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Procter & Gamble Co – ‘10-Q’ for 12/31/03

On: Tuesday, 2/3/04, at 4:00pm ET · For: 12/31/03 · Accession #: 80424-4-25 · File #: 1-00434

  As Of                Filer                Filing    For·On·As Docs:Size

 2/03/04  Procter & Gamble Co               10-Q       12/31/03    5:61K

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        10-Q Ond 2003                                         14     92K 
 2: EX-11       10-Q Ond 2003 Exhibit 11                               1      8K 
 3: EX-12       10-Q Ond 2003 Exhibit 12                               1      8K 
 4: EX-31       10-Q Ond 2003 Exhibit 31                               2     14K 
 5: EX-32       10-Q Odn 2003 Exhibit 32                               2      9K

10-Q — 10-Q Ond 2003
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Controls and Procedures Exhibits and Reports on Form 8-K Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations
1	1st Page - Filing Submission
2	Item 1. Financial Statements
9	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
11	Item 4. Controls and Procedures
12	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 14 TOC ↑Top Previous Next ↓Bottom Just 1st
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION    
Washington, D.C. 20549

 FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2003   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 [ ]                               

Indicate by check mark whether the registrant is an accelerated filer (as       
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]                      

There were 1,292,396,101 shares of Common Stock outstanding as of December 31,  
2003.                                                                           

10-Q 2nd Page of 14 TOC 1st Previous Next ↓Bottom Just 2nd
PART I.  FINANCIAL INFORMATION                                                  

Item 1.  Financial Statements                                                   

The Consolidated Statement of Earnings of The Procter & Gamble Company and      
subsidiaries for the three and six months ended December 31, 2003 and 2002, the 
Consolidated Balance Sheet as of December 31, 2003 and June 30, 2003, and the   
Consolidated Statement of Cash Flows for the six months ended December 31, 2003 
and 2002 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 periods
reported. However, such financial statements may not be indicative necessarily  
of annual results.                                                              

                                                        [Enlarge/Download Table]


                                 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES                                  
                                       CONSOLIDATED STATEMENT OF EARNINGS                                       

Amounts in millions except per share amounts                                                                    

                                             Three Months Ended                       Six Months Ended          
                                                 December 31                             December 31            
                                    ------------------------------------    ------------------------------------
                                         2003                 2002                2003                2002      
                                    ----------------    ----------------    ----------------    ----------------
                                                                                                                
NET SALES                           $   13,221           $   11,005          $   25,416          $   21,801     
   Cost of products sold                 6,324                5,490              12,203              10,979     
   Marketing, research, admini-                                                                                 
     strative and other expense          4,155                3,267               7,828               6,395     
                                    ----------           ----------          ----------          ----------     

OPERATING INCOME                         2,742                2,248               5,385               4,427     
   Interest expense                        149                  143                 290                 287     
   Other non-operating income, net          29                   74                  69                 177     
                                    ----------           ----------          ----------          ----------     

EARNINGS BEFORE INCOME TAXES             2,622                2,179               5,164               4,317     
   Income taxes                            804                  685               1,585               1,359     
                                    ----------           ----------          ----------          ----------     

NET EARNINGS                        $    1,818           $    1,494          $    3,579          $    2,958     
                                    ==========           ==========          ==========          ==========     

PER COMMON SHARE:                                                                                               
   Basic net earnings               $     1.38           $     1.13          $     2.71          $     2.23     
   Diluted net earnings             $     1.30           $     1.06          $     2.56          $     2.10     
   Dividends                        $     0.45           $     0.41          $     0.91          $     0.82     

AVERAGE COMMON SHARES                                                                                           
   OUTSTANDING - DILUTED               1,400.4              1,402.6             1,399.6             1,404.9     

See accompanying Notes to Consolidated Financial Statements                                                     

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                                                                [Download Table]


               THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES                   
                        CONSOLIDATED BALANCE SHEET                             
Amounts in millions                                                            

                                                      December 31    June 30   
ASSETS                                                   2003          2003    
                                                      -----------   ---------- 
CURRENT ASSETS                                                                 
                                                                               
     Cash and cash equivalents                         $    4,943    $   5,912 
     Investment securities                                    351          300 
     Accounts receivable                                    4,447        3,038 
     Inventories                                                               
         Materials and supplies                             1,322        1,095 
         Work in process                                      375          291 
         Finished goods                                     2,924        2,254 
                                                       ----------    --------- 
     Total Inventories                                      4,621        3,640 
     Deferred income taxes                                    877          843 
     Prepaid expenses and other                             1,926        1,487 
       receivables                                     ----------    --------- 

TOTAL CURRENT ASSETS                                       17,165       15,220 

PROPERTY, PLANT AND EQUIPMENT                                                  
     Buildings                                              5,210        4,729 
     Machinery and equipment                               19,188       18,222 
     Land                                                     665          591 
                                                       ----------    --------- 
                                                           25,063       23,542 
     Accumulated depreciation                             (11,020)     (10,438)
                                                       ----------    --------- 

NET PROPERTY, PLANT AND EQUIPMENT                          14,043       13,104 

NET GOODWILL AND OTHER INTANGIBLE ASSETS                                       
     Goodwill                                              16,528       11,132 
     Trademarks and other intangible assets                 4,182        2,375 
                                                       ----------    --------- 

NET GOODWILL AND OTHER INTANGIBLE ASSETS                   20,710       13,507 

OTHER NON-CURRENT ASSETS                                    1,944        1,875 
                                                       ----------    --------- 

TOTAL ASSETS                                           $   53,862    $  43,706 
                                                       ==========    ========= 

LIABILITIES AND SHAREHOLDERS' EQUITY                                           

CURRENT LIABILITIES                                                            
     Accounts payable                                  $    2,822    $   2,795 
     Accrued and other liabilities                          6,446        5,512 
     Taxes payable                                          2,454        1,879 
     Debt due within one year                               5,885        2,172 
                                                       ----------    --------- 

TOTAL CURRENT LIABILITIES                                  17,607       12,358 

LONG-TERM DEBT                                             12,636       11,475 

DEFERRED INCOME TAXES                                       1,898        1,396 

OTHER NON-CURRENT LIABILITIES                               3,149        2,291 
                                                       ----------    --------- 

TOTAL LIABILITIES                                          35,290       27,520 

SHAREHOLDERS' EQUITY                                                           
     Preferred stock                                        1,554        1,580 
     Common stock - shares outstanding Dec 31  1,292.4      1,292              
                                       June 30 1,297.2                   1,297 
     Additional paid-in capital                             3,250        2,931 
     Reserve for ESOP debt retirement                      (1,296)      (1,308)
     Accumulated other comprehensive income                (1,219)      (2,006)
     Retained earnings                                     14,991       13,692 
                                                       ----------    --------- 

TOTAL SHAREHOLDERS' EQUITY                                 18,572       16,186 
                                                       ----------    --------- 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $   53,862    $  43,706 
                                                       ==========    ========= 

See accompanying Notes to Consolidated Financial Statements                    

10-Q 4th Page of 14 TOC 1st Previous Next ↓Bottom Just 4th
 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS

                                              Six Months Ended
Amounts in millions                                       December 31           
                                               ---------------------------
                                              2003            2002
                                               -----------     -----------

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $    5,912           $   3,427   

OPERATING ACTIVITIES                                                            
    Net earnings                                 3,579               2,958
    Depreciation and amortization                  857                 844
    Deferred income taxes                          233                 166
Change in:                                                        
        Accounts receivable                        (452)               (117)
        Inventories                                 (74)                (89)
       Accounts payable and accruals              (183)                 73
       Other operating assets & liabilities       (144)                151
    Other                                          145                 340
                                            ----------           ---------

TOTAL OPERATING ACTIVITIES                          3,961               4,326   
                                            ----------           ---------

INVESTING ACTIVITIES                                                            
     Capital expenditures                          (810)               (616)
    Proceeds from asset sales                      124                 117
    Acquisitions, net of cash acquired          (5,358)                  0
     Change in investment securities                (69)                 (8)
                                            ----------           ---------

TOTAL INVESTING ACTIVITIES                         (6,113)               (507)  
                                            ----------           ---------

FINANCING ACTIVITIES                                                            
     Dividends to shareholders                   (1,245)             (1,129)
     Change in short-term debt                    2,791              (1,188)
    Additions to long-term debt                  1,405               1,187
     Reduction of long-term debt                   (993)                (50)
   Proceeds from stock options                    233                 58
     Purchase of treasury shares                 (1,046)             (1,025)
                                            ----------           ---------

TOTAL FINANCING ACTIVITIES                          1,145              (2,147)  
                                            ----------           ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                         
    AND CASH EQUIVALENTS                            38                   7

CHANGE IN CASH AND CASH EQUIVALENTS                  (969)              1,679   
                                            ----------           ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD       $    4,943           $   5,106   
                                            ==========           =========

See accompanying Notes to Consolidated Financial Statements                     

10-Q 5th Page of 14 TOC 1st Previous Next ↓Bottom Just 5th
 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   These statements should be read in conjunction with the Company's Annual   
     Report on Form 10-K for the fiscal year ended June 30, 2003. The results of
 operations for the three-month and six-month periods ended December 31,
2003 are not indicative necessarily of annual results.                

2.   Comprehensive Income - Total comprehensive income is comprised primarily of
 net earnings, net currency translation gains and losses, impacts of net
investment and cash flow hedges and net unrealized gains and losses on
    securities. Total comprehensive income for the three months ended December
    31, 2003 and 2002 was $2,429 million and $1,783 million, respectively. For
     the six months ended December 31, 2003 and 2002, total comprehensive income
was $4,366 million and $3,143 million, respectively.                  

3.   Segment Information - The basis for presenting segment results generally is
   consistent with overall Company reporting. The primary difference relates
to partially-owned operations, where segment reporting reflects such  
 investments as consolidated subsidiaries with applicable adjustments to
    comply with U.S. GAAP in the Corporate segment. The Corporate segment also
  includes both operating and non-operating elements such as financing and
 investment activities, certain employee benefit costs, intangible asset
  amortization, certain restructuring charges, segment eliminations, prior
 year results of certain divested businesses and other general corporate
    items. Additionally, for interim periods certain non-recurring tax impacts
are reflected on a discrete basis for management and segment reporting
purposes, but are eliminated in Corporate to arrive at the Company's  
effective tax rate for the quarter.                                   

10-Q 6th Page of 14 TOC 1st Previous Next ↓Bottom Just 6th
                                     SEGMENT INFORMATION (Amounts in millions)

                                                        [Enlarge/Download Table]

Three Months                Fabric &       Baby &        Beauty       Health      Snacks &                            
Ended December 31           Home Care    Family Care      Care         Care       Beverages   Corporate     Total     
---------------------      ------------  ------------ ------------ ------------ ------------ ------------ ------------
                                                                                                                      

Net Sales                                                                                                             
      2003                     $  3,407      $  2,673     $  4,492      $ 1,908      $   931       $ (190)   $  13,221
      2002                        3,102         2,526        2,997        1,567          881          (68)      11,005

Earnings Before Income Taxes                                                                                          
      2003                          843           444        1,047          500          188         (400)       2,622
      2002                          768           443          731          374          168         (305)       2,179

Net Earnings                                                                                                          
      2003                          570           281          681          333          122         (169)       1,818
      2002                          514           276          507          253          110         (166)       1,494

Six Months                  Fabric &       Baby &        Beauty       Health      Snacks &                            
Ended December 31           Home Care    Family Care      Care         Care       Beverages   Corporate     Total     
---------------------      ------------  ------------ ------------ ------------ ------------ ------------ ------------

Net Sales                                                                                                             
      2003                      $ 6,800      $  5,280     $  8,245      $ 3,636      $ 1,827       $ (372)   $  25,416
      2002                        6,234         4,952        6,120        2,977        1,703         (185)      21,801

Earnings Before Income Taxes                                                                                          
      2003                        1,675           916        1,960          906          350         (643)       5,164
      2002                        1,577           843        1,535          649          290         (577)       4,317

Net Earnings                                                                                                          
      2003                        1,132           576        1,297          609          231         (266)       3,579
      2002                        1,061           517        1,055          449          201         (325)       2,958

10-Q 7th Page of 14 TOC 1st Previous Next ↓Bottom Just 7th
4.   Acquisitions - Acquisitions during the six months ended December 31, 2003  
consist primarily of the Company's September 2003 acquisition of a    
controlling interest in Wella AG (Wella). Through a stock purchase    
   agreement with the majority shareholders of Wella and a tender offer made
 on the remaining shares, the Company acquired a total of 81% of Wella's
outstanding shares, including 99% of Wella's outstanding voting class 
shares, for a total purchase price of 4.67 billion Euros, excluding   
  acquisition costs (approximately $5.1 billion based on exchange rates on
    the date of the transactions). The Wella business consists of professional
  hair care, retail hair care, and cosmetics and fragrances divisions with
 over $3 billion in annual net sales. The operating results of the Wella
business are reported in the Company's Beauty Care business segment.  

The acquisition of Wella's shares has been accounted for as a purchase
   business combination in accordance with Statement of Financial Accounting
Standards (SFAS) No. 141, "Business Combinations." Accordingly, the   
  Company's consolidated financial statements include the results of Wella
  from the date on which the Company acquired control (September 2, 2003).

    The  Company is in the process of obtaining independent appraisals for the
    purpose of allocating the purchase price to the individual assets acquired
   and liabilities assumed. This will result in potential adjustments to the
carrying values of Wella's recorded assets and liabilities, the       
     establishment of certain intangible assets, the determination of the useful
 lives of intangible assets, some of which may have indefinite lives not
subject to amortization, and the determination of the amount of any   
residual value that will be allocated to goodwill. The preliminary    
 allocation of the purchase price included in the current period balance
   sheet is based on the current best estimates of management and is subject
   to revision based on final determination of fair values. The Company also
is completing its analysis of collaboration plans that may result in  
   additional purchase price allocation adjustments. The Company anticipates
 the valuations and other studies will be substantially completed in the
fourth quarter of the fiscal year.                                    

  The following table provides pro forma results of operations for the six
months ended December 31, 2003 and 2002 and for the three months ended
 December 31, 2002, as if Wella had been acquired as of the beginning of
each fiscal year presented. The pro forma results include certain     
    adjustments, including adjustments to convert Wella's historical financial
   information from International Accounting Standards (IAS) into accounting
    principles generally accepted in the United States of America (U.S. GAAP),
  estimated interest impacts from funding of the acquisition and estimated
    amortization of identifiable intangible assets. However, pro forma results
   do not include any anticipated cost savings or other effects of the Wella
     acquistion. Accordingly, such amounts are not necessarily indicative of the
 results that would have occurred if the acquisition had occurred on the
dates indicated or that may result in the future.                     

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                                                        [Enlarge/Download Table]

                          PRO FORMA RESULTS (Amounts in millions)                           
                          ---------------------------------------                           

                                      Six Months Ended December 31                          
                                   ----------------------------------    Three Months Ended 
                                        2003                2002         December 31, 2002  
                                   --------------      --------------  ---------------------

                                                                                            
Net Sales                             $25,932             $23,508            $11,936        

Net Earnings                            3,550               2,995              1,532        

Diluted net earnings per                 2.54                2.13               1.09        
common share                                                                                

5.   Goodwill and Intangible Assets - Goodwill as of December 31, 2003 is       
allocated by reportable segment as follows (amounts in millions):     

                                                        [Enlarge/Download Table]

                                                                                                                      
                               Fabric &          Baby &           Beauty         Health        Snacks &               
                               Home Care       Family Care         Care           Care         Beverages       Total  
                             -------------   ---------------   ------------    ----------    -------------   ---------

Goodwill, June 30, 2003          $460             $884           $6,600          $2,908           $280        $11,132 
   Acquisition (Note 4)                                           4,465             143                         4,608 
   Translation & Other              4               53              704              26              1            788 
----------------------------------------------------------------------------------------------------------------------
Goodwill, December 31, 2003      $464             $937           $11,769         $3,077           $281        $16,528 

     The increase in goodwill within the Beauty Care segment is primarily due to
    the preliminary allocation of goodwill related to the acquisition of Wella
   and translation. The increase in goodwill within Health Care is primarily
due to a small acquisition.                                           

  Identifiable intangible assets as of December 31, 2003 are comprised of:

Amounts in Millions                                                   
                           Gross
                                            Carrying     Accumulated
                                              Amount      Amortization
                                             --------     ------------

Amortizable intangible assets            $2,269          $517 
Non-amortizable intangible assets         2,599           169 
      --------------------------------------------------------------------
Total identifiable intangible assets     $4,868          $686 

  Amortizable intangible assets consist principally of patents, technology
    and trademarks. The non-amortizable intangible assets consist primarily of
   trademarks. Gross amortizable intangible assets increased by $962 million
     during the six months ended December 31, 2003, primarily due to intangibles
from the Wella acquisition, translation and several small brand       
    acquisitions. Non-amortizable intangibles increased by $933 million during
     the six months ended December 31, 2003 primarily due to trademarks from the
     Wella acquisition and translation. These estimated allocations of the Wella
purchase price to specific assets acquired, including identifiable    
  intangibles, are subject to revision based on the final determination of
fair values, as discussed in footnote 4.                              

  The amortization of intangible assets for the three and six months ended
December 31, 2003 is $47 million and $81 million, respectively.       

6.   Pro Forma Stock-Based Compensation - The Company has stock-based           
  compensation plans under which stock options are granted to key managers
     and directors at the market price on the date of grant. In prior years, the
majority of grants to key managers were issued in the quarter ended   
    September 30. While certain grants were issued during the six months ended
December 31, 2003, the Company will issue the fiscal 2004 key manager 
   grants in the quarter ended March 31, 2004. Grants issued since September
   2002 are vested after three years and have a ten-year life. Grants issued
   from 1999 through 2002 are fully exercisable after three years and have a
  fifteen-year life. The Company also makes other grants to employees, for
which vesting terms and option lives differ.                          

  Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the
  Company has elected to account for its employee stock option plans under
APB Opinion No. 25, "Accounting for Stock Issued to Employees," which 
    recognizes expense based on the intrinsic value at date of grant. As stock
    options have been issued with exercise prices equal to the market value of
     the underlying shares on the grant date, no compensation cost has resulted.
    Had compensation cost for all options granted been determined based on the
  fair value at grant date consistent with SFAS No. 123, the Company's net
earnings and earnings per share would have been as follows:           

                              Three Months Ended        Six Months Ended
                               December 31               December 31
                               ---------------------    ----------------------
                               2003        2002         2003        2002
                               ----------  ---------    ----------  ----------
Net earnings                                                                    
  As reported                 $1,818       $1,494       $3,579      $2,958
  Pro forma expense               65          101          147         205
  Pro forma                    1,753        1,393        3,432       2,753
                               ----------  ---------    ----------  ----------
Net earnings per common share                                                   
Basic                                                                           
  As reported                  $1.38        $1.13        $2.71       $2.23
   Pro forma adjustments        (0.05)       (0.08)       (0.11)      (0.16)
  Pro forma                     1.33         1.05         2.60        2.07
Diluted                                                                         
  As reported                   1.30         1.06         2.56        2.10
   Pro forma adjustments        (0.05)       (0.07)       (0.12)      (0.14)
  Pro forma                     1.25         0.99         2.44        1.96
                               ----------  ---------    ----------  ----------

 The assumptions used to calculate the fair value of options granted are
evaluated and revised, as necessary, to reflect market conditions and 
experience.                                                           

7.   Medicare Prescription Drug Act - The Medicare Prescription Drug,           
   Improvement and Modernization Act of 2003 was signed into law on December
    8, 2003. This Act introduced both a Medicare prescription-drug benefit and
   a federal subsidy to sponsors of retiree health-care plans that provide a
    benefit at least "actuarially equivalent" to the Medicare benefit. The Act
     will not have a material impact on the Company's accumulated postretirement
  benefit obligation or net postretirement benefit costs, due primarily to
     the relative size of the expected federal subsidy, the Company's assumption
     that its prescription benefits are at least as beneficial as those provided
under Medicare, and the Company's expectation that the Act will not   
materially impact participation rates or per capita claims costs.     
 Accordingly, the effects of the Act will be factored into the Company's
normal year-end measurement process for other post-employment benefit 
(OPEB) plans, which will decrease the Company's postretirement benefit
  obligation reported at June 2004 and periodic net postretirement benefit
costs beginning in fiscal 2005. Specific authoritative guidance on the
    accounting for the federal subsidy is pending and that guidance, if issued
after the effects of the Act are reflected in the measurement of the  
     accumulated postretirement benefit obligation or net postretirement benefit
costs, could require a subsequent change to such reported information.

8.   Other New Pronouncements - In January and December 2003, the FASB issued   
FASB Interpretation No. 46 (FIN 46) and No. 46, revised (FIN 46R),    
"Consolidation of Variable Interest Entities". These statements, which
   address preceived weaknesses in accounting for entities commonly known as
special-purpose or off-balance-sheet, require consolidation of certain
interests or arrangements by virtue of holding a controlling financial
interest in such entities. Certain provisions of FIN 46R related to   
    interests in special purpose entities were applicable for the period ended
     December 31, 2003. The Company must apply FIN 46R to their interests in all
  entities subject to the interpretation as of the first interim or annual
period ending after March 15, 2004. Adoption of this new method of    
  accounting for variable interest entities did not and is not expected to
    have a material impact on the Company's consolidated results of operations
and financial position.                                               

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations                                                 

OVERVIEW                                                                        
--------                                                                        

The Company markets approximately 300 products in more than 160 countries around
the world in five distinct business segments: Fabric and Home Care, Beauty Care,
Baby and Family Care, Health Care and Snacks and Beverages.                     

During the first six months of the fiscal year through December 31, 2003, the   
Company delivered strong top line results and double-digit earnings growth,     
despite widespread competitive activity. All business segments posted volume and
earnings growth. Results include the impact of the Wella acquisition which was  
completed in September 2003. Sales grew ahead of volume due to positive foreign 
exchange impacts, partially offset by mix (driven by high growth in developing  
markets) and pricing activity. Earnings increased due to the scale benefit of   
volume, the completion of the Company's restructuring program which had $211    
million of after tax charges in the base period, and lower manufacturing costs. 
Earnings growth was partially offset by continued marketing investments in the  
base business and in support of product initiatives.                            

Going forward, business and market uncertainties may affect results. For a      
discussion of key factors that could impact and must be managed by the Company, 
please refer to Management's Discussion and Analysis in the Company's Annual    
Report on Form 10-K for the fiscal year ended June 30, 2003.                    

10-Q 10th Page of 14 TOC 1st Previous Next ↓Bottom Just 10th
RESULTS OF OPERATIONS - Three Months Ended December 31, 2003                    
------------------------------------------------------------                    

 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
 Consolidated Earnings Information

                                      Three Months Ended
                                       December 31
                                      ----------------------
                                                2003         2002    % CHG
                                               ---------    ---------    -----
NET SALES                                       $  13,221    $  11,005     20 % 
COST OF PRODUCTS SOLD                              6,324        5,490     15 %
                                      ---------    ---------
GROSS MARGIN                                        6,897        5,515     25 % 
MARKETING, RESEARCH, ADMINISTRATIVE & OTHER        4,155        3,267     27 %
                                      ---------    ---------
OPERATING INCOME                                    2,742        2,248     22 % 
TOTAL INTEREST EXPENSE                               149          143         
OTHER NON-OPERATING INCOME, NET                       29           74         
                                      ---------    ---------
EARNINGS BEFORE INCOME TAXES                        2,622        2,179     20 % 
INCOME TAXES                                         804          685         

NET EARNINGS                                        1,818        1,494     22 % 

EFFECTIVE TAX RATE                                  30.7%        31.4%          

PER COMMON SHARE:                                                               
 BASIC NET EARNINGS                             $   1.38     $    1.13      22 %
 DILUTED NET EARNINGS                           $   1.30     $    1.06      23 %
DIVIDENDS                                      $   0.45     $    0.41         
AVERAGE DILUTED SHARES OUTSTANDING               1,400.4       1,402.6          

                                                                        Basis Pt
COMPARISONS AS A % OF NET SALES                                           Chg   
-------------------------------                                         --------
COST OF PRODUCTS SOLD                             47.8%         49.9%         
GROSS MARGIN                                      52.2%         50.1%     210 
MARKETING, RESEARCH, ADMINISTRATIVE & OTHER       31.4%         29.7%         
OPERATING MARGIN                                  20.7%         20.4%      30 
EARNINGS BEFORE INCOME TAXES                      19.8%         19.8%         
NET EARNINGS                                      13.8%         13.6%         

Unit volume for the quarter increased 19 percent, with all business segments and
geographic regions reporting unit volume growth. Excluding the impact of        
acquisitions and divestitures, primarily Wella, unit volume increased nine      
percent. Beauty Care led the business segments with unit volume growth of 45    
percent. Excluding acquisitions and divestitures, Beauty Care volume increased  
10 percent. Health Care and Fabric and Home Care volume increased 17 and nine   
percent, respectively. Developing markets delivered strong, double-digit unit   
volume growth.                                                                  

Net sales increased 20 percent to $13.22 billion. Foreign exchange had a        
positive impact of four percent due primarily to the strengthening of the Euro, 
Canadian dollar, British pound and Japanese yen, offset by weakening of the     
Mexican Peso and Venezuelan Bolivar. Mix was driven primarily by continued high 
growth in developing markets, including China and Latin America. Pricing        
activity, largely in response to competition, reduced sales by one percent.     
Pricing includes responses to competitive actions across multiple categories    
including family care in North America and Fabric and Home Care in Europe and   
the Middle East. The table below identifies the drivers to net sales changes    
versus the prior year quarter by business segment:                              

                                                        [Enlarge/Download Table]


                                   Volume                                                                          
                     -----------------------------------                                                           
                            With           Without                                                       Total     
                       Acquisitions/    Acquisitions/                                         Total      Impact    
                        Divestitures     Divestitures       FX         Price     Mix/Other    Impact     Ex-FX     
                     ----------------------------------------------------------------------------------------------
                                                                                                                   
FABRIC AND HOME CARE        9%               9%            4%          -1%         -2%        10%         6%       
         BEAUTY CARE       45%              10%            5%           0%          0%        50%        45%       
BABY AND FAMILY CARE        4%               4%            5%          -1%         -2%         6%         1%       
         HEALTH CARE       17%              17%            4%           1%          0%        22%        18%       
SNACKS AND BEVERAGES        1%               1%            4%          -2%          3%         6%         2%       
                    ---------------------------------------------------------------------------------------------- 
       TOTAL COMPANY       19%               9%            4%          -1%         -2%        20%        16%       

Note: These sales percentage changes are approximations based on quantitative                                      
formulas that are consistently applied.                                                                            

Net earnings increased 22 percent to $1.82 billion. Earnings growth was         
primarily driven by volume benefits, the completion of the prior year           
restructuring program (which included $98 million after tax in the base period) 
and lower manufacturing costs. These improvements were partially offset by      
marketing investments to support base business growth and new initiatives.      

Net earnings per share were $1.30, an increase of 23 percent, including a       
slightly accretive effect from Wella.                                           

Gross margin expanded 210 basis points. Of this, 70 basis points ($75 million   
before tax) relates to restructuring charges in the prior period. Of the        
remaining 140 basis points of expansion, approximately half was driven by the   
addition of Wella, which has a higher gross margin than the base business. The  
remaining half was driven by the scale benefit of volume growth, the mix impact 
of higher volume in the Health and Beauty Care businesses, and product cost     
savings.                                                                        

Marketing, Research, Administrative and Other Costs (MRA&O) as a percentage of  
net sales increased 170 basis points. The large majority of this basis point    
increase is due to Wella, reflecting a higher ratio of marketing expenses to    
sales than the base business and initial post-acquisition costs. The remaining  
increase in spending reflects investments behind the base business and support  
for initiatives. The addition of Wella and increased marketing investments more 
than offset the basis point improvement due to the non-recurrence of            
restructuring program charges ($57 million before tax) in the base period.      

RESULTS OF OPERATIONS - Six Months Ended December 31, 2003                      
----------------------------------------------------------                      

 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
 Consolidated Earnings Information

                                      Six Months Ended
                                     December 31
                                       -----------------------
                                                   2003         2002     % CHG
                                                -----------------------   ------
NET SALES                                       $  25,416    $  21,801      17 %
 COST OF PRODUCTS SOLD                             12,203       10,979      11 %
                                      ---------    ---------
GROSS MARGIN                                       13,213       10,822      22 %
 MARKETING, RESEARCH, ADMINISTRATIVE & OTHER        7,828        6,395      22 %
                                      ---------    ---------
OPERATING INCOME                                    5,385        4,427      22% 
TOTAL INTEREST EXPENSE                               290          287         
OTHER NON-OPERATING INCOME, NET                       69          177         
                                      ---------    ---------
EARNINGS BEFORE INCOME TAXES                        5,164        4,317      20 %
INCOME TAXES                                       1,585        1,359         
NET EARNINGS                                        3,579        2,958      21 %
                                      =========    =========
EFFECTIVE TAX RATE                                  30.7%        31.5%          

PER COMMON SHARE:                                                               
 BASIC NET EARNINGS                             $    2.71    $    2.23      22 %
 DILUTED NET EARNINGS                           $    2.56    $    2.10      22 %
DIVIDENDS                                      $    0.91    $    0.82         
AVERAGE DILUTED SHARES OUTSTANDING               1,399.6      1,404.9         

                                                                        Basis Pt
COMPARISONS AS A % OF NET SALES                                           Chg   
-------------------------------                                         --------
COST OF PRODUCTS SOLD                              48.0%        50.4%         
GROSS MARGIN                                       52.0%        49.6%     240 
MARKETING, RESEARCH, ADMINISTRATIVE & OTHER        30.8%        29.3%         
OPERATING MARGIN                                   21.2%        20.3%      90 
EARNINGS BEFORE INCOME TAXES                       20.3%        19.8%         
NET EARNINGS                                       14.1%        13.6%         

Fiscal year to date, unit volume increased 16 percent. All business segments and
geographic regions delivered unit volume growth. The lower growth rate year to  
date versus the October - December quarter reflects the acquisition of Wella in 
September. Excluding acquisitions and divestitures, unit volume increased nine  
percent through the first six months of the fiscal year. Volume growth was led  
by Beauty Care, up 33 percent, and Health Care, up 20 percent. Developing       
markets delivered double-digit volume growth with strong results in China and   
Central and Eastern Europe.                                                     

For the first six months of the fiscal year, net sales increased 17 percent to  
$25.42 billion. Foreign exchange contributed three percent to sales growth.     
Pricing and mix combined for a negative two percent impact on sales growth.     
Pricing investments include activities to drive top line growth in multiple     
businesses and to respond to competition. Mix was driven primarily by strong    
growth in developing markets. The table below identifies the drivers to net     
sales changes fiscal year to date versus the prior year by business segment:    

                                                        [Enlarge/Download Table]


                                  Volume                                                                        
                    -----------------------------------                                                         
                           With           Without                                                     Total     
                      Acquisitions/     Acquisitions/                                      Total      Impact    
                       Divestitures     Divestitures       FX        Price     Mix/Other   Impact     Ex-FX     
                    --------------------------------------------------------------------------------------------
                                                                                                                
FABRIC AND HOME CARE        9%               8%            3%         -1%         -2%         9%         6%     
         BEAUTY CARE       33%               9%            4%         -1%         -1%        35%        31%     
BABY AND FAMILY CARE        5%               5%            4%         -1%         -1%         7%         3%     
         HEALTH CARE       20%              20%            3%          0%         -1%        22%        19%     
SNACKS AND BEVERAGES        2%               2%            4%         -1%          2%         7%         3%     
                    --------------------------------------------------------------------------------------------
       TOTAL COMPANY       16%               9%            3%         -1%         -1%        17%        14%     

Note: These sales percentage changes are approximations based on quantitative                                   
formulas that are consistently applied.                                                                         

Fiscal year to date earnings increased 21 percent to $3.58 billion. Earnings    
growth was driven by volume benefits, the completion of the restructuring       
program (which included $211 million of after tax charges in the prior year     
period) and product cost savings. Earnings growth was partially offset by       
continued marketing investments in the base business and in support of          
initiatives. Net earnings per share increased 22 percent to $2.56 compared to   
$2.10 in the base period.                                                       

Gross margin fiscal year to date was 52.0 percent compared to 49.6 percent in   
the prior year, an increase of 240 basis points. The gross margin improvement   
was driven by the scale benefit of volume, the reduction of before tax charges  
related to the completed restructuring program of $163 million, the             
addition of Wella which has a higher gross margin than the base business, the   
mix shift to the Health and Beauty Care segments (which have higher gross       
margins than the Company average) and base business product cost savings. These 
improvements were partially offset by the impact of pricing and higher commodity
costs.                                                                          

Marketing, Research, Administrative and Other Costs (MRA&O) fiscal year to date 
increased to 30.8 percent from 29.3 percent of net sales in the comparable base 
period, an increase of 150 basis points. The majority of the increase is due to 
Wella, reflecting a higher ratio of marketing expenses to sales than the base   
business and initial post-acquisition costs. Marketing investments were made to 
drive growth on the base business and in support of initiatives. The spending   
increases associated with Wella and marketing investments more than offset the  
reduction in prior year restructuring program charges of $120 million before    
tax.                                                                            

BUSINESS SEGMENT DISCUSSION                                                     
---------------------------                                                     

The following tables provide supplemental information on net earnings and the   
underlying drivers of net sales changes by business segment for the quarter     
ended December 31, 2003 and fiscal year to date:                                

                                                        [Enlarge/Download Table]


                              THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES                                   
                              (Amounts in Millions Except Per Share Amounts)                                  
                                   Consolidated Earnings Information                                          

                            --------------------------------------------------------------------------------- 
                                                 Three Months Ended December 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         $      3,407         10%           $  843          10%       $   570         11% 
BEAUTY CARE                         4,492         50%            1,047          43%           681         34% 
BABY AND FAMILY CARE                2,673          6%              444           0%           281          2% 
HEALTH CARE                         1,908         22%              500          34%           333         32% 
SNACKS AND BEVERAGES                  931          6%              188          12%           122         11% 
                            ----------------------------------------------------------------------------------
    TOTAL BUSINESS SEGMENT         13,411         21%            3,022          22%         1,987         20% 
CORPORATE                           (190)         n/a            (400)          n/a         (169)         n/a 
                            ----------------------------------------------------------------------------------
    TOTAL COMPANY                  13,221         20%            2,622          20%         1,818         22% 

                            ----------------------------------------------------------------------------------
                                                   Six Months Ended December 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         $      6,800          9%         $  1,675           6%       $ 1,132          7% 
BEAUTY CARE                         8,245         35%            1,960          28%         1,297         23% 
BABY AND FAMILY CARE                5,280          7%              916           9%           576         11% 
HEALTH CARE                         3,636         22%              906          40%           609         36% 
SNACKS AND BEVERAGES                1,827          7%              350          21%           231         15% 
                            ----------------------------------------------------------------------------------
    TOTAL BUSINESS SEGMENT         25,788         17%            5,807          19%         3,845         17% 
CORPORATE                            (372)         n/a            (643)          n/a         (266)         n/a
                            ----------------------------------------------------------------------------------
    TOTAL COMPANY                  25,416         17%            5,164          20%         3,579         21% 

FABRIC AND HOME CARE                                                            
--------------------                                                            

For the quarter, volume was up nine percent behind Tide, Gain, Era and the      
continued success of initiatives including Mr. Clean Magic Eraser and Swiffer   
Duster. Net sales increased 10 percent to $3.41 billion. Sales growth includes a
positive four percent foreign exchange impact that was partially offset by      
negative pricing and mix. Mix was driven by continued strong growth in          
developing markets, particularly China and Central and Eastern Europe. Pricing  
had a one percent impact on sales and represents primarily the continuation of  
prior period actions to maintain competitiveness. Net earnings increased 11     
percent to $570 million driven primarily by volume, as lower manufacturing costs
were offset by the profit impact of continued pricing actions.                  

For the first six months of the fiscal year, Fabric and Home Care volume        
increased nine percent. Net sales increased nine percent, including a positive  
foreign exchange impact of three percent. Mix and pricing impacts combined for a
negative three percent impact on sales. Net earnings increased seven percent.   
Earnings growth lags sales growth for the first six months of the fiscal year   
due to a high base period comparison in the July - September quarter.           

BEAUTY CARE                                                                     
-----------                                                                     

Total volume in the October - December quarter increased 45 percent including   
acquisitions and divestitures, primarily Wella. Excluding acquisitions and      
divestitures, Beauty Care volume increased 10 percent. Strong base business     
results were led by double-digit growth by the Pantene, Head & Shoulders and    
Herbal Essences hair care brands, Olay skin care and the Always feminine care   
brand. Net sales increased 50 percent to $4.49 billion, including a positive    
five percent foreign exchange impact. Net earnings were $681 million, an        
increase of 34 percent, due to strong top line growth, including Wella. Gross   
margin expansion was partially offset by the higher ratio of marketing expenses 
to sales for the Wella business, increased marketing investments in the North   
America hair care and skin care businesses and in support of initiatives        
(including Boss Intense, Lacoste Pour Femme, Rejoice in Greater China,          
Always/Alldays upgrades, Herbal Essences and Pantene in Western Europe and the  
geographic expansion of Olay Regenerist and Total Effects). The Wella           
acquisition was accretive to Beauty Care earnings. Interest and amortization    
expenses associated with Wella are included in Corporate.                       

For the six months ended December 31, Beauty Care volume increased 33 percent.  
Volume growth fiscal year to date reflects the Wella acquisition, completed in  
September, and double-digit increases in developing markets. Net sales increased
35 percent to $8.25 billion. A positive foreign exchange impact of four percent 
was partially offset by pricing and mix. Net earnings increased 23 percent to   
$1.30 billion. Volume benefits and lower product costs were partially offset by 
additional marketing investments to support the base business and initiatives.  

BABY AND FAMILY CARE                                                            
--------------------                                                            

For the quarter ended December 31, volume increased four percent behind strong  
growth in baby care - primarily in Western Europe and developing markets. Family
care volume was flat due, in part, to high promotional spending levels by key   
competitors. Net sales increased six percent to $2.67 billion. Foreign exchange 
was a positive impact of five percent; the impact of volume on sales was        
partially offset by pricing and mix. Mix was primarily driven by strong growth  
in mid-tier diaper products in developing markets. Pricing had a negative one   
percent effect on sales in response to increased competitive promotional        
activity in North America family care. Earnings grew two percent against strong 
base period results (21 percent increase) to $281 million. Earnings in baby care
increased due to volume and cost savings, largely offset by the aforementioned  
pricing investments and rising commodity costs in family care.                  

Fiscal year to date, Baby and Family Care volume increased five percent. Baby   
care volume increased high single-digits, while family care volume increased low
single-digits. Net sales increased seven percent to $5.28 billion, including a  
positive foreign exchange impact of four percent. Price and mix combined for a  
negative two percent impact. Earnings were $576 million, an increase of 11      
percent, as profit growth behind volume and product cost savings was partially  
offset by pricing investments and increased commodity costs.                    

HEALTH CARE                                                                     
-----------                                                                     

Health Care unit volume increased 17 percent during the October - December      
quarter driven by the continued success of Actonel, Prilosec OTC and oral care. 
Vicks also posted strong unit volume growth due to the early cough/cold season  
in North America. Net sales increased 22 percent to $1.91 billion aided by a    
positive four percent foreign exchange impact and one percent for pricing. Net  
earnings were $333 million, an increase of 32 percent, on strong volume, lower  
manufacturing costs and margin expansion due to product mix. Marketing spending 
increased versus the base period primarily behind continued support of Prilosec 
OTC, Crest Whitestrips and Crest Night Effects. While double-digit top line     
growth is expected for the fiscal year, Prilosec OTC volume in the remaining    
quarters is expected to reflect consumption levels following the successful     
launch in September and continued strong results in October - December quarter. 

Fiscal year to date, Health Care volume increased 20 percent. Net sales were    
$3.64 billion, an increase of 22 percent. Sales growth was impacted by a        
positive three percent for foreign exchange. Mix was a negative one percent     
impact driven primarily by developing market growth. Net earnings increased 36  
percent to $609 million. Earnings increased behind sales growth and margin      
expansion, including the impact of product cost savings.                        

SNACKS AND BEVERAGES                                                            
--------------------                                                            

Snacks and Beverages unit volume increased one percent. Beverages volume        
increased two percent driven primarily by the Folgers AromaSeal initiative. Net 
sales increased six percent to $931 million driven primarily by a foreign       
exchange benefit of four percent. Volume and mix gains were partially offset by 
increased merchandising costs to support the continued high level of promotional
activity in the coffee category. Manufacturing costs increased behind initiative
start-up expenses. Net earnings increased 11 percent to $122 million behind     
sales growth and lower marketing and administrative spending.                   

For the first six months of the fiscal year, Snacks and Beverages volume        
increased two percent. Net sales increased seven percent to $1.83 billion,      
reflecting volume growth, a positive foreign exchange impact of four percent and
combined mix and pricing of one percent. Net earnings in Snacks and Beverages   
increased 15 percent to $231 million.                                           

CORPORATE                                                                       
---------                                                                       

Corporate includes certain operating and non-operating activities, as well as   
eliminations to adjust management reporting principles to United States         
Generally Accepted Accounting Principles (U.S. GAAP). For the quarter, net sales
were -$190 million compared to -$68 million in the prior period, primarily      
driven by eliminations due to stronger joint venture sales. Net earnings for the
quarter were -$169 million compared to -$166 million in the comparable prior    
period. Results primarily reflect lower costs from the restructuring program    
offset by charges associated with Wella and hedging impacts. For the first six  
months of the fiscal year, Corporate net sales were -$372 million compared to   
-$185 million in the prior period. Net earnings for the six month period were   
-$266 million versus -$325 million in the same period year ago.                 

FINANCIAL CONDITION                                                             
-------------------                                                             

Operating Activities                                                            
--------------------                                                            

Cash generated from operating activities for the six months ended December 31,  
2003 was $3.96 billion compared to $4.33 billion in the comparable prior period.
Strong earnings, adjusted for non-cash items (depreciation, amortization and    
deferred income taxes) generated $4.67 billion of cash flow and were partially  
offset by increases in working capital.                                         

Working capital increased by $0.9 billion during the period. Accounts receivable
increased by $0.5 billion due mainly to strong December shipments. Accounts     
payable decreased reflecting the Company's continued effort to accelerate       
payments to suppliers in order to maximize efficiencies and capture all         
discounts.                                                                      

Cash generated from operating activities is down $0.4 billion versus the        
comparable prior year period. The impact of increased earnings in the current   
period were offset by a larger increase in working capital and the impact of    
dividends received from a joint venture in the base period.                     

Investing Activities                                                            
--------------------                                                            

Investing activities in the current year decreased cash by $6.11 billion        
compared to a decrease of $0.5 billion in prior year period. The primary driver 
was the acquisition of Wella for approximately $5.10 billion. Additional current
year acquisitions include Glide Dental Floss and fabric care brands in Western  
Europe and the Middle East. There was no acquisition activity in the comparable 
prior year period.                                                              

Capital spending increased to $810 million versus $616 million in the comparable
prior period. Capital spending as a percent of sales increased slightly versus  
the comparable period, but was still below the Company's target of four percent.

Financing Activities                                                            
--------------------                                                            

Financing activities in the current fiscal year to date increased cash by $1.14 
billion, representing a year-over-year cash increase of $3.29 billion. Cash from
financing includes an increase in short and long-term debt to support the Wella 
acquisition. The Company issued $1.38 billion aggregate principal amount of     
notes with varying maturity dates. Additionally, two bonds matured reducing     
long-term debt $993 million. The net change in long-term debt is an increase of 
$412 million versus June 30. Treasury share repurchases were roughly in line    
with the comparable base period. Treasury share repurchases through the         
remainder of the fiscal year are expected to be higher than the prior year. The 
Company purchased approximately $200 million of stock in the January - June 2003
period.                                                                         

Current assets net of current liabilities declined by approximately $3.3 billion
during the six months ended December 31, 2003. This decline was primarily caused
by the issuance of commercial paper to partially fund the acquisition of Wella  
AG. The Company anticipates being able to support its short-term liquidity      
through cash generated from operations. The Company also has very strong long   
and short-term credit ratings which will enable it to refinance this debt at    
favorable rates in the commercial paper and bond markets. In addition, the      
Company has agreements with a diverse group of creditworthy financial           
institutions that, should they be needed, would provide sufficient credit       
funding to meet short-term financing requirements.                              

10-Q 11th Page of 14 TOC 1st Previous Next ↓Bottom Just 11th
Item 4.  Controls and Procedures                                                

The Company's Chairman of the Board, President and Chief Executive, A.G. Lafley,
and the Company's Chief Financial Officer, Clayton C. Daley, Jr., have evaluated
the Company's internal controls and disclosure controls systems as of the end of
the period covered by this report.                                              

Messrs. Lafley and Daley have concluded that the Company's disclosure controls  
systems are functioning effectively to provide reasonable assurance that the    
Company can meet its disclosure obligations. The Company's disclosure controls  
system is based upon a global chain of financial, staff and general business    
reporting lines that converge in the world-wide headquarters of the Company in  
Cincinnati, Ohio. The reporting process is designed to ensure that information  
required to be disclosed by the Company in the reports that it files or submits 
with the Commission is recorded, processed, summarized and reported within the  
time periods specified in the Commission's rules and forms. Consistent with SEC 
suggestion, the Company has a Disclosure Committee consisting of key Company    
personnel designed to review the accuracy and completeness of all disclosures   
made by the Company.                                                            

In connection with the evaluation described above, no changes in the Company's  
internal control over financial reporting occurred during the Company's second  
fiscal quarter that has materially affected, or is reasonably likely to         
materially affect, the Company's internal control over financial reporting.     

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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, 2003).          

         (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, 2003).                                  

(11)     Computation of Earnings per Share.                   

(12)     Computation of Ratio of Earnings to Fixed Charges.   

(31)     Rule 13a-14(a)/15d-14(a) Certifications.             

(32)     Section 1350 Certifications.                         

(b)      Reports on Form 8-K                                                    

      During the quarter ended December 31, 2003, the Company did not file
        any Current Reports on Form 8-K. During the quarter ended December 31,
    2003, the Company furnished reports on Form 8-K pursuant to Item 9
  ("Regulation FD Disclosure") dated October 14, 2003, relating to
      Chairman, President and Chief Executive A.G. Lafley's address to the
      shareholders at the Company's annual meeting; and dated December 11,
2003, relating to updating previously issued guidance for the 
         October-December 2003 quarter and 2003/04 fiscal year. The Company also
       furnished reports on Form 8-K containing information pursuant to Item
        12 ("Results of Operations and Financial Condition") dated October 27,
      2003, relating to the announcement of earnings for the quarter ended
September 30, 2003.                                           

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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/JOHN K. JENSEN                                                               
------------------------------                                                  
(John K. Jensen)                                                                
Vice President and Comptroller                                                  

February 3, 2004                                                                
------------------------------                                                  
Date                                                                            

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 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, 2003).

(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, 2003).                                  

       (11)     Computation of Earnings per Share.                        25

       (12)     Computation of Ratio of Earnings to Fixed Charges.        26

       (31)     Rule 13a-14(a)/15d-14(a) Certifications.               27-30

       (32)     Section 1350 Certifications.                           31-32

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	3/31/04	8		10-Q, 8-K
	3/15/04	8
Filed on:	2/3/04	13
For Period End:	12/31/03	1	12	11-K, 8-K
	12/11/03	12		4, 8-K
	12/8/03	8
	10/27/03	12		8-K
	10/14/03	12		8-K, DEF 14A
	9/30/03	12		10-Q, 11-K, 8-K
	9/2/03	7
	6/30/03	2	14	10-K, 11-K, 4, 5, 8-K
	12/31/02	2	8	10-Q, 11-K, 13F-HR, 8-K, NT 11-K
				List all Filings

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Procter & Gamble Co – ‘10-Q’ for 12/31/03

On: Tuesday, 2/3/04, at 4:00pm ET · For: 12/31/03 · Accession #: 80424-4-25 · File #: 1-00434

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Quarterly Report — Form 10-QFiling Table of Contents

10-Q — 10-Q Ond 2003Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q
Filing Table of Contents

10-Q — 10-Q Ond 2003
Document Table of Contents