PG

Business Context and Reporting Period

Company: The Procter & Gamble Company (P&G)
Filing Type: Annual Report on Form 10-K
Reporting Period: Fiscal year ended June 30, 2003
Headquarters: Cincinnati, Ohio

P&G is a global manufacturer and marketer of consumer products operating in five segments: Fabric and Home Care, Baby and Family Care, Beauty Care, Health Care, and Snacks and Beverages. The company operates in over 150 countries with approximately 98,000 employees. A significant development during the period was the acquisition of a controlling interest (approximately 81%) in Wella AG, a leading beauty care company, finalized in September 2003 for approximately $5.09 billion.

Key Financial Metrics

Revenue and Sales Geography:
The filing provides a breakdown of net sales by geography for the fiscal year ended June 30, 2003 (in millions):

Assets:
Total assets as of June 30, 2003, were $43,706 million ($23,424 million in the U.S. and $20,282 million International).

Profit, Margins, Cash Flow, and Debt:
The filing text incorporates detailed financial statements, including consolidated statements of earnings, cash flows, and balance sheets, by reference to the Annual Report to Shareholders (pages 34-55). Specific values for net income, operating margins, free cash flow, and total debt are not explicitly stated in the provided text.

Material Changes vs. Prior Period

• Acquisitions: P&G completed the acquisition of Wella AG (beauty care) in September 2003, following a tender offer and purchase of majority shares. This represents a major expansion in the Beauty Care segment.
• Divestitures: In May 2002, the company completed the spin-off of the Jif peanut butter and Crisco shortening brands to shareholders, which subsequently merged into J.M. Smucker Company.
• Workforce Reduction: Employee count declined by approximately 4,000 to 98,000, primarily due to separations related to the company's multi-year restructuring program initiated in 1999.
• Geographic Growth: International net sales grew from $19,040 million in 2002 to $21,524 million in 2003, outpacing U.S. sales growth.

Guidance, Outlook, Risks, and Contingencies

Management Commentary and Outlook:
Management emphasizes organic growth through new product creation and performance benefits. The company is focused on integrating the Wella acquisition and managing cost improvement plans. Forward-looking statements regarding volume and net sales growth are based on assumptions about competitive activity, pricing, and economic conditions.

Risks and Contingencies:

• Market Risks: Exposure to currency movements, interest rates, and commodity cost increases.
• Operational Risks: Reliance on single-source suppliers for some raw materials and potential disruptions from global political or economic uncertainty, including terrorist activities.
• Legal/Environmental: The company is involved in clean-up efforts at off-site Superfund locations. As of June 30, 2003, the accrued amount for probable future costs was $5 million.
• Integration Risk: Success depends on the ability to successfully manage and integrate key acquisitions like Wella.

Investor Verification Checklist

• Wella Acquisition Details: Verify the final purchase price, financing mix (cash vs. debt), and integration timeline for Wella AG, as the deal closed shortly after the fiscal year-end.
• Full Financial Statements: Review the referenced Annual Report to Shareholders (pages 34-55) for specific net income, EPS, cash flow, and debt figures not included in this summary text.
• Restructuring Costs: Examine Note 2 in the Annual Report for details on the multi-year restructuring program costs and their impact on operating margins.
• Segment Performance: Analyze Note 12 (Segment Information) to understand the specific contribution of the Beauty Care segment post-Wella and the impact of the Jif/Crisco spin-off on the Snacks and Beverages segment.
• Environmental Liabilities: Monitor the $5 million accrued Superfund liability for potential increases in future estimates.