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, 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 1,315,714,296 shares of Common Stock outstanding as of
December 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 and six months ended December 31, 1999
and 1998, the Condensed Consolidated Balance Sheets as of December 31, 1999 and
June 30, 1999, and the Condensed Consolidated Statements of Cash Flows for the
six months ended December 31, 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>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
Amounts in Millions Except Per Share Amounts
Three Months Ended Six Months Ended
December 31 December 31
------------------ ----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET SALES $10,588 $ 9,934 $20,507 $19,444
Cost of products sold 5,563 5,332 10,769 10,474
Marketing, research, and
administrative expenses 3,183 2,765 6,049 5,259
------- ------- ------- -------
OPERATING INCOME 1,842 1,837 3,689 3,711
Interest expense 178 166 325 323
Other income, net 51 60 96 110
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 1,715 1,731 3,460 3,498
Income taxes 589 589 1,187 1,189
------- ------- ------- -------
NET EARNINGS $ 1,126 $ 1,142 $ 2,273 $ 2,309
======= ======= ======= =======
PER COMMON SHARE:
Basic net earnings $ 0.83 $ 0.84 $ 1.68 $ 1.70
Diluted net earnings $ 0.78 $ 0.78 $ 1.58 $ 1.58
Dividends $ 0.320 $ 0.285 $ 0.640 $ 0.570
AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 1,434.8 1,451.4
</TABLE>
<TABLE>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts in Millions
December 31 June 30
1999 1999
------- -------
ASSETS
- ------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,044 $ 2,294
Investment securities 230 506
Accounts receivable 3,576 2,940
Inventories
Materials and supplies 1,374 1,176
Work in process 416 375
Finished products 1,969 1,787
Deferred income taxes 401 621
Prepaid expenses and other current assets
2,064 1,659
------- -------
TOTAL CURRENT ASSETS
12,074 11,358
PROPERTY, PLANT AND EQUIPMENT 22,958 21,400
LESS ACCUMULATED DEPRECIATION
9,569 8,774
------- -------
TOTAL PROPERTY, PLANT AND EQUIPMENT
13,389 12,626
GOODWILL AND OTHER INTANGIBLE ASSETS 9,015 6,822
OTHER NON-CURRENT ASSETS
1,523 1,307
------- -------
TOTAL ASSETS $36,001 $32,113
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 6,862 $ 7,611
Debt due within one year
4,779 3,150
------- -------
TOTAL CURRENT LIABILITIES 11,641 10,761
LONG-TERM DEBT 8,703 6,231
DEFERRED INCOME TAXES 489 362
OTHER NON-CURRENT LIABILITIES 2,467 2,701
------- -------
TOTAL LIABILITIES 23,300 20,055
SHAREHOLDERS' EQUITY
Preferred stock 1,758 1,781
Common stock-shares outstanding - Dec 31 1,315.7 1,316
June 30 1,319.8 1,320
Additional paid-in capital 1,529 1,337
Reserve for ESOP debt retirement (1,530) (1,552)
Accumulated comprehensive income (1,656) (1,606)
Retained earnings 11,284 10,778
------- -------
TOTAL SHAREHOLDERS' EQUITY 12,701 12,058
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $36,001 $32,113
======= =======
</TABLE>
<TABLE>
<CAPTION>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in Millions
Six Months Ended
December 31
------------------
1999 1998
------- --------
<S> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,294 $ 1,549
OPERATING ACTIVITIES
Net earnings 2,273 2,309
Depreciation and amortization 1,081 841
Deferred income taxes 318 58
Change in:
Accounts receivable (548) (441)
Inventories (360) (69)
Accounts payables and accruals (845) 207
Other operating assets & liabilities (533) (651)
Other 119 (269)
------- -------
TOTAL OPERATING ACTIVITIES 1,505 1,985
------- -------
INVESTING ACTIVITIES
Capital expenditures (1,452)
Proceeds from asset sales and retirements 109 436
Acquisitions (3,082) (107)
Change in investment securities 254 173
------- -------
TOTAL INVESTING ACTIVITIES (4,171) (628)
------- -------
FINANCING ACTIVITIES
Dividends to shareholders (900) (814)
Change in short-term debt 1,816 631
Additions to long-term debt 2,534 842
Reduction of long-term debt (269) (264)
Proceeds from stock options 109 85
Purchase of treasury shares (876)
------- -------
TOTAL FINANCING ACTIVITIES 2,414 (812)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 2 0
CHANGE IN CASH AND CASH EQUIVALENTS (250) 545
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,044 $ 2,094
======= =======
</TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts in Millions
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 and six-month periods ended December 31,
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 December 31, 1999 and 1998 was $983 and $1,295, respectively.
For the six months ended December 31, 1999 and 1998 total comprehensive
income was $2,223 and $2,549, respectively.
3. Segment Information - 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 in the
operating segments on a 100% basis. The adjustment to ownership basis is
included in Corporate & Other, which also includes certain financing and
investment activities, goodwill amortization, charges related to the
Organization 2005 program, and other general corporate income and expense
items.
<TABLE>
<CAPTION>
Three Months Ended Fabric & Health Beauty Food & Corporate &
December 31 Home Care Paper Care Care Beverage Other Total
--------- ------- ------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales
1999 $ 3,168 $ 3,181 $ 1,074 $ 1,903 $ 1,321 $ (59) $10,588
1998 2,883 3,160 799 1,962 1,266 (136) 9,934
Earnings Before Income Taxes
1999 653 498 202 420 219 (277) 1,715
1998 608 591 116 437 181 (202) 1,731
Net Earnings
1999 405 293 125 273 137 (107) 1,126
1998 379 343 80 273 112 (45) 1,142
<CAPTION>
Six Months Ended Fabric & Health Beauty Food & Corporate &
December 31 Home Care Paper Care Care Beverage Other Total
--------- ------- ------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales
1999 $ 6,328 $ 6,193 $ 1,874 $ 3,722 $ 2,530 $ (140) $20,507
1998 5,798 6,236 1,490 3,785 2,420 (285) 19,444
Earnings Before Income Taxes
1999 1,427 1,073 349 777 388 (554) 3,460
1998 1,316 1,207 232 816 311 (384) 3,498
Net Earnings
1999 890 637 215 498 243 (210) 2,273
1998 821 695 150 509 190 (56) 2,309
</TABLE>
Item 2. Management Discussion and Analysis
RESULTS OF OPERATIONS
- ---------------------
The Company reported net earnings of $1.1 billion or $0.78 per diluted share for
the quarter ended December 31, 1999, including charges of $137 million related
to its Organization 2005 program. Organization 2005 is the Company's multi-year
initiative designed to accelerate growth by increasing innovation and speed to
market. The objective of the program is to increase long-term sales growth to
six-to-eight percent annually and increase growth in core net earnings per share
to 13 to 15 percent over a five year period.
Core net earnings per diluted share, which exclude Organization 2005 costs, were
$0.88, a 13 percent increase over the second quarter of last year.
Net sales increased seven percent to a record $10.6 billion. Sales growth,
resulting from faster speed to market with initiatives and a greater strategic
focus from the Organization 2005 program, represented the largest quarterly
increase since 1997. Exchange rates, primarily Western Europe and Brazil
partially offset by Japan, negatively impacted sales by two percentage points.
Unit volume grew six percent, reflecting continued initiative activity around
the world, base business growth and acquisitions.
For the first six months, reported net earnings were $2.3 billion, or $1.58 per
diluted share. Worldwide sales grew five percent to $20.5 billion, including a
two percent impact from unfavorable exchange rates on four percent unit volume
growth. Core net earnings were $2.5 billion, while core diluted net earnings per
share grew 11 percent to $1.76.
Gross margin was 47.5 percent for the current quarter compared to 46.3 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 Products Sold is $110 million before
tax related to Organization 2005. Excluding Organization 2005 costs, core gross
margin reached 48.5 percent. Gross margin improvement this quarter reflected
continued focus on cost control, improved pricing and shifts towards premium
products.
Operating margin was 17.4 percent for the quarter compared to 18.5 percent in
the same quarter a year ago and 16.4 percent for the prior fiscal year.
Excluding $183 million before tax in Organization 2005 charges, operating margin
was 19.1 percent, primarily driven by gross margin improvement.
For the six-month period, gross margin was 47.5 percent, versus 46.1 percent in
the same period a year ago. Excluding $215 million in costs related to
Organization 2005, gross margin was 48.5 percent. For the current six-month
period, operating margin fell to 18 percent versus 19.1 percent in the
July-December, 1998 period. Excluding $343 million before tax in Organization
2005 costs, operating margin increased to 19.7 percent.
Following are highlights by business segment:
FABRIC AND HOME CARE
- --------------------
Fabric and home care continued to deliver strong results. Sales increased
10 percent to $3.17 billion, or 12 percent excluding unfavorable currency
impacts, primarily from euro-denominated countries and Brazil. Base business
strength and initiatives combined to ignite top-line growth. Febreze, Swiffer
and Dryel sales continued to grow strongly from global expansion and the
introduction of new line extensions. Unit volume grew eight percent, double the
growth rate posted in the September quarter this year. Volume gains were
broad-based across major markets in North America and Western Europe. Both
volume and share growth were particularly strong in Northeast Asia and the
Southern Cone (Brazil, Argentina, Chile). Net earnings grew seven percent to
$405 million, on improved gross margin, partially offset by increased costs
related to initiatives and negative exchange rate impacts. The Company also
announced plans to introduce Ariel liquid in Japan and to launch another
innovative new product, Fit Fruit and Vegetable Wash, in the United States this
spring
For the first six months of the fiscal year, a six percent unit volume increase
and higher-value initiatives drove sales up nine percent. Net earnings increased
eight percent.
PAPER
- -----
Paper results improved during the second quarter, with net sales up one percent
to $3.18 billion. Excluding negative exchange rate impacts, largely due to the
euro, net sales grew three percent. Unit volume grew three percent behind strong
increases on Charmin and Bounty and improved performance in diapers, despite
continuing competitive issues in feminine care. The divestiture of the Attends
adult incontinence business weakened comparisons, negatively impacting volume
and sales by two percent versus the same quarter last year. Earnings declined 15
percent to $293 million, behind continued investment in new initiatives,
geographic expansion and rising pulp prices. The effect of prior pricing
actions, primarily in baby care, were offset by price reductions in earlier
quarters taken on tissue/towel in reaction to competitive activities and
negative mix effects in diapers. An upgraded Tampax product based on closed-end
satin technology was introduced in Ireland and Switzerland, as part of the
Company's focus to build the business through product innovation.
On a year-to-date basis, sales were down one percent on flat unit volume. Net
earnings fell eight percent.
BEAUTY CARE
- -----------
Beauty care was impacted by a difficult competitive environment, especially in
Greater China and Western Europe, and the double impact of declining consumption
and price deflation in China, where the hair care market has been especially
hard hit by the weakened economy. Sales fell three percent to $1.90 billion on a
five percent volume decline. Net earnings were equal to year ago at $273
million, as pricing programs and progress on cost control offset incremental
spending and costs related to initiatives. The Company's response to the
situation in China, which is focused on stimulating consumption through price
reductions on specific hair care brands and complemented by a strong sachet
drive, is beginning to rebuild the business in that country. The Company also
continues to emphasize long-term value creation through investment in premium
initiatives, such as Secret Platinum and Oil of Olay Cosmetics. Several new
product upgrades and launches, including the U.S. launch of the Physique
styling-led hair care brand, are planned for the back half of the year.
For the first six months of the year, unit volume fell four percent. Sales and
net earnings fell two percent.
HEALTH CARE
- -----------
The health care segment, which includes new venture activities, delivered strong
results this quarter behind the acquisitions of Iams and Recovery Engineering,
with its water filtration brand, PuR. Net sales increased 35 percent to $1.07
billion on 33 percent unit volume growth. Net earnings were up 57 percent to
$125 million, driven by outstanding progress by Iams that supplemented solid
base business earnings. The Company recently announced that Iams pet food
products will be expanded to new retail channels in the coming quarter, only a
few months after the integration of the acquisition. Health care also introduced
ThermaCare portable heat wraps, which are intended to change the way consumers
think about pain relief, and announced further progress with Actonel, the
Company's new osteoporosis drug. The Swedish government approved Actonel for use
with Corticosteroid-Induced Osteoporosis and Post-Menopausal Osteoporosis in
October, 1999, while FDA approval is expected in the near future.
On a year-to-date basis, net sales increased 26 percent with unit volume up 21
percent. Net earnings increased 44 percent. Improvements were driven by the
newly acquired businesses, as well as strong growth in leading respiratory
brands.
FOOD AND BEVERAGE
- -----------------
Continued expansion of snacks across geographies, mainly in Western Europe,
drove strong quarterly results, with sales increasing four percent to $1.32
billion on comparable unit volume growth. Recent launches of Pringles in Spain
and Italy and the introduction of the Pringles Pizzalicious flavor in Japan are
yielding great results. Excluding the effects of the Hawaiian Punch divestiture,
volume grew nine percent, boosted by recent initiative launches of Folgers Whole
Bean, Pringles Twin Pack, Sunny Delight Eclipse, and Jif Smooth Sensations.
Significant improvements in gross margin, behind a sharpened focus on cost
control, boosted earnings 23 percent to $137 million, despite investments in new
initiatives.
For the first half of the year, sales increased five percent on four percent
unit volume growth. Net earnings climbed 28 percent, reflecting cost
improvements.
FISCAL YEAR ESTIMATES
- ---------------------
The Company confirmed that it was comfortable with the current range of analyst
estimates for fiscal year earnings. However, earnings growth may be more
concentrated in the April-June quarter, given heavy initiative spending planned
for the January-March quarter. Volume and sales increases through the remainder
of the year are expected to be above the growth achieved in the July-December
period. For fiscal year 2001 and beyond, the Company has raised its internal
expectations and is targeting for earnings growth near the top of its 13 to 15
percent target range, as it continues to see increased financial benefits
flowing from Organization 2005.
FINANCIAL CONDITION
- -------------------
Total debt increased $4.1 billion since June 30, 1999. The incremental debt was
used primarily to fund the previously announced share repurchase program and the
acquisitions of the Iams Company and Recovery Engineering.
For the six-month period ended December 31, 1999, cash generated from operating
activities totaled $1.5 billion, down from $2.0 billion in the same prior year
period. Most of the decrease resulted from increased investment in working
capital, driven by lower accrual balances and inventory accumulation in advance
of initiatives.
Capital spending increased $322 million versus the year ago period, including
Organization 2005-driven spending. Investment in acquisitions totaled $3.1
billion, compared to $0.1 billion in the prior period.
YEAR 2000 UPDATE
- ----------------
As described in the Form 10-K for the year ended June 30, 1999, the Company had
developed plans to address the possible exposures related to the impact on its
computer systems of the Year 2000. Since entering the year 2000, the Company has
not experienced any major disruptions to its business nor is it aware of any
significant Year 2000-related disruptions impacting its customers and suppliers.
Furthermore, the Company did not experience any material impact on inventories
at calendar year end. The Company will continue to monitor its critical systems
over the next several months but does not anticipate any significant impacts due
to Year 2000 exposures from its internal systems as well as from the activities
of its suppliers and customers.
Costs incurred to achieve Year 2000 readiness, which include contractor costs to
modify existing systems and costs of internal resources dedicated to achieving
Year 2000 compliance, were charged to expense as incurred. Such costs totaled
approximately $90 million and were largely incurred prior to the current fiscal
year.
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 December 31, 1999, the Company recorded expenses
totaling $183 million before tax related to Organization 2005, as detailed in
the following table:
<TABLE>
<CAPTION>
Organization 2005 July-December, 1999 Charges (before tax)
----------------------------------------------------------
For the July-December Period
----------------------------
Prior Current
Beginning Quarter Quarter Total Charged Ending
Reserves Charges New Charges Cash Against Reserve
at 6/30/99 Jul-Sep 99 Charges Jul-Dec Spent Assets 12/31/99
---------- ---------- ------- ------- ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee separations $35 $ 47 $ 25 $ 72 $(41) $--- $ 66
Asset write-downs -- 2 7 9 -- (9) --
Accelerated depreciation -- 100 99 199 -- (199) --
Other 9 11 52 63 (22) (3) 47
--- ---- ---- ---- ----- ----- ----
44 160 183 343 (63) (211) 113
</TABLE>
During October-December, 1999, Organization 2005 costs charged against the
Company's cost of products sold amounted to $110 million, while charges included
in marketing, research and administrative expenses amounted to $73 million.
Charges related to Organization 2005 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. Planned plant
closures and consolidations will not all be executed immediately due to either
capacity or logistics constraints. For the July-December, 1999 period, total
charges related to Organization 2005 amounted to $343 million before tax.
Employee separation charges in October-December, 1999 are associated with
severance packages for approximately 310 people, representing primarily
administrative employees in North America, Asia, and Europe. For the fiscal
year-to-date period, separation charges related to Organization 2005 totaled $72
million, and relate to approximately 1,010 terminations. 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. Approximately 60% of the $99
million of accelerated depreciation recorded in the October-December, 1999
quarter is concentrated in the paper segment and reflects the standardization of
manufacturing and other work processes being undertaken in that segment. Most of
the balance is concentrated in the beauty care and fabric and home care
segments. For the six month period ended December, 1999, total charges related
to accelerated depreciation amounted to $199 million before tax.
Charges for other costs related to Organization 2005 amounted to $52 million
during the October-December, 1999 quarter, and consisted primarily of costs
associated with the restructuring of certain beauty care categories, as well as
relocation, training costs and other Organization 2005-related expenses. For the
fiscal year-to-date period, other costs totaled $63 million.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3-1) Amended Articles of Incorporation (Incorporated by reference to
Exhibit (3-1) of the Company's Annual Report on Form 10-K for
the year ended June 30, 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 has filed no reports on Form 8-K during the quarter
ended December 31, 1999 and through the date of this report.
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/D. R. WALKER
- --------------------------------------
D. R. Walker
Vice President and Comptroller
(Principal Accounting Officer)
Date: January 27, 2000
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, 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 13
(12) Computation of Ratio of Earnings to Fixed Charges 14
(27) Financial Data Schedule 15
<TABLE>
<CAPTION>
EXHIBIT (11)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Computation of Earnings Per Share
---------------------------------
Amounts in Millions Except Per Share Amounts
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
BASIC NET EARNINGS PER SHARE
- ----------------------------
Net earnings $ 1,126 $ 1,142 $ 2,273 $ 2,309
Deduct preferred stock dividends 29 29 58 54
----------- ----------- ----------- ---------
Net earnings applicable to common stock $ 1,097 $ 1,113 $ 2,215 $ 2,255
=========== =========== =========== =========
Average number of common shares outstanding 1,316.0 1,330.1 1,316.0 1,330.1
=========== =========== =========== =========
Basic net earnings per share $ 0.83 $ 0.84 $ 1.68 $ 1.70
=========== =========== =========== =========
DILUTED NET EARNINGS PER SHARE
- ------------------------------
Net earnings $ 1,126 $ 1,142 $ 2,273 $ 2,309
Deduct differential - preferred
vs. common dividends 5 6 9 11
----------- ----------- ----------- ---------
Net earnings applicable to common stock $ 1,121 $ 1,136 $ 2,264 $ 2,298
=========== =========== =========== =========
Average number of common shares outstanding 1,316.0 1,330.1 1,316.0 1,330.1
Add potential effect of:
Exercise of options 23.9 23.5 23.9 23.5
Conversion of preferred stock 95.0 97.8 95.0 97.8
----------- ----------- ----------- ---------
Average number of common shares
outstanding, assuming dilution 1,434.9 1,451.4 1,434.9 1,451.4
=========== =========== =========== =========
Diluted earnings per share $ 0.78 $ 0.78 $ 1.58 $ 1.58
=========== =========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT (12)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
-------------------------------------------------
Amounts in Millions
Six Months Ended
Years Ended June 30 December 31
------------------------------------------ ----------------
1995 1996 1997 1998 1999 1998 1999
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED
- -------------------
Earnings from operations before income taxes
after eliminating undistributed earnings
of equity method investees $4,022 $4,695 $5,274 $5,704 $5,866 $3,524 $3,432
Fixed charges, excluding capitalized interest 571 576 534 639 751 370 439
------ ------ ------ ------ ------ ------ ------
TOTAL EARNINGS, AS DEFINED $4,593 $5,271 $5,808 $6,343 $6,617 $3,894 $3,871
====== ====== ====== ====== ====== ====== ======
FIXED CHARGES, AS DEFINED
- -------------------------
Interest expense including capitalized interest $ 511 $ 493 $ 457 $ 548 $ 650 $ 323 $ 325
1/3 of rental expense 83 92 77 91 101 47 53
------ ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES AS DEFINED $ 594 $ 585 $ 534 $ 639 $ 751 $ 370 $ 378
====== ====== ====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 7.7 9.0 10.9 9.9 8.8 10.5 10.2
</TABLE>
<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, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
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0
1,758
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</TABLE>
