Proctor and Gamble 1999 Annual Report Download - page 44

40 The Procter & Gamble Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans. A
one percentage point change in assumed health care cost
trend rates would have the following effects:
One Percentage One Percentage
Point Increase Point Decrease
Effect on total of service and
interest cost components $ 28 $ (23)
Effect on postretirement
benefit obligation 162 (136)
10 INCOME TAXES
Earnings before income taxes consist of the following:
Years Ended June 30
1999 1998 1997
United States $3,474 $3,632 $3,232
International 2,364 2,076 2,017
5,838 5,708 5,249
The income tax provision consists of the following:
Years Ended June 30
1999 1998 1997
Current Tax Expense
U.S. Federal $1,080 $ 996 $ 967
International 934 918 805
U.S. State & Local 121 115 88
2,135 2,029 1,860
Deferred Tax Expense
U.S. Federal (74) 51 1
International & other 14 (152) (27)
(60) (101) (26)
Total 2,075 1,928 1,834
Taxes credited to shareholders’ equity for the years ended
June 30, 1999 and 1998 were $222 and $147, respectively.
Undistributed earnings of foreign subsidiaries that are consid-
ered to be reinvested indefinitely were $7,764 at June 30, 1999.
The effective income tax rate was 35.5%, 33.8% and
34.9% in 1999, 1998 and 1997, respectively, compared to the
U.S. statutory rate of 35.0%. Excluding the Organization
2005 program costs and related tax effects, the effective tax
rate was 34.4%.
Deferred income tax assets and liabilities are comprised of
the following:
June 30
1999 1998
Current deferred tax assets $ 621 $ 595
Non-current deferred tax assets (liabilities)
Depreciation $(979) $(1,058)
Postretirement benefits 392 435
Loss and other carryforwards 206 167
Other 19 28
(362) (428)
Included in the above are total valuation allowances of
$140 and $177 in 1999 and 1998, respectively.
11 COMMITMENTS AND CONTINGENCIES
The Company has purchase commitments for materials,
supplies, and property, plant and equipment incidental to the
ordinary conduct of business. In the aggregate, such commit-
ments are not at prices in excess of current market.
The Company is 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. The Company is also subject to contin-
gencies pursuant to environmental laws and regulations that
in the future may require the Company to take action to
correct the effects on the environment of prior manufacturing
and waste disposal practices. Accrued environmental liabilities
for remediation and closure costs at June 30, 1999 were $58
and, in management’s opinion, such accruals are appropriate
based on existing facts and circumstances. Current year
expenditures were not material.
While the effect on future results of these items is not
subject to reasonable estimation because considerable uncer-
tainty exists, in the opinion of management and Company
counsel, the ultimate liabilities resulting from such claims will
not materially affect the Company’s financial statements.