FOR IMMEDIATE RELEASE
---------------------
P&G DELIVERS EARNINGS GROWTH AT HIGH END OF GUIDANCE
----------------------------------------------------
CINCINNATI, April 28, 2003 - The Procter & Gamble Company (NYSE:PG)
announced another quarter of strong volume growth driving double-digit earnings
progress. This is the fifth consecutive quarter of double-digit core net
earnings progress - and attainment of long-term growth objectives.
Unit volume for the quarter grew seven percent over the prior year,
behind double-digit growth in the health care business and continued strong
results in Asia and Central and Eastern Europe. Excluding acquisitions and
divestitures, unit volume increased eight percent. Net sales were $10.66
billion, up eight percent versus year-ago. Sales include a positive three
percent impact from foreign exchange, partially offset by pricing investments to
stimulate growth and price changes to remain competitive. In addition, sales
growth was reduced two percent by acquisition and divestiture impacts.
"P&G's core businesses and leading brands are strong," said A.G.
Lafley, P&G chairman of the board, president and chief executive. "We are
broadening product offerings in core categories. We are offering better consumer
value and leading innovation in developing and developed markets, and are on
track to deliver P&G's fiscal year sales and earnings goals in a very
challenging global economic environment."
Net earnings for the quarter were $1.27 billion, or $0.91 per share, up
23 percent versus year-ago. Results included a $66 million after tax ($0.05 per
share) restructuring charge related to the Company's program to streamline its
operations and business portfolio. Net earnings in the year-ago quarter were
$1.04 billion, or $0.74 per share, including a $147 million after tax ($0.10 per
share) restructuring charge.
- More -
Core net earnings, which excludes restructuring charges, grew 13
percent to $1.34 billion for the quarter. On a per share basis, core net
earnings grew 14 percent to $0.96. Restructuring program charges include
separation related costs, asset write-downs, accelerated depreciation and other
costs directly related to the Company's reorganization.
Given the clearly defined scope of this restructuring, beginning in
1999 and ending in 2003, the Company believes excluding these program charges
from the Company's results provides investors with additional perspective on the
Company's underlying business trends and results. This is consistent with the
Company's external segment reporting and internal management goal-setting. As
such, restructuring charges are not included in business segment results, but
instead are reported in the Corporate segment.
KEY FINANCIAL HIGHLIGHTS
- ------------------------
o This quarter's top line results include pricing investments to continue
to offer good consumer value in a difficult economic environment. These
investments expanded the Company's mid-tier and developing market
businesses and improved in-store presence and merchandising in Western
Europe. In addition, competition-driven pricing adjustments were made
by Crest Whitestrips(R) in response to a competitive entry, baby care
to maintain shelf price parity versus a key competitor, and coffee and
family care to match key competitors' merchandising.
o Gross margin, including restructuring charges in both periods, was 49.4
percent, an increase of 60 basis points versus year-ago, primarily due
to lower restructuring charges in the current quarter. Gross margin
includes $46 million before tax of restructuring charges in the current
quarter and $92 million before tax in the prior quarter.
o Core gross margin, which excludes restructuring charges remained even
at 49.8 percent, reflecting a very strong base period that delivered a
310 basis point improvement. In the current quarter, a portion of base
business and restructuring savings were reinvested in initiative and
pricing activities to stimulate future growth.
o MR&A as a percent of sales improved 110 basis points. This includes $41
million before tax in restructuring charges in the current quarter and
$99 million before tax in the same quarter, year-ago. Core MR&A, which
excludes restructuring, as a percent of sales improved 50 basis points
behind lower overhead spending, which more than offset increased
marketing investments, particularly in health care and beauty care.
o Operating margin, including restructuring charges in both periods,
increased 170 basis points to 18.4 percent for the quarter. Core
operating margin, which excludes $87 million before tax of
restructuring charges in the current year and $191 million in the prior
year, expanded 50 basis points to 19.2 percent.
o The Company's operating cash flow for the quarter was $2.41 billion, a
seven percent increase versus year-ago. Operating cash flow less
capital spending, (free cash flow) for the third quarter was $2.06
billion, a 21 percent increase over the same quarter year-ago. For the
first three quarters of the year, free cash flow was $5.77 billion,
representing a $1.57 billion increase over the same period last year.
The majority of the year-over-year improvement is driven by earnings
increases with lower capital spending also contributing. Fiscal
year-to-date operating cash flow generation increased 24 percent to
$6.74 billion.
BUSINESS SEGMENT DISCUSSION:
- ---------------------------
The following provides additional perspective on the Company's January
- - March results by business segment.
o Baby and family care delivered robust results this quarter with strong
volume, sales and earnings growth. Unit volume increased seven percent
behind continued growth in baby care, driven primarily by Pampers Baby
Stages of Development(R) and solid results in North America and Western
Europe family care. Net sales increased nine percent to $2.47 billion,
including a positive four percent foreign exchange impact. Positive mix
behind strength in premium tier diapers was more than offset by temporary
pricing adjustments in North America to reach shelf unit price parity with
key competition in baby care and retain competitive pricing in family care.
Earnings increased 39 percent to $200 million reflecting volume growth,
cost reductions and lower promotional marketing investment versus the base
period.
o Health care delivered double-digit unit volume, net sales and net earnings
growth this quarter. Unit volume increased 18 percent, driven by strong
results in oral care and continued strength in pharmaceuticals. Net sales
were $1.43 billion, up 18 percent including a three percent positive
foreign exchange impact that was offset by lower Crest Whitestrips pricing
versus year-ago. Crest(R) and Actonel(R) both delivered particularly strong
volume and sales growth. Health care's net earnings increased 19 percent to
$147 million primarily behind volume. Strong gross margin progress was
re-invested in marketing, primarily in oral care.
o Beauty care continued its trend of strong business results. Unit volume was
up nine percent driven by hair care, including continued strength behind
Pantene(R) and Head & Shoulders(R), and feminine care. Sales grew 10
percent, including a positive four percent foreign exchange impact,
reaching $3.03 billion. Negative pricing and mix impacts were driven by the
repositioning of the Company's portfolio of hair care brands such as
Pert(R), Aussie(R) and Renewal 5x(R) into multiple price tiers. Net
earnings were $463 million, up 19 percent, driven by volume and continued
cost reductions, despite increased marketing investments.
o Fabric and home care delivered strong topline results this quarter. Unit
volume grew nine percent and was broad-based, led by strength in North
America home care and developing markets. Net sales were up eight percent
to $3.06 billion. This includes a positive two percent foreign exchange
impact partially offset by mix impacts from strong growth in mid-tier
brands and developing markets. Additionally, pricing investments behind
mid-tier growth in North America and increased spending in support of
improved in-store presence and merchandising in Western Europe contributed
to sales growth lagging volume growth. Net earnings increased six percent
to $499 million, as volume growth was partially offset by the funding of
increased initiative spending and in-store marketing investments including
the launch of Mr. Proper(R) in Germany and Bold(R) in Japan.
o Snacks and beverages unit volume was down one percent as improved snacks
results in North America and Western Europe were offset by soft results in
beverages. Sales grew one percent to $756 million, including a positive
four percent foreign exchange impact. Following several quarters of strong
earnings progress, current quarter net earnings declined 22 percent to $50
million. This partly reflects the response to competitive promotional
spending in the U.S. coffee market, which has escalated at a rate in excess
of that justified by commodity price declines, resulting in increased
spending to defend Folgers(R) share, which continued to grow.
FOURTH QUARTER ESTIMATE
- -----------------------
For the June quarter, volume is expected to increase by five to seven
percent, despite a high base period versus year-ago. Net sales are expected to
grow in the mid to high single-digits versus year-ago; foreign exchange is
expected to positively impact the top line by two to three percent. This results
in an expected sales growth range, excluding foreign exchange, of four to five
percent. This measure is consistent with how management has previously
communicated the company's topline growth objectives. As a result of the strong
topline growth, core earnings per share, which excludes restructuring charges,
is expected to grow ten to twelve percent. Reported earnings per share are
expected to grow at a lower rate than core earnings per share, reflecting base
business growth and a higher level of restructuring charges versus the base
period.
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 actual results to differ materially from those anticipated by some
of the statements made. These include: (1) the achievement of expected cost and
tax savings associated with changes in the Company's organization structure; (2)
the ability to achieve business plans, including growing volume profitably,
despite high levels of competitive activity, especially with respect to the
product categories and geographical markets in which the Company has chosen to
focus; (3) the ability to manage and maintain key customer relationships; (4)
the achievement of growth in significant developing markets such as China,
Turkey, Mexico, the Southern Cone of Latin America, the countries of Central and
Eastern Europe and the countries of Southeast Asia; (5) the ability to
successfully manage regulatory, tax and legal matters, including resolution of
pending matters within current estimates; (6) the ability to successfully
implement, achieve and sustain cost improvement plans in manufacturing and
overhead areas; (7) the ability to successfully manage currency (including
currency issues in Latin America), interest rate and certain commodity cost
exposures; (8) the ability to manage the continued political and/or economic
uncertainty in Latin America (including Venezuela) and war in the Middle East,
as well as any political and/or economic uncertainty due to terrorist activities
or war (including Korea); and (9) the successful acquisition, transition,
integration, and operation of the Wella business. If the Company's assumptions
and estimates are incorrect or do not come to fruition, or if the Company does
not achieve all of these key factors, then the Company's actual results might
differ materially from the forward-looking statements made herein.
ABOUT PROCTER & GAMBLE
- ----------------------
Two billion times a day, P&G brands touch the lives of people around
the world. Some of the nearly 300 P&G brands consumers know and use with
confidence in over 160 countries around the world include: 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), Crest(R), Actonel(R), Olay(R) and
Clairol Nice `n Easy(R). The P&G community consists of nearly 102,000 employees
working in almost 80 countries worldwide. Please visit WWW.PG.COM for the latest
news and in-depth information about P&G and its brands.
# # #
P&G CONTACTS:
- ------------
MEDIA
Before 9:00 a.m. EDT Terry Loftus, (513) 983-9736
After 9:00 a.m. EDT:
P&G Corporate Media Center:
U.S. media call: 1-(866) PROCTER (1-866-776-2837)
Media outside the U.S. call: +1-(513) 945-9087
INVESTOR RELATIONS
- ------------------
John P. Goodwin - (513) 983-2414
P&G will webcast its conference call on Monday, April 28, 2003, at 8:30
a.m. EDT to review its third quarter 2002/03 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
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 webcast.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
----------------------------------------------------------------------------------
Three Months Ended March 31, 2003
----------------------------------------------------------------------------------
% Change Earnings % Change % Change
Versus Before Versus Net Versus
Net Sales Year Ago Income Taxes Year Ago Earnings Year Ago
----------------------------------------------------------------------------------
FABRIC AND HOME CARE $ 3,061 8% $ 752 5% $ 499 6%
BABY AND FAMILY CARE 2,473 9% 334 30% 200 39%
BEAUTY CARE 3,026 10% 685 15% 463 19%
HEALTH CARE 1,428 18% 227 21% 147 19%
SNACKS AND BEVERAGES 756 1% 87 -19% 50 -22%
----------------------------------------------------------------------------------
TOTAL BUSINESS SEGMENT 10,744 10% 2,085 12% 1,359 14%
CORPORATE (excluding restructuring costs) (88) n/a (142) n/a (20) n/a
----------------------------------------------------------------------------------
TOTAL COMPANY - CORE 10,656 8% 1,943 12% 1,339 13%
RESTRUCTURING COSTS 0 n/a (87) n/a (66) n/a
----------------------------------------------------------------------------------
TOTAL COMPANY - REPORTED $ 10,656 8% $ 1,856 20% $ 1,273 23%
==================================================================================
----------------------------------------------------------------------------------
Nine Months Ended March 31, 2003
----------------------------------------------------------------------------------
% Change Earnings % Change % Change
Versus Before Versus Net Versus
Net Sales Year Ago Income Taxes Year Ago Earnings Year Ago
----------------------------------------------------------------------------------
FABRIC AND HOME CARE $ 9,295 7% $ 2,329 14% $ 1,560 15%
BABY AND FAMILY CARE 7,425 7% 1,177 18% 717 21%
BEAUTY CARE 9,146 15% 2,220 20% 1,518 19%
HEALTH CARE 4,405 18% 876 32% 596 37%
SNACKS AND BEVERAGES 2,459 2% 377 3% 251 7%
----------------------------------------------------------------------------------
TOTAL BUSINESS SEGMENT 32,730 10% 6,979 18% 4,642 19%
CORPORATE (excluding restructuring costs) (277) n/a (436) n/a (134) n/a
----------------------------------------------------------------------------------
TOTAL COMPANY - CORE 32,453 8% 6,543 13% 4,508 13%
RESTRUCTURING COSTS 4 n/a (370) n/a (277) n/a
----------------------------------------------------------------------------------
TOTAL COMPANY - REPORTED $ 32,457 8% $ 6,173 21% $4,231 23%
==================================================================================
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
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 9% 9% 2% -1% -2% 8% 6%
BABY AND FAMILY CARE 7% 7% 4% -3% 1% 9% 5%
BEAUTY CARE 9% 9% 4% -1% -2% 10% 6%
HEALTH CARE 18% 18% 3% -3% 0% 18% 15%
SNACKS AND BEVERAGES -1% -1% 4% -1% -1% 1% -3%
TOTAL COMPANY (CORE) 7% 8% 3% -2% 0% 8% 5%
** These sales percentage changes are approximations based on quantitative formulas that are consistently applied.
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
- -------------------------------------------------------------------------------------------------------------------------
JFM QUARTER
- -------------------------------------------------------------------------------------------------------------------------
W/O Restructuring Chgs
JFM 03 JFM 02 % CHG JFM 03 JFM 02 % CHG
---------- --------- ------ ---------- --------- ------
NET SALES $ 10,656 $ 9,900 8 % $ 10,656 $ 9,885 8 %
COST OF PRODUCTS SOLD 5,394 5,070 6 % 5,348 4,963 8 %
---------- --------- ------ ---------- --------- ------
GROSS MARGIN 5,262 4,830 9 % 5,308 4,922 8 %
MARKETING, RESEARCH & ADMINISTRATION 3,305 3,176 4 % 3,264 3,077 6 %
---------- --------- ------ ---------- --------- ------
OPERATING INCOME 1,957 1,654 18 % 2,044 1,845 11 %
TOTAL INTEREST EXPENSE 138 146 138 146
OTHER NON-OPERATING INCOME, NET 37 40 37 40
---------- --------- ------ ---------- --------- ------
EARNINGS BEFORE INCOME TAXES 1,856 1,548 20 % 1,943 1,739 12 %
INCOME TAXES 583 509 604 553
---------- --------- ------ ---------- --------- ------
NET EARNINGS $ 1,273 $ 1,039 23 % $ 1,339 $ 1,186 13 %
========== ========= ====== ========== ========= ======
EFFECTIVE TAX RATE 31.4 % 32.9 % 31.1 % 31.8 %
PER COMMON SHARE:
BASIC NET EARNINGS $ 0.96 $ 0.78 23 % $ 1.01 $ 0.89 13 %
DILUTED NET EARNINGS $ 0.91 $ 0.74 23 % $ 0.96 $ 0.84 14 %
DIVIDENDS $ 0.41 $ 0.38 $ 0.41 $ 0.38
AVERAGE DILUTED SHARES OUTSTANDING 1,395.8 1,405.7 1,395.8 1,405.7
Basis Pt Basis Pt
COMPARISONS AS A % OF NET SALES Chg Chg
- ------------------------------- -------- --------
COST OF PRODUCTS SOLD 50.6 % 51.2 % 50.2 % 50.2 %
GROSS MARGIN 49.4 % 48.8 % 60 49.8 % 49.8 % -
MARKETING, RESEARCH & ADMINISTRATION 31.0 % 32.1 % 30.6 % 31.1 %
OPERATING MARGIN 18.4 % 16.7 % 170 19.2 % 18.7 % 50
EARNINGS BEFORE INCOME TAXES 17.4 % 15.6 % 18.2 % 17.6 %
NET EARNINGS 11.9 % 10.5 % 12.6 % 12.0 %
- -------------------------------------------------------------------------------------------------------------------------
FYTD
- -------------------------------------------------------------------------------------------------------------------------
W/O Restructuring Chgs
3/31/03 3/31/02 % CHG 3/31/03 3/31/02 % CHG
---------- --------- ------ ---------- --------- ------
NET SALES $ 32,457 $ 30,069 8 % $ 32,453 $ 30,016 8 %
COST OF PRODUCTS SOLD 16,373 15,520 5 % 16,160 15,211 6 %
---------- --------- ------ ---------- --------- ------
GROSS MARGIN 16,084 14,549 11 % 16,293 14,805 10 %
MARKETING, RESEARCH & ADMINISTRATION 9,700 9,269 5 % 9,539 8,835 8 %
---------- --------- ------ ---------- --------- ------
OPERATING INCOME 6,384 5,280 21 % 6,754 5,970 13 %
TOTAL INTEREST EXPENSE 425 453 425 453
OTHER NON-OPERATING INCOME, NET 214 262 214 262
---------- --------- ------ ---------- --------- ------
EARNINGS BEFORE INCOME TAXES 6,173 5,089 21 % 6,543 5,779 13 %
INCOME TAXES 1,942 1,647 2,035 1,806
---------- --------- ------ ---------- --------- ------
NET EARNINGS 4,231 $ 3,442 23 % $ 4,508 $ 3,973 13 %
========== ========= ====== ========== ========= ======
EFFECTIVE TAX RATE 31.5 % 32.4 % 31.1 % 31.3 %
PER COMMON SHARE:
BASIC NET EARNINGS $ 3.19 $ 2.58 24 % $ 3.40 $ 2.99 14 %
DILUTED NET EARNINGS $ 3.01 $ 2.45 23 % $ 3.21 $ 2.83 13 %
DIVIDENDS $ 1.23 $ 1.14 $ 1.23 $ 1.14
AVERAGE DILUTED SHARES OUTSTANDING 1,401.9 1,402.5 1,401.9 1,402.5
Basis Pt Basis Pt
COMPARISONS AS A % OF NET SALES Chg Chg
- ------------------------------- -------- --------
COST OF PRODUCTS SOLD 50.4 % 51.6 % 49.8 % 50.7 %
GROSS MARGIN 49.6 % 48.4 % 120 50.2 % 49.3 % 90
MARKETING, RESEARCH & ADMINISTRATION 29.9 % 30.8 % 29.4 % 29.4 %
OPERATING MARGIN 19.7 % 17.6 % 210 20.8 % 19.9 % 90
EARNINGS BEFORE INCOME TAXES 19.0 % 16.9 % 20.2 % 19.3 %
NET EARNINGS 13.0 % 11.4 % 13.9 % 13.2 %
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Cash Flows Information
--------------------------------------
Nine Months Ended March 31
--------------------------------------
2003 2002
-------------- -------------
OPERATING ACTIVITIES
NET EARNINGS $ 4,231 $ 3,442
DEPRECIATION AND AMORTIZATION 1,231 1,188
DEFERRED INCOME TAXES 277 249
CHANGES IN:
ACCOUNTS RECEIVABLE 183 10
INVENTORIES (221) (226)
ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES 423 1,061
OTHER OPERATING ASSETS & LIABILITIES 73 (359)
OTHER 542 66
-------------- -------------
TOTAL OPERATING ACTIVITIES 6,739 5,431
-------------- -------------
CAPITAL EXPENDITURES (967) (1,224)
-------------- -------------
FREE CASH FLOW BEFORE DIVIDENDS $ 5,772 $ 4,207
============== =============
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Balance Sheet Information
March 31, 2003 June 30, 2002
-------------- -------------
CASH AND CASH EQUIVALENTS $ 5,513 $ 3,427
INVESTMENTS SECURITIES 312 196
ACCOUNTS RECEIVABLE 2,960 3,090
TOTAL INVENTORIES 3,763 3,456
OTHER 1,917 1,997
-------------- -------------
TOTAL CURRENT ASSETS 14,465 12,166
NET PROPERTY, PLANT AND EQUIPMENT 13,078 13,349
NET GOODWILL AND OTHER INTANGIBLE ASSETS 13,465 13,430
OTHER NON-CURRENT ASSETS 1,675 1,831
-------------- -------------
TOTAL ASSETS $ 42,683 $ 40,776
============== =============
ACCOUNTS PAYABLE $ 2,064 $ 2,205
ACCRUED AND OTHER LIABILITIES 5,654 5,330
TAXES PAYABLE 1,818 1,438
DEBT DUE WITHIN ONE YEAR 2,794 3,731
-------------- -------------
TOTAL CURRENT LIABILITIES 12,330 12,704
LONG-TERM DEBT 11,333 11,201
OTHER 3,495 3,165
-------------- -------------
TOTAL LIABILITIES 27,158 27,070
-------------- -------------
-------------- -------------
TOTAL SHAREHOLDERS' EQUITY 15,525 13,706
-------------- -------------
-------------- -------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 42,683 $ 40,776
============== =============