Proctor and Gamble 2010 Annual Report Download - page 47

Management’s Discussion and Analysis The Procter & Gamble Company 45
Financing Activities
Dividend Payments. Our first discretionary use of cash is dividend
payments. Dividends per common share increased 10% to $1.80 per
share in 2010. Total dividend payments to both common and preferred
shareholders were $5.5billion in 2010 and $5.0billion in 2009. The
increase in dividend payments resulted from increases in our quarterly
dividends per share, partially offset by a reduction in the number of
shares outstanding. In April 2010, the Board of Directors declared an
increase in our quarterly dividend from $0.44 to $0.4818 per share on
Common Stock and Series A and B ESOP Convertible Class A Preferred
Stock. This represents a 9.5% increase compared to the prior quarterly
dividend and is the 54th consecutive year that our dividend has
increased. We have paid a dividend in every year since our incorporation
in 1890.
$1.45
$.
$1.64
10
08
09
DIVIDENDS
(per common share)
Long-Term and Short-Term Debt. We maintain debt levels we consider
appropriate after evaluating a number of factors, including cash flow
expectations, cash requirements for ongoing operations, investment
and financing plans (including acquisitions and share repurchase
activities) and the overall cost of capital. Total debt was $29.8billion
in 2010, $37.0billion in 2009 and $36.7billion in 2008. Our total
debt decreased in 2010 mainly due to repayments funded by operat-
ing cash flow and cash provided by the global pharmaceuticals
divestiture.
Treasury Purchases. In 2007, we began to acquire outstanding
shares under a publicly announced three-year share repurchase plan,
which expired on June30, 2010. We acquired $22.3billion of shares
under this repurchase plan. Total share repurchases were $6.0billion
in 2010 and $6.4billion in 2009, nearly all of which were made under
the publicly announced plan. We currently expect share repurchases
of $6 – 8billion in 2011.
In November 2008, we completed the divestiture of our Folgers coffee
subsidiary. In connection with this divestiture, 38.7million shares of
P&G common stock were tendered by shareholders and exchanged
for all shares of Folgers common stock, resulting in an increase of
treasury stock of $2.5billion.
Liquidity
Our current liabilities exceeded current assets by $5.5billion. We
utilize short- and long-term debt to fund discretionary items such as
acquisitions and share repurchases. We anticipate being able to
support our short-term liquidity and operating needs largely through
cash generated from operations. We have strong short- and long-term
debt ratings which have enabled and should continue to enable us to
refinance our debt as it becomes due at favorable rates in commercial
paper and bond markets. In addition, we have agreements with a
diverse group of financial institutions that, if needed, should provide
sufficient credit funding to meet short-term financing requirements.
On June30, 2010, our short-term credit ratings were P-1 (Moody’s) and
A-1+ (Standard & Poor’s), while our long-term credit ratings are Aa3
(Moody’s) and AA- (Standard & Poor’s), both with a stable outlook.
We maintain three bank credit facilities: a $6billion 5-year facility and
a $3billion 5-year facility which expire in August 2012 and a $2billion
364-day facility which expires in August 2011. The credit facilities are
in place to support our ongoing commercial paper program. These
facilities can be extended for certain periods of time as specified in, and
in accordance with, the terms of each credit agreement. We anticipate
that these facilities will remain largely undrawn for the foreseeable
future. These credit facilities do not have cross-default or ratings
triggers, nor do they have material adverse events clauses, except at
the time of signing. In addition to these credit facilities, we have an
automatically effective registration statement on Form S-3 filed with
the SEC that is available for registered offerings of short- or long-term
debt securities.
Guarantees and Other Off-Balance Sheet Arrangements
We do not have guarantees or other off-balance sheet financing
arrangements, including variable interest entities, which we believe
could have a material impact on financial condition or liquidity.