The Procter & Gamble Company
NEWS RELEASE One P&G Plaza
Cincinnati, OH 45202
FOR IMMEDIATE RELEASE
P&G DELIVERS 15% EARNINGS PER SHARE GROWTH FOR FISCAL YEAR
----------------------------------------------------------
April - June quarter sales up 10%, earnings per share up 12%
CINCINNATI, Aug. 1, 2005 - The Procter & Gamble Company (NYSE:PG) announced
strong top- and bottom-line growth for the April - June quarter and the fiscal
year. The company posted net sales growth of 10 percent for both the quarter and
fiscal year. Diluted net earnings per share were $0.56 for the quarter, a 12
percent increase, and $2.66 for the fiscal year, a 15 percent increase. This is
the fourth consecutive fiscal year the company delivered results at or above its
long-term annual growth rate targets for sales, earnings per share and free cash
flow productivity.
Executive Summary
- -----------------
o Unit volume grew six percent for the quarter and eight percent for the
fiscal year. Organic volume, which excludes the impact of acquisitions and
divestitures, increased seven percent for the quarter and eight percent for
the fiscal year. All business segments, regions and each of the company's
top 16 brands posted volume growth for the fiscal year.
o Net sales for the quarter increased 10 percent to $14.26 billion. For the
fiscal year, sales also grew 10 percent to $56.74 billion. Organic sales,
which exclude the impacts of acquisitions, divestitures and foreign
exchange, grew nine percent for the quarter and eight percent for fiscal
year.
o Diluted net earnings per share increased 12 percent for the quarter and 15
percent for the fiscal year.
o Earnings for both periods improved behind top-line growth, the benefits of a
balanced portfolio and a strong innovation program, despite a challenging
cost and competitive environment.
"We delivered another year of strong top- and bottom-line results despite
significant challenges from higher commodity costs, increased competitive
spending and continued economic weakness in Western Europe and Japan," said
Chairman of the Board, President and Chief Executive A.G. Lafley. "Our balanced
brand, customer and geographic presence and focus on consumer value and
innovation leadership continue to drive P&G's sustained growth. Today, P&G is
well positioned to deliver its growth targets, and the combination with Gillette
will provide further upside over the mid- and long-term."
April - June Quarter Discussion
- -------------------------------
Unit volume for the April - June quarter increased six percent. Organic
volume grew seven percent, which excludes the impact of acquisitions and
divestitures from year-over-year comparisons - primarily the divestiture of the
juice business. Volume growth was broad-based, led by strong gains in beauty,
fabric, health and home care. All regions posted unit volume growth of
mid-single digits or better, led by developing markets with growth in the
mid-teens.
Net sales for the quarter increased 10 percent to $14.26 billion. Organic
sales increased nine percent, well above the company's long-term annual target.
Foreign exchange added two percent to sales growth due to the strength of the
euro, Canadian dollar and British pound. Pricing added two percent to sales
growth behind actions that partially recovered the impact of higher commodity
costs in family care, pet health & nutrition, coffee and certain fabric care
markets.
For the quarter, net earnings increased nine percent to $1.50 billion.
Earnings growth was primarily driven by volume and pricing, partially offset by
higher commodity costs. Diluted net earnings per share increased 12 percent to
$0.56. Diluted net earnings per share grew ahead of net earnings due to share
repurchase activity. The company's stepped up share repurchase activity
associated with the Gillette acquisition, net of interest expense, was neutral
to earnings per share on the quarter.
Key Financial Highlights for the Quarter
- ----------------------------------------
o Gross margin contracted 110 basis points versus the prior year. Gross margin
decreased due to higher commodity costs, the mix impact of strong growth in
developing markets and the higher royalty expense rate for Prilosec OTC(R).
These more than offset the impacts of price increases, the scale benefits of
volume and manufacturing cost savings.
o For the quarter, selling, general and administrative expenses (SG&A) as a
percent of net sales improved by 70 basis points. Advertising spending was
up, but decreased as a percent of sales behind scale leverage. This was
partially offset by investments in selling capability, primarily in P&G
Beauty.
Business Segment Discussion for the Quarter
- -------------------------------------------
The following provides perspective on the company's April - June quarter
results by business segment.
P&G Beauty
- ----------
o For the quarter, P&G Beauty delivered strong sales and double-digit earnings
growth. Unit volume increased eight percent behind broad-based growth,
including strong double-digit growth of the Olay(R) brand and developing
markets. Global feminine care volume increased by low-double digits behind
product innovations on Always/Whisper(R) and continued growth of
Naturella(R). Professional and Prestige grew low-double digits behind strong
results in the Professional business. Global hair care volume increased
high-single digits behind the continued growth of Pantene(R), Head &
Shoulders(R) and Rejoice(R). P&G Beauty net sales increased 12 percent to
$4.93 billion, including a three percent gain from foreign exchange. Net
earnings increased 27 percent to $644 million primarily due to volume growth
and cost savings projects.
P&G Family Health
- -----------------
o Health care delivered a very strong quarter of volume, sales and earnings
growth. Unit volume increased 12 percent behind the continued success of
Prilosec OTC, Actonel(R) and oral care in developing markets. Health care
net sales increased 16 percent to $1.90 billion, including a positive
foreign exchange impact of two percent. Pricing added two percent to sales
growth due to actions taken earlier in the year in pet health & nutrition
and pharmaceuticals. Net earnings increased 42 percent to $182 million
driven by volume, partially offset by the higher royalty expense rate for
Prilosec OTC. Earnings margin also increased due to lower marketing spending
as a percentage of sales.
o For the quarter, baby care and family care delivered strong sales and
earnings growth. Unit volume increased six percent behind the continued
success of Baby Stages of Development(R) and recent initiatives on
Charmin(R) and Bounty(R) in North America. Net sales increased 10 percent to
$3.01 billion, with foreign exchange contributing two percent to sales
growth. Pricing added two percent to sales growth primarily from actions
earlier in the fiscal year in family care to recover higher commodity costs.
Earnings grew 25 percent to $246 million. Earnings increased behind the
scale benefits of volume growth and manufacturing cost savings. Pricing
largely offset the negative impact of higher commodity costs and
initiatives.
P&G Household Care
- ------------------
o Fabric care and home care unit volume increased eight percent in the April -
June quarter. Developing market volume increased by mid-teens behind the
continued growth of Tide(R) and Ariel(R). Growth was also driven by
initiatives -- Swiffer(R) in Western Europe; Ariel Ion Power Gel(R) in North
East Asia; Tide with a Touch of Downy(R), Febreze Air Effects(R) and Dawn(R)
in North America. Net sales increased 10 percent to $3.85 billion, including
a positive foreign exchange impact of two percent. Pricing actions on select
brands in the United States, Latin America, Eastern Europe, China and
certain Western European countries added one percent to sales growth. The
mix effect of strong developing market growth reduced sales by one percent.
Net earnings were $458 million, a decrease of 11 percent. Earnings margin
declined primarily due to commodity costs, which continued to increase in
the quarter.
o For the quarter, snacks and coffee delivered strong earnings growth. Unit
volume was flat. Net sales increased 11 percent to $787 million propelled by
pricing in coffee to recover the impact of higher commodity costs. Positive
foreign exchange of one percent was offset by product mix. Net earnings were
$105 million, an increase of 62 percent. Earnings increased due to sales
growth and continued progress on cost savings against a base period where
coffee market pricing lagged commodity cost increases.
Fiscal Year Discussion
- ----------------------
For the fiscal year, the company delivered results at or above its long-term
annual growth targets for sales, earnings per share and free cash flow
productivity. Unit volume for the fiscal year increased eight percent. Organic
volume also grew eight percent. Volume growth was broad-based, reflecting the
overall balance of the company's portfolio, with double-digit growth from the
beauty and health care businesses. All regions delivered mid-single digit volume
growth or better, with developing market volume growth in the high-teens. Every
one of the company's top 16 brands and each of the top 16 countries delivered
volume growth for the fiscal year.
Net sales for the fiscal year reached a record level of $56.74 billion, an
increase of 10 percent versus the prior year. Foreign exchange contributed two
percent to net sales growth, primarily driven by the strength of the euro,
British pound and Japanese yen. Net sales excluding foreign exchange increased
eight percent, above the company's long-term target of four to six percent.
Organic sales, which exclude the effects of acquisitions, divestitures and
foreign exchange, also increased eight percent. Mix reduced sales by one percent
due to higher relative growth in developing markets. Pricing added one percent
to sales growth behind actions to recover higher commodity costs in family care,
pet health & nutrition, coffee and in certain fabric care markets. These actions
were partially offset by price investments taken primarily earlier in the fiscal
year to address the growth of hard discounters in Europe and in response to
competitive activity in select fabric care and baby care markets.
Net earnings in 2005 increased 12 percent to $7.26 billion. Net earnings
margin increased 20 basis points to 12.8 percent. Earnings margin grew primarily
behind volume and cost reduction efforts, which more than offset the effects of
higher commodity costs.
Diluted net earnings per share were $2.66, an increase of 15 percent
compared to the prior year and above the company's annual minimum target growth
rate of 10 percent. Diluted net earnings per share grew ahead of net earnings
due to the company's share repurchase activity.
The effective tax rate for the fiscal year improved by 20 basis points
compared to the prior year. This includes a provision of $295 million for taxes
on the anticipated repatriation of income earned outside of the United States
under the American Jobs Creation Act. The company plans to repatriate $7.20
billion under the Act. This charge was largely offset by the reversal of tax
provisions for the successful resolution of tax audits in certain countries. The
effective tax rate also benefited from the overall country mix of taxable
income.
Key Financial Highlights for the Fiscal Year
- --------------------------------------------
o Gross margin in 2005 was 51.0 percent, a decrease of 20 basis points versus
the prior year. The company was able to largely offset higher commodity
costs, which reduced gross margin by more than 100 basis points, through the
scale benefits of volume growth, supply chain savings and pricing. Gross
margin also contracted due to the mix impact of strong growth in developing
markets.
o SG&A as a percent of sales improved by 40 basis points in 2005 versus the
prior year. Lower marketing spending as a percent of net sales drove the
basis point reduction in SG&A. Absolute spending for marketing increased
behind higher television advertising and production expense, as well as
increased promotional activity in response to competition. Marketing
spending increased to support product innovations including Olay
Anti-Aging(R), Olay Moisturinse(R), Olay Quench(R), Pantene Pro-Health(R),
Pantene Color Expressions(R), Tide with a Touch of Downy(R), Tide
Coldwater(R), Febreze Air Effects(R), Pampers Feel n' Learn(R), Kandoo
Toddler Wipes and Handsoap(R), and the geographical expansion of SK-II(R),
Lenor(R) and Herbal Essences(R). Overhead spending as a percentage of net
sales was consistent with the prior year period. Scale efficiencies in the
base business were offset by the mix impact of two additional months of
Wella in the current year and investments in selling capability. Minority
interest expense decreased versus the base period reflecting the impacts
from the company's purchase of the remaining stake in its China venture from
Hutchison Whampoa China Ltd., as well as the completion of the domination
and profit transfer agreement with Wella AG.
o The company's operating cash flow for the fiscal year was $8.72 billion
compared to $9.36 billion in the prior year. The operating cash increase
from higher net earnings was offset primarily by changes in inventory and
payables. Inventory days on hand were up two days versus the prior year due
to higher commodity costs and efforts to rebuild inventory levels in product
categories that could not meet customer demand. Days payables were down
three days versus the prior year. Operating cash was also reduced by tax
payments related to the settlement of prior year audits. Capital
expenditures for the year were 3.8 percent of net sales, slightly below the
company's long-term target of about 4 percent of net sales. Free cash flow,
defined as cash from operating activities less capital expenditures was
$6.54 billion. This represents free cash flow productivity of 90 percent,
in-line with the company's long-term objective.
Fiscal Year Business Segment Discussion
- ---------------------------------------
The following provides perspective on the company's fiscal year results by
business segment.
P&G Beauty
- ----------
o P&G Beauty delivered outstanding results with double-digit sales and
earnings growth for the fiscal year. Unit volume increased 12 percent.
Organic volume increased eight percent, with the difference due primarily to
the full year impact of Wella. Unit volume increased behind base business
growth and several new product initiatives including Olay Quench hand and
body lotions, Olay Moisturinse in-shower body moisturizer, Lacoste Touch of
Pink(R), Pantene Pro-Health and Pantene Color Expressions. Double-digit
growth in the feminine care business continues to be driven by product
upgrades to the Always/Whisper brands and the successful introduction of
Naturella in Latin America and Central and Eastern Europe. Global hair care
increased by low-double digits behind the Pantene, Head & Shoulders, Herbal
Essences, Rejoice and Aussie(R) brands. Net sales increased 14 percent to
$19.48 billion. Foreign exchange contributed three percent to sales growth,
while the mix impact of strong sales in developing markets reduced sales by
one percent. Net earnings increased 22 percent to $2.85 billion due to
volume growth, cost reduction programs and the impacts of the company's
increased ownership of the China operation and the domination and profit
transfer agreement with Wella AG. These benefits were partially offset by
marketing spending to support initiatives.
P&G Family Health
- -----------------
o Health care delivered solid results for the fiscal year. Unit volume in 2005
increased 10 percent behind very strong growth of Prilosec OTC, Actonel and
oral care in developing markets. Oral care posted mid-single digit volume
growth globally despite a challenging competitive environment in dentifrice
and a smaller market for tooth whitening products. Net sales increased 11
percent to $7.79 billion aided by a positive two percent foreign exchange
impact. Pricing in pet health & nutrition and pharmaceuticals increased
sales by one percent. Product mix reduced sales by two percent due to strong
oral care growth in developing markets and the shift of branded Macrobid(R)
sales to generics. Health care's net earnings were $1.00 billion, an
increase of eight percent against a base period comparison where earnings
increased 36 percent. Earnings increased primarily due to volume growth,
partially offset by marketing investments in support of initiatives.
After-tax earnings margin declined 40 basis points year-over-year due, in
part, to product mix impacts of lower volume in branded Macrobid and Crest
Whitestrips(R), both of which have higher margins than the balance of the
health care business. Earnings were also negatively impacted by a higher
royalty expense rate for Prilosec OTC and higher commodity costs.
o For the fiscal year, baby care and family care delivered very strong
results. Unit volume increased seven percent led by baby care's continued
stream of innovation including Feel `n Learn training pants in North
America, Baby Dry(R) fit upgrade and Baby Stages of Development upgrades in
Western Europe, and the expansion of Pampers Kandoo(R) in North America.
Family care volume increased due to product, packaging and format
initiatives in North America on both the Bounty and Charmin brands. Net
sales increased 11 percent to $11.89 billion, including a positive three
percent impact from foreign exchange. Pricing added one percent to sales
growth. Actions in North America family care to recover higher commodity
costs were partially offset by targeted pricing investments in Western
Europe baby care in response to competitive activity. Net earnings increased
28 percent to $1.26 billion, behind volume and manufacturing cost savings,
partially offset by marketing investments in support of initiatives.
P&G Household Care
- ------------------
o Fiscal year unit volume increased by nine percent in fabric care and home
care. Acquisitions in Europe and Latin America contributed two percent to
volume growth versus the prior year. Unit volume increased behind strong
initiative activity, expansion of the portfolio to serve more consumers and
continued growth in developing markets. Volume growth was led by the
continued success of Lenor, Febreze Air Effects, Swiffer Duster(R) and
Gain(R), as well as the launches of Tide with a Touch of Downy, Downy Simple
Pleasures and Mr. Clean Magic Reach(R). Developing markets grew volume by
double-digits, led by Greater China and the continued success of Tide. Net
sales increased 10 percent to $15.26 billion. Foreign exchange added two
percent to sales growth. The mix impact of higher relative growth in
developing markets reduced sales by one percent. Net earnings were $2.13
billion, a decrease of two percent compared to the prior year. After-tax
earnings margins declined primarily due to higher commodity costs, which
more than offset the scale benefits of volume growth and pricing actions
taken during the year. The after-tax margin in 2005 was also negatively
impacted by the mix effect of developing market growth.
o For the fiscal year, snacks and coffee delivered strong results. Unit volume
increased three percent compared to the prior year. Pringles volume grew
behind expanded distribution and merchandizing of customized flavors and
Pringles Prints(R) in North America. Coffee volume increased behind
Folgers(R) dark roasts. Net sales increased eight percent to $3.14 billion.
The combination of pricing to recover higher commodity costs and reduced
promotional spending increased sales four percent. Foreign exchange had a
positive two percent effect on sales growth. Net earnings increased 21
percent to $417 million behind higher volume, pricing to recover commodity
costs and lower merchandising spending versus the prior year.
Fiscal Year 2006 and July - September Quarter Guidance
- ------------------------------------------------------
Effective July 1, the company adopted stock option expensing using the
modified retrospective methodology. Prior year results will be restated to
reflect stock option expensing, consistent with the pro forma disclosures in the
Notes to Consolidated Financial Statements. A summary of the pro forma stock
option expense for fiscal year 2005 appears at the end of this release.
Fiscal year guidance does not include any impacts related to the pending
acquisition of Gillette or the stepped up share repurchase program. For 2006,
the company expects to deliver its fifth consecutive year of growth at or above
long-term targets, despite a very strong base period. Organic sales are expected
to grow by four to six percent. Foreign exchange is expected to reduce sales by
one to two percent. The impact of acquisitions and divestitures is expected to
be neutral to sales growth, excluding Gillette. The combination of pricing and
product mix is expected to provide a modest gain to sales growth. Total sales
are expected to increase three to five percent. The company stated it is
comfortable with the current analysts' consensus estimate of earnings per share.
This estimate excludes stock option expenses, which the company expects will be
$0.13 per share. The implied earnings per share growth rate is in line with our
double-digit long-term target. Operating margins are expected to be up modestly.
The tax rate for fiscal year 2006 is expected to decline 25 to 75 basis points
to about 30 percent, due mainly to strong growth in lower tax rate regions.
Guidance for the July - September quarter includes the impact of the
company's stepped up share repurchase program due to the Gillette acquisition.
For the quarter, the company expects sales growth of six to eight percent. A
modest gain from foreign exchange is expected to be offset by the impact of the
juice divestiture in the prior year. The combination of pricing and mix is
expected to add one to two percent to sales growth. The company is comfortable
with the current analysts' consensus estimate of earnings per share, which
excludes the impacts of stock option expensing and stepped up share repurchases.
This is equivalent to earnings per share growth of 10 percent excluding the
$0.02 per share gain from the juice divestiture proceeds in the base. Stock
option expense for the quarter should be $0.03 per share - in-line with prior
year pro forma results. The increase in year-on-year share repurchases, net of
associated interest expense, is expected to add up to $0.01 per share. Operating
margin is expected to be about neutral versus the comparable prior year period.
The tax rate for the quarter is expected to be about 30 percent.
Forward-Looking Statements
- --------------------------
All statements, other than statements of historical fact included in this
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 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 ability to achieve business plans,
including with respect to lower income consumers and growing existing sales and
volume profitably despite high levels of competitive activity, especially with
respect to the product categories and geographical markets (including developing
markets) in which the company has chosen to focus; (2) the ability to
successfully execute, manage and integrate key acquisitions and mergers,
including (i) the Domination and Profit Transfer Agreement with Wella, and (ii)
the company's agreement to merge with The Gillette Company, including obtaining
the related required regulatory approvals; (3) the ability to manage and
maintain key customer relationships; (4) the ability to maintain key
manufacturing and supply sources (including sole supplier and plant
manufacturing sources); (5) the ability to successfully manage regulatory, tax
and legal matters (including product liability, patent, and other intellectual
property matters), and to resolve pending matters within current estimates; (6)
the ability to successfully implement, achieve and sustain cost improvement
plans in manufacturing and overhead areas, including the company's outsourcing
projects; (7) the ability to successfully manage currency (including currency
issues in volatile countries), debt (including debt related to the company's
announced plan to repurchase shares of the company's stock), interest rate and
certain commodity cost exposures; (8) the ability to manage the continued global
political and/or economic uncertainty and disruptions, especially in the
company's significant geographical markets, as well as any political and/or
economic uncertainty and disruptions due to terrorist activities; (9) the
ability to successfully manage the pattern of sales, including the variation in
sales volume within periods; (10) the ability to successfully manage competitive
factors, including prices, promotional incentives and trade terms for products;
(11) the ability to obtain patents and respond to technological advances
attained by competitors and patents granted to competitors; (12) the ability to
successfully manage increases in the prices of raw materials used to make the
company's products; (13) the ability to stay close to consumers in an era of
increased media fragmentation; and (14) the ability to stay on the leading edge
of innovation. For additional information concerning factors that could cause
actual results to materially differ from those projected herein, please refer to
our most recent 10-K, 10-Q and 8-K reports.
About Procter & Gamble
- ----------------------
Two billion times a day, P&G brands touch the lives of people around the
world. The company has one of the strongest portfolios of trusted, quality,
leadership 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), Crest(R), Actonel(R), Olay(R), Clairol Nice `n
Easy(R), Head & Shoulders(R), and Wella. The P&G community consists of almost
110,000 employees working in over 80 countries worldwide.
# # #
P&G Media Contact:
- -----------------
In the US: 1-866-PROCTER or 1-866-776-2837
International: +1-513-945-9087
P&G Investor Relations Contact:
- ------------------------------
Thomas Tippl - (513) 983-2414
The Procter & Gamble Company
Segment Names
- -------------
Beginning July 1, 2005, we renamed our global business units. Beauty Care
was renamed P&G Beauty; Health, Baby and Family Care was changed to P&G Family
Health; and Household Care was renamed P&G Household Care. No changes were made
to the composition or historical results of the global business units.
Pro Forma Stock-Based Compensation
- ----------------------------------
The company's guidance for fiscal year 2006 and the July - September quarter
includes the impacts of stock option expensing. In December 2004, the Financial
Accounting Standards Board (FASB) issued SFAS No. 123 (Revised 2004),
"Share-Based Payment" (SFAS 123(R)). This Statement revises SFAS No. 123 by
eliminating the option to account for employee stock options under APB No. 25
and generally requires companies to recognize the cost of employee services
received in exchange for awards of equity instruments based on the grant-date
fair value of those awards (the "fair-value-based" method). The company adopted
SFAS 123(R) on July 1, 2005 using the modified retrospective method, whereby all
prior periods will be adjusted to give effect to the fair-value-based method of
accounting for awards granted in fiscal years beginning on or after July 1,
1995. The following table provides the pro forma stock-based compensation
expense for fiscal year 2005:
Fiscal
Q1 Q2 Q3 Q4 2005
Net Earnings ($MM)
As Reported $2,001 $2,039 $1,720 $1,497 $7,257
Pro Forma Expense 59 64 106 105 334
- ---------------------- ------- ------- ------- ------- -------
Pro Forma $1,942 $1,975 $1,614 $1,392 $6,923
Diluted Net Earnings Per Common Share
As Reported $ 0.73 $ 0.74 $ 0.63 $ 0.56 $ 2.66
Pro Forma Expense ($ 0.03) ($ 0.02) ($ 0.04) ($ 0.04) ($ 0.13)
- ---------------------- ------- ------- ------- ------- -------
Pro Forma $ 0.70 $ 0.72 $ 0.59 $ 0.52 $ 2.53
Measures Not Defined By U.S. GAAP
- ---------------------------------
In accordance with the SEC's Regulation G, the following provides
definitions of measures used in the earnings release that are not defined by
accounting principles generally accepted in the United States (U.S. GAAP) and
the reconciliation to the most closely related GAAP measure.
Organic sales growth is a non-GAAP measure of reported sales growth
excluding the impacts of acquisitions, divestitures and foreign exchange from
year-over-year comparisons. The company believes this provides investors with a
more complete understanding of underlying results and trends of the base
businesses by providing sales on a consistent basis. The reconciliation of
reported sales growth to organic sales growth for the quarter and year:
Q4 FY2005
-- ------
Total Sales Growth 10% 10%
Less: Foreign Exchange Impact 2% 2%
Less: Acquisitions/Divestitures -1% 0%
-----------------------------------------------------
Organic Sales Growth 9% 8%
The company also reports free cash flow. Free cash flow is defined as cash
from operating activities less capital expenditures. The company views free cash
flow as an important indicator of the cash available for dividends and
discretionary investment. Free cash flow is also one of the measures used to
evaluate management and is a factor in determining at-risk compensation levels.
Free cash flow productivity is defined as the ratio of free cash flow to net
earnings, and is another measure used to evaluate management's performance. The
company's target for free cash flow productivity is 90 percent. The
reconciliation of free cash flow and free cash flow productivity is provided
below:
Operating Capital Free Net Free Cash
($MM) Cash Flow Spending Cash Flow Earnings Flow Productivity
- --------------------------------------------------------------------------------
Jul - Sep'03 1,606 364 1,242 1,761 71%
Oct - Dec'03 2,355 446 1,909 1,818 105%
Jan - Mar'04 2,978 521 2,457 1,528 161%
Apr - Jun'04 2,423 693 1,730 1,374 126%
- --------------------------------------------------------------------------------
Jul - Jun'04 9,362 2,024 7,338 6,481 113%
Jul - Sep'04 1,918 413 1,505 2,001 75%
Oct - Dec'04 2,061 498 1,563 2,039 77%
Jan - Mar'05 2,645 475 2,170 ,720 126%
Apr - Jun'05 2,098 795 1,303 1,497 87%
- --------------------------------------------------------------------------------
Jul - Jun'05 8,722 2,181 6,541 7,257 90%
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information
------------------------------------
AMJ QUARTER
------------------------------------
AMJ 05 AMJ 04 % CHG
---------- ----------- ---------
NET SALES $ 14,258 $ 12,962 10 %
COST OF PRODUCTS SOLD 7,289 6,479 13 %
---------- ----------
GROSS MARGIN 6,969 6,483 7 %
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 4,670 4,344 8 %
---------- ----------
OPERATING INCOME 2,299 2,139 7 %
TOTAL INTEREST EXPENSE 231 175
OTHER NON-OPERATING INCOME, NET 49 16
---------- ----------
EARNINGS BEFORE INCOME TAXES 2,117 1,980 7 %
INCOME TAXES 620 606
NET EARNINGS 1,497 1,374 9 %
========== ==========
EFFECTIVE TAX RATE 29.3 % 30.6 %
PER COMMON SHARE:
BASIC NET EARNINGS $ 0.59 $ 0.52 13 %
DILUTED NET EARNINGS $ 0.56 $ 0.50 12 %
DIVIDENDS $ 0.28 $ 0.25
AVERAGE DILUTED SHARES OUTSTANDING 2,688.9 2,772.9
COMPARISONS AS A % OF NET SALES
- ------------------------------- Basis Pt Chg
COST OF PRODUCTS SOLD 51.1 % 50.0 %
GROSS MARGIN 48.9 % 50.0 % (110)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 32.8 % 33.5 % (70)
OPERATING MARGIN 16.1 % 16.5 % (40)
EARNINGS BEFORE INCOME TAXES 14.8 % 15.3 %
NET EARNINGS 10.5 % 10.6 % (10)
------------------------------------
FYTD
------------------------------------
6/30/2005 6/30/2004 % CHG
---------- ----------- ---------
NET SALES $ 56,741 $ 51,407 10 %
COST OF PRODUCTS SOLD 27,804 25,076 11 %
---------- -----------
GROSS MARGIN 28,937 26,331 10 %
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 18,010 16,504 9 %
---------- -----------
OPERATING INCOME 10,927 9,827 11 %
TOTAL INTEREST EXPENSE 834 629
OTHER NON-OPERATING INCOME, NET 346 152
---------- -----------
EARNINGS BEFORE INCOME TAXES 10,439 9,350 12 %
INCOME TAXES 3,182 2,869
---------- -----------
NET EARNINGS 7,257 6,481 12 %
========== ===========
EFFECTIVE TAX RATE 30.5 % 30.7 %
PER COMMON SHARE:
BASIC NET EARNINGS $ 2.83 $ 2.46 15 %
DILUTED NET EARNINGS $ 2.66 $ 2.32 15 %
DIVIDENDS $ 1.03 $ 0.93
AVERAGE DILUTED SHARES OUTSTANDING 2,726.2 2,790.1
COMPARISONS AS A % OF NET SALES Basis Pt Chg
- -------------------------------
COST OF PRODUCTS SOLD 49.0 % 48.8 %
GROSS MARGIN 51.0 % 51.2 % (20)
SELLING, GENERAL & ADMINISTRATIVE EXPENSE 31.7 % 32.1 % (40)
OPERATING MARGIN 19.3 % 19.1 % 20
EARNINGS BEFORE INCOME TAXES 18.4 % 18.2 %
NET EARNINGS 12.8 % 12.6 % 20
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Cash Flows Information
---------------------------
Twelve Months Ended June 30
---------------------------
2005 2004
------------- ------------
BEGINNING CASH $ 4,232 $ 5,428
OPERATING ACTIVITIES
NET EARNINGS 7,257 6,481
DEPRECIATION AND AMORTIZATION 1,884 1,733
DEFERRED INCOME TAXES 650 415
CHANGES IN:
ACCOUNTS RECEIVABLE (86) (159)
INVENTORIES (644) 56
ACCOUNTS PAYABLE, ACCRUED AND OTHER LIABILITIES (128) 625
OTHER OPERATING ASSETS & LIABILITIES (498) (88)
OTHER 287 299
------------- ------------
TOTAL OPERATING ACTIVITIES 8,722 9,362
------------- ------------
INVESTING ACTIVITIES
CAPITAL EXPENDITURES (2,181) (2,024)
PROCEEDS FROM ASSET SALES 517 230
ACQUISITIONS, NET OF CASH ACQUIRED (572) (7,476)
CHANGE IN INVESTMENT SECURITIES (100) (874)
------------- ------------
TOTAL INVESTMENT ACTIVITIES (2,336) (10,144)
------------- ------------
FINANCING ACTIVITIES
DIVIDENDS TO SHAREHOLDERS (2,731) (2,539)
CHANGE IN SHORT-TERM DEBT 2,016 4,911
ADDITIONS TO LONG TERM DEBT 3,108 1,963
REDUCTION OF LONG TERM DEBT (2,013) (1,188)
PROCEEDS FROM THE EXERCISE OF STOCK OPTIONS AND OTHER 478 555
TREASURY PURCHASES (5,026) (4,070)
------------- ------------
TOTAL FINANCING ACTIVITIES (4,168) (368)
------------- ------------
EXCHANGE EFFECT ON CASH (61) (46)
------------- ------------
CHANGE IN CASH AND CASH EQUIVALENTS 2,157 (1,196)
------------- ------------
ENDING CASH $ 6,389 $ 4,232
============= ============
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Balance Sheet Information
June 30, 2005 June 30, 2004
------------- -------------
CASH AND CASH EQUIVALENTS $ 6,389 $ 4,232
INVESTMENTS SECURITIES 1,744 1,660
ACCOUNTS RECEIVABLE 4,185 4,062
TOTAL INVENTORIES 5,006 4,400
OTHER 3,005 2,761
------------- ------------
TOTAL CURRENT ASSETS 20,329 17,115
NET PROPERTY, PLANT AND EQUIPMENT 14,332 14,108
NET GOODWILL AND OTHER INTANGIBLE ASSETS 24,163 23,900
OTHER NON-CURRENT ASSETS 2,703 1,925
TOTAL ASSETS $ 61,527 $ 57,048
============= ============
ACCOUNTS PAYABLE $ 3,802 $ 3,617
ACCRUED AND OTHER LIABILITIES 7,531 7,689
TAXES PAYABLE 2,265 2,554
DEBT DUE WITHIN ONE YEAR 11,441 8,287
------------- ------------
TOTAL CURRENT LIABILITIES 25,039 22,147
LONG-TERM DEBT 12,887 12,554
OTHER 6,124 5,069
------------- ------------
TOTAL LIABILITIES 44,050 39,770
------------- ------------
TOTAL SHAREHOLDERS' EQUITY 17,477 17,278
------------- ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 61,527 $ 57,048
============= ============
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information
----------------------------------------------------------------------
Three Months Ended June 30, 2005
----------------------------------------------------------------------
% Change Earnings % Change % Change
Versus Before Versus Net Versus
Net Sales Year Ago Income Taxes Year Ago Earnings Year Ago
----------------------------------------------------------------------
P&G BEAUTY $ 4,930 12% $ 911 19% $ 644 27%
HEALTH CARE 1,899 16% 285 36% 182 42%
BABY CARE AND FAMILY CARE 3,014 10% 405 16% 246 25%
----------------------------------------------------------------------
P&G FAMILY HEALTH 4,913 13% 690 23% 428 32%
FABRIC AND HOME CARE 3,849 10% 691 -11% 458 -11%
SNACKS AND COFFEE 787 11% 168 66% 105 62%
----------------------------------------------------------------------
P&G HOUSEHOLD CARE 4,636 11% 859 -2% 563 -3%
TOTAL BUSINESS SEGMENT 14,479 12% 2,460 12% 1,635 16%
CORPORATE (221) N/A (343) N/A (138) N/A
----------------------------------------------------------------------
TOTAL COMPANY $ 14,258 10% $ 2,117 7% $ 1,497 9%
----------------------------------------------------------------------
Twelve Months Ended June 30, 2005
----------------------------------------------------------------------
% Change Earnings % Change % Change
Versus Before Versus Net Versus
Net Sales Year Ago Income Taxes Year Ago Earnings Year Ago
----------------------------------------------------------------------
P&G BEAUTY $ 19,483 14% $ 4,099 15% $ 2,851 22%
HEALTH CARE 7,786 11% 1,505 8% 1,002 8%
BABY CARE AND FAMILY CARE 11,890 11% 2,030 25% 1,265 28%
----------------------------------------------------------------------
P&G FAMILY HEALTH 19,676 11% 3,535 17% 2,267 18%
FABRIC AND HOME CARE 15,262 10% 3,185 -3% 2,132 -2%
SNACKS AND COFFEE 3,140 8% 650 23% 417 21%
----------------------------------------------------------------------
P&G HOUSEHOLD CARE 18,402 10% 3,835 1% 2,549 1%
TOTAL BUSINESS SEGMENT 57,561 12% 11,469 10% 7,667 13%
CORPORATE (820) N/A (1,030) N/A (410) N/A
----------------------------------------------------------------------
TOTAL COMPANY $ 56,741 10% $ 10,439 12% $ 7,257 12%
APRIL - JUNE NET SALES INFORMATION
(Percent Change vs. Year Ago) *
Volume Volume
With Without
Acquisitions/ Acquisitions/ Total Total Impact
Divestitures Divestitures FX Price Mix/Other Impact Ex-FX
-------------------------------------------------------------------------------------
P&G BEAUTY 8% 7% 3% 1% 0% 12% 9%
P&G FAMILY HEALTH
HEALTH CARE 12% 10% 2% 2% 0% 16% 14%
BABY CARE AND FAMILY CARE 6% 7% 2% 2% 0% 10% 8%
P&G HOUSEHOLD CARE
FABRIC AND HOME CARE 8% 7% 2% 1% -1% 10% 8%
SNACKS AND COFFEE 0% 0% 1% 12% -2% 11% 10%
TOTAL COMPANY 6% 7% 2% 2% 0% 10% 8%
FISCAL YEAR 2004/2005 NET SALES INFORMATION
(Percent Change vs. Year Ago) *
Volume Volume
With Without
Acquisitions/ Acquisitions/ Total Total Impact
Divestitures Divestitures FX Price Mix/Other Impact Ex-FX
-------------------------------------------------------------------------------------
P&G BEAUTY 12% 8% 3% 0% -1% 14% 11%
P&G FAMILY HEALTH
HEALTH CARE 10% 8% 2% 1% -2% 11% 9%
BABY CARE AND FAMILY CARE 7% 7% 3% 1% 0% 11% 8%
P&G HOUSEHOLD CARE
FABRIC AND HOME CARE 9% 7% 2% 0% -1% 10% 8%
SNACKS AND COFFEE 3% 3% 2% 4% -1% 8% 6%
TOTAL COMPANY 8% 8% 2% 1% -1% 10% 8%
* These sales percentage changes are approximations based on quantitative formulas that are consistently applied.