-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RWCIo00vcOyD+Fpl8Z/dkXyEK+I7OT21C0JIbbXlo7yZSoF7LiEhJQI57GsaKhCK /JE2OeNUNUzKmPUXYLc42w== 0000080424-97-000023.txt : 19970512 0000080424-97-000023.hdr.sgml : 19970512 ACCESSION NUMBER: 0000080424-97-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROCTER & GAMBLE CO CENTRAL INDEX KEY: 0000080424 STANDARD INDUSTRIAL CLASSIFICATION: SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUMES, COSMETICS [2840] IRS NUMBER: 310411980 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00434 FILM NUMBER: 97598888 BUSINESS ADDRESS: STREET 1: ONE PROCTER & GAMBLE PLZ CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5139831100 10-Q 1 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 March 31, 1997 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 677,363,608 shares of Common Stock outstanding as of April 18, 1997. PART I. FINANCIAL INFORMATION Item 1. Financial Statements The Consolidated Statements of Earnings of The Procter & Gamble Company and subsidiaries for the three and nine months ended March 31, 1997 and 1996, the Consolidated Balance Sheets as of March 31, 1997 and June 30, 1996, and the Consolidated Statements of Cash Flows for the nine months ended March 31, 1997 and 1996 follow. In the opinion of management, these unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim period reported. However, such financial statements may not be necessarily indicative of annual results. Certain reclassifications of prior year's amounts have been made to conform with the current year's presentation. THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS
Millions of Dollars Except Per Share Amounts Three Months Ended Nine Months Ended March 31 .. March 31 1997 1996 1997 1996 ------- ------- ------- ------- NET SALES $ 8,771 $ 8,587 $26,816 $26,704 Cost of products sold 4,918 5,026 14,988 15,502 Marketing, research, and administrative expenses 2,470 2,368 7,377 7,222 ------- ------- ------- ------- OPERATING INCOME 1,383 1,193 4,451 3,980 Interest expense 106 121 352 367 Other income, net 53 75 154 189 ------- ------- ------- ------- EARNINGS BEFORE INCOME TAXES 1,330 1,147 4,253 3,802 Income taxes 449 387 1,449 1,310 ------- ------- ------- ------- NET EARNINGS $ 881 $ 760 $ 2,804 $ 2,492 ======= ======= ======= ======= PER COMMON SHARE: Net earnings $ 1.26 $ 1.07 $ 4.00 $ 3.52 Net earnings assuming full dilution $ 1.18 $ 1.01 $ 3.74 $ 3.30 Dividends $ .45 $ .40 $ 1.35 $ 1.20 AVERAGE COMMON SHARES OUTSTANDING 681.4 686.5
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
Millions of Dollars March 31 June 30 ASSETS 1997 1996 -------- -------- CURRENT ASSETS Cash and cash equivalents $ 2,421 $ 2,074 Investment securities 562 446 Accounts receivable 2,728 2,841 Inventories Materials and supplies 1,158 1,254 Work in process 281 210 Finished products 1,649 1,666 Deferred income taxes 705 598 Prepaid expenses and other current assets 1,365 1,718 -------- -------- TOTAL CURRENT ASSETS 10,869 10,807 -------- -------- PROPERTY, PLANT, AND EQUIPMENT 18,377 18,112 LESS ACCUMULATED DEPRECIATION 7,303 6,994 -------- -------- TOTAL PROPERTY, PLANT, AND EQUIPMENT 11,074 11,118 -------- -------- GOODWILL AND OTHER INTANGIBLE ASSETS 4,032 4,281 OTHER ASSETS 1,490 1,524 -------- -------- TOTAL ASSETS $ 27,465 $ 27,730 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accruals $ 6,392 $ 6,709 Debt due within one year 1,232 1,116 -------- -------- TOTAL CURRENT LIABILITIES 7,624 7,825 -------- -------- LONG-TERM DEBT 4,001 4,670 DEFERRED INCOME TAXES 712 638 OTHER NON-CURRENT LIABILITIES 2,776 2,875 SHAREHOLDERS' EQUITY Preferred stock 1,866 1,886 Common stock-shares outstanding-Mar. 31 679.1 679 686 -June 30 685.6 Additional paid-in capital 1,074 862 Currency translation adjustments (771) (418) Reserve for ESOP debt retirement (1,637) (1,676) Retained earnings 11,141 10,382 -------- -------- TOTAL SHAREHOLDERS' EQUITY 12,352 11,722 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 27,465 $ 27,730 ======== ========
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Millions of Dollars Nine Months Ended March 31 1997 1996 ------- ------- CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,074 $ 2,028 OPERATING ACTIVITIES Net earnings 2,804 2,492 Depreciation and amortization 1,012 975 Deferred income taxes (19) 187 Change in: Accounts receivable 29 (4) Inventories (60) (109) Accounts Payables and Accruals (7) (742) Other Operating Assets & Liabilities 167 (435) Other 83 92 ------- ------- TOTAL OPERATING ACTIVITIES 4,009 2,456 ------- ------- INVESTING ACTIVITIES Capital expenditures (1,322) (1,475) Proceeds from asset sales and retirements 284 326 Acquisitions (121) (144) Change in investment securities (93) (296) ------- ------- TOTAL INVESTING ACTIVITIES (1,252) (1,589) ------- ------- FINANCING ACTIVITIES Dividends to shareholders (998) (902) Change in short-term debt (49) 449 Additions to long-term debt 24 329 Reduction of long-term debt (389) (461) Proceeds from stock options 103 74 Purchase of treasury shares (1,058) (310) ------- ------- TOTAL FINANCING ACTIVITIES (2,367) (821) ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (43) (52) ------- ------- CHANGE IN CASH AND CASH EQUIVALENTS 347 (6) ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD 2,421 $ 2,022 ======= =======
MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations - --------------------- Worldwide net earnings for the third quarter of fiscal year 1997 were $881 million, a 16% increase over the same quarter of the prior year. Earnings per share for the quarter were $1.26, an 18% increase over the same quarter of the prior year. The difference between the net earnings and earnings per share increases was primarily due to the company's share repurchase program. Net sales for the quarter were $8.77 billion, up 2% compared to the prior year third quarter sales of $8.59 billion. Worldwide unit volume grew 4% from the third quarter a year ago. Weaker currencies in Europe, Asia and Latin America negatively impacted sales, causing the difference between sales and volume growth rates. In the first nine months of the fiscal year, worldwide net earnings were $2.80 billion, a 13% increase compared to the same prior year period. Year-to-date earnings per share were $4.00 per share, a 14% increase over the prior year. Worldwide unit volume for the first nine months was up 2% over the prior year, while sales were relatively stable at $26.8 billion, primarily reflecting unfavorable exchange rates. Gross margin was 43.9% for the current quarter, compared to 41.5% in the third quarter of the prior year and 41.2% for the full fiscal year ended June 30,1996. The key driver of the margin improvement has been cost reduction programs throughout the company and lower commodity prices, primarily pulp. Operating margin was 15.8% for the current quarter, an improvement over the 13.9% operating margin in the prior year third quarter and 13.6% for the prior fiscal year. This improvement was a reflection of higher gross margins, partially offset by increased costs related to marketing, research and administrative activities. North America - ------------- Net sales for the North America region remained relatively stable compared with the third quarter a year ago, on a 2% unit volume increase. The difference between sales and volume growth rates is primarily a reflection of lower pricing in the laundry category and commodity-based price reductions in the paper categories. Third quarter net earnings for the region increased 6% (compared to the same prior year period), as the region continued to benefit from simplification and standardization cost savings. The region's unit volume growth was led by the laundry, fabric conditioners and snacks categories. Importantly, laundry achieved volume growth over a very strong year ago base period and snacks continued to achieve double digit unit volume growth, benefitting from new production capacity. The paper business also increased unit volume led by strong growth in the feminine protection category and the Scott Baby Fresh acquisition in the diaper/wipes category. Beauty care volume declined in the current quarter due to softness in the hair care category, primarily reflecting trade inventory adjustments. Excluding the impacts of the prior year period divestiture of the Company's share of a joint venture, unit volume in the health care business improved over prior year period due to increased respiratory care volume. Health care's earnings also showed strong improvement due to increased licensing activity. For the first nine months of the fiscal year, the North American region had net sales and unit volume growth of 1% and 3%, respectively. Year to date net earnings increased 10% over the prior year. Europe, Middle East and Africa - ------------------------------ Third quarter net sales in Europe, Middle East and Africa increased by 3% compared to the prior year quarter, as unit volume growth of 9% was partially offset by unfavorable exchange rates. Net earnings for the quarter grew 20% compared to the same period a year ago, reflecting volume gains and cost savings as the region begins to benefit from Efficient Consumer Response (ECR). Central and Eastern Europe led the region's volume growth, increasing shipments by over 45%. The Middle East and Africa also had double digit increases. Market share for these two geographies continues to build across most core categories. Importantly, Western Europe, led by Germany, showed volume improvement over the comparable prior year period in which the Company began its transition to ECR. For the July-March period, the region's net sales remained stable on unit volume growth of 6%, reflecting unfavorable exchange rates and lower pricing. Year to date net earnings increased 18% over prior year. Asia - ---- Asia continued to be impacted by the transition to ECR and competitive pressures in Japan. Third quarter sales for the region increased 1% over the same prior year period, as improved pricing and product mix offset continued softness in Japan and the impact of unfavorable exchange rates. Unit volume growth declined by 1% during the quarter, with the negative impacts of Japan largely offset by the acceleration of unit volume growth rates in the Philippines and the continued growth in China. Net earnings for the quarter grew by 37%, driven primarily by pricing actions and improved product mix. Net sales and unit volume for the July-March period declined 7% and 6%, respectively. Year-to-date net earnings for the period were up 12%. Latin America - ------------- Net sales for the third quarter in Latin America grew 12% compared to the prior year quarter, on unit volume growth of 1%, as pricing designed to address inflation and devaluation was partially offset by unfavorable exchange rates. The region continues to be impacted by economic difficulties in certain key markets, as acquisitions in the laundry category were largely responsible for the unit volume increase. Net earnings for the quarter increased 53% on improved margins, primarily reflecting pricing, as well as the impact of divestitures of certain non-strategic brands. For the July-March period, net sales and net earnings were up 5% and 33%, respectively. The region's year-to-date unit volume was down 3% for the first three quarters. Restructuring Reserve Status - ---------------------------- In the year ended June 30, 1993, a reserve of $2.4 billion 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 separations. The balance of the reserve at March 31, 1997 was approximately $380 million, with approximately half of the balance representing planned fixed asset disposals, all of which have been announced. The restructuring program is expected to be substantially completed during the current fiscal year. Based on current management estimates, the cost of the program is expected to approximate the original estimate. Pending Acquisition - ------------------- In April 1997, the Company entered into an agreement to acquire Tambrands, Inc., a company in the feminine hygiene category, for approximately $2 billion. The acquisition is subject to approval by the shareholders of Tambrands, Inc., and regulatory clearance. It is expected to close in fiscal 1998. Pending Accounting Pronouncements - --------------------------------- In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share", which revises the manner in which earnings per share is calculated. The statement is effective for our reporting period ending December 31, 1997 and is not expected to have a significant impact on the Company's earnings per share. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (3-1) Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993) (3-2) Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993) (11) Computation of Earnings per Share (12) Computation of Ratio of Earnings to Fixed Charges (27) Financial Data Schedule (b) Reports on Form 8-K The Company filed Current Reports on Form 8-K containing information pursuant to Item 9 entitled "Sales of Equity Securities Pursuant to Regulations," dated February 21, 1997, March 4, 1997, March 24, 1997, April 7, 1997, April 9, 1997, April 23, 1997, April 25, 1997 and May 2, 1997. The Company also filed a Current Report on Form 8-K pursuant to Item 5 entitled "Other Events" dated April 9, 1997 containing a joint press release by the Company and Tambrands Inc. and the Agreement and Plan of Merger among the Company, C. R. MacIntosh, Inc. and Tambrands Inc. 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 E. H. EATON - -------------------------------------- E. H. Eaton Vice President and Comptroller (Principal Accounting Officer) Date: May 8, 1997 EXHIBIT INDEX Exhibit No. Page No. (3-1) Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993) (3-2) Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993) (11) Computation of Earnings per Share 10 (12) Computation of Ratio of Earnings to Fixed Charges 11 (27) Financial Data Schedule 12 EX-11 2 EXHIBIT (11) THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= COMPUTATION OF EARNINGS PER SHARE ---------------------------------------------
Amounts in Millions, Except per Share Amounts Three Months Ended Nine Months Ended March 31 March 31 ------------------ ----------------- 1997 1996 1997 1996 -------- -------- --------- --------- NET EARNINGS PER SHARE Net earnings $ 881 $ 760 $ 2,804 $ 2,492 Deduct preferred stock dividends 26 26 78 78 -------- -------- --------- --------- Net earnings applicable to common stock $ 855 $ 734 $ 2,726 $ 2,414 - --------------------------------------- ======== ======== ========= ========= Average number of common shares outstanding 681.4 686.5 681.3 686.5 Per Share - --------- Net earnings per share $ 1.26 $ 1.07 $ 4.00 $ 3.52 ======== ======== ========= ========= NET EARNINGS PER SHARE ASSUMING FULL DILUTION - ------------------------------- Net earnings $ 881 $ 760 $ 2,804 $ 2,492 Deduct differential -- preferred vs. common dividends 8 9 24 29 -------- -------- --------- --------- Net earnings applicable to common stock $ 873 $ 751 $ 2,780 $ 2,463 - --------------------------------------- ======== ======== ========= ========= Average number of common shares outstanding 681.4 686.5 681.3 686.5 Add potential effect of: Exercise of options 10.6 8.7 10.7 8.7 Conversion of preferred stock 51.0 52.0 51.0 52.0 -------- -------- --------- --------- Average number of common shares outstanding, assuming full dilution 743.0 747.2 743.0 747.2 ======== ======== ========= ========= Per share assuming full dilution - -------------------------------- Net earnings per share assuming full dilution $ 1.18 $ 1.01 $ 3.74 $ 3.30 ========= ======== ========= =========
EX-12 3 EXHIBIT (12) THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ================================================ COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES -------------------------------------------------
Millions of Dollars Nine Months Years Ended June 30 Ended Mar. 31 ------------------------------------------ ---------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------ ------ ------ ------ ------- EARNINGS AS DEFINED - ------------------- Earnings from operations before income taxes after eliminating undistributed earnings of equity method investees $2,870 $ 294 $3,307 $4,022 $4,695 $3,823 $4,215 Fixed charges excluding capitalized interest 584 631 569 571 576 432 420 ------ ------ ------ ------ ------ ------ ------ TOTAL EARNINGS, AS DEFINED $3,454 $ 925 $3,876 $4,593 $5,271 $4,255 $4,635 ====== ====== ====== ====== ====== ====== ====== FIXED CHARGES, AS DEFINED - ------------------------- Interest expense including capitalized interest $ 535 $ 577 $ 501 $ 511 $ 493 $ 372 $ 352 1/3 of rental expense 74 79 87 83 92 65 68 ------ ------ ------ ------ ------ ------ ------ $ 609 $ 656 $ 588 $ 594 $ 585 $ 437 $ 420 ====== ====== ====== ====== ====== ====== ====== RATIO OF EARNINGS TO FIXED CHARGES 5.7 1.4 6.6 7.7 9.0 9.7 11.0
EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENS FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000080424 THE PROCTER & GAMBLE COMPANY 1,000,000 U.S. DOLLARS 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 1 2,421 562 2,728 0 3,088 10,869 18,377 7,303 27,465 7,624 4,001 0 1,866 679 9,807 27,465 26,816 26,816 14,988 7,377 0 0 352 4,253 1,449 2,804 0 0 0 2,804 4.00 3.74
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