Proctor and Gamble 2003 Annual Report Download - page 55

Notes to Consolidated Financial Statements 53The Procter & Gamble Company and Subsidiaries
Operating Leases
The Company leases certain property and equipment for varying periods
under operating leases. Future minimum rental payments with terms in
excess of one year total approximately $550.
Litigation
The Company is subject to various lawsuits and claims with respect to
matters such as governmental regulations, income taxes and other ac-
tions arising out of the normal course of business. The Company is also
subject to contingencies pursuant to environmental laws and regula-
tions that in the future may require the Company to take action to cor-
rect the effects on the environment of prior manufacturing and waste
disposal practices. Accrued environmental liabilities for remediation and
closure costs were $34 and $39 at June 30, 2003 and 2002, respec-
tively. Current year expenditures were not material.
While considerable uncertainty exists, in the opinion of management and
Company counsel, the ultimate liabilities resulting from such lawsuits
and claims will not materially affect the Company’s financial condition.
Note 12 Segment Information
The Company’s reportable segments are organized into five product-
based global business units. The segments, which are generally deter-
mined by the product type and end-point user benefits offered, manu-
facture and market products as follows:
• Fabric and Home Care includes laundry detergents, dish care, fabric
enhancers and surface cleaners.
• Beauty Care includes hair care, skin care, cosmetics, fine
fragrances, deodorants, tampons, pads and pantiliners.
• Baby and Family Care includes diapers, wipes, tissue and towels.
• Health Care includes oral care, personal health care,
pharmaceuticals and pet health and nutrition.
• Snacks and Beverages includes coffee, snacks, commercial
services and juice.
To reflect management and business changes, the Company realigned
its reporting segments. Effective July 1, 2002, the feminine care busi-
ness, which had been managed within the Baby and Family Care seg-
ment, is included in the Beauty Care segment. In addition, the Food and
Beverage segment was renamed Snacks and Beverages to reflect its
remaining businesses. The historical results for the elements of the for-
mer Food and Beverage segment that have been divested or spun-off
(i.e., Jif, Crisco and commercial shortening and oils) are now reflected in
Net operating loss carryforwards were $1,222 at June 30, 2003. Net op-
erating losses and other tax credit carryforwards were $1,211 at June 30,
2002. If unused, $348 will expire between 2004 and 2013. The remain-
der, totaling $874 at June 30, 2003, may be carried forward indefinitely.
Note 11 Commitments and Contingencies
Guarantees
In conjunction with certain transactions, primarily divestitures, the Com-
pany may provide routine indemnifications (e.g., retention of previously
existing environmental, tax and employee liabilities) whose terms range
in duration and often are not explicitly defined. Where appropriate, an
obligation for such indemnifications is recorded as a liability. Generally,
the maximum obligation under such indemnifications is not explicitly
stated and as a result the overall amount of these obligations cannot be
reasonably estimated. Other than obligations recorded as liabilities at
the time of divestiture, historically the Company has not made signifi-
cant payments for these indemnifications. The Company believes that if
it were to incur a loss in any of these matters, the loss would not have a
material effect on the Company’s financial condition or results of oper-
ations.
In certain situations, the Company guarantees loans for suppliers that
construct assets to produce materials for sale to P&G. The total amount
of guarantees issued under such arrangements is not material.
Purchase Commitments
The Company has purchase commitments for materials, supplies, serv-
ices and property, plant and equipment as part of the normal course of
business. Due to the proprietary nature of many of the Company’s ma-
terials and processes, certain supply contracts contain penalty provi-
sions for early termination. The Company does not expect potential
payments under these provisions to materially affect results of opera-
tions or its financial condition in any individual year.
Minority Partner Put Option
At various points from 2007 to 2017, the minority partner in a subsid-
iary that holds most of the Company’s China operations has the right to
exercise a put option to require the Company to purchase from half to
all of its outstanding 20% interest at a price not greater than fair mar-
ket value. The impact of this put option is dependent on factors that can
change prior to its exercise. Given that the put price cannot exceed fair
market value and the Company’s current liquidity, the Company does
not believe that exercise of the put would materially impact its results
of operations or financial condition.
Millions of dollars except per share amounts