UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
Commission file number 1-434
THE PROCTER & GAMBLE COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-0411980
(State of incorporation) (I.R.S. Employer Identification No.)
One Procter & Gamble Plaza, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 983-1100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No .
There were 685,373,294 shares of Common Stock outstanding as of October 21,
1994.
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PART I. FINANCIAL INFORMATION
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Millions of Dollars
Three Months Ended September 30
1994 1993
------ ------
NET SALES $8,161 $7,564
Cost of products sold 4,596 4,228
Marketing, administrative, and other
operating expenses 2,311 2,251
------ ------
OPERATING INCOME 1,254 1,085
Interest expense 119 125
Other income/expense, net 101 94
------ ------
EARNINGS BEFORE INCOME TAXES 1,236 1,054
Income taxes 444 384
------ ------
NET EARNINGS $ 792 $ 670
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PER COMMON SHARE:
Net earnings $ 1.12 $ .95
Net earnings assuming full dilution $ 1.05 $ .89
Dividends per common share $ .35 $ .31
AVERAGE COMMON SHARES OUTSTANDING (in millions) 684.7 682.0
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THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEET
Millions of Dollars
September 30 June 30
ASSETS 1994 1994
----------- -------
CURRENT ASSETS
Cash and cash equivalents $ 2,429 $ 2,373
Marketable securities 146 283
Accounts receivable, less allowance for
doubtful accounts 3,590 3,115
Inventories
Raw materials and supplies 1,178 1,087
Work in process 198 213
Finished products 1,682 1,577
Deferred income taxes 768 716
Prepaid expenses and other current assets 824 624
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10,815 9,988
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PROPERTY, PLANT, AND EQUIPMENT 16,408 15,896
LESS ACCUMULATED DEPRECIATION 6,194 5,872
------- -------
10,214 10,024
------- -------
GOODWILL AND OTHER INTANGIBLE ASSETS 4,260 3,754
OTHER ASSETS 1,843 1,769
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TOTAL $27,132 $25,535
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals $ 7,142 $ 6,665
Debt due within one year 1,635 1,375
------- -------
8,777 8,040
------- -------
LONG-TERM DEBT 5,080 4,980
OTHER LIABILITIES 3,351 3,336
DEFERRED INCOME TAXES 459 347
SHAREHOLDERS' EQUITY
Preferred stock 1,932 1,942
Common stock-shares outstanding-Sept. 30 685,206,000 685 684
-June 30 684,348,359
Additional paid-in capital 590 560
Currency translation adjustments (2) (63)
Reserve for ESOP debt retirement (1,761) (1,787)
Retained earnings 8,021 7,496
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9,465 8,832
------- -------
TOTAL $27,132 $25,535
======= =======
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THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
Millions of Dollars
Three Months Ended September 30
1994 1993
---- ----
Cash and Cash Equivalents, beginning of year $2,373 $2,322
OPERATING ACTIVITIES
Net earnings 792 670
Depreciation, depletion and amortization 304 277
Deferred income taxes 65 58
Increase in accounts receivable (360) (331)
Increase in inventories (80) (110)
Change in payables and accrued liabilities 240 (201)
Change in other liabilities (124) 27
Other (246) 6
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591 396
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INVESTING ACTIVITIES
Capital expenditures (345) (351)
Proceeds from asset sales and retirements 150 20
Acquisitions (607) --
Marketable securities 137 (117)
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(665) (448)
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FINANCING ACTIVITIES
Dividends to shareholders (265) (236)
Additions to short-term debt 360 362
Additions to long-term debt 230 45
Reduction of long-term debt (232) (217)
Proceeds from stock options 10 7
Purchase of treasury shares (2) (3)
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101 (42)
------- -------
EFFECT OF EXCHANGE RATES ON CASH AND
CASH EQUIVALENTS 29 (13)
------- -------
CHANGE IN CASH AND CASH EQUIVALENTS 56 (107)
------- -------
Cash and Cash Equivalents, end of period $2,429 $2,215
======= =======
SUPPLEMENTAL DISCLOSURE
Non-cash transactions
Liabilities assumed in acquisitions 140 --
Reduction in employee stock ownership plan debt,
guaranteed by the Company 26 24
Conversion of preferred to common stock 10 6
<FN>
The interim financial statements are unaudited, but in the opinion of the
Company include all adjustments, consisting only of normal recurring items,
necessary for a fair presentation of the data.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
Worldwide net earnings for the July-September quarter achieved a record
level of $792 million, or $1.12 per share, an 18% increase over the same
quarter in the prior year. First quarter earnings for the prior year were
$670 million or $.95 per share. The earnings improvement reflects strong
worldwide unit volume growth and good cost control throughout the Company.
Worldwide net sales for the July-September quarter increased 8% from the
same three months a year ago to a record level of $8.2 billion. This
growth was driven by unit volume increases. Worldwide unit volume
increased 10%, which compares to a 5% volume growth in fiscal year 1994.
Acquisitions net of divestitures contributed 3 percentage points to the
volume growth in this quarter.
United States
- - - ----------------
Net earnings in the United States increased 12% versus the first quarter
last year, reflecting increases in Laundry & Cleaning, Paper and Food &
Beverage sectors again due to volume growth and cost control. Sales in the
United States increased 6% on an equal growth in unit volume. The Laundry
& Cleaning sector increased unit volume by 10%, led by growth in the
Laundry Detergent and Fabric Conditioners categories, reflecting the effect
of new product initiatives. The Food & Beverage sector recorded a small
unit volume decline, entirely due to the contraction of the coffee market
resulting from sharp price increases following crop freezes in Brazil. On
the balance of the Food & Beverage line there were broadly based volume
gains. The Paper sector increased unit volume 12% on broadly based market
share gains except for the Diaper category, where market share was flat.
The Tissue/Towel category recorded significant gains due importantly to new
product initiatives. The Beauty Care business also increased unit volume,
while Health Care was about equal to year ago.
International
- - - ---------------
Total International net earnings increased 23% over the first quarter a
year ago, on a sales increase of 8% and a unit volume increase of 13%. The
increase in earnings was driven by unit volume growth and continued cost
reduction efforts. The lower rate of sales versus unit volume growth was
in large part due to more competitive pricing across most regions.
Exchange rates did not have a significant effect on sales or net earnings
for the quarter. Europe's unit volume increased 13% led by broadly based
gains in the Health & Beauty Care sector and Eastern European region. The
European Laundry, Paper and Food & Beverage businesses did well, with
volume up 12% overall. The balance of International unit volume also
advanced by 13% with every region except Latin America growing at a double
digit rate. The economic and political conditions in Mexico and Venezuela
slowed volume advances in the region.
Globally, there are signs of upward pressure on costs, not only for green
coffee beans, but also for pulp and petrochemicals. Although the prices
for many of these materials are up from unusually depressed levels, the
increases may put pressure on pricing.
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Restructuring Reserve Status
- - - ----------------------------------
In the year ending June 30, 1993 a pre-tax reserve of $2,402 million was
established to cover a worldwide restructuring effort to consolidate
manufacturing systems and reduce overhead costs. The primary elements of
this reserve were costs related to fixed asset disposals and separation-
related activities (86% of the total).
The following information relates to the 1993 reserve (in millions of
dollars pre-tax):
Original Balance July-Sept. Balance
Reserve 6/30/94 Charges 9/30/94
-------- ------- ---------- -------
Separation-related costs<F1> $ 965 $ 596 $ 67 $ 529
Disposals of fixed assets 1,109 960 10 950
Other<F2> 328 227 17 210
------ ------ ----- ------
$2,402 $1,783 $ 94 $1,689
====== ====== ===== ======
<FN>
<F1>
Includes separation allowances and related benefits, out
placement services, and personnel relocation costs.
<F2>
Including closing, environmental remediation and contract
termination costs for sites shut down or divested, offset by net
proceeds from asset sales. No cost element within this category
exceeds 5% of the total reserve.
</FN>
Execution of the restructuring program is on track and the cost of
completing it is expected to approximate the original estimates. As
anticipated, charges for the disposal of fixed assets will lag behind
spending for separation-related programs. We have announced more than half
of the sites and production modules to be closed in order to provide early
notice to employees. However, relatively few of these facilities have been
totally shut down at this time.
Benefits continue to be obtained from the restructuring program. We
estimate that incremental savings of about $60 million after-tax were
achieved in the July-September 1994 quarter. This brings cumulative
restructuring savings to about half of the $500 million after-tax objective
established in June, 1993. These amounts reflect estimated gross savings,
which may be offset to some degree by other actions, such as pricing or
research and development spending.
Additional Information
- - - -------------------------
Additional Information responsive to this Item is incorporated by reference
to the Report by Edwin L. Artzt, Chairman and Chief Executive, delivered on
October 11, 1994, during the Company's Annual Meeting of Shareholders
(Exhibit 99).
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
At the Company's 1994 Annual Meeting of Shareholders held on October 11,
1994, the following actions were taken:
The following Directors were elected for terms of office expiring in 1997:
Votes For Votes Abstentions Broker
Withheld Non-Votes
David M. Abshire 625,255,050 8,628,297 N/A N/A
Edwin L. Artzt 612,649,332 21,234,015 N/A N/A
Norman R. Augustine 625,567,640 8,315,707 N/A N/A
Richard J. Ferris 625,045,193 8,838,154 N/A N/A
John G. Smale 623,094,568 10,788,779 N/A N/A
Marina V.N. Whitman 624,258,411 9,624,936 N/A N/A
A proposal by the Board of Directors to ratify the appointment of Deloitte
& Touche LLP as the Company's independent auditors to conduct the annual
audit of the financial statements of the Company and its subsidiaries for
the fiscal year ending June 30, 1995, was approved by the shareholders.
The shareholders cast 625,446,995 votes in favor of this proposal and
5,358,300 votes against. There were 3,078,052 abstentions.
A proposal by the Board of Directors to ratify The Procter & Gamble 1993
Non-Employee Directors' Stock Plan was approved by the shareholders. The
shareholders cast 584,930,595 votes in favor of this proposal and
48,949,871 against. Pursuant to the terms of the Notice of Annual Meeting
and Proxy Statement, abstentions were treated as votes against this
proposal.
A shareholder resolution proposed by Evelyn Y. Davis was defeated by the
shareholders. The proposal recommended that the Company reinstate the
system of electing all Directors annually, in place of the system of
classifying Directors into three classes with overlapping three-year terms
which was approved by the shareholders in 1985. The Board opposed the
resolution. The shareholders cast 183,626,999 votes in favor of the
resolution and 380,215,855 against. There were 9,481,875 abstentions and
60,558,618 broker non-votes.
A shareholder resolution proposed by The New York City Employees'
Retirement System was defeated by the shareholders. The proposal requested
the Company to endorse the CERES Principles as a commitment to be publicly
accountable for its environmental impact. The Board opposed the
resolution. The shareholders cast 55,294,317 votes in favor of the
resolution and 478,634,695 against. There were 39,391,718 abstentions and
60,562,617 broker non-votes.
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A shareholder resolution proposal by Jayn Meinhardt and Sandy Caron was
defeated by the shareholders. The proposal recommended that the Company
release to the public through product labeling the results of animal
testing on cosmetic and non-medical household products. The Board opposed
the resolution. The shareholders cast 34,116,837 votes in favor of the
resolution and 508,320,619 against. There were 30,862,085 abstentions and
60,583,806 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Earnings per Share
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(99) Report by Edwin L. Artzt, Chairman and Chief Executive, Delivered
on October 11, 1994, During the Company's Annual Meeting of
Shareholders.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1994.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PROCTER & GAMBLE COMPANY
/S/E. H. EATON
- - - ------------------------------
E. H. Eaton
Vice President and Comptroller
(Principal Accounting Officer)
Date: November 10, 1994
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EXHIBIT INDEX
Exhibit No. Page No.
(11) Computation of Earnings per Share 10
(12) Computation of Ratio of Earnings to Fixed Charges 11
(27) Financial Data Schedule 12
(99) Report by Edwin L. Artzt, Chairman and Chief Executive,
Delivered on October 11, 1994, During the Company's
Annual Meeting of Shareholders. 13
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