Proctor and Gamble 2006 Annual Report Download - page 63

Millions of dollars except per share amounts or otherwise specified.
Notes to Consolidated Financial Statements The Procter &Gamble Company and Subsidiaries 61
Off-Balance Sheet Arrangements
We do not have off-balance sheet financing arrangements, including
variable interest entities, under FIN 46, “Consolidation of Variable Interest
Entities,” that have a material impact on our financial statements.
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: 2007 – $1,940; 2008 – $1,008; 2009 – $585; 2010 – $505 and
2011 – $497. Such amounts represent future purchases in line with
expected usage to obtain favorable pricing. Approximately 50% of our
purchase commitments relate to service contracts for information
technology, human resources management and facilities management
activities that were outsourced in recent years. 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 condition, cash flows or results of operations.
Operating Leases
We lease certain property and equipment for varying periods. Future
minimum rental commitments under noncancelable operating leases
are as follows: 2007 – $269; 2008 – $212; 2009 – $182; 2010 – $168;
2011 – $140 and $428 thereafter.
Litigation
We are subject to various lawsuits and claims with respect to matters
such as governmental regulations, income taxes and other actions
arising out of the normal course of business. 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 condition, cash flows or results of operations. 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
have a material adverse effect on our financial position, cash flows or
results of operations.
NOTE 12
SEGMENT INFORMATION
We are organized under three Global Business Units as follows:
•Beauty and Health includes the Beauty and the Health Care
businesses. Beauty includes retail and professional hair care, skin
care, feminine care, cosmetics, fine fragrances and personal
cleansing. Health Care includes oral care and pharmaceuticals
and personal health care.
•Household Care includes the Fabric Care and Home Care, the Baby
Care and Family Care and the Pet Health, Snacks and Coffee
businesses. Fabric Care and Home Care includes laundry detergents,
dish care, fabric enhancers, surface care, air care and commercial
products. Baby Care and Family Care includes diapers, baby wipes,
bath tissue and kitchen towels. Pet Health, Snacks and Coffee
includes pet food, salted snacks and coffee.
•Gillette GBU includes the Blades and Razors and the Duracell and
Braun businesses. Blades and Razors includes men’s and women’s
blades and razors. Duracell and Braun includes batteries, electric
razors and small appliances.
Under U.S. GAAP, we have seven reportable segments: Beauty;
Health Care; Fabric Care and Home Care; Baby Care and Family Care;
Pet Health, Snacks and Coffee; Blades and Razors and Duracell and
Braun. The accounting policies of the businesses are generally the
same as those described in Note 1. Differences between these
policies and U.S. GAAP primarily reflect: income taxes, which are
reflected in the businesses using applicable blended statutory rates;
the recording of fixed assets at historical exchange rates in certain
high-inflation economies and the treatment of certain unconsolidated
investees. Certain unconsolidated investees are managed as integral
parts of our business units for management reporting purposes.
Accordingly, these partially owned operations are reflected as
consolidated subsidiaries in business results, with 100% recognition
of the individual income statement line items through before-tax
earnings. Eliminations to adjust these line items to U.S. GAAP are
included in Corporate. In determining after-tax earnings for the
businesses, we eliminate the share of earnings applicable to other
ownership interests, in a manner similar to minority interest, and
apply statutory tax rates. Adjustments to arrive at our effective tax
rate are also included in Corporate.
Corporate includes certain operating and non-operating activities that
are not reflected in the operating results used internally to measure and
evaluate the businesses, as well as eliminations to adjust management
reporting principles to U.S. GAAP. Operating activities in Corporate
include the results of incidental businesses managed at the corporate
level along with the elimination of individual revenues and expenses
generated by companies over which we exert significant influence, but
do not control. Operating elements also comprise certain employee
benefit costs and other general corporate items. The non-operating
elements include financing and investing activities. In addition, Corporate
includes the historical results of certain divested businesses, including
the Juice business, which was divested in August of 2004. Corporate
assets primarily include cash, investment securities and all goodwill.
We had net sales in the U.S. of $29,462, $25,342 and $23,688
for the years ended June 30, 2006, 2005 and 2004, respectively.
Assets in the U.S. totaled $75,444 and $25,399 as of June 30, 2006
and 2005, respectively.
Our largest customer, Wal-Mart Stores, Inc. and its affiliates,
accounted for 15%, 16% and 17% of consolidated net sales in 2006,
2005 and 2004, respectively.