Proctor and Gamble 2009 Annual Report Download - page 71

Notes to Consolidated Financial Statements The Procter & Gamble Company 69
Amounts in millions of dollars except per share amounts or as otherwise specified.
Off-Balance Sheet Arrangements
We do not have off-balance sheet financing arrangements, including
variable interest entities, that have a material impact on our financial
statements.
Purchase Commitments
We have purchase commitments for materials, supplies, services
and property, plant and equipment as part of the normal course of
business. Commitments made under take-or-pay obligations are as
follows: 2010
— $1,258; 2011 — $872; 2012 — $787; 2013 — $525;
2014
— $156; and $299 thereafter. Such amounts represent future
purchases in line with expected usage to obtain favorable pricing.
Approximately 43% of our purchase commitments relate to service
contracts for information technology, human resources management
and facilities management activities that have been outsourced to
third-party suppliers. Due to the proprietary nature of many of our
materials and processes, certain supply contracts contain penalty
provisions for early termination. We do not expect to incur penalty
payments under these provisions that would materially affect our
financial position, results of operations or cash flows.
Operating Leases
We lease certain property and equipment for varying periods. Future
minimum rental commitments under noncancelable operating
leases are as follows: 2010
— $305; 2011 — $272; 2012 — $223;
2013
— $202; 2014 — $176; and $442 thereafter. Operating lease
obligations are shown net of guaranteed sublease income.
Litigation
We are subject to various legal proceedings and claims arising out of
our business which cover a wide range of matters such as govern-
mental regulations, antitrust and trade regulations, product liability,
patent and trademark matters, income taxes and other actions.
As previously disclosed, the Company is subject to a variety of investi-
gations into potential competition law violations in Europe, including
investigations initiated in the fourth quarter of fiscal 2008 by the
European Commission with the assistance of national authorities
from a variety of countries. We believe these matters involve a number
of other consumer products companies and/or retail customers. The
Company’s policy is to comply with all laws and regulations, including
all antitrust and competition laws, and to cooperate with investigations
by relevant regulatory authorities, which the Company is doing.
Competition and antitrust law inquiries often continue for several years
and, if violations are found, can result in substantial fines. In other
industries, fines have amounted to hundreds of millions of dollars.
At this point, no significant formal claims have been made against the
Company or any of our subsidiaries in connection with any of the
above inquiries.
In response to the actions of the European Commission and national
authorities, the Company has launched its own internal investigations
into potential violations of competition laws, some of which are
ongoing. The Company has identified violations in certain European
countries and appropriate actions are being taken. It is still too early
for us to reasonably estimate the fines to which the Company will be
subject as a result of these competition law issues. However, the
ultimate resolution of these matters will likely result in fines or other
costs that could materially impact our income statement and cash
flows in the period in which they are accrued and paid, respectively.
As these matters evolve the Company will, if necessary, recognize the
appropriate reserves.
With respect to other litigation and claims, while considerable uncer-
tainty exists, in the opinion of management and our counsel, the
ultimate resolution of the various lawsuits and claims will not materially
affect our financial position, results of operations or cash flows.
We are also subject to contingencies pursuant to environmental laws
and regulations that in the future may require us to take action to
correct the effects on the environment of prior manufacturing and
waste disposal practices. Based on currently available information, we
do not believe the ultimate resolution of environmental remediation
will have a material adverse effect on our financial position, results of
operations or cash flows.
NOTE 11
SEGMENT INFORMATION
Through fiscal 2009, we were organized under three GBUs as follows:
ō The Beauty GBU includes the Beauty and the Grooming businesses.
The Beauty business is comprised of cosmetics, deodorants, prestige
fragrances, hair care, personal cleansing and skin care. The Grooming
business includes blades and razors, electric hair removal devices,
face and shave products and home appliances.
ō The Health and Well-Being GBU includes the Health Care and the
Snacks and Pet Care businesses. The Health Care business includes
feminine care, oral care, personal health care and pharmaceuticals.
The Snacks and Pet Care business includes pet food and snacks.
ō The Household Care GBU includes the Fabric Care and Home Care
as well as the Baby Care and Family Care businesses. The Fabric Care
and Home Care business includes air care, batteries, dish care,
fabric care and surface care. The Baby Care and Family Care business
includes baby wipes, bath tissue, diapers, facial tissue and paper
towels.
Under U.S. GAAP, we have six reportable segments: Beauty; Grooming;
Health Care; Snacks and Pet Care; Fabric Care and Home Care; and
Baby Care and Family Care. The accounting policies of the businesses
are generally the same as those described in Note 1. Differences
between these policies and U.S. GAAP primarily reflect: income taxes,
which are reflected in the businesses using applicable blended statutory
rates; the recording of fixed assets at historical exchange rates in certain
high-inflation economies; and the treatment of certain unconsolidated
investees. Certain unconsolidated investees are managed as integral
parts of our business units for management reporting purposes.