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 September 30, 1999 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 1,314,171,455 shares of Common Stock outstanding as of October 31,
1999.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Condensed Consolidated Statements of Earnings of The Procter & Gamble
Company and subsidiaries for the three months ended September 30, 1999 and 1998,
the Condensed Consolidated Balance Sheets as of September 30, 1999 and June 30,
1999, and the Condensed Consolidated Statements of Cash Flows for the three
months ended September 30, 1999 and 1998 follow. In the opinion of management,
these unaudited condensed 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 necessarily indicative of annual results.
Certain reclassifications of prior year's amounts have been made to conform with
the current year's presentation.
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
Amounts in Millions Except Per Share Amounts
Three Months Ended
September 30
1999 1998
------- -------
<S> <C> <C>
NET SALES $ 9,919 $ 9,510
Cost of products sold 5,206 5,142
Marketing, research, and
administrative expenses 2,866 2,494
------- -------
OPERATING INCOME 1,847 1,874
Interest expense 147 157
Other income, net 45 50
------- -------
EARNINGS BEFORE INCOME TAXES 1,745 1,767
Income taxes 598 600
------- -------
NET EARNINGS $ 1,147 $ 1,167
======= =======
PER COMMON SHARE:
Basic net earnings $ 0.85 $ 0.86
Diluted net earnings $ 0.80 $ 0.80
Dividends $ 0.320 $ 0.285
AVERAGE COMMON SHARES 1,435.2 1,454.5
OUTSTANDING - DILUTED
</TABLE>
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Amounts in Millions
September 30 June 30
1999 1999
------------ ------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,123 $ 2,294
Investment securities 348 506
Accounts receivable 3,221 2,940
Inventories
Materials and supplies 1,278 1,176
Work in process 418 375
Finished products 1,953 1,787
Deferred income taxes 576 621
Prepaid expenses and other current assets 1,909 1,659
------------ ------------
TOTAL CURRENT ASSETS 11,826 11,358
PROPERTY, PLANT AND EQUIPMENT 22,734 21,400
LESS ACCUMULATED DEPRECIATION 9,455 8,774
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 13,279 12,626
GOODWILL AND OTHER INTANGIBLE ASSETS 8,837 6,822
OTHER NON-CURRENT ASSETS 1,382 1,307
------------ ------------
TOTAL ASSETS $35,324 $32,113
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 7,759 $ 7,611
Debt due within one year 4,916 3,150
------------ ------------
TOTAL CURRENT LIABILITIES 12,675 10,761
LONG-TERM DEBT 7,212 6,231
DEFERRED INCOME TAXES 523 362
OTHER NON-CURRENT LIABILITIES 2,562 2,701
------------ ------------
TOTAL LIABILITIES 22,972 20,055
SHAREHOLDERS' EQUITY
Preferred stock 1,768 1,781
Common stock-shares outstanding - Sept. 30 1,315.7 1,316
- June 30 1,319.8 1,320
Additional paid-in capital 1,432 1,337
Reserve for ESOP debt retirement (1,531) (1,552)
Accumulated comprehensive income (1,513) (1,606)
Retained earnings 10,880 10,778
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 12,352 12,058
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,324 $32,113
============ ============
</TABLE>
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Millions of Dollars Three Months Ended
September 30
1999 1998
-------- -------
<S> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,294 $ 1,549
OPERATING ACTIVITIES
Net earnings 1,147 1,167
Depreciation and amortization 518 399
Deferred income taxes 191 81
Change in:
Accounts receivable (256) (140)
Inventories (294) (189)
Accounts payables and accruals 392 138
Other operating assets & liabilities (350) (270)
Other (1) 5
-------- --------
TOTAL OPERATING ACTIVITIES 1,347 1,191
-------- --------
INVESTING ACTIVITIES
Capital expenditures (684) (440)
Proceeds from asset sales and retirements 98 137
Acquisitions (2,797) 0
Change in investment securities 169 70
-------- --------
TOTAL INVESTING ACTIVITIES (3,214) (233)
-------- --------
FINANCING ACTIVITIES
Dividends to shareholders (452) (406)
Change in short-term debt 1,965 841
Additions to long-term debt 1,007 765
Reduction of long-term debt (265) (105)
Proceeds from stock options 45 28
Purchase of treasury shares (601) (1,078)
-------- --------
TOTAL FINANCING ACTIVITIES 1,699 45
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (3) (12)
-------- --------
CHANGE IN CASH AND CASH EQUIVALENTS (171) 991
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,123 $ 2,540
======== ========
</TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
NOTES TO THE CONDENSED 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, 1999. The results of
operations for the three month period ended September 30, 1999 are not
necessarily indicative of the results for the full year.
2. Comprehensive Income - Total comprehensive income is comprised primarily of
net earnings, net currency translation gains and losses, and net unrealized
gains and losses on securities. Total comprehensive income for the three
months ended September 30, 1999 and 1998 was $1,240 million and $1,254
million, respectively.
3. Segment Information:
Effective July 1, 1999, the Company moved from a geographic region structure to
product-based Global Business Units, which are responsible for all strategic,
manufacturing and sourcing activities. Consistent with this, segment reporting
has been changed to reflect the following product-based segments: Fabric and
Home Care, Paper, Beauty Care, Food and Beverage and Health Care. Prior year
information has been restated to conform with current year presentation. The
basis for presenting segment results generally is consistent with overall
company reporting. The primary difference relates to presentation of
partially-owned operations, which are presented based on 100% ownership basis.
The adjustment for this is included in Corporate & Other, which additionally
also includes certain financing and investment activities, goodwill
amortization, charges related to Organization 2005, and other general corporate
income and expense items.
<TABLE>
<CAPTION>
Amounts in Millions
Three Months Fabric
Ended & Home Health Beauty Food & Corporate
September 30 Care Paper Care Care Beverage & Other Total
------ ------ ------ ------ -------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales
1999 $3,160 $3,012 $799 $1,820 $1,209 $ (81) $9,919
1998 2,915 3,077 692 1,823 1,154 (151) 9,510
Earnings Before
Income Taxes
1999 $ 774 $ 575 $147 $ 357 $ 169 $(277) $1,745
1998 708 616 117 379 130 (183) 1,767
Net Earnings
1999 $ 484 $ 343 $ 91 $ 225 $ 106 $(102) $1,147
1998 442 352 70 235 79 (11) 1,167
</TABLE>
Item 2. Management Discussion and Analysis
RESULTS OF OPERATIONS
- ---------------------
The Company reported net earnings of $1.15 billion or $0.80 per diluted share
for the quarter ended September 30, 1999. These results include charges related
to the Company's Organization 2005 program, which was announced last June. This
multi-year program is associated with the Company's reorganization to
product-based Global Business Units, as described more fully below.
Core net earnings per diluted share, which exclude the Organization 2005 costs,
were $0.88, a ten percent increase over the first quarter of last year. Core net
earnings were $1.27 billion, excluding $120 million after tax in charges related
to Organization 2005. This solid progress reflects a continued cost-containment
focus in the face of significant initiative investments that yielded initial
results in the first quarter and laid the foundation for future growth.
Reported net sales for the first quarter were a record $9.92 billion, up four
percent. Net sales grew five percent, excluding a one percent impact of negative
exchange rates, primarily the euro and the Brazilian real. Unit volume grew two
percent. New premium-priced initiatives and product upgrades boosted sales ahead
of volume.
Gross margin was 47.5 percent for the current quarter compared to 45.9 percent
in the same quarter of the prior year and 44.8 percent for the full fiscal year
ended June 30, 1999. Included in Cost of Product Sold is $105 million before tax
related to Organization 2005. Gross margin was positively impacted this quarter
by improved pricing, product mix, and lower manufacturing expenses.
Operating margin was 18.6 percent for the quarter compared to 19.7 percent in
the same quarter a year ago and 16.4 percent for the prior fiscal year.
Excluding $160 million before tax in Organization 2005 charges, operating margin
was 20.2 percent, primarily due to gross margin improvement.
Following are highlights by business segment:
FABRIC AND HOME CARE
- --------------------
As the Company's biggest and fastest-growing business unit, Fabric and Home Care
set the pace for the Company's results. Net sales grew eight percent to $3.16
billion on four percent unit volume growth supplemented by the launch of
higher-margin initiatives and product upgrades. Currency impacts depressed sales
by one percent. The recent launches of Swiffer and Dryel in North America and
strong base business results drove volume gains. Share-building initiative
activity in Northeast Asia spurred double-digit volume growth in the geography.
Ariel tablets performed well after their spring launch in the United Kingdom and
are currently being expanded in Western Europe. Net earnings grew ten percent to
$484 million, reflecting volume growth and improved pricing, despite continued
initiative investment and the impact of unfavorable currency movements,
particularly the euro.
PAPER
- -----
The Paper business demonstrated strong volume gains on certain key brands,
behind an upgrade on Charmin and increased capacity on Bounty and Charmin. These
results were mitigated by significant competitive activity, particularly in
diapers and feminine care products. Excluding a two percent impact from the
Attends divestiture, volume and net sales were stable for the quarter, with net
sales at $3.01 billion. On the base business, successful pricing measures on
certain brands and markets were offset by negative currency impacts. Despite the
improved pricing, chiefly behind product upgrades in diapers, increased spending
in a difficult competitive environment resulted in net earnings of $343 million,
a two percent decline.
FOOD AND BEVERAGE
- -----------------
Food and Beverage posted a strong first quarter. Geographical expansion in both
snacks and juice helped push sales up five percent to $1.21 billion, on
comparable unit volume growth. A slate of new initiatives in North America,
including Folgers Whole Bean, Pringles Twin Pack, Sunny Delight Eclipse, and Jif
Smooth Sensations, along with the expansion of Pringles and Sunny Delight across
Western Europe, drove the volume growth. Earnings grew 35 percent to $106
million, behind the volume gains on the base business, higher-margin
initiatives, and improved gross margin.
BEAUTY CARE
- -----------
During the first quarter, Beauty Care continued to see benefits from the launch
of Oil of Olay Cosmetics, as well as a number of other premium initiatives.
Premium initiatives, as well as favorable currency impacts in Northeast Asia,
helped offset a three percent unit volume decline to maintain sales in line with
year-ago levels at $1.82 billion. Currency effects contributed one percent to
the sales increase. Volume comparisons reflect strong year-ago results and the
current competitive environment, primarily for hair care in key European
markets. Western Europe results were negatively impacted by the recent
introduction of new trade terms in France and the prior year divestiture of
certain minor brands. Volume also was impacted by economic sluggishness in China
that dampened consumption and certain trade inventory adjustments in advance of
current quarter pricing actions. Net earnings were $225 million, down four
percent as volume declines and initiative spending offset pricing improvements.
HEALTH CARE
- -----------
Health Care segment results included the integration of the newly acquired pet
health and nutrition business, The Iams Company, in September, 1999. Net sales
increased 16 percent to $799 million on seven percent unit volume growth,
primarily reflecting the Iams acquisition. Negative exchange impacts reduced
sales by one percent for the quarter. Net earnings were $91 million, a 29
percent increase over the prior year. The overall segment earnings reflect the
benefits of favorable pricing and increased licensing and divestiture activity,
which more than offset continued investment behind future initiatives and
product upgrades.
CORPORATE
- ---------
The Corporate segment includes certain financing and investing activities, other
general corporate income and expense items, segment eliminations, and
Organization 2005 costs which amounted to $120 million after tax for the
July-September, 1999 quarter.
FINANCIAL CONDITION
- -------------------
Total debt increased $2.7 billion since June 30, 1999. The incremental debt was
used primarily to fund the previously announced share repurchase program and the
acquisition of The Iams Company, which was completed August 31, 1999.
YEAR 2000 UPDATE
- ----------------
As outlined in the 10-K for the year ended June 30, 1999, the Company has
substantially completed its program to address the possible exposures related to
the impact on its computer systems of the Year 2000. These plans have not
changed materially in terms of scope or estimated costs to complete, and have
progressed according to previously identified time schedules.
Implementation of required changes to critical systems is complete. Testing and
certification of critical systems, which includes review of documented
remediation work and test results by technical experts, key users, and a central
project team, was successfully completed by September 30, 1999. The focus in
this area is now on maintaining Year 2000 readiness. The Company's risk
management program, which was expanded to include the Year 2000 Business
Continuity Plan (BCP), was completed by October 31, 1999, consistent with
previously identified time schedules. The objectives of the BCP are twofold: 1)
to ensure business-critical processes are protected from disruption and will
continue to function during and after the year 2000; and, 2) to ensure the
Company's ability to produce an acceptable level of products and services is
safeguarded in the event of failures of external systems and services. The BCP
includes, for example, identification of alternative suppliers or customers,
possible increases in safety inventory levels and other backup procedures.
Businesses and assets acquired by the Company after June 30, 1999 but prior to
the end of 1999 are subjected by the Company to a Year 2000 assessment process
and, where feasible, representations as to Year 2000 readiness are obtained from
the seller. Post-closing, the Company will take such actions as it considers
necessary regarding Year 2000 readiness, including modification or remediation
work and testing.
Incremental costs related to Year 2000 efforts, which include contractor costs
to modify existing systems and costs of internal resources dedicated to
achieving and maintaining Year 2000 compliance, are charged to expense as
incurred. Costs are expected to total approximately $90 million, of which over
90% has been spent through September 30, 1999.
The Company is taking all reasonable steps to prevent major interruptions in the
business due to Year 2000 issues. The effect, if any, on the Company's financial
statements if the Company, its customers, its suppliers, or the public sector
are not fully Year 2000 compliant is not reasonably estimable. The Company
believes, however, that the successful completion of its Year 2000 project will
significantly reduce the risk of a major business interruption due to Year 2000
failures. Additionally, the Company's broad base of customers and suppliers and
the worldwide nature of its operations is expected to mitigate any Year 2000
risks.
ORGANIZATION 2005 UPDATE
- ------------------------
On June 9, 1999, the Company announced an Organization 2005 program that is an
integral part of the broader 2005 initiative, which includes a realignment of
the organization structure, work processes and culture designed to accelerate
growth by streamlining management decision-making, manufacturing and other work
processes. These changes are intended to increase the Company's ability to
innovate and bring initiatives to global markets more quickly. In order to
implement the program's structural changes and achieve the benefits of faster
growth, the Company needs to make a number of structural changes to both its
administrative and manufacturing operations.
Charges related to Organization 2005 consist primarily of costs related to the
consolidation of manufacturing facilities (including accelerated depreciation,
asset writedowns and contract termination costs) and employee separation costs.
During the quarter ended September 30, 1999, the Company recorded expenses
totaling $160 million before tax related to Organization 2005, as detailed in
the following table:
<TABLE>
ORGANIZATION 2005 JULY-SEPTEMBER, 1999 CHARGES (BEFORE TAX)
- -----------------------------------------------------------
<CAPTION>
Cash Amount
Total Spent Charged
Beginning New During Against Ending
Reserves Charges Period Assets Reserves
-------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
Employee separations $35 $ 47 $(12) $-- $70
Asset write-downs -- 2 -- (2) --
Accelerated depreciation -- 100 -- (100) --
Other 9 11 (6) (2) 12
--- ---- ----- ----- ---
44 160 (18) (104) 82
</TABLE>
Organization 2005 charges are included in the Company's cost of products sold
($105 million) and in marketing, research and administrative expenses ($55
million), and are included in Corporate & Other in the Company's segment
reporting disclosure. The underlying plant closures and consolidations will
impact all regions and product segments. The planned plant closures and
consolidations will not all be executed immediately due to either capacity or
logistics constraints.
Employee separation charges in July-September, 1999 relate to severance packages
for approximately 700 people, representing primarily administrative employees in
North America, Asia, Europe, Middle East and Africa. The predominantly voluntary
packages 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 in accordance with P&G policy for such programs. On average,
net enrollment is expected to decline by approximately 75% of total separations,
as some terminations will be partially offset through increased enrollment at
remaining sites. Of total separations expected through fiscal 2001,
approximately half will take place in manufacturing with the balance in
administrative functions. Separation costs related to manufacturing employees
are included in cost of products sold, while those for administrative employees
are reported in marketing, research and administrative expenses.
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 and closures that will
occur primarily over the next three years as a result of the Organization 2005
program. The Company has changed the estimated useful lives of such assets,
resulting in an acceleration of depreciation. The majority of accelerated
depreciation recorded in the July-September, 1999 quarter is concentrated in the
Paper segment and reflects the standardization of manufacturing and other work
processes being undertaken in that segment.
Other costs include primarily relocation and training costs, as well as other
Organization 2005-related expenses. Such costs are expensed as incurred.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
At the Company's 1999 Annual Meeting of Shareholders held on October 12, 1999,
the following action was taken:
The following Directors were elected for terms of office expiring in 2002:
<TABLE>
<CAPTION>
BROKER NON-
VOTES FOR VOTES WITHHELD ABSTENTIONS* VOTES*
------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Donald R. Beall 1,204,249,875 8,046,622 N/A N/A
Gordon F. Brunner 1,201,356,980 10,939,517 N/A N/A
Richard B. Cheney 1,203,346,454 8,950,043 N/A N/A
Durk I. Jager 1,200,494,695 11,801,802 N/A N/A
Charles R. Lee 1,203,914,387 8,382,110 N/A N/A
</TABLE>
* Pursuant to the terms of the Notice of Annual Meeting and Proxy Statements,
proxies received were voted, unless authority was withheld, in favor of the
election of the five nominees named.
A proposal by the Board of Directors to ratify the appointment of Deloitte &
Touche LLP as the Company's independent auditors to conduct the annual audit of
the financial statements of the Company and its subsidiaries for the fiscal year
ending June 30, 2000, was approved by the shareholders. The shareholders cast
1,201,941,481 votes in favor of this proposal and 6,590,219 votes against. There
were 3,772,827 abstentions.
A proposal by the Board of Directors to ratify and approve certain grants of
stock options or stock appreciation rights was approved by the shareholders. The
proposal, reflecting the Compensation Committee's recommendation to encourage
executive participants to hold their stock options for a longer period,
requested that all outstanding grants of conditional stock options with a life
of more than ten years to the Chief Executive or to any other executive officer
subject to Section 162 (m) of the Internal Revenue Code and subject to U.S.
taxes be approved, have conditions removed, and have a maximum life of no more
than fifteen years from the date of grant. The shareholders cast 1,108,929,577
votes in favor of this proposal and 90,198,842 votes against. There were
13,171,228 abstentions.
A shareholder resolution proposed by Evelyn Y. Davis was defeated by the
shareholders. The proposal sought to reinstate the system of electing all
Directors annually, in place of the system of classifying Directors into three
classes with overlapping three-year terms which was approved by the shareholders
in 1985. The Board opposed the resolution. The shareholders cast 416,736,482
votes in favor of the resolution and 614,231,103 against. There were 18,201,527
abstentions and 163,135,416 broker non-votes.
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, 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.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K containing information
pursuant to Item 5 ("Other Events") dated August 11, 1999, entitled "Joint
Press Release by The Procter & Gable Company and The Iams Company Regarding
the Purchase of Iams by P&G."
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
D. R. WALKER
- --------------------------------------
D. R. Walker
Vice President and Comptroller
(Principal Accounting Officer)
Date: November 5, 1999
EXHIBIT INDEX
-------------
EXHIBIT NUMBER PAGE NUMBER
- -------------- -----------
(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.
(27) Financial Data Schedule.
EXHIBIT (11)
<TABLE>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Computation of Earnings Per Share
---------------------------------
Amounts in Millions Except Per Share Amounts
Three Months Ended
September 30
1999 1998
------- -------
<S> <C> <C>
BASIC NET EARNINGS PER SHARE
Net earnings $ 1,147 $ 1,167
Deduct preferred stock dividends 30 25
------- -------
Net earnings applicable to common stock $ 1,117 $ 1,142
======= =======
Average number of common shares outstanding 1,316.5 1,332.4
======= =======
Basic net earnings per share $ 0.85 $ 0.86
======= =======
DILUTED NET EARNINGS PER SHARE
Net earnings $ 1,147 $ 1,167
Deduct differential - preferred
vs. common dividends 5 5
------- -------
Net earnings applicable to common stock $ 1,142 $ 1,162
======= =======
Average number of common shares outstanding 1,316.5 1,332.4
Add potential effect of:
Exercise of options 23.3 24.0
Conversion of preferred stock 95.4 98.1
------- -------
Average number of common shares
outstanding, assuming dilution 1,435.2 1,454.5
======= =======
Diluted earnings per share $ 0.80 $ 0.80
======= =======
</TABLE>
EXHIBIT (12)
<TABLE>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
Millions of Dollars
Three Months Ended
Years Ended June 30 September 30
----------------------------------------------------------------------------
1995 1996 1997 1998 1999 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED
- -------------------
Earnings from operations before income $4,022 $4,695 $5,274 $5,704 $5,866 $1,676 $1,763
taxes after eliminating undistributed
earnings of equity method investees
Fixed charges, excluding capitalized interest 571 576 534 639 751 181 04
------ ------ ------ ------ ------ ------ ------
TOTAL EARNINGS, AS DEFINED $4,593 $5,271 $5,808 $6,343 $6,617 $1,857 $1,967
====== ====== ====== ====== ====== ====== ======
FIXED CHARGES, AS DEFINED
- -------------------------
Interest expense including capitalized interest $ 511 $ 493 $ 457 $ 548 $ 650 $ 157 $ 147
1/3 of rental expense 83 92 77 91 101 24 26
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES AS DEFINED $ 594 $ 585 $ 534 $ 639 $ 751 $ 181 $ 173
====== ====== ====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 7.7 9.0 10.9 9.9 8.8 10.3 11.4
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,123
<SECURITIES> 348
<RECEIVABLES> 3,221
<ALLOWANCES> 0
<INVENTORY> 3,649
<CURRENT-ASSETS> 11,826
<PP&E> 22,734
<DEPRECIATION> 9,455
<TOTAL-ASSETS> 35,234
<CURRENT-LIABILITIES> 12,675
<BONDS> 7,212
0
1,768
<COMMON> 1,316
<OTHER-SE> 9,268
<TOTAL-LIABILITY-AND-EQUITY> 35,234
<SALES> 9,919
<TOTAL-REVENUES> 9,919
<CGS> 5,206
<TOTAL-COSTS> 2,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 1,745
<INCOME-TAX> 598
<INCOME-CONTINUING> 1,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,147
<EPS-BASIC> 0.85
<EPS-DILUTED> 0.80
</TABLE>
