PG The Procter & Gamble Company 49

Net earnings per common share were calculated as follows: Fiscal years ended June 30####2023####2022####2021 CONSOLIDATED AMOUNTS############ Net earnings##$##14,738##$##14,793##$##14,352 Less: Net earnings attributable to noncontrolling interests####85####51####46 Net earnings attributable to P&G####14,653####14,742####14,306 Less: Preferred dividends####282####281####271 Net earnings attributable to P&G available to common shareholders (Basic)##$##14,371##$##14,461##$##14,035 Net earnings attributable to P&G available to common shareholders (Diluted)##$##14,653##$##14,742##$##14,306 SHARES IN MILLIONS############ Basic weighted average common shares outstanding####2,368.2####2,410.3####2,465.8 Add effect of dilutive securities:############ Stock options and other unvested equity awards (1)####39.4####49.5####52.5 Convertible preferred shares (2)####76.3####79.3####82.7 Diluted weighted average common shares outstanding####2,483.9####2,539.1####2,601.0 NET EARNINGS PER COMMON SHARE (3)############ Basic##$##6.07##$##6.00##$##5.69 Diluted##$##5.90##$##5.81##$##5.50


PG The Procter & Gamble Company 49

(1)Excludes 19 million, 11 million and 9 million in 2023, 2022 and 2021, respectively, of weighted average stock options outstanding because the exercise price of these options was greater than the average market value of the Company's stock or their effect was antidilutive.


PG The Procter & Gamble Company 49

(2)An overview of preferred shares can be found in Note 8.


PG The Procter & Gamble Company 49

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


PG SHARE-BASED COMPENSATION

The 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.


PG SHARE-BASED COMPENSATION

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.


PG SHARE-BASED COMPENSATION

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.


PG SHARE-BASED COMPENSATION

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.


PG SHARE-BASED COMPENSATION

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 96 million shares remain available for grant.


PG SHARE-BASED COMPENSATION

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 Statement of Earnings and includes an estimate of forfeitures, which is based on historical data.


PG SHARE-BASED COMPENSATION

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


PG 50 The Procter & Gamble Company

Total expense and related tax benefit were as follows: Fiscal years ended June 30####2023####2022####2021 Stock options##$##303##$##271##$##279 RSUs and PSUs####242####257####261 Total share-based expense##$##545##$##528##$##540 Income tax benefit##$##103##$##88##$##102


PG 50 The Procter & Gamble Company

We utilize an industry standard lattice-based valuation model to calculate the fair value for stock options granted. Assumptions utilized in the model, which are evaluated and revised to reflect market conditions and experience, were as follows: Fiscal years ended June 30####2023########2022########2021#### Interest rate##3.7##-##4.1##%##0.1##-##1.6##%##0.1##-##0.7##% Weighted average interest rate####3.7####%####1.5####%####0.6####% Dividend yield####2.6####%####2.4####%####2.4####% Expected volatility####21####%####19####%####20####% Expected life in years####8.8########9.1########9.2####


PG 50 The Procter & Gamble Company

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.


PG 50 The Procter & Gamble Company

We utilize a Monte-Carlo simulation model to estimate the fair value of performance stock units granted. Assumptions utilized in the model are not substantially different from those used for stock options.


PG 50 The Procter & Gamble Company

A summary of options outstanding under the plans as of June 30, 2023, and activity during the year then ended is presented below: Options##Options (in thousands)####Weighted Average Exercise Price##Weighted Average Contractual Life in Years####Aggregate Intrinsic Value Outstanding at July 1, 2022##126,715##$##99.59###### Granted##9,672####131.26###### Exercised##(14,667)####81.07###### Forfeited/expired##(515)####128.40###### Outstanding at June 30, 2023##121,205##$##104.18##5.1##$##5,770 Exercisable##86,336##$##90.46##3.9##$##5,291


PG 50 The Procter & Gamble Company

The following table provides additional information on stock options: Fiscal years ended June 30####2023####2022####2021 Weighted average grant-date fair value of options granted##$##29.58##$##21.55##$##20.94 Intrinsic value of options exercised####979####1,886####1,401 Grant-date fair value of options that vested####219####177####236 Cash received from options exercised####1,189####1,930####1,705 Actual tax benefit from options exercised####207####399####292


PG 50 The Procter & Gamble Company

At June 30, 2023, $159 of compensation cost had not yet been recognized related to stock option grants. That cost is expected to be recognized over a remaining weighted average period of 1.6 years.


PG 50 The Procter & Gamble Company


PG The Procter & Gamble Company 51

A summary of non-vested RSUs and PSUs outstanding under the plans as of June 30, 2023, and activity during the year then ended is presented below: ####RSUs######PSUs## RSU and PSU awards##Units (in thousands)####Weighted Average Grant Date Fair Value##Units (in thousands)####Weighted Average Grant Date Fair Value Non-vested at July 1, 2022##2,832##$##130.37##928##$##152.94 Granted##1,727####128.78##569####133.21 Vested##(1,286)####116.89##(453)####152.90 Forfeited##(101)####131.22##(33)####140.68 Non-vested at June 30, 2023##3,172##$##134.94##1,011##$##142.40


PG The Procter & Gamble Company 51

At June 30, 2023, $218 of compensation cost had not yet been recognized related to RSUs and PSUs. That cost is expected to be recognized over a remaining weighted average period of 1.7 years. The total grant date fair value of shares vested was $220, $248 and $266 in 2023, 2022 and 2021, respectively.


PG The Procter & Gamble Company 51

The Company settles equity issuances with treasury shares. 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.


PG POSTRETIREMENT BENEFITS AND EMPLOYEE STOCK OWNERSHIP PLAN

We offer various postretirement benefits to our employees.


PG 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 $392, $366 and $340 in 2023, 2022 and 2021, 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 13% of total participants' annual wages and salaries in 2023 and 14% in 2022 and 2021.


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.


PG Defined Benefit Retirement Plans and Other Retiree Benefits

We offer defined benefit retirement pension plans to certain employees. These benefits relate primarily to 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 benefits for the majority of our U.S. employees who become eligible for these benefits when they meet minimum age and service requirements. The plans require cost sharing with retirees and the benefits are funded by ESOP Series B shares and certain other assets contributed by the Company.


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


PG 52 The Procter & Gamble 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)#### Fiscal years ended June 30####2023######2022####2023######2022 CHANGE IN BENEFIT OBLIGATION#################### Benefit obligation at beginning of year (3)##$##12,608####$##18,469##$##3,070####$##4,206 Service cost####173######253####71######86 Interest cost####430######253####142######99 Participants' contributions####13######14####50######67 Amendments (4)####8######5####—######(586) Net actuarial loss/(gain)####(550)######(4,067)####(208)######(586) Special termination benefits####5######4####4######1 Currency translation and other####363######(1,720)####31######51 Benefit payments####(551)######(603)####(227)######(268) BENEFIT OBLIGATION AT END OF YEAR (3)##$##12,499####$##12,608##$##2,933####$##3,070 CHANGE IN PLAN ASSETS################ Fair value of plan assets at beginning of year##$##10,173##$##13,041##$##6,889##$##6,444 Actual return on plan assets####37####(1,233)####482####526 Employer contributions####392####222####42####37 Participants' contributions####13####14####50####67 Currency translation and other####310####(1,268)####1####1 ESOP debt impacts (5)####—####—####87####82 Benefit payments####(551)####(603)####(227)####(268) FAIR VALUE OF PLAN ASSETS AT END OF YEAR##$##10,374##$##10,173##$##7,324##$##6,889 FUNDED STATUS##$##(2,125)##$##(2,435)##$##4,391##$##3,819


PG 52 The Procter & Gamble Company

(1)Primarily non-U.S.-based defined benefit retirement plans.


PG 52 The Procter & Gamble Company

(2)Primarily U.S.-based other postretirement benefit plans.


PG 52 The Procter & Gamble Company

(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.


PG 52 The Procter & Gamble Company

(4)For the other retiree benefits, the amendment primarily relates to adjustments in the self-insured U.S. retiree health care program to utilize fully-insured Medicare Advantage Programs impacting fiscal year 2022.


PG 52 The Procter & Gamble Company

(5)Represents the net impact of ESOP debt service requirements, which is netted against plan assets for other retiree benefits.


PG 52 The Procter & Gamble Company

The actuarial gain for pension plans in 2023 was primarily related to increases in discount rates, offset by inflation-related pension benefit increases. The actuarial gain for other retiree benefits in 2023 was primarily related to increases in discount rates and a decrease in assumptions for medical claims costs. The actuarial gain for pension plans in 2022 was primarily related to increases in discount rates. The actuarial gain for other retiree benefits in 2022 was primarily related to increases in discount rates, partially offset by unfavorable medical claim experience.


PG 52 The Procter & Gamble Company

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#### As of June 30####2023######2022####2023######2022 CLASSIFICATION OF NET AMOUNT RECOGNIZED#################### Noncurrent assets##$##1,085####$##765##$##5,119####$##4,525 Current liabilities####(94)######(61)####(38)######(34) Noncurrent liabilities####(3,116)######(3,139)####(690)######(672) NET AMOUNT RECOGNIZED##$##(2,125)####$##(2,435)##$##4,391####$##3,819 ########AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE (INCOME)/LOSS (AOCI)############ Net actuarial loss/(gain)##$##1,818####$##1,906##$##(1,160)####$##(1,093) Prior service cost/(credit)####156######170####(787)######(907) NET AMOUNTS RECOGNIZED IN AOCI##$##1,974####$##2,076##$##(1,947)####$##(2,000)


PG 52 The Procter & Gamble Company


PG The Procter & Gamble Company 53

The accumulated benefit obligation for all defined benefit pension plans, which differs from the projected obligation in that it excludes the assumption of future salary increases, was $11.8 billion and $11.9 billion as of June 30, 2023 and 2022, respectively. Information related to the funded status of selected pension and other retiree benefits at June 30 is as follows: As of June 30####2023######2022 ######PENSION PLANS WITH A PROJECTED BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS#### Projected benefit obligation##$##7,967####$##7,989 Fair value of plan assets####4,758######4,789 ######PENSION PLANS WITH AN ACCUMULATED BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS#### Accumulated benefit obligation##$##7,442####$##7,191 Fair value of plan assets####4,677######4,433 ######OTHER RETIREE BENEFIT PLANS WITH AN ACCUMULATED BENEFIT OBLIGATION IN EXCESS OF PLAN ASSETS#### Accumulated benefit obligation##$##818####$##808 Fair value of plan assets####89######102


PG The Procter & Gamble Company 53

Net Periodic Benefit Cost. Components of the net periodic benefit cost were as follows: ########Pension Benefits##############Other Retiree Benefits#### Fiscal years ended June 30####2023####2022####2021######2023####2022####2021 ##############AMOUNTS RECOGNIZED IN NET PERIODIC BENEFIT COST/(CREDIT)############ Service cost##$##173##$##253##$##275####$##71##$##86##$##94 Interest cost####430####253####240######142####99####114 Expected return on plan assets####(591)####(684)####(783)######(611)####(564)####(508) Amortization of net actuarial loss/(gain)####133####337####423######(7)####11####47 Amortization of prior service cost/(credit)####26####28####25######(125)####(107)####(60) Amortization of net actuarial loss/(gain) due to settlements####—####(5)####5######—####—####— Special termination benefits####5####4####17######4####1####2 GROSS BENEFIT COST/(CREDIT)####176####186####202######(526)####(474)####(311) Dividends on ESOP preferred stock####—####—####—######—####—####(8) NET PERIODIC BENEFIT COST/(CREDIT)##$##176##$##186##$##202####$##(526)##$##(474)##$##(319) ##############CHANGE IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN AOCI############ Net actuarial loss/(gain) - current year##$##4##$##(2,150)########$##(79)##$##(548)#### Prior service cost/(credit) - current year####8####5##########—####(586)#### Amortization of net actuarial loss/(gain)####(133)####(337)##########7####(11)#### Amortization of prior service (cost)/credit####(26)####(28)##########125####107#### Amortization of net actuarial loss/(gain) due to settlements####—####5##########—####—#### Currency translation and other####45####(486)##########—####13#### TOTAL CHANGE IN AOCI####(102)####(2,991)##########53####(1,025)#### NET AMOUNTS RECOGNIZED IN PERIODIC BENEFIT COST/(CREDIT) AND AOCI##$##74##$##(2,805)########$##(473)##$##(1,499)####


PG The Procter & Gamble Company 53

The service cost component of the net periodic benefit cost is included in the Consolidated Statements of Earnings in Cost of products sold and SG&A. All other components are included in the Consolidated Statements of Earnings in Other non-operating income/(expense), net, unless otherwise noted.


PG The Procter & Gamble Company 53


PG 54 The Procter & Gamble Company

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, 2023 and 2022, were as follows: (1) ######Pension Benefits##########Other Retiree Benefits#### As of June 30##2023######2022####2023######2022## Discount rate##4.2##%####3.7##%##5.6##%####5.0##% Rate of compensation increase##2.9##%####2.8##%##N/A######N/A## Interest crediting rate for cash balance plans##4.3##%####4.3##%##N/A######N/A## Health care cost trend rates assumed for next year##N/A######N/A####6.1##%####6.4##% Rate to which the health care cost trend rate is assumed to decline (ultimate trend rate)##N/A######N/A####4.5##%####4.5##% Year that the rate reaches the ultimate trend rate##N/A######N/A####2028######2028##


PG 54 The Procter & Gamble Company

(1)Determined as of end of fiscal year.


PG 54 The Procter & Gamble Company

The weighted average assumptions used to determine net benefit cost recorded on the Consolidated Statement of Earnings for the fiscal years ended June 30 were as follows: (1) ######Pension Benefits############Other Retiree Benefits###### Fiscal years ended June 30##2023####2022####2021####2023####2022####2021## Discount rate##3.7##%##1.7##%##1.5##%##5.0##%##3.2##%##3.1##% Expected return on plan assets##5.9##%##5.5##%##6.5##%##8.4##%##8.4##%##8.4##% Rate of compensation increase##2.8##%##2.7##%##2.5##%##N/A####N/A####N/A## Interest crediting rate for cash balance plans##4.3##%##4.4##%##4.4##%##N/A####N/A####N/A##


PG 54 The Procter & Gamble Company

(1)Determined as of beginning of fiscal year.


PG 54 The Procter & Gamble Company

For plans that make up the majority of our obligation, the Company calculates the benefit obligation and the related impacts on service and interest costs using specific spot rates along the corporate bond yield curve. For the remaining plans, the Company determines these amounts utilizing a single weighted average discount rate derived from the corporate bond yield curve used to measure the plan obligations.


PG 54 The Procter & Gamble Company

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 3 - 5% 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.


PG 54 The Procter & Gamble Company

Plan Assets. Our investment objective for defined benefit retirement plan assets is to meet the plans' benefit obligations and to improve plan self-sufficiency for future benefit obligations. 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 assessing different investment risks and matching the actuarial projections of the plans' future liabilities and benefit payments with current as well as 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.


PG 54 The Procter & Gamble Company

Our target asset allocation for the fiscal year ended June 30, 2023, and actual asset allocation by asset category as of June 30, 2023 and 2022, were as follows: ######Target Asset Allocation################Actual Asset Allocation at June 30########## ##Pension Benefits######Other Retiree Benefits########Pension Benefits############Other Retiree Benefits#### Asset Category############2023######2022######2023######2022## Cash##1##%####2##%##1##%####1##%####2##%####2##% Debt securities##59##%####—##%##60##%####58##%####1##%####1##% Equity securities##40##%####98##%##39##%####41##%####97##%####97##% TOTAL##100##%####100##%##100##%####100##%####100##%####100##%


PG 54 The Procter & Gamble Company

The following table sets forth the fair value of the Company's plan assets as of June 30, 2023 and 2022, segregated by level within the fair value hierarchy (refer to Note 9 for further discussion on the fair value hierarchy and fair value principles).


PG 54 The Procter & Gamble Company

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


PG The Procter & Gamble Company 55

Investments valued using net asset value as a practical expedient are not valued using the fair value hierarchy, but rather 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. ######Pension Benefits##########Other Retiree Benefits#### As of June 30##Fair Value Hierarchy Level####2023####2022##Fair Value Hierarchy Level####2023####2022 ASSETS AT FAIR VALUE#################### Cash and cash equivalents##1##$##54##$##78##1##$##148##$##130 Company common stock######—####—##1####368####319 Company preferred stock (1)######—####—##2####6,721####6,340 Fixed income securities (2)##2####1,190####1,545######—####— Insurance contracts (3)##3####93####94######—####— TOTAL ASSETS IN THE FAIR VALUE HIERARCHY######1,337####1,717######7,237####6,789 Investments valued at net asset value (4)######9,037####8,456######87####100 TOTAL ASSETS AT FAIR VALUE####$##10,374####10,173####$##7,324####6,889


PG The Procter & Gamble Company 55

(1)Company preferred stock is valued based on the value of Company common stock and is presented net of ESOP debt discussed below.


PG The Procter & Gamble Company 55

(2)Fixed income securities are estimated by using pricing models or quoted prices of securities with similar characteristics.


PG The Procter & Gamble Company 55

(3)Fair values of insurance contracts are valued based on either their cash equivalent value 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. The activity for Level 3 assets is not significant for all years presented.


PG The Procter & Gamble Company 55

(4)Investments valued using net asset value as a practical expedient are primarily equity and fixed income collective funds.


PG The Procter & Gamble Company 55

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 fiscal year ending June 30, 2024, is $206 and $52, respectively. 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.


PG The Procter & Gamble Company 55

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: Fiscal years ending June 30####Pension Benefits####Other Retiree Benefits ##EXPECTED BENEFIT PAYMENTS###### 2024##$##648##$##179 2025####633####186 2026####632####189 2027####652####196 2028####704####202 2029 - 2033####3,800####1,102


PG Employee Stock Ownership Plan

We maintain the ESOP to provide funding for certain employee benefits discussed in the preceding paragraphs.


PG Employee Stock Ownership Plan

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 $8 remain outstanding at June 30, 2023. 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 $3.68 per share. The liquidation value is $6.82 per share.


PG Employee Stock Ownership Plan

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. The original borrowings of $1.0 billion were repaid in 2021. Debt service requirements were funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $814 are outstanding at June 30, 2023. 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 $3.68 per share. The liquidation value is $12.96 per share.


PG Employee Stock Ownership Plan


PG 56 The Procter & Gamble Company

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 was guaranteed by the Company, was recorded as debt 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 was recorded as Interest expense. Dividends on all preferred shares are charged to Retained earnings.


PG 56 The Procter & Gamble Company

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 thousands##2023##2022##2021 Allocated##24,449##25,901##27,759 Unallocated##535##1,123##1,769 TOTAL SERIES A##24,984##27,024##29,528 Allocated##32,172##30,719##29,203 Unallocated##17,867##20,120##22,349 TOTAL SERIES B##50,039##50,839##51,552


PG 56 The Procter & Gamble Company

For purposes of calculating diluted net earnings per common share, the preferred shares held by the ESOP are considered converted from inception.


PG 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.


If the Company elects to do so and if the instrument meets certain specified accounting criteria, management designates derivative instruments as cash flow hedges, fair value hedges or net investment hedges. We record derivative instruments at fair value and the accounting for changes in the fair value depends on the intended use of the derivative, the resulting designation and the effectiveness of the instrument in offsetting the risk exposure it is designed to hedge. We generally have a high degree of effectiveness between the exposure being hedged and the hedging instrument.


PG Credit Risk Management

We have counterparty credit guidelines and normally enter into transactions with investment grade financial 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.


PG Credit Risk Management

Substantially 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 arrangements. The aggregate fair value of the instruments covered by these contractual features that are in a net liability position was $1,088 and $219 as of June 30, 2023 and 2022, respectively. The Company has not been required to post collateral as a result of these contractual features.


PG 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.


PG Interest Rate Risk Management

We designate certain interest rate swaps on fixed rate debt that meet specific accounting criteria as fair value 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 earnings.


PG 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. We leverage the Company’s diversified portfolio of exposures as a natural hedge. In certain cases, we enter into non-qualifying foreign currency contracts to hedge certain balance sheet items subject to revaluation. The change in fair value of these instruments and the underlying exposure are both immediately recognized in earnings.


PG Foreign Currency Risk Management

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


PG The Procter & Gamble Company 57

To manage exchange rate risk related to our intercompany financing, we primarily use forward contracts and currency swaps. The change in fair value of these non-qualifying instruments is immediately recognized in earnings, substantially offsetting the foreign currency mark-to-market impact of the related exposure.


PG 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. The time value component of the net investment hedge currency swaps is excluded from the assessment of hedge effectiveness. Changes in the fair value of the swap, including changes in the fair value of the excluded time value component, are recognized in OCI and offset the value of the net investment being hedged. The time value component is subsequently reported in income on a systematic basis.


PG 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. As of and during the fiscal years ended June 30, 2023 and 2022, we did not have any financial commodity hedging activity.


PG 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.


PG 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.


PG Fair Value Hierarchy

The Company had no significant activity with Level 3 assets and liabilities during the periods presented. 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.


PG Fair Value Hierarchy

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 using market-based observable inputs including credit risk, interest rate curves 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.


PG Assets and Liabilities Measured at Fair Value

Cash equivalents were $6.8 billion and $6.0 billion as of June 30, 2023 and 2022, respectively, and are classified as Level 1 within the fair value hierarchy. The Company had no other material investments in debt or equity securities during the periods presented.


The fair value of long-term debt was $26.9 billion and $25.7 billion as of June 30, 2023 and 2022, respectively. This includes the current portion of long-term debt instruments ($3.9 billion as of June 30, 2023, and $3.6 billion as of June 30, 2022). Certain long-term debt (debt designated as a fair value hedge) is recorded at fair value. All other long-term debt is recorded at amortized cost but is measured at fair value for disclosure purposes. We consider our debt to be Level 2 in the fair value hierarchy. Fair values are generally estimated based on quoted market prices for identical or similar instruments.


PG Disclosures about Financial Instruments

The notional amounts and fair values of financial instruments used in hedging transactions as of June 30, 2023 and 2022, are as follows: ######Notional Amount##########Fair Value Asset##########Fair Value (Liability)#### As of June 30####2023######2022####2023######2022####2023######2022 ########DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS###################### Interest rate contracts##$##4,044####$##4,972##$##—####$##3##$##(445)####$##(307) ########DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS###################### Foreign currency interest rate contracts##$##11,005####$##7,943##$##26####$##561##$##(631)####$##(1) TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS##$##15,049####$##12,915##$##26####$##564##$##(1,076)####$##(308) ########DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS###################### Foreign currency contracts##$##3,489####$##5,625##$##7####$##6##$##(42)####$##(61) TOTAL DERIVATIVES AT FAIR VALUE##$##18,538####$##18,540##$##33####$##570##$##(1,118)####$##(369)


The fair value of the interest rate derivative asset/liability directly offsets the cumulative amount of the fair value hedging adjustment included in the carrying amount of the underlying debt obligation. The carrying amount of the underlying debt obligation, which includes the unamortized discount or premium and the fair value adjustment, was $3.6 billion and $4.7 billion as of June 30, 2023 and 2022, respectively. In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The carrying value of those debt instruments designated as net investment hedges, which includes the adjustment for the foreign currency transaction gain or loss on those instruments, was $11.8 billion and $11.2 billion as of June 30, 2023 and 2022, respectively. The increase in the notional balance of derivative instruments designated as net investment hedges is primarily driven by the Company’s decision to leverage favorable interest rate spreads in the foreign currency swap market. The decrease in the notional balance of foreign currency contracts not designated as hedging instruments reflects changes in the level of intercompany financing activity during the period.


Derivative assets are presented in Prepaid expenses and other current assets or Other noncurrent assets. Derivative liabilities are presented in Accrued and other liabilities or Other noncurrent liabilities. Changes in the fair value of net investment hedges are recognized in the Foreign currency translation component of Other comprehensive income (OCI). All of the Company's derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy.


Before tax gains/(losses) on our financial instruments in hedging relationships are categorized as follows: ########Amount of Gain/(Loss) Recognized in OCI on Derivatives#### Fiscal years ended June 30####2023########2022 ######DERIVATIVES IN NET INVESTMENT HEDGING RELATIONSHIPS (1) (2)###### Foreign currency interest rate contracts##$##(544)######$##1,033


(1)For the derivatives in net investment hedging relationships, the amount of gain excluded from effectiveness testing, which was recognized in earnings, was $238 and $73 for the fiscal years ended June 30, 2023 and 2022, respectively.


(2)In addition to the foreign currency derivative contracts designated as net investment hedges, certain of our foreign currency denominated debt instruments are designated as net investment hedges. The amount of gain/(loss) recognized in AOCI for such instruments was $(315) and $1,639, for the fiscal years ended June 30, 2023 and 2022, respectively. ########Amount of Gain/(Loss) Recognized in Earnings#### Fiscal years ended June 30####2023########2022 ######DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS###### Interest rate contracts##$##(141)######$##(450) ######DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS###### Foreign currency contracts##$##(97)######$##(149)


The loss on the derivatives in fair value hedging relationships is fully offset by the mark-to-market impact of the related exposure. These are both recognized in the Consolidated Statement of Earnings in Interest Expense. The loss on derivatives not designated as hedging instruments is substantially offset by the currency mark-to-market of the related exposure. These are both recognized in the Consolidated Statements of Earnings in SG&A.


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


PG SHORT-TERM AND LONG-TERM DEBT

As of June 30####2023########2022## ########DEBT DUE WITHIN ONE YEAR###### Current portion of long-term debt##$####3,951####$####3,647 Commercial paper####6,236########4,805## Other####42########193## TOTAL##$####10,229####$####8,645 Weighted average interest rate of debt due within one year (1)####4.2##%######0.8##%


PG SHORT-TERM AND LONG-TERM DEBT

(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 30####2023######2022## LONG-TERM DEBT############ 3.10% USD note due August 2023##$####1,000##$####1,000 1.13% EUR note due November 2023####1,359######1,306## 0.50% EUR note due October 2024####544######523## 0.63% EUR note due October 2024####870######836## 0.55% USD note due October 2025####1,000######1,000## 4.10% USD note due January 2026####650######—## 2.70% USD note due February 2026####600######600## 1.00% USD note due April 2026####1,000######1,000## 3.25% EUR note due August 2026####707######—## 2.45% USD note due November 2026####875######875## 1.90% USD note due February 2027####1,000######1,000## 2.80% USD note due March 2027####500######500## 4.88% EUR note due May 2027####1,087######1,045## 2.85% USD note due August 2027####750######750## 3.95% USD note due January 2028####600######—## 1.20% EUR note due October 2028####870######836## 1.25% EUR note due October 2029####544######523## 3.00% USD note due March 2030####1,500######1,500## 0.35% EUR note due May 2030####544######523## 1.20% USD note due October 2030####1,250######1,250## 1.95% USD note due April 2031####1,000######1,000## 3.25% EUR note due August 2031####707######—## 2.30% USD note due February 2032####850######850## 4.05% USD note due January 2033####850######—## 5.55% USD note due March 2037####716######716## 1.88% EUR note due October 2038####544######523## 3.55% USD note due March 2040####516######516## 0.90% EUR note due November 2041####652######627## All other long-term debt####5,244######7,196## Current portion of long-term debt####(3,951)######(3,647)## TOTAL##$####24,378##$####22,848 Weighted average interest rate of long-term debt (1)####2.9%######2.2%##


PG SHORT-TERM AND LONG-TERM DEBT

(1)Weighted average interest rate of long-term debt includes the effects of interest rate swaps discussed in Note 9.


PG SHORT-TERM AND LONG-TERM DEBT


PG 60 The Procter & Gamble Company

Long-term debt maturities during the next five fiscal years are as follows: Fiscal years ending June 30##2024##2025##2026##2027##2028 Debt maturities##$3,951##$1,954##$3,364##$4,368##$1,380


PG ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The table below presents the changes in Accumulated other comprehensive income/(loss) attributable to Procter & Gamble (AOCI), including the reclassifications out of AOCI by component: ##########Changes in Accumulated Other Comprehensive Income/(Loss) by Component######## ####Investment Securities####Post-retirement Benefit Plans######Foreign Currency Translation####Total AOCI BALANCE at JUNE 30, 2021##$##15##$##(2,963)####$##(10,796)##$##(13,744) OCI before reclassifications (1)####4####2,797######(1,451)####1,350 Amounts reclassified to the Consolidated Statement of Earnings (2)####1####195######1####197 Net current period OCI####5####2,992######(1,450)####1,547 Less: OCI attributable to non-controlling interests####—####2######(10)####(8) BALANCE at JUNE 30, 2022####20####27######(12,236)####(12,189) OCI before reclassifications (3)####(7)####21######(71)####(57) Amounts reclassified to the Consolidated Statement of Earnings (4)####—####19######—####19 Net current period OCI####(7)####40######(71)####(38) Less: OCI attributable to non-controlling interests####—####—######(7)####(7) BALANCE at JUNE 30, 2023##$##13##$##67####$##(12,300)##$##(12,220)


(1)Net of tax (benefit)/expense of $1, $953 and $515 for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively, for the period ended June 30, 2022. Income tax effects within foreign currency translation include impacts from items such as net investment hedge transactions.


(2)Net of tax (benefit)/expense of $0, $69 and $0 for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively, for the period ended June 30, 2022.


(3)Net of tax (benefit)/expense of $(2), $1 and $(197) for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively, for the period ended June 30, 2023. Income tax effects within foreign currency translation include impacts from items such as net investment hedge transactions.


(4)Net of tax (benefit)/expense of $0, $8 and $0 for gains/losses on investment securities, postretirement benefit plans and foreign currency translation, respectively, for the period ended June 30, 2023.


The below provides additional details on amounts reclassified from AOCI into the Consolidated Statement of Earnings: •Investment securities: amounts reclassified from AOCI into Other non-operating income, net. •Postretirement benefit plans: amounts reclassified from AOCI into Other non-operating income, net and included in the computation of net periodic postretirement costs (see Note 8).


PG LEASES

The 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.


PG LEASES


PG The Procter & Gamble Company 61

The components of the Company’s total operating lease cost for the fiscal years ended June 30, 2023, 2022 and 2021, were as follows: Fiscal years ended June 30####2023####2022####2021 Operating lease cost##$##229##$##220##$##245 Variable lease cost (1)####79####89####75 Total lease cost##$##308##$##309##$##320


PG The Procter & Gamble Company 61

(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.


PG The Procter & Gamble Company 61

Supplemental balance sheet and other information related to leases is as follows: As of June 30####2023########2022## Operating leases:############## Right-of-use assets (Other noncurrent assets)##$####781####$####760 Current lease liabilities (Accrued and other liabilities)####222########205## Noncurrent lease liabilities (Other noncurrent liabilities)####595########595## Total operating lease liabilities##$####817####$####800 ########Weighted average remaining lease term:###### Operating leases####6.2 years########6.4 years## ########Weighted average discount rate:###### Operating leases####3.5##%######3.2##%


PG The Procter & Gamble Company 61

At June 30, 2023, future payments of operating lease liabilities were as follows: ####Operating Leases ####June 30, 2023 1 year##$##222 2 years####185 3 years####137 4 years####100 5 years####71 Over 5 years####196 Total lease payments####911 Less: Interest####(94) Present value of lease liabilities##$##817


PG The Procter & Gamble Company 61

Total cash paid for amounts included in the measurement of lease liabilities was $233 and $228 for the fiscal years ended June 30, 2023 and 2022, respectively.


PG The Procter & Gamble Company 61

The right-of-use assets obtained in exchange for lease liabilities were $213 and $217 for the fiscal years ended June 30, 2023 and 2022, respectively.


PG 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. 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.


PG Guarantees

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


PG 62 The Procter & Gamble Company

In certain situations, we guarantee loans for suppliers and customers. The total amount of guarantees issued under such arrangements is not material.


PG 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.


PG Purchase Commitments

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: Fiscal years ending June 30####2024####2025####2026####2027####2028####Thereafter Purchase obligations##$##1,169##$##597##$##379##$##314##$##168##$##362


PG Purchase Commitments

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.


PG Litigation

We 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. 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.


PG Litigation

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 materially affect our financial position, results of operations or cash flows.


PG Litigation

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


PG Litigation

Not applicable.


PG Controls and Procedures

Evaluation of Disclosure Controls and Procedures.


PG Controls and Procedures

The Company's Chairman of the Board, President and Chief Executive Officer, Jon R. Moeller, and the Company's Chief Financial Officer, Andre Schulten, 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.


PG Controls and Procedures

Messrs. Moeller and Schulten 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. Moeller and Schulten, to allow their timely decisions regarding required disclosure.


PG Controls and Procedures

Reports on Internal Control over Financial Reporting.


PG Controls and Procedures

The information required by this item is incorporated by reference to "Management's Report on Internal Control over Financial Reporting" and "Report of Independent Registered Public Accounting Firm" included in Item 8 of this Form 10-K.


PG Controls and Procedures

Changes in Internal Control over Financial Reporting.


PG Controls and Procedures

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.


PG Other Information

Not applicable.


PG Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.


PG 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 Ms. Christine M. McCarthy.


The information required by this item is incorporated by reference to the following sections of the 2023 Proxy Statement filed pursuant to Regulation 14A, which will be filed no later than 120 days after June 30, 2023: the section entitled Election of Directors; the subsection of the Corporate Governance section entitled Board Meetings and Committees of the Board; the subsection of the Corporate Governance section entitled Code of Ethics; and the subsection of the Other Matters section entitled Shareholder Recommendations or Nominations of Director Candidates. Pursuant to the Instruction to Item 401 of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.


PG Executive Compensation

The information required by this item is incorporated by reference to the following sections of the 2023 Proxy Statement filed pursuant to Regulation 14A, which will be filed no later than 120 days after June 30, 2023: the subsections of the Corporate Governance section entitled Board Meetings and Committees of the Board, Compensation Committee Interlocks and Insider Participation, and Risk Oversight - Compensation-Related Risk; and the portion beginning with the section entitled Director Compensation up to but not including the section entitled Pay Versus Performance.


PG Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


PG Executive Compensation

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, 2023. The table includes the following plans: The Procter & Gamble 1992 Stock Plan; The Procter & Gamble 2001 Stock and Incentive Compensation Plan; The Procter & Gamble 2003 Non-Employee Directors' Stock Plan; The Procter & Gamble 2009 Stock and Incentive Compensation Plan; The Procter & Gamble 2014 Stock and Incentive Compensation Plan; and The Procter & Gamble 2019 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######## Stock Options/Stock Appreciation Rights##121,226,313##$104.1900####(1) Restricted Stock Units (RSUs)/Performance Stock Units (PSUs)##6,430,184##N/A####(1) TOTAL##127,656,497##$104.1900##(2)##


PG Executive Compensation

(1)Of the plans listed above, only The Procter & Gamble 2019 Stock and Incentive Compensation Plan (the “2019 Plan”) allows for future grants of securities. The maximum number of shares that may be granted under this plan is 187 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) are counted as five shares for each share awarded. Total shares available for future issuance under this plan is 96 million.


PG Executive Compensation

(2)Weighted average exercise price of outstanding options only.


PG Executive Compensation

Additional information required by this item is incorporated by reference to the following section of the 2023 Proxy Statement filed pursuant to Regulation 14A, which will be filed no later than 120 days after June 30, 2023: the subsection of the Beneficial Ownership section entitled Security Ownership of Management and Certain Beneficial Owners.


PG Certain Relationships and Related Transactions and Director Independence

The information required by this item is incorporated by reference to the following sections of the 2023 Proxy Statement filed pursuant to Regulation 14A, which will be filed no later than 120 days after June 30, 2023: the subsections of the Corporate Governance section entitled Director Independence and Review and Approval of Transactions with Related Persons.


PG Principal Accountant Fees and Services

The information required by this item is incorporated by reference to the following section of the 2023 Proxy Statement filed pursuant to Regulation 14A, which will be filed no later than 120 days after June 30, 2023: Report of the Audit Committee, which ends with the subsection entitled Services Provided by Deloitte.


PG Exhibits and Financial Statement Schedules

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 (PCAOB Firm ID is 34) •Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements •Consolidated Statements of Earnings - for fiscal years ended June 30, 2023, 2022 and 2021 •Consolidated Statements of Comprehensive Income - for fiscal years ended June 30, 2023, 2022 and 2021 •Consolidated Balance Sheets - as of June 30, 2023 and 2022 •Consolidated Statements of Shareholders' Equity - for fiscal years ended June 30, 2023, 2022 and 2021 •Consolidated Statements of Cash Flows - for fiscal years ended June 30, 2023, 2022 and 2021 •Notes to Consolidated Financial Statements


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.


PG EXHIBITS

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) (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016). (3-2) -##Regulations (as approved by the Board of Directors on December 13, 2022, 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 Current Report on Form 8-K filed December 13, 2022). 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). (4-2) -##The Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any other instrument defining the rights of holders of the Company’s long-term debt. (4-3) -##Description of the Company’s Common Stock (Incorporated by reference to Exhibit (4-3) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). (4-4) -##Description of the Company’s 0.625% Notes due 2024, 1.200% Notes due 2028, and 1.875% Notes due 2038 (Incorporated by reference to Exhibit (4-4) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). (4-5) -##Description of the Company’s 4.875% EUR notes due May 2027, 6.250% GBP notes due January 2030, and 5.250% GBP notes due January 2033 (Incorporated by reference to Exhibit (4-5) of the Company’s Annual report on Form 10-K for the year ended June 30, 2021). (4-6) -##Description of the Company’s 0.500% Notes due 2024 and 1.250% Notes due 2029 (Incorporated by reference to Exhibit (4-6) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). (4-7) -##Description of the Company’s 1.375% Notes due 2025 and 1.800% Notes due 2029 (Incorporated by reference to Exhibit (4-7) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). (4-8) -##Description of the Company’s 1.125% Notes due 2023 (Incorporated by reference to Exhibit (4-8) of the Company’s Annual report on Form 10-K for the year ended June 30, 2019). (4-9) -##Description of the Company's 0.350% EUR Notes due 2030 and 0.900% EUR Notes due 2041 (Incorporated by reference to Exhibit (4-10) of the Company's Annual Report on Form 10-K for the year ended June 30, 2022). (4-10) -##Description of the Company's 0.110% Yen Notes due 2026 and 0.230% Yen Notes due 2031 (Incorporated by reference to Exhibit (4-11) of the Company's Annual Report on Form 10-K for the year ended June 30, 2022). (4-11) -##Description of the Company's 3.250% Notes due 2026 and 3.250% Notes due 2031.+


PG The Procter & Gamble Company 65

Exhibit (10-1) -##The Procter & Gamble 2001 Stock and Incentive Compensation Plan (as amended), 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 Annual Report on Form 10-K for the year ended June 30, 2018).* (10-2) -##The Procter & Gamble 2001 Stock and Incentive Compensation Plan 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).* (10-3) -##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, 2018).* (10-4) -##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, 2018).* (10-5) -##Summary of the Company’s Retirement Plan Restoration Program (Incorporated by reference to Exhibit (10-5) of the Company's Form 10-Q for the quarter ended December 31, 2019).* (10-6) -##Retirement Plan Restoration Program - Related Correspondence and Terms and Conditions. * + (10-7) -##Summary of the Company’s Long-Term Incentive Program (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30, 2020).* (10-8) -##Long-Term Incentive Program related correspondence and terms and conditions (Incorporated by reference to Exhibit (10-3) of the Company's Form 10-Q for the quarter ended September 30, 2021).* (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 March 31, 2020).* (10-10) -##Summary of the Company's Short Term Achievement Reward Program (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2022).* (10-11) -##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, 2021).* (10-12) -##Company's Form of Separation Agreement & Release (Incorporated by reference to Exhibit (10-12) of the Company's Annual Report on Form 10-K for the year ended June 30, 2022).* (10-13) -##Company's Form of Separation Letter and Release (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended March 31, 2023).* (10-14) -##Summary of personal benefits available to certain officers and non-employee directors (Incorporated by reference to Exhibit (10-5) of the Company's Form 10-Q for the quarter ended September 30, 2021).* (10-15) -##The Gillette Company Deferred Compensation Plan (Incorporated by reference to Exhibit (10-18) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2017).* (10-16) -##Senior Executive Recoupment Policy (Incorporated by reference to Exhibit (10-19) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).* (10-17) -##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 (10-20) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017).* (10-18) -##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 (10-21) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017).* (10-19) -##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 (10-21) of the Company’s Annual Report on Form 10-K for the year ended June 30, 2018).* (10-20) -##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).* (10-21) -##The Procter & Gamble Performance Stock Program Summary (Incorporated by reference to Exhibit (10-5) of the Company's Form 10-Q for the quarter ended September 30, 2020).* (10-22) -##Performance Stock Program 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, 2021).* (10-23) -##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). *


PG 66 The Procter & Gamble Company

(10-24) -##The Procter & Gamble 2014 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 14, 2014 (Incorporated by reference to Exhibit (10-25) of the Company's Annual Report on Form 10-K for the year ended June 30, 2016).* (10-25) -##Regulations of the Compensation and Leadership Development Committee for The Procter & Gamble 2019 Stock and Incentive Compensation Plan and The Procter & Gamble 2014 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit (10-1) of the Company's Form 10-Q for the quarter ended December 31, 2019).* (10-26) -##The Procter & Gamble 2014 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-26) of the Company's Annual Report on Form 10-K for the year ended June 30, 2017).* (10-27) -##The Procter & Gamble 2019 Stock and Incentive Compensation Plan, which was originally adopted by shareholders at the annual meeting on October 8, 2019 (Incorporated by reference to Exhibit (10-1) of the Company’s Current Report on Form 8-K filed October 11, 2019).* (10-28) -##The Procter & Gamble 2019 Stock and Incentive Compensation Plan - Additional terms and conditions (Incorporated by reference to Exhibit (10-28) of the Company's Annual Report on Form 10-K for the year ended June 30, 2021).* 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)##Inline XBRL Instance Document 101.SCH (1)##Inline XBRL Taxonomy Extension Schema Document 101.CAL (1)##Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF (1)##Inline XBRL Taxonomy Definition Linkbase Document 101.LAB (1)##Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE (1)##Inline XBRL Taxonomy Extension Presentation Linkbase Document 104##Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) (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.


PG Form 10-K Summary

Not applicable.


PG 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/ JON R. MOELLER ####(Jon R. Moeller) Chairman of the Board, President and Chief Executive Officer ####August 04, 2023


PG SIGNATURES

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. Signature##Title##Date /s/ JON R. MOELLER (Jon R. Moeller)##Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)##August 04, 2023 /s/ ANDRE SCHULTEN (Andre Schulten)##Chief Financial Officer (Principal Financial Officer)##August 04, 2023 /s/ MATTHEW W. JANZARUK (Matthew W. Janzaruk)##Senior Vice President - Chief Accounting Officer (Principal Accounting Officer)##August 04, 2023 /s/ B. MARC ALLEN (B. Marc Allen)##Director##August 04, 2023 /s/ SHEILA BONINI (Sheila Bonini)##Director##August 04, 2023 /s/ ANGELA F. BRALY (Angela F. Braly)##Director##August 04, 2023 /s/ AMY L. CHANG (Amy L. Chang)##Director##August 04, 2023 /s/ JOSEPH JIMENEZ (Joseph Jimenez)##Director##August 04, 2023 /s/ CHRISTOPHER J. KEMPCZINSKI (Christopher J. Kempczinski)##Director##August 04, 2023 /s/ DEBRA L. LEE (Debra L. Lee)##Director##August 04, 2023 /s/ TERRY J. LUNDGREN (Terry J. Lundgren)##Director##August 04, 2023 /s/ CHRISTINE M. MCCARTHY (Christine M. McCarthy)##Director##August 04, 2023 /s/ ROBERT J. PORTMAN (Robert J. Portman)##Director##August 04, 2023 /s/ RAJESH SUBRAMANIAM (Rajesh Subramaniam)##Director##August 04, 2023 /s/ PATRICIA A. WOERTZ (Patricia A. Woertz)##Director##August 04, 2023


TSLA Overview

We design, develop, manufacture, sell and lease high-performance fully electric vehicles and energy generation and storage systems, and offer services related to our products. We generally sell our products directly to customers, and continue to grow our customer-facing infrastructure through a global network of vehicle showrooms and service centers, Mobile Service, body shops, Supercharger stations and Destination Chargers to accelerate the widespread adoption of our products. We emphasize performance, attractive styling and the safety of our users and workforce in the design and manufacture of our products and are continuing to develop full self-driving technology for improved safety. We also strive to lower the cost of ownership for our customers through continuous efforts to reduce manufacturing costs and by offering financial and other services tailored to our products.


TSLA Overview

Our mission is to accelerate the world’s transition to sustainable energy. We believe that this mission, along with our engineering expertise, vertically integrated business model and focus on user experience differentiate us from other companies.


TSLA Segment Information

We operate as two reportable segments: (i) automotive and (ii) energy generation and storage.


TSLA Segment Information

The automotive segment includes the design, development, manufacturing, sales and leasing of high-performance fully electric vehicles as well as sales of automotive regulatory credits. Additionally, the automotive segment also includes services and other, which includes sales of used vehicles, non-warranty after-sales vehicle services, body shop and parts, paid Supercharging, vehicle insurance revenue and retail merchandise. The energy generation and storage segment includes the design, manufacture, installation, sales and leasing of solar energy generation and energy storage products and related services and sales of solar energy systems incentives.


TSLA Automotive

We currently manufacture five different consumer vehicles – the Model 3, Y, S, X and Cybertruck. Model 3 is a four-door mid-size sedan that we designed for manufacturability with a base price for mass-market appeal. Model Y is a compact sport utility vehicle (“SUV”) built on the Model 3 platform with seating for up to seven adults. Model S is a four-door full-size sedan and Model X is a mid-size SUV with seating for up to seven adults. Model S and Model X feature the highest performance characteristics and longest ranges that we offer in a sedan and SUV, respectively. In November 2023, we entered the consumer pickup truck market with first deliveries of the Cybertruck, a full-size electric pickup truck with a stainless steel exterior that has the utility and strength of a truck while featuring the speed of a sports car.


TSLA Automotive

In 2022, we also began early production and deliveries of a commercial electric vehicle, the Tesla Semi. We have planned electric vehicles to address additional vehicle markets, and to continue leveraging developments in our proprietary Full Self-Driving (“FSD”) Capability features, battery cell and other technologies.


TSLA Energy Storage Products

Powerwall and Megapack are our lithium-ion battery energy storage products. Powerwall, which we sell directly to customers, as well as through channel partners, is designed to store energy at a home or small commercial facility. Megapack is an energy storage solution for commercial, industrial, utility and energy generation customers, multiple of which may be grouped together to form larger installations of gigawatt hours (“GWh”) or greater capacity.


TSLA Energy Storage Products

We also continue to develop software capabilities for remotely controlling and dispatching our energy storage systems across a wide range of markets and applications, including through our real-time energy control and optimization platforms.


TSLA Solar Energy Offerings

We sell retrofit solar energy systems to customers and channel partners and also make them available through power purchase agreement (“PPA”) arrangements. We purchase most of the components for our retrofit solar energy systems from multiple sources to ensure competitive pricing and adequate supply. We also design and manufacture certain components for our solar energy products.


TSLA Solar Energy Offerings

We sell our Solar Roof, which combines premium glass roof tiles with energy generation, directly to customers, as well as through channel customers. We continue to improve our installation capability and efficiency, including through collaboration with real estate developers and builders on new homes.


TSLA Battery and Powertrain

Our core vehicle technology competencies include powertrain engineering and manufacturing and our ability to design vehicles that utilize the unique advantages of an electric powertrain. We have designed our proprietary powertrain systems to be adaptable, efficient, reliable and cost-effective while withstanding the rigors of an automotive environment. We offer dual motor powertrain vehicles, which use two electric motors to maximize traction and performance in an all-wheel drive configuration, as well as vehicle powertrain technology featuring three electric motors for further increased performance in certain versions of Model S and Model X, Cybertruck and the Tesla Semi.


TSLA Battery and Powertrain

We maintain extensive testing and R&D capabilities for battery cells, packs and systems, and have built an expansive body of knowledge on lithium-ion cell chemistry types and performance characteristics. In order to enable a greater supply of cells for our products with higher energy density at lower costs, we have developed a new proprietary lithium-ion battery cell and improved manufacturing processes.


TSLA Vehicle Control and Infotainment Software

The performance and safety systems of our vehicles and their battery packs utilize sophisticated control software. Control systems in our vehicles optimize performance, customize vehicle behavior, manage charging and control all infotainment functions. We develop almost all of this software, including most of the user interfaces, internally and update our vehicles’ software regularly through over-the-air updates.


TSLA Self-Driving Development and Artificial Intelligence

We have expertise in developing technologies, systems and software to enable self-driving vehicles using primarily vision-based technologies. Our FSD Computer runs our neural networks in our vehicles, and we are also developing additional computer hardware to better enable the massive amounts of field data captured by our vehicles to continually train and improve these neural networks for real-world performance.


Currently, we offer in our vehicles certain advanced driver assist systems under our Autopilot and FSD Capability options. Although at present the driver is ultimately responsible for controlling the vehicle, our systems provide safety and convenience functionality that relieves drivers of the most tedious and potentially dangerous aspects of road travel much like the system that airplane pilots use, when conditions permit. As with other vehicle systems, we improve these functions in our vehicles over time through over-the-air updates.


We intend to establish in the future an autonomous Tesla ride-hailing network, which we expect would also allow us to access a new customer base even as modes of transportation evolve.


We are also applying our artificial intelligence learnings from self-driving technology to the field of robotics, such as through Optimus, a robotic humanoid in development, which is controlled by the same AI system.


TSLA Energy Storage Products

We leverage many of the component-level technologies from our vehicles in our energy storage products. By taking a modular approach to the design of battery systems, we can optimize manufacturing capacity of our energy storage products. Additionally, our expertise in power electronics enables our battery systems to interconnect with electricity grids while providing fast-acting systems for power injection and absorption. We have also developed software to remotely control and dispatch our energy storage systems.


TSLA Solar Energy Systems

We have engineered Solar Roof over numerous iterations to combine aesthetic appeal and durability with power generation. The efficiency of our solar energy products is aided by our own solar inverter, which incorporates our power electronics technologies. We designed both products to integrate with Powerwall.


TSLA Automotive

We have established significant in-house capabilities in the design and test engineering of electric vehicles and their components and systems. Our team has significant experience in computer-aided design as well as durability, strength and crash test simulations, which reduces the product development time of new models. We have also achieved complex engineering feats in stamping, casting and thermal systems, and developed a method to integrate batteries directly with vehicle body structures without separate battery packs to optimize manufacturability, weight, range and cost characteristics.


TSLA Automotive

We are also expanding our manufacturing operations globally while taking action to localize our vehicle designs and production for particular markets, including country-specific market demands and factory optimizations for local workforces. As we increase our capabilities, particularly in the areas of automation, die-making and line-building, we are also making strides in the simulations modeling these capabilities prior to construction.


TSLA Energy Generation and Storage

Our expertise in electrical, mechanical, civil and software engineering allows us to design, engineer, manufacture and install energy generating and storage products and components, including at the residential through utility scale. For example, the modular design of our Megapack utility-scale battery line is intended to significantly reduce the amount of assembly required in the field. We also customize solutions including our energy storage products, solar energy systems and/or Solar Roof for customers to meet their specific needs.


TSLA Sales and Marketing

Historically, we have been able to achieve sales without traditional advertising and at relatively low marketing costs. We continue to monitor our public narrative and brand, and tailor our marketing efforts accordingly, including through investments in customer education and advertising as necessary.


TSLA Direct Sales

Our vehicle sales channels currently include our website and an international network of company-owned stores. In some jurisdictions, we also have galleries to educate and inform customers about our products, but such locations do not transact in the sale of vehicles. We believe this infrastructure enables us to better control costs of inventory, manage warranty service and pricing, educate consumers about electric vehicles, make our vehicles more affordable, maintain and strengthen the Tesla brand and obtain rapid customer feedback.


TSLA Direct Sales

We reevaluate our sales strategy both globally and at a location-by-location level from time to time to optimize our sales channels. However, sales of vehicles in the automobile industry tend to be cyclical in many markets, which may expose us to volatility from time to time.


TSLA Used Vehicle Sales

Our used vehicle business supports new vehicle sales by integrating the trade-in of a customer’s existing Tesla or non-Tesla vehicle with the sale of a new or used Tesla vehicle. The Tesla and non-Tesla vehicles we acquire as trade-ins are subsequently remarketed, either directly by us or through third parties. We also remarket used Tesla vehicles acquired from other sources including lease returns.


TSLA Public Charging

We have a growing global network of Tesla Superchargers, which are our industrial-grade, high-speed vehicle chargers. Where possible, we co-locate Superchargers with our solar and energy storage systems to reduce costs and promote renewable power. Supercharger stations are typically placed along well-traveled routes and in and around dense city centers to allow vehicle owners the ability to enjoy quick, reliable charging along an extensive network with convenient stops. Use of the Supercharger network either requires payment of a fee or is free under certain sales programs. In November 2021, we began to offer Supercharger access to non-Tesla vehicles in certain locations in support of our mission to accelerate the world’s transition to sustainable energy, and in November 2022, we opened up our previously proprietary charging connector as the North American Charging Standard (NACS). This enables all electric vehicles and charging stations to interoperate — which makes charging easier and more efficient for everyone and advances our mission to accelerate the world’s transition to sustainable energy. Following this, a number of major automotive companies announced their adoption of NACS, with their access to the Supercharger network beginning in phases in 2024 and their production of NACS vehicles beginning no later than 2025. We also engaged SAE International to govern NACS as an industry standard, now named J3400. We continue to monitor and increase our network of Tesla Superchargers in anticipation of future demand.


TSLA Public Charging

We also work with a wide variety of hospitality, retail and public destinations, as well as businesses with commuting employees, to offer additional charging options for our customers, as well as single-family homeowners and multi-family residential entities, to deploy home charging solutions.


TSLA In-App Upgrades

As our vehicles are capable of being updated remotely over-the-air, our customers may purchase additional paid options and features through the Tesla app or through the in-vehicle user interface. We expect that this functionality will also allow us to offer certain options and features on a subscription basis in the future.


TSLA Energy Generation and Storage

We market and sell our solar and energy storage products to residential, commercial and industrial customers and utilities through a variety of channels, including through our website, stores and galleries, as well as through our network of channel partners, and in the case of some commercial customers, through PPA transactions. We emphasize simplicity, standardization and accessibility to make it easy and cost-effective for customers to adopt clean energy, while reducing our customer acquisition costs.


TSLA Service

We provide service for our electric vehicles at our company-owned service locations and through Tesla Mobile Service technicians who perform work remotely at customers’ homes or other locations. Servicing the vehicles ourselves allows us to identify problems and implement solutions and improvements faster than traditional automobile manufacturers and their dealer networks. The connectivity of our vehicles also allows us to diagnose and remedy many problems remotely and proactively.


TSLA Vehicle Limited Warranties and Extended Service Plans

We provide a manufacturer’s limited warranty on all new and used Tesla vehicles we sell directly to consumers, which may include limited warranties on certain components, specific types of damage or battery capacity retention. We also currently offer optional extended service plans that provide coverage beyond the new vehicle limited warranties for certain models in specified regions.


TSLA Energy Generation and Storage

We provide service and repairs to our energy product customers, including under warranty where applicable. We generally provide manufacturer’s limited warranties with our energy storage products and offer certain extended limited warranties that are available at the time of purchase of the system. If we install a system, we also provide certain limited warranties on our installation workmanship.


TSLA Energy Generation and Storage

For retrofit solar energy systems, we provide separate limited warranties for workmanship and against roof leaks, and for Solar Roof, we also provide limited warranties for defects and weatherization. For components not manufactured by us, we generally pass-through the applicable manufacturers’ warranties.


TSLA Energy Generation and Storage

As part of our solar energy system and energy storage contracts, we may provide the customer with performance guarantees that commit that the underlying system will meet or exceed the minimum energy generation or performance requirements specified in the contract.


TSLA Purchase Financing and Leases

We offer leasing and/or loan financing arrangements for our vehicles in certain jurisdictions in North America, Europe and Asia ourselves and through various financial institutions. Under certain of such programs, we have provided resale value guarantees or buyback guarantees that may obligate us to cover a resale loss up to a certain limit or repurchase the subject vehicles at pre-determined values.


TSLA Insurance

In 2021, we launched our insurance product using real-time driving behavior in select states, which offers rates that are often better than other alternatives and promotes safer driving. Our insurance products are currently available in 12 states and we plan to expand the markets in which we offer insurance products, as part of our ongoing effort to decrease the total cost of ownership for our customers.


TSLA Energy Generation and Storage

We offer certain financing options to our solar customers, which enable the customer to purchase and own a solar energy system, Solar Roof or integrated solar and Powerwall system. Our solar PPAs, offered primarily to commercial customers, charge a fee per kilowatt-hour based on the amount of electricity produced by our solar energy systems.


TSLA Manufacturing

We currently have manufacturing facilities in the U.S. in Northern California, in Buffalo, New York, Gigafactory New York; in Austin, Texas, Gigafactory Texas and near Reno, Nevada, Gigafactory Nevada. At these facilities, we manufacture and assemble, among other things, vehicles, certain vehicle parts and components, such as our battery packs and battery cells, energy storage components and solar products and components.


TSLA Manufacturing

Internationally, we also have manufacturing facilities in China (Gigafactory Shanghai) and Germany (Gigafactory Berlin-Brandenburg), which allows us to increase the affordability of our vehicles for customers in local markets by reducing transportation and manufacturing costs and eliminating the impact of unfavorable tariffs. In March 2023, we announced the location of our next Gigafactory in Monterrey, Mexico. Generally, we continue to expand production capacity at our existing facilities. We also intend to further increase cost-competitiveness in our significant markets by strategically adding local manufacturing.


TSLA Supply Chain

Our products use thousands of parts that are sourced from hundreds of suppliers across the world. We have developed close relationships with vendors of key parts such as battery cells, electronics and complex vehicle assemblies. Certain components purchased from these suppliers are shared or are similar across many product lines, allowing us to take advantage of pricing efficiencies from economies of scale.


TSLA Supply Chain

As is the case for some automotive companies, some of our procured components and systems are sourced from single suppliers. Where multiple sources are available for certain key components, we work to qualify multiple suppliers for them where it is sensible to do so in order to minimize potential production risks due to disruptions in their supply. We also mitigate risk by maintaining safety stock for key parts and assemblies and die banks for components with lengthy procurement lead times.


TSLA Supply Chain

Our products use various raw materials including aluminum, steel, cobalt, lithium, nickel and copper. Pricing for these materials is governed by market conditions and may fluctuate due to various factors outside of our control, such as supply and demand and market speculation. We strive to execute long-term supply contracts for such materials at competitive pricing when feasible, and we currently believe that we have adequate access to raw materials supplies to meet the needs of our operations.


TSLA Governmental Programs, Incentives and Regulations

Globally, the ownership of our products by our customers is impacted by various government credits, incentives, and policies. Our business and products are also subject to numerous governmental regulations that vary among jurisdictions.


The operation of our business is also impacted by various government programs, incentives, and other arrangements. See Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.


TSLA Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law and is effective for taxable years beginning after December 31, 2022, and remains subject to future guidance releases. The IRA includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, including through providing tax credits to consumers. For example, qualifying Tesla customers may receive up to $7,500 in federal tax credits for the purchase of qualified electric vehicles in the U.S. through 2032.


TSLA Automotive Regulatory Credits

We earn tradable credits in the operation of our business under various regulations related to zero-emission vehicles (“ZEVs”), greenhouse gas, fuel economy and clean fuel. We sell these credits to other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. Sales of these credits are recognized within automotive regulatory credits revenue in our consolidated statements of operations included elsewhere in this Annual Report on Form 10-K.


TSLA Energy Storage System Incentives and Policies

While the regulatory regime for energy storage projects is still under development, there are various policies, incentives and financial mechanisms at the federal, state and local levels that support the adoption of energy storage.


For example, energy storage systems that are charged using solar energy may be eligible for the solar energy-related U.S. federal tax credits described below. The Federal Energy Regulatory Commission (“FERC”) has also taken steps to enable the participation of energy storage in wholesale energy markets. In addition, California and a number of other states have adopted procurement targets for energy storage, and behind-the-meter energy storage systems qualify for funding under the California Self Generation Incentive Program. Our customers primarily benefit directly under these programs. In certain instances our customers may transfer such credits to us as contract consideration. In such transactions, they are included as a component of energy generation and storage revenues in our consolidated statements of operations included elsewhere in this Annual Report on Form 10-K.


Pursuant to the IRA, under Sections 48, 48E and 25D of the Internal Revenue Code (”IRC”), standalone energy storage technology is eligible for a tax credit between 6% and 50% of qualified expenditures, regardless of the source of energy, which may be claimed by our customers for storage systems they purchase or by us for arrangements where we own the systems. These tax credits are primarily for the benefit of our customers and are currently scheduled to phase-out starting in 2032 or later.


TSLA Solar Energy System Incentives and Policies

U.S. federal, state and local governments have established various policies, incentives and financial mechanisms to reduce the cost of solar energy and to accelerate the adoption of solar energy. These incentives include tax credits, cash grants, tax abatements and rebates.


In particular, pursuant to the IRA, Sections 48, 48E and 25D of the IRC provides a tax credit between 6% and 70% of qualified commercial or residential expenditures for solar energy systems, which may be claimed by our customers for systems they purchase, or by us for arrangements where we own the systems for properties that meet statutory requirements. These tax credits are primarily for the direct benefit of our customers and are currently scheduled to phase-out starting in 2032 or later.