FOR IMMEDIATE RELEASE
---------------------
P&G DELIVERS DOUBLE-DIGIT GROWTH IN THIRD QUARTER
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CINCINNATI, April 30, 2002 - P&G delivered double-digit volume and core
earnings per share growth for the January-March quarter, exceeding Wall Street
consensus estimates. This marks three quarters of sequential volume and core
earnings growth.
For the quarter ended March 31, 2002, unit volume grew 10 percent
versus the prior year behind double-digit growth in the health care and beauty
care businesses and strong progress in fabric and home care. Excluding
acquisitions and divestitures, unit volume increased six percent. Reported net
sales were $9.90 billion, up seven percent versus year-ago excluding a three
percent negative foreign exchange impact, as pricing and mix effects partially
offset volume growth.
"Last quarter's results were strong across core businesses, leading
brands and top countries. P&G is solidly back on track," said P&G President and
Chief Executive A. G. Lafley. "To sustain stronger results long-term, we must
continue to focus on consumer value, innovation leadership, outstanding brand
marketing and disciplined cash and cost management."
Net earnings for the quarter were $1.04 billion or $0.74 per share.
Results included a $147 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 $51 million before
tax and asset-related charges of $83 million before tax. Net earnings in the
year-ago quarter were $893 million, including a $113 million after-tax
restructuring charge.
Core net earnings growth was very strong, increasing 12 percent to
$0.84 per share or $1.19 billion for the quarter. Core results exclude
restructuring charges, as well as an adjustment to the prior year to remove
amortization of goodwill and certain intangibles that is no longer required
under the accounting rules. This is the second consecutive quarter with core
earnings growth across every business unit and marks a return to total company
double-digit earnings growth.
Key Financial Highlights
- ------------------------
* Core net earnings improvement was driven by operating margin expansion of
280 basis points. Gross margin improvement was exceptional, while
marketing, research and administration (MR&A), as a percent of net sales,
was fairly stable.
* Core gross margin progress (up 310 basis points) reflects decreased cost of
products sold and the benefits of a shift into higher margin businesses.
Lower material prices, the benefits of restructuring projects and volume
growth, drove the cost decline.
* Core MR&A as a percent of sales increased 30 basis points as overhead cost
reductions from restructuring actions were offset by Clairol integration
costs and increased marketing investments.
* The company's cash flow from operations for the first nine months of the
year was $5.4 billion, representing a $1.6 billion increase over the same
period last year. Combined with earnings growth, this increase reflects the
benefit of a non-recurring shift in payment timing on certain operating
accruals.
* In addition to operating cash flow progress, year-to-date capital spending
was down $0.7 billion achieving our long-term six percent of sales target
several quarters ahead of expectations.
For the first nine months of the fiscal year, reported net earnings
were $3.44 billion, or $2.45 per share. Results included a $531 million
after-tax restructuring charge related to the company's streamlining of
operations and business portfolio. This restructuring charge includes employee
separation costs of $348 million before tax and asset-related charges of $224
million before tax. Core net earnings were $3.97 billion; core net earnings per
share grew seven percent to $2.83, excluding restructuring charges and the prior
year amortization of goodwill and certain intangibles. Net sales were $30.1
billion, up three percent, excluding a two percent negative foreign exchange
impact.
The following provides additional perspective on the company's
January-March results by business segment:
* Fabric and home care delivered excellent results this quarter. Unit volume
increased six percent, driven by growth in North America behind
strengthened advertising fundamentals on all of our fabric care brands. The
Dawn(R) brand further expanded its U.S. value share leadership in the hand
dish market with outstanding share progress in the quarter. Net sales were
$2.84 billion, up five percent excluding a three percent negative foreign
exchange impact. Net earnings were $472 million, up 36 percent, reflecting
a continued focus on disciplined cost management. Operating expansion was
achieved through lower material prices, improved marketing efficiencies and
savings from restructuring activities.
* Health care continued to deliver excellent results as unit volume increased
16 percent, driven by strength in oral care, pharmaceuticals and pet health
and nutrition. Net sales were $1.22 billion, up 13 percent, excluding a two
percent negative exchange impact. Crest Whitestrips(R) and Spinbrush(R)
were particularly strong in oral care. By the end of the fiscal year,
Spinbrush(R) will be available in 20 countries, while shares have continued
to grow in the United States market. Net earnings were $124 million, up 36
percent versus last year reflecting volume and sales growth of high margin
items, which has funded increased marketing investments.
* Beauty care posted strong results, with double-digit volume, sales and
earnings growth, led by hair care and fine fragrances. Unit volume
increased 28 percent, driven by the Clairol acquisition. Excluding the
impact of acquisitions and divestitures, volume was up four percent behind
strength in hair care. Sales grew 21 percent, excluding a three percent
negative foreign exchange impact, reaching $2.11 billion. Volume growth was
partially offset by mix impacts driven by the Clairol business. Excluding
acquisitions and divestitures, net sales were up one percent versus year
ago due to unfavorable foreign exchange impacts and a comparison to base
period that reflected mix benefits from pipeline volume for premium
skincare initiatives. Net earnings were $269 million, up 11 percent. The
relationship between earnings and top-line growth reflects mix effects from
the Clairol acquisition.
* Net earnings in food and beverage increased behind broad-based cost
reductions. Unit volume is showing improvement after a slow start to the
fiscal year but is down one percent. Sales were $879 million, lower by five
percent excluding a one percent negative foreign exchange impact, as
Folgers(R) pricing continued to reflect lower green coffee costs. Net
earnings grew strongly, up 18 percent to $79 million.
* Baby, feminine and family care achieved solid earnings growth during the
quarter through both volume growth and cost reductions. Unit volume
increased four percent behind continuing strength in North America family
care across all three major brands (Bounty(R), Charmin(R), Puffs(R)) and
strong Pampers(R)growth while feminine care volume was down slightly. Net
sales were $2.90 billion, up two percent, excluding a three percent
negative foreign exchange impact, as volume growth was partially offset by
pricing adjustments to improve consumer value, including commodity-driven
price moves. Earnings were $263 million, up 11 percent, including a
non-operating gain from a licensing transaction with an unconsolidated
joint venture. Excluding this one-time gain, earnings would have been up
four percent, reflecting gross margin improvement from manufacturing
projects and commodity price reductions that funded increased marketing
investment.
Fourth Quarter and Next Fiscal Year Estimates
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For the fourth quarter, the company expects volume to be up in the high
single digits. 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 low teens reflecting strong volume and higher
operating margins. The company will provide full guidance on its 2003 fiscal
year in August. Based on preliminary data, however, the company anticipates
achieving its long-term sales growth objective of four to six percent. This will
likely be toward the low end of the range reflecting the full-year effect of the
Crisco(R)/Jif(R) spin merge. Core earnings per share is expected to grow at the
company's target rate of double-digits despite expected adverse movements in
interest rates and lower income from minor brand divestitures.
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 and the Middle
East, any political and/or economic uncertainty due to terrorist activities, 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
- -----
Linda L. Ulrey - (513) 983-8975
Terry E. Loftus - (513) 983-9736
Investor Relations
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John P. Goodwin - (513) 983-2414
P&G will web cast its conference call on Tuesday, April 30, 2002, at 8:30 a.m.
to review its third 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 Events and Presentation section of the P&G Investor Site for a link to
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 March 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 $2,837 2% $716 40% $472 36%
Baby, Feminine and Family Care 2,898 -1% 450 12% 263 11%
Beauty Care 2,109 18% 402 13% 269 11%
Health Care 1,215 11% 188 31% 124 36%
Food and Beverage 879 -6% 132 12% 79 18%
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TOTAL BUSINESS SEGMENTS 9,938 4% 1,888 23% 1,207 23%
Corporate (excluding restructuring costs) (53) n/a (149) n/a (21) n/a
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TOTAL COMPANY - CORE 9,885 4% 1,739 13% 1,186 12%
Restructuring Costs 15 n/a (191) n/a (147) n/a
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TOTAL COMPANY - REPORTED* 9,900 4% 1,548 12% 1,039 9%
*Percentages exclude goodwill and indefinite-lived intangible amortization expense and restructuring costs in both years.
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Nine Months Ended March 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 $8,687 -1% $2,041 11% $1,359 10%
Baby, Feminine and Family Care 8,920 -1% 1,552 11% 940 9%
Beauty Care 5,941 8% 1,301 13% 929 17%
Health Care 3,732 15% 662 29% 436 30%
Food and Beverage 2,887 -9% 478 10% 304 14%
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TOTAL BUSINESS SEGMENTS 30,167 2% 6,034 13% 3,968 14%
Corporate (excluding restructuring costs) (151) n/a (255) n/a 5 n/a
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TOTAL COMPANY - CORE 30,016 1% 5,779 7% 3,973 7%
Restructuring Costs 53 n/a (690) n/a (531) n/a
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TOTAL COMPANY - REPORTED* 30,069 1% 5,089 2% 3,442 1%
*Percentages exclude goodwill and indefinite-lived intangible amortization expense and restructuring costs in both years.
JANUARY - MARCH 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 6% 6% -3% -1% 0% 2% 5%
Baby, Feminine and Family Care 4% 4% -3% -3% 1% -1% 2%
Beauty Care 28% 4% -3% 0% -7% 18% 21%
Health Care 16% 17% -2% 1% -4% 11% 13%
Food and Beverage -1% -1% -1% -3% -1% -6% -5%
TOTAL COMPANY (Core) 10% 6% -3% -1% -2% 4% 7%
** These sales percentage changes are approximations based on quantitative formulas that are consistently applied.
CONSOLIDATED STATEMENT OF EARNINGS
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QUARTER
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Millions of dollars (except per share amounts) W/O Restructuring Chgs
and W/O Goodwill Amortization
JFM 02 JFM 01 % CHG JFM 02 JFM 01 % CHG
-------- -------- ----- -------- -------- -----
NET SALES $ 9,900 $ 9,511 4 % $ 9,885 $ 9,511 4 %
COST OF PRODUCTS SOLD 5,070 5,175 (2)% 4,963 5,073 (2)%
-------- -------- -------- --------
GROSS MARGIN 4,830 4,336 11 % 4,922 4,438 11 %
MARKETING, RESEARCH & ADMINISTRATION 3,176 3,034 5 % 3,077 2,925 5 %
-------- -------- -------- --------
OPERATING INCOME 1,654 1,302 27 % 1,845 1,513 22 %
INTEREST EXPENSE 146 204 146 204
OTHER NON-OPERATING INCOME 40 227 40 227
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 1,548 1,325 17 % 1,739 1,536 13 %
INCOME TAXES 509 432 553 474
NET EARNINGS 1,039 893 16 % 1,186 1,062 12 %
======== ======== ======== ========
EFFECTIVE TAX RATE 32.9 % 32.6 % 31.8 % 30.9 %
PER COMMON SHARE:
BASIC NET EARNINGS $ 0.78 $ 0.66 18 % $ 0.89 $ 0.79 13 %
DILUTED NET EARNINGS $ 0.74 $ 0.63 17 % $ 0.84 $ 0.75 12 %
DIVIDENDS $ 0.38 $ 0.35 $ 0.38 $ 0.35
AVERAGE DILUTED SHARES OUTSTANDING 1,405.7 1,404.9 1,405.7 1,404.9
COMPARISONS AS A % OF NET SALES Basis Pt Basis Pt
- ------------------------------- Chg Chg
COST OF PRODUCTS SOLD 51.2 % 54.4 % 50.2 % 53.3 %
GROSS MARGIN 48.8 % 45.6 % 320 49.8 % 46.7 % 310
MARKETING, RESEARCH & ADMINISTRATION 32.1 % 31.9 % 31.1 % 30.8 %
OPERATING MARGIN 16.7 % 13.7 % 300 18.7 % 15.9 % 280
EARNINGS BEFORE INCOME TAXES 15.6 % 13.9 % 17.6 % 16.1 %
NET EARNINGS 10.5 % 9.4 % 12.0 % 11.2 %
FYTD
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Millions of dollars (except per share amounts) W/O Restructuring Chgs
and W/O Goodwill Amortization
3/31/02 3/31/01 % CHG 3/31/02 3/31/01 % CHG
-------- -------- ------ -------- -------- -----
NET SALES $ 30,069 $ 29,662 1 % $ 30,016 $ 29,662 1 %
COST OF PRODUCTS SOLD 15,520 15,899 (2)% 15,211 15,653 (3)%
-------- -------- -------- --------
GROSS MARGIN 14,549 13,763 6 % 14,805 14,009 6 %
MARKETING, RESEARCH & ADMINISTRATION 9,269 8,971 3 % 8,835 8,630 2 %
-------- -------- -------- --------
OPERATING INCOME 5,280 4,792 10 % 5,970 5,379 11 %
INTEREST EXPENSE 453 607 453 607
OTHER NON-OPERATING INCOME 262 624 262 624
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 5,089 4,809 6 % 5,779 5,396 7 %
INCOME TAXES 1,647 1,567 1,806 1,672
NET EARNINGS 3,442 3,242 6 % 3,973 3,724 7 %
======== ======== ======== ========
EFFECTIVE TAX RATE 32.4 % 32.6 % 31.3 % 31.0 %
PER COMMON SHARE:
BASIC NET EARNINGS $ 2.58 $ 2.42 7 % $ 2.99 $ 2.78 8 %
DILUTED NET EARNINGS $ 2.45 $ 2.29 7 % $ 2.83 $ 2.64 7 %
DIVIDENDS $ 1.14 $ 1.05 $ 1.14 $ 1.05
AVERAGE DILUTED SHARES OUTSTANDING 1,402.5 1,408.3 1,402.5 1,408.3
COMPARISONS AS A % OF NET SALES Basis Pt Basis Pt
- ------------------------------- Chg Chg
COST OF PRODUCTS SOLD 51.6 % 53.6 % 50.7 % 52.8 %
GROSS MARGIN 48.4 % 46.4 % 200 49.3 % 47.2 % 210
MARKETING, RESEARCH & ADMINISTRATION 30.8 % 30.2 % 29.4 % 29.1 %
OPERATING MARGIN 17.6 % 16.2 % 140 19.9 % 18.1 % 180
EARNINGS BEFORE INCOME TAXES 16.9 % 16.2 % 19.3 % 18.2 %
NET EARNINGS 11.4 % 10.9 % 13.2 % 12.6 %