Proctor and Gamble 2010 Annual Report Download - page 61

Notes to Consolidated Financial Statements The Procter & Gamble Company 59
Amounts in millions of dollars except per share amounts or as otherwise specified.
NOTE 4
SHORT-TERM AND LONG-TERM DEBT
June 30 2010 2009
DEBT DUE WITHIN ONE YEAR
Current portion of long-term debt $ 564 $ 6,941
Commercial paper 7,838 5,027
Other 70 4,352
TOTAL 8,472 16,320
Short-term weighted average interest rates (1) 0.4% 2.0%
(1) Weighted average short-term interest rates include the effects of interest rate swaps
discussed in Note 5.
June 30 2010 2009
LONG-TERM DEBT
1.35% USD note due August 2011 $ 1,000 $ —
4.88% EUR note due October 2011 1,221 1,411
1.38% USD note due August 2012 1,250 —
3.38% EUR note due December 2012 1,710 1,975
4.50% EUR note due May 2014 1,832 2,116
4.95% USD note due August 2014 900 900
3.50% USD note due February 2015 750 750
0.95% JPY note due May 2015 1,129 —
3.15% USD note due September 2015 500 —
4.85% USD note due December 2015 700 700
5.13% EUR note due October 2017 1,344 1,552
4.70% USD note due February 2019 1,250 1,250
4.13% EUR note due December 2020 733 846
9.36% ESOP debentures due 2010 – 2021 (1) 854 896
4.88% EUR note due May 2027 1,221 1,411
6.25% GBP note due January 2030 753 832
5.50% USD note due February 2034 500 500
5.80% USD note due August 2034 600 600
5.55% USD note due March 2037 1,400 1,400
Capital lease obligations 401 392
All other long-term debt 1,876 10,062
Current portion of long-term debt (564) (6,941)
TOTAL 21,360 20,652
Fair value of long-term debt 23,072 21,514
Long-term weighted average interest rates (2) 3.6% 4.9%
(1) Debt issued by the ESOP is guaranteed by the Company and must be recorded as debt of the
Company as discussed in Note 8.
(2) Weighted average long-term interest rates include the effects of interest rate swaps and net
investment hedges discussed in Note 5.
Long-term debt maturities during the next five years are as follows:
June 30 2011 2012 2013 2014 2015
Debt maturities $564 $2,304 $3,051 $1,924 $2,897
The Procter& Gamble Company fully and unconditionally guarantees
the registered debt and securities issued by its 100% owned finance
subsidiaries.
NOTE 5
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 netting and
correlation. To the extent we choose to manage volatility associated
with the net exposures, we enter into various financial transactions
which we account for using the applicable accounting guidance for
derivative instruments and hedging activities. These financial transac-
tions are governed by our policies covering acceptable counterparty
exposure, instrument types and other hedging practices.
At inception, we formally designate and document qualifying instru-
ments as hedges of underlying exposures. We formally assess, at
inception and at least quarterly, whether the financial instruments
used in hedging transactions are effective at offsetting changes in
either the fair value or cash flows of the related underlying exposure.
Fluctuations in the value of these instruments generally are offset by
changes in the value or cash flows of the underlying exposures being
hedged. This offset is driven by the high degree of effectiveness
between the exposure being hedged and the hedging instrument.
The ineffective portion of a change in the fair value of a qualifying
instrument is immediately recognized in earnings. The amount of
ineffectiveness recognized is immaterial for all years presented.
Credit Risk Management
We have counterparty credit guidelines and generally enter into
transactions with investment grade financial institutions. Counterparty
exposures are monitored daily and downgrades in counterparty
credit ratings are reviewed on a timely basis. Credit risk arising from
the inability of a counterparty to meet the terms of our financial
instrument contracts generally is limited to the amounts, if any, by
which the counterparty’s obligations to us exceed our obligations to
the counterparty. We have not incurred, and do not expect to incur,
material credit losses on our risk management or other financial
instruments.
Certain of the Company’s financial instruments used in hedging
transactions are governed by industry standard netting 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 arrangement.
The aggregate fair value of the instruments covered by these contrac-
tual features that are in a net liability position as of June30, 2010
was $226. The Company has never been required to post collateral
as a result of these contractual features.