Proctor and Gamble 2000 Annual Report Download - page 39

The Procter & Gamble Company and Subsidiaries
37
Millions of dollars except per share amounts
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for the pension plans with accu-
mulated benefit obligations in excess of plan assets were $1,368,
$1,073 and $189, respectively, as of June 30, 2000, and $1,382,
$1,122 and $233, respectively, as of June 30, 1999.
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 $ 23 $ (18)
Effect on postretirement
benefit obligation 167 (138)
NOTE 10 INCOME TAXES
Earnings before income taxes consist of the following:
Years ended June 30
2000 1999 1998
United States $3,006 $3,474 $3,632
International 2,530 2,364 2,076
5,536 5,838 5,708
The income tax provision consists of the following:
Years ended June 30
2000 1999 1998
Current Tax Expense
U.S. Federal $ 648 $1,080 $ 996
International 816 934 918
U.S. State & Local 67 121 115
1,531 2,135 2,029
Deferred Tax Expense
U.S. Federal 241 (74) 51
International & other 222 14 (152)
463 (60) (101)
1,994 2,075 1,928
Taxes credited to shareholders’ equity for the years ended June 30,
2000 and 1999 were $59 and $222, respectively. Undistributed
earnings of foreign subsidiaries that are considered to be rein-
vested indefinitely were $8,828 at June 30, 2000.
The Company’s effective income tax rate was 36.0%, 35.5% and
33.8% in 2000, 1999 and 1998, 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 33.4% in
2000 and 34.4% in 1999. This change reflects the execution of tax
planning opportunities which is offset by the impact of various
country tax rates on Organization 2005 program costs.
Deferred income tax assets and liabilities are comprised of the
following:
June 30
2000 1999
Current deferred tax assets $ 309 $ 621
Non-current deferred tax assets (liabilities)
Depreciation $(951) $(979)
Other postretirement benefits 273 392
Loss and other carryforwards 332 206
Other (279) 19
(625) (362)
Included in Other above are valuation allowances of $207 and
$140 in 2000 and 1999, respectively.
NOTE 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 commitments 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 contingencies pursuant to environmen-
tal 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, 2000 and
1999 were $47 and $58, respectively, and, in management’s opinion,
such accruals are appropriate based on existing facts and circum-
stances. Current year expenditures were not material.
While considerable uncertainty exists, in the opinion of manage-
ment and Company counsel, the ultimate liabilities resulting from
such claims will not materially affect the Company’s financial
statements.