10-Q 1 pg-20211231.htm FY2122 Q2 OND 10-Q pg-20211231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
xTrueQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2021
OR
oFalseTRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     

pg-20211231_g1.jpg
THE PROCTER & GAMBLE COMPANY
(Exact name of registrant as specified in its charter)
 
OhioOH1-43431-0411980
(State of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)
One Procter & Gamble PlazaCincinnatiOH
One Procter & Gamble Plaza, Cincinnati, Ohio45202
(Address of principal executive offices)(Zip Code)
(513) 983-1100
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, without Par ValuePGNYSE
2.000% Notes due 2022PG22BNYSE
1.125% Notes due 2023PG23ANYSE
0.500% Notes due 2024PG24ANYSE
0.625% Notes due 2024PG24BNYSE
1.375% Notes due 2025PG25NYSE
0.110% Notes due 2026PG26DNYSE
4.875% EUR notes due May 2027PG27ANYSE
1.200% Notes due 2028PG28NYSE
1.250% Notes due 2029PG29BNYSE
1.800% Notes due 2029PG29ANYSE
6.250% GBP notes due January 2030PG30NYSE
0.350% Notes due 2030PG30CNYSE
0.230% Notes due 2031PG31ANYSE
5.250% GBP notes due January 2033PG33NYSE
1.875% Notes due 2038PG38NYSE
0.900% Notes due 2041PG41NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 þ
Accelerated filer
 ¨
Non-accelerated filer
 ¨
Smaller reporting company
 ¨
False
Emerging growth company
 ¨
False
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No þ False
There were 2,397,065,706 shares of Common Stock outstanding as of December 31, 2021.



PART I. FINANCIAL INFORMATION 
Item 1.Financial Statements
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended December 31Six Months Ended December 31
Amounts in millions except per share amounts2021 20202021 2020
NET SALES$20,953 $19,745 $41,291 $39,063 
Cost of products sold10,664 9,253 21,029 18,395 
Selling, general and administrative expense5,121 5,112 10,071 10,007 
OPERATING INCOME5,168 5,380 10,191 10,661 
Interest expense(106)(143)(215)(279)
Interest income10 9 21 19 
Other non-operating income/(expense), net 167 (369)277 (227)
EARNINGS BEFORE INCOME TAXES5,239 4,877 10,274 10,174 
Income taxes997 990 1,906 1,979 
NET EARNINGS4,242 3,887 8,368 8,195 
Less: Net earnings attributable to noncontrolling interests19 33 33 64 
NET EARNINGS ATTRIBUTABLE TO PROCTER & GAMBLE$4,223 $3,854 $8,335 $8,131 
NET EARNINGS PER SHARE (1)
Basic$1.72 $1.53 $3.39 $3.22 
Diluted$1.66 $1.47 $3.27 $3.10 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING2,544.2 2,615.4 2,551.6 2,620.4 
(1)Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Procter & Gamble.

See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended December 31Six Months Ended December 31
Amounts in millions2021202020212020
NET EARNINGS$4,242 $3,887 $8,368 $8,195 
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
Foreign currency translation(241)885 (706)1,237 
Unrealized gains on investment securities2 8 7 14 
Unrealized gains/(losses) on defined benefit retirement plans737 (101)879 (170)
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX498 792 180 1,081 
TOTAL COMPREHENSIVE INCOME4,740 4,679 8,548 9,276 
Less: Total comprehensive income attributable to noncontrolling interests19 35 33 71 
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO PROCTER & GAMBLE$4,721 $4,644 $8,515 $9,205 

See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Amounts in millionsDecember 31, 2021June 30, 2021
Assets
CURRENT ASSETS
Cash and cash equivalents$11,544 $10,288 
Accounts receivable5,241 4,725 
INVENTORIES
Materials and supplies2,061 1,645 
Work in process766 719 
Finished goods3,846 3,619 
Total inventories6,673 5,983 
Prepaid expenses and other current assets2,087 2,095 
TOTAL CURRENT ASSETS25,545 23,091 
PROPERTY, PLANT AND EQUIPMENT, NET21,357 21,686 
GOODWILL40,315 40,924 
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET23,538 23,642 
OTHER NONCURRENT ASSETS10,661 9,964 
TOTAL ASSETS$121,416 $119,307 
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable$14,154 $13,720 
Accrued and other liabilities10,542 10,523 
Debt due within one year13,331 8,889 
TOTAL CURRENT LIABILITIES38,027 33,132 
LONG-TERM DEBT22,322 23,099 
DEFERRED INCOME TAXES6,506 6,153 
OTHER NONCURRENT LIABILITIES9,668 10,269 
TOTAL LIABILITIES76,523 72,653 
SHAREHOLDERS’ EQUITY
Preferred stock856 870 
Common stock – shares issued –December 20214,009.2 
June 20214,009.2 4,009 4,009 
Additional paid-in capital65,432 64,848 
Reserve for ESOP debt retirement(965)(1,006)
Accumulated other comprehensive loss(13,564)(13,744)
Treasury stock(121,543)(114,973)
Retained earnings110,393 106,374 
Noncontrolling interest275 276 
TOTAL SHAREHOLDERS’ EQUITY44,893 46,654 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$121,416 $119,307 

See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Months Ended December 31, 2021
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumulated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE SEPTEMBER 30, 20212,419,948 $4,009 $859 $65,148 ($964)($14,062)($117,240)$108,361 $297 $46,408 
Net earnings4,223 19 4,242 
Other comprehensive income/(loss)498  498 
Dividends and dividend equivalents
($0.8698 per share):
Common(2,108)(2,108)
Preferred(70)(70)
Treasury stock purchases(31,433)(4,754)(4,754)
Employee stock plans7,986 284 448 732 
Preferred stock conversions565 (3) 3  
ESOP debt impacts(1)(13)(14)
Noncontrolling interest, net (41)(41)
BALANCE
DECEMBER 31, 2021
2,397,066 $4,009 $856 $65,432 ($965)($13,564)($121,543)$110,393 $275 $44,893 
Six Months Ended December 31, 2021
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumulated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
JUNE 30, 2021
2,429,706 $4,009 $870 $64,848 ($1,006)($13,744)($114,973)$106,374 $276 $46,654 
Net earnings8,335 33 8,368 
Other comprehensive income/(loss)180  180 
Dividends and dividend equivalents
($1.7396 per share):
Common(4,226)(4,226)
Preferred(140)(140)
Treasury stock purchases(50,786)(7,504)(7,504)
Employee stock plans16,423 584 922 1,506 
Preferred stock conversions1,723 (14)2 12  
ESOP debt impacts41 50 91 
Noncontrolling interest, net(2)(34)(36)
BALANCE
DECEMBER 31, 2021
2,397,066 $4,009 $856 $65,432 ($965)($13,564)($121,543)$110,393 $275 $44,893 
See accompanying Notes to Consolidated Financial Statements.



Three Months Ended December 31, 2020
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumulated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
SEPTEMBER 30, 2020
2,479,606 $4,009 $888 $64,467 ($1,046)($15,881)($106,794)$102,539 $394 $48,576 
Net earnings3,854 33 3,887 
Other comprehensive income/(loss)790 2 792 
Dividends and dividend equivalents
($0.7907 per share):
Common(1,966)(1,966)
Preferred(66)(66)
Treasury stock purchases(21,485)(3,008)(3,008)
Employee stock plans3,836 205 216 421 
Preferred stock conversions519 (3) 3  
ESOP debt impacts(26) (26)
Noncontrolling interest, net(70)(70)
BALANCE
DECEMBER 31, 2020
2,462,476 $4,009 $885 $64,672 ($1,072)($15,091)($109,583)$104,361 $359 $48,540 
Six Months Ended December 31, 2020
Dollars in millions;
shares in thousands
Common StockPreferred StockAdd-itional Paid-In CapitalReserve for ESOP Debt RetirementAccumulated
Other
Comp-rehensive
Income/(Loss)
Treasury StockRetained EarningsNon-controlling InterestTotal Share-holders' Equity
SharesAmount
BALANCE
JUNE 30, 2020
2,479,746 $4,009 $897 $64,194 ($1,080)($16,165)($105,573)$100,239 $357 $46,878 
Net earnings8,131 64 8,195 
Other comprehensive income/(loss)1,074 7 1,081 
Dividends and dividend equivalents
( $1.5814 per share):
Common(3,935)(3,935)
Preferred(132)(132)
Treasury stock purchases(36,127)(5,008)(5,008)
Employee stock plans17,340 476 988 1,464 
Preferred stock conversions1,517 (12)2 10  
ESOP debt impacts8 58 66 
Noncontrolling interest, net(69)(69)
BALANCE
DECEMBER 31, 2020
2,462,476 $4,009 $885 $64,672 ($1,072)($15,091)($109,583)$104,361 $359 $48,540 

See accompanying Notes to Consolidated Financial Statements.




THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31
Amounts in millions20212020
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD$10,288 $16,181 
OPERATING ACTIVITIES
Net earnings8,368 8,195 
Depreciation and amortization1,395 1,342 
Loss on early extinguishment of debt 512 
Share-based compensation expense268 254 
Deferred income taxes(101)145 
Gain on sale of assets(82)(14)
Changes in:
Accounts receivable(644)(462)
Inventories(840)(217)
Accounts payable, accrued and other liabilities1,431 312 
Other operating assets and liabilities(84)(14)
Other53 110 
TOTAL OPERATING ACTIVITIES9,764 10,163 
INVESTING ACTIVITIES
Capital expenditures(1,717)(1,417)
Proceeds from asset sales97 39 
Acquisitions, net of cash acquired(349) 
Change in other investments3  
TOTAL INVESTING ACTIVITIES(1,966)(1,378)
FINANCING ACTIVITIES
Dividends to shareholders(4,353)(4,055)
Increases in short-term debt with original maturities of more than three months6,747 5,267 
Reductions in short-term debt with original maturities of more than three months(1,730)(2,602)
Increases/(reductions) in other short-term debt(1,124)(6,083)
Additions to long-term debt2,136 2,429 
Reductions to long-term debt (1)
(1,673)(4,220)
Treasury stock purchases(7,504)(5,008)
Impact of stock options and other1,215 1,101 
TOTAL FINANCING ACTIVITIES(6,286)(13,171)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(256)146 
CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH1,256 (4,240)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$11,544 $11,941 
(1) Includes early extinguishment of debt costs of $512 during the six months ended December 31, 2020.
See accompanying Notes to Consolidated Financial Statements.



THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. In the opinion of management, the accompanying unaudited Consolidated Financial Statements of The Procter & Gamble Company and subsidiaries (the "Company," "Procter & Gamble," "P&G," "we" or "our") contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.
Beginning in fiscal year 2022, the Company began to present increases and reductions in short-term debt with maturities of more than three months separately within the Consolidated Statements of Cash Flows. The presentation for the six months ended December 31, 2020 has been revised to align with the current period presentation. This change had no impact on total financing activities and we have concluded the change is not material.
2. New Accounting Pronouncements and Policies
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The amendments provide optional expedients and exceptions for applying generally accepted accounting principles ("GAAP") to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU No. 2021-01, "Reference Rate Reform (Topic 848): Scope", which clarified that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that are affected by the discounting transition due to reference rate reform. These ASUs were effective upon issuance and may be applied prospectively to contract modifications and hedging relationships entered into or evaluated through December 31, 2022. We have completed our evaluation of significant contracts and the guidance has not had, and is not expected to have, a material impact on the Company's Consolidated Financial Statements. Specific elections of expedients and exceptions provided under the ASUs will be made when contract modifications in response to reference rate reform commence.
In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance". This guidance requires annual disclosures for transactions with a government authority that are accounted for by applying a grant or contribution model. These amendments are effective for annual periods beginning after December 15, 2021, with early adoption permitted. We plan to adopt the standard for the fiscal year ending June 30, 2023. We are currently assessing the impact of this guidance on our Consolidated Financial Statements and disclosures.
No other new accounting pronouncement issued or effective during the fiscal year had, or is expected to have, a material impact on our Consolidated Financial Statements.
3. Segment Information
Under U.S. GAAP, our operating segments are aggregated into five reportable segments: 1) Beauty, 2) Grooming, 3) Health Care, 4) Fabric & Home Care and 5) Baby, Feminine & Family Care. Our five reportable segments are comprised of:
Beauty: Hair Care (Conditioners, Shampoos, Styling Aids, Treatments); Skin and Personal Care (Antiperspirants and Deodorants, Personal Cleansing, Skin Care);
Grooming: Shave Care (Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Shave Care); Appliances;
Health Care: Oral Care (Toothbrushes, Toothpaste, Other Oral Care); Personal Health Care (Gastrointestinal, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Pain Relief, Other Personal Health Care);
Fabric & Home Care: Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents); Home Care (Air Care, Dish Care, P&G Professional, Surface Care); and
Baby, Feminine & Family Care: Baby Care (Baby Wipes, Taped Diapers and Pants); Feminine Care (Adult Incontinence, Feminine Care); Family Care (Paper Towels, Tissues, Toilet Paper).





Amounts in millions of dollars unless otherwise specified.


Our operating segments are comprised of similar product categories. Operating segments that individually accounted for 5% or more of consolidated net sales are as follows:
% of Net sales by operating segment (1)
Three Months Ended December 31Six Months Ended December 31
2021202020212020
Fabric Care22%22%23%22%
Home Care11%11%11%12%
Baby Care11%10%10%10%
Skin and Personal Care10%10%10%10%
Hair Care9%9%9%9%
Family Care8%9%8%9%
Oral Care8%9%8%8%
Shave Care7%7%7%7%
Feminine Care6%6%6%6%
Personal Health Care6%5%6%5%
Other2%2%2%2%
Total100%100%100%100%
(1)% of Net sales by operating segment excludes sales held in Corporate.
The following is a summary of reportable segment results:
Three Months Ended December 31Six Months Ended December 31
Net SalesEarnings/(Loss) Before Income TaxesNet EarningsNet SalesEarnings/(Loss) Before Income TaxesNet Earnings
Beauty2021$3,926 $1,179 $947 $7,890 $2,421 $1,938 
20203,806 1,196 955 7,591 2,424 1,931 
Grooming20211,811 576 476 3,498 1,094 893 
20201,735 537 452 3,336 963 807 
Health Care20212,976 905 701 5,652 1,600 1,230 
20202,746 830 655 5,217 1,509 1,180 
Fabric & Home Care20216,972 1,463 1,137 13,981 3,009 2,328 
20206,498 1,599 1,250 13,142 3,341 2,599 
Baby, Feminine & Family Care20215,116 1,187 914 9,980 2,262 1,740 
20204,858 1,352 1,044 9,581 2,670 2,053 
Corporate2021152 (71)67 290 (112)239 
2020102 (637)(469)196 (733)(375)
Total Company2021$20,953 $5,239 $4,242 $41,291 $10,274 $8,368 
202019,745 4,877 3,887 39,063 10,174 8,195 

Amounts in millions of dollars unless otherwise specified.


4. Goodwill and Other Intangible Assets
Goodwill is allocated by reportable segment as follows:
BeautyGroomingHealth CareFabric & Home CareBaby, Feminine & Family CareTotal Company
Goodwill at June 30, 2021$13,257 $13,095 $8,046 $1,873 $4,653 $40,924 
Acquisitions and divestitures188  1   189 
Translation and other(288)(200)(194)(26)(90)(798)
Goodwill at December 31, 2021$13,157 $12,895 $7,853 $1,847 $4,563 $40,315 
Goodwill decreased from June 30, 2021 due to currency translation, partially offset by acquisitions in Beauty and Health Care.
Identifiable intangible assets at December 31, 2021 were comprised of:
Gross Carrying AmountAccumulated Amortization
Intangible assets with determinable lives$8,688 $(6,198)
Intangible assets with indefinite lives21,048  
Total identifiable intangible assets$29,736 $(6,198)
Intangible assets with determinable lives consist of brands, patents, technology and customer relationships. The intangible assets with indefinite lives primarily consist of brands. The amortization expense of determinable-lived intangible assets for the three months ended December 31, 2021 and 2020 was $74 million and $79 million, respectively. For the six months ended December 31, 2021 and 2020, the amortization expense was $151 million and $163 million, respectively.
Goodwill and indefinite-lived intangible assets are not amortized but are tested at least annually for impairment by comparing the estimated fair values of our reporting units and underlying indefinite-lived intangible assets to their respective carrying values. We typically use an income method to estimate the fair value of these assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. If the resulting fair value is less than the asset's carrying value, that difference represents an impairment. Our annual impairment testing for goodwill and indefinite-lived intangible assets occurs during the three months ended December 31.
The business unit valuations used to test goodwill and intangible assets for impairment depend on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment, margin expansion and Company business plans. We believe these estimates and assumptions are reasonable. However, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill and indefinite-lived intangible assets, including discount rates, tax rates or future cash flow projections, could result in significantly different estimates of the fair values. To the extent changes in such factors result in a failure to achieve the level of projected cash flows initially used to estimate fair value for purposes of establishing or subsequently impairing the carrying amount of goodwill and related intangible assets, we may need to record non-cash impairment charges in the future.
Most of our goodwill reporting units are comprised of a combination of legacy and acquired businesses and as a result have fair value cushions that, at a minimum, exceed three times their underlying carrying values. Certain of our goodwill reporting units, in particular Shave Care and Appliances, are comprised entirely of acquired businesses and as a result, have historically had fair value cushions that are not as high. The Appliances reporting unit has a fair value that significantly exceeds the underlying carrying value. As previously disclosed, the carrying values of the Shave Care reporting unit and the related Gillette indefinite-lived intangible asset were impaired during the quarter ended June 30, 2019. Based on our impairment testing during the three months ended December 31, 2021, the Shave Care reporting unit fair value exceeded its carrying value by more than 30% and the Gillette indefinite-lived intangible asset fair value exceeded its carrying value by approximately 5%.
The most significant assumptions utilized in the determination of the estimated fair values of the Shave Care reporting unit and the Gillette indefinite-lived intangible asset are the net sales and earnings growth rates (including residual growth rates), the discount rate and the royalty rate. The residual growth rate represents the expected rate at which the Shave Care reporting unit and Gillette brand are expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimates is consistent with the reporting unit and brand operating plans and approximates expected long-term category market growth rates. The residual growth rate depends on overall market growth rates, the competitive environment, inflation, relative currency exchange rates and business activities that impact market share. As a result, the residual growth rate could be adversely impacted by a sustained deceleration in category growth, grooming habit changes, devaluation of currencies against the U.S. dollar or an increased competitive environment. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including
Amounts in millions of dollars unless otherwise specified.


consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other country specific factors, such as further devaluation of currencies against the U.S. dollar. Spot rates as of the fair value measurement date are utilized in our fair value estimates for cash flows outside the U.S. The royalty rate used to determine the estimated fair value for the Gillette indefinite-lived intangible asset is driven by historical and estimated future profitability of the underlying Gillette business. The royalty rate may be impacted by significant adverse changes in long-term operating margins.
While management has implemented strategies to address these events, changes in operating plans or adverse changes in the business or in the macroeconomic environment in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the Shave Care reporting unit's goodwill and indefinite-lived intangibles. The duration and severity of the pandemic could also result in future impairment charges for the Shave Care reporting unit goodwill and the Gillette indefinite-lived intangible asset. While we have concluded that no impairment exists based on our annual testing during the quarter ended December 31, 2021, the Gillette indefinite-lived intangible asset is most susceptible to future impairment risk. Our assessment of the Gillette intangible asset assumes the net sales growth rates will continue to recover from the impact of the COVID-19 pandemic during the current fiscal year. There continues to be a high level of uncertainty relating to how the pandemic will evolve, how governments and consumers will react, progress on the distribution of vaccines and whether the pandemic will have a longer-term effect on consumer habits. Accordingly, there continues to be risk related to this key assumption. A more prolonged pandemic recovery period could impact the assumptions utilized in the determination of the estimated fair values of the Shave Care reporting unit and the Gillette indefinite-lived intangible asset that are significant enough to trigger an impairment. Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our Shave Care products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, or financial hardship, changes in the use and frequency of grooming products, by shifts in demand away from one or more of our higher priced products to lower priced products, or by impacts of potential supply chain constraints. In addition, relative global and country/regional macroeconomic factors could result in additional and prolonged devaluation of other countries’ currencies relative to the U.S. dollar. Finally, the discount rate utilized in our valuation model could be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital. As of December 31, 2021, the carrying values of the Shave Care goodwill and the Gillette indefinite-lived intangible asset were $12.6 billion and $14.1 billion, respectively.
We performed a sensitivity analysis for the Shave Care reporting unit and the Gillette indefinite-lived intangible asset as part of our annual impairment testing during the three months ended December 31, 2021, utilizing reasonably possible changes in the assumptions for the shorter-term and residual growth rates, discount rate and royalty rate to demonstrate the potential impacts to estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25 basis-point increase in the discount rate, a 25 basis-point decrease in our shorter-term and residual growth rates or a 50 basis-point decrease in our royalty rate, some of which would result in an impairment of the Gillette indefinite-lived intangible asset.
Approximate Percent Change in Estimated Fair Value
+25 bps Discount Rate-25 bps Growth Rates-50 bps Royalty Rate
Shave Care goodwill reporting unit(6)%(6)%N/A
Gillette indefinite-lived intangible asset(6)%(6)%(3)%


Amounts in millions of dollars unless otherwise specified.


5. Earnings Per Share
Basic net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble less preferred dividends by the weighted average number of common shares outstanding during the period. Diluted net earnings per common share are calculated by dividing Net earnings attributable to Procter & Gamble by the diluted weighted average number of common shares during the period. The diluted shares include the dilutive effect of stock options and other stock-based awards based on the treasury stock method and the assumed conversion of preferred stock.
Net earnings per share were calculated as follows:
CONSOLIDATED AMOUNTSThree Months Ended December 31Six Months Ended December 31
2021202020212020
Net earnings$4,242 $3,887 $8,368 $8,195 
Less: Net earnings attributable to noncontrolling interests19 33 33 64 
Net earnings attributable to P&G (Diluted)4,223 3,854 8,335 8,131 
Less: Preferred dividends70 66 140 132 
Net earnings attributable to P&G available to common shareholders (Basic)$4,153 $3,788 $8,195 $7,999 
SHARES IN MILLIONS
Basic weighted average common shares outstanding2,413.4 2,475.8 2,420.7 2,481.0 
Add: Effect of dilutive securities
Convertible preferred shares (1)
79.6 83.1 80.1