Proctor and Gamble 2002 Annual Report Download - page 44

42 The Procter & Gamble Company and Subsidiaries
Components of the net periodic benefit cost are as follows:
In addition to the net periodic benefit cost, additional expense of $46
was recognized during the year ended June 30, 2002, for special termi-
nation benefits provided as part of early retirement packages in con-
nection with the Company’s restructuring program.
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:
Note 11 Income Taxes
Under SFAS No. 109, ”Accounting for Income Taxes,” income taxes are
recognized for the following: a) amount of taxes payable for the current
year, and b) deferred tax liabilities and assets for future tax conse-
quences of events that have been recognized differently in the financial
statements than for tax purposes. Deferred tax assets and liabilities are
established using the enacted statutory tax rates and adjusted for tax
rate changes. Earnings before income taxes consist of the following:
The income tax provision consists of the following:
The Company’s effective income tax rate was 31.8%, 36.7% and
36.0% in 2002, 2001 and 2000, respectively, compared to the U.S.
statutory rate of 35.0%. The country mix impacts of foreign operations
reduced the Company’s effective tax rate to a larger degree than prior
years – 3.1% for 2002. Excluding restructuring costs and adjustments
to remove amortization of goodwill and indefinite-lived intangibles that
is no longer required, and their related tax effects, the effective tax rate
was 31.1%, 31.1% and 32.5% in 2002, 2001 and 2000, respectively.
Taxes impacted shareholders’ equity with a $477 credit for the year
ended June 30, 2002 and a $155 charge for the year ended June 30,
2001. These primarily relate to the tax effects of net investment hedges
and tax benefits from the exercise of stock options.
Undistributed earnings of foreign subsidiaries that are considered to be
reinvested indefinitely were $10,698 and $9,231 at June 30, 2002 and
2001, respectively. If such earnings were repatriated, additional taxes
may result.
One-Percentage
Point Increase
One-Percentage
Point Decrease
Effect on total of service and
interest cost components
Effect on postretirement
benefit obligation
$(23)
(239)
$29
291
Notes to Consolidated Financial Statements
Millions of dollars except per share amounts
Years Ended June 30
2002
Current Tax Expense
U.S. Federal
International
U.S. State & Local
Deferred Tax Expense
U.S. Federal
International & other
$975
551
116
1,642
571
(182)
389
2,031
$1,030
676
90
1,796
142
(244)
(102)
1,694
$648
816
67
1,531
241
222
463
1,994
2000
2001
Years Ended June 30
United States
International
$4,411
1,972
6,383
$3,340
1,276
4,616
$3,006
2,530
5,536
2002 2000
2001
2002
Years Ended June 30
Pension Benefits Other Retiree Benefits
Components of Net
Periodic Benefit Cost
Service cost
Interest cost
Expected return on
plan assets
Amortization of
prior service cost
Amortization of prior
transition amount
Settlement loss (gain)
Curtailment loss (gain)
Recognized net
actuarial loss (gain)
Gross benefit cost
Dividends on ESOP
preferred stock
Net periodic
benefit cost
$114
153
(133)
4
3
–
1
9
151
–
151
$115
149
(127)
5
3
6
(13)
3
141
–
141
$120
151
(122)
7
4
(6)
(3)
4
155
–
155
$49
116
(320)
(1)
–
–
(1)
(64)
(221)
(76)
(297)
$40
101
(317)
(1)
–
–
–
(85)
(262)
(76)
(338)
$39
90
(294)
(2)
–
–
–
(92)
(259)
(77)
(336)
20002001
2002 20002001