-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SHtg3h4rOJVJu3LN6UIbl7hBuZzN+oXXcckct/uheSMGAvFjd/1FGrtJHJkvVi04 1+0JECNHe42wB0yLrtYiOQ== 0000080424-99-000027.txt : 19990916 0000080424-99-000027.hdr.sgml : 19990916 ACCESSION NUMBER: 0000080424-99-000027 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990915 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROCTER & GAMBLE CO CENTRAL INDEX KEY: 0000080424 STANDARD INDUSTRIAL CLASSIFICATION: SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUMES, COSMETICS [2840] IRS NUMBER: 310411980 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00434 FILM NUMBER: 99711647 BUSINESS ADDRESS: STREET 1: ONE PROCTER & GAMBLE PLZ CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5139831100 10-K 1 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED JUNE 30, 1999 ****************************************** UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ------------------------------------------------ ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999 Commission File No. 1-434 -------------------------------------------------------- THE PROCTER & GAMBLE COMPANY One Procter & Gamble Plaza, Cincinnati, Ohio 45202 Telephone (513) 983-1100 IRS Employer Identification No. 31-0411980 State of Incorporation: Ohio -------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each Exchange on which registered - ------------------------------- ---------------------------------------------- Common Stock, without Par Value New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Brussels, Tokyo Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. There were 1,315,149,346 shares of Common Stock outstanding as of July 30, 1999. The aggregate market value of the voting stock held by non-affiliates amounted to $119 billion on July 30, 1999. Documents Incorporated By Reference ----------------------------------- Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 1999 are incorporated by reference into Part I, Part II and Part IV of this report. Portions of the Proxy Statement for the 1999 Annual Meeting of Shareholders are incorporated by reference into Part III of this report. PART I ------ Item 1. Business. --------- General Development of Business ------------------------------- The Procter & Gamble Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, the Company manufactures and markets a broad range of consumer products in many countries throughout the world. Unless the context indicates otherwise, the term the "Company" as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries. Additional information required by this item is incorporated herein by reference to the two Letters to Shareholders, which appear on the inside cover, pages 1-8, and 10-11 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Financial Information About Industry Segments --------------------------------------------- The Company's products fall into five business segments: Laundry and Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care. Additional information required by this item is incorporated herein by reference to Note 12 Segment Information of the Notes to the Consolidated Financial Statements, which appears on page 41, and Financial Review, which appears on pages 14-23 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Narrative Description of Business --------------------------------- The Company's business, represented by the aggregate of its Laundry and Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care segments, is essentially homogeneous. For the most part, the factors necessary for an understanding of these five segments are essentially identical. The markets in which the Company's products are sold are highly competitive. The products of the Company's business segments compete with many large and small companies, and there is no dominant competitor or competitors. Advertising is used in conjunction with an extensive sales force because the Company believes this combination provides the most efficient method of marketing these types of products. Product quality, performance, value and packaging are also important competitive factors. Most of the Company's products in each of its segments are distributed through grocery stores and other retail outlets. The Laundry category and Diaper category constitute approximately 21% and 14% of consolidated fiscal 1999 sales, respectively. These categories grew slightly as percentages of consolidated sales versus the preceding two fiscal years. The creation of new products and the development of new performance benefits for consumers on the Company's existing products are vital ingredients in its continuing progress in the highly competitive markets in which it does business. Basic research and product development activities continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, the Company believes these activities demonstrate its commitment to future growth. The Company has registered trademarks and owns or has licenses under patents which are used in connection with its business in all segments. Some of these patents or licenses cover significant product formulation and processing of the Company's products. The trademarks of all major products in each segment are registered. In part, the Company's success can be attributed to the existence of these trademarks, patents and licenses. Most of the raw materials used by the Company are purchased from others. Additionally, some raw materials, primarily chemicals, are produced by the Company for further use in the manufacturing process. The Company purchases and produces a substantial variety of raw materials, no one of which is material to the Company's business taken as a whole. Expenditures in fiscal year 1999 for compliance with Federal, State and local environmental laws and regulations were not materially different from such expenditures in the prior year, and no material increase is expected in fiscal year 2000. Operations outside the United States are generally characterized by the same conditions discussed in the description of the business above and may also be affected by additional elements including changing currency values and different rates of inflation and economic growth. The effect of these additional elements is less significant in the Food and Beverage segment than in the Company's other business segments. The Company has approximately 110,000 employees. The Company provides an Employee Stock Ownership Plan ("ESOP") which is part of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan. Convertible preferred stock of the Company and other assets owned by the ESOP are held through a trust (the "ESOP Trust"). The ESOP Trust has issued certain debt securities to the public. The Company has guaranteed payment of principal and interest on these debt securities. Holders of these debt securities have no recourse against the assets of the ESOP Trust except with respect to cash contributions made by the Company to the ESOP Trust, and earnings attributable to such contributions. Such cash contributions are made by the Company only to the extent that dividends on the convertible preferred stock are inadequate to fund repayment of the debt securities. Any such contributions and subsequent payments to holders are made on a same-day basis and such contributions would therefore not be held by the ESOP Trust unless there was a default in payment on the debt securities by the ESOP Trust after having received such contributions from the Company. Such a default is not likely to occur and therefore there is little likelihood that there would not be assets available to satisfy the claims of any holders of the debt securities. A summary description of the liabilities of the ESOP Trust and of the dividends paid by the Company on the convertible preferred stock and cash payments from the Company to the ESOP Trust for the three years ended June 30, 1999 are incorporated by reference to Note 8 Employee Stock Ownership Plan and Note 9 Postretirement Benefits, which appear on pages 38-40 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Additional information required by this item is incorporated herein by reference to Note 12 Segment Information, which appears on page 41, Financial Highlights, which appears on page 42, and Financial Review, which appears on pages 14-23 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Financial Information About Foreign and Domestic Operations ----------------------------------------------------------- The information required by this item is incorporated herein by reference to Note 12 Segment Information, which appears on page 41, and Financial Review, which appears on pages 14-23 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Item 2. Properties. ----------- In the United States, the Company owns and operates manufacturing facilities at 37 locations in 21 states. In addition, it owns and operates 93 manufacturing facilities in 44 other countries. Laundry and Cleaning products are produced at 45 of these locations; Paper products at 49; Health Care products at 21; Beauty Care products at 38; and Food and Beverage products at 15. Management believes that the Company's production facilities are adequate to support the business efficiently and that the properties and equipment have been well maintained. Item 3. Legal Proceedings. ------------------- The Company is involved in clean-up efforts at off-site Superfund locations, many of which are in the preliminary stages of investigation. The amount of the accrued at the end of June 30, 1999 representing the Company's probable future costs that can be reasonably estimated was $7 million. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- Not applicable. Executive Officers of the Registrant ------------------------------------ The names, ages and positions held by the executive officers of the Company on July 31, 1999 are:
Elected to Officer Name Position Age Position - ---------------------- -------------------------------------------- --- ---------- John E. Pepper* Chairman of the Board. 60 1978 Director since June 12, 1984. Durk I. Jager* President and Chief Executive. 56 1987 Director since December 12, 1989. Richard L. Antoine Global Human Resources & Product Supply 53 1998 Officer Wolfgang C. Berndt President - Global Fabric & Home Care 56 1984 and Europe Gordon F. Brunner Chief Technology Officer 60 1985 Director since March 1, 1991. Bruce L. Byrnes President - Global Health Care and Corporate 51 1991 New Ventures R. Kerry Clark President - Global Feminine Protection 47 1995 and Asia Clayton C. Daley, Jr. Chief Financial Officer 47 1998 Stephen N. David Global Customer Business Development 50 1998 Officer James J. Johnson Chief Legal Officer 52 1991 Mark D. Ketchum President - Global Baby Care 49 1996 Alan G. Lafley President - Global Beauty Care and North 52 1992 America Gary T. Martin President - Global Tissues & Towel 54 1990 Jorge P. Montoya President - Global Food & Beverage and Latin 53 1991 America David R. Walker Vice President and Comptroller 44 1997
All of the above named Executive Officers, except James J. Johnson and David R. Walker, are members of the Global Leadership Council of The Procter & Gamble Company. All of the Executive Officers named above have been employed by the Company for more than five years. *Effective September 1, 1999, John E. Pepper retired as an employee and as Chairman of the Board of Directors of the Company. Effective September 1, 1999, Durk I. Jager, President and Chief Executive, succeeded Mr. Pepper as Chairman of the Board. PART II ------- Item 5. Market for the Common Stock and Related Stockholder Matters ----------------------------------------------------------- The information required by this item is incorporated by reference to Shareholder Information, which appears on page 48 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Item 6. Selected Financial Data ----------------------- The information required by this item is incorporated by reference to Financial Highlights, which appears on page 42 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ------------------------------------------------------------------------ The information required by this item is incorporated by reference to Financial Review, which appears on pages 14-23, Note 2 Organization 2005, which appears on pages 34-35, Note 11 Commitments and Contingencies, which appears on page 40, and Note 12 Segment Information, which appears on page 41 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Organization 2005 - ----------------- As more fully described in Note 2 to the consolidated financial statements, under the heading Organization 2005, the Company has begun a major reorganization of its operations, moving from a geographical structure to product-based Global Business Units (GBUs) that will streamline management decision-making, strategic planning and manufacturing. Consistent with this change, segment reporting will be restated starting with the first quarter of fiscal 2000 to reflect the following product-based segments: Fabric and Home Care, Paper, Beauty Care, Food and Beverage and Health Care. The GBU structure will be complemented by eight Market Development Organizations (MDOs) intended to maximize the business potential for the entire product portfolio in each local market. The new organization structure became effective July 1, 1999, although certain strategic planning activities were effective January 1, 1999. Organization 2005 will also streamline and standardize the Company's global essential business services, such as accounting, employee benefits management, order management and information technology services, to a common Global Business Services organization. Additional information pursuant to the Company's Organization 2005 reorganization is incorporated by reference to Note 2 Organization 2005, which appears on pages 34-35 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Year 2000 Update - ---------------- As outlined in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, the Company has developed plans 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. 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, is expected to be successfully completed by September 30, 1999. Critical systems compliance has progressed as follows: Critical Systems Description Year 2000 % of Applications Complete ------------------------------------------ Actual Actual June Planned June 1998 1999 Sept. 1999 - ------------------------------------------------------------------------------- Critical manufacturing, operating and control systems 44.0% 99.0% 100.0% All other critical systems 56.0% 99.6% 100.0% - ------------------------------------------------------------------------------- The Company's risk management program includes emergency backup and recovery procedures to be followed in the event of the failure of a business-critical system. These procedures have been expanded to include the Year 2000 Business Continuity Plan (BCP). The objectives of the BCP are to ensure business-critical processes are protected from disruption and will continue to function during and after the year 2000, and 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 will be complete by October 31, 1999 and will include, for example, identification of alternate suppliers or customers, possible increases in safety inventory levels and other backup procedures. Incremental costs, which include contractor costs to modify existing systems and costs of internal resources dedicated to achieving Year 2000 compliance, are charged to expense as incurred. Total Year 2000 costs, including BCP costs, are expected to total approximately $90 million, of which 86% has been spent to date. Additional information pursuant to the Company's preparation for Year 2000 is incorporated by reference to Financial Review, Year 2000, which appears on pages 22-23 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. The Company has made certain forward-looking statements in the Annual Report to Shareholders for the fiscal year ended June 30, 1999, and has done or will do so in other contexts, relating to volume growth, increases in market shares, Year 2000 compliance, financial goals and cost reduction, among others. These forward-looking statements represent challenging goals for the Company and are based on certain assumptions and estimates regarding the worldwide economy, technological innovation, competitive activity, pricing, currency movements, product introductions, governmental action and the development of certain markets. Among the key factors necessary to achieve the Company's goals are: (1) the achievement of lower costs and increases in reliability and capacity utilization, resulting from simplification and standardization and Organization 2005; (2) the ability to improve revenue and profitability despite high levels of competitive activity around the world, and economic volatility in emerging markets; (3) the ability to maintain key customer relationships in important developed markets; (4) the continuation of substantial growth in significant developing markets such as China, Mexico, Brazil and the countries of Central and Eastern Europe; (5) the ability to successfully manage regulatory, tax and legal matters, (6) the ability to continue technological innovation; (7) the timely resolution of the Year 2000 issue by the Company and its customers and suppliers; and (8) the ability to react to the introduction of the euro currency in Europe, including the ability to successfully compete in Europe. If the Company's assumptions and estimates are incorrect or do not come to fruition, or if the Company does not achieve all of these key factors, then the Company's actual performance could vary materially from the forward-looking statements made herein. Item 7A. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- The information required by this item is incorporated by reference to Financial Review, which appears on pages 14-23, and Note 6 Risk Management Activities, which appears on pages 36-37 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Item 8. Financial Statements and Supplemental Data ------------------------------------------ The financial statements and supplemental data are incorporated by reference to pages 27-42 of the Annual Report to Shareholders for the fiscal year ended June 30, 1999. Item 9. Disagreements on Accounting and Financial Disclosure ---------------------------------------------------- Not applicable. PART III -------- Item 10. Directors and Executive Officers -------------------------------- The information required by this item is incorporated by reference to pages 2-8 and 22 of the proxy statement filed since the close of the fiscal year ended June 30, 1999, pursuant to Regulation 14A which involved the election of directors. Pursuant to Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report. Item 11. Executive Compensation ---------------------- The information required by this item is incorporated by reference to pages 8-18 of the proxy statement filed since the close of the fiscal year ended June 30, 1999, pursuant to Regulation 14A which involved the election of directors. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- The information required by this item is incorporated by reference to pages 19-21 of the proxy statement filed since the close of the fiscal year ended June 30, 1999, pursuant to Regulation 14A which involved the election of directors. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The information required by this item is incorporated by reference to page 22 of the proxy statement filed since the close of the fiscal year ended June 30, 1999, pursuant to Regulation 14A which involved the election of directors. PART IV ------- Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K ----------------------------------------------------------------- A. 1. Financial Statements: The following consolidated financial statements of The Procter & Gamble Company and subsidiaries and the report of independent accountants are incorporated by reference in Part II, Item 8. - Report of independent accountants - Consolidated statements of earnings -- for years ended June 30, 1999, 1998 and 1997 - Consolidated balance sheets -- as of June 30, 1999 and 1998 - Consolidated statements of shareholders' equity -- for years ended June 30, 1999, 1998 and 1997 - Consolidated statements of cash flows -- for years ended June 30, 1999, 1998 and 1997 - Notes to consolidated financial statements 2. Financial Statement Schedules: These schedules are omitted because of the absence of the conditions under which they are required or because the information is set forth in the financial statements or notes thereto. 3. Exhibits: Exhibit (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). Exhibit (4) -- Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission. Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended January 12, 1999) which was adopted by the shareholders at the annual meeting on October 13, 1992. (10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993) which was adopted by the shareholders at the annual meeting on October 11, 1983 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-3) -- The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-6) -- The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-7) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended January 12, 1999), which was adopted by the shareholders at the annual meeting on October 11, 1994, and which was amended on January 10, 1995, by the Board of Directors, and ratified by the shareholders at the annual meeting on October 10, 1995, and which was further amended by the Board of Directors on June 11, 1996 to be effective on January 1, 1997, and which was also amended on August 22, 1997 for the 2-for-1 stock split. (10-8) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan which was authorized by the Board of Directors of The Procter & Gamble Company and adopted by the Board of Directors of Richardson-Vicks Inc. on December 31, 1985. (10-9) -- The Procter & Gamble Executive Group Life Insurance Policy (Additional Policy) (Incorporated by reference to Exhibit (10-9) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). Exhibit (11) -- Computation of earnings per share. Exhibit (12) -- Computation of ratio of earnings to fixed charges. Exhibit (13) -- Annual Report to Shareholders (inside front cover, pages 1-8, 10-11, 14-23, 27-42, and 48). Exhibit (21) -- Subsidiaries of the registrant. Exhibit (23) -- Consent of Deloitte & Touche LLP. Exhibit (27) -- Financial Data Schedule. Exhibit (99-1) -- Directors and Officers Liability Policy (Incorporated by reference to Exhibit (99-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/02). (99-2) -- Directors and Officers (First) Excess Liability Policy (Incorporated by reference to Exhibit (99-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-3) -- Directors and Officers (Second) Excess Liability Policy (Incorporated by reference to Exhibit (99-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-4) -- Directors and Officers (Third) Excess Liability Policy (Incorporated by reference to Exhibit (99-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-5) -- Directors and Officers (Fourth) Excess Liability Policy (Incorporated by reference to Exhibit (99-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-6) -- Fiduciary Responsibility Insurance (Incorporated by reference to Exhibit (99-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). The exhibits listed are filed with the Securities and Exchange Commission but are not included in this booklet. Copies of these exhibits may be obtained by sending a request to: Linda D. Rohrer, Assistant Secretary, The Procter & Gamble Company, P. O. Box 599, Cincinnati, Ohio 45201 B. Reports on Form 8-K: The Company filed Current Reports on Form 8-K containing information pursuant to Item 5 entitled "Joint Press Release by The Procter & Gamble Company and the Iams Company regarding the purchase of Iams by P&G" dated August 11, 1999. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) 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 in the city of Cincinnati, State of Ohio. THE PROCTER & GAMBLE COMPANY By DURK I. JAGER ----------------------------------- Durk I. Jager Chairman of the Board, President and Chief Executive September 14, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- DURK I. JAGER Chairman of the Board, President | - ---------------------------- and Chief Executive | (Durk I. Jager) (Principal Executive Officer) | | CLAYTON C. DALEY, JR. Chief Financial Officer | - ---------------------------- (Principal Financial Officer) | (Clayton C. Daley, Jr.) | | DAVID R. WALKER Vice President and Comptroller | - ---------------------------- (Principal Accounting Officer) | (David R. Walker) | | EDWIN L. ARTZT | - --------------------------- Director | (Edwin L. Artzt) | | NORMAN R. AUGUSTINE | - ---------------------------- Director | (Norman R. Augustine) | | DONALD R. BEALL | - ---------------------------- Director | (Donald R. Beall) | | GORDON F. BRUNNER | - ---------------------------- Director | (Gordon F. Brunner) | | | - ---------------------------- Director | (Richard B. Cheney) | | RICHARD J. FERRIS | - ---------------------------- Director | (Richard J. Ferris) | | JOSEPH T. GORMAN | - ---------------------------- Director September 14, 1999| (Joseph T. Gorman) | | CHARLES R. LEE | - ---------------------------- Director | (Charles R. Lee) | | LYNN M. MARTIN | - ---------------------------- Director | (Lynn M. Martin) | | JOHN E. PEPPER | - ---------------------------- Director | (John E. Pepper) | | JOHN C. SAWHILL | - ---------------------------- Director | (John C. Sawhill) | | JOHN F. SMITH, JR. | - ---------------------------- Director | (John F. Smith, Jr.) | | RALPH SNYDERMAN | - ---------------------------- Director | (Ralph Snyderman) | | ROBERT D. STOREY | - ---------------------------- Director | (Robert D. Storey) | | MARINA v.N. WHITMAN | - ---------------------------- Director | (Marina v.N. Whitman) | ----- EXHIBIT INDEX ------------- Exhibit (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). Exhibit (4) -- Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission. Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended January 12, 1999) which was adopted by the shareholders at the annual meeting on October 13, 1992. (10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993) which was adopted by the shareholders at the annual meeting on October 11, 1983 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-3) -- The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-6) -- The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). (10-7) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (as amended January 12, 1999), which was adopted by the shareholders at the annual meeting on October 11, 1994, and which was amended on January 10, 1995, by the Board of Directors, and ratified by the shareholders at the annual meeting on October 10, 1995, and which was further amended by the Board of Directors on June 11, 1996 to be effective on January 1, 1997, and which was also amended on August 22, 1997 for the 2-for-1 stock split. (10-8) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan which was authorized by the Board of Directors of The Procter & Gamble Company and adopted by the Board of Directors of Richardson-Vicks Inc. on December 31, 1985. (10-9) -- The Procter & Gamble Executive Group Life Insurance Policy (Additional Policy) (Incorporated by reference to Exhibit (10-9) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998). Exhibit (11) -- Computation of earnings per share. Exhibit (12) -- Computation of ratio of earnings to fixed charges. Exhibit (13) -- Annual Report to Shareholders (inside front cover, pages 1-8, 10-11, 14-23, 27-42, and 48). Exhibit (21) -- Subsidiaries of the registrant. Exhibit (23) -- Consent of Deloitte & Touche LLP. Exhibit (27) -- Financial Data Schedule. Exhibit (99-1) -- Directors and Officers Liability Policy (Incorporated by reference to Exhibit (99-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/02). (99-2) -- Directors and Officers (First) Excess Liability Policy (Incorporated by reference to Exhibit (99-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-3) -- Directors and Officers (Second) Excess Liability Policy (Incorporated by reference to Exhibit (99-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-4) -- Directors and Officers (Third) Excess Liability Policy (Incorporated by reference to Exhibit (99-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-5) -- Directors and Officers (Fourth) Excess Liability Policy (Incorporated by reference to Exhibit (99-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). (99-6) -- Fiduciary Responsibility Insurance (Incorporated by reference to Exhibit (99-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1998) (the "Policy Period" has been extended to 6/30/00). EX-10.1 2 Exhibit (10-1) ----------------- THE PROCTER & GAMBLE 1992 STOCK PLAN (as amended January 12, 1999) ARTICLE A -- PURPOSE. The purpose of The Procter & Gamble 1992 Stock Plan (hereinafter referred to as the "Plan") is to encourage those employees of The Procter & Gamble Company (hereinafter referred to as the "Company") and its subsidiaries who are largely responsible for the long-term success and development of the business to strengthen the alignment of interests between employees and the Company's shareholders through the increased ownership of shares of the Company's Common Stock, and to encourage those employees to remain in the employ of the Company and its subsidiaries. This will be accomplished through the granting to employees of options to purchase shares of the Common Stock of the Company, payment of a portion of the employees' remuneration in shares of the Common Stock, and the granting to them by the Company and a subsidiary, if appropriate, of deferred awards related to the increase in the price of the Common Stock of the Company as provided by the terms and conditions set forth in the Plan. ARTICLE B -- ADMINISTRATION. 1. The Plan shall be administered by the Compensation Committee (hereinafter referred to as the "Committee") of the Board of Directors of the Company (hereinafter referred to as the "Board"), or such other committee as may be designated by the Board. The Committee shall consist of not less than three (3) members of the Board who are neither officers nor employees, or members of the Board who are "Non-Employee Directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (hereinafter referred to as the "1934 Act"), or any successor rule or definition adopted by the Securities and Exchange Commission, to be appointed by the Board from time to time and to serve at the discretion of the Board. 2. It shall be the duty of the Committee to administer this Plan in accordance with its provisions, to report thereon not less than once each year to the Board and to make such recommendations of amendments or otherwise as it deem necessary or appropriate. A decision by a majority of the Committee shall govern all actions of the Committee. 3. Subject to the express provisions of this Plan, the Committee shall have authority: to grant nonstatutory and incentive stock options; to grant to recipients stock appreciation rights either freestanding, in tandem with simultaneously granted stock options, or in parallel with simultaneously granted stock options; to award a portion of a recipient's remuneration in shares of Common Stock of the Company subject to such conditions or restrictions, if any, as the Committee may determine; to determine all the terms and provisions of the respective stock option, stock appreciation right, and stock award agreements including setting the dates when each stock option or stock appreciation right or part thereof may be exercised and determining the conditions and restrictions, if any, of any shares of Common Stock acquired through the exercise of any stock option; and to make all other determinations it deems necessary or advisable for administering this Plan; provided, however, the Committee shall have the further authority to: (a) waive the provisions of Article F, paragraph 1(a); (b) waive the provisions of Article F, paragraph 1(b); (c) waive the provisions of Article G, paragraph 4(a); and (d) impose conditions at time of grant in lieu of those set forth in Article G, paragraphs 4 through 7, for nonstatutory stock options, stock appreciation rights, and stock award grants which do not increase or extend the rights of the recipient, to take into consideration the differences, limitations, and requirements of foreign laws or conditions including tax regulations, exchange controls or investment restrictions, possible unenforceability of any part of this Plan, or other matters deemed appropriate by it. 4. The Committee may establish from time to time such regulations, provisions, and procedures within the terms of this Plan as, in its opinion, may be advisable in the administration of this Plan. 5. The Committee may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration of this Plan and may grant authority to such persons to execute documents on behalf of the Committee. ARTICLE C -- PARTICIPATION. The Committee shall select those employees of the Company and its subsidiaries who, in the opinion of the Committee, have demonstrated a capacity for contributing in a substantial manner to the success of such companies and shall determine the number of shares of the Common Stock of the Company to be transferred under this Plan subject to such conditions or restrictions as the Committee may determine and the number of shares with respect to which stock options or stock appreciation rights will be granted. The Committee may consult with the Chief Executive, but nevertheless the Committee has the full authority to act, and the Committee's actions shall be final. ARTICLE D -- LIMITATION ON NUMBER OF SHARES FOR THE PLAN. 1. Unless otherwise authorized by the shareholders, the maximum aggregate number of shares available for award under this Plan for each calendar year the Plan is in effect shall be one percent (1%) of the total issued shares of Common Stock of the Company as of June 30 of the immediately preceding fiscal year. 2. Any of the authorized shares may be used in respect of any of the types of awards described in this Plan, except that no more than twenty-five percent (25%) of the authorized shares in any calendar year may be issued as restricted or unrestricted stock and no more than 50,000,000 of the authorized shares during the term of the Plan may be issued as incentive stock options. 3. Any authorized shares not used in a calendar year shall be available for awards under this Plan in succeeding calendar years. ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN. 1. The shares to be delivered by the Company upon exercise of stock options or stock appreciation rights shall be either authorized but unissued shares or treasury shares, as determined by the Board. In the case of redemption of stock appreciation rights by one of the Company's subsidiaries, such shares shall be shares acquired by that subsidiary. Notwithstanding any terms or conditions contained herein, the shares to be delivered by the Company upon exercise of stock options or stock appreciation rights by a participant located in Italy shall be authorized but unissued shares. 2. For purposes of this Plan, restricted or unrestricted stock awarded under the terms of this Plan shall be authorized but unissued shares, treasury shares, or shares acquired for purposes of the Plan by the Company or a subsidiary, as determined by the Board. ARTICLE F -- STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. 1. In addition to such other conditions as may be established by the Committee, in consideration of the granting of stock options or stock appreciation rights under the terms of this Plan, the recipient agrees as follows: (a) The right to exercise any stock option or stock appreciation right shall be conditional upon certification by the recipient at time of exercise that the recipient intends to remain in the employ of the Company or one of its subsidiaries (except in cases of retirement, disability or Special Separation as defined in section 6 of Article G) for at least one (1) year following the date of the exercise of the stock option or stock appreciation right, and, (b) In order to better protect the goodwill of the Company and its subsidiaries and to prevent the disclosure of the Company's or it subsidiaries' trade secrets and confidential information and thereby help insure the long-term success of the business, the recipient, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of three (3) years following the date of the recipient's termination of employment with the Company, in connection with the manufacture, development, advertising, promotion, or sale of any product which is the same as or similar to or competitive with any products of the Company or its subsidiaries (including both existing products as well as products known to the recipient, as a consequence of the recipient's employment with the Company or one of its subsidiaries, to be in development): (1) with respect to which the recipient's work has been directly concerned at any time during the two (2) years preceding termination of employment with the Company or one of its subsidiaries or (2) with respect to which during that period of time the recipient, as a consequence of the recipient's job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company or its subsidiaries. For purposes of this section, it shall be conclusively presumed that recipients have knowledge of information they were directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed. (c) The provisions of this Article are not in lieu of, but are in addition to the continuing obligation of the recipient (which recipient hereby acknowledges) to not use or disclose the Company's or its subsidiaries' trade secrets and confidential information known to the recipient until any particular trade secret or confidential information become generally known (through no fault of the recipient), whereupon the restriction on use and disclosure shall cease as to that item. Information regarding products in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company or one of its subsidiaries is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented. As used in this Article, "generally known" means known throughout the domestic U. S. industry or, in the case of recipients who have job responsibilities outside of the United States, the appropriate foreign country or countries' industry. (d) By acceptance of any offered stock option or stock appreciation rights granted under the terms of this Plan, the recipient acknowledges that if the recipient were, without authority, to use or disclose the Company's or any of its subsidiaries' trade secrets or confidential information or threaten to do so, the Company or one of its subsidiaries would be entitled to injunctive and other appropriate relief to prevent the recipient from doing so. The recipient acknowledges that the harm caused to the Company by the breach or anticipated breach of this Article is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. The recipient consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company or one of its subsidiaries, be entered on consent and enforced by any court having jurisdiction over the recipient, without prejudice to any rights either party may have to appeal from the proceedings which resulted in any grant of such relief. (e) If any of the provisions contained in this Article shall for any reason, whether by application of existing law or law which may develop after the recipient's acceptance of an offer of the granting of stock appreciation rights or stock options, be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the recipient agrees to join the Company or any of its subsidiaries in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the extent compatible with then applicable law. If any one or more of the terms, provisions, covenants, or restrictions of this Article shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, and restrictions of this Article shall remain in full force and effect and shall in no way be affected, impaired, or invalidated. 2. The fact that an employee has been granted a stock option or a stock appreciation right under this Plan shall not limit the right of the employer to terminate the recipient's employment at any time. The Committee is authorized to suspend or terminate any outstanding stock option or stock appreciation right prior to or after termination of employment if the Committee determines the recipient has acted significantly contrary to the best interests of the Company. 3. More than one stock option or stock appreciation right may be granted to any employee under this Plan but the maximum number of shares with respect to which stock options or stock appreciation rights may be granted to any employee in any calendar year shall not exceed five percent (5%) of the number of shares which can be issued or transferred annually hereunder. 4. The aggregate fair market value (determined at the time when the incentive stock option is exercisable for the first time by an employee during any calendar year) of the shares for which any employee may be granted incentive stock options under this Plan and all other stock option plans of the Company and its subsidiaries in any calendar year shall not exceed $100,000 (or such other amount as reflected in the limits imposed by Section 422(d) of the Internal Revenue Code of 1986, as it may be amended from time to time). 5. If the Committee grants incentive stock options, all such stock options shall contain such provisions as permit them to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as may be amended from time to time. 6. With respect to stock options granted in tandem with or parallel to stock appreciation rights, the exercise of either such stock options or such stock appreciation rights will result in the simultaneous cancellation of the same number of tandem or parallel stock appreciation rights or stock options, as the case may be. 7. The exercise price for all stock options and stock appreciation rights shall be established by the Committee at the time of their grant and shall be not less than one hundred percent (100%) of the fair market value of the Common Stock of the Company on the date of grant. ARTICLE G -- EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. 1. All stock options and stock appreciation rights granted hereunder shall have a maximum life of no more than fifteen (15) years from the date of grant; provided, however, that any stock options or stock appreciation rights with a life of more than ten (10) years from the date of grant that have been conditionally granted to the Chief Executive or to any other executive officer subject to the provisions of Section 162(m) of the Internal Revenue Code and subject to taxation under United States law, as it may be amended from time to time, prior to the annual meeting of shareholders scheduled for October 12, 1999 shall automatically be canceled effective October 12, 1999 if the shareholders do not adopt a resolution at such annual meeting approving grants to such officers with a maximum life of up to fifteen (15) years from the date of grant. 2. No stock options or stock appreciation rights shall be exercisable within one (1) year from their date of grant, except in the case of the death of the recipient. 3. During the lifetime of the recipient, stock options and stock appreciation rights may be exercised only by the recipient personally, or, in the event of the legal incompetence of the recipient, by the recipient's duly appointed legal guardian. 4. In case a recipient of stock options or stock appreciation rights ceases to be an employee of the Company or any of its subsidiaries while holding an unexercised stock option or stock appreciation right: (a) Any unexercisable portions thereof are then void, except in the case of: (1) death of the recipient; (2) any Special Separation (as defined in section 6 of this Article G) that occurs more than six months from the date the options were granted; or (3) any option as to which the Committee has waived, at the time of grant, the provisions of this Article G, paragraph 4(a) pursuant to the authority granted by Article B, paragraph 3. (b) Any exercisable portions thereof are then void, except in the case of death, retirement in accordance with the provisions of any appropriate profit sharing or retirement plan of the Company or any of its subsidiaries, or Special Separation (as defined in section 6 of this Article G) of the recipient. 5. In the case of the death of a recipient of stock options or stock appreciation rights while an employee of the Company or any of its subsidiaries, the persons to whom the stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising remaining stock options, stock appreciation rights or parts thereof, whether or not exercisable on the date of death of such employee, at any time prior to the expiration date of the stock options or stock appreciation rights. 6. Termination of employment under the permanent disability provision of any appropriate profit sharing or retirement plan of the Company or any of its subsidiaries shall be deemed the same as retirement. Special Separation means any termination of employment, except a termination for cause, if it is certified in writing by a principal officer of the Company or an employee of the Company or any of its subsidiaries who has the title of Vice President, with the concurrence of the Global Human Resources Officer or such Officer's delegate, that the termination should be treated as a Special Separation under this Plan. The death of a recipient of stock options or stock appreciation rights subsequent to retirement or Special Separation shall not render exercisable stock options or stock appreciation rights which were unexercisable at the time of the retirement or Special Separation. The persons to whom the exercisable stock options or stock appreciation rights have been transferred by will or the laws of descent and distribution shall have the privilege of exercising such remaining stock options, stock appreciation rights or parts thereof, at any time prior to the expiration date of the stock options or stock appreciation rights. 7. Stock options and stock appreciation rights are not transferable other than by will or by the laws of descent and distribution. For the purpose of exercising stock options or stock appreciation rights after the death of the recipient, the duly appointed executors and administrators of the estate of the deceased recipient shall have the same rights with respect to the stock options and stock appreciation rights as legatees or distributees would have after distribution to them from the recipient's estate. 8. Upon the exercise of stock appreciation rights, the recipient shall be entitled to receive a redemption differential for each such stock appreciation right which shall be the difference between the then fair market value of one share of the Common Stock of the Company and the exercise price of one stock appreciation right then being exercised. In the case of the redemption of stock appreciation rights by a subsidiary of the Company not located in the United States, the redemption differential shall be calculated in United States dollars and converted to the appropriate local currency on the exercise date. As determined by the Committee, the redemption differential may be paid in cash, Common Stock of the Company to be valued at its fair market value on the date of exercise, any other mode of payment deemed appropriate by the Committee or any combination thereof. The number of shares with respect to which stock appreciation rights are being exercised shall not be available for granting future stock options or stock appreciation rights under this Plan. 9. The Committee may, in its sole discretion, permit a stock option which is being exercised either (a) by an optionee whose retirement is imminent or who has retired or (b) after the death of the optionee, to be surrendered, in lieu of exercise, for an amount equal to the difference between the stock option exercise price and the fair market value of shares of the Common Stock of the Company on the day the stock option is surrendered, payment to be made in shares of the Company's Common Stock which are subject to this Plan valued at their fair market value on such date, cash, or a combination thereof, in such proportion and upon such terms and conditions as shall be determined by the Committee. The difference between the number of shares subject to stock options so surrendered and the number of shares, if any, issued upon such surrender shall represent shares which shall not be available for granting future stock options under this Plan. 10. Time spent on leave of absence shall be considered as employment for the purposes of this Plan. Leave of absence means any period of time away from work granted to any employee by his or her employer because of illness, injury, or other reasons satisfactory to the employer. 11. The Company reserves the right from time to time to suspend the exercise of any stock option or stock appreciation right where such suspension is deemed by it necessary or appropriate for corporate purposes. No such suspension shall extend the life of the stock option or stock appreciation right beyond its expiration date, and in no event will there be a suspension in the five (5) calendar days immediately preceding the expiration date. ARTICLE H -- PAYMENT FOR STOCK OPTIONS. Upon the exercise of a stock option, payment in full of the exercise price shall be made by the optionee. As determined by the Committee, the stock option exercise price may be paid for by the optionee either in cash, shares of the Common Stock of the Company to be valued at their fair market value on the date of exercise, a combination thereof, or such other method as determined by the Committee. ARTICLE I -- TRANSFER OF SHARES. 1. The Committee may transfer Common Stock of the Company under the Plan subject to such conditions or restrictions, if any, as the Committee may determine. The conditions and restrictions may vary from time to time and with respect to particular employees or group of employees and may be set forth in agreements between the Company and the employee or in the awards of stock to them, all as the Committee determines. It is contemplated that the conditions and restrictions established by the Committee will be consistent with the objectives of this Plan and may be of the following types. In giving these examples, it is not intended to restrict the Committee's authority to impose other restrictions or conditions, or to waive restrictions or conditions under circumstances deemed by the Committee to be appropriate and not contrary to the best interests of the Company. (a) Restrictions The employee will not be able to sell, pledge, or dispose of the shares during a specified period except in accordance with the agreement or award. Such restrictions will lapse either after a period of, for example, five years, or in fifteen or fewer annual installments following retirement or termination of employment, as the Committee from time to time may determine. However, upon the transfer of shares subject to restrictions, an employee will have all incidents of ownership in the shares, including the right to dividends (unless otherwise restricted by the Committee), to vote the shares, and to make gifts of them to family members (still subject to the restrictions). (b) Lapse of Restrictions In order to have the restrictions lapse, an employee may be required to continue in the employ of the Company or a subsidiary for a prescribed period of time. Exemption from this requirement may be prescribed in the case of death, disability, or retirement, or as otherwise prescribed by the Committee. In addition, an employee may be required, following termination of employment other than by retirement or disability, to render limited consulting and advisory services and to refrain from conduct deemed contrary to the best interests of the Company. ARTICLE J -- ADJUSTMENTS. The amount of shares authorized to be issued annually under this Plan will be subject to appropriate adjustments in their numbers in the event of future stock splits, stock dividends, or other changes in capitalization of the Company occurring after the date of approval of this Plan by the Company's shareholders to prevent the dilution or enlargement of rights under this Plan; following any such change, the term "Common Stock" shall be deemed to refer to such class of shares or other securities as may be applicable. The number of shares and exercise prices covered by outstanding stock options and stock appreciation rights shall be adjusted to give effect to any such stock splits, stock dividends, or other changes in the capitalization. ARTICLE K -- ADDITIONAL PROVISIONS. 1. The Board may, at any time, repeal this Plan or may amend it from time to time except that no such amendment may amend this paragraph, increase the annual aggregate number of shares subject to this Plan, reduce the price at which stock options or stock appreciation rights may be granted, exercised, or surrendered, alter the class of employees eligible to receive stock options, or increase the percentage of shares authorized to be transferred as restricted or unrestricted stock. The recipient of awards under this Plan and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding stock options or stock appreciation rights are affected, notice thereof shall be given to the holders of such stock options and stock appreciation rights and such amendments shall not be applicable to such holder without his or her written consent. If this Plan is repealed in its entirety, all theretofore granted unexercised stock options or stock appreciation rights shall continue to be exercisable in accordance with their terms and shares subject to conditions or restrictions transferred pursuant to this Plan shall continue to be subject to such conditions or restrictions. 2. In the case of an employee of a subsidiary company, performance under this Plan, including the transfer of shares of the Company, may be by the subsidiary. Nothing in this Plan shall affect the right of the Company or any subsidiary to terminate the employment of any employee with or without cause. None of the participants, either individually or as a group, and no beneficiary or other person claiming under or through any participant, shall have any right, title, or interest in any shares of the Company purchased or reserved for the purpose of this Plan except as to such shares, if any, as shall have been granted or transferred to him or her. Nothing in this Plan shall preclude the issuance or transfer of shares of the Company to employees under any other plan or arrangement now or hereafter in effect. 3. "Subsidiary" means any company in which fifty percent (50%) or more of the total combined voting power of all classes of stock is owned, directly or indirectly, by the Company. In addition, the Board may designate for participation in this Plan as a "subsidiary," except for the granting of incentive stock options, those additional companies affiliated with the Company in which the Company's direct or indirect stock ownership is less than fifty percent (50%) of the total combined voting power of all classes of such company's stock. ARTICLE L -- CONSENT. Every recipient of a stock option, stock appreciation right, or transfer of shares pursuant to this Plan shall be bound by the terms and provisions of this Plan and of the stock option, stock appreciation right, or transfer of shares agreement referable thereto, and the acceptance of any stock option, stock appreciation right, or transfer of shares pursuant to this Plan shall constitute a binding agreement between the recipient and the Company and its subsidiaries and any successors in interest to any of them. This Plan shall be governed by and construed in accordance with the laws of the State of Ohio, United States of America. ARTICLE M -- DURATION OF PLAN. This Plan will terminate on July 14, 2002 unless a different termination date is fixed by the shareholders or by action of the Board of Directors, but no such termination shall affect the prior rights under this Plan of the Company (or any subsidiary) or of anyone to whom stock options or stock appreciation rights were granted prior thereto or to whom shares have been transferred prior to such termination. ADDITIONAL INFORMATION 1. SHARES AWARDED AS A PORTION OF REMUNERATION Any shares of Common Stock of the Company awarded as a portion of a participant's remuneration shall be valued at not less than one hundred percent (100%) of the fair market value of the Company's Common Stock on the date of the award. These shares may be subject to such conditions or restrictions as the Committee may determine, including a requirement that the participant remain in the employ of the Company or one of its subsidiaries for a set period of time, or until retirement. Failure to abide by any applicable restriction will result in forfeiture of the shares. 2. TAX EFFECTS INCENTIVE STOCK OPTIONS With regard to tax effects which may accrue to the optionee, counsel advises that if the optionee has continuously been an employee from the time an option has been granted until at least three months before it is exercised, under existing law no taxable income results to the optionee from the exercise of an incentive stock option at the time of exercise. However, the spread at exercise is an "adjustment" item for alternative minimum tax purposes. Any gain realized on the sale or other disposition of stock acquired on exercise of an incentive stock option is considered as long-term capital gain for tax purposes if the stock has been held more than two years after the date the option was granted and more than one year after the date of exercise of the option. If the stock is disposed of within one year after exercise, the lesser of any gain on such disposition or the spread at exercise (i.e., the excess of the fair market value of the stock on the date of exercise over the option price) is treated as ordinary income, and any appreciation after the date of exercise is considered long-term or short-term capital gain to the optionee depending on the holding period prior to sale. However, the spread at exercise (even if greater than the gain on the disposition) is treated as ordinary income if the disposition is one on which a loss, if sustained, is not recognized--e.g., a gift, a "wash" sale or a sale to a related party. The amount of ordinary income recognized by the optionee is treated as a tax deductible expense to the Company. No other amount relative to an incentive stock option is a tax deductible expense to the Company. NONSTATUTORY STOCK OPTIONS With regard to tax effects which may accrue to the optionee, counsel advises that under existing tax law gain taxable as ordinary income to the optionee is deemed to be realized at the date of exercise of the option, the gain on each share being the difference between the market price on the date of exercise and the option price. This amount is treated as a tax deductible expense to the Company at the time of the exercise of the option. Any appreciation in the value of the stock after the date of exercise is considered a long-term or short-term capital gain to the optionee depending on whether or not the stock was held for the appropriate holding period prior to sale. STOCK APPRECIATION RIGHTS With regard to tax effects which may accrue to the recipient, counsel advises that "United States persons," as defined in the Internal Revenue Code of 1986 (the "I.R.C."), must recognize ordinary income as of the date of exercise equal to the amount paid to the recipient, i.e., the difference between the grant price and the value of the shares on the date of exercise. SHARES AWARDED AS A PORTION OF REMUNERATION With regard to tax effects which may accrue to the recipient, counsel advises that "United States persons" as defined in the Internal Revenue Code of 1986 (the "I.R.C."), must recognize ordinary income in the first taxable year in which the recipient's rights to the stock are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. Recipients who are "United States persons" may also elect to include the income in their tax returns for the taxable year in which they receive the shares by filing an election to do so with the appropriate office of the Internal Revenue Service within 30 days of the date the shares are transferred to them. The amount includable in income is the fair market value of the shares as of the day the shares are transferable or not subject to a substantial risk of forfeiture, whichever is applicable; if the recipient has elected to include the income in the year in which the shares are received, the amount of income includable is the fair market value of the shares at the time of transfer. For non-United States persons, the time when income is realized, its measurement and its taxation, will depend on the laws of the particular countries in which the recipients are residents and/or citizens at the time of transfer or when the shares are first transferable and not subject to a substantial risk of forfeiture, as the case may be. "United States persons" who receive shares awarded as a portion of remuneration may also have tax consequences with respect to the receipt of shares or the expiration of restrictions or substantial risk of forfeiture on such shares under the laws of the particular country other than the United States of which such person is a resident or citizen. Notwithstanding the above advice received by the Company, it is each individual recipient's responsibility to check with his or her personal tax adviser as to the tax effects and proper handling of stock options, stock appreciation rights and Common Stock acquired. The above advice relates specifically to the U.S. consequences of stock options, stock appreciation rights and Common Stock acquired, including the U.S. consequences to "United States persons" whether or not resident in the U.S. In addition to U.S. tax consequences, for all persons who are not U.S. residents, the time when income, if any, is realized, the measurement of such income and its taxation will also depend on the laws of the particular country other than the U.S. of which such persons are resident and/or citizens at the time of grant or the time of exercise, as the case may be. The Plan is not subject to the qualification requirements of Section 401(a) of the I.R.C. 3. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. 4. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Securities and Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated into this document by reference: 1. The Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998; 2. The Company's Quarterly Reports on Form 10-Q for the quarters ended September30, 1998 and December 31, 1998; and 3. All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold. The Company will provide without charge to each participant in the Plan, upon oral or written request, a copy of any or all of these documents other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents. In addition, the Company will provide without charge to such participants a copy of the Company's most recent annual report to shareholders, proxy statement, and other communications distributed generally to security holders of the Company. Requests for such copies should be directed to Mr. Robert J. Thompson, Manager, Shareholder Services, The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio 45201, (513) 983-3413. 5. ADDITIONAL INFORMATION Additional information about the Plan and its administrators may be obtained from Mr. Terry L. Overbey, Secretary, The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4463. EX-10.7 3 Exhibit (10-7) ---------------- THE PROCTER & GAMBLE 1993 NON-EMPLOYEE DIRECTORS' STOCK PLAN (as amended January 12, 1999) ARTICLE A -- PURPOSE. The purpose of The Procter & Gamble 1993 Non-Employee Directors' Stock Plan (hereinafter referred to as the "Plan") is to strengthen the alignment of interests between non-employee Directors (hereinafter referred to as "Participants") and the shareholders of The Procter & Gamble Company (hereinafter referred to as the "Company") through the increased ownership of shares of the Company's Common Stock. This will be accomplished by allowing Participants to elect voluntarily to convert a portion or all of their cash fees for services as a Director into Common Stock, by granting Participants a fixed value of shares of Common Stock restricted until retirement (hereinafter referred to as "Retirement Shares") and by granting Participants non-qualified options to purchase shares of Common Stock (hereinafter referred to as "Stock Options"). ARTICLE B -- ADMINISTRATION. 1. The Plan shall be administered by the Compensation Committee (hereinafter referred to as the "Committee") of the Board of Directors of the Company (hereinafter referred to as the "Board"), or such other committee as may be designated by the Board. The Committee shall consist of not less than three (3) members of the Board who are "Non-Employee Directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor rule or definition adopted by the Securities and Exchange Commission, to be appointed by the Board from time to time and to serve at the discretion of the Board. 2. It shall be the duty of the Committee to administer this Plan in accordance with its provisions and to make such recommendations of amendments or otherwise as it deems necessary or appropriate. A decision by a majority of the Committee shall govern all actions of the Committee. 3. Subject to the express provisions of this Plan, the Committee shall have authority to allow Participants the right to elect to receive fees for services as a director in either cash or an equivalent amount of whole shares of Common Stock of the Company, or partly in cash and partly in whole shares of the Common Stock of the Company, subject to such conditions or restrictions, if any, as the Committee may determine. The Committee also has the authority to make all other determinations it deems necessary or advisable for administering this Plan. 4. The Committee may establish from time to time such regulations, provisions, and procedures within the terms of this Plan as, in its opinion, may be advisable in the administration of this Plan. 5. The Committee may designate the Secretary of the Company or other employees of the Company to assist the Committee in the administration of this Plan and may grant authority to such persons to execute documents on behalf of the Committee. ARTICLE C -- PARTICIPATION. Participation in the Plan shall be limited to all non-employee Directors of the Company. ARTICLE D -- LIMITATION ON NUMBER OF SHARES FOR THE PLAN. The total number of shares of Common Stock of the Company that may be awarded each year shall not exceed 50,000 shares. ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN. Shares of Common Stock to be awarded under the terms of this Plan shall be treasury shares. ARTICLE F -- RETIREMENT SHARES 1. Commencing January 2, 1997 and on the first business day in each January thereafter, each Participant shall receive Retirement Shares with a fair market value of $20,000 on the date of grant. 2. All shares awarded under this Article shall be valued as set forth in Article I. ARTICLE G -- STOCK OPTIONS. 1. Each Participant shall, on the fifteenth day of September or on the next preceding business day if such day is not a business day, automatically be granted a Stock Option to purchase 2,000 shares of Common Stock (with such amount subject to adjustment as set forth in Article H) having an exercise price of one hundred percent (100%) of the fair market value of the Common Stock on the date of grant. On February 26, 1999, each Participant shall receive a one-time Stock Option grant to purchase 1,000 shares of Common Stock having an exercise price of one hundred percent (100%) of the fair market value of the Common Stock on the date of grant. 2. The Stock Options shall have a term of fifteen (15) years from the date of grant, subject to earlier termination as provided herein, and shall be exercisable three (3) years from the date of grant, except in the case of death, in which case the Stock Options shall be immediately exercisable. 3. Stock Options are not transferable other than by will or by the laws of descent and distribution. Legatees, distributees and duly appointed executors and administrators of the estate of a deceased Participant shall have the right to exercise such Stock Options at any time prior to the expiration date of the Stock Options. 4. If a Participant ceases to be a Director while holding unexercised Stock Options, such stock options are then void, except in the case of (i) death, (ii) disability, (iii) retirement at the end of a term, (iv) retirement after attaining the age of sixty-nine (69) or (v) resignation from the Board for reasons of the antitrust laws or the conflict of interest, corporate governance or continued service policies. 5. Upon the exercise of a Stock Option, payment in full of the exercise price shall be made by the Participant. The exercise price may be paid for by the Participant either in cash, shares of the Common Stock of the Company to be valued at their fair market value on the date of exercise, or a combination thereof. ARTICLE H -- ADJUSTMENTS. The amount of shares authorized to be issued annually under this Plan will be subject to appropriate adjustment in the event of future stock splits, stock dividends, or other changes in capitalization of the Company to prevent the dilution or enlargement of rights under this Plan; following any such change, the term "Common Stock" shall be deemed to refer to such class of shares or other securities as may be applicable. The number of shares and exercise prices covered by outstanding Stock Options and the number of shares to be granted as Stock Options pursuant to Article F, paragraph 1 shall be adjusted to give effect to any such stock splits, stock dividends, or other changes in the capitalization. ARTICLE I -- TRANSFER OF SHARES. 1. The Committee may transfer Common Stock of the Company under the Plan subject to such conditions or restrictions, if any, as the Committee may determine. The conditions and restrictions may vary from time to time and may be set forth in agreements between the Company and the Participant or in the awards of stock to them, all as the Committee determines. 2. The shares awarded shall be valued at the average of the high and low quotations for Common Stock of the Company on the New York Stock Exchange on the day of the transfer to a Participant. All shares awarded shall be full shares, rounded up to the nearest whole share. ARTICLE J -- ADDITIONAL PROVISIONS. 1. The Board may, at any time, repeal this Plan or may amend it from time to time except that no such amendment may amend this paragraph, increase the annual aggregate number of shares subject to this Plan, or alter the persons eligible to participate in this Plan. The Participants and the Company shall be bound by any such amendments as of their effective dates, but if any outstanding awards are affected, notice thereof shall be given to the holders of such awards and such amendments shall not be applicable to such holder without his or her written consent. If this Plan is repealed in its entirety, all theretofore awarded shares subject to conditions or restrictions transferred pursuant to this Plan shall continue to be subject to such conditions or restrictions. 2. Every recipient of shares pursuant to this Plan shall be bound by the terms and provisions of this Plan and of the transfer of shares agreement referable thereto, and the acceptance of any transfer of shares pursuant to this Plan shall constitute a binding agreement between the recipient and the Company. ARTICLE K -- DURATION OF PLAN. This Plan shall be effective as of January 1, 1994. This Plan will terminate on December 31, 2003 unless a different termination date is fixed by the shareholders or by action of the Board but no such termination shall affect the prior rights under this Plan of the Company or of anyone to whom shares have been transferred prior to such termination. Plan adopted November 9, 1993 Plan Amended January 10, 1995 Plan Amended June 11, 1996 Adjusted for August 22, 1997 stock split Plan amended January 12, 1999 EX-10.8 4 Exhibit (10-8) -------------- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan RICHARDSON-VICKS INC. SPECIAL STOCK EQUIVALENT INCENTIVE PLAN --------------------------------------- (As authorized by the Board of Directors of The Procter & Gamble Company and adopted by the Board of Directors of Richardson-Vicks Inc. on 12/31/85.) ARTICLE A - THE PLAN AND ITS OBJECTIVES In retaining top caliber personnel, it is important for Richardson-Vicks Inc. (the "Company") to be in a position to pay a part or all of the additional remuneration portion of an employee's aggregate remuneration in Procter & Gamble Common Stock equivalents ("Contingent Stock Awards"). The granting of Contingent Stock Awards will strengthen the identity of their interests with those of other shareholders. Only those executives will participate in the Plan who will substantially contribute to the success and development of the business and upon whom the future of the Company chiefly depends. ARTICLE B - ADMINISTRATION 1. The Company, with the concurrence of the appropriate officers of The Procter & Gamble Company ("Procter & Gamble") as authorized by the Board of Directors of Procter & Gamble (the "P&G Board"), has determined those employees and officers of the Company initially eligible to participate in the Plan effective as of January 1, 1986, the amount of their participation and the terms, conditions and restrictions applicable to Contingent Stock Awards granted to such participants pursuant to the Plan, such terms, conditions and restrictions to be set forth in a Statement of Conditions and Restrictions (the "Statement") to accompany each grant. Future grants may be made in accordance with the procedures set forth in the preceding sentence. 2. A contingent Stock Awards Committee appointed by the Board of the Company with the concurrence of the P&G Board as set forth in paragraph 1 above, (the "Committee") will have full authority in the operation, administration and interpretation of the Plan and may issue rules and regulations governing the administration of the Plan. The Committee shall be composed of three members, at least two of whom shall be senior executive officers of the Company as of October 24, 1985, (the executive officers so serving being hereinafter referred to as the "RVI Executives"), or their successors designated by the RVI Executive(s) and approved by the Board of Directors of the Company (the "RVI Board"), which approval shall not be unreasonably withheld. The Committee may designate employees of the Company or of Procter & Gamble to assist the Committee in the administration of the Plan and may grant authority to such persons to execute documents upon behalf of the Committee. 3. The Committee may consult with the participants, but nevertheless the Committee has full authority to act and the Committee's action shall be final. ARTICLE C - SHARES SUBJECT TO THE PLAN The shares of Procter & Gamble Common Stock (the "Common Stock") transferred under this Plan will be authorized but unissued shares, treasury shares or shares acquired for purposes of the Plan by Procter & Gamble or the Company. ARTICLE D - LIMITATION ON NUMBER OF CONTINGENT STOCK AWARDS FOR THE PLAN 1. Subject to adjustment pursuant to Article D, paragraph 2 below, the aggregate number of Contingent Stock Awards granted under the Plan shall not exceed 150,000 units, with each unit representing one share of Common Stock. 2. Contingent Stock Awards granted or reserved for purposes of the Plan will be subject to appropriate adjustment in the event of future stock splits, stock dividends or other changes in capitalization; following any such change, the term "Contingent Stock Awards" or "Common Stock," as used in the Plan, shall be deemed to refer to such interests, class of shares or other securities as may be applicable. ARTICLE E - GENERAL PROVISIONS The granting of Contingent Stock Awards or the transfer of shares of Common Stock under the Plan shall be by the Company. Nothing in the Plan shall affect the right of the Company to terminate the employment of any employee with or without cause (subject to possible acceleration of the lapse of conditions and restrictions in accordance with the provisions of the Statement). None of the participants, either individually or as a group, and no beneficiary or other person claiming under or through any participant, shall have any right, title or interest in any Contingent Stock Awards except as to such Contingent Stock Awards, if any, as shall have been granted to him. Any Contingent Stock Awards reserved for purposes of the Plan shall, unless and until granted pursuant to the Plan, constitute and remain the property of the Company. Nothing in the Plan shall preclude the issuance or transfer of shares of Common Stock to employees under any other plan or arrangement now or hereafter in effect. ARTICLE F - AMENDMENT AND TERMINATION The Plan or the Statement may at any time or from time to time be amended by the RVI Board with the concurrence of the P&G Board in the manner set forth in Article B, paragraph 1 above, except that no such amendment may amend this Article of Article B, paragraph 2 or may increase the aggregate limitations on the number of Contingent Stock Awards as set forth above, or may, without the written consent of the participant, adversely affect the rights of anyone to whom Contingent Stock Awards have been granted prior to such amendment. The Plan may be terminated at any time by vote of a majority of the entire RVI Board, but no such termination shall affect the rights of the Company or of anyone to whom Contingent Stock Awards have been granted prior to such termination. EX-11 5 EXHIBIT (11) THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Computation of Earnings Per Share --------------------------------- Dollars and Share Amounts in Millions
Years Ended June 30 ------------------------------------------------------- 1995 1996 1997 1998 1999 ------ ------- ------- ------- ------- BASIC NET EARNINGS PER SHARE - ---------------------------- Net Earnings/(Loss) $2,645 $3,046 $3,415 $3,780 $3,763 Deduct preferred stock dividends 102 103 104 104 109 ------- ------- ------- ------- ------- Net Earnings/(Loss) Applicable to Common Stock 2,543 2,943 3,311 3,676 3,654 - ---------------------------------------------- Average number of common shares outstanding 1,372.0 1,372.6 1,360.3 1,343.4 1,328.1 Per Share - --------- Net earnings before prior years' effect of accounting changes Prior year effect of accounting changes Basic Net Earnings/(Loss) per Share $1.85 $2.14 $2.43 $2.74 $2.75 DILUTED NET EARNINGS PER SHARE - ------------------------------ Net Earnings/(Loss) $2,645 $3,046 $3,415 $3,780 $3,763 Deduct differential -- preferred vs. common dividends 45 39 32 25 22 -------- ------- ------- ------- ------- Net Earnings/(Loss) Applicable to Common Stock 2,600 3,007 3,383 3,755 3,741 - ---------------------------------------------- Average number of common shares outstanding 1,372.0 1,372.6 1,360.3 1,343.4 1,328.1 Add potential effect of: Exercise of options 17.0 19.8 24.8 22.3 21.5 Conversion of preferred stock 105.6 103.8 101.9 99.8 97.2 -------- ------- ------- ------- ------- Average number of common shares outstanding 1,494.6 1,496.2 1,487.0 1,465.5 1,446.8 Per Share - --------- Net earnings before prior years' effect of accounting changes Prior year effect of accounting changes Diluted Net Earnings/(Loss) per Share $1.74 $2.01 $2.28 $2.56 $2.59
EX-12 6 EXHIBIT (12) THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Computation of Ratio of Earnings to Fixed Charges ------------------------------------------------- Millions of Dollars
Years Ended June 30 -------------------------------------------------- 1995 1996 1997 1998 1999 ------ ------ ------ ------ ------ 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 Fixed charges, excluding capitalized interest 571 576 534 639 751 ------ ------ ------ ------ ------ TOTAL EARNINGS, AS DEFINED $4,593 $5,271 $5,808 $6,343 $6,617 ====== ====== ====== ====== ====== FIXED CHARGES, AS DEFINED - ------------------------- Interest expense (including capitalized interest) $ 511 $ 493 $ 457 $ 548 $ 650 1/3 of rental expense 83 92 77 91 101 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES, AS DEFINED $ 594 $ 585 $ 534 $ 639 $ 751 ====== ====== ====== ====== ====== RATIO OF EARNINGS TO FIXED CHARGES 7.7 9.0 10.9 9.9 8.8
EX-13 7 Exhibit (13) ------------ Annual Report to shareholders. (inside cover, pages 1-8, 10-11, 14-23, 27-42,and 48) (Top of inside cover - picture of Durk I. Jager at one of Procter & Gamble's technical centers, name and title) Durk I. Jager, President and Chief Executive, at one of Procter & Gamble's 21 technical centers. Fiscal year 1998-99 was a good year for our shareholders, but not a great year. We know we can do better, and we must. We must increase P&G's pace of growth - what we call our business vitality. This comes from increased innovation vitality, the contribution that new and improved products make to our growth. It also comes from increased organization vitality, the degree to which people perform above their expectations, outside their comfort zone, to produce continually better results. GOOD RESULTS DESPITE REGIONAL ECONOMIC CRISES We are already beginning to see an increase in P&G's business vitality. Our 1999 results were good, particularly given economic crises in many regions of the world, including Russia, Brazil and many parts of Asia. (bullet) Net earnings for the fiscal year were $3.76 billion, including charges of $385 million after tax for the Fiscal 1999 costs of Organization 2005, our major initiative to accelerate growth through far-reaching changes in structure, work processes and culture. (bullet) Core net earnings, which exclude Organization 2005 costs, were $4.15 billion or $3.04 basic net earnings per share - an 11% increase over the prior year. (bullet) Every region achieved double-digit earnings growth. This was driven by introduction of more value-added initiatives, effective cost containment and improved pricing. In fact, our margin on core net earnings was the highest in 58 years. (bullet) Net sales grew to a record $38.1 billion, up 3% versus last year. While this growth rate was below our expectations, we are encouraged by the increased percentage of sales in products that leverage our technology advantages. (bullet) The Company continued to generate strong operating cash flow of $5.5 billion, up more than 12% over the previous year. We know that if we are to continue strong financial performance, we must grow faster. This is what Organization 2005 is all about. We have changed our structure, work processes and reward systems to drive bigger innovations to market faster. (Pages 5 and 6 provide more details about these changes.) ACCELERATING GROWTH IS OUR TOP PRIORITY In June of this year, as part of Organization 2005, we announced a multiyear program that will result in charges of approximately $1.9 billion after tax over a six-year period and affect about 15,000 positions worldwide. Overall, we expect the Organization 2005 program to increase long-term sales growth to 6-8% and accelerate core net earnings per share growth to 13-15% in each of the next five years. We also expect to generate annual after-tax savings of approximately $900 million by Fiscal 2004. I am confident these changes will deliver the results we expect. Financial Highlights
Years Ended June 30 =========================================== Amounts in Millions Except Per Share Amounts 1999 1998 % Change ========================================================================================================= Net Sales $38,125 $37,154 3% Operating Income 6,253 6,055 3% Core Operating Income* 6,734 6,055 11% Net Earnings 3,763 3,780 - Core Net Earnings* 4,148 3,780 10% ------- ------- -------- Per Common Share Basic Net Earnings 2.75 2.74 - Core Basic Net Earnings* 3.04 2.74 11% Diluted Net Earnings 2.59 2.56 1% Core Diluted Net Earnings* 2.85 2.56 11% Dividends 1.14 1.01 13% =============================== ======= ======= ======== *Excludes Organization 2005 Program Costs
(Page 1, right-hand margin 3 bar graphs as follows: NET SALES in Billions of Dollars -- '95-33.5, '96-35.3, '97-35.8, '98-37.2, '99-38.1; BASIC NET EARNINGS Per Common Share -- '95-1.85, '96-2.14, '97-2.43, '98-2.74, '99-2.75; CORE BASIC NET EARNINGS Per Common Share -- '95-1.85, '96-2.14, '97-2.43, '98-2.74, '99-3.04* *Excluding O-2005 Program Costs of $385 Million After Tax) (Page 1, bottom right-hand margin 1 line graph as follows: VALUE OF $1,000 INVESTED IN P&G STOCK IN JUNE 1989 With Dividend Reinvestment -- June '89 - $1,000, June '99 - $7,800) BUILDING RELATIONSHIPS THAT BUILD RESULTS Noxzema's new line of facial cleansers, moisturizers and a body wash is building relationships with active women online. The marketing focus for Noxzema Skin Fitness brings consumers to the Noxzema Skin Fitness Web site for skin fitness tips and product samples. Using the Internet as a significant part of the brand's introduction helped get this product to market in less than 12 months. This new approach is reinvigorating the 85-year-old Noxzema brand. www.fitskin.com (Middle, left-hand side of page 2, Picture of 3 Noxzema Skin Fitness products) The most important reason we must change is because the world around us has changed. It used to take years to start up a company. Now, it takes weeks. A consumer recommendation that used to reach a handful of friends in days now reaches thousands - worldwide - in minutes. The space between buyer and seller that was measured in distance is now measured in seconds. Markets totaling more than two billion people have opened as trade and regulatory barriers have collapsed. The Internet has created a global community of more than 179 million people online. THE PACE OF BUSINESS HAS CHANGED Information moves faster. Products are redefined. The marketplace is global. The pace of business has changed. These changes have created tremendous new opportunities and contradictions. Globalization creates advantage in scale and the demand for greater speed. Yet, large companies can create advantage with personalized products and service, one consumer at a time. These opportunities enable a company like P&G to be big and small at the same time, capitalizing on both. We've anticipated this new marketplace. We're ready for it. (Bottom of page 2, picture of young lady sitting on bed with laptop computer) (Fold out page 2 - Caption -- CONNECTING TECHNOLOGIES TO BUILD NEW BRANDS IT ALL STARTED WITH CANDLES arrow to candle, arrow from candle to soap, arrow from soap to deodorants, arrow form soap to lotion, arrow from soap to cosmetics, arrow from soap to liquid soap, arrow from soap to soap flakes, arrow from soap flakes to soap powders, arrow from soap powders to cleaners, arrow from cleaners to cleansers, arrow from cleaners to disposable mop, arrow from soap powders to detergents, arrow from detergents to shampoos, arrow from shampoos to sahmpoo/conditioners, arrow form detergents to liquid cleaners, arrow from liquid cleaners to food sanitizer, arrow from detergents to food sanitizer, arrow from detergents to "dry clean only" fabric care, arrow from detergents to dry dishwashing detergent, arrow from detergents to fabric softeners, arrow from fabric softeners to fabric refresher, arrow from detergents to liquid dishwashing detergents, arrow from detergents to prescription drugs, arrow from detergents to bleach, arrow from detergents to toothpastes, arrow from toothpastes to prescription drugs, arrow from toothpastes to analgesic, arrow from analgesic to stomach remedy, arrow from toothpastes to decongestants, arrow from toothpastes to mouthwash, arrow from mouthwash to oral antiseptic, arrow from toothpastes to dental adhesive, arrow from candle to shortening, arrow from shortening to vegetable oil, arrow from vegetable oil to peanut butter, arrow from peanut butter to coffee, arrow from coffee to fruit juices, arrow from peanut butter to potato crisps, arrow from vegetable oil to Olean, arrow from vegetable oil to cellulose, arrow from cellulose to toilet tissue, arrow from toilet tissue to paper towels, arrow from paper towels to table napkins, arrow from toilet tissue to disposable diapers, arrow from toilet tissue to feminine products, arrow from toilet tissue to disposable briefs, arrow from toilet tissue to facial tissue, arrow from toilet tissue to baby wipes, arrow from toilet tissue to disposable mop.) IT ALL STARTED WITH CANDLES P&G's focus on connecting sciences started when candles provided the technology base for making soap. That brought us fundamental expertise in fats and oils, and that led to the creation of vegetable oil products like Crisco and Crisco Oil. Crushing seeds to produce oil gave us expertise in plant fibers, which led to insights into paper and absorbent products like diapers, feminine protection and paper towels. The science of fat and oils is also a fundamental base for surfactants, the technology used to produce detergents. Making detergents gave us experience with hard water and calcium. Expertise in calcium gave us an understanding of how to strengthen teeth, which led to strengthening bone. And that brought us to effective drugs for osteoporosis. It all started with candles - and connecting technologies to create innovative brands that connect with consumer needs. Gordon Brunner Chief Technology Officer BREADTH OF BUSINESSES PROVIDES ADVANTAGE The first key to faster growth, greater business vitality, is increasing the pace of innovation at P&G. This has been true for us in the past and is just as true today. P&G is unique when it comes to innovation. We compete in nearly 50 product categories - laundry products, toothpaste, paper towels, personal cleansing, cough and cold, bone disease therapies, snacks, diapers, cosmetics - and many others. Some people argue that such a diversity of categories leads to a lack of focus. We see it differently. The breadth of our business enables us to connect technologies from seemingly unrelated businesses in unexpected ways. We don't leave these connections to chance. Our Technology Council brings together R&D leaders from our existing product categories to more quickly transfer technologies from one business to another. Even as the Company grows bigger and bigger, the Technology Council accelerates the exchange of ideas much like the discussions that happened over the lunch table when we were much, much smaller. Our Innovation Leadership Team, which I chair, is fueling our growth in new product categories. It funds promising ideas that fall outside our businesses, from seed-level investment all the way through test market. Previously, these kinds of ideas would often go undeveloped. CONNECTING SCIENCE TO CREATE INNOVATIONS Actonel - Actonel is an advanced pharmaceutical therapy for the prevention and treatment of osteoporosis. The science behind Actonel comes from our work in laundry detergents with hard water minerals. Through more than a decade of advanced pharmaceutical research, P&G scientists took what they learned about removing calcium from water and used that expertise to put calcium back into bone, creating a powerful bone-building osteoporosis therapy. Actonel is currently under review by the U.S. FDA for the treatment and prevention of post-menopausal osteoporosis and other indications. (Page 3, right-hand margin, bottle of Actonel) Dryel - Dryel helps clean and freshen "dry clean only" clothes in your home dryer by connecting technology from four different P&G areas of expertise. The absorbent pads borrowed from our work in paper, the stain removal formula built on cleaning agents from laundry and dish care, our work with Bounce brought understanding of heat-activated systems in dryers, and our expertise in packaging created the dryer bag. www.dryel.com (Page 3, right-hand margin, Dryel package) INVESTING IN R&D With an investment of $1.7 billion this year, P&G is the 21st largest U.S.-based and 52nd largest global investor in research and development. We invest to drive clear product superiority in our core businesses and to acquire new technologies and fund entrepreneurial programs that create big, discontinuous product innovation. Ten years ago, our investment in R&D was 2.9% of net sales. Today it represents 4.5% of net sales. www.pg.com/about/rnd (Line graph showing P&G'S R&D INVESTMENT AS A PERCENTAGE OF NET SALES in 1989 at 2.9% and in 1999 at 4.5%) Connections create breakthroughs. Last year, for example, we were granted more U.S. patents than any of our competitors. We hold over 25,000 patents worldwide, and this technology base is paying off. We are launching more new-to-the-world products than at any other time in our history - products like Febreze, our fabric refresher; Swiffer, our disposable mop; and Dryel, our home care product for dry-cleanables. We are also introducing an unprecedented number of major improvements on established brands such as Pampers Rash Guard, the first diaper specifically designed to protect against diaper rash, and a new Tide with Bleach that kills 99.9% of bacteria. CONNECTIONS CREATE BREAKTHROUGHS (Bottom of page 4, picture of a woman lab technician and a man lab technician with lab bottles) Today, we have tapped only a portion of our innovation capacity. With Organization 2005, we are making changes to unleash this capability and to capitalize on the new marketplace in which we compete. UNLEASHING INNOVATION (bullet) New Global Business Units (GBUs) leverage our scale. We will develop products and plans globally, to better utilize our technology and get products to the world faster. (bullet) Focus on new business will increase our innovative output. Each GBU has a dedicated New Business Development unit to create new brands in related categories. In addition, our Corporate New Ventures group focuses on big ideas that don't fit neatly within existing businesses - and helps commercialize ideas funded by the Innovation Leadership Team. (Top of page 5, right-hand margin picture of man holding a baby. Also, package of Pampers Rash Guard product) NEW PAMPERS RASH GUARD P&G scientists connected skin care and regulatory expertise from our Beauty Care and Health Care GBUs with unique, patented diaper technologies in new Pampers Rash Guard. These premium diapers are clinically proven to help protect against diaper rash. Diaper rash is a miserable experience for babies and parents - and Pampers has received hundreds of testimonials from satisfied consumers who tell us Rash Guard makes a real difference. P&G introduced Pampers Rash Guard in North America in March and in Puerto Rico in August. www.pampers.com (Top, right-hand corner of page 6 - Swiffer package and a Swiffer sheet) A LOT OF SCIENCE IN A PIECE OF CLOTH Swiffer is a revolutionary new sweeper with disposable cleaning cloths. P&G scientists used sophisticated technologies from our paper business to create a webbed cloth of microfibers. As you dust, these fibers develop an electrostatic charge that picks up dust, dirt and allergens like a magnet. Swiffer expanded on record timing - from start of test market to global expansion in just 18 months. Try Swiffer and get rid of household soil instead of just stirring it up. www.swiffer.com ORGANIZING FOR SPEED (bullet) Market Development Organizations will bring deep knowledge of individual markets to ensure that innovations developed globally win locally. (bullet) Streamlining and standardizing our manufacturing systems will move innovations to market faster and better align capacity with the new Global Business Units. (bullet) Global Business Services will turn the administration of our business into competitive advantage, with fewer transactions, faster service and lower costs. (bullet) Leaner Corporate Functions will focus single-mindedly on cutting-edge new knowledge in every area of our business. (bullet) New reward systems put more of senior management's pay at risk, and better align compensation with our expectations for growth and increased shareholder return. The net result will be bigger innovations, faster speed to market, greater growth - innovation vitality. The second measure of our business vitality is the vitality of our organization - - the degree to which people are breaking barriers, challenging conventional wisdom, stretching to achieve the unachievable, redefining the marketplace. It is the degree to which people have freedom to perform at their peak, all the time. This is the kind of organization vitality we strive for. It is the vitality that Organization 2005 will help us deliver consistently. ORGANIZATION VITALITY IS OUR STRENGTH We are simplifying our structure to make decisions faster, encouraging impatience and a greater sense of urgency, and redefining expectations. In short, we're stripping out barriers that can hold people back. We are making the most of what has always been P&G's greatest strength, our people: their expertise, integrity, drive and hunger to continually serve the world's consumers better. (Bottom of page 7 shows a lady spraying Febreze on a chair, in background is a window) CHALLENGING THE STATUS QUO From the start, Febreze - the fabric spray that permanently removes odors from clothes and household fabrics - was a product with something to prove. Consumers who tried it said Febreze was a big idea. But conventional wisdom said it was a niche product. Febreze had trouble meeting early sales goals, but the Febreze group refused to give up. Driven by their passion, they went back to consumers and listened to their feedback about the variety of uses they were finding. As a result, the Febreze advertising began to reflect how consumers felt about Febreze and how it fit into their lives. Sales quadrupled. Today, Febreze is sold in Japan, Korea, Australia, New Zealand, the U.S. and more than 15 European countries. In the U.S. alone, over 35 million households depend on Febreze. www.febreze.com (Middle of page 7, right-hand margin is a bottle of Febreze) MANAGEMENT CHANGE After almost 36 years of service, John Pepper retires September 1, 1999, as Chairman of the Board of Procter & Gamble to become Chairman of the Executive Committee. He led P&G's expansion into emerging markets, was instrumental in the introduction of dozens of innovative new products and, with Durk Jager, was a principal architect of Organization 2005. He personifies the creativity, passion and dedication to serving consumers that are the best of Procter & Gamble. There is an easy way to gauge the vitality of a business: Is it fundamentally reinventing itself time and time again? P&G is. We always have. We reinvented our approach to marketing when radio was born, then again with television. We're doing it now with the Internet. We reinvented our organization with the creation of brand management, then category management a few decades later. We're redesigning our Company today with Organization 2005. In every area of our business, you can see this pattern. CONFIDENT IN OUR FUTURE Even in the midst of dramatic change, some things remain the same: our core values of integrity, leadership, respect for our people; our commitment to serving consumers by improving their everyday lives through our products. As we preserve these important values, we remain committed to changing everything else, especially when we can create new opportunities by changing first. This is an observation John Pepper and I have discussed on many occasions. And as I look toward our future, I am grateful - as I think we all are - for the personal leadership John has provided. He has been instrumental in making sure that this organization is ready for the future. As he retires as P&G's Chairman of the Board, he leaves P&G - and the individuals and communities he's touched - stronger than ever. As I said at the beginning, the pace of business has changed. And Procter & Gamble has picked up its own pace, as well. We are better prepared today than at any other time to compete, to balance the paradoxical demands of the future marketplace, to earn the loyalty of consumers worldwide. I'm confident in our future. /s/DURK I. JAGER Durk I. Jager President and Chief Executive July 29, 1999 (Top of page 10 - picture of John E. Pepper with name and title) John E. Pepper, Chairman of the Board EMBRACING THE FUTURE This letter marks my last as an active employee of Procter & Gamble, and I want to use this opportunity to tell you, my fellow shareholders, why I'm so very confident in the future of this Company. When I joined P&G in 1963, we were operating in 17 countries. Today, that number has grown to over 140 countries, serving almost five billion people. Sales have grown from just over $1 billion to over $38 billion. Profits have grown from $116 million to just under $4 billion (after tax). Our stock price has grown from $2.45 (adjusted for splits) to about $90 as I write this letter. But, as productive as our past has been, it is the opportunities ahead that excite me. We stand at a moment in history unlike any other. This period of globalization and explosion of technology offers us the opportunity to grow our business and unleash the capacity of P&G people as never before. However, it is also clear that seizing this opportunity requires substantial changes in the way we operate. As the cover of this report says, we are "Embracing the Future" today at Procter & Gamble - more aggressively than ever in our history. We are changing the way we're structured to create many more new brands and categories, and to expand our best ideas globally far faster. We've decentralized decision-making for greater speed. We've instilled goal-setting that asks people to go for stretch targets, knowing this will yield better results than just playing it safe. We've introduced new reward systems that recognize superior contributions at every level of the organization. This is all part of Organization 2005 - the boldest change effort in Procter & Gamble's history. I expect great things from this Company in the years ahead. And you should, too. (bullet) I see us creating and launching new brands at a record pace. (bullet) I see us establishing leadership positions in the most important developing markets of the world. (bullet) I see us growing our global brands with a far more rapid flow of innovation. (bullet) I see us benefiting from "win-win" relationships with our retail customers. (bullet) I see us capitalizing on the revolutionary power of information technology to share knowledge, design products, provide service to consumers and create whole new businesses. POSITIONED FOR SUCCESS I have great confidence in our ability to accomplish this and much more. That confidence rests on our new organizational design and on our new processes, which will continually evolve. And, it rests on the fact that these changes, as big as they are, are rooted in our fundamental purpose of serving consumers and achieving leadership results and that they grow out of our long-established Values and Principles. Above all, my confidence rests on the women and men of this Company. I know them well. They are extraordinary. They are the heart of this place. You can be assured their capability, their commitment and their tenacity will renew this Company and ensure it continues to grow as one of the great corporations in the world. They will take us into the new century with the greatest vitality in our history. Of this, I am very sure. I am confident that, with this organization under the leadership of Durk Jager, our best years lie just ahead. I want to express my thanks and appreciation for your confidence in, and support of, our Company. /s/JOHN E. PEPPER John E. Pepper Chairman of the Board July 29, 1999 P&G: SERVING THE WORLD'S CONSUMERS (Middle of page 11, right-hand margin picture of 1963 and 1999 world maps) FINANCIAL REVIEW (Page 14, right-hand margin 3 bar graphs as follows: NET EARNINGS in Billions of Dollars - '97-3.4, '98-3.8, '99-3.8; CORE NET EARNINGS* in Billions of Dollars - '97-3.4, '98-3.8, '99-4.2 *Excluding O-2005 Costs NET SALES in Billions of Dollars - '97-35.8, '98-37.2, '99-38.1) RESULTS OF OPERATIONS The Company achieved strong core earnings performance for the year ended June 30, 1999. Basic net earnings were $3.76 billion or $2.75 per share compared to $3.78 billion or $2.74 per share in the prior year. Results include charges of $385 million after tax for the current year costs of the Organization 2005 initiative approved in June 1999. Organization 2005 is the Company's multiyear program designed to accelerate sales and earnings growth over the coming years. Core net earnings were $4.15 billion for the fiscal year, up 10% from the prior year. Core net earnings exclude the Organization 2005 costs. Core basic net earnings per share were $3.04, an increase of 11% from the prior year. Fiscal year profit results were driven by higher value initiatives, effective cost containment and improved pricing. Worldwide net sales for the current year were $38.13 billion, an increase of 3% on flat unit volume. The increase in sales was attributable to improved pricing in all regions and favorable volume and product mix in North America, partially offset by exchange impacts. Unfavorable exchange rates, primarily in Asia and Latin America, depressed sales by 1% for the year. Worldwide gross margin was 44.4%, compared to 43.3% in the prior year. Gross margin includes $443 million in before-tax charges related to the Organization 2005 program. These charges consisted primarily of accelerated depreciation and asset write-downs. Excluding these charges, gross margin increased to 45.5%, reflecting effective cost containment, primarily in North America. Worldwide marketing, research and administrative expenses were $10.67 billion, versus $10.04 billion in the prior year, or 28.0% and 27.0% of sales for 1999 and 1998, respectively. The 6% increase in total spending was primarily due to increased research spending, primarily in the paper and health care businesses, and increased spending for new initiatives. Organization 2005 costs increased marketing, research and administrative expenses by $38 million, related primarily to employee separation expenses. Operating income grew 3%. Excluding the charges for Organization 2005, operating income grew 11%. These trends reflect sales growth and cost control efforts. Interest expense increased 19% to $650 million on increased debt, primarily due to share repurchases. Other income, net, which consists primarily of interest and investment income, contributed $235 million in the current year compared to $201 million in the prior year. The Company's effective tax rate for the year was 35.5%, compared to 33.8% in the prior year. The increase reflects a reduction in benefits for research and development tax credits in North America, which were included in prior year results, as well as the impact of various country tax rates on Organization 2005 program costs. Excluding Organization 2005 program costs and related tax effects, the tax rate was 34.4%. Net earnings margin was 9.9% versus 10.2% in the prior year. Excluding the Organization 2005 charges, core net earnings margin was 10.9%, the highest in fifty-eight years. Over the last several years, the Company maintained an ongoing program of simplification and standardization, which included projects to consolidate selected manufacturing facilities, re-engineer manufacturing and distribution processes, redesign organizations, simplify product line-ups and divest non-strategic brands and assets. This program did not have a significant impact on 1999 or 1998 net earnings. Beginning with the fourth quarter of 1999, this program was superseded by Organization 2005. The following provides perspective on the year ended June 30, 1998 versus the prior year: Worldwide net earnings increased 11% to $3.78 billion in 1998. Net earnings for 1997 were $3.42 billion. Worldwide net sales in 1998 were $37.15 billion, up 4% from the prior year on unit volume growth of 6%. The difference between sales and volume growth rates was primarily due to weaker currencies in Europe and Asia. Excluding this impact, sales for 1998 increased 8% over the prior year. Worldwide gross margin increased to 43.3% from 42.7% in 1997, reflecting cost savings, including the Company's simplification and standardization efforts. Worldwide marketing, research and administrative expenses were 27.0% of sales compared with 27.3% in 1997. The increase in absolute spending was primarily due to increased marketing support behind new initiatives, such as Tampax and Fat Free Pringles, and the expansion of existing brands into new markets. Operating income grew 10% in 1998, primarily reflecting sales growth and cost control efforts. The Company's net earnings margin increased from 9.5% in 1997 to 10.2% in 1998. Interest expense increased 20% to $548 million in 1998, on increased debt, due mainly to acquisitions. In 1997, interest expense was $457 million. Other income, net, was $201 million in 1998, versus $218 million in 1997. The Company's effective tax rate for the year was 33.8%, compared to 34.9% in 1997. The decline reflected the benefits of lower effective tax rates in Europe, increased research and development tax credits in North America, and continued focus on tax planning. (Page 15, right-margin 3 bar graphs as follows: NET EARNINGS MARGIN % - '97-9.5%, '98-10.2%, '99-9.9%; CORE NET EARNINGS MARGIN %* - '97-9.5%, '98-10.2%, '99-10.9%; *Excluding O-2005 Costs DIVIDENDS Per Common Share - '97-0.90, '98-1.01, '99-1.14) FINANCIAL CONDITION Cash flow from operations was $5.54 billion, $4.89 billion and $5.88 billion in 1999, 1998 and 1997, respectively. Operating cash flow provided the primary source of funds to finance operating needs, capital expenditures and acquisitions. Operating cash flow, supplemented by additional borrowings, provided the primary source of funds to finance the share repurchase program. Cash and cash equivalents increased $745 million in the current year to $2.29 billion. The increase was primarily concentrated in Europe and was due to improved profitability. In the prior year, cash and cash equivalents decreased by $801 million to $1.55 billion, reflecting acquisitions and increased capital spending. Capital expenditures were $2.83 billion in 1999, $2.56 billion in 1998 and $2.13 billion in 1997. Current year expenditures included standardization projects in the paper business and capacity expansions in tissue and towel and in snacks. Capital expenditures are expected to increase in the upcoming year, reflecting Organization 2005 projects and capacity increases in laundry and cleaning and in paper. In 1998, capital expenditures related primarily to capacity expansion in the paper and food businesses. Net cash used for acquisitions completed during 1999 totaled $137 million, compared to $3.27 billion in 1998 and $150 million in 1997. Transactions in fiscal 1998 were largely concentrated in paper businesses and included Tambrands, Inc., the Loreto y Pena paper company in Mexico and the Ssangyong Paper Company in Korea. The Company also increased ownership of various joint ventures in Asia and Latin America in 1998. The Company continued to divest certain non-strategic brands in 1999 in order to focus resources on the Company's core businesses. The proceeds from these and other asset sales generated $434 million in cash flow in the current year, compared to $555 million and $520 million in 1998 and 1997, respectively. The Company maintains a share repurchase program, which authorizes the Company to purchase shares annually on the open market to mitigate the dilutive impact of employee compensation programs. The Company also has a discretionary buy-back program under which it currently intends to repurchase additional outstanding shares of up to $1 billion per year. Current year purchases under the repurchase programs were above normal at $2.53 billion, compared to $1.93 billion in 1998 and $1.65 billion in 1997. Common share dividends grew 13% to $1.14 per share in 1999, compared to $1.01 and $.90 in 1998 and 1997, respectively. For the coming year, the annual dividend rate will increase to $1.28 per common share, marking the forty-fourth consecutive year of increased common share dividend payments. Total dividend payments, to both common and preferred shareholders, were $1.63 billion, $1.46 billion and $1.33 billion in 1999, 1998 and 1997, respectively. Total debt was up $1.33 billion to $9.38 billion, due to the issuance of commercial paper and long-term debt to fund share repurchases. Long-term borrowing available under the Company's shelf registration statement filed in 1995, as amended in July 1997, was $1.18 billion at June 30, 1999. Additionally, the Company has the ability to issue commercial paper at favorable rates, and to access general bank financing. (Top of page 16, left-hand margin shows the following bar graph: OPERATING CASH FLOW in Billions of Dollars - '97-5.9, '98-4.9, '99-5.5) (Middle of page 16, left-hand margin shows the following pie graph: 1999 NET SALES BY GEOGRAPHIC REGION in Billions of Dollars - North America-19.0, Europe, Middle East and Africa-11.9, Asia-3.6, Latin America-2.8, Corporate & Other-0.8) (Bottom of page 16, left-hand margin shows the following bar graph: NORTH AMERICA NET SALES in Billions of Dollars - '97-17.6, '98-18.5, '99-19.0) The following pages provide perspective on the Company's geographic operating segments. Geographic segments exclude items that are not included in measuring business performance, most notably certain financing and employee benefit costs, goodwill amortization, corporate eliminations, certain asset write-downs and costs related to the Company's Organization 2005 and simplification and standardization programs. NORTH AMERICA REGION The North America region delivered record results for the fiscal year, spurred by initiative activity and share growth. Net sales for the year were $18.98 billion, an increase of 3% from the prior year level of $18.46 billion, on broad-based unit volume growth of 2%. Net sales in 1998 increased 5% over 1997, on 4% unit volume growth. Net earnings for the region were up 10% to $2.71 billion. The region achieved earnings growth through volume gains, continued focus on cost control, pricing and value-added initiatives, particularly in laundry and cleaning products and in paper. Prior year net earnings were $2.47 billion, which represented a 10% increase over 1997. Net earnings margin for the region was 14.3%, compared to 13.4% and 12.8% in 1998 and 1997, respectively. The laundry and cleaning sector led the region's current year volume progress, generating 5% unit volume growth versus the prior year. The reformulation of Tide for sanitization and clean rinse benefits, the launch of Febreze fabric refresher and strong base business performance drove volume gains and increased share. Febreze, introduced late in fiscal 1998, exceeded expectations, becoming one of the Company's most successful brands in terms of introductory year sales. Laundry and cleaning also performed well on earnings, delivering half the region's earnings improvement behind the introduction of premium products, pricing and cost savings. In the prior year, the sector was also a strong contributor, driving volume and earnings gains. The paper sector also provided solid volume and earnings growth, achieving a 2% increase in unit volume compared to a strong base year. Tissue and towel posted gains on strength in the base business, as did feminine protection, behind the integration of the Tambrands acquisition, and diapers, behind initiatives. The paper sector improved sales and earnings ahead of volume, on the strength of its pricing program and cost savings, while still investing in initiatives. In 1998, paper led the region in volume and earnings progress. Prior year operating results were driven by the feminine protection business, behind the acquisition of Tambrands; initiative programs in diapers; and tissue and towel capacity increases and pricing strategies. The health care sector posted a 3% increase in unit volume versus the prior year. While all categories delivered positive volume results, pharmaceuticals made the strongest contribution by increasing share on all major brands. The sector attained excellent earnings progress behind the shift toward higher-margin pharmaceutical sales and pricing, mitigated by increased support for upcoming initiative launches. In 1998, the sector's unit volume fell slightly, as improved volume in pharmaceuticals only partially offset oral care declines related to heavy competition. Prior year earnings declined over 1997 due to a continued investment in research and development, primarily in pharmaceuticals, and in marketing support to combat competition in oral care. The sector's high level of investment in research and development has resulted in a strong pipeline of new pharmaceutical products, while setting the stage for innovations in other health care products in the years to come. Unit volume in the beauty care sector grew 1% during the year, led by cosmetics and fragrances, on the basis of the launch of Oil of Olay Cosmetics; and deodorants, behind a strong performance by Old Spice and the introduction of Secret Platinum. The introduction of Oil of Olay Cosmetics exceeded expectations and resulted in strong share performance. Net earnings for the sector increased versus the prior year, behind the success of a strategic pricing and initiative platform, partially offset by higher marketing costs for new product introductions as well as competitive defense in the hair care category. In 1998, unit volume gains were driven by hair care and deodorants. Earnings progress in 1998 was driven by the skin care and personal cleansing and cosmetics and fragrances categories, partially offset by spending against intense competition and for product initiatives. The food and beverage sector experienced a 5% unit volume decline in the current year, due to competition in the snacks market and divestitures. In addition, the June 1998 launch of Fat Free Pringles created pipeline volume in the last fiscal year, depressing the current year comparison. Coffee performed well as a result of commodity-based price decreases, which were passed on to the consumer. Excluding the impact of acquisitions and divestitures, volume was up 1%. Current year sector earnings were negatively impacted by the loss of profit contribution from divested brands and lower volumes. In 1998, unit volume growth was led by the snacks category, behind the launch of Fat Free Pringles. In the prior year, sector earnings were negatively affected by the Duncan Hines divestiture and by investments in new initiatives. (Page 17, right-hand margin 3 bar graphs as follows: NORTH AMERICA NET EARNINGS in Millions of Dollars - '97-2,253, '98-2,474, '99-2,710; EUROPE, MIDDLE EAST AND AFRICA NET SALES in Billions of Dollars - '97-11.6, '98-11.8, '99-11.9 EUROPE, MIDDLE EAST AND AFRICA NET EARNINGS in Millions of Dollars - '97-956, '98-1,092, '99-1,214) EUROPE, MIDDLE EAST AND AFRICA REGION Results in the Europe, Middle East and Africa region were mixed, as progress on cost control, premium products and improved pricing were partially offset by impacts from the financial crisis in Russia and neighboring countries. The region was able to hold sales flat at $11.88 billion, despite a 3% decline in unit volume. Volume declines were driven by the Russian economic crisis and competitive activity, primarily in laundry and hair care. Sales outpaced volume due primarily to improved pricing. During the prior year, sales increased 2% to $11.84 billion, which trailed the 8% unit volume growth rate due to unfavorable exchange rate impacts. The region's net earnings progress continued in the current year, growing 11% to $1.21 billion. Net earnings in 1998 were $1.09 billion, a 14% increase over 1997. Current year earnings growth was driven by contributions from premium product introductions, pricing strategies and cost reductions, which more than offset the negative impacts in Russia. Progress in the net earnings margin also continued, increasing to 10.2% in the current year, up from 9.2% and 8.3%, in 1998 and 1997, respectively. Importantly, margins in Western Europe reached their highest levels, as the region continued to focus on developing even more productive relationships with customers. Middle East, Africa and General Export, which includes the region's snack business, increased unit volume 9% over the prior year base period, which generated a double-digit increase over 1997. Increased snack sales across the region and expansion of core categories into developing markets drove volume gains. Although volume fell off the high rate of growth achieved in prior years, unit volume improvements were notable in the midst of weak oil markets and political uncertainty in the area. Prior year results were also fueled by snack sales. Earnings in 1999 improved ahead of volume, behind cost reductions and economies of scale. Western Europe unit volume decreased 2%, reflecting divestitures of non-strategic local beauty care and juice brands, and strong competitive activity in laundry and hair care. Sunny Delight continued performing well in its first full year after launch, achieving a tie for the number two position in the United Kingdom soft drinks market during the last half of the year. Net earnings increased in the double digits due to cost savings, efficiencies in promotional spending and pricing. In the prior year, volume also grew behind the acquisition of Tambrands. Prior year earnings were boosted by volume increases, cost savings and lower tax rates, partially offset by increased promotional spending. (Page 18, left-hand margin 2 bar graphs as follows: ASIA NET SALES in Billions of Dollars - '97-3.6, '98-3.5, '99-3.6 ASIA NET EARNINGS in Millions of Dollars - '97-275, '98-174, '99-279) Central and Eastern Europe's unit volume slid 16%, reflecting the 75% devaluation of the Russian ruble and the resulting disruptions in neighboring economies. Despite the contraction in consumption, Russia and Central and Eastern Europe either maintained or further improved leading market share positions. Current year earnings fell substantially as a result of the crisis. In the prior year, volume grew by double digits, and earnings improved versus 1997. The strong volume and earnings performance in the prior year reflected leverage in cost management and efficiency gained from expansion into emerging markets. ASIA REGION The Asia region showed some signs of emergence from the currency crisis, as the Asian economy began to stabilize and consumer markets began to recover. Net sales for the region were $3.65 billion, 6% above the prior year on 2% unit volume growth. Current year volume growth was driven by prior year acquisitions, including Ssangyong, a paper business in Korea, and increased ownership of a joint venture in China. Japan also demonstrated growth, behind innovative products and increased share. Both Japan and China increased share in core categories. Price recovery strategies, especially in Korea and the ASEAN countries grew sales ahead of volume. Excluding exchange effects, sales grew 11%, primarily due to pricing aimed at recovering prior currency devaluation effects. In the prior year, net sales declined 3% to $3.45 billion on 4% unit volume growth. Prior year sales were negatively affected by the impact of unfavorable exchange rate movements, partially offset by improved pricing and product mix. Excluding exchange effects in 1998, sales grew 10%. The region's net earnings were a record $279 million, a 60% increase from the prior year. Earnings growth was driven by recovery pricing, volume gains and a focus on premium brands, partially offset by increased costs related to new initiatives and product upgrades. The prior year net earnings of $174 million represented a 37% decrease from 1997, reflecting lower sales, increased investment in product initiatives and the negative effects of the currency crisis. Net earnings margin for the current year was 7.6%, compared to 5.0% in 1998 and 7.7% in 1997. The 1999 margin improvement reflects the pricing and volume gains, and represents the region's return to pre-crisis margin levels. Japan demonstrated strong results this year, despite continuing economic recession. Unit volume was up 9% versus the prior year, behind an aggressive slate of new product innovations on core brands, such as Ariel and Pampers, and new brands, such as Febreze. Net earnings increased substantially ahead of sales and volume due to cost efficiencies and the favorable settlement of a patent litigation dispute. Prior year results reflected relatively flat volume as a result of the difficult Japanese economy. Earnings were lower in 1998 due to unfavorable sales mix, investment in new products and a weak yen. Greater China's unit volume grew 5% versus the prior year despite a deceleration in overall market growth in the geography, given the difficult economic climate there. Volume gains were driven by Taiwan and increased ownership of joint ventures in China. Net earnings declined under competitive pressure, a consumption tax on hair care products and continued investment in product upgrades. In the prior year, increased ownership of a joint venture contributed to volume as well as earnings. The higher earnings were partially offset by unfavorable sales mix and investment in product initiatives. Volumes declined in the balance of Asia as a result of market contraction caused by economic volatility, particularly in India and Thailand. These effects were partially offset by Korea, where volumes were positively impacted by the prior year acquisition of the Ssangyong Paper Company. Earnings also benefited from improved pricing platforms. In 1998, acquisitions drove the net volume increase despite base business volume declines. Net earnings for 1998 were also down due to the currency crisis. The Asian markets continue to experience some difficulties. While early signs of recovery are evident, these are limited at present, and the potential for economic complications remains. However, because the Asia region accounts for less than 10% of total Company sales and total earnings, any impact from economic dislocation is not expected to disproportionately impact results. (Page 19, right-hand margin 2 bar graphs as follows: LATIN AMERICA NET SALES in Billions of Dollars - '97-2.3, '98-2.6, '99-2.8 LATIN AMERICA NET EARNINGS in Millions of Dollars - '97-256, '98-274, '99-318) LATIN AMERICA REGION Latin America continued to deliver solid results, despite a challenging economic environment, with record sales, unit volume and net earnings. Net sales in the region grew 7% to $2.83 billion on 3% unit volume growth, as inflation-targeted pricing outpaced the negative impact of currency devaluation, primarily in Mexico and Venezuela. Strong volume progress in laundry and snacks supplemented the prior year acquisition of Loreto y Pena, a paper company in Mexico, and the buyout of a paper joint venture in the Southern Cone. Laundry results reflect the strengthening of the base business in Mexico and the launch of Ariel in the Southern Cone. In the prior year, sales for the region grew 14% to $2.64 billion on 12% unit volume growth, reflecting acquisitions, strength in the base business and pricing. For the current year, net earnings for the region were $318 million, a 16% increase. Mexico, Venezuela and Central America achieved double-digit earnings growth, and more than offset the heavy investment in the laundry expansion in the Southern Cone. Earnings surpassed sales as a result of cost reductions and tax benefits generated from inflationary markets. Prior year net earnings were $274 million, a 7% increase over 1997, despite increased initiative spending. Net earnings margin for the current year was 11.3% compared to 10.4% and 11.1% in 1998 and 1997, respectively. In Mexico, the Company's largest operation in the region, business results were strong. Unit volume increased 7%, behind a strong base business, prior year acquisitions and a general upturn in the consumer market. Prior year results were also strong, behind acquisitions and favorable economic conditions. The balance of the region's volume fell 1%, driven by the economic situation in Brazil. However, Chile and Argentina achieved double-digit volume increases over 1998, behind the prior year acquisition and the expansion of Ariel into the Southern Cone. Prior to January 1, 1998, both Brazil and Peru were highly inflationary economies, and accordingly, the results of the Company's subsidiaries in Brazil and Peru were measured using the United States dollar as their functional currency. Effective January 1, 1998, neither Brazil nor Peru qualified as a highly inflationary economy. The impact of this change was not material to the Company's earnings. HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to market risk, including changes in interest rates, currency exchange rates and commodity prices. To manage the volatility relating to these exposures, the Company nets the exposures on a consolidated basis to take advantage of natural offsets and enters into various derivative transactions for the residual portion pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. The financial impacts of these hedging instruments are offset in part or in whole by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. Note 6 to the consolidated financial statements includes a discussion of the Company's accounting policies for financial instruments. Derivative positions are monitored using techniques including market value, sensitivity analysis and value at risk modeling. The tests for interest rate and currency rate exposures discussed below are based on a variance/co-variance value at risk model using a one year horizon and a 95% confidence level. The model incorporates the impact of correlation and diversification from holding multiple currency and interest rate instruments, and assumes that financial returns are normally distributed, and approximates the financial return for options and other non-linear instruments. Estimates of volatility and correlations of market factors are drawn from the RiskMetrics(tm) dataset as of June 30, 1999. In cases where data is unavailable in RiskMetrics(tm) a reasonable proxy is included. The Company's market risk exposures relative to interest and currency rates, as discussed below, have not changed materially versus the previous reporting period. In addition, the Company is not aware of any facts or circumstances that would significantly impact such exposures in the near-term. INTEREST RATE EXPOSURE Interest rate swaps are used to hedge underlying debt obligations. Certain currency interest rate swaps are designated as hedges to the Company's related foreign net investments. Based on the Company's overall interest rate exposure as of and during the year ended June 30, 1999, including derivative and other interest rate sensitive instruments, a near-term change in interest rates, at a 95% confidence level based on historical interest rate movements, would not materially affect the Company's financial statements. CURRENCY RATE EXPOSURE The Company manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The major foreign currency exposures involve the markets in Western and Eastern Europe, Asia and Mexico. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business. Corporate policy prescribes the range of allowable hedging activity. The Company primarily utilizes forward exchange contracts and purchased options with maturities of less than eighteen months. In addition, the Company enters into certain foreign currency swaps to hedge intercompany financing transactions, and utilizes purchased foreign currency options with maturities of generally less than eighteen months and forward exchange contracts to hedge against the effect of exchange rate fluctuations on royalties and foreign source income. Based on the Company's overall currency rate exposure as of and during the year ended June 30, 1999, including derivative and other foreign currency sensitive instruments, a near-term change in currency rates, at a 95% confidence level based on historical currency rate movements, would not materially affect the Company's financial statements. COMMODITY PRICE EXPOSURE Raw materials used by the Company are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. The Company uses futures and options contracts, primarily in food and beverage products, to manage the volatility related to certain of these exposures. Gains and losses relating to qualifying hedges of firm commitments or anticipated inventory transactions are deferred in prepaid expenses and are included in the basis of the underlying transactions. Commodity hedging activity is not material to the Company's financial statements. EURO CONVERSION On January 1, 1999, eleven of fifteen member countries of the European Economic Union fixed conversion rates between their existing currencies ("legacy currencies") and one common currency, the euro. The euro trades on currency exchanges and may be used in business transactions. Conversion to the euro eliminated currency exchange rate risk between the member countries. Beginning in January 2002, new euro-denominated bills and coins will be issued and the legacy currencies will be withdrawn from circulation. The Company is actively addressing the many areas involved with the introduction of the euro, including information management, finance, legal and tax. This review includes the conversion of information technology, and business and financial systems, and evaluation of currency risk as well as the impact on the pricing and distribution of the Company's products. One outcome of the introduction of the euro is the trend toward more uniform pricing in all European markets, including those that have not adopted the euro as their common currency. The Company believes the effect of the introduction of the euro, as well as any related cost of conversion, will not have a material adverse impact on its financial statements. ORGANIZATION 2005 As more fully described in Note 2 to the consolidated financial statements, under the heading Organization 2005, the Company has begun a major reorganization of its operations, moving from a geographical structure to product-based Global Business Units (GBUs) that will streamline management decision making, strategic planning and manufacturing. Consistent with this change, segment reporting will be restated starting in the first quarter of fiscal 2000 to reflect the following product-based segments: Fabric and Home Care, Paper, Beauty Care, Food and Beverage and Health Care. The GBU structure will be complemented by eight Market Development Organizations (MDOs) intended to maximize the business potential of the entire product portfolio in each local market. The new organization structure was effective July 1, 1999, although certain strategic planning activities began effective January 1, 1999. Organization 2005 will also streamline and standardize the Company's global essential business services, such as accounting, employee benefits management, order management and information technology services, to a common Global Business Services organization. The intention to redesign the Company's management and operating structures was first announced in September 1998. Organization plans and new operating procedures were finalized during the April-June quarter, 1999. As a result of the significant changes associated with the Organization 2005 program, the Company identified a number of restructuring projects that encompass manufacturing consolidations and standardization, enrollment reductions and other related costs. The Organization 2005 program, which was approved by the Board of Directors in June 1999, is expected to result in total charges of approximately $2.6 billion ($1.9 billion after tax) over six years. The Company recorded a current year charge of $481 million ($385 million after tax) and expects additional costs of approximately $1.5 billion ($1.0 billion after tax) during the next two years, approximately two-thirds of which will be incurred in fiscal 2000. The balance of the charges related to the Organization 2005 program are expected to be incurred after fiscal 2001. Costs to be incurred in future years are subject to varying degrees of estimation for key assumptions, such as normal employee attrition levels, the actual timing of the execution of plans and other variables. Thus, the amount and timing of future anticipated charges could change. Significant changes in estimated future charges will be disclosed as they occur. Significant savings from the program are expected to begin accruing in fiscal 2001, reaching going annual levels of approximately $900 million after tax by fiscal 2004. Charges incurred under Organization 2005 will consist primarily of costs related to the consolidation of manufacturing facilities (including accelerated depreciation, asset write-downs and contract termination costs) and employee separation costs. The non-cash costs of the program, primarily related to manufacturing consolidations and asset write-offs, accounted for approximately 88% of current year charges and will account for approximately 30% of the remaining total program costs. Approximately half of the plant or production module closings will take place through fiscal 2000 and the balance the following year. Costs associated with the manufacturing consolidation portion of the program are included in cost of products sold. A small portion of these costs, as well as the balance of the costs under the program will represent cash charges, and will be funded with cash from operations. Organization 2005 charges recorded in fiscal 1999, all of which are included in Corporate & Other in the Company's segment reporting disclosure, are comprised of the following before-tax amounts: Organization 2005 Fiscal 1999 Charges Cash Amount Spent Charged Total During Against Ending Charges Period Assets Reserves ===================================================================== Employee separations $ 45 $(10) $ - $35 Asset write-downs 217 - (217) - Accelerated depreciation 208 - (208) - Other 11 (2) - 9 ---------------------------------------- 481 (12) (425) 44 ===================================================================== Employee separation charges in 1999 relate to severance packages for approximately 400 people, representing primarily administrative employees in 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. The streamlined work processes and manufacturing consolidations driven by the Organization 2005 program will result in additional separations of approximately 9,000 employees through fiscal 2001, representing approximately $530 million of costs over that period. 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. Asset write-downs relate primarily to manufacturing assets that, based on a shift in global strategy enabled by Organization 2005, as well as demand trends below expectation, now are expected to operate at levels significantly below their capacity. Because the projected cash flows from such assets over their remaining useful lives now are estimated to be less than their current carrying values, the assets were written down to estimated fair value as determined using discounted cash flows. The balance of the asset write-downs relate to "assets held for disposal" and represent excess capacity that is in the process of being removed from service and disposed. Such assets were written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, less related disposal costs. Disposal costs are not expected to be significant. Asset write-downs charged to earnings in 1999 will not have a significant impact on future depreciation charges. The 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 underlying plant closures and consolidations will impact all regions and product segments. These planned plant closures and consolidations will not be executed immediately due to either capacity or logistics constraints. Accelerated depreciation charges for fiscal years 2000 and 2001 are expected to amount to approximately $390 million before tax and $170 million before tax, respectively. Other costs include primarily relocation and training costs, as well as other Organization 2005-related expenses. Such costs are expensed as incurred. Other costs currently are estimated at $220 million before tax and $170 million before tax for fiscal years 2000 and 2001, respectively, reflecting increased activity related to the transition to Global Business Services. YEAR 2000 The Company has substantially completed its program to address the possible exposures related to the Year 2000 impact on its computer systems. Progress against detailed plans is monitored and reported to management and the Audit Committee of the Board of Directors on a regular basis. Modification or replacement of critical financial, information and operational systems, including equipment with embedded microprocessors, have been substantially completed. 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, is expected to be successfully completed by September 30, 1999. In addition, the Company's internal controls organization has reviewed the testing and certification process and observed the testing of selected critical systems in each region. Critical Systems Description Year 2000 % of Applications Complete ------------------------------------ Actual Actual Planned June 1998 June 1999 Sept. 1999 =============================================================================== Critical manufacturing, operating and control systems 44.0% 99.0% 100.0% All other critical systems 56.0% 99.6% 100.0% =============================================================================== As part of its Year 2000 preparation planning, the Company has also contacted suppliers and customers to assess the current state of readiness and any potential impact on operations if key third parties are not successful in converting their systems in a timely manner in all regions around the world. Risk assessment, readiness evaluation, action plans and contingency plans related to these third parties have now been completed. The Company's risk management program includes emergency backup and recovery procedures to be followed in the event of the failure of a business-critical system. These procedures have been expanded to include the Year 2000 Business Continuity Plan (BCP). The objectives of the Plan are to ensure business-critical processes are protected from disruption and will continue to function during and after the year 2000, and 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 will be complete by October 31, 1999 and will include, for example, identification of alternate suppliers or customers, possible increases in safety inventory levels and other backup procedures. The Company believes the worst-case scenario is that a short-term disruption would occur with a few suppliers or customers. The Company has procedures in place to be notified immediately of any such disruption, and would respond as prescribed by the BCP. Incremental costs, which include contractor costs to modify existing systems and costs of internal resources dedicated to achieving Year 2000 compliance, are charged to expense as incurred. Total Year 2000 costs, including BCP costs, are expected to total approximately $90 million, of which 86% has been spent to date. 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. SUBSEQUENT EVENT On August 11, 1999, the Company announced an agreement to acquire The Iams Company and Affiliates, a worldwide leader in pet nutrition, for approximately $2.3 billion in cash. The acquisition will be financed mainly through external borrowings and is expected to be completed during the first quarter of fiscal 2000. FORWARD-LOOKING STATEMENT The Company has made and will make certain forward-looking statements in the Annual Report and in other contexts relating to volume growth, increases in market shares, Year 2000 compliance, Organization 2005, financial goals and cost reduction, among others. These forward-looking statements represent challenging goals for the Company and are based on certain assumptions and estimates regarding the worldwide economy, technological innovation, competitive activity, pricing, currency movements, product introductions, governmental action and the development of certain markets. Among the key factors necessary to achieve the Company's goals are: (1) the achievement of lower costs and increases in reliability and capacity utilization, resulting from simplification and standardization and Organization 2005, (2) the ability to improve revenue and profitability despite high levels of competitive activity and the economic volatility in emerging markets, (3) the ability to maintain key customer relationships in important developed markets, (4) the continuation of substantial growth in significant developing markets such as China, Mexico, Brazil and the countries of Central and Eastern Europe, (5) the ability to successfully manage regulatory, tax and legal matters, (6) the ability to continue technological innovation, (7) the timely resolution of the Year 2000 issue by the Company and its customers and suppliers and (8) the ability to react to the introduction of the euro currency in Europe, including the ability to successfully compete in Europe. If the Company's assumptions and estimates are incorrect or do not come to fruition, or if the Company does not achieve all of these key factors, then the Company's actual performance could vary materially from the forward-looking statements made herein. CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended June 30 ============================= Amounts in Millions Except Per Share Amounts 1999 1998 1997 ================================================================================ NET SALES $38,125 $37,154 $35,764 Cost of products sold 21,206 21,064 20,510 Marketing, research and administrative expenses 10,666 10,035 9,766 ------- ------- ------- OPERATING INCOME 6,253 6,055 5,488 Interest expense 650 548 457 Other income, net 235 201 218 ------- ------- ------- EARNINGS BEFORE INCOME TAXES 5,838 5,708 5,249 Income taxes 2,075 1,928 1,834 ------- ------- ------- NET EARNINGS $ 3,763 $ 3,780 $ 3,415 ======= ======= ======= BASIC NET EARNINGS PER COMMON SHARE $ 2.75 $ 2.74 $ 2.43 Diluted Net Earnings Per Common Share $ 2.59 $ 2.56 $ 2.28 Dividends Per Common Share $ 1.14 $ 1.01 $ .90 ================================================ ======= ======= =======
See accompanying Notes to Consolidated Financial Statements CONSOLIDATED BALANCE SHEETS
June 30 ==================== Amounts in Millions Except Per Share Amounts 1999 1998 ============================================ ==================== ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,294 $ 1,549 Investment securities 506 857 Accounts receivable 2,940 2,781 Inventories Materials and supplies 1,176 1,225 Work in process 375 343 Finished goods 1,787 1,716 Deferred income taxes 621 595 Prepaid expenses and other current assets 1,659 1,511 ------- ------- TOTAL CURRENT ASSETS 11,358 10,577 PROPERTY, PLANT AND EQUIPMENT Buildings 3,885 3,660 Machinery and equipment 16,953 15,953 Land 562 539 ------- ------- 21,400 20,152 Accumulated depreciation (8,774) (7,972) ------- ------- TOTAL PROPERTY, PLANT AND EQUIPMENT 12,626 12,180 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill 7,062 7,023 Trademarks and other intangible assets 1,115 1,157 ------- ------- 8,177 8,180 Accumulated amortization (1,355) (1,169) ------- ------- TOTAL GOODWILL AND OTHER INTANGIBLE ASSETS 6,822 7,011 OTHER NON-CURRENT ASSETS 1,307 1,198 ------- ------- TOTAL ASSETS $32,113 $30,966 ============================================ ======= ======= June 30 ==================== Amounts in Millions Except Per Share Amounts 1999 1998 ============================================ ==================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,300 $ 2,051 Accrued and other liabilities 4,083 3,942 Taxes payable 1,228 976 Debt due within one year 3,150 2,281 ------- ------- TOTAL CURRENT LIABILITIES 10,761 9,250 LONG-TERM DEBT 6,231 5,765 DEFERRED INCOME TAXES 362 428 OTHER NON-CURRENT LIABILITIES 2,701 3,287 ------- ------- TOTAL LIABILITIES 20,055 18,730 ------- ------- SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) 1,781 1,821 Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized; none issued) - - Common stock, stated value $1 per share (5,000 shares authorized; shares outstanding: 1999-1,319.8 and 1998-1,337.4) 1,320 1,337 Additional paid-in capital 1,337 907 Reserve for Employee Stock Ownership Plan debt retirement (1,552) (1,616) Accumulated other comprehensive income (1,606) (1,357) Retained earnings 10,778 11,144 ------- ------- TOTAL SHAREHOLDERS' EQUITY 12,058 12,236 ------- ------- Total Liabilities and Shareholders' Equity $32,113 $30,966 ============================================ ======= =======
See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated Common Additional Reserve for Other Total Dollars in Millions/ Shares Common Preferred Paid-in ESOP Debt Comprehensive Retained Comprehensive Shares in Thousands Outstanding Stock Stock Capital Retirement Income Earnings Total Income ==================================================================================================================================== BALANCE JUNE 30, 1996 1,371,146 $1,371 $1,886 $ 294 $(1,676) $ (418) $10,265 $11,722 --------- ------ ------ ------ -------- -------- ------- ------- Net earnings 3,415 3,415 $3,415 Other comprehensive income: Currency translation, net of $38 tax (412) (412) (412) Other, net of tax 11 11 11 ------ Total comprehensive income $3,014 ====== Dividends to shareholders: Common (1,225) (1,225) Preferred, net of tax benefit (104) (104) Treasury purchases (30,875) (31) (1,621) (1,652) Employee plan issuances 8,801 9 240 249 Preferred stock conversions 1,771 2 (27) 25 -- ESOP debt guarantee reduction 42 42 --------- ------ ------ ------ ------- ------- ------- ------- BALANCE JUNE 30, 1997 1,350,843 1,351 1,859 559 (1,634) (819) 10,730 12,046 --------- ------ ------ ------ ------- ------- ------- ------- Net earnings 3,780 3,780 $3,780 Other comprehensive income: Currency translation, net of $25 tax (536) (536) (536) Other, net of tax (2) (2) (2) ------ Total comprehensive income $3,242 ====== Dividends to shareholders: Common (1,358) (1,358) Preferred, net of tax benefit (104) (104) Treasury purchases (24,716) (25) (1,904) (1,929) Employee plan issuances 8,777 9 312 321 Preferred stock conversions 2,557 2 (38) 36 -- ESOP debt guarantee reduction 18 18 --------- ------ ------ ------ ------- ------- ------- ------- BALANCE JUNE 30, 1998 1,337,461 1,337 1,821 907 (1,616) (1,357) 11,144 12,236 --------- ------ ------ ------ ------- ------- ------- ------- Net earnings 3,763 3,763 $3,763 Other comprehensive income: Currency translation, net of $4 tax (232) (232) (232) Other, net of tax (17) (17) (17) ------ Total comprehensive income $3,514 ====== Dividends to shareholders: Common (1,517) (1,517) Preferred, net of tax benefit (109) (109) Treasury purchases (29,924) (30) (2,503) (2,533) Employee plan issuances 9,605 10 393 403 Preferred stock conversions 2,612 3 (40) 37 -- ESOP debt guarantee reduction 64 64 --------- ------ ------ ------ ------- ------- ------- ------- BALANCE JUNE 30, 1999 1,319,754 $1,320 $1,781 $1,337 $(1,552) $(1,606) $10,778 $12,058 ========= ====== ====== ====== ======= ======= ======= =======
See accompanying Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30 =============================== Amounts in Millions 1999 1998 1997 ==================================================================================================== CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 1,549 $ 2,350 $ 2,074 ------- ------- ------- OPERATING ACTIVITIES Net earnings 3,763 3,780 3,415 Depreciation and amortization 2,148 1,598 1,487 Deferred income taxes (60) (101) (26) Change in accounts receivable (207) 42 8 Change in inventories (96) (229) (71) Change in accounts payable, accrued and other liabilities 792 (3) 561 Change in other operating assets and liabilities (926) (65) 503 Other 130 (137) 5 ------ ------- ------- TOTAL OPERATING ACTIVITIES 5,544 4,885 5,882 ------ ------- ------- INVESTING ACTIVITIES Capital expenditures (2,828) (2,559) (2,129) Proceeds from asset sales 434 555 520 Acquisitions (137) (3,269) (150) Change in investment securities 356 63 (309) ------- ------- ------- TOTAL INVESTING ACTIVITIES (2,175) (5,210) (2,068) ------- ------- ------- FINANCING ACTIVITIES Dividends to shareholders (1,626) (1,462) (1,329) Change in short-term debt 689 1,315 (160) Additions to long-term debt 986 1,970 224 Reductions of long-term debt (334) (432) (724) Proceeds from stock options 212 158 134 Treasury purchases (2,533) (1,929) (1,652) ------- ------- ------- TOTAL FINANCING ACTIVITIES (2,606) (380) (3,507) ------- ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (18) (96) (31) ------- ------- ------- CHANGE IN CASH AND CASH EQUIVALENTS 745 (801) 276 ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,294 $ 1,549 $ 2,350 ======= ======= ======= SUPPLEMENTAL DISCLOSURE Cash payments for: Interest, net of amount capitalized $ 640 $ 536 $ 449 Income taxes 1,957 2,056 1,380 Liabilities assumed in acquisitions 38 808 42 ============================================================= ======= ======= =======
See accompanying Notes to Consolidated Financial Statements RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Consolidated financial statements and financial information included in this report are the responsibility of Company management. This includes preparing the statements in accordance with accounting principles generally accepted in the United States and necessarily includes estimates based on management's best judgments. To help insure the accuracy and integrity of Company financial data, management maintains internal controls designed to provide reasonable assurance that transactions are executed as authorized and accurately recorded and that assets are properly safeguarded. These controls are monitored by an ongoing program of internal audits. These audits are supplemented by a self-assessment program that enables individual organizations to evaluate the effectiveness of their controls. Careful selection of employees and appropriate divisions of responsibility are designed to achieve control objectives. The Company's "Worldwide Business Conduct Manual" sets forth management's commitment to conduct its business affairs with the highest ethical standards. Deloitte & Touche LLP, independent public accountants, have audited and reported on the Company's consolidated financial statements. Their audits were performed in accordance with generally accepted auditing standards. The Board of Directors, acting through its Audit Committee composed entirely of outside directors, oversees the adequacy of internal controls. The Audit Committee meets periodically with representatives of Deloitte & Touche LLP and internal financial management to review internal control, auditing and financial reporting matters. The independent auditors and the internal auditors also have full and free access to meet privately with the Audit Committee. /s/JOHN E. PEPPER /s/DURK I. JAGER /s/CLAYTON C. DALEY, JR. John E. Pepper Durk I. Jager Clayton C. Daley Jr. Chairman of the Board President and Chief Executive Chief Financial Officer REPORT OF INDEPENDENT ACCOUNTANTS DELOITTE & 250 East Fifth Street TOUCHE LLP Cincinnati, Ohio 45202 - ----------- To the Board of Directors and Shareholders of The Procter & Gamble Company: We have audited the accompanying consolidated balance sheets of The Procter & Gamble Company and subsidiaries as of June 30, 1999 and 1998 and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company at June 30, 1999 and 1998 and the results of its operations and cash flows for each of the three years in the period ended June 30, 1999, in conformity with generally accepted accounting principles. /s/DELOITTE & TOUCHE LLP July 29, 1999 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Millions of Dollars Except Per Share Amounts 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: The consolidated financial statements include The Procter & Gamble Company and its controlled subsidiaries (the Company). Investments in companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for by the equity method. These investments are managed as integral parts of the Company's segment operations, and the Company's share of their results is included in net sales for the related segments. Use of Estimates: Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from estimates. Accounting Changes: In 1999, the Company adopted SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which, on a prospective basis, revised the accounting for software development costs. Under SOP 98-1, certain costs that the Company has historically expensed are now capitalized. The adoption of this statement did not have a material impact on the Company's financial statements. New Pronouncements: In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which revises the accounting for derivative financial instruments. The Company is currently analyzing the impact of this statement, which is required to be adopted in 2001, but does not expect it to have a material impact on the Company's financial statements. Currency Translation: Financial statements of subsidiaries outside the U.S. generally are measured using the local currency as the functional currency. Adjustments to translate those statements into U.S. dollars are accumulated in a separate component of shareholders' equity. For subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments for highly inflationary economies and other transactional exchange gains and losses are reflected in earnings. Cash Equivalents: Highly liquid investments with maturities of three months or less when purchased are considered cash equivalents. Inventory Valuation: Inventories are valued at cost, which is not in excess of current market price. Cost is primarily determined by either the average cost or the first-in, first-out method. The replacement cost of last-in, first-out inventories exceeded carrying value by approximately $100 and $91 at June 30, 1999 and 1998, respectively. Goodwill and Other Intangible Assets: The cost of intangible assets is amortized, principally on a straight-line basis, over the estimated periods benefited, generally forty years for goodwill and periods ranging from five to forty years for other intangible assets. The realizability of goodwill and other intangibles is evaluated periodically when events or circumstances indicate a possible inability to recover the carrying amount. Such evaluation is based on various analyses, including cash flow and profitability projections that incorporate the impact of existing Company businesses. The analyses necessarily involve significant management judgment to evaluate the capacity of an acquired business to perform within projections. Historically, the Company has generated sufficient returns from acquired businesses to recover the cost of the goodwill and other intangible assets. Property, Plant and Equipment: Property, plant and equipment are recorded at cost reduced by accumulated depreciation. Depreciation expense is provided based on estimated useful lives using the straight-line method. Estimated useful lives are periodically reviewed, and where warranted, changes are made that result in an acceleration of depreciation. Fair Values of Financial Instruments: Fair values of cash equivalents, short and long-term investments and short-term debt approximate cost. The estimated fair values of other financial instruments, including debt and risk management instruments, have been determined using available market information and valuation methodologies, primarily discounted cash flow analysis. These estimates require considerable judgment in interpreting market data, and changes in assumptions or estimation methods may significantly affect the fair value estimates. Reclassifications: Certain reclassifications of prior years' amounts have been made to conform with the current year presentation. 2 ORGANIZATION 2005 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 to increase the Company's ability to innovate and bring initiatives to global markets more quickly. In connection with this program, effective July 1, 1999, the Company moved from a geographic region structure to product-based Global Business Units (GBUs), which will be responsible for all strategic, manufacturing and sourcing activities. The GBU structure will be complemented by eight Market Development Organizations (MDOs) intended to maximize the business potential of the entire product portfolio in each local market. Organization 2005 will also consolidate, standardize and streamline essential business services such as accounting, employee benefits, order management and information technology services, by creating a Global Business Services organization. In order to implement the program's structural changes and achieve the benefits of faster growth, the Company also needs to make a number of structural and organizational changes to both its administrative and manufacturing operations. This will result in the implementation of standardized global manufacturing facilities and processes designed to streamline its global manufacturing capabilities. The costs resulting from Organization 2005 include those related to separation and relocation of employees, streamlining manufacturing capabilities, including consolidation and closure of certain manufacturing facilities, and other charges. Total charges related to Organization 2005 are expected to approximate $2.6 billion ($1.9 billion after tax) over six years. The Company recorded charges totaling $481 ($385 after tax) for the year ended June 30, 1999, and expects to record additional charges under this program totaling $1.5 billion ($1.0 billion after tax) during the next two years, approximately two-thirds of which will be incurred in fiscal 2000. The balance of the charges related to Organization 2005 are not expected to materially affect any single year, and savings are expected to offset the charges. Given the scope, magnitude and term of this program, the expected timing and amount of costs and savings are based on management's judgment. Accordingly, such estimates could change as future events evolve. For 1999, the before-tax charges consisted of the following: Cash Amount Spent Charged Total During Against Ending Charges Period Assets Reserves ========================================================================== Employee separations $45 $(10) $ - $35 Asset write-downs 217 - (217) - Accelerated depreciation 208 - (208) - Other 11 (2) - 9 ----------------------------------------- 481 (12) (425) 44 ========================================================================== The Organization 2005 charges are included in the Company's cost of products sold ($443) and in marketing, research and administrative expenses ($38), and are included in Corporate & Other for segment reporting. The employee separation charges in 1999 relate to severance packages for approximately 400 people, primarily administrative employees in Asia, Europe, Middle East and Africa. The predominantly voluntary packages are formula-driven based on salary levels and past service and were charged to earnings upon acceptance of the package. The Organization 2005 program will result in approximately 9,000 additional employee separations over the next two years. The asset write-downs relate primarily to manufacturing assets that, based on a shift in global strategy resulting from Organization 2005, as well as demand trends below expectation, now are expected to operate at levels significantly below their capacity for an extended period of time. Because the projected cash flows from such assets over their remaining useful lives are less than the current carrying values, the assets were written down to their estimated fair values as determined using discounted cash flows. The balance of the asset write-downs relate to "assets held for disposal" and represent excess capacity that is in the process of being removed from service and disposed. Such assets were written down to the lower of their current carrying basis or amounts expected to be realized upon disposal, net of related disposal costs. Such disposal costs are not expected to be significant. The disposition of these assets, which do not have a significant remaining carrying value, will be completed during the first quarter of fiscal 2000, primarily through abandonment. The asset write-downs charged to earnings in 1999 will not have a significant impact on future depreciation charges. The accelerated depreciation relates to long-lived productive 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, resulting from Organization 2005. The Company's policy is to change the estimated useful lives of such assets, resulting in an acceleration of depreciation. The underlying plant closures and consolidations will impact all regions and product segments. These planned plant closures and consolidations will not be executed immediately due to either capacity or logistics constraints. 3 ACQUISITIONS Acquisitions accounted for as purchases in 1999 and 1997 totaled $137 and $150, respectively. In 1998, the Company acquired Tambrands, Inc., and its global leading brand, Tampax, for approximately $1,844 in cash. Other acquisitions in 1998 totaled $1,425 and included the acquisition of paper businesses and increased ownership in various ventures in Latin America and Asia. The 1998 acquisitions, all of which were accounted for using the purchase method, resulted in goodwill of $3,335. 4 SUPPLEMENTAL FINANCIAL INFORMATION June 30 ================= 1999 1998 ============================================================ ACCRUED AND OTHER LIABILITIES Marketing expenses $1,094 $1,109 Compensation expenses 449 485 Other 2,540 2,348 ----------------- 4,083 3,942 OTHER NON-CURRENT LIABILITIES Postretirement benefits $1,081 $1,193 Pension benefits 926 843 Other 694 1,251 ----------------- 2,701 3,287 ============================================================ Selected Operating Expenses Research and development costs are charged to earnings as incurred and were $1,726 in 1999, $1,546 in 1998 and $1,469 in 1997. Advertising costs are charged to earnings as incurred and were $3,538 in 1999, $3,704 in 1998 and $3,466 in 1997. Net Earnings Per Common Share Net earnings less preferred dividends (net of related tax benefits) are divided by the weighted average number of common shares outstanding during the year to calculate basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to stock options and convertible preferred stock. Basic and diluted net earnings per share are reconciled as follows: Years Ended June 30 ========================= 1999 1998 1997 ============================================================================== Net earnings available to common shareholders $3,654 $3,676 $3,311 Effect of dilutive securities Preferred dividends, net of tax benefit 109 104 104 Preferred dividend impact on funding of ESOP (22) (25) (32) ------------------------- Diluted net earnings 3,741 3,755 3,383 ------------------------- Basic weighted average common shares outstanding 1,328.1 1,343.4 1,360.3 Effect of dilutive securities Conversion of preferred shares 97.2 99.8 101.9 Exercise of stock options 21.5 22.3 24.8 ------------------------- Diluted weighted average common shares outstanding 1,446.8 1,465.5 1,487.0 ============================================================================== 5 Short-Term and Long-Term Debt June 30 =============== 1999 1998 ========================================================================= SHORT-TERM DEBT U. S. obligations $2,308 $1,435 Foreign obligations 375 560 Current portion of long-term debt 467 286 --------------- 3,150 2,281 ========================================================================= The weighted average short-term interest rates were 5.7% and 6.2% as of June 30, 1999 and 1998, respectively. June 30 =============== Average Rate Maturities 1999 1998 =========================================================================== LONG-TERM DEBT U.S. notes and debentures 6.59% 1999-2049 $3,760 $2,897 ESOP Series A 8.33% 1999-2004 472 545 ESOP Series B 9.36% 2007-2021 1,000 1,000 U.S. commercial paper 1,019 1,207 Foreign obligations 447 402 Current portion of long-term debt (467) (286) --------------- 6,231 5,765 =========================================================================== Long-term weighted average interest rates in the preceding table are as of June 30, 1999, and include the effects of related interest rate swaps discussed in Note 6. Certain commercial paper balances have been classified as long-term debt based on the Company's intent and ability to renew the obligations on a long-term basis. The Company has entered into derivatives that convert certain of these commercial paper obligations into fixed-rate obligations. The fair value of the long-term debt was $6,517 and $6,412 at June 30, 1999 and 1998, respectively. Long-term debt maturities during the next five years are as follows: 2000-$467; 2001-$368; 2002-$453; 2003-$1,103; and 2004-$1,190. 6 Risk Management Activities The Company is exposed to market risk, including changes in interest rates, currency exchange rates and commodity prices. To manage the volatility relating to these exposures, the Company nets the exposures on a consolidated basis to take advantage of natural offsets and enters into various derivative transactions for the residual portion pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. The financial impacts of these hedging instruments are offset in part or in whole by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. Interest Rate Management The Company's policy is to manage interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost-efficient manner, the Company enters into interest rate swaps, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt obligations. For qualifying hedges, the interest rate differential is reflected as an adjustment to interest expense over the life of the swaps. Certain currency interest rate swaps are designated as hedges of the Company's related foreign net investments. Currency effects of these hedges are reflected in the accumulated other comprehensive income section of shareholders' equity, offsetting a portion of the translation of the net assets. The following table presents information for all interest rate instruments. The notional amount does not necessarily represent amounts exchanged by the parties and, therefore, is not a direct measure of the Company's exposure to credit risk. The fair value approximates the cost to settle the outstanding contracts. The carrying value includes the net amount due to counterparties under swap contracts, currency translation associated with currency interest rate swaps and any marked-to-market value adjustments of instruments. June 30 =============== 1999 1998 ===================================== Notional amount $1,614 $2,149 --------------- Fair value $ 7 $ 7 Carrying value 15 28 --------------- Unrecognized loss (8) (21) ===================================== Although derivatives are an important component of the Company's interest rate management program, their incremental effect on interest expense for 1999, 1998 and 1997 was not material. Currency Rate Management The Company manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The major foreign currency exposures involve the markets in Western and Eastern Europe, Asia and Mexico. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with foreign currency purchases of materials and other assets and liabilities created in the normal course of business. Corporate policy prescribes the range of allowable hedging activity. The Company primarily utilizes forward exchange contracts and purchased options with maturities of less than eighteen months. In addition, the Company enters into certain foreign currency swaps to hedge intercompany financing transactions, and utilizes purchased foreign currency options with maturities of generally less than eighteen months and forward exchange contracts to hedge against the effect of exchange rate fluctuations on royalties and foreign source income. Gains and losses related to qualifying hedges of foreign currency firm commitments or anticipated transactions are deferred in prepaid expense and are included in the basis of the underlying transactions. To the extent that a qualifying hedge is terminated or ceases to be effective as a hedge, any deferred gains and losses up to that point continue to be deferred and are included in the basis of the underlying transaction. All other foreign exchange contracts are marked-to-market on a current basis, generally to marketing, research and administration expense. To the extent anticipated transactions are no longer likely to occur, the related hedges are closed with gains or losses charged to earnings on a current basis. Currency instruments outstanding are as follows: June 30 ================= 1999 1998 =========================================================== Notional amount Forward contracts $1,988 $3,448 Purchased options 1,358 1,262 Currency swaps 33 217 Fair value Forward contracts $ (6) $ 30 Purchased options 19 16 Currency swaps 5 8 =========================================================== The reduction in the notional amount of forward contracts reflects the introduction of the euro and increased efficiencies in our hedge program. The deferred gains and losses on these instruments were not material. In addition, in order to hedge currency exposures related to the net investments in foreign subsidiaries, the Company utilizes local currency financing entered into by the subsidiaries, and currency interest rate swaps and other foreign currency denominated financing instruments entered into by the parent. Gains and losses on instruments designated as hedges of net investments are offset against the translation effects reflected in shareholders' equity. Currency interest rate swaps, foreign currency instruments and foreign currency denominated debt that have been designated as hedges of the Company's net investment exposure in certain foreign subsidiaries have notional amounts totaling $826 and $1,138 at June 30, 1999 and 1998, respectively. These hedges resulted in gains of $5 and $42, net of $4 and $25 in tax effects, reflected in shareholders' equity. Credit Risk Credit risk arising from the inability of a counterparty to meet the terms of the Company's financial instrument contracts is generally limited to the amounts, if any, by which the counterparty's obligations exceed the obligations of the Company. It is the Company's policy to enter into financial instruments with a diversity of creditworthy counterparties. Therefore, the Company does not expect to incur material credit losses on its risk management or other financial instruments. 7 Stock Options The Company has stock-based compensation plans under which stock options are granted annually to key managers and directors at the market price on the date of grant. The 1999 grants are fully exercisable after three years and have a fifteen year life, while prior years' grants are fully exercisable after one year and have a ten year life. In 1998, the Company granted stock options to all eligible employees not covered by the key manager and director plans. These grants, which comprised 8.7 million of the 20.3 million options granted in 1998, are fully exercisable after five years and have a ten year life. The Company issues stock appreciation rights in countries where stock options have not been approved by local governments. Pursuant to FASB Statement 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." Accordingly, compensation cost has not been recognized for stock options issued under these plans. Had compensation cost for the plans been determined based on the fair value at the grant date consistent with FASB Statement No. 123, the Company's net earnings and earnings per share would have been as follows: Years Ended June 30 ======================== 1999 1998 1997 ============================================================================= Net earnings As reported $3,763 $3,780 $3,415 Pro forma 3,683 3,472 3,305 Net earnings per common share Basic As reported $ 2.75 $ 2.74 $ 2.43 Pro forma 2.69 2.51 2.35 Diluted As reported 2.59 2.56 2.28 Pro forma 2.53 2.35 2.20 ============================================================================= The fair value of each option grant is estimated on the date of grant using a binomial option-pricing model with the following weighted average assumptions: Years Ended June 30 ======================== 1999 1998 1997 ============================================================================= Interest rate 5.4% 5.6% 6.6% Dividend yield 1.5% 2% 2% Expected volatility 26% 26% 22% Expected life in years 7 6 6 ============================================================================= Stock option activity was as follows: Options in Thousands ======================== 1999 1998 1997 ============================================================================= Outstanding, July 1 79,918 68,514 66,657 Granted 7,026 20,315 10,409 Exercised (9,397) (8,477) (8,357) Canceled (737) (434) (195) ------------------------ Outstanding, June 30 76,810 79,918 68,514 Exercisable 61,664 59,610 58,098 Available for grant 39,874 31,558 28,538 Average price Outstanding, beginning of year $45.58 $31.00 $24.79 Granted 89.72 83.26 58.72 Exercised 22.36 18.57 16.02 Outstanding, end of year 52.11 45.58 31.00 Exercisable, end of year 43.79 32.74 26.03 Weighted average fair value of options granted during the year 32.23 24.56 17.14 ============================================================================= The following table summarizes information about stock options outstanding at June 30, 1999: Options Outstanding --------------------------------------------------- Number Weighted-Avg Range of Outstanding Weighted-Avg Remaining Prices (Thousands) Exercise Price Contractual Life ====================================================================== $15 to 26 19,642 $22.99 2.3 years 28 to 46 21,899 35.24 5.7 57 to 83 17,822 71.10 8.0 84 to 94 17,447 86.66 10.6 The following table summarizes information about stock options exercisable at June 30, 1999: Options Exercisable -------------------------------- Number Range of Exercisable Weighted-Avg Prices (Thousands) Exercise Price ================================================ $15 to 26 19,642 $22.99 28 to 46 21,899 35.24 57 to 83 9,824 61.65 84 to 94 10,299 84.59 ================================================ 8 Employee Stock Ownership Plan The Company maintains the Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan (ESOP) to provide funding for two primary postretirement benefits: a defined contribution profit sharing plan and certain U.S. postretirement health care benefits. The ESOP borrowed $1,000 in 1989, which has been guaranteed by the Company. The proceeds were used to purchase Series A ESOP Convertible Class A Preferred Stock to fund a portion of the defined contribution plan. Principal and interest requirements are $117 per year, paid by the trust from dividends on the preferred shares and from cash contributions and advances from the Company. The shares are convertible at the option of the holder into one share of the Company's common stock. Annual credits to participants' accounts are based on individual base salaries and years of service, and do not exceed 15% of total participants' annual salaries and wages. The liquidation value is equal to the issue price of $13.75 per share. Years Ended June 30 ====================== 1999 1998 1997 ============================================================================ ESOP preferred shares allocated at market value $279 $235 $247 Company contributions 18 35 11 ---------------------- Benefits earned 297 270 258 ============================================================================ In 1991, the ESOP borrowed an additional $1,000, also guaranteed by the Company. The proceeds were used to purchase Series B ESOP Convertible Class A Preferred Stock to fund a portion of retiree health care benefits. Debt service requirements are $94 per year, funded by preferred stock dividends and cash contributions from the Company. Each share is convertible at the option of the holder into one share of the Company's common stock. The liquidation value is equal to the issue price of $26.12 per share. Shares in Thousands ======================== 1999 1998 1997 ============================================================================ Outstanding, June 30 Series A 58,342 60,635 62,952 Series B 37,485 37,805 38,045 ============================================================================ Shares of the ESOP are allocated at original cost based on debt service requirements, net of advances made by the Company to the trust. The fair value of the Series A shares serves to reduce the Company's cash contribution required to fund the profit sharing plan contributions earned. The Series B shares are considered plan assets of the other retiree benefits plan. Dividends on all preferred shares, net of related tax benefit, are charged to retained earnings. The preferred shares held by the ESOP are considered outstanding from inception for purposes of calculating diluted net earnings per common share. 9 Postretirement Benefits The Company offers various postretirement benefits to its employees. Defined Contribution Retirement Plans Within the U.S., the most significant retirement benefit is the defined contribution profit sharing plan described in Note 8. Other Retiree Benefits The Company also provides certain health care and life insurance benefits for substantially all U.S. employees who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans require contributions from retirees and pay a stated percentage of expenses, reduced by deductibles and other coverages. Retiree contributions change annually in line with health care cost trends. These benefits are partially funded by an ESOP, as well as certain other assets contributed by the Company. Certain other employees, primarily outside the U.S., are covered by local defined benefit pension, health care and life insurance plans. The elements of the net amount recognized for the Company's postretirement plans are summarized below: Years Ended June 30 ----------------------------------------- Other Pension Benefits Retiree Benefits ================== ================== 1999 1998 1999 1998 ========================================================================== CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $2,282 $1,991 $1,465 $1,460 Service cost 111 106 49 42 Interest cost 140 148 97 102 Participants' contributions 4 3 17 11 Amendments (5) 21 (1) (6) Actuarial loss (gain) 164 87 (356) (71) Acquisitions 4 154 0 1 Curtailments (3) 13 0 0 Currency exchange (73) (85) (1) (7) Benefit payments (136) (156) (71) (67) ----------------------------------------- Benefit obligation at end of year 2,488 2,282 1,199 1,465 ----------------------------------------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 1,523 1,229 2,611 1,828 Actual return on plan assets 111 243 (49) 803 Acquisitions 4 131 0 0 Employer contributions 95 103 8 37 Participants' contributions 4 3 17 11 Currency exchange (46) (30) 0 (1) Benefit payments (136) (156) (71) (67) ----------------------------------------- Fair value of plan assets at end of year 1,555 1,523 2,516 2,611 ----------------------------------------- FUNDED STATUS Funded status at end of year (933) (759) 1,317 1,146 Unrecognized net actuarial loss (gain) 17 (163) (2,384) (2,354) Unrecognized transition amount 27 32 0 0 Unrecognized prior service cost 37 75 (21) (21) ----------------------------------------- Net amount recognized (852) (815) (1,088) (1,229) ========================================================================== Prepaid benefit cost $ 59 $ 34 $ 1 $ 1 Accrued benefit cost (936) (849) (1,089) (1,230) Accumulated other comprehensive income 25 0 0 0 ----------------------------------------- Net liability recognized (852) (815) (1,088) (1,229) ========================================================================== The Company's stock comprised $2,346 and $2,443 of other retiree plan assets, net of Series B ESOP debt, as of June 30, 1999 and 1998, respectively. Assumptions for the postretirement benefit calculations are as follows: Years Ended June 30 --------------------------------------- Other Pension Benefits Retiree Benefits ================ ================ 1999 1998 1999 1998 ============================================================================== WEIGHTED AVERAGE ASSUMPTIONS Discount rate 6.0% 7.0% 7.5% 6.8% Expected return on plan assets 8% 9% 10% 9% Rate of compensation increase 5% 5% - - Initial health care cost trend rate* - - 6% 8% ============================================================================== *Assumed to decrease to 5% by 2006 and remain at that level thereafter. Components of the net periodic benefit cost are as follows: Years Ended June 30 ------------------------------------------------ Other Pension Benefits Retiree Benefits ====================== ===================== 1999 1998 1997 1999 1998 1997 =============================================================================== COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $111 $106 $100 $ 49 $ 42 $ 45 Interest cost 140 148 131 97 102 109 Expected return on plan assets (105) (103) (87) (218) (171) (138) Amortization of prior service cost 8 7 5 (2) (2) (2) Amortization of transition amount 3 3 0 0 0 0 Curtailment loss 0 12 0 0 0 0 Recognized net actuarial loss (gain) 4 0 (7) (58) (41) (18) ------------------------------------------------ Gross benefit cost 161 173 142 (132) (70) (4) Dividends on ESOP preferred stock 0 0 0 (78) (78) (79) ------------------------------------------------ Net periodic benefit cost 161 173 142 (210) (148) (83) =============================================================================== The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $1,382, $1,122 and $233, respectively, as of June 30, 1999, and $1,206, $984 and $155, respectively, as of June 30, 1998. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects: One Percentage One Percentage Point Increase Point Decrease ====================================================================== Effect on total of service and interest cost components $ 28 $ (23) Effect on postretirement benefit obligation 162 (136) ====================================================================== 10 Income Taxes Earnings before income taxes consist of the following: Years Ended June 30 ======================== 1999 1998 1997 ==================================================== United States $3,474 $3,632 $3,232 International 2,364 2,076 2,017 ------------------------ 5,838 5,708 5,249 ==================================================== The income tax provision consists of the following: Years Ended June 30 ======================== 1999 1998 1997 ==================================================== CURRENT TAX EXPENSE U.S. Federal $1,080 $ 996 $ 967 International 934 918 805 U.S. State & Local 121 115 88 ------------------------ 2,135 2,029 1,860 DEFERRED TAX EXPENSE U.S. Federal (74) 51 1 International & other 14 (152) (27) ------------------------ (60) (101) (26) ------------------------ Total 2,075 1,928 1,834 ==================================================== Taxes credited to shareholders' equity for the years ended June 30, 1999 and 1998 were $222 and $147, respectively. Undistributed earnings of foreign subsidiaries that are considered to be reinvested indefinitely were $7,764 at June 30, 1999. The effective income tax rate was 35.5%, 33.8% and 34.9% in 1999, 1998 and 1997, respectively, compared to the U.S. statutory rate of 35.0%. Excluding the Organization 2005 program costs and related tax effects, the effective tax rate was 34.4%. Deferred income tax assets and liabilities are comprised of the following: June 30 ================ 1999 1998 =================================================================== Current deferred tax assets $ 621 $ 595 ---------------- Non-current deferred tax assets (liabilities) Depreciation $(979) $(1,058) Postretirement benefits 392 435 Loss and other carryforwards 206 167 Other 19 28 ---------------- (362) (428) =================================================================== Included in the above are total valuation allowances of $140 and $177 in 1999 and 1998, respectively. 11 Commitments and Contingencies The Company has purchase commitments for materials, supplies, and property, plant and equipment incidental to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. The Company is subject to various lawsuits and claims with respect to matters such as governmental regulations, income taxes and other actions arising out of the normal course of business. The Company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the Company to take action to correct the effects on the environment of prior manufacturing and waste disposal practices. Accrued environmental liabilities for remediation and closure costs at June 30, 1999 were $58 and, in management's opinion, such accruals are appropriate based on existing facts and circumstances. Current year expenditures were not material. While the effect on future results of these items is not subject to reasonable estimation because considerable uncertainty exists, in the opinion of management and Company counsel, the ultimate liabilities resulting from such claims will not materially affect the Company's financial statements. 12 Segment Information In 1999, the Company was organized and managed on a geographical basis, with four operating segments: North America, which includes the United States and Canada; Europe, Middle East and Africa; Asia; and Latin America. The Corporate & Other segment includes certain financing and employee benefit costs, goodwill amortization, other general corporate income and expense items, segment eliminations, certain asset impairments and the Organization 2005 costs (see Note 2). Corporate & Other also includes the activities of the Company's simplification and standardization program for the consolidation and re-engineering of selected manufacturing and distribution facilities, simplified product line-ups, as well as the gains and losses on sales of non-strategic brands and assets. Beginning with the fourth quarter of 1999, the Organization 2005 program superseded the simplification and standardization program. Corporate assets primarily include cash, investment securities and goodwill. The Company's largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for 12%, 11% and 10% of consolidated net sales in 1999, 1998 and 1997, respectively. These sales occurred primarily in the North America segment.
Europe, North Middle East Latin Corporate America and Africa Asia America & Other Total ============================================================================================================== Net Sales 1999 $18,977 $11,878 $3,648 $2,825 $ 797 $38,125 1998 18,456 11,835 3,453 2,640 770 37,154 1997 17,625 11,587 3,573 2,306 673 35,764 ---- ------- ------- ------ ------ ---- ------- Net Earnings 1999 2,710 1,214 279 318 (758) 3,763 1998 2,474 1,092 174 274 (234) 3,780 1997 2,253 956 275 256 (325) 3,415 ---- ------- ------- ------ ------ ---- ------- Earnings Before Income Taxes 1999 4,215 1,692 411 350 (830) 5,838 1998 3,789 1,540 266 329 (216) 5,708 1997 3,516 1,446 400 326 (439) 5,249 ---- ------- ------- ------ ------ ------- ------- Identifiable Assets 1999 11,390 6,286 2,793 1,577 10,067 32,113 1998 11,063 5,998 2,499 1,519 9,887 30,966 1997 10,280 5,433 2,726 1,389 7,716 27,544 ---- ------- ------- ------ ------ ------- ------- Capital Expenditures 1999 1,484 905 265 174 - 2,828 1998 1,433 686 266 174 - 2,559 1997 1,163 547 287 132 - 2,129 ---- ------- ------- ------ ------ ------- ------- Depreciation and Amortization 1999 902 481 161 87 517 2,148 1998 731 345 144 91 287 1,598 1997 666 374 139 71 237 1,487 ---- ------- ------- ------ ------ ------- ------- Interest Expense 1999 - - - - 650 650 1998 - - - - 548 548 1997 - - - - 457 457 ==== ======= ======= ====== ====== ======= =======
Product Net Sales Information The following is supplemental information on net sales by product groups, aligned as follows: Laundry and Cleaning-dish care, fabric conditioners, hard surface cleaners and laundry. Paper-diapers, feminine protection, tissue and towel, and wipes. Beauty Care-cosmetics, deodorants, fragrances, hair care, personal cleansing and skin care. Food and Beverage-coffee, commercial services, juice, peanut butter, shortening and oil, and snacks. Health Care-gastrointestinal, oral care, pharmaceuticals and respiratory care.
Laundry and Beauty Food and Health Corporate Cleaning Paper Care Beverage Care & Other Total ============================================================================================= 1999 $11,517 $11,451 $7,115 $4,381 $2,836 $825 $38,125 1998 11,099 10,862 7,160 4,376 2,849 808 37,154 1997 10,892 10,101 7,101 4,107 2,895 668 35,764 ==== ======= ======= ====== ====== ====== ==== =======
13 Quarterly Results (Unaudited)
Quarters Ended Total -------------------------------------------- Sept. 30 Dec. 31 Mar. 31 June 30* Year* ================================================================================================================= Net Sales 1998-99 $9,510 $9,934 $9,231 $9,450 $38,125 1997-98 9,355 9,641 8,881 9,277 37,154 ------- ------ ------ ------ ------ ------- Operating Income 1998-99 1,874 1,837 1,665 877 6,253 1997-98 1,739 1,688 1,516 1,112 6,055 ------- ------ ------ ------ ------ ------- Net Earnings 1998-99 1,167 1,142 1,040 414 3,763 1997-98 1,087 1,046 961 686 3,780 ------- ------ ------ ------ ------ ------- Basic Net Earnings Per Common Share 1998-99 .86 .84 .76 .29 2.75 1997-98 .79 .76 .69 .50 2.74 ------- ------ ------ ------ ------ ------- Diluted Net Earnings Per Common Share 1998-99 .80 .78 .72 .29 2.59 1997-98 .73 .71 .65 .47 2.56 - ------------------------------------- ------- ------ ------ ------ ------ -------
FINANCIAL HIGHLIGHTS - ----------------------------------------------------------------------------------------------------------------------
Millions of Dollars Except Per Share and Percentage Amounts 1999* 1998 1997 1996 1995 ====================================================================================================================== Net Sales $38,125 $37,154 $35,764 $35,284 $33,482 Operating Income 6,253 6,055 5,488 4,815 4,244 Net Earnings 3,763 3,780 3,415 3,046 2,645 Net Earnings Margin 9.9% 10.2% 9.5% 8.6% 7.9% Basic Net Earnings Per Common Share 2.75 2.74 2.43 2.14 1.85 Diluted Net Earnings Per Common Share 2.59 2.56 2.28 2.01 1.74 Dividends Per Common Share 1.14 1.01 .90 .80 .70 Research and Development Expense 1,726 1,546 1,469 1,399 1,304 Advertising Expense 3,538 3,704 3,466 3,254 3,284 Total Assets 32,113 30,966 27,544 27,730 28,125 Capital Expenditures 2,828 2,559 2,129 2,179 2,146 Long-Term Debt 6,231 5,765 4,143 4,670 5,161 Shareholders' Equity 12,058 12,236 12,046 11,722 10,589 ====================================== ======= ======= ======= ======= =======
*Operating income includes a before-tax charge of $481 for Organization 2005 program costs. Net earnings include an after-tax charge of $385 for Organization 2005 program costs, and basic and diluted net earnings per share include charges of $.29 and $.26, respectively. SHAREHOLDER INFORMATION CONTACT P&G 24 HOURS A DAY Visit our Web site at www.pg.com/investor Call for financial information 1-800-764-7483 (1-513-945-9990 outside the U.S.) PERSON TO PERSON Shareholder Services representatives available Monday-Friday, 9-4 EST 1-800-742-6253 (1-513-983-3034 outside the U.S.) Automated service available after U.S. business hours. OR WRITE The Procter & Gamble Company Shareholder Services Department P.O. Box 5572 Cincinnati, Ohio 45201-5572 IF ... (bullet) You need help with your account or if you need automated access to your account (bullet) You are interested in our Certificate Safekeeping service (bullet) You want to arrange for direct deposit of dividends (bullet) A stock certificate is lost, stolen or destroyed THANKS TO YOUR FEEDBACK, WE ARE CONTINUALLY IMPROVING P&G'S INVESTOR WEB SITE (www.pg.com/investor): (bullet) Customized navigation: Go to the "Quick Finder" feature to use the site's navigation that best describes you. (bullet) Sign up to have P&G news releases and notification of important events, such as dividend payment dates, sent to you via e-mail. (bullet) Check out the latest new, innovative P&G products available in a store near you. (bullet) Sign up for P&G's direct stock purchase and dividend reinvestment plan by down- loading the application. As a shareholder, you can download all transaction forms required to maintain your account. WE MAKE IT EASIER THAN EVER FOR YOU TO FIND SHAREHOLDER INFORMATION OR ANSWERS TO YOUR QUESTIONS COMMON STOCK PRICE RANGE AND DIVIDENDS
Price Range Dividends ===================================== ================ 1998-99 1997-98 1998-99 1997-98 ================= ======= Quarter Ended High Low High Low ========================================================================================= September 30 $ 94.00 $65.13 $77.56 $64.06 $.2850 $.2525 December 31 94.81 69.63 83.44 62.00 .2850 .2525 March 31 101.81 82.00 87.88 77.31 .2850 .2525 June 30 103.81 84.13 92.50 80.19 .2850 .2525 ============ ======= ====== ====== ====== ====== ======
CORPORATE HEADQUARTERS The Procter & Gamble Company P.O. Box 599 Cincinnati, Ohio 45201-0599 TRANSFER AGENT/SHAREHOLDER SERVICES The Procter & Gamble Company Shareholder Services Department P.O. Box 5572 Cincinnati, Ohio 45201-5572 REGISTRAR Chase Manhattan Trust Company, N.A. 255 East Fifth Street, Suite 2115 Cincinnati, Ohio 45202 EXCHANGE LISTING New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Brussels, Tokyo SHAREHOLDERS OF COMMON STOCK There were 278,245 Common Stock shareholders of record, including participants in the Shareholder Investment Program, as of July 23, 1999. FORM 10-K Beginning in October 1999, shareholders may obtain a copy of the Company's 1999 report to the Securities and Exchange Commission on Form 10-K by going to P&G's investor Web site at www.pg.com/investor or by calling us at 1-800-764-7483. This information is also available at no charge by sending a request to Shareholder Services at the address listed above. SHAREHOLDERS' MEETING The next annual meeting of shareholders will be held on Tuesday, October 12, 1999. A full transcript of the meeting will be available from Linda D. Rohrer, Assistant Secretary, at a cost of $10. Ms. Rohrer can be reached at One P&G Plaza, Cincinnati, Ohio 45202-3315. (Page 48 is a double page - at the top of the right-hand page is a hat with P&G logo a mug with P&G logo) You can order imprinted P&G merchandise from the P&G Galleria. Shop for umbrellas, business accessories and clothing online at www.ehowe.com or call 1-800-969-4693 (1-513-651-1888 outside the U.S.). DID YOU KNOW ... You can give P&G stock to your children, grandchildren, nieces, nephews and friends. The gift of P&G stock is perfect for any occasion, including baptisms, birthdays, holidays and graduations. The friend or relative you enroll in our Shareholder Investment Program will be able to reinvest dividend payments, as well as learn about the value of investing for the long term. With each gift, we will send an attractive, non-negotiable P&G gift certificate that you can frame for the recipient. Visit our investor Web site at www.pg.com/investor to view and download the enrollment package, or call us at 1-800-742-6253. Note, if you intend to give the gift of stock to more than one individual, an application must be filled out for each person. Please read the prospectus prior to investing. (Bottom of right-hand page 48 is a little girl holding a P&G stock gift announcement) EX-21 8 EXHIBIT (21) THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Subsidiaries of the Registrant ------------------------------ The Procter & Gamble Company [Ohio] Abora Capital, S.A. [Spain] Arbora Holding, S.A. [Spain] Arbora & Ausonia, S.L. [Spain] Richvest B.V. [Netherlands] The Dover Wipes Company [Ohio] The Folger Coffee Company [Ohio] P&G Consultoria E Servicos Ltda. [Brazil] FPG Oleochemicals Sdn. Bhd. [Malaysia] Giorgio Beverly Hills, Inc. [Delaware] Industria de Concentrados Crush Limitada [Uruguay] Inversiones Procter & Gamble de Venezuela, C.A. [Venezuela] Inversiones Industrias Mammi, C.A. [Venezuela] Midway Holdings Ltd. [Cayman Islands] Marcvenca Inversiones, C.A. [Venezuela] Procter & Gamble de Venezuela, C.A. [Venezuela] Inmobiliaria Procter & Gamble de Venezuela, S.C.S. [Venezuela] Inmobiliaria Procter & Gamble de Venezuela, S.R.L. [Venezuela] Inversiones 1667, S.A. [Venezuela] Inversiones PGV, S.R.L. [Venezuela] Inversiones PGV-1, S.C.S. [Venezuela] PGV-1 Investment, Ltd. [Cayman Islands] PGV Chile S.A. [Chile] PGV-2 Investment, Ltd. [Cayman Islands] Karm, S.A. [Liechtenstein] Millstone Coffee, Inc. [Washington] Noxell Corporation [Maryland] Max Factor & Co. [Delaware] Noxell (Barbados) Limited [Barbados] Noxell (Panama) S.A. [Panama] Noxell (Thailand) Limited [Thailand] Noxell de Venezuela, C.A. [Venezuela] Procter & Gamble do Brasil S.A. [Brazil] Phebo do Nordeste S/A [Brazil] Procter & Gamble Quimica S.A. [Brazil] Procter & Gamble A.G. [Switzerland] Betrix (Schweiz) AG [Switzerland] Detergent Products A.G. [Switzerland] Modern Industries Company - Dammam [Saudi Arabia] Modern Industries Company - Jeddah [Saudi Arabia] Modern Products Company - Jeddah [Saudi Arabia] Deurocos Cosmetic AG [Switzerland] Moroccan Modern Industries [Morocco] Comunivers sa [Morocco] Procter & Gamble Austria GmbH [Austria] Eurocos Cosmetic Warenvertrieb GmbH [Austria] The Procter & Gamble Company of South Africa (Proprietary) Limited [S. Africa] Procter & Gamble South Africa Proprietary Limited [South Africa] Procter & Gamble Development Company A.G. Glarus [Switzerland] Procter & Gamble (East Africa) Limited [Kenya] Procter & Gamble Egypt [Egypt] Procter & Gamble (Egypt) Industrial and Commercial Company [Egypt] Procter & Gamble (Egypt) Manufacturing Company [Egypt] Procter & Gamble Hellas A.E. (Chemical Industries) [Greece] Procter & Gamble-Hutchison Ltd. [Hong Kong] Procter & Gamble (China) Ltd. [PRC] Procter & Gamble (Chengdu) Ltd. [PRC] Procter & Gamble (Guangzhou) Ltd. [PRC] Procter & Gamble Lonkey (Guangzhou) Ltd. [PRC] Procter & Gamble Lonkey (Shaoguan) Ltd. [PRC] Procter & Gamble Manufacturing (Tianjin) Co. Ltd. [PRC] Procter & Gamble Manufacturing Detergent (Tianjin) Co. Ltd. [PRC] Procter & Gamble Manufacturing Paper (Tianjin) Co. Ltd. [PRC] Procter & Gamble Oral Care (Guangzhou) [China] Procter & Gamble Panda Detergent Co. Ltd. Beijing [PRC] Procter & Gamble Paper (Guangzhou) Ltd. [PRC] Procter & Gamble Personal Cleansing (Tianjin) Ltd. [PRC] Procter & Gamble Detergent (Guangzhou) Ltd. [PRC] Procter & Gamble Jamaica Ltd. [Jamaica] The Procter & Gamble Manufacturing Company of Lebanon, S.A.L.[Lebanon] Procter & Gamble Marketing A.G. [Switzerland] Procter & Gamble Maroc [Morocco] Procter & Gamble Nigeria Limited [Nigeria] Procter & Gamble Pakistan (Private) Limited [Pakistan] Procter & Gamble de Panama, S.A. [Panama] Procter & Gamble Pharmaceuticals S.A.R.L. [Switzerland] Procter & Gamble Tissues AG [Switzerland] Procter & Gamble (Yemen) Ltd [Yemen] Societe Immobiliere Les Colombettes, S.A. [Switzerland] Procter & Gamble Asia Pacific Ltd. [Hong Kong] Procter & Gamble Asia Pacific Ltd. Manila Regional Headquarters [Philippines] Procter & Gamble do Brazil, Inc. [Delaware] Procter & Gamble do Brasil & Cia [Brazil] Procter & Gamble Chile, Inc. [Ohio] Procter & Gamble Colombia S.A. [Colombia] The Procter & Gamble Commercial Company [Ohio] PROGAM Leasing, Inc. [Puerto Rico] Procter & Gamble del Peru S.A. [Peru] Procter & Gamble Commercial de Cuba, S.A. [Cuba] The Procter & Gamble Distributing Company [Ohio] Procter & Gamble FSC (Barbados) Inc. [Barbados] Procter & Gamble Eastern Europe, Inc. [Ohio] Detergenti SA Timisoara [Romania] Hyginett KFT [Hungary] Novomoskovskbytkhim [Russia] P&G Balkans, Inc. [Ohio] P&G C&CA, Inc. [Ohio] Procter & Gamble Bulgaria Ltd. [Bulgaria] Procter & Gamble C&EE Investment, Inc. [Ohio] Procter & Gamble Central &Eastern Europe GmbH [Germany] Procter & Gamble Hungary Wholesale Trading Partnership (KKT) [Hungary] Alvorada BT [Hungary] Beta BT [Hungary] Beauty-Care Beauty-Treatment Product Distribution Foreign Trade Ltd.[Hungary] Carlos BT [Hungary] Cleveland Export-Import Trading Ltd. [Hungary] Diego BT [Hungary] Elysee BT [Hungary] Ferraris BT [Hungary] Frank BT [Hungary] Helga BT [Hungary] Olga BT [Hungary] Pal BT [Hungary] Pannonia Trading Ltd. [Hungary] Shampoo-Trade Export Import Trading Ltd. [Hungary] Stan BT [Hungary] Transylvania Trading Ltd. [Hungary] Varadi BT [Hungary] Procter & Gamble Kazakhstan [Kazakhstan] Procter & Gamble Kereskedelmi BT [Hungary] Procter & Gamble Limited Liability Company [Uzbekistan] Procter & Gamble Marketing & Commercial Activities d.o.o. [Slovenia] Procter & Gamble Marketing and Services d.o.o. [Yugoslavia] Procter & Gamble Marketing Latvia Ltd. [Latvia] Procter & Gamble Marketing Romania SRL [Romania] Procter & Gamble Manufacturing Romania SRL [Romania] Procter & Gamble Operations Polska - Spolka Akcyjna [Poland] Procter & Gamble Polska Sp. zo.o [Poland] Procter & Gamble O.O.O. [Russia] Procter & Gamble Spol. s.r.o. (Ltd) [Slovak Republic] Procter & Gamble Ukraine [Ukraine] Procter & Gamble Rakona Ltd. [Czech Republic] Procter & Gamble European Technical Center N.V. [Belgium] P&G Holding B.V. [Netherlands] P&G Tissues B.V. [Netherlands] Procter & Gamble Nederland B.V. [Netherlands] Richardson-Vicks B.V. [Netherlands] Richardson-Vicks Overseas Finance N.V. [Netherlands Antilles] Procter & Gamble European Supply Company N.V. [Belgium] Procter & Gamble Belgium BVBA [Belgium] Procter & Gamble Eurocor N.V. [Belgium] Procter & Gamble Europe BVBA[ Belgium] Procter & Gamble Manufacturing Belgium BVBA [Belgium] Procter & Gamble Services Company S.A. [Belgium] Procter & Gamble Far East, Inc. [Ohio] Max Factor K.K. [Japan] American Cosmetics K.K. [Japan] Betrix Japan K.K. [Japan] Max Factor Hanbai K.K. [Japan] P&G Indochina [Vietnam] Procter & Gamble Asia Pte. Ltd. [Singapore] Procter & Gamble Distribution Company Limited [India] Procter & Gamble Holdings Singapore Pte. Ltd. [Singapore] Procter & Gamble India Holdings, Inc. [Ohio] Procter & Gamble Bangladesh Private Ltd. [Bangladesh] Procter & Gamble Home Products Limited [India] Procter & Gamble Sri Lanka Private Ltd. [Sri Lanka] Procter & Gamble Korea Inc. [Korea] Procter & Gamble NPD, Inc. [Ohio] Procter & Gamble Taiwan Limited [Taiwan] Procter & Gamble Technology (Beijing) Co., Ltd. [PRC] Procter & Gamble (Vietnam) Ltd. [Vietnam] Procter & Gamble FED, Inc. [Delaware] Procter & Gamble Finance Corporation [Canada] The Procter & Gamble Global Finance Company [Ohio] Procter & Gamble Holding S.A. [Argentina] Productos Sanitarios S.A. [Argentina] Topsy S.A. [Argentina] Procter & Gamble Inc. [Ontario, Canada] Crest Toothpaste Inc. [Canada] Procter & Gamble Financial Services [Ireland] Procter & Gamble Industrial e Comercial Ltda. [Brazil] Procter & Gamble Mississauga Real Estate Company [Canada] Shulton de Venezuela, C.A. [Venezuela] Procter & Gamble Investment Corporation [Canada] Procter & Gamble Italia, S.p.A. [Italy] Rapik S.p.A. [Italy] Procter & Gamble Limited [U.K.] European Beauty Products (U.K.) Limited [U.K.] Max Factor & Co. (U.K.) Ltd. [Bermuda] Max Factor Limited [U.K.] Eurocos Ltd [U.K.] Gala Cosmetics International Limited [U.K.] Komal Manufacturing Chemists Ltd. [India] Gala of London Limited [U.K.] Girl Cosmetics Ltd. [U.K.] Max Factor Manufacturing Ltd. [U.K.] Procter & Gamble (Enterprise Fund) Limited [U.K.] Procter & Gamble (Health & Beauty Care) Limited [U.K.] Giorgio Beverly Hills (Europe) Ltd. [U.K.] Noxell Limited [U.K.] Procter & Gamble (Cosmetics and Fragrances) Limited [U.K.] Procter & Gamble Product Supply (U.K.) Limited [U.K.] Procter & Gamble Technical Centers Limited [U.K.] Procter & Gamble U.K. [U.K.] Shulton (Great Britain) Ltd. [U.K.] Colfax Laboratories (India) Ltd. [India] Tambrands Limited [U.K.] Tambrands (Continental) Ltd. [U.K.] Tambrands Investments Ltd. (U.K.) [U.K.] Tambrands Ireland Limited [Ireland] Procter & Gamble Distributing Limited [U.K.] Procter & Gamble Health and Beauty Care-Europe Limited [U.K.] Procter & Gamble Laundry & Cleaning Products Limited [U.K.] Procter & Gamble (NTC) Limited [U.K.] Procter & Gamble Pharmaceuticals U.K., Limited [U.K.] Procter & Gamble (Properties) Ltd. [U.K.] Vidal Sassoon Holdings Ltd. [U.K.] The Procter & Gamble Manufacturing Company [Ohio] Procter & Gamble Manufacturing (Thailand) Limited [Thailand] The Procter & Gamble Paper Products Company [Ohio] Procter & Gamble Philippines, Inc. [Philippines] Progam Realty & Development Corporation [Philippines] Procter & Gamble Productions, Inc. [Ohio] Fountain Square Music Publishing Co., Inc. [Ohio] Liberty Street Music Publishing Company, Inc. [Ohio] Riverfront Music Publishing Co., Inc. [Ohio] Sycamore Productions, Inc. [Ohio] Procter & Gamble S.A. [Chile] Procter & Gamble S.A. [France] Fonciere des 96 et 104 Avenue Charles de Gaulle [France] Laboratoire Lachartre SNC [France] S. H. Equateur S.A.S. [France] Procter & Gamble Amiens SNC [France] Procter & Gamble Brionne S.N.C. [France] Laboratoires Sofabel S.A.R.L. [France] Procter & Gamble France S.N.C.[France] Procter & Gamble MSV SAS [France] Procter & Gamble Neuilly S.A.R.L. [France] Procter & Gamble Orleans SAS [France] Procter & Gamble Pharmaceuticals France S.A. [France] Procter & Gamble Scandinavia, Inc. [Ohio] Procter & Gamble Hygien AB [Sweden] Procter & Gamble Hygien A/S [Norway] Procter & Gamble Hygien OY [Finland] Procter & Gamble S.p.A. [Italy] Eczacibasi Yatirim Holding Ortakligi A.S. [Turkey] Fater S.p.A. [Italy] Fameccanica Data S.p.A. [Italy] Procter & Gamble Distribution Company (Europe) N.V. [Belgium] Procter & Gamble Tissues Italia S.p.A. [Italy] Procter & Gamble Tuketim Mallari Sanayii Ltd. [Turkey] Progasud S.p.A. [Italy] Sanipak Saglik Urunleri Sanayi Ve Ticaret A.S. [Turkey] Eczacibasi Procter & Gamble Dagitim Ve Satis AS [Turkey] Promotora de Bienes y Valores, S.A. de C.V. [Mexico] Procter & Gamble de Mexico, S.A. de C.V. [Mexico] Max Factor Mexicana, S.A. de C.V. [Mexico] P.T. Procter & Gamble Home Products Indonesia [Indonesia] REVAC 2 Corp. [Delaware] Richardson-Vicks Inc. [Delaware] Celtic Insurance Company Limited [Bermuda] Industrias Modernas, S.A. [Guatemala] Olay Company, Inc. [Delaware] P&G do Brasil Comercial Ltda. [Brazil] Procter & Gamble Australia Proprietary Limited [Australia] Procter & Gamble (NBD) Pty. Ltd. [Australia] Procter & Gamble Espana S.A. [Spain] Procter & Gamble Portugal S.A. [Portugal] Neoblanc-Productos de Higiene e Limpeza Lda. [Portugal] Procter & Gamble GmbH [Germany] Betrix Cosmetic GmbH [Germany] Blendax Dental Vertriebs-GmbH [Germany] Blendax GmbH [Germany] Blendax Unterstutzungskasse GmbH [Germany] Buscher GmbH [Germany] Cover Girl Cosmetic GmbH [Germany] Eurocos Cosmetic GmbH [Germany] EURO-Juice G.m.b.H. Import und Vertrieb [Germany] Euro-Juice y Compania, S. en C. [Spain] Herve Leger Parfums GmbH [Germany] Procter & Gamble European Service GmbH [Germany] Procter & Gamble GmbH & Co. Manufacturing OHG [Germany] Noris Transport GmbH [Germany] Papierhygiene GmbH [Germany] Tempo AG [Switzerland] Bess Hygiene AG [Switzerland] Unterstutzungskasse der Vereinigte Papierwerke AG Nurnberg e.V. [Germany] Procter & Gamble Pharmaceuticals-Germany GmbH [Germany] Rohm Pharma GmbH [Germany] Egnaro Arzneimittel GmbH [Germany] Rohm Pharma GmbH Wien [Austria] Rolf H. Dittmeyer GmbH [Germany] SCS Sales + Cosmetic Service GmbH [Germany] Shulton GmbH [Germany] Ssangyong Paper [Korea] TRAPOFA Leonhard-Speditions GmbH I.L. [Germany] Procter & Gamble Health Products, Inc. [Delaware] Procter & Gamble Hong Kong Limited [Hong Kong] Procter & Gamble India Limited [India] Procter & Gamble Interamericas Inc. [Delaware] Alejandro Llauro E Hijos S.A.I.C. [Argentina] Compania Quimica S.A. [Argentina] Loreto y Pena Pobre, S.A. de C.V. [Mexico] Procter & Gamble Interamericas de Costa Rica, S.A. [Costa Rica] Procter & Gamble Interamericas de El Salvador, S.A. de C.V. [El Salvador] Procter & Gamble Interamericas de Guatemala, S.A. [Guatemala] Procter & Gamble Interamericas de Nicaragua, S.A. [Nicaragua] Surfac S.A. [Peru] Procter & Gamble (Malaysia) Sdn. Berhad [Malaysia] Procter & Gamble Pharmaceuticals, Inc. [Ohio] Norwich Overseas, Inc. [Delaware] Procter & Gamble Pharmaceuticals Australia Pty. Limited [Australia] Procter & Gamble Pharmaceuticals Canada, Inc. [Canada] S.A. Procter & Gamble Pharmaceuticals N.V. [Belgium] Procter & Gamble Pharmaceuticals Puerto Rico, Inc. [Delaware] Procter & Gamble (Singapore) Pte. Ltd. [Singapore] P. T. Procter & Gamble Indonesia [Indonesia] Richardson-Vicks do Brasil Quimica e Farmaceutica S.A. [Brazil] Richardson-Vicks Limited [Thailand] Richardson-Vicks Real Estate Inc. [Ohio] R-V Chemicals Holdings Ltd. [Ireland] Procter & Gamble (Ireland) Limited [Ireland] Procter & Gamble (Manufacturing) Ireland Limited [Ireland] Vick Nigeria Limited [Nigeria] Rosemount Corporation [Delaware] Anjali Corporation [Delaware] Kangra Valley Enterprises Ltd. [Delaware] The Mandwa Company, Inc. [Delaware] Ramalayam Investments Company [Delaware] Yamuna Investments Company [Delaware] The Malabar Company [Delaware] Temple Trees [India] Procter & Gamble Ecuador Compania Anonima [Ecuador] Sacoma, S.A. [Argentina] Shulton, Inc. [New Jersey] Shulton S.A. [Guatemala] Shulton (New Zealand) Limited [New Zealand] Shulton (Thailand) Ltd. [Thailand] Sundor Brands Inc. [Florida] Sundor Canada Inc. [Delaware] Sundor Brands Limited [U.K.] Sycamore Investment Company [Ohio] Thomas Hedley & Co. Limited [U.K.] Vick International Corporation [Delaware] Tambrands Inc. [Delaware] Shenyang Tambrands Company Limited [PRC] Tambrands Industria e Comercia Ltda. [Brazil] Tambrands de Venezuela, C.A. [Venezuela] Tambrands Polska Sp.z.o.o. [Poland] Tambrands Ukraine Ltd. [Ukraine] Tambrands S.A. [Brazil] Industrial Calentation Services (Pty.) Ltd. [S. Africa] Tambrands South Africa (Pty.) Ltd. [S. Africa] Tambrands Properties (Pty.) Ltd. [S. Africa] Tambrands AG [Switzerland] Tambrands Canada Inc. [Canada] Tambrands France S.A. [France] Tambrands GmbH [Germany] ZAO Tambrands [Russia] Adminser S.A. [Mexico] Tambrands Dosmil, S.A. de C.V. [Mexico] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EX-23 9 Exhibit (23) ---------------- Consent of Deloitte & Touche LLP DELOITTE & TOUCHE LLP 250 East Fifth Street Post Office Box 5340 Cincinnati, Ohio 45201-5340 Telephone: (513) 784-7100 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS - --------------------------------------------------- We consent to the incorporation by reference in the following documents of our report dated July 29, 1999, incorporated by reference in this Annual Report on Form 10-K of The Procter & Gamble Company for the year ended June 30, 1999. 1. Amendment No. 2, Post-Effective Amendment No. 2 to Registration Statement No. 33-26514 on Form S-8 For The Procter & Gamble 1983 Stock Plan; 2. Amendment No. 1 on Form S-8 to Registration Statement No. 33-31855 on Form S-4 (now S-8) for the 1982 Noxell Employees' Stock Option Plan and the 1984 Noxell Employees' Stock Option Plan; 3. Amendment No. 1, Post Effective Amendment No. 1 to Registration Statement No. 33-49289 on Form S-8 for The Procter & Gamble 1992 Stock Plan; 4. Registration Statement No. 33-47656 on Form S-8 for The Procter & Gamble International Stock Ownership Plan; 5. Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble Commercial Company Employees' Savings Plan; 6. Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble 1993 Non-Employee Directors' Stock Plan; 7. Registration Statement No. 333-05715 on Form S-8 for The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan; 8. Amendment No. 2, Post-Effective Amendment No. 2 to Registration Statement No. 33-59257 on Form S-3 for The Procter & Gamble Shareholder Investment Program; 9. Registration Statement No. 333-14381 on Form S-8 for Profit Sharing Retirement Plan of The Procter & Gamble Commercial Company; 10. Registration Statement No. 333-14387 on Form S-8 for Giorgio Employee Savings Plan; 11. Registration Statement No. 333-14389 on Form S-8 for Procter & Gamble Pharmaceuticals Savings Plan; 12. Registration Statement No. 333-14391 on Form S-8 for Richardson-Vicks Savings Plan; 13. Registration Statement No. 333-14397 on Form S-8 for Procter & Gamble Subsidiaries Savings Plan; 14. Registration Statement No. 333-14395 on Form S-8 for Procter & Gamble Subsidiaries Savings and Investment Plan; 15. Registration Statement No. 333-21783 on Form-8 for The Procter & Gamble 1992 Stock Plan (Belgian Version); 16. Registration Statement No. 333-30949 on Form S-3 for The Procter & Gamble Company Debt Securities and Warrants; 17. Registration Statement No. 333-37905 on Form S-8 for The Procter & Gamble Future Shares Plan; 18. Registration Statement No. 333-51213 on Form S-8 for Group Profit Sharing, Incentive, and Employer Contribution Plan (France); 19. Registration Statement No. 333-51219 on Form S-8 for Procter & Gamble Ireland Employees Share Ownership Plan; 20. Registration Statement No. 333-51221 on Form S-8 for Employee Stock Purchase Plan (Japan); 21. Registration Statement No. 333-51223 on Form S-8 for Savings and Thrift Plan (Saudi Arabia); and 22. Registration Statement No. 333-51225 on Form S-8 for The Procter & Gamble UK Matched Savings Share Purchase Plan. /s/DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP September 15, 1999 EX-27 10
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000080424 THE PROCTER & GAMBLE COMPANY 1,000,000 U.S. DOLLARS 12-MOS JUN-30-1999 JUL-01-1998 JUN-30-1999 1 2,294 506 2,940 0 3,338 11,358 21,400 8,774 32,113 10,761 6,231 0 1,781 1,320 8,957 32,113 38,125 38,125 21,206 10,666 0 0 650 5,838 2,075 3,763 0 0 0 3,763 2.75 2.59
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