PER COMMON SHARE $ $ $ 3.98 0.03 4.01 2.45 3.83 0.03 3.86 2.29 3.06 0.60 3.66 2.14 $ $ 2014 11,785 2013 11,402 $ $ $ 2012 10,904 (5.990) 724 Amounts in millions; Years ended June 30 NET EARNINGS OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX Financial statement translation Unrealized gains/(losses) on hedges (net of $209. $92 and $441 tax, respectively) Unrealized gains (losses) on investment securities (net of $4, $5 and $3 tax, respectively) Defined benefit retirement plans (net of $356, 5637 and $993 tax, respectively) TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX TOTAL COMPREHENSIVE INCOME Less: Total comprehensive income attributable to noncontrolling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE 1,044 710 (347) 144 (24) (869) 1,004 (163) 1,834 11,622 13.236 15094 11,472 $ 13,142 $ (2,010) (7,279) 3,625 124 3,501 $ 2014 2013 $ $ 5,947 8,558 2,128 6,386 6,508 Amounts in millions: June 30 Assets CURRENT ASSETS Cash and cash equivalents Available for sale investment securities Accounts receivable INVENTORIES Materials and supplies Work in process Finished goods Total inventories Deferred income taxes Prepaid expenses and other current assets Assets held for sale TOTAL CURRENT ASSETS 1,704 1,742 684 4,333 722 6,759 4,483 6,909 948 3,678 1,092 3,845 2,849 31,617 23,990 21,666 PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OTHER NONCURRENT ASSETS TOTAL ASSETS 22,304 53,704 30,843 5,798 144,266 31,572 6,847 139,263 $ $ $ $ 8,777 8,828 8,461 8,999 660 15,606 33,726 19,811 10,218 10,535 74,290 12,432 30,037 19,111 10,827 10,579 70,554 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable Accrued and other liabilities Liabilities held for sale Debt due within one year TOTAL CURRENT LIABILITIES LONG-TERM DEBT DEFERRED INCOME TAXES OTHER NONCURRENT LIABILITIES TOTAL LIABILITIES SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) 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: 2014-4009.2, 2013 - 4,009.2) Additional paid-in capital Reserve for ESOP debt retirement Accumulated other comprehensive income/loss) Treasury stock, at cost (shares held: 2014 - 1.298.4.2013 - 1.266.9) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,111 1,137 4,009 63,911 (1,340) (7,662) (75,805) 84,990 762 69,976 144,266 4,009 63,538 (1,352) (7,499) (71,966) 80,197 645 68,709 139,263 $ $ Reserve for Accumulated Common Additional ESOP Other Non- Shares Common Preferred Paid-In Debt Comprehensive Treasury Retained controlling Outstanding Stock Stock Capital Retirement Income (Loss) Stock Earnings Interest Total 2,765,737 $ 4,008 $ 1.234 $ 62,405 $ (1.357) $ (2,054) $ (67,278) $ 70,682 $ 361 $ 68,001 10,756 148 10,904 (7,279) (7,279) (5,883) (256) (5,883) (256) (4,024) 2.215 (61,826) 39,546 4,576 (4,024) 1,665 33 550 6 (39) 50 220 63,181 2,748,033 4,0081,195 (1,357) (9,333) (69,604) 75,349 11,312 87 5 96 90 50 307 64,035 11,402 1,834 1,834 Dollars in millions/Shares in thousands BALANCE JUNE 30, 2011 Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2012 Net earnings Other comprehensive income Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2013 Net earnings Other comprehensive loss Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions ESOP debt impacts Noncontrolling interest, net BALANCE JUNE 30, 2014 (6,275) (244) (6,275) (244) (5,986) (84.234) 70,923 7,605 (5,986) 3,573 51 352 7 3.926 (58) 5 (2) 63,538 2,742,327 4,009 1,137 (1.352) (7,499) (71,966) 5560 (41) (43) 80,197 645 68,709 11,643 142 11,785 (163) (163) (6,658) (253) (6,658) (253) (6,005) 2,508 (74,987) 40,288 3,178 364 (6,005) 2,144 22 (26) 12 61 73 (25) (20) 762 $69,976 2,710,806 $ 4,009 $ 1,111 $ 63,911 $ (1,340) $ (7,662) $ (75,805) $84,990 $ 2014 5,947 2013 4,436 $ $ $ 2012 2,768 11,785 3,141 360 (44) (154) 10,904 3,204 377 (65) (2,106) 11,402 2,982 346 (307) (916) 308 (415) (225) 1,253 68 377 14,873 1,576 (427) 77 (22) 87 8 1 (1,557) 331 13,958 (444) 210 13.284 Amounts in millions: Years ended June 30 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR OPERATING ACTIVITIES Net earnings Depreciation and amortization Share-based compensation expense Deferred income taxes Gain on sale and purchase of businesses Goodwill and indefinite-lived intangible asset impairment charges Change in accounts receivable Change in inventories Change in accounts payable, accrued and other liabilities Change in other operating assets and liabilities Other TOTAL OPERATING ACTIVITIES INVESTING ACTIVITIES Capital expenditures Proceeds from asset sales Acquisitions, net of cash acquired Purchases of available-for-sale investment securities Proceeds from sales of available-for-sale investment securities Change in other investments TOTAL INVESTING ACTIVITIES FINANCING ACTIVITIES Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Treasury stock purchases Impact of stock options and other TOTAL FINANCING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, END OF YEAR (3,848) 570 (24) (568) 24 (261) (4,107) (4,008) 584 (1,145) (1,605) (3.964) 2,893 (134) - (121) (6,295) 112 (1,093) (6,911) (6,519) 3,304 3,406 4,334 2.331 (4,095) (3,752) (6,005) (5,986) 2,094 3,449 (7,279) (7,071) 394 2,611 1,511 8,558 $ 5,947 (6,139) (3,412) 3,985 (2.549) (4,024) 1,729 (10,410) (113) $ $ 4,436 SUPPLEMENTAL DISCLOSURE Cash payments for: Interest $ $ 686 3,320 683 $ 3,780 740 4.348 Income taxes Assets acquired through non-cash capital leases are immaterial for all periods. (a) What investments does P&G report in 2014, and how are these investments accounted for in its financial statements? (b) How are P&G's investments valued? How does P&G determine fair value? (c) How does P&G use derivative financial instruments