Document/Exhibit Description Pages Size
1: 10-Q Jfm '03 - 10-Q 22 87K
2: EX-2 Purchase Offer 46± 162K
3: EX-11 Jfm '03 - 10-Q (Exhibit 11) 1 9K
4: EX-12 Jfm '03 - 10-Q (Exhibit 12) 1 8K
5: EX-99 Jfm '03 - 10-Q (Exhibit 99-1 - CEO Cert) 1 7K
6: EX-99 Jfm '03 - 10-Q (Exhibit 99-2 CFO Cert) 1 7K
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 March 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 [ ]
There were 1,294,704,875 shares of Common Stock outstanding as of March 31,
2003.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Statement of Earnings of The Procter & Gamble Company and
subsidiaries for the three and nine months ended March 31, 2003 and 2002, the
Consolidated Balance Sheet as of March 31, 2003 and June 30, 2002, and the
Consolidated Statement of Cash Flows for the nine months ended March 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 Nine Months Ended
March 31 March 31
----------------------------------- -----------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
NET SALES $ 10,656 $ 9,900 $ 32,457 $ 30,069
Cost of products sold 5,394 5,070 16,373 15,520
Marketing, research, administrative
and other expenses 3,305 3,176 9,700 9,269
--------------- --------------- --------------- ---------------
OPERATING INCOME 1,957 1,654 6,384 5,280
Interest expense 138 146 425 453
Other non-operating income, net 37 40 214 262
--------------- --------------- --------------- ---------------
EARNINGS BEFORE INCOME TAXES 1,856 1,548 6,173 5,089
Income taxes 583 509 1,942 1,647
--------------- --------------- --------------- ---------------
NET EARNINGS $ 1,273 $ 1,039 $ 4,231 $ 3,442
=============== =============== =============== ===============
PER COMMON SHARE:
Basic net earnings $ 0.96 $ 0.78 $ 3.19 $ 2.58
Diluted net earnings $ 0.91 $ 0.74 $ 3.01 $ 2.45
Dividends $ 0.41 $ 0.38 $ 1.23 $ 1.14
AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 1,395.8 1,405.7 1,401.9 1,402.5
See accompanying Notes to Consolidated Financial Statements
[Enlarge/Download Table]
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Amounts in millions
March 31 June 30
ASSETS 2003 2002
------------------ ------------------
CURRENT ASSETS
Cash and cash equivalents $ 5,513 $ 3,427
Investment securities 312 196
Accounts receivable 2,960 3,090
Inventories
Materials and supplies 1,054 1,031
Work in process 379 323
Finished goods 2,330 2,102
------------------ ------------------
Total Inventories 3,763 3,456
Deferred income taxes 465 521
Prepaid expenses and other receivables 1,452 1,476
------------------ ------------------
TOTAL CURRENT ASSETS 14,465 12,166
PROPERTY, PLANT AND EQUIPMENT
Buildings 4,697 4,532
Machinery and equipment 18,284 17,963
Land 591 575
------------------ ------------------
23,572 23,070
Accumulated depreciation (10,494) (9,721)
------------------ ------------------
NET PROPERTY, PLANT AND EQUIPMENT 13,078 13,349
NET GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill 11,075 10,966
Trademarks and other intangible assets 2,390 2,464
------------------ ------------------
NET GOODWILL AND OTHER INTANGIBLE ASSETS 13,465 13,430
OTHER NON-CURRENT ASSETS 1,675 1,831
------------------ ------------------
TOTAL ASSETS $ 42,683 $ 40,776
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,064 $ 2,205
Accrued and other liabilities 5,654 5,330
Taxes payable 1,818 1,438
Debt due within one year 2,794 3,731
------------------ ------------------
TOTAL CURRENT LIABILITIES 12,330 12,704
LONG-TERM DEBT 11,333 11,201
DEFERRED INCOME TAXES 1,278 1,077
OTHER NON-CURRENT LIABILITIES 2,217 2,088
------------------ ------------------
TOTAL LIABILITIES 27,158 27,070
SHAREHOLDERS' EQUITY
Preferred stock 1,591 1,634
Common stock - shares outstanding - Mar 31 1,294.7 1,295
June 30 1,300.8 1,301
Additional paid-in capital 2,800 2,490
Reserve for ESOP debt retirement (1,306) (1,339)
Accumulated other comprehensive income (2,149) (2,360)
Retained earnings 13,294 11,980
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 15,525 13,706
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 42,683 $ 40,776
================== ==================
See accompanying Notes to Consolidated Financial Statements
[Enlarge/Download Table]
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
Amounts in millions March 31
-----------------------------
2003 2002
------------ ------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $3,427 $2,306
OPERATING ACTIVITIES
Net earnings 4,231 3,442
Depreciation and amortization 1,231 1,188
Deferred income taxes 277 249
Change in:
Accounts receivable 183 10
Inventories (221) (226)
Accounts payable and accruals 423 1,061
Other operating assets & liabilities 73 (359)
Other 542 66
------------ ------------
TOTAL OPERATING ACTIVITIES 6,739 5,431
------------ ------------
INVESTING ACTIVITIES
Capital expenditures (967) (1,224)
Proceeds from asset sales 122 185
Acquisitions (51) (5,405)
Change in investment securities (93) (167)
------------ ------------
TOTAL INVESTING ACTIVITIES (989) (6,611)
------------ ------------
FINANCING ACTIVITIES
Dividends to shareholders (1,690) (1,571)
Change in short-term debt (1,386) 3,577
Additions to long-term debt 1,227 712
Reduction of long-term debt (749) (527)
Proceeds from stock options 170 191
Purchase of treasury shares (1,235) (439)
------------ ------------
TOTAL FINANCING ACTIVITIES (3,663) 1,943
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (1) (8)
CHANGE IN CASH AND CASH EQUIVALENTS 2,086 755
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $5,513 $3,061
============ ============
See accompanying Notes to Consolidated Financial Statements
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, 2002. The results of
operations for the three-month and nine-month periods ended March 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 March 31,
2003 and 2002 was $1,299 million and $787 million, respectively. For the
nine months ended March 31, 2003 and 2002, total comprehensive income was
$4,442 million and $3,095 million, respectively.
3. Segment Information - To reflect management and business changes, the
Company has realigned its reporting segments. Effective July 1, 2002, the
feminine care business, which had been managed within the baby, feminine
and family care segment, is included in the beauty care segment, with the
baby, feminine and family care segment renamed the baby and family care
segment. In addition, the food and beverage segment was renamed snacks and
beverages to reflect its remaining businesses. The historical results for
the elements of the former food and beverage segment that have been
divested or spun-off (i.e., Jif, Crisco and commercial shortening and oils)
are now reflected in corporate. As required by SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," prior year
operating information in the following table has been restated to conform
with the current year presentation. In conjunction with the realignments,
approximately $1.8 billion in segment assets related to the feminine care
business are now part of the beauty care reporting segment.
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.
[Enlarge/Download Table]
SEGMENT INFORMATION (Amounts in millions)
Three Months Ended Fabric & Baby & Beauty Health Snacks &
March 31 Home Care Family Care Care Care Beverages Corporate Total
--------------------------- -------------- ------------- ------------ ------------ -------------- ------------- --------------
Net Sales
2003 $ 3,061 $ 2,473 $ 3,026 $ 1,428 $ 756 $ (88) $ 10,656
2002 2,837 2,259 2,748 1,215 751 90 9,900
Earnings Before Income Taxes
2003 752 334 685 227 87 (229) 1,856
2002 716 256 596 188 108 (316) 1,548
Net Earnings
2003 499 200 463 147 50 (86) 1,273
2002 472 144 388 124 64 (153) 1,039
Nine Months Ended Fabric & Baby & Beauty Health Snacks &
March 31 Home Care Family Care Care Care Beverages Corporate Total
-------------------------- --------------- ------------- ------------ ------------ -------------- ------------- --------------
Net Sales
2003 $ 9,295 $ 7,425 $ 9,146 $ 4,405 $ 2,459 $ (273) $ 32,457
2002 8,687 6,931 7,930 3,732 2,422 367 30,069
Earnings Before Income Taxes
2003 2,329 1,177 2,220 876 377 (806) 6,173
2002 2,041 1,001 1,852 662 365 (832) 5,089
Net Earnings
2003 1,560 717 1,518 596 251 (411) 4,231
2002 1,359 595 1,275 436 234 (457) 3,442
4. Acquisitions - On November 16, 2001, the Company completed the acquisition
of the Clairol business from Bristol-Myers Squibb Company for approximately
$5 billion. The operating results of the Clairol business are reported in
the beauty care segment from November 16, 2001. The following table
provides pro forma results of operations for the nine months ended March
31, 2002, as if Clairol had been acquired as of July 1, 2001. The pro forma
results do not include any anticipated cost savings or other effects of the
planned integration of Clairol. Accordingly, such amounts are not
indicative necessarily of the results that would have occurred if the
acquisition had been completed on the date indicated or that may result in
the future.
PRO FORMA RESULTS (Amounts in millions)
---------------------------------------
Nine months ended
March 31, 2002
---------------------------------
Net Sales $30,611
Net Earnings 3,495
Diluted net earnings per
common share 2.49
In March, 2003, the Company entered into an agreement to acquire a
controlling interest in Wella AG from the majority shareholders and
announced its intent to make a tender offer for the remaining shares of
Wella AG. Assuming all of the shares are tendered, the acquisition price
will total approximately 5.7 billion Euros. The acquisition is subject to
normal regulatory approvals. Wella AG is a beauty care business
headquartered in Western Europe. In connection with the agreement to
acquire the controlling interest, the Company has represented that it will
maintain minimum cash balances in certain designated accounts of
approximately 3.3 billion Euros until the closing of the transaction.
5. Goodwill - Goodwill as of March 31, 2003 is allocated by reportable segment
as follows (amounts in millions):
[Download Table]
Fabric & Baby & Beauty Health Snacks &
Home Care Family Care Care Care Beverages Total
--------- ----------- ------ ------ --------- -----
Goodwill, March 31, 2003 $451 $866 $6,586 $2,893 $279 $11,075
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. Grants were issued
during the nine months ended March 31, 2003 under stock-based compensation
plans approved by shareholders in 2001. These new grants are fully
exercisable after three years and have a ten-year life. Prior grants,
issued in 1999 through 2002, are fully exercisable after three years and
have a fifteen-year life. The Company also makes other minor 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 grant date fair
value, 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 Nine Months Ended
March 31 March 31
----------------- ------------------
2003 2002 2003 2002
------ ------ ------ ------
Net earnings
As reported $1,273 $1,039 $4,231 $3,442
Pro forma expense 100 106 305 336
Pro forma 1,173 933 3,926 3,106
------ ------ ------ ------
Net earnings per common share
Basic
As reported $0.96 $0.78 $3.19 $2.58
Pro forma adjustments (0.08) (0.09) (0.24) (0.26)
Pro forma 0.88 0.69 2.95 2.32
Diluted
As reported 0.91 0.74 3.01 2.45
Pro forma adjustments (0.07) (0.08) (0.21) (0.23)
Pro forma 0.84 0.66 2.80 2.22
------ ------ ------ ------
The assumptions used to calculate the fair value of options granted are
evaluated and revised, as necessary, to reflect market conditions and
experience.
7. Guarantees - In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others," which elaborates
on required disclosures by a guarantor in its financial statements about
obligations under certain guarantees that it has issued and clarifies the
need for a guarantor to recognize, at the inception of certain guarantees,
a liability for the fair value of the obligation undertaken in issuing the
guarantee. The provisions of this Interpretation relating to initial
recognition and measurement of guarantor liabilities were effective for
qualifying guarantees entered into or modified after December 31, 2002. The
adoption of these provisions did not have a material impact on the
Company's financial statements. The disclosure requirements of the
Interpretation, which were effective for the quarter ended December 31,
2002, are included in the following paragraphs.
In conjunction with certain transactions, primarily divestitures, the
Company may provide routine indemnifications (e.g., retention of previously
existing environmental, tax and employee liabilities) whose terms range in
duration and often are not explicitly defined. Where appropriate, an
obligation for such indemnifications is recorded as a liability. Generally,
a maximum obligation is not explicitly stated. Because the obligated
amounts of these types of indemnifications often are not explicitly stated,
the overall maximum amount of the obligation under such indemnifications
cannot be reasonably estimated. Other than obligations recorded as
liabilities at the time of divestiture, historically the Company has not
made significant payments for these indemnifications.
In certain situations, the Company enters into capital guarantees for
suppliers that construct assets to produce materials for sale to P&G. The
total amount of guarantees issued under such arrangements is not
significant.
8. Other New Pronouncements - In January 2003, the FASB issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities," which
addresses consolidation by a business of variable interest entities in
which it is the primary beneficiary. The Interpretation is effective
immediately for certain disclosure requirements and variable interest
entities created after January 31, 2003, and in fiscal 2004 for all other
variable interest entities. This interpretation will not have a material
impact on the Company's financial statements.
Item 2. Management Discussion and Analysis
RESULTS OF OPERATIONS
---------------------
Despite continuing softness in the global economy and competitive activity
within certain of the Company's core categories, the Company delivered strong
sales and earnings growth for the quarter ended March 31, 2003. Businesses in
Latin America continue to suffer declines in sales and earnings from the
economic and political situation in the region, which had a modest dampening
effect on the Company. Going forward, uncertainties in markets such as Latin
America and the Middle East could affect results. For a discussion of key
factors that could impact and must be managed by the Company, refer to the
Management Discussion and Analysis section in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2002.
The Company reported net earnings of $1.27 billion or $0.91 diluted net earnings
per share for the quarter ended March 31, 2003. Results included a $66 million
after-tax restructuring charge related to the Company's program to streamline
operations and its business portfolio. Net earnings in the year ago quarter were
$1.04 billion or $0.74 per share, including a $147 million after-tax
restructuring charge.
Net sales were $10.66 billion, up eight percent versus the year-ago quarter.
Unit volume grew seven percent versus the prior year quarter behind double-digit
growth in the health care business and nine percent growth in both the fabric
and home care and the beauty care businesses. Double-digit volume increases in
Asia and Central and Eastern Europe helped drive the volume growth. Excluding
acquisitions and divestitures, unit volume increased eight percent. Sales growth
included a positive foreign exchange impact of three percent, which was
partially offset by pricing. Acquisitions and divestitures had a negative two
percent impact on sales. The foreign exchange impact represents the benefits of
the Euro and British Pound, partially offset by Latin American devaluations. The
pricing impacts were directed towards activities to drive top line growth,
including expanding the Company's mid-tier and developing market businesses,
improving in-store presence and merchandising activities in Western Europe and
to achieve competitive pricing on shelf. Examples include the following: the
re-launch of a number of beauty and fabric care brands into mid-tier product
positionings, pricing adjustments on Crest Whitestrips following competitive
entry, price adjustments on baby care to maintain shelf parity versus a key
competitor, and promotional investments on coffee and family care to match key
competitors' levels of merchandising and remain competitive on shelf.
Gross margin was 49.4 percent for the quarter ended March 31, 2003, compared to
48.8 percent in the same quarter of the prior year. This represents an increase
of 60 basis points versus a base period that delivered a 320 basis point
improvement. The current year increase was driven by a reduction in cost of
products sold for charges related to the restructuring program, which totaled
$46 million before tax in the current quarter and $107 million in the prior year
quarter. Other base business and restructuring savings in the current quarter
were reinvested in pricing activities to stimulate growth as discussed in the
preceding paragraph, leading to lower margin expansion.
Marketing, Research, Administrative, and Other costs (MRA&O), as a percent of
sales, decreased from 32.1 percent in the prior year quarter to 31.0 percent in
the current year quarter, an improvement of 110 basis points. This improvement
was caused by a reduction in restructuring costs, from $99 million in the prior
year to $41 million in the current year, a base period that included Clairol
transition costs, and lower overhead spending which more than offset increased
marketing investments, particularly in fabric and home care, health care and
beauty care.
Operating margin increased 170 basis points to 18.4 percent for the quarter,
compared to 16.7 percent in the same quarter a year ago. This improvement was
caused by lower restructuring charges, which declined from $191 million in the
prior year quarter to $87 million in the current quarter, along with the other
MRA&O improvements discussed in the preceding paragraph.
FABRIC & HOME CARE
------------------
Fabric and home care unit volume grew nine percent and was broad-based, led by
North America home care and Asia and Central and Eastern Europe. Net sales were
up eight percent to $3.06 billion. This includes a positive two percent foreign
exchange impact partially offset by mix impacts from growth in mid-tier brands
and developing markets. Additionally, pricing investments behind mid-tier growth
in North America and increased spending to improve in store presence and
merchandising activities in Western Europe contributed to sales growth lagging
volume growth. Net earnings increased six percent to $499 million, as volume
growth was partially offset by the funding of increased initiative spending and
in-store marketing investments, including the launch of Mr. Proper in Germany
and Bold in Japan.
BABY & FAMILY CARE
------------------
Baby and family care delivered unit volume growth of seven percent behind
continued strength in baby care, driven primarily by Pampers Baby Stages of
Development, and solid results in North America and Western Europe family care.
Net sales increased nine percent to $2.47 billion, including a positive four
percent foreign exchange impact. Positive mix behind growth in premium tier
diapers was more than offset by temporary pricing adjustments in North America
to reach shelf unit price parity with key competition in baby care and retain
competitive pricing in family care. Earnings increased 39 percent to $200
million reflecting volume growth, cost reductions and lower promotional
marketing investment versus the base period.
BEAUTY CARE
-----------
Beauty care unit volume was up nine percent driven by hair care, including
continued strength behind Pantene and Head & Shoulders, and feminine care. Sales
grew 10 percent, including a positive four percent foreign exchange impact,
reaching $3.03 billion. Negative pricing and mix impacts, driven by the
repositioning of the Company's portfolio of hair care brands such as Pert,
Aussie and Renewal 5x into multiple price tiers, partially offset foreign
exchange impacts. Net earnings were $463 million, up 19 percent driven by volume
and continued reductions in cost of products sold, partially offset by increased
marketing investments.
HEALTH CARE
-----------
Health care delivered double-digit unit volume, sales and earnings growth this
quarter. Unit volume increased 18 percent driven by strong results in oral care
and continued strength in pharmaceuticals. Net sales were $1.43 billion, up 18
percent, including a three percent positive foreign exchange impact that was
offset by lower Crest Whitestrips pricing versus year ago. Crest and Actonel led
the volume and sales growth. Health care's net earnings increased 19 percent to
$147 million primarily behind volume. Progress in health care's gross margin was
re-invested in marketing, primarily in oral care.
SNACKS & BEVERAGES
------------------
Snacks and beverages unit volume was down one percent as improved snacks results
in North America and Western Europe were offset by soft beverage results. Sales
grew one percent to $756 million, including a positive four percent foreign
exchange impact. Net earnings declined 22 percent to $50 million. This partly
reflects the response to competitive promotional spending in the U.S. coffee
market, which has escalated at a rate in excess of that justified by commodity
price declines, resulting in increased promotional spending to defend share.
CORPORATE
---------
The corporate segment contains both operating and non-operating items that are
not included in the business results. Current quarter results primarily reflect
lower restructuring costs.
FINANCIAL CONDITION
-------------------
For the nine months ended March 31, 2003, cash generated from operating
activities totaled $6.74 billion, compared to $5.43 billion in the prior year.
Earnings adjusted for non-cash items including depreciation, amortization and
deferred income taxes accounted for $5.7 billion of the current year cash flow
and $0.9 billion of the $1.31 billion current year improvement. The inventory,
accounts receivable and accounts payable and accruals components of working
capital changed slightly from June 30, providing $0.4 billion of operating cash
flow. Inventories increased as compared to June 30, 2002, while receivables
declined. However, both receivables days sales outstanding and inventory days on
hand improved versus the year ago period. Accounts payable and other accruals
increased as compared to June 30, providing operating cash flows, due to timing
differences for payments of other accruals, primarily taxes. Working capital
changes during the nine months ended March 31, 2002 provided a higher amount of
operating cash flows than the current year due to abnormally low tax payments in
the year ago period. Current year activity reflects a return to historical
levels.
Investing activities used $989 million of cash year to date, compared to $6.61
billion used in the comparable prior year period, which included the Clairol
acquisition during the October-December quarter. There has been no significant
acquisition activity in the current year. This difference in acquisition
activity generated $5.35 billion of the year over year change in investing cash
flows. Divestiture proceeds in the current year include the Vicks throat drop
business in Japan, certain Clairol small brands and a family care divestiture in
China. Prior year divestitures included Comet and PUR Outdoor. Capital spending
was also reduced in the current year as compared to the prior year. The Company
anticipates that this capital spending rate may increase through the year, but
the fiscal year average will be below the Company's revised target of less than
five percent of sales. The Company's pending acquisition of Wella AG is
discussed in Note 4 to the Consolidated Financial Statements.
Financing activities used $3.66 billion of cash for the current fiscal year
versus a source of $1.94 billion in the first nine months of the prior year. The
largest driver of this $5.6 billion difference is the prior year issuance of
short-term debt to finance the Clairol acquisition. In addition, treasury share
purchases used more cash in the current year, reflecting lower repurchase
activity in the prior year base period driven by cash needs for the Clairol
acquisition.
RESTRUCTURING PROGRAM UPDATE
----------------------------
In 1999, concurrent with a reorganization of its operations into product-based
global business units, the Company initiated a multi-year restructuring program.
The program was designed to accelerate growth and deliver cost reductions by
streamlining management decision-making, manufacturing and other work processes
and discontinuing under-performing businesses and initiatives. Technology
improvements as well as standardization of manufacturing and other work
processes allow the Company to streamline operations, resulting in the
consolidation of manufacturing activity and various business processes.
Costs to be incurred include separation related costs, asset write-downs,
accelerated depreciation and other costs directly related to the restructuring
efforts.
During the quarter ended March 31, 2003, the Company recorded charges totaling
$87 million before tax ($66 million after tax) related to its restructuring
program, as detailed in the following table. In addition, the Company continues
to execute similar projects as part of ongoing operations.
[Enlarge/Download Table]
Restructuring Program July, 2002 - March, 2003 Charges (before tax)
-------------------------------------------------------------------
Amounts in millions
Previous
Beginning Quarter Current Applied Ending
Reserves Charges Quarter Total Cash Against Reserves
6/30/02 Jul-Dec 02 Charges Charges Spent Assets 3/31/03
--------- ---------- ------- ------- ----- ------- --------
Employee separations $159 $106 $29 $135 ($193) $ - $101
Asset write-downs - 59 38 97 - (97) -
Accelerated depreciation - 63 9 72 - (72) -
Other 86 55 11 66 (47) (25) 80
--------- ---------- ------- ------- ----- ------- --------
245 283 87 370 (240) (194) 181
During January-March 2003, restructuring charges included in the Company's
cost of products sold amounted to $46 million before tax and charges included in
MRA&O amounted to $41 million before tax.
Employee separation charges in January-March 2003 are associated with
severance packages for approximately 250 people. The packages are predominantly
voluntary and are formula driven based on salary levels and past service.
Severance costs related to voluntary separations are charged to earnings when
the employee accepts the offer. The current and planned separations span the
entire organization, including manufacturing, selling, research and
administrative positions.
The charges for accelerated depreciation and asset write-downs, which totaled
$47 million before tax in the quarter ended March 31, 2003, are primarily
related to manufacturing operations. Charges for accelerated depreciation relate
to long-lived assets that will be taken out of service prior to the end of their
normal service period due to manufacturing consolidations, technology
standardization, plant closures or strategic choices to discontinue initiatives.
The Company has shortened the estimated useful lives of such assets, resulting
in incremental depreciation expense. Charges for asset write-downs relate to the
establishment of new fair value bases for assets held for sale or disposal that
represent excess capacity in the process of being removed from service or
disposed and businesses held for sale in the next 12 months.
Asset write-downs also include certain manufacturing assets that are expected to
operate at levels significantly below their planned capacity. The projected cash
flows from such assets over their remaining useful lives were no longer
estimated to be greater than their current carrying values; therefore, they are
written down to estimated fair value, generally determined by reference to
discounted expected future cash flows.
Other costs incurred as a direct result of the restructuring program amounted to
$11 million before tax during January-March 2003. These were primarily for
relocation, training, establishment of global business services and results from
discontinued initiatives.
The Company recently announced its intent to discontinue separate reporting of
its current Restructuring Program at the conclusion of the current fiscal year.
The Company anticipates an increase in the quarterly restructuring charges in
April-June 2003, as many enrollment reductions and consolidation projects are
completed. The Company, as part of its on-going operations, will continue to
undertake similar projects in future periods to maintain a competitive cost
structure, including manufacturing consolidation and work force rationalization.
Item 4: Controls and Procedures
The Company's President, Chief Executive, and Chairman of the Board, 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 within
90 days of the filing of 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 formed a Disclosure Committee consisting of key
Company personnel designed to review the accuracy and completeness of all
disclosures made by the Company.
Since Messrs. Lafley's and Daley's most recent review of the Company's internal
controls systems, there have been no significant changes in internal controls or
in other factors that could significantly affect these controls.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2-1) Share Purchase Agreement for Shares of Wella AG (English
Translation).
(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, 1998).
(3-2) Regulations (Incorporated by reference to Exhibit (3-2) of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).
(11) Computation of Earnings per Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(99) Certification of Periodic Financial Reports Pursuant to 18 U.S.C.
Section 1350.
(b) Reports on Form 8-K
The Company filed Current Reports on Form 8-K containing information
pursuant to Item 5 ("Other Events") dated January 28, 2003, relating to
the announcement of earnings for the October-December 2002 quarter
(including unaudited financial information), and dated March 27, 2003,
relating to the realignment of the Company's reporting segments as
required by FASB Statement No. 131 (including unaudited financial
information). The Company also filed Current Reports on Form 8-K
containing information pursuant to Item 9 ("Regulation FD Disclosure")
dated March 17, 2003, relating to updating previously issued guidance
for the January-March 2003 quarter; dated March 18, 2003, relating to
the signing of an agreement to purchase a controlling interest in Wella
AG; and dated March 20, 2003, relating to the posting of questions and
answers regarding the Wella AG acquisition on the Company's website.
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
Date: APRIL 29, 2003
-----------------------
I, A.G. Lafley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Procter &
Gamble Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/S/ A.G. LAFLEY
--------------------------
(A.G. Lafley)
Chairman of the Board,
President and Chief Executive
Date: APRIL 29, 2003
--------------------
I, Clayton C. Daley, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Procter &
Gamble Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/S/ CLAYTON C. DALEY, JR.
------------------------------
(Clayton C. Daley, Jr.)
Chief Financial Officer
Date: APRIL 29, 2003
------------------------
EXHIBIT INDEX
Exhibit No.
(2-1) Share Purchase Agreement for Shares of Wella AG (English Translation).
(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, 1998).
(3-2) Regulations (Incorporated by reference to Exhibit (3-2) of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).
(11) Computation of Earnings per Share
(12) Computation of Ratio of Earnings to Fixed Charges
(99) Certification of Periodic Financial Reports Pursuant to 18 U.S.C.
Section 1350
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘10-Q’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 4/29/03 | | 17 | | 21 | | | 4 |
| For Period End: | | 3/31/03 | | 1 | | 13 | | | 8-K, NT 11-K |
| | 3/27/03 | | 16 | | | | | 8-K |
| | 3/20/03 | | 16 | | | | | 8-K |
| | 3/18/03 | | 16 | | | | | 8-K |
| | 3/17/03 | | 16 | | | | | 8-K |
| | 1/31/03 | | 9 | | | | | 4 |
| | 1/28/03 | | 16 | | | | | 8-K |
| | 12/31/02 | | 8 | | | | | 10-Q, 11-K, 13F-HR, 8-K, NT 11-K |
| | 7/1/02 | | 5 | | | | | 4 |
| | 6/30/02 | | 2 | | 12 | | | 10-K, 11-K, 13F-HR, 5, 8-K, NT 11-K |
| | 3/31/02 | | 2 | | 12 | | | 10-Q, 13F-HR, 8-K, 8-K/A |
| | 11/16/01 | | 7 | | | | | 8-K |
| | 7/1/01 | | 7 |
| | 9/30/98 | | 16 | | 22 | | | 10-Q |
| | 6/30/98 | | 16 | | 22 | | | 10-K, 11-K |
| List all Filings |
↑Top
Filing Submission 0000080424-03-000021 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Thu., Apr. 25, 12:58:50.2am ET 