UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1994
Commission file number 1-434
THE PROCTER & GAMBLE COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-0411980
(State of incorporation) (I.R.S. Employer Identification No.)
One Procter & Gamble Plaza, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(513) 983-1100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No .
There were 686,464,155 shares of Common Stock outstanding as of
January 20, 1994.
-1-
PART I. FINANCIAL INFORMATION
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<CAPTION>
Millions of Dollars
Three Months Ended Six Months Ended
December 31 December 31
1994 1993 1994 1993
------ ------ ------- -------
<S> <C> <C> <C> <C>
NET SALES $8,467 $7,788 $16,628 $15,352
Cost of products sold 4,832 4,394 9,428 8,622
Marketing, administrative, and
other operating expenses 2,445 2,371 4,756 4,622
------ ------ ------- -------
OPERATING INCOME 1,190 1,023 2,444 2,108
Interest expense 125 123 244 248
Other income/(expense) net 94 105 195 199
------ ------ ------- -------
EARNINGS BEFORE INCOME TAXES 1,159 1,005 2,395 2,059
Income Taxes 409 352 853 736
------ ------ ------- -------
NET EARNINGS $ 750 $ 653 $ 1,542 $ 1,323
====== ====== ======= =======
PER COMMON SHARE:
Net earnings $ 1.06 $ .92 $ 2.18 $ 1.87
Net earnings assuming full dilution $ .99 $ .85 $ 2.04 $ 1.74
Dividends per common share $ .35 $ .31 $ .70 $ .62
AVERAGE COMMON SHARES OUTSTANDING (in millions) 685.2 682.3
</TABLE>
-2-
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEET
<CAPTION>
Millions of Dollars
December 31 June 30
ASSETS 1994 1994
----------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,184 $ 2,373
Marketable securities 177 283
Accounts receivable, less allowance for
doubtful accounts 3,743 3,115
Inventories
Raw materials and supplies 1,157 1,087
Work in process 201 213
Finished products 1,758 1,577
Deferred income taxes 720 716
Prepaid expenses and other current assets 966 624
-------- --------
10,906 9,988
-------- --------
PROPERTY, PLANT, AND EQUIPMENT 16,645 15,896
LESS ACCUMULATED DEPRECIATION 6,227 5,872
-------- --------
10,418 10,024
-------- --------
GOODWILL AND OTHER INTANGIBLE ASSETS 4,282 3,754
OTHER ASSETS 1,731 1,769
-------- --------
TOTAL $ 27,337 $ 25,535
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accruals $ 7,114 $ 6,665
Debt due within one year 1,691 1,375
-------- --------
8,805 8,040
-------- --------
LONG-TERM DEBT 5,061 4,980
OTHER LIABILITIES 3,158 3,336
DEFERRED INCOME TAXES 508 347
SHAREHOLDERS' EQUITY
Preferred stock 1,926 1,942
Common stock-shares outstanding-Dec. 31 686,017,433 686 684
-June 30 684,348,359
Additional paid-in capital 622 560
Currency translation adjustments (167) (63)
Reserve for ESOP debt retirement (1,761) (1,787)
Retained earnings 8,499 7,496
-------- --------
9,805 8,832
-------- --------
TOTAL $ 27,337 $ 25,535
======== ========
</TABLE>
-3-
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Millions of Dollars Six Months Ended December 31
1994 1993
-------- --------
<S> <C> <C>
Cash and Cash Equivalents, beginning of year $2,373 $2,322
OPERATING ACTIVITIES
Net earnings 1,542 1,323
Depreciation, depletion and amortization 603 557
Deferred income taxes 155 68
Increase in accounts receivable (447) (293)
Increase in inventories (109) (50)
Change in payables and accrued liabilities 36 (129)
Decrease in other liabilities (308) (84)
Other (202) (72)
-------- --------
1,270 1,320
-------- --------
INVESTING ACTIVITIES
Capital expenditures (866) (760)
Proceeds from asset sales and retirements 158 38
Acquisitions (616) (170)
Marketable securities 106 (120)
-------- --------
(1,218) (1,012)
-------- --------
FINANCING ACTIVITIES
Dividends to shareholders (531) (474)
Additions to short-term debt 260 357
Additions to long-term debt 328 413
Reduction of long-term debt (312) (500)
Proceeds from stock options 28 22
Purchase of treasury shares (9) (6)
-------- --------
(236) (188)
EFFECT OF EXCHANGE RATES ON CASH AND -------- --------
CASH EQUIVALENTS (5) (30)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS (189) 90
-------- --------
Cash and Cash Equivalents, end of period $2,184 $2,412
====== ======
SUPPLEMENTAL DISCLOSURE
Non-cash transactions
Liabilities assumed in acquisitions 449 11
Reduction in employee stock ownership plan debt,
guaranteed by the Company 26 24
Conversion of preferred to common stock 16 11
<FN>
The interim financial statements are unaudited, but in the opinion of
the Company include all adjustments, consisting only of normal
recurring items, necessary for a fair presentation of the data.
</TABLE>
-4-
MANAGEMENT'S DISCUSSION AND ANALYSIS
Worldwide net earnings for the quarter ending December 31, 1994 were
$750 million, a 15% increase over the same quarter of the prior year.
Earnings per share for the quarter were $1.06 compared to $.92 per
share for the second quarter of the prior year, also a 15% increase.
Worldwide net sales for the quarter increased 9% over the same quarter
of the prior year to $8.5 billion. Strong unit volume growth
continued, with worldwide unit shipments increasing 9% over the same
quarter in the prior year. Acquisitions contributed 3% of the
quarter's volume growth. Favorable exchange rates contributed
approximately 2% to the sales and earnings growth for the quarter.
Results for the first six months of the fiscal year reflect continued
volume growth and cost control efforts throughout the company.
Worldwide net earnings for the July-December period were $1,542, or
$2.18 per share, a 17% increase over the same period of the prior
year. Year to date sales were $16.6 billion, up 8% compared to $15.4
billion for this period of the prior fiscal year. Year to date volume
has grown 10%.
United States
Net earnings in the United States increased 7% for the quarter, on a
6% sales growth versus the same period a year ago. The earnings
increase reflects unit volume growth in all sectors, as well as
benefits from restructuring actions begun in the prior year. Overall,
unit volume increased 3%. The Laundry & Cleaning sector increased
unit volume in spite of competitive pressure and responses to new
initiatives in the Fabric Conditioners category. The Food & Beverage
sector unit volume benefited from strong shipments in the Juice and
Shortening & Oils categories. In the Paper sector, volume gains were
driven by continued strength in the Tissue/Towel category. Diaper
volume was down due, in part, to announced pricing reductions which
will take effect in the January-March quarter. Driven by double-digit
volume growth in the Hair Care category, the Beauty Care business also
increased unit volume 2%, excluding the discontinued Clarion business.
The Health Care business increased unit volume 2%. The primary driver
of the growth was Aleve, offsetting lower volumes in respiratory
attributable to a mild cough and cold season.
Year to date earnings for the United States have increased 10% over
the first half of the prior fiscal year. The earnings increase is
attributable to a 6% increase in sales on a 5% unit volume growth,
combined with the benefits of continued cost reduction efforts. Unit
volume growth has been achieved by nearly all sectors. Food and
Beverage year-to-date unit volume is down slightly due to the impact
of the contraction of the coffee market following the crop freeze in
Brazil.
International
Total international earnings increased 20% over the same quarter of
the prior year on a sales increase of 8%. Unit volume increased 15%.
The difference between sales and volume growth is largely due to
competitive pricing in a number of markets. Favorable exchange rates
contributed 4% to the sales growth and 5% to earnings growth.
-5-
Europe posted strong net earnings gains, as broadly-based unit volume
growth of 14% and continued cost reduction benefits offset the impact
of reduced pricing. The European Laundry business continues to be
strong, attaining record market share. The balance of international
achieved 16% unit volume growth. Cost control efforts contributed to
attaining double digit growth in quarterly earnings for this segment.
The devaluation of the Mexican peso did not adversely impact the
quarterly results. Translation of the net assets in Mexico resulted
in a charge to the cumulative translation component of shareholders'
equity, without significant impact to total equity. The devaluation
of the Mexican peso is not expected to significantly impact results
for the fiscal year.
For the first half of the fiscal year, International earnings have
increased 22% over the prior comparable period. Year to date sales
growth was 8% on a 15% unit volume growth, reflecting pricing actions
in a number of markets. International unit volume has increased at a
double digit rate across all regions except Latin America where the
economic conditions in Mexico and Venezuela have slowed volume growth.
Favorable exchange rates contributed 3% to the sales and earnings
growth for the first six months.
Restructuring Reserve Status
In the year ending June 30, 1993, a pre-tax reserve of $2,402 million
was established to cover a worldwide restructuring effort to
consolidate manufacturing systems and reduce overhead costs. The
primary elements of this reserve were costs related to fixed asset
disposals and separation-related costs (86% of the total).
The following information relates to the June 1993 reserve (in
millions of dollars pre-tax):
<TABLE>
<CAPTION>
Original Balance July-Dec Balance
Reserve 6/30/94 Charges 12/31/94
--------- --------- ---------- --------
<S> <C> <C> <C> <C>
Separation-related costs<F1> $ 965 $ 596 $134 $ 462
Disposals of Fixed Assets 1,109 960 116 844
Other<F2> 328 227 34 193
------ ------ ---- ------
$2,402 $1,783 $284 $1,499
====== ====== ==== ======
<FN>
<F1>
Includes separation allowances and related benefits, out
placement services, and personnel relocation costs.
<F2>
Includes closing, environmental remediation and contract
termination costs for sites shut down or divested, offset
by proceeds from asset sales. No cost element within this
category exceeds 5% of the total reserve.
</FN>
</TABLE>
Execution of the restructuring program is on track and the cost of
completing it is expected to approximate the original estimates. As
anticipated, charges for the disposal of fixed assets will lag behind
spending for separation-related programs. We have announced more than
half of the sites and production modules to be closed in order to
provide advance notice to employees. However, relatively few of these
facilities have been totally shut down at this time.
-6-
Benefits continue to be obtained from the restructuring program. We
estimate that incremental savings of almost $65 million after tax were
achieved in the October-December quarter, bringing cumulative
restructuring savings to approximately two-thirds of the $500 million
after-tax objective established in June 1993. These amounts reflect
estimated gross savings, which may be offset to some degree by other
actions, such as pricing or research and development spending.
Subsequent Event
Based on the information currently available, the recent earthquake in
Kobe, Japan will result in a $50 million after-tax charge to earnings
in the January-March quarter for employee assistance, clean-up and
repair of facilities and other incremental expenses directly
associated with the earthquake. Four of five plants in Japan were not
affected by the earthquake. The Akashi plant, which produces paper
products, suffered some damage and is being repaired currently.
Customers are being supplied from existing inventory and another P&G
plant in Japan. P&G's Japan headquarters and technical center on
Rokko Island suffered some damage, but based on initial assessments,
the basic structure appears sound.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Earnings per Share
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1994.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE PROCTER & GAMBLE COMPANY
E. H. EATON
- ------------------------------
E. H. Eaton
Vice President and Comptroller
(Principal Accounting Officer)
Date: February 13, 1995
-7-
EXHIBIT INDEX
Exhibit No. Page No.
(11) Computation of Earnings per Share 9
(12) Computation of Ratio of Earnings to Fixed Charges 10
(27) Financial Data Schedule 11
-8-
EXHIBIT (11)
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
===============================
COMPUTATION OF EARNINGS PER SHARE
---------------------------------------------------
Dollars and Share Amounts in Millions
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
------------------ ------------------
<S> <C> <C> <C> <C>
NET EARNINGS PER SHARE 1994 1993 1994 1993
- ---------------------------------------- ------ ------ ------ ------
Net earnings $ 750 $ 653 $1,542 $1,323
Deduct preferred stock dividends 26 26 51 50
------ ------ ------ ------
Net earnings applicable to common stock $ 724 $ 627 $1,491 $1,273
- ---------------------------------------------- ====== ====== ====== ======
Average number of common shares outstanding 685.2 682.3 685.2 682.3
Per Share
- ------------
Net earnings per share $ 1.06 $ .92 $ 2.18 $ 1.87
====== ====== ====== ======
NET EARNINGS PER SHARE ASSUMING
FULL DILUTION
- -----------------------------------------------
Net earnings $ 750 $ 653 $1,542 $1,323
Deduct differential -- preferred
vs. common dividends 11 13 23 26
------ ------ ------ ------
Net earnings/(loss) applicable to common stock $ 739 $ 640 $1,519 $1,297
- ----------------------------------------------- ====== ====== ====== ======
Average number of common shares outstanding 685.2 682.3 685.2 682.3
Add potential effect of:
Exercise of options 7.4 7.2 7.4 7.2
Conversion of preferred stock 53.0 54.2 53.0 54.2
------ ------ ------ ------
Average number of common shares
outstanding, assuming full dilution 745.6 743.7 745.6 743.7
====== ====== ====== ======
Per share assuming full dilution
- -----------------------------------------
Net earnings per share assuming full dilution $ .99 $ .85 $ 2.04 $ 1.74
====== ====== ====== ======
</TABLE>
-9-
EXHIBIT (12)
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
===============================
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------------------------------
Millions of Dollars
<CAPTION>
Six Months
Years Ended June 30 Ended Dec. 31
----------------------------------------------- ---------------
1990 1991 1992 1993 1994 1993 1994
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED
- ----------------------------------
Earnings from operations before income taxes
after eliminating undistributed earnings
of 20% to 50% owned affiliates $2,401 $2,652 $2,870 $ 294 $3,307 $2,043 $2,414
Fixed charges excluding capitalized interest 480 435 584 631 569 290 291
------ ------ ------ ------ ------ ------ ------
TOTAL EARNINGS, AS DEFINED $2,881 $3,087 $3,454 $ 925 $3,876 $2,333 $2,705
====== ====== ====== ====== ====== ====== ======
FIXED CHARGES, AS DEFINED
- --------------------------------------------
Interest expense $ 442 $ 395 $ 510 $ 552 $ 482 $ 248 $ 244
1/3 of rental expense 38 40 74 79 87 42 47
------ ------ ------ ------ ------ ------ ------
480 435 584 631 569 290 291
Capitalized interest 3 17 25 25 19 10 5
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES, AS DEFINED $ 483 $ 452 $ 609 $ 656 $ 588 $ 300 $ 296
====== ====== ====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 6.0 6.8 5.7 1.4 6.6 7.8 9.2
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000080424
<NAME> THE PROCTER & GAMBLE COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 2,184
<SECURITIES> 177
<RECEIVABLES> 3,743
<ALLOWANCES> 0
<INVENTORY> 3,116
<CURRENT-ASSETS> 10,906
<PP&E> 16,645
<DEPRECIATION> 6,227
<TOTAL-ASSETS> 27,337
<CURRENT-LIABILITIES> 8,805
<BONDS> 5,061
<COMMON> 686
0
1,926
<OTHER-SE> 7,193
<TOTAL-LIABILITY-AND-EQUITY> 27,337
<SALES> 16,628
<TOTAL-REVENUES> 16,628
<CGS> 9,428
<TOTAL-COSTS> 4,756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244
<INCOME-PRETAX> 2,395
<INCOME-TAX> 853
<INCOME-CONTINUING> 1,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,542
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.04
</TABLE>
