Proctor and Gamble 2012 Annual Report Download - page 21
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and organizational changes including acquisitions,
divestitures and workforce optimization projects to support
our growth strategies. We expect these types of changes to
continue for the foreseeable future. Successfully managing
these changes, including retention of key employees, is
critical to our business success. Further, ongoing business
and organizational changes are likely to result in more
reliance on third parties for various services, and that
reliance may increase reputational, operational, and
compliance risks, including the risk of corruption. We are
generally a build-from-within company, and our success is
dependent on identifying, developing and retaining key
employees to provide uninterrupted leadership and direction
for our business. This includes developing organization
capabilities in key growth markets where the depth of skilled
employees is limited and competition for these resources is
intense. Finally, our financial targets assume a consistent
level of productivity improvement. If we are unable to
deliver expected productivity improvements, while
continuing to invest in business growth, our financial results
could be adversely impacted.
Our ability to successfully manage ongoing acquisition,
joint venture, and divestiture activities could impact our
business results.
As a company that manages a portfolio of consumer
brands, our ongoing business model involves a certain level
of acquisition, joint venture and divestiture activities. We
must be able to successfully manage the impacts of these
activities, while at the same time delivering against our
business objectives. Specifically, our financial results could
be adversely impacted if: 1) we are not able to deliver the
expected cost and growth synergies associated with our
acquisitions and joint ventures, 2) changes in the cash flows
or other market-based assumptions cause the value of
acquired assets to fall below book value, or 3) we are unable
to offset the dilutive impacts from the loss of revenue
associated with divested brands. Additionally, joint ventures
inherently involve a lesser degree of control over business
operations, thereby potentially increasing the financial, legal,
operational, and/or compliance risks associated with each
joint venture we enter into.
Our business is subject to changes in legislation,
regulation and enforcement, and our ability to manage
and resolve pending legal matters in the United States
and abroad.
Changes in laws, regulations and related
interpretations, including changes in accounting standards,
taxation requirements and increased enforcement actions and
penalties may alter the environment in which we do
business. As a U.S. based multinational company we are
subject to tax regulations in the United States and multiple
foreign jurisdictions, some of which are interdependent. For
example, certain income that is earned and taxed in countries
outside the United States is not taxed in the United States,
provided those earnings are indefinitely reinvested outside
the United States. If these or other tax regulations should
change, our financial results could be impacted.
In addition, our ability to manage regulatory,
environmental, tax and legal matters (including product
liability, patent, and other intellectual property matters), and
to resolve pending legal matters without significant liability
may materially impact our results of operations and financial
position. Furthermore, if pending legal matters, including the
competition law and antitrust investigations described in
Item 3 of this Form 10-K and Note 10 of our Consolidated
Financial Statements, Commitments and Contingencies,
result in fines or costs in excess of the amounts accrued to
date, that could materially impact our results of operations
and financial position.
There are increasing calls in the United States from
members of leadership in both major U.S. political parties
for “comprehensive tax reform” which may significantly
change the income tax rules that are applicable to U.S.
domiciled corporations, such as P&G. It is very difficult to
assess whether the overall effect of such potential legislation
would be cumulatively positive or negative for P&G's
earnings and cash flows.
A material change in customer relationships or in
customer demand for our products could have a
significant impact on our business.
We sell most of our products via retail customers,
which consist of mass merchandisers, grocery stores, club
stores, drug stores and high-frequency stores. Our success is
dependent on our ability to successfully manage
relationships with our retail trade customers. This includes
our ability to offer trade terms that are acceptable to our
customers and are aligned with our pricing and profitability
targets. Our business could suffer if we cannot reach
agreement with a key customer based on our trade terms and
principles. Our business would be negatively impacted if a
key customer were to significantly reduce the range or
inventory level of our products.
Consolidation among our retail customers could
create significant cost and margin pressure and lead to more
complex work across broader geographic boundaries for
both us and our key retailers. This would be particularly
challenging if major customers are addressing local trade
pressures, local law and regulation changes, or financial
distress.
A failure of one or more key information technology
systems, networks, processes, associated sites or service
providers could have a material adverse impact on our
business or reputation.
We rely extensively on information technology (IT)
systems, networks, and services, including internet sites, data
hosting and processing facilities and tools, and other
hardware, software and technical applications and platforms,
some of which are managed, hosted, provided and/or used by