FOR IMMEDIATE RELEASE
P&G DELIVERS IMPROVED CORE OPERATING EARNINGS
---------------------------------------------
CINCINNATI, Oct. 30, 2001 - The Procter & Gamble Company announced it
delivered first quarter results above consensus expectations. This performance
reflects the growing benefits of the company's focus on building core brands and
delivering its restructuring savings commitments.
For the quarter ended September 30, 2001, unit volume grew two percent
versus the prior year, excluding the one percent impact of divestitures. Net
sales were $9.77 billion, flat versus year-ago after adjusting for a two percent
negative exchange impact.
Net earnings for the quarter were $1.10 billion or $0.79 per share.
Results included a $238 million after-tax restructuring charge related to the
company's initiative to streamline its organization structure and business
portfolio. Net earnings in the year-ago quarter were $1.16 billion, including an
$85 million after-tax restructuring charge.
Core earnings for the quarter ended September 30, 2001 were up four
percent to $1.34 billion compared to $1.29 billion in the prior year. On a per
share basis, core net earnings grew four percent to $0.96 per share from $0.92
per share. Core results exclude restructuring charges in both periods and $53
million after-tax or $0.04 per share of goodwill and intangible asset
amortization in the prior period. In the first quarter, the company adopted the
new accounting rules for goodwill and other intangible assets, which
prospectively eliminates a significant portion of amortization expense beginning
July 1, 2001.
Excluding restructuring charges and adjusted for prior period
amortization, core operating income was up seven percent. The operating margin
progress was driven by gross margin improvement from lower material costs and
other cost saving programs. Importantly, overhead cost reductions are
accelerating, yielding further margin improvement.
"The company delivered solid core operating earnings growth. We
exceeded expectations and made good progress in what we acknowledged, even prior
to September 11, would be a difficult environment. We're pleased with the
continued growth in our core operating results, which is a direct result of
making clear strategic choices and cost efficiencies flowing from our
organization restructuring," said P&G President and Chief Executive, A.G.
Lafley.
The following provides additional perspective on the company's results
by business segment:
* Health care delivered double-digit growth behind the sustained development
of initiative programs on leading brands. Unit volume was up 19 percent
driven by excellent results in oral care, Iams(R) pet health and nutrition,
and pharmaceuticals. Net sales grew 21 percent to $1.18 billion, excluding
a two percent unfavorable exchange impact. Net earnings increased 73
percent to $140 million, reflecting the benefit of high margin brands
driving growth. In oral care, Spinbrush(R) is vying for value share
leadership in the U.S. electric toothbrush market, while Whitestrips(R)
achieved $100 million in net sales since its launch in May 2001. Iams(R)
continues to grow behind initiatives and channel expansion. Pharmaceuticals
continued growth was driven by Actonel(R), which built prescription share
in the United States, Canada and key European markets.
* Beauty care results demonstrate the benefit of portfolio shifts into higher
margin products behind leadership innovation. Unit volume was down slightly
due to Clearasil divestiture impacts; however, earnings growth was
outstanding. Net sales were $1.77 billion, comparable to the prior year
after excluding a three percent impact of unfavorable currencies and a two
percent impact of divestitures. Net earnings grew 22 percent to $326
million, primarily due to marketing support efficiencies behind growing
businesses and lower launch expenditures, coupled with disciplined cost
management. Additionally, the majority of key markets achieved double-digit
earnings progress, with Latin America providing the strongest growth behind
the successful restages of Pantene(R) and Head and Shoulders(R).
* Fabric and home care's focus on leadership brands and improved fundamentals
is beginning to show promising results in key markets. However, prior year
comparisons are difficult due to a very high base that included significant
customer buying in advance of a price increase in North America laundry.
Unit volume decreased two percent versus the prior year comparison, despite
growth in Western Europe and developing markets. Excluding two percent
negative foreign exchange and a one percent impact of divestitures in the
prior year, net sales of $2.88 billion were down three percent. Net
earnings were down 10 percent to $450 million versus year-ago, primarily
due to lower sales and minor brand divestitures in the prior year.
* The baby, feminine and family care segment generated earnings growth as the
business responds to improved consumer value propositions. Unit volume grew
four percent, driven by family care. Net sales of $3.00 billion were up two
percent excluding a three percent unfavorable exchange impact. Net earnings
for the quarter increased four percent to $342 million due to lower
commodity costs and other cost structure improvements.
* Food and beverage achieved solid earnings progress during the quarter.
Excluding divestitures, unit volume declined two percent. Net sales were
$955 million, down from the prior year level of $1.05 billion. The decrease
is attributable to divestitures, unfavorable foreign exchange impact and
commodity-related pricing actions in coffee. Importantly, net earnings grew
to $99 million, a 32 percent increase, behind heightened cost savings
efforts in juice and coffee.
Second Quarter Estimates:
------------------------
Commenting on P&G's ability to meet its targets for the remainder of
the fiscal year, Lafley said, "We do not underestimate for a minute the
challenges faced by all of us in these uncertain times, but as a result of the
structural changes that we have implemented over the last 18 months, I remain
confident we will continue to deliver improving business and financial results."
In the December quarter, sales excluding foreign exchange and volume
are both expected to be up in the low single digits versus year-ago. At current
rates, foreign exchange is estimated to negatively impact the top line by one
percent. Earnings per share growth is expected to be up in the low to
mid-single-digits, despite a significantly lower contribution from non-operating
profits in the current year.
Fiscal Year Guidance:
--------------------
For the fiscal year, the company updated guidance to reflect the impact
of several pending transactions: the Clairol acquisition which we hope to close
in the next few months; and the recently announced Jif and Crisco spin/merge
transaction with J.M. Smucker, which is expected to close in the April-June
quarter.
Each of these transactions is slightly dilutive, impacting core net
earnings per share by about $0.04 in total. However, based on better than
expected first half results, the company confirmed that it is comfortable with
its prior guidance and the current fiscal 2002 range of analysts' estimates,
even after incorporating the expected dilutive impacts of the pending
transactions. For reference, the company views the range of analysts' estimates,
adjusted up for the $0.15 goodwill elimination, to be $3.40-$3.50 for fiscal
year 2002.
All statements, other than statements of historical facts included in
this news release, are forward-looking statements, as that term is defined in
the Private Securities Litigation Reform Act of 1995. In addition to the risks
and uncertainties noted in this news release, there are certain factors that
could cause results to differ materially from those anticipated by some of the
statements made. These include achievement of the business unit volume and
income growth projections, the achievement of the company's cost containment
goals, any adverse effects related to or arising out of the events of September
11, 2001, the timely and successful closings of the Clairol acquisition and the
Jif and Crisco spin/merge transaction, as well as factors listed in Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
company's most recently filed Forms 10-K and 8-Ks.
P&G markets more than 250 brands including Pampers(R), Tide(R),
Ariel(R), Always(R), Whisper(R), Pantene(R), Bounty(R), Pringles(R), Folgers(R),
Charmin(R), Downy(R), Lenor(R), Iams(R), Olay(R), Crest(R), Vicks(R) and
Actonel(R). P&G employs nearly 106,000 people in more than 80 countries
worldwide. For more information about P&G, please visit our website at
www.pg.com.
# # #
P&G CONTACTS:
Linda L. Ulrey (513) 983-8975
Martha W. Depenbrock (513) 983-5366
P&G will web cast its conference call on Tuesday, October 30, 2001, at 8:30
a.m. to review its first quarter 2001/02 results. The call will last
approximately one hour. You may receive the web cast by going to our web site
at: http://www.pg.com/investor
We suggest you check in at least ten minutes in advance of the start time
to complete the brief registration process and ensure you are set up to receive
the web cast.
CONSOLIDATED STATEMENT OF EARNINGS
JAS QUARTER
W/O O-2005 Restructuring Chgs
Millions of dollars (except per share amounts) and W/O Goodwill Amortization
JAS 01 JAS 00 % CHG JAS 01 JAS 00 % CHG
---------- ---------- ------- ---------- ---------- -------
NET SALES $ 9,766 $ 9,969 (2)% $ 9,742 $ 9,969 (2)%
COST OF PRODUCTS SOLD 5,111 5,307 (4)% 4,991 5,244 (5)%
---------- ---------- ---------- ----------
GROSS MARGIN 4,655 4,662 (0)% 4,751 4,725 1 %
MARKETING, RESEARCH & ADMINISTRATION 2,893 2,883 0 % 2,679 2,784 (4)%
---------- ---------- ---------- ----------
OPERATING INCOME 1,762 1,779 (1)% 2,072 1,941 7 %
TOTAL INTEREST EXPENSE 157 179 157 179
OTHER NON-OPERATING, NET 22 103 22 105
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 1,627 1,703 (4)% 1,937 1,867 4 %
INCOME TAXES 523 548 595 574
NET EARNINGS 1,104 1,155 (4)% 1,342 1,293 4 %
========== ========= ========== =========
EFFECTIVE TAX RATE 32.1 % 32.2 % 30.7 % 30.7 %
EBITDA 2,166 2,385 2,476 2,549
PER COMMON SHARE:
BASIC NET EARNINGS 0.83 0.86 (3)% 1.01 0.97 4 %
DILUTED NET EARNINGS 0.79 0.82 (4)% 0.96 0.92 4 %
DIVIDENDS 0.38 0.35 0.38 0.35
AVERAGE DILUTED SHARES OUTSTANDING 1,400.8 1,410.8 1,400.8 1,410.8
Basis Pt Basis Pt
COMPARISONS AS A % OF NET SALES Chg Chg
-------------------------------
COST OF PRODUCTS SOLD 52.3 % 53.2 % 51.2 % 52.6 %
GROSS MARGIN 47.7 % 46.8 % 90 48.8 % 47.4 % 140
MARKETING, RESEARCH & ADMINISTRATION 29.6 % 28.9 % 27.5 % 27.9 %
OPERATING MARGIN 18.0 % 17.8 % 20 21.3 % 19.5 % 180
EARNINGS BEFORE INCOME TAXES 16.7 % 17.1 % 19.9 % 18.7 %
NET EARNINGS 11.3 % 11.6 % 13.8 % 13.0 %
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
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Three Months Ended September 30
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%Change %Change %Change
Versus Earnings Before Versus Net Versus
Net Sales Year Ago Income Taxes Year Ago* Earnings Year Ago*
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Fabric and Home Care $2,883 -6% $665 -10% $450 -10%
Baby, Feminine and Family Care 2,997 -1% 549 7% 342 4%
Beauty Care 1,772 -5% 458 19% 326 22%
Health Care 1,176 19% 210 79% 140 73%
Food and Beverage 955 -9% 154 26% 99 32%
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Total Business Segments 9,783 -2% 2,036 9% 1,357 9%
Corporate (excluding restructuring costs) (41) n/a (99) n/a (15) n/a
---------------------------------------------------------------------------------
Total Company - Core* 9,742 -2% 1,937 4% 1,342 4%
Restructuring Costs 24 n/a (310) n/a (238) n/a
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Total Company - Reported 9,766 -2% 1,627 -4% 1,104 -4%
<FN>
*Percentages exclude prior year goodwill amortization expense and restructuring costs in both years.
</FN>
JULY-SEPTEMBER NET SALES INFORMATION
(Percent Change vs. Year Ago) *
Volume
-------------------------------
With Without
Acquisitions/ Acquisitions/ Total Total Impact
Divestitures Divestitures FX Price Mix/Other Impact Ex-FX
------------------------------------------------------------------------------------------------
Fabric and Home Care -2 -2 -2 -1 -1 -6 -4
Baby, Feminine and Family Care +4 +4 -3 -1 -1 -1 +2
Beauty Care -1 +1 -3 -3 +2 -5 -2
Health Care +19 +17 -2 +1 +1 +19 +21
Food and Beverage -7 -2 -1 -2 +1 -9 -8
Total Company (Core) +1% +2% -2% -1% 0% -2% 0%
<FN>
* These sales percentage changes are approximations based on quantitative formulas that are consistently applied.
</FN>