Proctor and Gamble 2005 Annual Report Download - page 40
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Please find page 40 of the 2005 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.Management’sDiscussionandAnalysisTheProcter&GambleCompanyandSubsidiaries
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Thesecreditfacilitiesdonothavecross-defaultorratingstriggers,nor
dotheyhavematerialadverseeventsclauses,exceptatthetimeof
signing.Whilenotconsideredmaterialtotheoverallfinancialcondition
oftheCompany,thereisacovenantinthecreditfacilitiesstatingthe
ratioofnetdebttoearningsbeforeinterestexpense,incometaxes,
depreciationandamortizationcannotexceedfouratthetimeofadraw
onthefacility.AsofJune30,2005,wearecomfortablybelowthislevel,
witharatioofapproximately1.2.
Additionally,wesecureda$3.40billionbridgefacilitytofundtheshare
buybackplanannouncedconcurrentlywiththeCompany’splanned
acquisitionofTheGilletteCompany.AsdiscussedinNote2tothe
ConsolidatedFinancialStatements,weenteredintoanagreementto
acquireTheGilletteCompanyonJanuary27,2005.Inconnectionwith
thistransaction,wealsoannouncedasharebuybackplanunderwhich
wewillacquireupto$22billionofCompanycommonshares.Asof
June30,2005,$3.00billioninshareswereacquiredunderthisplan,
financedbythebridgefacility.
OnJuly27,2005,wesigneda$24billionthree-yearcreditfacilitywith
asyndicateofbankstoreplacethecurrent$3.40billionbridgefacility.
Thecreditfacilitywillbeavailableforgeneralcorporatepurposeswith
theexpectationthatthemajorityofthefundswillbeusedtofundthe
sharerepurchaseprogram.Weexpectthesharebuybackprogramto
belargelycompletebyJune30,2006.Aspartofthesharerepurchase
program,wemayalsopurchasesharesofTheGilletteCompanyprior
totheclosetofacilitatecompletionofthetransaction(dependenton
marketconditionsandregulatoryapproval).Wedonotanticipateany
significantimpactstotheCompany’soverallliquidityasaresultof
theacquisitionorsharebuybackprogram.Thiscreditfacilitycarriesa
variableinterestrate.Interestonthefacilitywillbemanagedwithinour
overallinterestratemanagementpoliciesdescribedinNote6tothe
ConsolidatedFinancialStatements.
Inadditiontothesecreditfacilities,long-termborrowingavailable
underourcurrentshelfregistrationstatementwas$7.01billionat
June30,2005.
TheCompany’sMoody’sandStandard&Poor’s(S&P)short-termcredit
ratingsareP-1andA-1+,respectively.OurMoody’sandS&Plong-term
creditratingsareAa3andAA-withanegativeoutlook,respectively.
TheseratingswererecentlyconfirmedfollowingtheCompany’s
announcementoftheagreementtoacquireGilletteandthestock
buybackplan.
TreasuryPurchases.Duringthepastyear,wesubstantiallyincreasedour
levelofsharerepurchases.Totalsharerepurchasesin2005were$5.03
billion,ofwhich$3.00billionweremadeaspartofouraforementioned
sharerepurchaseplan.Asdiscussedpreviously,weexpecttolargely
completethesharepurchasesunderthisplanbyJune30,2006.In
2004,treasurysharepurchasestotaled$4.07billioncomparedto$1.24
billionin2003.Lowersharepurchasesin2003reflectedtheneedto
preservecapitalaheadoftheWellaacquisition.
GuaranteesandOtherOff-BalanceSheetArrangements.Wedonothave
guaranteesorotheroff-balancesheetfinancingarrangements,including
variableinterestentities,thatwebelievecouldhaveamaterialimpact
onfinancialconditionorliquidity.
ContractualCommitments.Thetablebelowprovidesinformationonour
contractualcommitmentsasofJune30,2005(inmillions).
LessThan 1–3 3–5 After5
Total 1Year Years Years Years
Recordedliabilities
Totaldebt $23,927 $11,414 $2,009 $2,763 $7,741
Capitalleases 327 50 232 36 9
WellaDominationandProfitTransferAgreement 1,0871,087 – – –
Other
Interestpaymentsrelatingtolong-termdebt 8,929 794 1,281 1,029 5,825
Operatingleases 977 215 288 215 259
Minimumpensionfunding1 643 241 402 – –
Purchaseobligations2 6,739 2,663 1,665 1,178 1,233
1 Representsfuturepensionpaymentstocomplywithlocalfundingrequirements.Theprojectedpaymentsbeyondfiscalyear2008arenotcurrentlydeterminable.
2 Primarilyreflectsfuturecontractualpaymentsundervarioustake-or-payarrangementsenteredintoaspartofthenormalcourseofbusiness.Commitmentsmadeundertake-or-payobligations
representfuturepurchasesinlinewithexpectedusagetoobtainfavorablepricing.Approximately70%relatestoservicecontractsforinformationtechnology,humanresourcesmanagement
andfacilitiesmanagementactivitiesthatwereoutsourcedinrecentyears.Whiletheamountslistedrepresentcontractualobligations,wedonotbelieveitislikelythatthefullcontractual
amountwouldbepaidiftheunderlyingcontractswerecanceledpriortomaturity.Insuchcases,wegenerallyareabletonegotiatenewcontractsorcancellationpenalties,resultinginareduced
payment.Theamountsdonotincludeobligationsrelatedtoothercontractualpurchaseobligationsthatarenottake-or-payarrangements.Suchcontractualpurchaseobligationsareprimarily
purchaseordersatfairvaluethatarepartofnormaloperationsandarereflectedinhistoricaloperatingcashflowtrends.Wedonotbelievesuchpurchaseobligationswilladverselyaffectour
liquidityposition.