Proctor and Gamble 2014 Annual Report Download - page 75

The Procter & Gamble Company 73
Amounts in millions of dollars except per share amounts or as otherwise specified.
than obligations recorded as liabilities at the time of
divestiture, we have not made significant payments for these
indemnifications. We believe that if we were to incur a loss
on any of these matters, the loss would not have a material
effect on our financial position, results of operations or cash
flows.
In certain situations, we guarantee loans for suppliers and
customers. The total amount of guarantees issued under
such arrangements is not material.
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 and Operating Leases
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:
Years ended
June 30 2015 2016 2017 2018 2019
There
after
Purchase
obligations $ 1,068 $ 268 $ 164 $ 92 $ 72 $ 321
Such amounts represent future purchases in line with
expected usage to obtain favorable pricing. Approximately
19% 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.
We also lease certain property and equipment for varying
periods. Future minimum rental commitments under non-
cancelable operating leases, net of guaranteed sublease
income, are as follows:
Years ended
June 30 2015 2016 2017 2018 2019
There
after
Operating
leases $ 288 $ 273 $ 236 $ 216 $ 188 $ 743
Litigation
We are subject to various legal proceedings and claims
arising out of our business which cover a wide range of
matters such as antitrust, trade and other governmental
regulations, product liability, patent and trademark matters,
advertising, contracts, environmental issues, labor and
employments matters and income and other taxes.
As previously disclosed, the Company has had a number of
antitrust matters in Europe. These matters involve a number
of other consumer products companies and/or retail
customers. Several regulatory authorities in Europe have
issued separate decisions pursuant to their investigations
alleging that the Company, along with several other
companies, engaged in violations of competition laws in
those countries. Many of these matters have concluded and
the fines have been paid. For ongoing matters, the Company
has accrued liabilities for competition law violations totaling
$225 as of June 30, 2014. While the ultimate resolution of
these matters may result in fines or costs in excess of the
amounts reserved, we do not expect any such incremental
losses to materially impact our financial statements in the
period in which they are accrued and paid, respectively.
With respect to other litigation and claims, while
considerable uncertainty 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 effect on our financial
position, results of operations or cash flows.
NOTE 12
SEGMENT INFORMATION
Effective July 1, 2013, we reorganized our Global Business
Unit (GBU) structure, which resulted in changes to our
reporting segments. We reorganized our GBUs into four
industry-based sectors, comprised of 1) Global Beauty, 2)
Global Health and Grooming, 3) Global Fabric and Home
Care and 4) Global Baby, Feminine and Family Care. In
April 2014, we announced our decision to exit our Pet Care
business. On July 31, 2014, the Company completed the
divestiture of its Pet Care operations in North America, Latin
America and other selected markets. The Company is
pursuing alternate plans to sell its Pet Care business in the
other markets, primarily the European Union countries. This
GBU is reported as a discontinued operation for all periods
presented.
Under U.S. GAAP, the remaining GBUs underlying the four
sectors are aggregated into five reportable segments: 1)
Beauty, 2) Grooming, 3) Health Care, 4) Fabric Care and
Home Care and 5) Baby, Feminine and Family Care. As a
result of the organizational changes, Feminine Care
transitioned from Health Care to Baby, Feminine and Family
Care for all periods presented. Our five reportable segments
are comprised of:
•Beauty: Beauty Care (Antiperspirant and Deodorant,
Cosmetics, Personal Cleansing, Skin Care); Hair Care
and Color; Prestige (SKII, Fragrances); Salon
Professional;