Proctor and Gamble 2013 Annual Report Download - page 72

70 The Procter & Gamble Company
Amounts in millions of dollars except per share amounts or as otherwise specified.
Other Retiree Benefits
Level 1 Level 2 Level 3 Total
June 30 2013 2012 2013 2012 2013 2012 2013 2012
ASSETS AT FAIR VALUE
Cash and cash equivalents $56 $ 16 $— $ — $— $ — $56 $ 16
Company stock ——3,270 2,418 ——3,270 2,418
Common collective fund - equity — — 16 30 — — 16 30
Common collective fund - fixed income — — 200 247 — — 200 247
Other — — — — 11 211 2
TOTAL ASSETS AT FAIR VALUE 56 16 3,486 2,695 11 2 3,553 2,713
There was no significant activity within the Level 3 pension
and other retiree benefits plan assets during the years
presented.
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 year ending June 30, 2014, is approximately $1,463 and
$31, respectively. For the defined benefit retirement plans,
this is comprised of $90 in expected benefit payments from
the Company directly to participants of unfunded plans and
$1,373 of expected contributions to funded plans. This
estimate includes a discretionary contribution made to a
foreign pension plan for approximately $1.0 billion in July
2013. For other retiree benefit plans, this is comprised of
expected contributions that will be used directly for benefit
payments. 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.
Total benefit payments expected to be paid to participants,
which include payments funded from the Company's assets,
as discussed above, as well as payments from the plans, are
as follows:
Years ending June 30
Pension
Benefits
Other Retiree
Benefits
EXPECTED BENEFIT PAYMENTS
2014 $ 553 $ 208
2015 545 224
2016 568 237
2017 596 251
2018 602 266
2019 - 2023 3,392 1,549
Employee Stock Ownership Plan
We maintain the ESOP to provide funding for certain
employee benefits discussed in the preceding paragraphs.
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 $112 remain outstanding at
June 30, 2013. 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 $2.29 per share. The liquidation value is $6.82
per share.
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. Debt service requirements are funded by
preferred stock dividends, cash contributions and advances
provided by the Company, of which $539 is outstanding at
June 30, 2013. 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 $2.29 per share. The liquidation value is $12.96
per share.
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 is guaranteed by the Company,
is recorded as debt (see Note 4) 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 is
recorded as interest expense. Dividends on all preferred
shares, net of related tax benefits, are charged to retained
earnings.
The series A and B preferred shares of the ESOP are
allocated to employees based on debt service requirements,
net of advances made by the Company to the Trust. The