RECORD VOLUME DRIVES IMPROVED EARNINGS AT P&G
---------------------------------------------
CINCINNATI, Jan. 31, 2002 - The Procter & Gamble Company today reported
that it exceeded consensus expectations for second quarter results. P&G
delivered on the high end of its financial guidance for the October - December
quarter, behind record quarter unit volume.
For the quarter ended Dec. 31, 2001, unit volume grew five percent
versus the prior year led by double-digit growth in the health and beauty care
businesses. Excluding acquisitions and divestitures, unit volume increased four
percent. Net sales were $10.40 billion, up two percent versus year-ago.
"We are seeing clear improvements in our results, and we're pleased to
have met our commitments once again," said P&G President and Chief Executive A.
G. Lafley. "We're continuing our unyielding focus on delivering better consumer
value on our brands, building core categories, reducing the company's cost
structure and improving our cash flow."
Net earnings for the quarter were $1.30 billion or $0.93 per share.
Results included a $146 million after-tax restructuring charge related to the
company's streamlining of operations and business portfolio. This restructuring
charge for the quarter included employee separation costs of $85 million before
tax and asset related charges of $72 million before tax. Net earnings in the
year-ago quarter were $1.19 billion, including a $120 million after-tax
restructuring charge.
Core earnings were up six percent to $1.03 per share or $1.45 billion
for the quarter. This excludes restructuring charges and the adjustment to the
prior year to remove amortization no longer required for goodwill and certain
intangibles.
KEY QUARTERLY FINANCIAL HIGHLIGHTS
- ----------------------------------
* Core net earnings improvement was driven by operating margin expansion of
0.9 percentage points.
* Core gross margin progress (up 1.8 percentage points) reflects lower
manufacturing costs and increased restructuring savings. o Marketing,
research and administration (MR&A) reflects good progress on base savings
programs - but increased due to costs associated with the integration of
Clairol and increased investments in health care.
* Non-operating income was down behind lower minor brand divestiture gains.
* October - December operating cash flow was $1.8 billion, an increase of
$0.7 billion versus prior year.
* Capital spending was down $0.3 billion reflecting a continued focus on
driving capital efficiencies - the business is tracking ahead of schedule
to deliver the capital spending objective of being at or below six percent
of sales.
For the first six months, reported net earnings were $2.40 billion, or
$1.71 per share. Results included a $384 million after-tax charge related to the
restructuring program. Excluding restructuring charges and the prior year
amortization of goodwill and certain intangibles, core net earnings were $2.79
billion; core net earnings per share grew five percent to $1.99. Net sales were
up two percent, excluding a two percent negative foreign exchange impact.
The following provides additional perspective on the company's October
- - December results by business segment:
* Beauty care continued to deliver strong results led by progress on hair
care across all regions. Unit volume increased 15 percent driven by the
Clairol acquisition. Excluding the impact of acquisitions and divestitures,
volume was up three percent. Net sales were $2.06 billion, up 13 percent,
excluding a two percent negative exchange impact, as strength in hair care
- driven by Pantene(R), Head & Shoulders(R) and Clairol - was partially
offset by price adjustments in North America's personal cleansing category.
Excluding acquisitions and divestitures, net sales were up two percent. Net
earnings were $334 million, up 17 percent versus last year despite
increased costs associated with the integration of Clairol. This earnings
increase was driven by a continued focus on cost control and higher launch
costs in the base period.
* Health care posted strong results, with double-digit volume and sales
growth, led by oral care and pharmaceuticals. Unit volume increased 15
percent driven by strong sales of Actonel(R) and Crest(R) (particularly
White Strips(R) and Spinbrush(R)). Sales grew 17 percent to $1.34 billion
behind volume growth and positive mix effects. Crest joined the ranks of
P&G's billion dollar brands, achieving $1.0 billion in sales in calendar
year 2001. Net earnings were $172 million, up five percent, as investments
behind oral care initiatives and pharmaceutical research and development
partially offset gains due to volume.
* Net earnings in food and beverage increased despite a divestiture in the
prior year and commodity-related pricing actions. Sales declined 11 percent
to $1.05 billion on a nine percent unit volume decline. Excluding the
divestiture impacts, unit volume was down five percent reflecting an
increased competitive merchandising environment. Pricing also contributed
to decreased sales as we continued to reflect lower green coffee costs into
Folgers(R) pricing. Net earnings were $126 million, up two percent, behind
restructuring savings in juice and coffee and other cost savings efforts
offset by lower volumes.
* Baby, feminine and family care reflected solid results. Unit volume
increased three percent behind strong family care volume, particularly on
Bounty(R) in North America and baby care's Pamper's Wipes(R). Net sales
were $3.03 billion, down one percent, as commodity-driven price moves in
family care and targeted pricing actions in baby care more than offset
volume growth. Earnings were $335 million, up 14 percent, behind a strong
focus on cost efficiencies including restructuring gains.
* Fabric and home care results improved during the second quarter, with four
percent volume growth behind strength in Europe fabric care and improved
performance in North America home care. Net sales were $2.97 billion, up
one percent, as minor pricing and mix impacts in Western Europe and Asia
partially offset increased volume. Net earnings were $437 million, up 12
percent, due to disciplined cost management led by North America and
Western Europe and increased marketing support efficiencies.
THIRD QUARTER ESTIMATES
- -----------------------
For the third quarter, the company expects volume to be up in the high
single digits. Excluding Clairol, volume growth is expected to be up at about
the same level as the October - December quarter. Sales, excluding foreign
exchange, are expected to be up in the mid-single digits versus year ago. At
current rates, foreign exchange would negatively impact sales by two to three
percent. The company projects core earnings per share growth in the high single
digits reflecting strong volume and restructuring benefits.
FISCAL YEAR GUIDANCE
- --------------------
The company confirmed that it is comfortable with the guidance provided
earlier for fiscal 2002. Core earnings per share growth will be above that
achieved last year, but not yet at going levels of double digits. Sales,
excluding foreign exchange, are expected to be at or ahead of last year's growth
and approaching the target range of four to six percent. Volume is projected to
be in the mid-single digits.
All statements, other than statements of historical fact 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 the achievement of the business unit volume and
income growth projections, the achievement of the company's cost containment
goals, the successful integration of the Clairol business, the timely and
successful closing of the Jif(R) and Crisco(R) spin/merge transaction, the
continued political and/or economic uncertainty in Latin America, any political
and/or economic uncertainty due to terrorist activities, Kmart's successful
management during, and emergence from, Chapter 11 bankruptcy and P&G's
successful management of business, legal and financial matters during Kmart's
Chapter 11 bankruptcy proceedings, 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), Clairol Nice `n Easy(R),
Herbal Essences(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
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Media Relations Investor Relations
- --------------- ------------------
Linda L. Ulrey - (513) 983-8975 John Goodwin - (513) 983-2414
Martha W. Depenbrock - (513) 983-5366
P&G will web cast its conference call on Thursday, Jan. 31, 2001, at 8:30
a.m. to review its second 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/investors
---------------------------
Check the Corporate Information section of the investor site to view the web
cast.
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.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED EARNINGS INFORMATION
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THREE MONTHS ENDED DECEMBER 31
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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 $2,967 1% $ 660 12% $437 12%
Baby, Feminine and Family Care 3,025 -1% 553 14% 335 14%
Beauty Care 2,060 11% 441 7% 334 17%
Health Care 1,341 17% 264 5% 172 5%
Food and Beverage 1,053 -11% 192 -2% 126 2%
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Total Business Segments 10,446 3% 2,110 9% 1,404 12%
Corporate (excluding restructuring costs) (57) n/a (7) n/a 41 n/a
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Total Company - Core 10,389 2% 2,103 6% 1,445 6%
Restructuring Costs 14 n/a (189) n/a (146) n/a
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Total Company - Reported* 10,403 2% 1,914 7% 1,299 9%
* Percentages exclude goodwill and indefinite-lived intangible amortization expense and restructuring costs in both years.
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SIX MONTHS ENDED DECEMBER 31
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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 $5,850 -3% $1,325 0% $887 0%
Baby, Feminine and Family Care 6,022 -1% 1,102 11% 677 8%
Beauty Care 3,832 3% 899 13% 660 19%
Health Care 2,517 18% 474 28% 312 27%
Food and Beverage 2,008 -10% 346 9% 225 13%
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Total Business Segments 20,229 0% 4,146 9% 2,761 10%
Corporate (excluding restructuring costs) (98) n/a (106) n/a 26 n/a
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Total Company - Core 20,131 0% 4,040 5% 2,787 5%
Restructuring Costs 38 n/a (499) n/a (384) n/a
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Total Company - Reported* 20,169 0% 3,541 2% 2,403 2%
* Percentages exclude goodwill and indefinite-lived intangible amortization expense and restructuring costs in both years.
OCTOBER - DECEMBER 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 4% 5% -1% -1% -1% 1% 2%
Baby, Feminine and Family Care 3% 3% 0% -3% -1% -1% -1%
Beauty Care 15% 3% -2% -1% -1% 11% 13%
Health Care 15% 12% 0% 1% 1% 17% 17%
Food and Beverage -9% -5% 0% -3% 1% -11% -11%
Total Company (Core) 5% 4% -1% -2% 0% 2% 3%
* These sales percentage changes are approximations based on quantitative formulas that are consistently applied.
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
QUARTER
-------
Millions of dollars (except per share amounts) W/O RESTRUCTURING CHGS
AND W/O GOODWILL AMORTIZATION
OND 01 OND 00 %CHG OND 01 OND 00 %CHG
-------- -------- -------- -------- -------- --------
NET SALES $ 10,403 10,182 2 % $ 10,389 $ 10,182 2 %
COST OF PRODUCTS SOLD 5,339 5,417 (1)% 5,257 5,336 (1)%
-------- -------- -------- --------
GROSS MARGIN 5,064 4,765 6 % 5,132 4,846 6 %
MARKETING, RESEARCH & ADMINISTRATION 3,200 3,054 5 % 3,079 2,921 5 %
-------- -------- -------- --------
OPERATING INCOME 1,864 1,711 9 % 2,053 1,925 7 %
INTEREST EXPENSE 150 224 150 224
OTHER NON-OPERATING, NET 200 294 200 292
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 1,914 1,781 7 % 2,103 1,993 6 %
INCOME TAXES 615 587 658 624
-------- -------- -------- --------
NET EARNINGS 1,299 1,194 9 % 1,445 1,369 6 %
======== ======== ======== ========
EFFECTIVE TAX RATE 32.1% 33.0% 31.3% 31.3%
PER COMMON SHARE:
BASIC NET EARNINGS $ 0.98 $ 0.89 10% $ 1.09 $ 1.03 6 %
DILUTED NET EARNINGS $ 0.93 $ 0.84 11% $ 1.03 $ 0.97 6 %
DIVIDENDS $ 0.38 $ 0.35 $ 0.38 $ 0.35
AVERAGE DILUTED SHARES OUTSTANDING 1,401.5 1,411.0 1,401.5 1,411.0
BASIS PT BASIS PT
COMPARISONS AS A % OF NET SALES CHANGE CHANGE
- -------------------------------
COST OF PRODUCTS SOLD 51.3% 53.2% 50.6% 52.4%
GROSS MARGIN 48.7% 46.8% 190 49.4% 47.6% 180
MARKETING, RESEARCH & ADMINISTRATION 30.8% 30.0% 29.6% 28.7%
OPERATING MARGIN 17.9% 16.8% 110 19.8% 18.9% 90
EARNINGS BEFORE INCOME TAXES 18.4% 17.5% 20.2% 19.6%
NET EARNINGS 12.5% 11.7% 13.9% 13.4%
FYTD
----
W/O RESTRUCTURING CHGS
AND W/O GOODWILL AMORTIZATION
12/31/01 12/31/00 %CHG 12/31/01 12/31/00 %CHG
-------- -------- -------- -------- -------- --------
NET SALES $ 20,169 20,151 0 % 20,131 20,151 (0)%
COST OF PRODUCTS SOLD 10,450 10,724 (3)% 10,248 10,580 (3)%
-------- -------- -------- --------
GROSS MARGIN 9,719 9,427 3 % 9,883 9,571 3 %
MARKETING, RESEARCH & ADMINISTRATION 6,093 5,937 3 % 5,758 5,705 1 %
-------- -------- -------- --------
OPERATING INCOME 3,626 3,490 4 % 4,125 3,866 7 %
INTEREST EXPENSE 307 403 307 403
OTHER NON-OPERATING, NET 222 397 222 397
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 3,541 3,484 2 % 4,040 3,860 5 %
INCOME TAXES 1,138 1,135 1,253 1,198
NET EARNINGS 2,403 2,349 2 % 2,787 2,662 5 %
======== ======== ======== ========
EFFECTIVE TAX RATE 32.1% 32.6% 31.0% 31.0%
PER COMMON SHARE:
BASIC NET EARNINGS $ 1.81 $ 1.76 3 % $ 2.10 $ 1.99 6 %
DILUTED NET EARNINGS $ 1.71 $ 1.66 3 % $ 1.99 $ 1.89 5 %
DIVIDENDS $ 0.76 $ 0.70 $ 0.76 $ 0.70
AVERAGE DILUTED SHARES OUTSTANDING 1,401.0 1,410.0 1,401.0 1,410.0
BASIS PT BASIS PT
COMPARISONS AS A % OF NET SALES CHANGE CHANGE
- -------------------------------
COST OF PRODUCTS SOLD 51.8% 53.2% 50.9% 52.5%
GROSS MARGIN 48.2% 46.8% 140 49.1% 47.5% 160
MARKETING, RESEARCH & ADMINISTRATION 30.2% 29.5% 28.6% 28.3%
OPERATING MARGIN 18.0% 17.3% 70 20.5% 19.2% 130
EARNINGS BEFORE INCOME TAXES 17.6% 17.3% 20.1% 19.2%
NET EARNINGS 11.9% 11.7% 13.8% 13.2%