Proctor and Gamble 2012 Annual Report Download - page 31
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Please find page 31 of the 2012 Proctor and Gamble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.The Procter & Gamble Company 29
information, are "forward-looking statements" and are based
on financial data and our business plans available only as of
the time the statements are made, which may become out-of-
date or incomplete. We assume no obligation to update any
forward-looking statements as a result of new information,
future events or other factors. Forward-looking statements
are inherently uncertain and investors must recognize that
events could be significantly different from our expectations.
For more information on risks that could impact our results,
refer to Item 1A Risk Factors in this 10-K.
Ability to Achieve Business Plans. We are a consumer
products company and rely on continued demand for our
brands and products. To achieve business goals, we must
develop and sell products that appeal to consumers and retail
trade customers. Our continued success is dependent on
leading-edge innovation with respect to both products and
operations, on the continued positive reputations of our
brands and our ability to successfully maintain trademark
protection. This means we must be able to obtain patents and
trademarks, and respond to technological advances and
patents granted to competition. Our success is also
dependent on effective sales, advertising and marketing
programs. Our ability to innovate and execute in these areas
will determine the extent to which we are able to grow
existing sales and volume profitably, especially with respect
to the product categories and geographic markets (including
developing markets) in which we have chosen to focus.
There are high levels of competitive activity in the
environments in which we operate. To address these
challenges, we must respond to competitive factors,
including pricing, promotional incentives, trade terms and
product initiatives. We must manage each of these factors, as
well as maintain mutually beneficial relationships with our
key customers, in order to effectively compete and achieve
our business plans.
As a company that manages a portfolio of consumer brands,
our ongoing business model involves a certain level of
ongoing acquisition, divestiture and joint venture activities.
We must be able to successfully manage the impacts of these
activities, while at the same time delivering against base
business objectives.
Daily conduct of our business also depends on our ability to
maintain key information technology systems, including
systems operated by third-party suppliers, and to maintain
security over our data.
Cost Pressures. Our costs are subject to fluctuations,
particularly due to changes in commodity prices, raw
materials, labor costs, foreign exchange and interest rates.
Therefore, our success is dependent, in part, on our
continued ability to manage these fluctuations through
pricing actions, cost savings projects, sourcing decisions and
certain hedging transactions, as well as consistent
productivity improvements. We also must manage our debt
and currency exposure, especially in certain countries with
currency exchange controls, such as Venezuela, China, and
India. We need to maintain key manufacturing and supply
arrangements, including sole supplier and sole
manufacturing plant arrangements, and successfully manage
any disruptions at Company manufacturing sites. We must
implement, achieve and sustain cost improvement plans,
including our outsourcing projects and those related to
general overhead and workforce optimization. Successfully
managing these changes, including identifying, developing
and retaining key employees, is critical to our success.
Global Economic Conditions. Demand for our products has
a correlation to global macroeconomic factors. The current
macroeconomic factors remain dynamic. Economic changes,
terrorist activity, political unrest and natural disasters may
result in business interruption, inflation, deflation or
decreased demand for our products. Our success will
depend, in part, on our ability to manage continued global
political and/or economic uncertainty, especially in our
significant geographic markets, due to terrorist and other
hostile activities or natural disasters. We could also be
negatively impacted by a global, regional or national
economic crisis, including sovereign risk in the event of a
deterioration in the credit worthiness of, or a default by local
governments, resulting in a disruption of credit markets.
Such events could negatively impact our ability to collect
receipts due from governments, including refunds of value
added taxes, create significant credit risks relative to our
local customers and depository institutions and/or negatively
impact our overall liquidity.
Regulatory Environment. Changes in laws, regulations and
the related interpretations may alter the environment in
which we do business. This includes changes in
environmental, competitive and product-related laws, as well
as changes in accounting standards and tax laws. Our ability
to manage regulatory, tax and legal matters (including
product liability, patent, intellectual property, competition
law matters and tax policy) and to resolve pending legal
matters within current estimates may impact our results.
RESULTS OF OPERATIONS
The key metrics included in our discussion of our
consolidated results of operations include net sales, gross
margin, selling, general and administrative expenses
(SG&A), other non-operating items and income taxes. The
primary factors driving year over year changes in net sales
include overall market growth in the categories in which we
compete, product initiatives and geographic expansion, all of
which drive changes in our underlying unit volume, as well
as pricing actions (which can also indirectly impact volume),
changes in product mix and foreign currency impacts on
sales outside the United States. Most of our cost of products
sold and SG&A expenses are to some extent variable in
nature. Accordingly, our discussion of these operating costs
focus primarily on relative margins rather than the absolute
year over year changes in total costs. The primary drivers of
changes in gross margin are input costs (energy and other
commodities), pricing impacts, product and geographic mix
(for example, gross margins in developed markets are