-----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, UxYS9tDV1m7lkbEUtQXGZasysrUcAsjxDxP2KWLdSnxrJXH3CJIDl7xrRberyt6n rvnwPURapgBZS2FqEP68tA== 0000080424-96-000017.txt : 19960912 0000080424-96-000017.hdr.sgml : 19960912 ACCESSION NUMBER: 0000080424-96-000017 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960911 SROS: CSE SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-00434 FILM NUMBER: 96628407 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, 1996 ****************************************** 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, 1996 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, Antwerp, 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 684,717,750 shares of Common Stock outstanding as of August 9, 1996. The aggregate market value of the voting stock held by non-affiliates amounted to $65 billion on August 9, 1996. Documents Incorporated By Reference ------------------------------------ Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 1996 are incorporated by reference into Part I and Part II of this report. Portions of the Proxy Statement for the 1996 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 Letter to Shareholders, which appears on pages 1-4, and Building Leadership Brands, which appears on pages 5-15 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. 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 11 Segment Information, which appears on pages 40 and 41, and Financial Review, which appears on pages 20-27 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. 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 13% of consolidated fiscal 1996 sales, respectively. These categories constituted approximately the same percentages of consolidated sales in 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 trade names of all major products in each segment are registered trademarks. 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 1996 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 1997. 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 103,000 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 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, 1996 are incorporated by reference to Note 7 Postretirement Benefits and Note 8 Employee Stock Ownership Plan, which appear on pages 38-39 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. Additional information required by this item is incorporated herein by reference to Note 11 Segment Information, which appears on pages 40 and 41, the Financial Highlights, which appear on page 42, and Financial Review, which appears on pages 20-27 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. Financial Information About Foreign and Domestic Operations ----------------------------------------------------------- The information required by this item is incorporated herein by reference to Note 11 Segment Information, which appears on pages 40 and 41, and Financial Review, which appears on pages 20-27 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. Item 2. Properties. ----------- In the United States, the Company owns and operates manufacturing facilities at 36 locations in 20 states. In addition, it owns and operates 90 manufacturing facilities in 43 other countries. Laundry and Cleaning products are produced at 40 of these locations; Paper products at 39; Health Care products at 30; Beauty Care products at 52; and Food and Beverage products at 12. 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 accrued at June 30, 1996 representing the Company's probable future costs that can be reasonably estimated was $10 million. The Company is also involved in certain other environmental proceedings. No such proceeding is expected to result in material monetary or other sanctions being imposed by any governmental entity, or in other material liabilities. However, the Company has agreed to participate in the Toxic Substances Control Act ("TSCA") Section 8(e) Compliance Audit Program of the United States Environmental Protection Agency ("EPA"). As a participant, the Company has agreed to audit its files for materials which under current EPA guidelines would be subject to notification under Section 8(e) of TSCA and to pay stipulated penalties for each report submitted under this program. It is anticipated that the Company's liability under the Program will be $1,000,000. No administrative proceeding is pending; however the Company anticipates being required to enter an Administrative Order on Consent pursuant to this Program in late calendar year 1996. 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 August 9, 1996 are: Elected to Present Name Position Age Position - ------------------ ------------------------------- --- ---------- John E. Pepper Chairman of the Board and 58 1995 Chief Executive. Director since June 12, 1984. Durk I. Jager President and Chief Operating 53 1995 Officer. Director since December 12, 1989. Wolfgang C. Berndt Executive Vice President. 53 1995 Harald Einsmann Executive Vice President. 62 1995 Director since June 10, 1991. Alan G. Lafley Executive Vice President. 49 1995 Jorge P. Montoya Executive Vice President. 50 1995 Benjamin L. Bethell Senior Vice President. 56 1991 Robert T. Blanchard Group Vice President. 51 1991 Gordon F. Brunner Senior Vice President. 57 1987 Director since March 1, 1991. Bruce L. Byrnes Group Vice President. 48 1991 R. Kerry Clark Group Vice President. 44 1995 Larry G. Dare Group Vice President. 56 1990 Stephen P. Donovan, Jr. Group Vice President. 55 1986 Todd A. Garrett Group Vice President. 54 1995 Jacobus Groot Group Vice President. 45 1995 James J. Johnson Senior Vice President 49 1992 and General Counsel. Jeffrey D. Jones Group Vice President. 43 1992 Mark D. Ketchum Group Vice President. 46 1996 Fuad O. Kuraytim Group Vice President. 55 1995 Gary T. Martin Senior Vice President. 51 1991 Claude L. Meyer Group Vice President. 53 1995 Lawrence D. Milligan Senior Vice President. 60 1990 Erik G. Nelson Senior Vice President. 56 1993 John O'Keeffe Group Vice President. 46 1995 Herbert Schmitz Group Vice President. 59 1995 Robert L. Wehling Senior Vice President. 57 1994 Edwin H. Eaton, Jr. Vice President and Comptroller. 57 1987 All of the above Executive officers are members of the Executive Committee of The Procter & Gamble Company and have been employed by the Company over five years. PART II ------- Item 5. Market for the Common Stock and Related Stockholder Matters ----------------------------------------------------------- The information required by this item is incorporated by reference to the Shareholder Information, which appears on page 43 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. Item 6. Selected Financial Data ----------------------- The information required by this item is incorporated by reference to the Financial Highlights, which appear on page 42 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. 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 20-27, Note 10 Commitments and Contingencies, which appears on page 40, and Note 11 Segment Information, which appears on pages 40 and 41 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. Item 8. Financial Statements and Supplemental Data ------------------------------------------ The financial statements and supplemental data are incorporated by reference to pages 28-42 of the Annual Report to Shareholders for the fiscal year ended June 30, 1996. 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 3-7 and 21 of the proxy statement filed since the close of the fiscal year ended June 30, 1996, 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 9-16 of the proxy statement filed since the close of the fiscal year ended June 30, 1996, 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 18-20 of the proxy statement filed since the close of the fiscal year ended June 30, 1996, 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 21 of the proxy statement filed since the close of the fiscal year ended June 30, 1996, 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, 1996, 1995 and 1994 - Consolidated balance sheets -- as of June 30, 1996 and 1995 - Consolidated statements of shareholders' equity -- for years ended June 30, 1996, 1995 and 1994 - Consolidated statements of cash flows -- for years ended June 30, 1996, 1995 and 1994 - 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, 1993). (3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). 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 December 14, 1993) which was adopted by the shareholders at the annual meeting on October 13, 1992 (Incorporated by reference to Exhibit (10-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). (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, 1993). (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, 1993). (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, 1993). (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, 1993). (10-6) -- The Procter & Gamble Retirement Plan for Directors which was adopted by the Board of Directors on December 12, 1989 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-7) -- 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 (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan 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 (Incorporated by reference to Appendix A of the proxy statement filed September 1, 1995 since the close of the fiscal year ended June 30, 1995). (10-9) -- 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 (Incorporated by reference to Exhibit (10-9) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). (10-10) -- The Procter & Gamble Executive Group Life Insurance Policy (Additional Policy). Exhibit (11) -- Computation of earnings per share. Exhibit (12) -- Computation of ratio of earnings to fixed charges. Exhibit (13) -- Annual Report to Shareholders. (Pages 1-15 and 20-43) 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, 1995) (the "Policy Period" has been extended to 6/30/99). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (99-6) -- Fiduciary Responsibility Insurance Policy (Incorporated by reference to Exhibit 99-6 of the Company's Annual Report on Form 10-K for the year ended June 30, 1995) (the "Policy Period" has been extended to 6/30/97). 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: None. 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 JOHN E. PEPPER ---------------------------------- John E. Pepper Chairman of the Board and Chief Executive September 10, 1996 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 --------- ----- ---- JOHN E. PEPPER Chairman of the Board and | - ----------------------- Chief Executive and Director | (John E. Pepper) (Principal Executive Officer) | | ERIK G. NELSON Senior Vice President | - ----------------------- (Principal Financial Officer) | (Erik G. Nelson) | | EDWIN H. EATON, JR. Vice President and Comptroller | - ----------------------- (Principal Accounting Officer) | (Edwin H. Eaton, Jr.) September 10, 1996 | 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) | | RICHARD B. CHENEY | - ----------------------- Director | (Richard B. Cheney) | | HARALD EINSMANN | - ----------------------- Director | (Harald Einsmann) | | | - ----------------------- Director | (Richard J. Ferris) | | | - ----------------------- Director September 10, 1996 (Joseph T. Gorman) | | DURK I. JAGER | - ----------------------- Director | (Durk I. Jager) | | CHARLES R. LEE | - ----------------------- Director | (Charles R. Lee) | | LYNN M. MARTIN | - ----------------------- Director | (Lynn M. Martin) | | 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) | | - ----------------------- 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, 1993). (3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). 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 December 14, 1993) which was adopted by the shareholders at the annual meeting on October 13, 1992 (Incorporated by reference to Exhibit (10-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). (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, 1993). (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, 1993). (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, 1993). (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, 1993). (10-6) -- The Procter & Gamble Retirement Plan for Directors which was adopted by the Board of Directors on December 12, 1989 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). Exhibit (10-7) -- 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 (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan 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 (Incorporated by reference to Appendix A of the proxy statement filed September 1, 1995 since the close of the fiscal year ended June 30, 1995). (10-9) -- 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 (Incorporated by Reference to Exhibit (10-9) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). (10-10) -- The Procter & Gamble Executive Group Life Insurance Policy (Additional Policy) Exhibit (11) -- Computation of earnings per share. Exhibit (12) -- Computation of ratio of earnings to fixed charges. Exhibit (13) -- Annual Report to Shareholders. (Pages 1-15 and 20-43) 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, 1995) (the "Policy Period" has been extended to 6/30/99). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (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, 1995) (the "Policy Period" has been extended to 6/30/97). (99-6) -- Fiduciary Responsibility Insurance Policy (Incorporated by reference to Exhibit 99-6 of the Company's Annual Report on Form 10-K for the year ended June 30, 1995) (the "Policy Period" has been extended to 6/30/97). EX-10.10 2 Exhibit (10-10) ----------------- The Procter & Gamble Executive Group Life Insurance Policy (Additional Policy) Group Control No. 363417 AETNA LIFE INSURANCE COMPANY HARTFORD, CONNECTICUT (Herein called the Insurance Company) Group Policy No.: GL-363417 Policy Delivered In: Ohio (State or other Jurisdiction) Policy holder: THE PROCTER & GAMBLE COMPANY Policy Signed: June 14, 1977 To Take Effect: April 13, 1977 This policy is a contract between the Policyholder and the Insurance Company and shall be construed in accordance with the law of the jurisdiction in which it is delivered. In consideration of the payment by the Policyholder of premiums in the amounts and at the times hereinafter provided, the Insurance company hereby agrees with the Policyholder, subject to the terms appearing on this and the following pages of this policy (including, if any, the riders, endorsements, and amendments, to this policy which are signed by the Insurance Company), to pay benefits in accordance with the terms of this policy. The obligations and the rights of all persons under this policy shall be determined in accordance with the terms of this policy. In witness whereof the Insurance Company has signed this policy at Hartford, Connecticut. Aetna Life Insurance Company /S/HARVEY P. BERMAN /S/WILLIAM O. BAILEY Secretary President /S/HELEN N. MATIJCZYK Registrar GROUP LIFE INSURANCE POLICY INDEX Page Article I-GENERAL PROVISIONS. Article II-BENEFITS. Article III-TERMINATION OF INSURANCE. Article IV-PREMIUMS. Article V-DISCONTINUANCE OF POLICY. Article VI-MISCELLANEOUS PROVISIONS. COPY OF APPLICATION Article I-GENERAL PROVISIONS 363417 Section 1. General Definitions As used in this policy: (a) The term "Employee Coverage" means only insurance as to an employee. (b) The term "date of issue" means the date this policy took effect as shown on Page 1 of this policy. (c) Commencing January 1, 1978, "policy anniversaries" shall be deemed to occur on said date, and on the same day in each succeeding year. (d) The term "policy year" means a period commencing with the date of issue of this policy, or a policy anniversary, and terminating immediately prior to the next succeeding policy anniversary. (e) A "policy month" shall commence on the date of issue. Each "policy month" thereafter shall be deemed to commence on the first day of the calendar month. (f) "Contributory insurance" means insurance for which an employee makes written request to his Participant Employer and agrees to make the required contributions to his Participant Employer. "Non-contributory insurance" is insurance for which an employee does not make written request nor contribute toward the cost. This policy provides insurance on the non-contributory basis. (g) The term "Added Compensation" means the total amount of additional remuneration: 1) awarded by the Board of Directors of The Procter & Gamble Company, the Compensation Committee of The Procter & Gamble Company or the Procter & Gamble Chief Executive Officers and heads of the various subsidiary companies, and 2) charges against the Executive Additional Remuneration Reserve, but excluding any supplemental awards which are made because of the limits imposed by the Employee Retirement Income Security Act of 1974 on credits to the Profit Sharing Trust Plan. (h) The term "Total Compensation" means the sum of (a) base salary plus, (b) added compensation. Section 2. List of Participant Employers An Employer shall be eligible to be included in this list as a Participant Employer if such inclusion is not contrary to any applicable insurance law of the state or other jurisdiction in which this contract is delivered. The Policyholder may act for and on behalf of any and all of the Employers included in this list in all matters pertaining to this contract, and every act done by the Policyholder, agreement made between the Insurance company and the Policyholder, or notice given by the Insurance Company to the Policyholder or by the Policyholder to the Insurance Company, shall be binding on all such Employers. Any eligible Employer may be added to this list as a Participant Employer only upon written agreement between the Policyholder and the Insurance Company and upon terms mutually agreeable to them. An Employer shall be eliminated automatically from this list when this contract is discontinued with respect to employees of such Employer, as provided for elsewhere in this contract, but termination of an Employer's status as a Participant Employer shall not relieve such Employer from any obligations to the Insurance Company with respect to the time such Employer was a Participant Employer under this contract. This list shall, at any time, consist of those Employers which have been included under this contract by written agreement between the Policyholder and the Insurance Company, and which have not been removed, in accordance with the above terms of this section. Section 3. Employees to be Insured (I) Employee Coverage A. Employees Eligible: All employees of a Participant Employer shall be eligible for Employee Coverage except employees in the following classes: (a) temporary or substitute employees (i.e., employees who are not classified by such Employer as permanent employees); (b) employees who are actively working for such Employer on a part-time basis, but this exceptions shall not apply in the case of a regular, full-time, active employee of such Employer if and while he is only temporarily working for such Employer on a part-time basis; (c) regular full-time active employees who are not key executives of The Procter & Gamble Company or its subsidiaries. Each employee in an eligible class who has completed six months or more of continuous service on the date of issue shall become eligible for Employee Coverage on that date, and each other employee in an eligible class shall become eligible for Employee Coverage on the date on which he completes six months of continuous service. Anything to the contrary notwithstanding, if an individual is in the employ of or connected with two or more Participant Employers, he shall not be eligible for multiple coverage under this policy, but shall be treated the same as if he were in the employ of or connected with a single Participant Employer; the amount of insurance for which any such individual shall be eligible under this policy shall under no circumstances exceed the amount which would apply if all of the Participant Employers with which he is employed or connected were a single Participant Employer and if the aggregate of the remuneration being paid to him by all such Participant Employers were being paid to him by a single Participant Employer. If any Participant Employer is a partnership, the natural-person partners thereof shall be considered to be employees within the meaning of this policy if and while they are actively engaged in and devoting their time on a substantially full-time basis to the conduct of the business of the partnership. If any Participant Employer is an individual proprietorship, the natural-person proprietor thereof shall be considered to be an employee within the meaning of this policy on the same terms as those applicable to partners of a partnership. B. Effective Dates of Insurance: (1) As to contributory insurance, each employee who makes written request to his Participant Employer for Employee Coverage and agrees to make the required contributions therefor to his Participant Employer is to be insured for Employee Coverage on the date he becomes eligible for Employee Coverage or on the date he makes such request, whichever is later; provided, however, that (a) the Employee Coverage of any employee who makes such written request after thirty-one days from the date he becomes eligible, or who revokes any written request previously made, shall become effective only if and when the Insurance Company gives its written consent; and (b) any employee who is both disabled (i.e., ill or injured) and away from work on the date Employee Coverage is to become effective shall not be insured until he actually returns to work on a full-time basis. (2) As to non-contributory insurance, each employee is to be insured for Employee Coverage on the date he becomes eligible therefor; provided, however, that any employee who is both disabled (i.e., ill or injured) and away from work on the date Employee Coverage is to become effective shall not be insured until he actually returns to work on a full-time basis. Section 4. Changes in Amounts of Insurance The initial amount of insurance for an employee under any Title of this policy shall conform to that provided for his classification. As to contributory insurance, if, for any reason, the terms of any Title of this policy warrant an amount of insurance for any employee greater or less than that for which he is then insured, the amount of his insurance shall be increased or reduced as follows: Any reduction in insurance because of attainment of a specified age or because of retirement shall become effective on the employee's "reduction date"; any other reduction in insurance shall become effective on the date the employee makes a request therefor to his Participant Employer: any increase in insurance shall become effective only in conformity with the terms applicable with respect to the effecting of the initial insurance of employees as set forth in Section 3 of Article I of this policy. As to non-contributory insurance, if, for any reason, the terms of any Title of this policy warrant an amount of insurance for any employee greater or less than that for which he is then insured, the amount of his insurance shall be increased or reduced to the applicable amount as specified in such Title; provided, however, that in any instance in which an employee is both disables (i.e., ill or injured) and not working on the date his insurance would otherwise be increased, the effective date of the increase in insurance shall be deferred until he actually returns to active work on a full-time basis. A retroactive change in an employee's rate of earnings shall be deemed to be effective on the date of the determination of the change in the rate of earnings. If the terms of Title ELIC provide for a reduction in the amount of any employee's insurance under that Title because of attainment of a specified age or because of retirement, no further increases or reduction will be made in the amount of such employee's insurance under that Title because of a change in the employee's classification or because of a change in the Schedule of Insurance in accordance with the terms of this section after the first reduction because of age or retirement becomes effective. Article II-BENEFITS TITLE ELIC-EMPLOYEES' LIFE INSURANCE COVERAGE Section 1. Life Insurance Benefit If an employee shall die while Employee Coverage is in force for the employee, the Insurance Company shall pay, upon receipt of due proof of the death of such employee-to the beneficiary determined in accordance with the terms of this policy-the amount determined in accordance with the terms of this policy. Schedule of Insurance --------------------- Classification Amount of Insurance -------------- ------------------- All employees An amount equal to 100% of the employee's total compensation, the resulting amount, if not an integral multiple of $500 is to be taken to the nearest integral multiple of $500, but in no event shall the amount of insurance be more than $1,000,000 nor less than $4,000. Continuation of Coverage for Retired Employees If an employee, while insured under this Title, becomes retired from the service of a Participant Employer, his employment, for the purposes of this policy, will be continued while the Policyholder continues to make premium payments for such employee's insurance, provided the following requirements are met: The employee retires in accordance with the terms of his Participant Employer's Qualified Pension Plan and will receive pension consideration (other than a deferred vested pension) thereunder. Employees retired prior to January 1, 1981 and eligible only for the amounts of insurance shown in the schedule of insurance below. Schedule of Insurance --------------------- Classification Amount of Insurance -------------- ------------------- All employees An amount equal to 100% of the employee's Annual Rate of Basic Earnings, the resulting amount, if not an integral multiple of $500, to be taken to the nest higher integral multiple of $500, but in no event shall the amount of insurance be more than $400,000 nor less than $4,000. Article III-TERMINATION OF INSURANCE Section 1. Employee Coverage All insurance of any employee under this policy shall terminate at the earliest time specified below: (1) Upon discontinuance of the policy. (2) Immediately when the employee's employment with a Participant employer in the classes of employees eligible for insurance terminates. Cessation of active work by an employee shall be deemed to be termination of his employment, except that (a) in the case of an absence from active work because of sickness or injury, his employment may, for the purposes of insurance under this policy, be deemed to continue until terminated by his Participant Employer, but in no case beyond twelve months from the date such absence from active work started, or (b) in the case of absence of an employee from active work because of temporary lay-off or leave of absence (other than leave for military service), his employment may, for the purposes of insurance under this policy, be deemed to continue until terminated by his Participant Employer but in no case beyond 12 months from the date such lay-off or leave of absence commenced. In the case of any of the exceptions in the foregoing paragraph, the insurance under this policy for such employee shall automatically cease on the date of such termination of his employment by his Participant Employer, as evidenced to the Insurance Company by the Policyholder, whether by notification or by cessation of premium payment on account of such employee's insurance hereunder. Any maximum period of continuation permitted by the foregoing paragraph may be extended by written mutual agreement between the Policyholder and the Insurance Company. In no event may any insurance provided on a contributory basis be continued beyond the end of the period for which the employee has made to his Participant Employer the contributions required. Article IV-PREMIUMS Section 1. PREMIUM RATES EMPLOYEE COVERAGE TABLE OF PREMIUM RATES
Age on Monthly Age on Monthly Age on Monthly Age on Monthly Birthday Premium Birthday Premium Birthday Premium Birthday Premium Nearest Per Nearest Per Nearest Per Nearest Per Beginning $1,000 Beginning $1,000 Beginning $1,000 Beginning $1,000 of the of of the of of the of of the of Policy Year Insurance Policy Year Insurance Policy Year Insurance Policy Year Insurance 15 $ .19 35 $ .32 55 $1.65 75 $ 8.56 16 .20 36 .34 56 1.80 76 9.24 17 .21 37 .36 57 1.97 77 10.00 18 .22 38 .38 58 2.14 78 10.86 19 .23 39 .41 59 2.32 79 11.81 20 .23 40 .45 60 2.51 80 12.83 21 .24 41 .49 61 2.72 81 13.93 22 .24 42 .53 62 2.96 82 15.07 23 .25 43 .58 63 3.21 83 16.26 24 .25 44 .63 64 3.48 84 17.50 25 .25 45 .68 65 3.78 85 18.80 26 .25 46 .74 66 4.11 86 20.16 27 .26 47 .81 67 4.48 87 21.60 28 .26 48 .89 68 4.89 88 23.13 29 .26 49 .97 69 5.34 89 24.79 30 .27 50 1.06 70 5.81 90 26.62 31 .27 51 1.16 71 6.32 91 28.68 32 .28 52 1.26 72 6.84 92 31.03 33 .29 53 1.38 73 7.38 93 33.75 34 .30 54 1.51 74 7.95 94 36.95 95 40.98
For annual, semi-annual, or quarterly premiums multiply the monthly premiums determined from the above table by 11.83, 5.96 or 2.99 respectively. Policy Charge The premium calculated as above shall be increased by a policy charge of $.20 for each $1,000 of insurance in force hereunder at the beginning of the then current policy year for each policy month which occurs during the premium paying period, provided that the policy charge shall not exceed $8.00 in respect of any month. During the first policy year, the policy charge shall be waived and the total premium is subject to a reduction of 35%. Advance Expense Adjustment For the first policy year the total premium, including the policy charge, shall be reduced by the applicable advance expense adjustment indicated below (for annual, semi-annual or quarterly premiums, divide the total premium, including the policy charge by 12, 6, or 8, respectively, before entering this table): Total Monthly Advance Expense Total Monthly Advance Expense Premium Before Adjustment Premium Before Adjustment Advance Expense Advance Expense Adjustment Adjustment Under $125 0% $ 700- 899 26% $125-149 10 900- 1,399 27 150-174 11 1,400- 2,499 28 175-199 13 2,500- 3,999 29 200-224 14 4,000- 7,499 30 225-249 16 7,500-11,999 31 250-299 17 12,000-26,999 32 300-349 19 27,000-59,999 33 350-399 20 60,000-79,999 34 400-449 21 80,000 and over 35 450-499 22 500-549 23 550-599 24 600-699 25 Section 2. Premium Calculations and Experience Rating Portion Applicable to Employee Coverage Only: At the beginning of each policy year the Insurance Company shall compute an aggregate annual, semi-annual, quarterly, or monthly premium, as the case may be, based upon the frequency of premium payments then agreed upon between the Policyholder and the Insurance Company, which shall be the sum of the individual premiums for the employees then insured, calculated according to the table of premium rates then in effect hereunder on the basis of the ages (nearest birthday) then attained by the employees insured for Employee Coverage and their respective amounts of insurance. From such computation an average premium rate shall be determined by dividing the aggregate premium by the aggregate amount of insurance then in force, and such average premium rate shall remain in effect, and shall be used in calculating premiums under this policy, until a new one is determined. Each premium due during the policy year shall be calculated by multiplying the amount of insurance in force at the beginning of the premium-paying period by the average premium rate in effect on the premium-due date. Portion Having General Application: The premium due under this policy on any premium-due date shall be the sum of the premium charges for the insurance provided under the Titles then forming a part of this policy. If premiums are payable monthly, any insurance becoming effective shall, except as hereinafter provided, be charged for from the first day of the policy month coinciding with or next following the date the insurance takes effect, and premium charges for any insurance terminated shall cease as of the first day of the policy month coinciding with or next following the date the insurance terminates. If premiums are payable quarterly, semi-annually, or annually, premium charges or credits for a fraction of a premium-paying period required by the foregoing terms of this paragraph shall, except as hereinafter provided, be made on a pro-rate basis for the number of policy months between the date premium charges commence or cease and the end of the premium-paying period. If this policy is amended to provide additional coverage, or any increase in coverage, and if the effective date of such amendment is other than the first day of a premium-paying period, a pr-rate premium in respect of such coverage shall become due and payable as of such date, to cover the period beginning on that date and ending immediately prior to the commencement of the next premium-paying period. The premium charges for the insurance under any Title forming a part of this policy shall be calculated at the premium rates specified above, subject to such reductions or increases as the Insurance Company shall determine to be warranted by experience or by reason of any change in factors bearing on the risk assumed. Each reduction or increase in any premium rate shall be made by written notification to the Policyholder by the Insurance Company. No experience reduction or increase in premium rates shall become effective less than twelve months after the effective date of this policy. As of the end of any policy year the Insurance Company may declare an experience credit in such amount as the Insurance Company shall determine. The amount of each experience credit declared by the Insurance Company shall be refunded to the Policyholder, or upon request by the Policyholder, a part or all of the experience credit shall be applied against the payment of any premium or premiums. If at any time the aggregate of employee contributions theretofore made for group insurance shall exceed the aggregate of premiums theretofore paid for group insurance (after giving effect to any experience credits allowed the Policyholder), such excess shall be applied by the Policyholder for the sole benefit of employees, but the Insurance Company shall not be obliged to see to the application of any such excess. Instead of the method of calculation of premiums above provided, premiums may be calculated by any method which produces approximately the same total amount of premiums and is mutually agreeable to the Insurance Company and the Policyholder. Section 3. Premiums, How Payable Premiums shall be payable by the Policyholder in advance at the Home Office of the Insurance Company or to its authorized agent. The first premium under this policy shall be due and payable as of the date of issue to cover the period beginning on that date and ending on the last day of the first policy month and thereafter premiums shall be due and payable on the first day of each policy month. The Policyholder may change the frequency of premium payments as of any premium-due date with the written consent of the Insurance Company. Section 4. Grace Period A grace period of thirty-one days following the due-date shall be allowed the Policyholder for the payment of each premium. Article V-DISCONTINUANCE OF POLICY The Policyholder may discontinue this policy with respect to all employees of any one or more Participant Employers, and any Participant Employer may discontinue this policy with respect to all employees of such Employer, by giving to the Insurance Company written notice stating when, after the date of such notice, such discontinuance shall become effective; but no such discontinuance shall become effective with respect to employees of any Participant Employer during any period for which a premium has been paid to the Insurance Company with respect to employees of such Employer. The Insurance Company reserves the right to discontinue this policy. (a) with respect to all employees of any Participant Employer, at any time after the end of the grace period allowed for payment of a premium with respect to employees of such Employer which has not been paid, by giving written notice to the Policyholder stating when such discontinuance shall become effective; (b) either in its entirety or with respect to all employees of any Participant Employer, at any time, by giving to the Policyholder written notice stating the date as of which such discontinuance shall become effective but such date shall not be one that occurs earlier than thirty-one days after the date of such notice unless mutually satisfactory to the Policyholder and the Insurance Company. If this policy discontinues with respect to any of the employees of a Participant Employer, the Policyholder and the Employer shall be jointly and severally liable to the Insurance Company for all unpaid premiums for the period during which this policy was in force with respect to any of the employees of such Employer. Article VI-MISCELLANEOUS PROVISIONS Section 1. Assignment No assignment of any present or future right or interest, under this policy by the Policyholder or by any Participant Employer shall bind the Insurance Company without its written consent. Neither the employees nor their beneficiaries may assign any of the insurance or other benefits under this policy; provided, however, that if the Policyholder and the Insurance Company consent in writing, the employee or his assignee may, as a gift, transfer by absolute and irrevocable assignment all of his incidents of ownership and all of his other right, title, and interest, both present and future, in and to insurance under this policy, including but not limited to the right to designate and change the beneficiary, the right to make any requisite contributions to maintain the insurance in force under this policy, and the right to exercise any conversion privilege provided under this policy. No assignment shall be binding upon the Insurance Company unless the assignment meets the foregoing conditions and requirements, is in form approved by the Insurance Company, and it or a duplicate thereof is filed with the Insurance Company at its Home Office in Hartford, Connecticut. Neither the Insurance Company nor the Policyholder guarantees or assumes any obligation as to the validity, sufficiency, or effect of any assignment. Section 1-A. Claims of Creditors Except so far as may be contrary to the laws of any state having jurisdiction in the premises, the insurance and other benefits under this policy shall be exempt from execution, attachment, garnishment, or other legal or equitable process, for the debts of the employees or their beneficiaries. Nothing in this section, however, shall be construed so as to prejudice the right of any person to receive payment pursuant to the beneficiary provisions of this policy. Section 2. Employees' Certificates The Insurance Company will issue to the Policyholder, for delivery to each insured employee, an individual certificate setting forth a summary of the essential features of the insurance coverage to which the employee is entitled and stating to whom the benefits are payable, together with a statement of the "Conversion Privilege" set forth in Section 7 of this Article. Section 3. Data Required-Clerical Error-Misstatements-Non-Discrimination The Policyholder and each of the Participant Employers shall furnish to the Insurance Company all information which the Insurance Company may reasonably require with regard to any matters pertaining to this policy. All documents, books, and records which may have a bearing on the insurance or premiums shall be open for inspection by the Insurance Company at all reasonable times during the continuance of this policy and until the final determination of all rights and obligations under this policy. Neither clerical error (whether by the Policyholder, by any of the Participant Employers, or by the Insurance Company) in keeping any records pertaining to the insurance, nor delays in making entries thereon, shall invalidate insurance otherwise validly in force or continue insurance otherwise validly terminated, but upon discovery of such error or delay an equitable adjustment of premiums shall be made. If any relevant facts pertaining to any individual to whom the insurance relates shall be found to have been misstated, an equitable adjustment of premiums shall be made, and if such misstatement affects the existence or the amount of insurance, the true facts shall be used in determining whether insurance is in force under the terms of this policy and in what amount. No refund of any premium or portion thereof, whether paid in error or otherwise, shall be made for any period commencing earlier than (a) three months prior to the date on which evidence that the particular refund should be made is received by the Insurance Company, or (b) the beginning of the policy year in which such evidence is received, whichever method (a) or (b) above would result in the greater refund. In connection with the administration of this policy, the Policyholder and the Participant Employers shall act so as not to discriminate unfairly between individuals in similar situations at the time of such action, but the Insurance Company shall be entitled to rely upon any action of the Policyholder or of any of the Participant Employers without being obliged to inquire into the circumstances thereof. Section 4. Entire Contract-Incontestability This policy and the application of the Policyholder, a copy of which is attached to this policy, constitutes the entire contract. All statements made by the Policyholder or by the insured employees shall be deemed representations and not warranties. No written statement made by any insured employee shall be used by the Insurance Company in any contest unless a copy of the instrument containing the statement is or has been furnished to such employee or to his beneficiary. The validity of this policy shall not be contested, except for non-payment of premiums, after it has been in force for two years from its effective date. No statement made by any insured employee relating to his insurability shall be used by the Insurance Company in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such employee's lifetime nor unless such statement is contained in a written instrument signed by him. This policy is issued in the non-participating department of the Insurance Company. This policy may be changed at any time or times by written agreement between the Insurance Company and the Policyholder, without the consent of any employee or other person. All agreements made by the Insurance Company are signed by an executive officer of the Insurance Company. No other person can change or waive any of the terms of this policy or make any agreement which shall be binding upon the Insurance Company. Failure to insist upon compliance with any provision of this policy at any given time or times on under any given set or sets of circumstances shall not operate to waive or modify such provision, or in any manner whatsoever to render it unenforceable, as to any other time or times or as to any other occurrence or occurrences, whether the circumstances are, or are not, the same. Section 5. Contribution By Employee Contributory Insurance: The maximum amount that any employee shall be required or permitted to contribute toward the cost of his contributory insurance, if any, under Title ELIC shall be $0.60 per month for each One Thousand Dollars of such insurance hereunder. Non-contributory Insurance: No insured employee shall be required or permitted to contribute toward the cost of non-contributory insurance, if any hereunder. Section 6. Beneficiary and Mode of Settlement Beneficiary An employee, whether or not employment has terminated, may designate a beneficiary, and from time to time change his designation of beneficiary, by written request filed at the headquarters of the Policyholder or at the Home Office of the Insurance Company. Such designation or change shall take effect as of the date of execution of such request, whether or not the employee be living at the time of such filing, but without prejudice to the Insurance Company on account of any payments made by it before receipt of such request at its Home Office. Any amount payable to a beneficiary to a beneficiary shall be paid to the beneficiary or beneficiaries designated by the employee, except that, unless otherwise specifically provided by the employee in his beneficiary designation: (a) if more than one beneficiary is designated, the designated beneficiaries shall share equally; (b) if any designated beneficiary predeceases the employee, the share which such beneficiary would have received if surviving the employee shall be payable equally to the remaining designated beneficiary or beneficiaries, if any, who survive the employee; and (c) if no designated beneficiary survives the employee, or if no beneficiary has been designated, payment shall be made to the employee's widow or widower, if surviving the employee; if not surviving the employee, in equal shares to the employee's children who survive the employee; if none survives the employee, to the employee's parents, equally, or to the survivor; if neither survives the employee, in equal shares to the employee's brothers and sisters who survive the employee; or, if non survives the employee, to the employee's executors or administrators. Mode of Settlement The whole or any part of any amount payable under Article II shall be paid in accordance with that one of the following Methods (A) or (B) that shall be elected by the employee, or in accordance with such other method of settlement as shall be elected by the employee and agreed to by the Insurance Company. An employee may revoke any such election at any time before payments commence upon written notice filed at the Home Office of the Insurance Company. An employee may change any such election at any time but only with the consent of the Insurance Company. In any case where the amount of any death benefit is payable in one sum, the beneficiary may, after the death of the employee but before payment is made, elect that the whole or any part of any death benefit be payable in accordance with Method (B) below, or in accordance with such other method of settlement as shall be elected by the beneficiary and agreed to by the Insurance Company. A beneficiary may change or revoke any such election but only with the consent of the Insurance Company. METHOD (A): Payment in one sum. This method shall be automatic if no other method is elected. METHOD (B): Payment in monthly installments of any fixed amount specified in the election (which shall be not less than $5.00 per month per $1,000 so payable nor less than $10.00 per month regardless of the amount so payable), until the amount so payable with interest is exhausted. With respect to each such election of this method, the rate of interest to be allowed on the unpaid balance shall be determined by the Insurance Company but shall in no case be less than the guaranteed rate of interest provided for with respect to optional methods of settlements under the individual policies of life insurance being issued by the Insurance Company on the date of such election. At the death of the payee to whom payment is being made under this method, the unpaid balance shall be paid in one sum to the executors or administrators of the payee, unless otherwise provided in the election. If any payee for any benefit payment under this policy is a minor or is, in the opinion of the Insurance Company, legally incapable of giving a valid receipt and discharge for such benefit payment, the Insurance Company shall have the option, unless claim has been made by a duly appointed guardian or committee of such payee, of paying such benefit in monthly installments of not over $100 the first month and not over $50 a month thereafter to the person or persons who, in the opinion of the Insurance Company, are caring for and supporting such payee. Payment made in accordance with the terms of this paragraph shall be a complete discharge of the Insurance Company's obligations to the extent of such payment, and the Insurance Company shall not be obligated to see to the application of any payment so made. Section 7. Conversion Privilege Employee Coverage If an employee's insurance under this policy, or any amount of such insurance, ceases because of termination of employment or because of termination of membership in the class or classes of employees eligible for insurance under this policy, the employee shall be entitled to have issued to him by the Insurance Company, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided written application for the individual policy shall be made, and the first premium thereon paid, to the Insurance Company within thirty-one days after such termination, and provided further that: (a) the individual policy shall be on any of the forms, other than term insurance, that shall be selected by the employee from among the forms then customarily issued by the Insurance Company at the age and for the amount applied for: (b) the individual policy shall be in an amount equal to or, at the option of the employee, an amount less than the amount of the employee's life insurance which ceases under this policy because of such termination; (c) the premiums payable under the individual policy shall be at the Insurance Company's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which the employee then belongs, and to his age (nearest birthday) attained on the effective date of the individual policy; and (d) any individual policy issued under the terms of this section shall take effect at the end of the thirty-one day period during which application for the individual policy may be made. If this policy discontinues, whether by its terms or by agreement between the Insurance Company and the Employer, and whether with respect to all employees or with respect to any class or classes of employees insured hereunder, any employee insured under this policy at the date of such discontinuance who has been continuously insured for group life insurance by the Insurance Company under this policy for at least five years prior to such discontinuance shall, if his insurance this policy, or any portion of such insurance, ceased because of such discontinuance, be entitled to the conversion privilege as though his employment had terminated on the date of such discontinuance, except that the amount of the individual policy shall not exceed the smaller of (a) the amount of the employee's life insurance which ceases under this policy because of such discontinuance, less the amount of any life insurance for which he is or becomes eligible within thirty-one days after such discontinuance under any group policy, whether issued by the Insurance Company or by any other insurer, and (b) $2,000. If an employee dies during the thirty-one day period within which he is entitled to have an individual policy issued to him in accordance with this section and before any insurance such individual policy has become effective, the amount of life insurance which the employee is entitled to have issued to him under such individual policy shall be payable as a claim under Title ELIC, whether or not application for the individual policy or the payment of the first premium therefor has been made. When any insurance becomes effective under an individual policy issued under the conversion privilege, it shall be in exchange for all privileges and benefits under the group policy. Aetna Life Insurance Company Hartford, Connecticut (Herein called the Insurance Company) Group Policy No.: GC-363417 Policy Delivered In: Ohio State of other jurisdiction) Policyholder: THE PROCTER & GAMBLE COMPANY Policy Signed: November 11, 1981 To Take Effect: October 1, 1981 This policy is a contract between the Policyholder and the Insurance Company and shall be construed in accordance with the law of the jurisdiction in which it is delivered. In consideration of the payment by the Policyholder of premiums in the amounts and at the times hereinafter provided, the Insurance Company hereby agrees with the Policyholder, subject to the terms appearing on this and the following pages of this policy (including, if any, the riders, endorsements, and amendments, to this policy which are signed by the Insurance Company), to pay benefits in accordance with the terms of this policy. The obligations and the rights of all persons under this policy shall be determined in accordance with the terms of this policy. In witness whereof the Insurance company has signed this policy at Hartford, Connecticut. Aetna Life Insurance Company /S/LEWIS R MERVINE /S/WILLIAM O. BAILEY Secretary President Registrar Countersigned at Cincinnati, Ohio, April 13, 1982 by ___________________________ Licensed Resident Agent GROUP INSURANCE POLICY INDEX Page Article I--GENERAL PROVISIONS Article II--BENEFITS Article III--TERMINATION OF INSURANCE Article IV--PREMIUMS Article V--DISCONTINUANCE OF POLICY Article VI--MISCELLANEOUS PROVISIONS COPY OF APPLICATION ARTICLE I -- GENERAL PROVISIONS Section 1. General Definitions As used in this policy: (a) The term "Employee Coverage means only insurance as to an employee. (b) The term "non-occupational disease" means a disease which does not arise, and which is not caused or contributed to by, or as a consequence of, any disease which arises, out of or in the course of any employment or occupation for compensation or profit; however if evidence satisfactory to the Insurance Company is furnished that the individual concerned is covered as an employee under any workmen's compensation law, occupational disease law, or any other legislation of similar purpose, or under the maritime doctrine of maintenance, wages, and cure, but that the disease involved is one not covered under the applicable laws or doctrine, then such disease shall, for the purposes of this policy, be regarded as a "non-occupational disease". (c) The term "non-occupational injury" means an accidental bodily injury which does not arise, and which is not caused or contributed to by, or a as a consequence of, any injury which arises, out of or in the course of any employment or occupation for compensation or profit. (d) The term "date of issue" means the date this policy took effect shown on Page 1 of this policy. (e) Commencing January 1, 1982, "policy anniversaries" shall be deemed to occur on said date, and on the same day in each succeeding year. (f) The term "policy year" means a period commencing with the date of issue of this policy, or a policy anniversary, and terminating immediately prior to the next succeeding policy anniversary. (g) A "policy month" shall commence on the date of issue. Each "policy month" thereafter shall be deemed to commence on the first day of the calendar month. (h) The term "physician" or "surgeon" means only a legally qualified physician. (i) "Contributory insurance" means insurance for which an employee makes written request to his Participant Employer and agrees to make the required contributions to his Participant Employer. "Non-contributory insurance" is insurance for which an employee does not make written request nor contribute toward the cost. This policy provides insurance on the non-contributory. (j) The term "Added Compensation" means the total amount of additional remuneration: 1) Awarded by the Board of Directors of The Procter & Gamble Company, the Compensation Committee of The Procter & Gamble Company or the Procter & Gamble Chief Executive Officers and heads of the various subsidiary companies, and 2) Charges against the Executive Additional Remuneration Reserve, but excluding any supplemental awards which are made because of the limits imposed by the Employee Retirement Income Security Act of 1974 on credits to the Profit Sharing Trust Plan. (k) The term "Total Compensation" means the sum of (a) base salary plus, (b) added compensation. Section 2. List of Participant Employers An Employer shall be eligible to be included in this list as a Participant Employer if such inclusion is not contrary to any applicable insurance law of the state or other jurisdiction in which this contract is delivered. The Policyholder may act for and on behalf of any and all of the Employers included in this list in all matters pertaining to this contract, and every act done by the Policyholder, agreement made between the Insurance Company and the Policyholder, or notice given by the Insurance Company to the Policyholder or by the Policyholder to the Insurance Company, shall be binding on all such Employers. Any eligible Employer may be added to this list as a Participant Employer only upon written agreement between the Policyholder and the Insurance Company and upon terms mutually agreeable to them. An Employer shall be eliminated automatically from this list when this contract is discontinued with respect to employees of such Employer, as provided for elsewhere in this contract, but termination of an Employer's status as a Participant Employer shall not relieve such Employer from any obligations to the Insurance Company with respect to the time such Employer was a Participant Employer under this contract. This list shall, at any time, consist of those Employers which have been included under this contract by written agreement between the Policyholder and the Insurance Company, and which have not been removed, in accordance with the above terms of this section. Section 3. Employees to be Insured (I) Employee Coverage A. Employees Eligible: All employees of a Participant Employer shall be eligible for Employee Coverage except employees in the following classes: (a) temporary or substitute employees (i.e. employees who are not classified by such Employer as permanent employees); (b) employees who are actively working for such Employer on a part-time basis, but this exception shall not apply in the case of a regular, full-time, active employee of such Employer if and while he is only temporarily working for such Employer on a part-time basis; (c) regular full-time employees who are not key executives of The Procter & Gamble Company or its subsidiaries. Each employee in an eligible class who has completed six months or more of continuous service on the date of issue shall become eligible for Employee Coverage on that date, and each other employee in an eligible class shall become eligible for Employee Coverage on the date on which he completes six months of continuous service. Anything to the contrary notwithstanding, if an individual is in the employ of or connected with two or more Participant Employers, he shall not be eligible for multiple coverage under this policy, but shall be treated the same as if he were in the employ of or connected with a single Participant Employer; the amount of insurance for which any such individual shall be eligible under this policy shall under no circumstances exceed the amount which would apply if all of the Participant Employers with which he is employed or connected were a single Participant Employer and if the aggregate of the remuneration being paid to him by all such Participant Employers were being paid to him by a single Participant Employer. If any Participant Employer is a partnership, the natural-person partners thereof shall be considered to be employees within the meaning of this policy if and while they are actively engaged in and devoting their time on a substantially full-time basis to the conduct of the business of the partnership. If any Participant Employer is an individual proprietorship, the natural-person proprietor thereof shall be considered to be an employee within the meaning of this policy on the same terms as those applicable to partners of a partnership. B. Effective Dates of Insurance: (1) As to contributory insurance, each employee who makes written request to his Participant Employer for Employee Coverage and agrees to make the required contributions therefor to his Participant Employer is to be insured for Employee Coverage on the date he becomes eligible for Employee Coverage or on the date he makes such request, whichever is later; provided, however, that (a) the Employee Coverage of any employee who makes such written request after thirty-one days from the date he becomes eligible, or who revokes any written request previously made, shall become effective only if and when the Insurance Company gives its written consent; and (b) any employee who is both disabled (i.e., ill or injured) and away from work on the date Employee Coverage is to become effective shall not be insured until he actually returns to work on a full-time basis. (2) As to non-contributory insurance, each employee is to be insured for Employee Coverage on the date he becomes eligible therefor; provided, however, that any employee who is both disabled (i.e., ill or injured) and away from work on the date Employee Coverage is to become effective shall not be insured until he actually returns to work on a full-time basis. Section 4. Changes in Amounts of Insurance EMPLOYEE COVERAGE A retroactive change in an employee's rate of earnings or classification will not result in a retroactive change in coverage. Any change in coverage will be effective on the date the change in earnings or classification is determined. This section will not apply to any reduction due to attainment of a specified age. Any such rules appear in Title ADDC, if included in this policy. If any rule which reduces an employee's Principal Sum due to attainment of a specified age is changed so that an employee is eligible for an increased amount of Principal Sum by reason of such change, such increase will become effective only if the Insurance Company gives its written consent. As to contributory insurance: If, at any time, the employee's rate of earnings or classification changes so as to warrant level of benefits different from that for which the employee is then covered, the amount of his coverage will be changed as follows: Any reduction under Title ADDC, if included in this policy, will become effective on the date the employee requests his Participant Employer to make the reduction. Any other reduction will become effective automatically. Any increase will become effective automatically; provided, however, that the employee may, within thirty-one days of the date an increase would become effective under Title ADDC, if included in this policy, refuse such increase. If an employee refuses such increase, then no increase in the employee's amount of Principal Sum by reason of a change in his rate of earnings or classification will become effective until the Insurance Company gives its written consent. If, at any time, any schedule or level of benefits is changed so as to warrant an amount different from that for which the employee is then covered, the amount of his coverage will be increased or decreased automatically, However, the employee may, within thirty-one days of the date an increase would become effective under Title ADDC, if included in this policy, refuse such an increase. The employee may at any thereafter elect that the increase become effective; it will only be effective if the Insurance Company gives its written consent. In any instance in which an employee is both disabled (i.e., ill or injured) and not working on the date his coverage would otherwise be increased, the effective date of the increase shall be deferred until he actually returns to active work on a full-time basis. As to non contributory insurance: If, for any reason and at any time, the employee's rate of earnings or classification, any schedule or any level of benefits is changed so as to warrant an amount different from that for which the employee is then covered, the amount of his coverage will be increased or decreased automatically as warranted. However, in any instance in which an employee is both disabled (i.e., ill or injured) and not working on the date his coverage would otherwise be increased, the effective date of the increase in insurance shall be deferred until he actually returns to active work on a full-time basis. Article II --BENEFITS TITLE ADDC--ACCIDENTAL DEATH AND DISMEMBERMENT COVERAGE Section 1. Accidental Death and Dismemberment Benefit Schedule of Insurance --------------------- Classification Principal Sum -------------- ------------- All employees An amount equal to 100% of the employees total compensation, the resulting amount, if not an integral multiple of $500 is to be taken to the nearest integral multiple of $500, but in no event shall the amount of insurance (Principal Sum) be more than $1,000,000 nor less than $4,000. If an employee suffers a bodily injury caused by an accident and as a direct result of such injury and, to the exclusion of all other causes, sustains within not more than ninety days after the date of the accident which causes such injury any of the losses listed in the Table of Benefits in this section, then, provided: (a) the injury occurs while insurance is in force for the employee under this Title; and (b) the loss resulting from the injury is not excluded from coverage in accordance with Section 2 of this Title; the insurance Company shall, subject to the terms of this policy, pay a benefit in the amount provided for such loss in said Table of Benefits but in no case shall more than the Principal Sum be paid for all losses sustained by an employee through any one accident. Table of Benefits ----------------- In the Event of Loss of The Benefit will be - ----------------------- ------------------- Life The Principal Sum A Hand One-Half The Principal Sum A Foot One-Half The Principal Sum An Eye One-Half The Principal Sum Loss means, with regard to a hand or foot, actual severance through or above the wrist or ankle joint; with regard to an eye, the entire and irrecoverable loss of sight of such eye. Section 2. Exclusions The insurance provided under this Title does not include, and no payment shall be made for, any loss resulting from any injury caused or contributed to by, or as a consequence of, any of the following excluded risks, even though the proximate or precipitating cause of loss is accidental bodily injury: (a) bodily or mental infirmity; or (b) disease, ptomaines or bacterial infections, of any kind, except a pus-forming infection attributable solely to and occurring as the proximate result of an injury not excluded by this Title; or (c) medical or surgical treatment, except a loss covered by this Title which results directly from a surgical operation made necessary solely by an injury not excluded by this Title and performed within ninety days after the date of such injury; or (d) suicide or any attempt there at (whether sane or insane), or intentionally self-inflicted injury; or (e) war or any act of war (whether war is declared or not). Section 3. Beneficiary An employee, whether or not employment has terminated, may designate a beneficiary, and from time to time change his designation of beneficiary, by written request filed at the headquarters of the Policy holder or at the Home Office of the Insurance Company. Such designation or change shall take effect as of the date of execution of such request, whether or not the employee be living at the time of such filing, but without prejudice to the Insurance Company on account of any payments made by it before receipt of such request at its Home Office. Any amount payable to a beneficiary shall be paid to the beneficiary or beneficiaries designated by the employee, except that, unless otherwise specifically provided by the employee in his beneficiary designation; (a) if more than one beneficiary is designated, the designated beneficiaries shall hare equally; (b) if any designated beneficiary predeceases the employee, the share which such beneficiary would have received if surviving the employee shall be payable equally to the remaining designated beneficiary or beneficiaries, if any, who survive the employee; and (c) if no designated beneficiary survives the employee, or if no beneficiary has been designated, payment shall be made to the employee's widow or widower, if surviving the employee; if not surviving the employee, in equal shares to the employee's children who survive the employee; if none survives the employee, to the employee's parents, equally, or to the survivor; if neither survives the employee, in equal shares to the employee's brothers and sisters who survive the employee; or, if none survives the employee, to the employee's executors or administrators. Article III--TERMINATION OF INSURANCE Section 1. Employee Coverage All insurance of any employee under this policy shall terminate at the earliest time specified below: (1) Upon discontinuance of the policy. (2) Immediately when the employee's employment with a Participant Employer in the classes of employees eligible for insurance terminates. Cessation of active work by an employee shall be deemed to be termination of his employment, except that (a) in the case of an absence from active work because of sickness or injury, his employment may, for the purposes of insurance under this policy, be deemed to continue until terminated by his Participant Employer but in no case beyond twelve months from the date such absence from active work started, or (b) in the case of absence of an employee from active work because of temporary lay-off or leave of absence (other than leave from military service), his employment may, for the purposes of insurance under this policy, be deemed to continue until terminated by his Participant Employer but in no case beyond the end of the policy month following the policy month in which such lay-off or leave of absence commenced. In the case of any of the exceptions in the foregoing paragraph, the insurance under this policy for such employee shall automatically cease on the date of such termination of his employment by his Participant Employer, as evidenced to the Insurance Company by the Policyholder, whether by notification or by cessation of premium payment on account of such employee's insurance hereunder. Any maximum period of continuation permitted by the foregoing paragraph may be extended by written mutual agreement between the Policyholder and the Insurance Company in each individual case. In no event may any insurance provided on a contributory basis be continued beyond the end of the period for which the employee has made to his Participant Employer the contributions required. Article IV--PREMIUMS Section 1. Premium Rates The premium rates are as follows, but are subject to change as hereinafter provided: The premium rates shown are for a period of one month. Title ADDC- Premium per $1,000 of Principal Sum: $ .02 Section 2. Premium Calculations and Experience Rating The premium due under this policy on any premium-due date shall be the sum of the premium charges for the insurance provided under the Titles then forming a part of this policy. The premium charges for the insurance under any such Title shall be calculated at the Premium Rates specified above, subject to such reductions or increases as the Insurance Company shall determine to be warranted by experience or by reason of any change in factors bearing on the risk assumed. Each reduction or increase in any premium rate shall be made by written notification to the Policyholder by the Insurance Company. No experience reduction or increase in premium rates shall become effective less than twelve months after the effective date of this policy. As of the end of any policy year the Insurance Company may declare an experience credit in such amount as the Insurance Company shall determine. The amount of each experience credit declared by the Insurance Company shall be refunded to the Policyholder, or upon request by the Policyholder, a part or all of the experience credit shall be applied against the payment or any premium or premiums. If at any time the aggregate of employee contributions theretofore made for group insurance shall exceed the aggregate of premiums theretofore paid for group insurance (after giving effect to any experience credits allowed the Policyholder), such excess shall be applied by the Policy holder for the sole benefit of employees, but the Insurance Company shall not be obliged to see to the application of any such excess. If premiums are payable monthly, any insurance becoming effective shall, except as hereinafter provided, be charged for from the first day of the policy month coinciding with or next following the date the insurance takes effect, and premium charges for any insurance terminated shall cease as of the first day of the policy month coinciding with or next following the date the insurance terminates. If premiums are payable quarterly, semi-annually, or annually, premium charges or credits for a fraction of a premium-paying period required by the foregoing terms of this paragraph shall except as hereinafter provided, be made on a pro-rata basis for the number of policy months between the date premium charges commence or cease and the end of the premium-paying period. If this policy is amended to provide additional insurance, or any increase in insurance and if the effective date of such amendment is other than the first day of a premium-paying period, a pro-rata premium in respect of such insurance shall become due and payable as of such date, to cover the period beginning on that date and ending immediately prior to the commencement of the next premium-paying period. Instead of the method of calculation of premiums above provided, premiums may be calculated by any method which produces approximately the same total amount of premiums and is mutually agreeable to the Insurance Company and the Policyholder. Section 3. Premiums, How Payable Premiums shall be payable by the Policyholder in advance at the Home Office of the Insurance Company or to its authorized agent. The first premium under this policy shall be due and payable as of the date of issue to cover the period beginning on that date and ending on the last day of the first policy month and thereafter premiums shall be due and payable on the first day of each policy month. Section 4. Grace Period A grace period of thirty-one days following the due-date shall be allowed the Policyholder for the payment of each premium. Article V--DISCONTINUANCE OF POLICY The Policyholder may discontinue this policy with respect to all employees of any one or more Participant Employers, and any Participant Employer may discontinue this policy with respect to all employees of such Employer, by giving to the Insurance Company written notice stating when, after the date of such notice, such discontinuance shall become effective; but no such discontinuance shall become effective with respect to employees of any Participant Employer during any period for which a premium has been paid to the Insurance Company with respect to employees of such Employer. The Insurance Company reserves the right to discontinue this policy, (a) with respect to all employees of any Participant Employer, at any time after the end of the grace period allowed for payment of a premium with respect to employees of such Employer which has not been paid, by giving written notice to the Policyholder stating when such discontinuance shall become effective; (b) either in its entirety or with respect to all respect to all employees of any Participant Employer, at any time, by giving to the Policyholder written notice stating the date as of which such discontinuance shall become effective but such date shall not be one that occurs earlier than thirty-one days after the date of such notice unless mutually satisfactory to the Policyholder and the Insurance Company. If this policy discontinues with respect to any of the employees of a Participant Employer, the Policyholder and the Employer shall be jointly and severally liable to the Insurance Company for all unpaid premiums for the period during which this policy was in force with respect to any of the employees of such Employer. Article VI--MISCELLANEOUS PROVISIONS (Continued) Section 5. Time Limit on Certain Defenses No claim for loss incurred or commencing after two years from the effective date of the insurance coverage with respect to which claim is made shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss, had existed prior to the effective date of the coverage with respect to which claim is made. Section 6. Proofs of Loss Written proof covering the occurrence, the character, and the extent of loss must be furnished to the Insurance Company, in case of claim for loss under Title WBC, if included in this policy, within 90 days after the termination of the period for which the Insurance Company is liable, and in case of claim for any other loss, within 90 days after the date of such loss. Failure to furnish such proof within the time required shall not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity of the employee, later than one year from the time proof is otherwise required. No action at law or in equity shall be brought to recover on this policy after the expiration of three years after time written proof of loss is required to be furnished. Section 7. Payment of Claims Benefits payable under this policy for any loss with be paid immediately upon receipt of due written proof of loss. The benefit, if any, for loss of life will be payable in accordance with the beneficiary designation and the provisions respecting such payment. All other benefits are payable to the insured employee. If any benefit under any Title of this policy shall be payable to the estate of the insured employee, or to an insured employee who is a minor or otherwise not competent to give a valid release, the Insurance Company may pay such benefit up to an amount not exceeding $1,000 to any relative by blood or connection by marriage of the insured employee who is deemed by the Insurance Company to be equitably entitled thereto. Any payment made by the Insurance Company in good faith pursuant to this provision shall fully discharge the Insurance Company to the extent of such payment. Subject to any written direction of the insured employee in a request for insurance or otherwise, all or a portion of the benefits, if any, provided by this policy on account of hospital, nursing, medical, or surgical service may, at the Insurance Company's option, and unless the insured employee requests otherwise in writing not later than the time proof of loss is filed, be paid directly to the hospital or person rendering such services, but it is not required that the service be rendered by a particular hospital or person. The Insurance Company at its own expense shall have the right and opportunity to examine the person of any individual whose injury or sickness is the basis of claim when and as often as it may reasonably require during the pendency of a claim hereunder. [Page 12 is missing] Section 8. Conversion Privilege (Continued) (4) the converted policy may include a provision whereby the Insurance Company may request information at any premium due date of such policy of any individual covered thereunder as to whether he is then covered by another policy of hospital or surgical expense insurance or hospital service or medical expense indemnity corporation subscriber contract providing similar benefits or is then covered by a group contract or policy providing similar benefits or is then provided with similar benefits required by any statute or provided by any welfare plan or program--if any such individual is so covered or so provided and fails to furnish the details of such coverage when requested, the benefits payable under the converted policy may be based on the hospital, surgical, or medical expenses actually incurred after excluding expenses to the extent they are payable under such other coverage or provided under such statute, plan, or program; and (5) the Insurance Company may decline to issue the converted policy (i) if application therefor is not made in the jurisdiction in which this group policy is delivered or in some other jurisdiction in which the Insurance Company is authorized to issue or deliver the converted policy; or (ii) if termination of insurance under said Titles of this policy takes place prior to the date the employee concerned has been insured thereunder for at least three months; and (6) the Insurance Company may decline (i) to cover an individual who t is desired be included in the converted policy, if the insurance under said Titles of this policy terminated because such individual had exhausted the maximum benefit available to him under said Titles; and (ii) to cover an individual who it is desired be included in the converted policy for any one or more of the benefits included in the converted policy, if the provision of such benefit or benefits, as the case may be, is prohibited by any application for such policy is made; and (7) the premium payable under the converted policy on its effective date shall be at the Insurance Company's then customary rate applicable to the class of risk to which the insured individual under the converted policy belongs, to the age of such insured individual and to the form and amount of insurance under the converted policy; and (8) any converted policy issued under the terms of this section shall take effect as of the date of termination of insurance under said Titles of this policy. Any converted policy issued pursuant to this section shall be in exchange for all privileges and benefits under said Titles with respect to the person or persons named in the converted policy. EX-11 3 EXHIBIT (11)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Computation of Earnings Per Share ---------------------------------- Dollars and Share Amounts in Millions Years Ended June 30 ----------------------------------------------------------------------------- NET EARNINGS PER SHARE 1992 1993 1994 1995 1996 - ---------------------- ------ ------ ------ ------ ------ Net Earnings/(Loss) $1,872 $(656) $2,211 $2,645 $3,046 Deduct preferred stock dividends 94 102 102 102 103 ------- ------- ------- ------- ------- Net Earnings/(Loss) Applicable to Common Stock 1,778 (758) 2,109 2,543 $2,943 - ---------------------------------------------- Average number of common shares outstanding 677.4 680.4 683.1 686.0 686.3 Per Share - --------- Net earnings before prior years' effect of accounting changes $0.25 Prior year effect of accounting changes $(1.36) Net Earnings/(Loss) per share $2.62 $(1.11) $3.09 $3.71 $4.29 NET EARNINGS PER SHARE ASSUMING FULL DILUTION - ------------------------------- Net Earnings/(Loss) $1,872 $(656) $2,211 $2,645 $3,046 Deduct differential -- preferred vs. common dividends 60 57 51 45 39 -------- -------- -------- -------- ------- Net Earnings/(Loss) Applicable to Common Stock 1,812 (713) 2,160 2,600 3,007 - ---------------------------------------------- Average number of common shares outstanding 677.4 680.4 683.1 686.0 686.3 Add potential effect of: Exercise of options 7.5 7.2 6.0 8.5 9.9 Conversion of preferred stock 55.2 54.7 53.9 52.8 51.9 -------- -------- -------- -------- ------- Average number of common shares outstanding, assuming full dilution 740.1 742.3 743.0 747.3 748.1 Per Share Assuming full dilution - -------------------------------- Net earnings before prior years' effect of accounting changes $0.29 Prior year effect of accounting changes $(1.25) Net Earnings/(Loss) $2.45 $(0.96) $2.91 $3.48 $4.02
EX-12 4 EXHIBIT (12)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Computation of Ratio of Earnings to Fixed Charges ------------------------------------------------- Millions of Dollars Years Ended June 30 -------------------------------------------------------------- 1992 1993 1994 1995 1996 ------ ------ ------ ------ ------ EARNINGS AS DEFINED - ------------------- Earnings from operations before income taxes after eliminating undistributed earnings of equity method investees $2,870 $ 294 $3,307 $4,022 $4,695 Fixed charges, excluding capitalized interest 584 631 569 571 576 -------- -------- -------- -------- ------- TOTAL EARNINGS, AS DEFINED $3,454 $ 925 $3,876 $4,593 $5,271 ====== ====== ====== ====== ====== FIXED CHARGES, AS DEFINED - ------------------------- Interest expense $ 510 $ 552 $ 482 $ 488 $ 484 1/3 of rental expense 74 79 87 83 92 ------- ------- ------- ------- ------- 584 631 569 571 576 Capitalized interest 25 25 19 23 9 ------- ------- ------- ------- ------- TOTAL FIXED CHARGES, AS DEFINED $ 609 $ 656 $ 588 $ 594 $ 585 ====== ====== ====== ====== ====== RATIO OF EARNINGS TO FIXED CHARGES 5.7 1.4 6.6 7.7 9.0
EX-13 5 Exhibit (13) ------------ Annual Report to shareholders. (Pages 1-15 and 20-43) (Picture top of Page 1 from left to right: John E. Pepper, Chairman of the Board and Chief Executive; Durk I. Jager, President and Chief Operating Officer) TO OUR SHAREHOLDERS: Ally Heeter, our "cover girl" for this year's Annual Report, is one of America's Dirtiest Kids. But her mom, Jenni, doesn't mind. "I don't even think twice about dirty clothes," she told us "because I know that Tide will get them clean." That's the kind of confidence that has made Tide America's favorite laundry detergent for nearly 50 years -- and it's the same confidence that consumers have in literally dozens of P&G brands. Consumers trust our brands and have made many of them market leaders in countries around the world. It's that depth and breadth of leadership across categories and across geographies -- that drives your Company's growth. That was certainly the case in 1995/96, a year of continued strong progress. Shipments, sales and earnings all reached record levels. Each of our four regions contributed to this growth by achieving record volume levels, and our four largest product categories built share globally. (For additional perspective on worldwide and regional financial results, please see the Financial Review that begins on page 20.) We know the leadership of our brands will continue to be the principal driver of P&G's growth in the years ahead, so we want to use this year's Annual Report to talk about leadership -- the leadership goals we've set for your Company and the leadership strengths we've relied on to build many of the world's most successful brands. SETTING OUR SIGHTS ON GROWTH We have set three growth goals for the Company. 1. DOUBLE UNIT VOLUME IN 10 YEARS. Consider what this means: we'll need to build as much business in a decade as we've built in the 159 years since your Company was founded. A stretching goal, to be sure, but one we are striving to achieve with continued, fast-paced geographic expansion and extraordinary levels of innovation in both existing and new businesses. 2. ACHIEVE SHARE GROWTH IN THE MAJORITY OF OUR CATEGORIES. The growth potential of this goal is enormous. A one percentage point share increase in a major global category such as Hair Care could mean more than $100 million in additional sales. Multiply that across the many categories in which we compete, and you can see the opportunity for growth. 3. DELIVER TOTAL SHAREHOLDER RETURN (TSR) THAT RANKS US OVER TIME AMONG THE TOP THIRD OF OUR PEER GROUP. This is an especially challenging goal. Despite the challenge, we consider this an important goal because TSR -- stock price appreciation plus dividends --- is the best measurement of our overall financial performance. We've been among the top third for the past three-, five-, 10-year periods, and we will stay focused on achieving that level of performance in the years ahead. (Top of Page 2 - Cumulative Consolidated Operating Cash Flow (in billions of dollars) Trend Chart for 1994 - 3.6, 1995 - 7.2 and 1996- 11.4 and 1994-96 Primary Uses of Cash Pie Chart for Capital Expenditures, Dividends Paid, Acquisitions, Net Debt Reduction and Treasury Purchases) (Center of Page 2 - Picture of Ariel, Pantene, Always and Pampers with the following caption: "These are just a few of P&G's established global brands.) PREPARING TO WIN IN THE 21ST CENTURY We know these are the right goals. Broad share growth in our categories and steady, significant gains in volume assure us that our brands are meeting the needs of consumers around the world. Meeting the needs of consumers is the best way to generate leadership shareholder returns. And, achieving the growth we're targeting -- while adhering to the core values that have always distinguished P&G -- is the best way to attract and retain the talented men and women who are the producers of P&G's long-term growth and health. We know also that to achieve these goals, we'll need to be better than we've ever been, because the competitive environment we're entering will be tougher than it's ever been. There will be little if any room for marginal performers. What will set tomorrow's winners and losers apart? The winners will be strong global businesses. They will put tremendous pressure on costs. They'll bring innovations to market at a much faster pace than today -- and not just in one or two countries at a time, but worldwide. As a result, they won't only be the share leaders of their categories. They will lead in every other measure that matters, as well: sales growth, volume growth, geographic presence, profitability. This environment exists already, but it will intensify in the years ahead. And as that happens, we'll need to work even harder in a number of important areas. FIRST, WE WILL NEED TO EXPAND OUR OWN LINEUP OF GLOBAL BRANDS. We have a solid foundation to build on. For example, in BRANDWEEK magazine's 1995 ranking of "Super Brands," P&G led the list of companies in the categories in which we compete. BRANDWEEK included 17 P&G brands among its list of Super Brands. The next closest competitor had eight. And the BRANDWEEK ranking was based only on U.S. sales. Though the U.S. remains P&G's largest single market, the real breadth and depth of our business is reflected in the list of our brands that are truly global. Pantene Pro-V hair care products, for example. Always and Whisper feminine protection products. Ariel detergent, Pampers diapers, Vicks cough and cold products. Brands that are winning the loyalty of consumers around the world. And we are adding to the list. (Top of Page 3 - Net Earnings per Employee Trend Chart for 1994-$22,912, 1995 - $26,663 and 1996 - $29,573 and Total Shareholder Return Trend Chart for Ten Year - 18.7%, Five Year - 19.8% and Three Year - 25.1%) (Center of Page 3 - Picture of Head & Shoulders, Old Spice and Olay with the following caption: "These are a few of P&G's potential global brands.") Tide detergent, for instance. The U.S. market leader for nearly 50 years. Now also the leader in Canada, Saudi Arabia, Morocco. And moving toward leadership in Russia and China. Head & Shoulders shampoo. This brand has been the U.S. market leader virtually since it was introduced in 1961. Today, it is quickly becoming a global market leader, as well, with growing businesses in nearly 40 countries. And there are many others, like Oil of Olay and Old Spice, that are on their way to becoming strong global brands. SECOND, WE WILL NEED TO STRENGTHEN OUR ABILITY TO DELIVER BREAKTHROUGH PRODUCT INNOVATION. There will be a far greater premium on leading-edge product technology. Brands that fall into the trap of merely shifting value with "me-too" line extensions will quickly fall behind the market leaders that create value with fundamentally better, new products. In fact, a hallmark of tomorrow's leading brands will be their ability not just to improve existing products but to create entirely new product categories with innovative technologies. P&G has a long history of being among the technology pacesetters. Today, we have more than 250 proprietary technologies in the marketplace, technologies that provide a clear-cut advantage for brands like Bounty paper towels. And, we are accelerating our pace of innovation. In 1995, for example, P&G filed for more than 17,000 patents worldwide -- a 35% increase over 1994 and a 60% increase over 1993. THIRD, WE WILL NEED TO ACHIEVE AN EXTRAORDINARY LEVEL OF COST EFFECTIVENESS. The strongest brands of the 21st century will respond to consumers' increasing demands for good value. In fact, the best of these brands will push consumers' value expectations even higher by continually resetting the standard for delivering the highest possible quality at the lowest possible cost. We're working hard to ensure that our brands are among those that set the standard for good value. We are driving out costs that don't add value and investing the savings in those things that do. For example, as we reported in last year's Letter to Shareholders, the Company has reduced the total delivered costs (TDC) of products by more than one dollar per case since 1990/91 -- $1.6 billion in total. And in 1995/96, we continued to tightly control TDC spending. At the same time, we made major investments in new product initiatives, such as the upcoming Pampers Baby-Dry launch -- which you can read about on page 12 -- and in a number of new manufacturing plants, including important new facilities in China, Brazil and Thailand. We've made good progress, but we know we'll need to do even better. We will need breakthrough efficiencies in virtually every part of the organization. (Center of Page 4 - Picture of Bounty, Pringles and Folgers with the following caption: These flagship brands are leading P&G into the 21st Century.") FOURTH, WE WILL NEED TO WORK MORE EFFECTIVELY WITH RETAIL AND WHOLESALE CUSTOMERS TO BUILD CONSUMER LOYALTY. This is truly a breakthrough opportunity. Until recently, manufacturers, retailers and wholesalers rarely saw one another as business partners. In many cases, we saw one another as adversaries. As a result, we created inefficiencies in the supply chain that increased consumers' prices and eroded loyalty to brands and stores alike. The competitive environment ahead of us will reward manufacturers and retailers who reject this obsolete way of doing business and work together to increase consumer value. This is a new global marketplace reality, and we are moving fast to get ahead of the curve. The most far-reaching of our efforts is our involvement in an industry initiative called Efficient Consumer Response (ECR). We are working closely with retailers and wholesalers to fundamentally change the way consumer products are introduced, marketed, shipped and sold to consumers. We anticipate that, industrywide, ECR will generate more than $30 billion in annual savings in North America alone -- and we are helping to implement similar changes in Europe, Latin America and Asia, as well. By investing our savings to increase consumer value, we will build consumer loyalty and make our brands even stronger. BOUND AND DETERMINED TO WIN These implications for our business are challenging, to be sure, but they come with extraordinary opportunities for growth -- opportunities that we believe P&G is uniquely positioned to capture. Why? Because the winners of the 21st century will be the companies that are best at building leadership brands. And building brands consumers love is what we do best. As we noted at the beginning of this letter, our organization turned in an excellent performance in 1995/96, and we are committed -- bound and determined, in fact -- to continue that performance in the years to come . . . with leadership brands built and nurtured by an organization of leaders around the world. On that note we'd like to thank the men and women of P&G for their excellent performance this past year and thank you for your support of our Company. /S/ JOHN E. PEPPER John E. Pepper Chairman and Chief Executive /S/DURK I. JAGER Durk I. Jager President and Chief Operating Officer August 8, 1996 (Top of Page 5 - Caption "Building Leadership Brands" with a Pyramid Picture listing "The Best People," "Loyal Consumers," "Good Value," "Superior Products," and "Great Brands." Also a picture of the following brands: Always, Pampers, Tide and Pringles.) (The rest of Page 5 shows a consumer shopping with the following caption: "Turn the page to learn more about how P&G builds many of the world's most successful leading brands.") (Top of Page 6 - Pie Chart showing Total U.S. Wash Loads for All Other Brands, Other P&G Brands and Tide with the following caption: U.S. consumers use Tide to clean nearly 12 billion wash loads - 33 million tons of clothes - every year. Also a picture of a 1946 Tide box with the following caption: "Tide, the first heavy-duty synthetic laundry detergent, is introduced in 1946 as 'the Washday Miracle.' Tide radically changes the way people wash their clothes and quickly establishes itself as America's favorite laundry brand.) (The rest of Page 6 shows consumers at the laundromat using Tide.) (Top of Page 7 has a picture of a 1988 Tide box with the following caption: "After more than 40 years, Tide is still the best-selling laundry brand in the U.S. Key to its long success is its ability to continually reinvent the laundry category. Tide with Bleach, for example, does what no other detergent can do. It combines a heavy-duty detergent and full-strength color-safe bleach in one product." Also a picture of a 1996 Tide box with the following caption: "Tide celebrates its 50th birthday with a series of breakthrough innovations. On the heels of its revolutionary carezyme technology, which helps keep clothes looking like new, the brand's Ultra 2 initiative sets a new standard for soil and stain removal.") (Center of Page 7 has different Tide packages with the following caption: "Tide is the 6th largest of all brands sold in U.S. grocery stores.") GREAT BRANDS Great brands always stand for something -- something that consumers care about, something the brand delivers better than any competitor, something that can last and is consistent over time. This "something" is what we think of as a brand's "equity." It is the fundamental reason that consumers purchase any given brand on a sustained basis. Tide, P&G's single largest brand, is one of the best examples of how to build and maintain a strong equity. Since its introduction in 1946, Tide has been known as the gold standard: "If it's got to be clean, it's got to be Tide." Winning such a high degree of consumer confidence is tough to do, but Tide has been doing it for generations. In fact, Tide has been the number 1 laundry brand in the U.S. for nearly half a century and today, as this great brand celebrates its 50th birthday, its market share is the highest it's been since 1952. Most important, Tide's future is bright. In 1996 we are rolling out Tide Ultra 2 -- a new generation of Tide that represents the latest of more than 60 performance improvements since the brand was introduced. Ultra 2, like virtually every Tide innovation that preceded it, resets the standard for cleaning, with even better stain removal and advanced color care technologies. In the process, this breakthrough innovation reinforces Tide's equity as "the best clean you can get." Building great brands that consumers trust is a difficult and never-ending challenge -- but it's one of the things that P&G does best. Another source of our leadership, as you'll see on the next page, is the outstanding performance of our products. (Top of Page 8 - Picture of Always With Wings with the following caption: "Always invented the unique "wing" design that helps hold the pad in place and, as a result, provides better protection." Also a Picture of Always Dri-Weave Topsheet with the following caption: "Always patented Dri-Weave Topsheet helps keep moisture in the pad and away from the skin, providing cleaner, drier protection.") (Center of Page 8 - Picture of different Always packages with the following caption: "P&G feminine protection products hold nearly 1,000 patents worldwide.") SUPERIOR PRODUCTS Great brands earn consumers' trust by meeting their needs -- better than anyone else -- with truly superior products. P&G's Always and Whisper feminine protection brands are good examples. Feminine hygiene habits vary widely around the world -- based on culture, clothing and available products. Still, the basic needs in this category are very much the same. Women worldwide need protection and the cleaner, drier feeling that a superior pad provides. In one country after another, Always and Whisper have been first to market with truly breakthrough products that meet these needs. The combination of our proprietary "wings" design and our patented Dri-Weave technology have helped make P&G the global leader of this $6 billion business today. And we are expanding our brands' leadership with new products, as well. Always with Side Channels, introduced in the U.S. in 1995, directs moisture away from the edges and toward the center of the pad for added protection. And Alldays with Duo-Active technology, introduced in Germany and France in 1995, has driven the growth of our pantiliner business in Europe. The product's core locks in wetness and actually absorbs odor. Other pantiliners use perfume to mask odor. Innovative products like these are the cornerstones of all our leading brands -- and are principal drivers of P&G's leadership in one category after another. The third element of our leadership, as you'll read on page 10, is our consistent ability to deliver the best possible value to consumers around the world. (Top of Page 9 - Picture of Whisper Curve with the following caption: "Whisper Curve, launched in Japan in 1995, is designed to fit a woman's body better than previous products. The product's 'fusion bonded' channels prevent bunching and reduce leakage, delivering substantially improved performance." Also a Pie Chart showing All Other Brands and P&G with the following caption: "One-fourth of all the feminine protection pads and pantiliners sold worldwide are Procter & Gamble products.) (The rest of Page 9 shows a mother and daughter talking about the use of Always as a feminine protection pad.) (Top of Page 10 - Picture of Pringles in a number "1" with the following caption: "Consumer demand--in more than 40 countries--has made Pringles P&G's number one export brand." Also a picture of a stack of individual Pringles with the following caption: "One Product. Pringles leverages its growing global scale and builds brand equity by staying focused on a consistent product formulation and the most popular snack flavors. In fact, Pringles is able to meet 80% of worldwide consumer demand with only six flavors.") (The rest of Page 10 shows three young people with a canister of Pringles and a rugby ball.) (Top of Page 11 - Picture of one package of Pringles with the following caption: "No matter where in the world you buy Pringles, you'll find it in the same familiar can. Pringles' ability to maintain just one basic package design not only reaps substantial cost savings but reinforces the brand's growing global equity, as well." Also a picture of a boy looking at a Pringles canister with stars coming out of it with the following caption: "One Message. Pringles advertising is another area in which the brand achieves a high level of cost effectiveness while building consumer loyalty. The proven 'Once you pop, you can't stop' campaign has helped grow Pringles' business around the world, from Chicago to London to Tokyo.") (Center of Page 11 - Picture of Sunny Delight, Crisco, Jif and Folgers with the following caption: "90% of P&G's Food and Beverage brands grew share this year.") GOOD VALUE It's important to have great brands with a lineup of superior products. But even these cornerstone elements won't build a leading brand over time unless consumers feel it represents a good value -- a fair price for a superior product. Consequently, we work hard to keep our prices down by keeping our costs low. Our Food and Beverage business is a good example. Five years ago, this business was struggling, with profits below the Company average -- despite a strong lineup of brands, including Folgers coffee, Crisco Oil and Jif peanut butter. We needed a breakthrough to realize our potential in this business. We achieved that breakthrough, in part, with relentless cost control. We knew we were spending more than competitors and that, if we could lower our costs dramatically, we'd free our brands to compete on the strength of their quality, value and equity with consumers -- a prescription for leadership. That is exactly what happened. Our cost control efforts provided a strong foundation for our Food and Beverage brands to grow profitably. Pringles, for example, achieved breakthrough savings in manufacturing, product and package costs -- savings we then invested in strong marketing and value pricing initiatives. The business impact has been tremendous. In the past four years, Pringles has more than doubled its worldwide volume and, today, is one of P&G's fastest growing global brands. Similar success stories -- great brands providing superior products at a good value -- can be found throughout our Company. Consumers trust our brands and that trust is the foundation of consumer loyalty. But preserving their loyalty is a never-ending challenge, as our Pampers story on page 12 illustrates. (Top of Page 12 - Picture of Pampers Premium with the following caption: "Better Diapers. Pampers Premium is a new 'breathable' diaper with revolutionary side panels that allow air to pass through to baby's skin. Pediatricians know that this is important to skin health." Also a picture of Pampers Unisex Baby-Dry with the following caption: "Simpler Choices. Unisex Baby-Dry diapers use a newly designed core technology that concentrates absorbency where both boys and girls need it most, making gender-specific Pampers obsolete.") (Center of Page 12 - Picture of three Pampers packages with the following caption: "Pampers has more than a 70% share of eight markets.") LOYAL CONSUMERS Loyal consumers rely on their favorite brands week in and week out. They don't have to worry whether they're getting the best deal because they know the brands they love deliver the best products at a good value every day. This kind of loyalty is hard to earn and it can be easily lost if consumer confidence is eroded. For example, the disposable diaper category has become so complex that many consumers walk away unsure of whether they've gotten the best value -- or even the right product! They're forced to choose between so many different sizes, genders and features that they become frustrated and confused. Pampers, which is celebrating its 35th birthday in 1996, is working hard to end this confusion. With the introduction of Pampers Baby-Dry in the U.S. and Canada this fall -- part of P&G's biggest diaper initiative in a decade - -- the brand is redefining the way consumers shop for diapers. New breakthrough absorbency technology on Pampers Baby-Dry makes gender-specific Pampers obsolete. This move not only makes it simpler to find the right product, it frees up shelf space in stores that can now be used to provide a full range of large-count packages in all sizes for the first time. As a result, parents will be able to buy better-performing diapers -- and select the right diaper more easily -- while also having a wider selection of money-saving, large-count packs in every size from which to choose. All our brands look for ways to provide the kind of bold leadership that Pampers is providing. And it's no surprise, because as you'll hear from three of our employees on the following pages, leadership is a way of life at P&G. (Top of Page 13 - Picture of Pampers Jumbo with the following caption: "More Convenience. An expanded range of large-count packs of Pampers, which had been previously unavailable in many sizes, better meets consumers' usage needs. Jumbo-size packs are now available on all sizes of Pampers and Luvs in the U.S." Also a picture of the Pampers 35 year logo with the following caption: "As Pampers celebrated its 35th anniversary, P&G's U.S. diaper business achieved its highest level of volume growth in a decade.") (The rest of Page 13 shows a mother with her baby and a package of Pampers sitting next to them.) (Top of Page 14 - A book entitled "Built to Last: Successful Habits of Visionary Companies," authors James C. Collins and Jerry I. Porras with the following caption: "P&G understands the importance of constantly developing talent so as to never face gaps in succession at any level, and therefore to preserve its core throughout the Company." Also a picture of Clarence Hall, Ivorydale Technician Leader with the following caption: "My ability to impact the business directly -- every day, in whatever way is necessary -- is greater today than at any time in my 30-year career with P&G.") (The rest of Page 14 shows Mr. Hall and another employee working with Zest.) (Top of Page 15 - A picture of Cindy Moseley, Ivorydale Reliability Manager with the following caption: "I don't spend time inspecting other people's work. Instead, I work with people -- technician leaders and their teams -- who need direction, not inspection. That enables me to have far more impact than I ever expected." Also a picture of Toufic Waked, Ivorydale Power and Controls Manager with the following caption: "The great benefit of driving leadership responsibility down to every level in the organization is continuity. Most of our technician leaders will spend their career at a single P&G plant. And that continuity breeds mastery -- which is fundamental to the speed and excellence today's business environment requires.") (Center of Page 15 - Book entitled "The 100 Best Companies to Work for in America," author Robert Levering and Milton Moskowitz with the caption: "P&G is regularly ranked as a top employer in the U.S. and around the world.") THE BEST PEOPLE Leadership is a way of life at P&G because it comes naturally to the men and women who keep our business growing around the world. We take full advantage of the leadership qualities of our people by creating a business culture in which P&G leaders can thrive. An example is the "high performance" environment in which many of our people work. At P&G plants, such as our Ivorydale Beauty Care plant in Cincinnati, Ohio, the traditional lines dividing technicians and managers have been essentially erased. Everyone in the organization is empowered to make decisions . . . empowered to lead. "We place tremendous emphasis on teamwork at our plant," says Clarence Hall, a technical leader at Ivorydale. "Everyone at every level and in every function understands what we are all responsible for building the business. If something needs to be changed, or can be improved, we're empowered to make the change. That empowerment has created a culture steeped in ownership and breakthrough thinking." This kind of everyday, yet extraordinary, leadership is crucial, because it is the most important factor in our ability to build leadership brands . . . and to keep your Company growing in the years and decades ahead. (Top of Page 20 - Picture of the globe.) (Center of Page 20 - Net Sales and Net Earnings Trend Charts for 1994, 1995 and 1996.) FINANCIAL REVIEW RESULTS OF OPERATIONS The Company's financial results for its year ended June 30, 1996 reflect record levels of unit volume, net sales, and net earnings, with profit margins reaching the highest level in over 45 years. Results for the year reflect the Company's strategy to provide superior products at better value to consumers, while pursuing simplification of product lines and marketing strategies to improve efficiency and build profitability. Worldwide net earnings for the year were $3,046 million, a 15% increase over the prior year of $2,645 million. Current year results include settlement of the Bankers Trust lawsuit, sale of the Company's share of a health care joint venture, a reserve for estimated losses on a supply agreement entered into as part of the previous divestiture of the commercial pulp business, and early adoption of FASB Statement No. 121, covering recognition of impairment of long-lived assets. Excluding these items, net earnings for the current year were $3,031 million. The prior year results included a $50 million after-tax charge for costs related to the earthquake in Kobe, Japan. Excluding the unusual items in both years, net earnings grew 12%. New earnings per share for the current year were $4.29, a 16% increase over the prior year amount of $3.71. Excluding the unusual items in both years, net earnings per share grew 13%. Worldwide net sales for the current year were $35,284 million, up 5%. Worldwide unit volume increased 7%, with all geographic regions achieving record volume levels. Worldwide gross margin for the current year was 41.2% compared to 41.6% in the prior year. The current year was impacted by difficult economic conditions in Mexico. Additionally, the early adoption of FASB Statement No. 121, which provides new guidance on recognition of impaired assets, impacted the cost of products sold by approximately $50 million. Worldwide marketing, research, and administrative expenses were $9,707 million compared to $9,677 million in the prior year. This represents 27.5% of sales, compared with 28.9% in the prior year, and reflects the emphasis on cost control, as well as benefits of the restructuring program. Additionally, expenses were reduced in certain markets as the Company expanded its value pricing and simplification of trade terms initiatives, which are designed to provide better value to consumers, to countries outside the United States. Other income, net of expense, contributed $338 million before-tax in the current year, including: a $120 million benefit to reverse the remaining reserve previously established for two interest rate swap contracts following settlement of a lawsuit against Bankers Trust; a $185 million gain on the sale of the Company's 50% share of a health care joint venture to its venture partner; and a $230 million charge to increase the reserve for estimated losses on a supply agreement entered into as part of the previous sale of the Company's commercial pulp business. In the prior year, other income was $244 million before-tax and contained a $77 million charge related to the Kobe, Japan earthquake. Top of Page 21 the following statement by John E. Pepper, Chairman and Chief Executive: "This was a year of continued strong progress. Shipments, sales and earnings all reached record levels. Each of our four regions contributed to this growth through record volume levels and excellent cost control. Importantly, our four largest categories built share globally.") (Center of Page 21 - Operating Margin Trend Chart for 1994, 1995 and 1996.) Net earnings margin increase to 8.6% in the current year from 7.9% in the prior year, including the effects of unusual items in both years. Excluding the unusual items, it was 8.6% in the current year, up from 8.0% in the prior year, reflecting unit volume growth and continued emphasis on cost control through the Company's simplification and standardization programs. The following provides perspective on the year ended June 30, 1995 versus the prior year: Worldwide net earnings increased 20% to $2,645 million, including a $50 million after-tax charge for costs associated with the earthquake in Kobe, Japan. Net earnings for 1994 were $2,211 million, including a $102 million after-tax charge related to two interest rate contracts. Excluding the unusual items in both periods, net earnings increased by 17%. Worldwide net sales for 1995 increased 10% to $33,482 million. The sales growth was driven by year-to-year unit volume growth of 10%, with acquisitions contributing approximately 2%. More favorable exchange rates positively impacted net sales by 2%, but the effect was offset by lower pricing in certain markets. The decline in worldwide gross margin from 42.9% in 1994 to 41.6% in 1995, was primarily due to higher green coffee bean costs, net of related pricing. Higher raw material prices, most importantly pulp, more than offset the incremental benefits of restructuring activities and other cost reduction programs during 1995. The Company's gross margin trends were also affected by changes in promotional policies. Specifically, from 1993 to 1995, the Company's value pricing initiative reduced list prices by approximately $1 billion (excluding coffee). Worldwide marketing, research, and administrative expenses were 28.9% of sales in 1995, down from 30.9% in 1994. This reflects the benefits of cost control efforts, as well as an incremental benefit from restructuring actions, which more than offset increased research and development costs. Other income, net of expense, was $244 million before-tax in 1995, which included a $77 million charge related to the Kobe, Japan earthquake. The 1994 amount of $158 million contained a $157 million charge to establish a reserve related to two interest rate contracts with Bankers Trust. Net earnings margin increased to 7.9% in 1995 from 7.3% in 1994, including the effect of unusual items in both years. Excluding the unusual items, net earnings margin increased to 8.0% in 1995 from 7.6% in 1994. FINANCIAL CONDITION Cash flow from operations was $4,158 million, $3,568 million and $3,649 million in 1996, 1995, and 1994 respectively. Generally, operating cash flow provided the primary source of funds to finance operating needs and capital expenditures. (Top of Page 22 - Net Sales By Business Segment Pie Chart -- 30% - Laundry & Cleaning; 29% Paper; 20% - Beauty Care; 12% Food & Beverage; 8% - Health Care and 1% - Corporate) (Center of Page 22 - Dividends Per Share Trend Chart for 1992, 1993, 1994, 1995 and 1996.) Cash and cash equivalents were fairly stable from June 30, 1995, following a decline of $345 million in the prior year. Importantly, in the current year $331 million was transferred to investment securities. Under the share repurchase program initiated in 1995, current year purchases were $432 million compared to $114 million in the prior year. The Company is authorized to purchase up to 6 million shares annually to mitigate the dilutive impact of management compensation programs. The Company recently announced its intention to repurchase additional outstanding shares of up to $1 billion during 1997. Funds for the repurchase program will come primarily from existing cash balances and operating cash not needed for the business. Capital expenditures were $2,179 million in 1996, $2,146 million in 1995, and $1,841 million in 1994. Over 65% of current year expenditures were related to the Laundry and Cleaning and Paper businesses, reflecting capacity expansions and technological advances. Capital expenditures are expected to increase during the upcoming year, reflecting the planned expansions associated with Olean, a recently approved fat substitute, additional paper capacity, and other planned capacity increases. Funds for these activities generally are provided from operations. Common share dividends grew 14% to $1.60 per share in 1996, compared to $1.40 and $1.24 in 1995 and 1994, respectively. For the coming year, the annual dividend rate will increase to $1.80 per common share, marking the 41st consecutive year of increased common share dividend payments. Total dividend payments, to both common and preferred shareholders, were $1,202 million, $1,062 million, and $949 million in 1996, 1995, and 1994, respectively. During the year, the Company issued $300 million of 30-year, 6.45% debentures under the shelf registration statement that was filed in 1995. Subsequently, the amount available under the shelf was raised to $725 million. Securities pursuant to this registration statement may be offered as determined appropriate in light of market conditions. Additionally, the Company has the ability to issue commercial paper at favorable rates. Total debt was down $345 million. Exchange effects, primarily the Japanese yen and German mark, reduced total debt by approximately $250 million. During the current year, the Company completed the previously announced program to divest certain non-strategic brands in order to focus organizational resources on the Company's core businesses. The program did not have a significant effect on the Company's results of operations or financial condition. The proceeds from these sales, combined with other asset sales, generated $402 million in cash flow in the current year. Acquisitions, including Millstone Coffee, the global baby and child wipes business of the former Scott Paper Company, and several Latin America laundry and cleaning businesses, reduced cash by $358 million. In prior years, the net amount of cash required for these activities was $313 million in 1995 and $190 million in 1994. The Company expects to continue to divest minor, non-strategic brands as considered appropriate to increase its focus on larger opportunities. (Top of Page 23 - Pie Chart showing Net Sales by Geographic Segment -- North America - 49%, Europe, Middle East & Africa - 33%, Asia - 11%, Latin America - 6% and Corporate - 1%.) (Center of Page 23 - Operating Cash Flow Trend Chart for 1994, 1995 and 1996.) RESTRUCTURING RESERVE STATUS In the year ended June 30, 1993, a reserve of $2.4 billion was established to cover a worldwide restructuring effort to consolidate manufacturing systems and reduce overhead costs. The primary elements of this reserve were costs related to fixed asset disposals and separation-related costs. The restructuring program is expected to be completed during the next year. The cost of completing it is expected to approximate the original estimate. Substantially all of the planned closures have been announced in order to provide advance notice to the employees. With incremental after-tax savings of approximately $100 million in the current year, cumulative restructuring savings have exceeded the $500 million after-tax objective originally established. Total savings, which have been offset to some degree by lower pricing and other actions to build the business, are expected to exceed the original estimate by approximately 20%. The following pages provide perspective on the Company's geographic segments. Additionally, the Corporate segment includes interest income and expense, segment eliminations, and other general corporate income and expense.
Original Balance Balance Balance Reserve 6/30/94 6/30/95 Charges 6/30/96 - ------------------------------------------------------------------------- Separation costs $ 965 $ 596 $ 369 $130 $239 Fixed asset disposals 1,109 960 597 282 315 Other 328 227 194 60 134 - ------------------------------------------------------------------------- $2,402 $1,783 $1,160 $472 $688 - ------------------------------------------------------------------------- Includes separation allowances and related benefits, outplacement services, and personnel relocation costs. Includes closing, environmental remediation and contract termination costs for sites shut down or divested, offset by proceeds from asset sales. No cost element within this category exceeds 5% of the total reserve.
(Top of Page 24 map of North America - Population: 300 million - with the following bullet points "Sales increased 6% to $17.1 billion;" "Unit volume grew 5%, on strength of Laundry and Cleaning and Paper;" and "Region produced record earnings of $2.2 billion.") (Center of Page 24 - North America Net Earnings Trend Chart for 1994, 1995 and 1996.) NORTH AMERICA REGION Excellent results in most established businesses drove the financial performance of the North America region to record levels during the current year. Net sales for the year were $17,133 million, up 6% from the prior year level of $16,233 million. Unit volume increased 5%. Progress during the current year compares to a strong 1995, when net sales increased 7% and unit volume grew 6% over 1994. The region's unit volume progress, combined with more favorable raw material prices and a continued focus on cost control, produced record net earnings of $2,220 million, a 19% increase over the prior year. Excluding the gain on the sale of the Company's share of a health care joint venture, net earnings increased 12%. Prior year net earnings were $1,872 million, which represented a 9% increase over 1994. Excluding the unusual item in the current year, net profit margin for the region was 12.3%, compared to 11.5% and 11.3% in 1995 and 1994, respectively. Laundry and Cleaning drove the region's current year unit volume and earnings growth, delivering over 40% of the total region's unit volume increase. The Laundry and Fabric Conditioner categories contributed heavily to the segment's unit volume increase. In the prior year, Laundry and Cleaning was also a key driver, achieving a unit volume growth rate above the regional average. Tide, which celebrated its 50th anniversary, continued to maintain market leadership, making excellent unit volume and earnings progress in the current year. The strength of the Paper segment also contributed to the region's current year progress, generating 7% unit volume growth despite capacity constraints, which will be addressed in the upcoming year. The Tissue and Towel category delivered strong increases for the second straight year. Following several years of disappointing results due to competitive pressure, the Diaper category responded strongly with increased unit volume. Product initiatives and more favorable pricing related to the pulp price declines in the latter part of the year were key in reversing prior years' trends. Innovation remained a focus, evidenced by the planned introduction of Pampers Baby-Dry, a significant new diaper initiative that is consistent with the Company's simplification strategy to build consumer value. Due to the inherent dependence on pulp, volatility of pulp prices may affect results in this segment, but the impact is directly influenced by pricing policies. The Food and Beverage segment achieved 7% unit volume growth in the current year, led by the Coffee category. Sales growth was less than volume growth due to price reductions made in response to declining green coffee costs. In 1995, unit volume growth in this segment was hampered by the effect of crop freezes in Brazil, but was mitigated by unit volume growth in the Snacks and Juice categories. Overall, the segment achieved excellent earnings progress in the current year due to lower costs in key categories. During the upcoming year, the Food & Beverage segment will move forward on capacity additions for Olean, a recently approved fat substitute, and testing marketing of new snack products. Unit volume in the Beauty Care segment grew 4% during the year, led by the Hair Care category. This growth followed strong results in the prior year, when unit volume for the segment increased above the region average. Net earnings benefited from simplification and other cost reduction efforts, achieving double-digit earnings growth in both the current and prior year. Competitive activity in the Oral Care and Over-the-Counter (OTC) categories contributed to overall unit volume and net sales declines in the Health Care segment. Unit volume was down 3% for the year, compared to a 1% increase in 1995. During the year, the Company divested its share of a health care joint venture that marketed Aleve and Femstat 3. Excluding the effect of this one-time gain, net earnings declined significantly, reflecting the effects of competitive activity, as well as increased investment in the business to regenerate growth in our key brand franchises. We expect to continue a high level of investment in these categories into the next year. Additionally, a high level of investment in research and development in the Pharmaceuticals area continued in the current year, after a sizable increase in 1995 that affected prior year results for this segment. Overall, the Pharmaceuticals business made good progress, with increased sales and earnings in the current year. (Top of Page 25 - Map of Europe, Middle East and Africa - Population: 1.9 billion - with the following bullet points "Sales increased 6% to $11.7 billion;" "Unit volume grew 6%;" and "Cost control and volume growth drove earnings to $767 million, up 14%.") (Center of Page 25 - Europe, Middle East, and Africa Net Earnings Trend Chart for 1994, 1995 and 1996.) EUROPE, MIDDLE EAST, AND AFRICA REGION Coming off a strong comparison period, the Europe, Middle East, and Africa region delivered continued solid progress during the current fiscal year, generating nearly one-third of the Company's total unit volume. Net sales grew 6% to $11,719 million, on comparable unit volume growth. During the prior year, sales increased 13% to $11,017 million on 15% unit volume growth, which included 5% due to acquisitions. Exchange effects in 1995 contributed 6% to net sales growth, but were offset by lower pricing in certain markets. The region's net earnings progress continued in the current year, growing 14% to $767 million. This follows 16% growth in the prior year, with earnings of $675 million. The net profit margin in the current year increased to 6.5% from 6.1% and 6.0%, in 1995 and 1994, respectively. Cost control efforts complemented the region's unit volume growth to deliver these results. Central and Eastern Europe led the region's unit volume progress, achieving 65% growth following an increase of over 40% in 1995. In this geography, P&G held leadership share positions in many key categories, such as Diapers, Laundry, and Hair Care. The excellent volume progress contributed to strong earnings growth, reflecting the economies of scale achieved by early entry into the market. The Middle East and General Export business also achieved excellent unit volume and earnings growth in both the current and prior year, led by the Laundry, Hair Care, and Diapers categories. Western Europe unit volume increased slightly, compared to 13% in the prior year, despite the introduction of value pricing and a simplification of trade terms designed to provide better value to consumers by eliminating inefficient promotion costs. When introduced in the United States, these initiatives negatively impacted short-term results due to trade inventory adjustments, but were significant factors in improved long-term results. The initial introduction in Europe has faced similar challenges, but the Company is achieving the results it had expected and remains committed to this strategy. Notwithstanding the low rate of unit volume growth, earnings increased solidly as the impact of the value pricing initiative was more than offset by cost reduction efforts. Within Western Europe, the Laundry and Cleaning and Beauty Care segments contributed the strongest earnings growth. Initiatives such as the use of the carezyme enzyme and growth of the mid-price segment were factors in the Laundry and Cleaning growth, while the Hair Care category, led by Pantene, was an important driver of the Beauty Care progress. (Top of Page 26 - Map of Asia - Population: 3.1 billion - with the following bullet points "Sales increased 5% to $3.8 billion;" "Unit volume grew 16%;" and "Excellent progress in key markets was important in achieving earnings of $222 million.") (Center of Page 26 - Asia Net Earnings Trend Chart for 1994, 1995 and 1996.) ASIA REGION Results in the Asia region were positive, driven by the excellent progress of developing markets in achieving growth objectives, off-set, in part, by the effect of the economic and competitive environment in Japan. Net sales for the region were $3,790 million, up 5%, as unit volume grew 16%. Sales were reduced 3% by exchange effects. This follows excellent results in the prior year, when net sales grew 15% on unit volume growth of 24%. Exchange effects contributed 7% to 1995 sales. The differential between unit volume and net sales increases reflects the continued growth of lower-priced brands in developing markets. Excluding exchange effects, this differential narrowed in the current year, reflecting favorable pricing and mix effects. The region's net earnings were $222 million, an increase of 12%. Prior year net earnings were $199 million, a 51% increase over 1994. Net profit margin in 1996 was 5.9%, compared to 5.5% and 4.2% in 1995 and 1994, respectively. Margin progress has been achieved by cost control efforts building on strong volume growth in key markets. China led the region's growth, achieving over 50% unit volume growth while maintaining excellent earnings progress. These results reflect the expansion of geographical coverage and share growth in all categories. The Philippines was also a key contributor to the region's progress, with unit volume growing 18%. The Hair Care, Personal Cleansing and Feminine Hygiene categories achieved record shares during the current year. Unit volume was down slightly in Japan, reflecting the competitive market environment and difficult economic climate. Additionally, unfavorable exchange rates and pricing contributed to a decline in sales and net earnings. The diaper business continued to face challenges in maintaining market share and increasing profitability. Profits were also affected by the investment associated with the successful Joy dishwashing liquid launch, which achieved market leadership in just 5 weeks after national introduction. Asia's unit volume growth was also broad based across product segments, with core categories representing approximately 80% of the region's business growing at double-digit rates. Proven success models were expanded into new geographies and new products were introduced, including Pampers Comfort, Pantene Extra Treatment, and Pantene Styling. Crest dentifrice and toothbrushes were introduced into China, the Company's first major introduction of oral care products in the region. (Top of Page 27 - Map of Latin America - Population: 500 million - with the following bullet points "Affected by economic conditions, sales were stable at $2.2 billion;" "Unit volume grew 4%;" and "Boosted by improved profit margins, net earnings were $218 million.") (Center of Page 27 - Latin America Net Earnings Trend Chart for 1994, 1995 and 1996.) LATIN AMERICA REGION Latin America achieved satisfactory results overall, as strong growth in most of the region was largely offset by Mexico, where economic weakness following the December 1994 peso devaluation continued to hamper results. Despite unit volume growth of 4% for the region, net sales were flat at $2,173 million, reflecting the full-year impact of the Mexican peso devaluation. In the prior year, unit volume grew 6%, while sales declined 3%, reflecting the initial effect of the peso devaluation. Net earnings for the region were $218 million, a 2% increase. Prior year net earnings were $213 million, a 36% increase over 1994. Net profit margin for the current year increased to 10.0% from 9.8% and 7.0% in 1995 and 1994, respectively, reflecting aggressive pricing and cost control efforts in the difficult economic environment. Mexico represents the Company's largest operation in the region, and its economic situation presented a significant challenge during the period following the initial peso devaluation. Unit volume was down 6% in the current year, while higher costs and the effect of exchange rate movements also contributed to significantly lower earnings. These results follow a 4% decline in the country's prior year unit volume. The effect of Mexico was balanced by excellent progress in other key countries, as the remainder of the region achieved unit volume growth of 16% in the current year. Venezuela, another large market in the region, achieved solid growth, with a 17% increase in unit volume and excellent earnings growth, following a decline in unit volume in the prior year. The recent devaluation in Venezuela is not expected to significantly impact the Company's 1997 results. FORWARD LOOKING STATEMENT The Company has made and will make certain forward-looking statements in this Annual Report and in other contexts relating to volume growth, increases in market shares, total shareholder return and cost reductions, 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, 2) the ability to improve results despite unusual levels of competitive activity, 3) the successful implementation of value pricing and 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, Russia and the balance of Central and Eastern Europe, 5) obtaining successful outcomes in regulatory and tax matters, 6) the ability to continue technological innovation. 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. RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The consolidated financial statements and the related financial information included in this report are the responsibility of Company management. This responsibility includes preparing the statements in accordance with generally accepted accounting principles and necessarily includes estimates that are based on management's best judgments. To help insure the accuracy and integrity of Company financial data, management maintains a system of internal controls that is 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 extensive and ongoing program of internal audits. These audits are supplemented by a self-assessment program that enables individual organizations to evaluate the effectiveness of their control structure. Careful selection of employees and appropriate divisions of responsibility also are designed to achieve our control objectives. The Company's "Worldwide Business Conduct Manual" sets forth management's commitment to conducting its business affairs in keeping 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 the Company's control environment. 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/ERIK G. NELSON John E. Pepper Erik G. Nelson Chairman and Chief Executive Chief Financial Officer - --------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS DELOITTE & TOUCHE LLP 250 East Fifth Street ________________________ 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, 1996 and 1995 and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1996. 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, 1996 and 1995 and the results of operations and cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. /S/DELOITTE & TOUCHE LLP August 8, 1996 CONSOLIDATED STATEMENT OF EARNINGS (Amounts in Millions Except Per Share Amounts)
Years Ended June 30 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------- NET SALES $35,284 $33,482 $30,385 Cost of products sold 20,762 19,561 17,338 Marketing, research, and administrative expenses 9,707 9,677 9,377 - --------------------------------------------------------------------------------------------------------------- OPERATING INCOME 4,815 4,244 3,670 Interest expense 484 488 482 Other income, net 338 244 158 - --------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 4,669 4,000 3,346 Income taxes 1,623 1,355 1,135 - --------------------------------------------------------------------------------------------------------------- NET EARNINGS $ 3,046 $ 2,645 $ 2,211 - --------------------------------------------------------------------------------------------------------------- NET EARNINGS PER COMMON SHARE $ 4.29 $ 3.71 $ 3.09 FULLY DILUTED NET EARNINGS PER COMMON SHARE $ 4.02 $ 3.48 $ 2.91 DIVIDENDS PER COMMON SHARE $ 1.60 $ 1.40 $ 1.24 AVERAGE COMMON SHARES OUTSTANDING 686.3 686.0 683.1 - --------------------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS (Amounts in Millions Except Per Share Amounts)
June 30 1996 1995 - --------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,074 $ 2,028 Investment securities 446 150 Accounts receivable 2,841 3,010 Inventories Materials and supplies 1,254 1,315 Work in process 210 247 Finished goods 1,666 1,891 Deferred income taxes 598 804 Prepaid expenses and other current assets 1,718 1,397 - --------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 10,807 10,842 PROPERTY, PLANT, AND EQUIPMENT Buildings 3,369 3,364 Machinery and equipment 14,174 13,734 Land 569 641 - --------------------------------------------------------------------------------------------------------- 18,112 17,739 Less accumulated depreciation 6,994 6,713 - --------------------------------------------------------------------------------------------------------- TOTAL PROPERTY, PLANT, AND EQUIPMENT 11,118 11,026 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill 4,175 4,474 Trademarks and other intangible assets 1,095 1,008 - --------------------------------------------------------------------------------------------------------- 5,270 5,482 Less accumulated amortization 989 910 - --------------------------------------------------------------------------------------------------------- TOTAL GOODWILL AND OTHER INTANGIBLE ASSETS 4,281 4,572 OTHER NON-CURRENT ASSETS 1,524 1,685 - --------------------------------------------------------------------------------------------------------- TOTAL ASSETS $27,730 $28,125 - --------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,366 $ 2,891 Accrued and other liabilities 3,851 4,219 Taxes payable 492 568 Debt due within one year 1,116 970 - --------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 7,825 8,648 LONG-TERM DEBT 4,670 5,161 DEFERRED INCOME TAXES 638 531 OTHER NON-CURRENT LIABILITIES 2,875 3,196 - --------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 16,008 17,536 - --------------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Convertible Class A preferred stock, stated value $1 per share (600 shares authorized) 1,886 1,913 Non-Voting Class B preferred stock, stated value $1 per share (200 shares authorized; none issued) - - Common stock, stated value $1 per share (2,000 shares authorized; shares outstanding: 1996 - 685.6 and 1995 - 686.6) 686 687 Additional paid-in capital 862 693 Currency translation adjustments (418) 65 Reserve for employee stock ownership plan debt retirement (1,676) (1,734) Retained earnings 10,382 8,965 - --------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 11,722 10,589 - --------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $27,730 $28,125 - --------------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in Millions/Shares in Thousands)
Common Additional Currency Reserve for Shares Common Preferred Paid-In Translation ESOP Debt Retained Outstanding Stock Stock Capital Adjustments Retirement Earnings Total - --------------------------------------------------------------------------------------------------------------------------------- BALANCE JUNE 30, 1993 681,754 $682 $1,969 $477 $ (99) $(1,836) $ 6,248 $ 7,441 - --------------------------------------------------------------------------------------------------------------------------------- Net earnings 2,211 2,211 Dividends to shareholders: Common (847) (847) Preferred, net of tax benefit (102) (102) Currency translation adjustments 36 36 Treasury purchases (255) (1) (14) (15) Employee plan issuances 1,872 2 57 59 Preferred stock conversions 977 1 (27) 26 0 ESOP debt guarantee reduction 49 49 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE JUNE 30, 1994 684,348 684 1,942 560 (63) (1,787) 7,496 8,832 - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 2,645 2,645 Dividends to shareholders: Common (960) (960) Preferred, net of tax benefit (102) (102) Currency translation adjustments 128 128 Treasury purchases (1,708) (1) (114) (115) Employee plan issuances 2,883 3 105 108 Preferred stock conversions 1,051 1 (29) 28 0 ESOP debt guarantee reduction 53 53 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE JUNE 30, 1995 686,574 687 1,913 693 65 (1,734) 8,965 10,589 - ---------------------------------------------------------------------------------------------------------------------------------- Net earnings 3,046 3,046 Dividends to shareholders: Common (1,099) (1,099) Preferred, net of tax benefit (103) (103) Currency translation adjustments (483) (483) Treasury purchases (5,234) (5) (427) (432) Employee plan issuances 3,257 3 143 146 Preferred stock conversions 976 1 (27) 26 0 ESOP debt guarantee reduction 58 58 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE JUNE 30, 1996 685,573 $686 $1,886 $862 $(418) $(1,676) $10,382 $11,722 - ---------------------------------------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Millions)
Years Ended June 30 1996 1995 1994 - ------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,028 $ 2,373 $ 2,322 - ------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings 3,046 2,645 2,211 Depreciation and amortization 1,358 1,253 1,134 Deferred income taxes 328 181 196 Change in accounts receivable 17 (161) (136) Change in inventories 202 (401) 25 Change in accounts payable (366) 70 218 Change in other operating assets and liabilities (716) (84) (281) Other 289 65 282 - ------------------------------------------------------------------------------------------------- TOTAL OPERATING ACTIVITIES 4,158 3,568 3,649 - ------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Capital expenditures (2,179) (2,146) (1,841) Proceeds from asset sales 402 310 105 Acquisitions (358) (623) (295) Change in investment securities (331) 96 23 - ------------------------------------------------------------------------------------------------- TOTAL INVESTING ACTIVITIES (2,466) (2,363) (2,008) - ------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Dividends to shareholders (1,202) (1,062) (949) Change in short-term debt 242 (429) (281) Additions to long-term debt 339 449 414 Reductions of long-term debt (619) (510) (797) Proceeds from stock options 89 66 36 Treasury purchases (432) (114) (14) - ------------------------------------------------------------------------------------------------- TOTAL FINANCING ACTIVITIES (1,583) (1,600) (1,591) - ------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (63) 50 1 - ------------------------------------------------------------------------------------------------- CHANGE IN CASH AND CASH EQUIVALENTS 46 (345) 51 - ------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,074 $ 2,028 $ 2,373 - ------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE Cash payments for: Interest, net of amount capitalized $ 459 $ 444 $ 487 Income taxes 1,339 1,047 1,225 Liabilities assumed in acquisitions 56 575 65 - -------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
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 that are at least 20% to 50% owned and 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 and in earnings for the related segments. USE OF ESTIMATES: The 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. Although these estimates are based on management's best knowledge of current events and actions the Company may undertake in the future, actual results ultimately may differ from the estimates. ACCOUNTING CHANGES: In 1996, the Company adopted FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires review for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The effect of the adoption was not material. CURRENCY TRANSLATION: The financial statements of subsidiaries outside the U.S. generally are measured using the local currency as the functional currency. Translation adjustments 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 and other transactional exchange losses reflected in net earnings were $28, $38 and $27 for 1996, 1995 and 1994, respectively. 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 exceeds carrying value by approximately $169. GOODWILL AND OTHER INTANGIBLE ASSETS: The cost of intangible assets is amortized, principally on a straight-line basis, over the estimated periods benefited (not exceeding 40 years). The average remaining life is 31 years. The realizability of goodwill and other intangibles is evaluated periodically as 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 on 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. SELECTED OPERATING EXPENSES: Research and development costs are charged to earnings as incurred and were $1,221 in 1996, $1,148 in 1995 and $964 in 1994. Advertising costs are charged to earnings as incurred and were $3,254 in 1996, $3,284 in 1995, and $2,996 in 1994. 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 net earnings per common share. Fully diluted net earnings per common share are calculated to give effect to stock options and convertible preferred stock. 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. Importantly, costs related to research and development now are reported as an element of marketing, research, and administrative expenses. Concurrently, certain component elements of research and development have been reclassified, primarily to administrative expense. Delivery costs now are in cost of products sold. Certain balance sheet elements have been reclassified to separately reflect trade accounts receivable and payable. 2. ACQUISITIONS In 1995, the Company purchased the European tissue business of Vereinigte Papierwerke Schickedanz AG and the prestige fragrance business of Giorgio Beverly Hills, Inc. These purchase acquisitions had an aggregate purchase price of $598. Other acquisitions accounted for as purchases totaled $358, $25, and $295 in 1996, 1995, and 1994, respectively. 3. SUPPLEMENTAL LIABILITY INFORMATION
June 30 1996 1995 - ------------------------------------------------------------------------- ACCRUED AND OTHER LIABILITIES Marketing expenses $ 990 $ 1,135 Restructuring reserves 748 828 Compensation expenses 437 419 Other 1,676 1,837 - ------------------------------------------------------------------------- 3,851 4,219 OTHER NON-CURRENT LIABILITIES Postretirement benefits 1,347 1,402 Pension benefits 879 777 Restructuring reserves - 466 Other 649 551 - ------------------------------------------------------------------------- 2,875 3,196
4. SHORT-TERM AND LONG-TERM DEBT
June 30 1996 1995 - ------------------------------------------------------------------------- SHORT-TERM U.S. obligations $ 465 $ 26 Foreign obligations 231 450 Current portion of long-term debt 420 494 - ------------------------------------------------------------------------- 1,116 970
The weighted average short-term interest rates were 7.4% and 9.5% as of June 30, 1996 and 1995, respectively.
Average June 30 Rate Maturities 1996 1995 - --------------------------------------------------------------------------- LONG-TERM U.S. notes and debentures 7.86% 1997-2029 $1,982 $1,899 U.S. commercial paper 772 922 Foreign obligations 660 1,100 ESOP Series A 8.28% 1997-2004 676 734 ESOP Series B 9.36% 2021 1,000 1,000 Current portion of long-term debt (420) (494) - ---------------------------------------------------------------------------- 4,670 5,161
The long-term weighted average interest rates are as of June 30, 1996 and exclude the effects of related interest rate swaps. 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 derivative instruments that convert these commercial paper obligations into fixed-rate obligations. The fair value of the long-term debt was $5,014 and $5,662 June 30, 1996 and 1995, respectively. The following payments are required the next five years: 1997 - $420; 1998 - $344; 1999 - $87; 2000 - $240; and 2001 - $338. 5. RISK MANAGEMENT ACTIVITIES The Company is exposed to market risk including changes in interest rates, currency exchange rates, and certain commodity prices. To manage the volatility relating to these exposures, the Company enters into various derivative transactions pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. Positions are monitored using techniques including market value and sensitivity analyses. 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 hedge underlying debt obligations, and the interest rate differential is reflected as an adjustment to interest expense over the life of the swaps. The following table presents information for outstanding interest rate swaps:
1996 1995 ------------- -------------- 1996- Beyond 1995- Beyond June 30 2001 2001 2000 2000 - ------------------------------------------------------------------------- Pay Fixed: Notional amount $859 $536 $845 $914 Weighted average receive rate 6.2% 5.4% 4.9% 5.8% Weighted average pay rate 6.8% 6.7% 5.9% 7.0% Pay Variable: Notional amount $377 -- $535 $171 Weighted average receive rate 8.4% -- 6.3% 9.3% Weighted average pay rate 6.7% -- 6.8% 7.7% - -------------------------------------------------------------------------
Certain of the above instruments are currency rate swaps that are designated as a hedge of the Company's related foreign net asset exposure. The currency effects of these hedges are reflected in the currency translation adjustments section of shareholders' equity, offsetting a portion of the translation of the net assets. The following table presents information for all interest rate instruments, including warrants and options. The notional amount does not necessarily represent amounts exchanged by the parties and, therefore, is not a direct measure of the exposure of the Company. 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 of instruments.
June 30 1996 1995 - ---------------------------------------------------------------------- Notional amount $1,872 $2,765 - ---------------------------------------------------------------------- Fair value $ (165) $ (373) Carrying value (121) (298) - ---------------------------------------------------------------------- Unrecognized Loss (44) (75)
Although derivatives are an integral part of the Company's interest rate management program, their incremental effect on interest expense for 1996 and 1995 was not material. Additionally, based on the Company's overall variable rate position at June 30, 1996, including other interest rate instruments, a change within a 95% confidence level based on historical interest rate movements would not have a material effect on earnings. CURRENCY RATE MANAGEMENT The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with local currency purchase transactions. Corporate policy prescribes the range of hedging activity into which the subsidiary operations may enter. To execute this policy, the Company primarily utilizes forward exchange contracts and purchased options with durations of generally less than 12 months. Because these are entered into as a hedge of planned transactions, a change in the fair value of the instruments is offset by a corresponding change in the related exposure. In addition, the Company enters into foreign currency swaps to hedge intercompany financing transactions and purchases foreign currency options 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 recognized in income when the hedged transaction occurs. Other foreign exchange contracts are marked-to-market on a current basis through income. Currency instruments outstanding are as follows:
Notional Fair June 30 Amount Value - -------------------------------------------------------------------- 1996 Forward Contracts $2,586 $ (23) Purchased Options 1,726 41 Currency Swaps 505 (17) 1995 Forward Contracts $3,423 $ (20) Purchased Options 2,419 38 Currency Swaps 863 (140) - --------------------------------------------------------------------
The deferred gains/losses on these instruments were not material. The major currency exposures (notional amounts) hedged by the Company at June 30, 1996 and 1995, respectively include the German mark ($1,276 and $2,465), U.S. dollar ($623 and $824), British pound sterling ($525 and $811), Belgian franc ($519 and $631), Italian lira ($453 and $299), and French franc ($437 and $535). Based on the Company's estimates at June 30, 1996, a change within a 95% confidence level based on historical currency rate movements would not have a material effect on earnings. Currency exposure related to the net assets of subsidiaries is managed primarily through local currency financing and foreign currency denominated financing instruments entered into by the parent. Gains or losses on instruments designated as a hedge of net assets are offset against the translation effects reflected in shareholders' equity. At June 30, 1995, the Company's total foreign net assets were $6,895. Of this, approximately 20% is denominated in the German mark. The Canadian dollar, Japanese yen, British pound, Chinese renminbi, Mexican peso, and Italian lira each represent between approximately 5% and 10% of the total. No other individual country represents more than 5% of the total. The Company has designated $1,458 and $1,386 of foreign currency instruments as hedges of its net asset exposure in certain foreign subsidiaries at June 30, 1996 and 1995, respectively. These hedges resulted in gains/(losses)of $129 and $(115) that are net of ($80) and $73 in tax effects reflected in shareholders' equity. COMMODITY PRICE MANAGEMENT Because market prices of certain raw materials used in food and beverage products depend on a number of unpredictable factors, such as weather, the Company's policy is to manage the resulting volatility using commodities contracts. Commodity activity is not material to the Company's earnings or cash flows. 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 counterparties' obligations exceed the obligations of the Company. It is the Company's policy to only 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. 6. STOCK OPTIONS Under the Company's stock option plans, options have been granted to key employees an directors to purchase common shares of the Company within a ten-year term at the market value on the dates of the grants. Stock option activity was as follows:
Options in Thousands 1996 1995 1994 - ---------------------------------------------------------------------- Outstanding, July 1 31,692 30,556 28,497 Granted 4,802 3,926 3,880 Exercised (3,055) (2,639) (1,673) Canceled (111) (151) (148) - ---------------------------------------------------------------------- Outstanding, June 30 33,328 31,692 30,556 Exercisable 28,524 27,777 26,685 Available for grant 12,209 9,755 6,418 Average Price: Outstanding $49.59 $42.72 $38.23 Granted 81.74 66.21 56.81 Exercised 29.04 25.18 21.35 - ----------------------------------------------------------------------
Effective with 1997 year-end reporting, the Company intends to adopt the disclosure requirements of FASB Statement No. 123, "Accounting for Stock-Based Compensation," while continuing to measure compensation cost for stock options and awards under APB Opinion No. 25, "Accounting for Stock Issued to Employees." 7. POSTRETIREMENT BENEFITS The Company offers various postretirement benefits to U.S. and international employees. PENSION BENEFITS Within the U.S., the most significant retirement benefit is the defined contribution profit sharing plan funded by an employee stock ownership plan (ESOP) and Company contributions. Annual credits to participants' accounts are based on individual base salaries and years of service, not exceeding 15% of total participants' annual salaries and wages.
Years Ended June 30 1996 1995 1994 - ----------------------------------------------------------------------- Preferred shares allocated at market value $200 $155 $117 Company contributions` 75 112 157 - ----------------------------------------------------------------------- Benefits earned 275 267 274
Certain other employees, primarily outside the U.S., are covered by local defined benefit pension plans, with summarized information as follows:
June 30 1996 1995 - ---------------------------------------------------------------- Vested benefit obligations $1,315 $1,250 Non-vested benefit obligations 188 178 - ---------------------------------------------------------------- Accumulated benefit obligations 1,503 1,428 Effect of projected salaries 383 375 - ---------------------------------------------------------------- Projected benefit obligations 1,886 1,803 Plan assets at market value (1,019) (890) - ---------------------------------------------------------------- Unfunded pension benefit obligations 867 913 Unrecognized: Net transition obligations (37) (37) Prior service costs (43) (45) Net gains (losses) 32 (30) - ----------------------------------------------------------------- Net accrued pension costs 819 801
Plan assets are held in restricted trusts or foundations. The assets are in stocks, bonds, insurance contracts, and other investments within the limits prescribed by local laws and in line with local investment practices for pension and retirement plans. Funding policies vary by country and consider such factors as actuarial reports, tax regulations, and local practices. In the U.S., plan assets exceeded the projected benefit obligation by $27 in 1996 and $21 in 1995.
PENSION EXPENSE Years Ended June 30 1996 1995 1994 - -------------------------------------------------------------------- Benefits earned during the year $ 96 $ 89 $ 84 Interest on projected benefit obligations 131 116 97 Actual return on plan assets (132) (74) (63) Net amortization and other 60 10 3 - ------------------------------------------------------------------- 155 141 121
The actuarial assumptions vary by country and consider such factors as economic conditions and the nature of plan assets. The following is a summary of assumptions, reflecting an average for the Company:
ASSUMPTIONS Years Ended June 30 1996 1995 1994 - --------------------------------------------------------------- Long-term rate of return on plan assets 9% 9% 9% Increase in compensation 5% 6% 6% Discount rate 7% 7% 7.4% - ---------------------------------------------------------------
OTHER RETIREE BENEFITS The Company provides certain health care and life insurance benefits for substantially all U.S. employees and, to a lesser extent, certain foreign 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 medical cost trends. These benefits are partially funded by an ESOP, as well as certain other assets contributed by the Company.
ACCUMULATED BENEFIT OBLIGATION AND NET LIABILITY June 30 1996 1995 - -------------------------------------------------------------- Retirees $ 613 $ 611 Employees eligible to retire 125 133 Other active employees 667 681 - -------------------------------------------------------------- Accumulated benefit obligation 1,405 1,425 Unrecognized gain 821 458 Plan assets at market value (838) (440) - --------------------------------------------------------------- Net liability 1,388 1,443
BENEFIT EXPENSE Years Ended June 30 1996 1995 1994 - ----------------------------------------------------------------------------- Benefits earned during the year $ 47 $ 43 $ 60 Interest on accumulated benefit obligation 102 98 116 Actual return on plan assets (377) (364) (21) Net amortization and other 239 241 (79) - ---------------------------------------------------------------------------- Gross benefit expense 11 18 76 Dividends on ESOP preferred stock (79) (79) (79) - ---------------------------------------------------------------------------- (68) (61) (3)
ASSUMPTIONS Years Ended June 30 1996 1995 1994 - ----------------------------------------------------------------------------- Discount rate 7.5% 7.5% 8% Long-term rate of return on plan assets 9% 9% 9% Initial health care cost trend rate 9.5% 10.5% 11% - ---------------------------------------------------------------------------- Assumed to decline gradually to 5% in 2006 and thereafter.
The pre-tax effect of a 1% increase in the assumed health care cost trend rate would increase the accumulated benefit obligations at June 30, 1996 and 1995 by approximately $210 and $200 and increase the respective annual costs by $27 and $24. 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 described in Note 7: 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 by the Company. The shares are 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 $27.50 per share. 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 issuance price of $52.24 per share.
Shares in Thousands 1996 1995 1994 - -------------------------------------------------------------------- Shares outstanding: Series A 32,281 33,218 34,269 Series B 19,102 19,142 19,142
Shares of the ESOP are allocated at original cost based on debt service requirements. 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 fully diluted net earnings per common share. 9. INCOME TAXES Earnings before income taxes consist of the following:
Years Ended June 30 1996 1995 1994 - ------------------------------------------------------------------ United States $3,023 $2,683 $2,216 International 1,646 1,317 1,130 - ------------------------------------------------------------------ 4,669 4,000 3,346
The income tax provision consists of the following:
Years Ended June 30 1996 1995 1994 - ----------------------------------------------------------------------- Current tax expense U.S. Federal $ 776 $ 718 $ 574 International 413 399 298 U.S. State & Local 106 57 67 - ----------------------------------------------------------------------- 1,295 1,174 939 Deferred tax expense U.S. Federal 220 124 118 International and other 108 57 78 - ----------------------------------------------------------------------- 328 181 196
Taxes credited to Shareholders' Equity for the years ended June 30, 1996 and 1995 were $3 and $144. Undistributed earnings of foreign subsidiaries that are considered to be reinvested indefinitely $5,078 at June 30, 1996. The effective income tax rate was 34.8%, 33.9% and 33.9% in 1996, 1995 and 1994, respectively, compared to the U.S. statutory rate of 35%. Deferred income tax assets and liabilities are comprised of the following:
June 30 1996 1995 - ------------------------------------------------------------------------ Current deferred tax assets: Restructuring reserve $ 267 $ 293 Other 331 511 - ------------------------------------------------------------------------ 598 804 Non-current deferred tax assets (liabilities): Depreciation (1,005) (1,164) Postretirement benefits 492 550 Restructuring reserve -- 170 Loss carryforwards 166 276 Other (291) (363) - ------------------------------------------------------------------------ (638) (531)
Included in the above are total valuation allowances of $252 and $263 in 1996 and 1995, respectively. 10. COMMITMENTS AND CONTINGENCIES The Company has various purchase commitments for materials, supplies and items of permanent investment incidental to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. Additionally, the Company has a pulp supply agreement entered into in conjunction with the prior sale of the Company's commercial pulp business. In the year ended June 30, 1996, the Company increased the reserve related to this contract by $230. 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 disposal practices. Accrued environmental liabilities for remediation and closure costs at June 30, 1996 were $100 and, in management's opinion, such accruals are appropriate based on existing facts and circumstances. Under the most adverse circumstances, however, this potential liability could be higher. 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 consolidated financial position, results of operations or cash flows of the Company. 11. SEGMENT INFORMATION Geographic segments are aligned into four regions: North America -- including the United States and Canada; Europe, Middle East and Africa; Asia; and Latin America. Business segments are aligned as follows: Laundry and Cleaning - laundry, dishcare, hard surface cleaners and fabric conditioners. Representative brands include Ariel, Tide, Cascade, Dawn, Mr. Proper, Downy. Paper - tissue/towel, feminine hygiene, incontinence, and diapers. Representative brands include Bounty, Charmin, Always, Whisper, Pampers, Attends. Beauty Care - hair care, deodorants, personal cleansing, skin care and cosmetics and fragrances. Representative brands include Pantene, Vidal Sassoon, Secret, Safeguard, Olay, Cover Girl, Giorgio Beverly Hills. Food and Beverage - coffee, peanut butter, juice, snacks, shortening and oil, baking mixes and commercial services. Representative brands include Folgers, Jif, Sunny Delight, Pringles, Crisco, Duncan Hines. Health Care - oral care, gastro-intestinal, respiratory care, analgesics and pharmaceuticals. Representative brands include Crest, Scope, Metamucil, Vicks. Corporate items primarily include interest income and expense, segment eliminations, and other general corporate income and expense. The Company's operations are characterized by interrelated raw materials and manufacturing facilities and centralized research and staff functions. Accordingly, separate profit determination by segment is dependent upon assumptions regarding allocations.
GEOGRAPHIC SEGMENTS Europe, North Middle East Latin America and Africa Asia America Corporate Total - ------------------------------------------------------------------------------------------------------------- Net Sales 1996 $17,133 $11,719 $3,790 $2,173 $ 469 $35,284 1995 16,233 11,017 3,617 2,178 437 33,482 1994 15,164 9,738 3,133 2,250 100 30,385 - ------------------------------------------------------------------------------------------------------------- Net Earnings 1996 2,220 767 222 218 (381) 3,046 1995 1,872 675 199 213 (314) 2,645 1994 1,713 581 132 157 (372) 2,211 - ------------------------------------------------------------------------------------------------------------- Identifiable Assets 1996 11,894 6,895 2,882 1,445 4,614 27,730 1995 11,375 7,446 3,311 1,305 4,688 28,125 1994 10,699 5,576 2,690 1,302 5,268 25,535 - ------------------------------------------------------------------------------------------------------------- Includes a gain on the sale of the Company's share of a health care joint venture: North America - $120 after tax, Health Care - $185 before tax.
BUSINESS SEGMENTS Laundry and Beauty Food and Health Cleaning Paper Care Beverage Care Corporate Total - ---------------------------------------------------------------------------------------------------------------------------- Net Sales 1996 $10,673 $10,196 $6,914 $4,066 $2,966 $ 469 $35,284 1995 10,222 9,291 6,507 3,988 3,037 437 33,482 1994 9,837 8,282 5,912 3,261 2,993 100 30,385 - ---------------------------------------------------------------------------------------------------------------------------- Earnings Before 1996 1,869 1,253 966 574 426 (419) 4,669 Income Taxes 1995 1,690 1,125 728 513 358 (414) 4,000 1994 1,512 1,091 570 362 363 (552) 3,346 - ---------------------------------------------------------------------------------------------------------------------------- Identifiable Assets 1996 5,316 6,824 5,317 2,026 3,633 4,614 27,730 1995 5,375 7,082 5,511 2,148 3,321 4,688 28,125 1994 4,777 5,521 4,936 2,049 2,984 5,268 25,535 - ---------------------------------------------------------------------------------------------------------------------------- Capital 1996 643 804 344 186 175 27 2,179 Expenditures 1995 608 731 341 150 295 21 2,146 1994 590 663 247 136 182 23 1,841 - ---------------------------------------------------------------------------------------------------------------------------- Depreciation 1996 316 519 211 101 176 35 1,358 and 1995 279 500 189 108 144 33 1,253 Amortization 1994 252 435 177 113 131 26 1,134 - ---------------------------------------------------------------------------------------------------------------------------- Includes a gain on the sale of the Company's share of a health care joint venture: North America - $120 after tax, Health Care - $185 before tax.
12. QUARTERLY RESULTS (UNAUDITED)
- ------------------------------------------------------------------------------------------------------- Quarters Ended -------------------------------------------- Total Sept. 30 Dec. 31 Mar. 31 Jun. 30 Year - ------------------------------------------------------------------------------------------------------- Net Sales 1995-96 $9,027 $9,090 $8,587 $8,580 $35,284 1994-95 8,177 8,485 8,318 8,502 33,482 - ------------------------------------------------------------------------------------------------------- Operating Income 1995-96 1,435 1,352 1,193 835 4,815 1994-95 1,270 1,208 1,064 702 4,244 - ------------------------------------------------------------------------------------------------------- Net Earnings 1995-96 896 836 760 554 3,046 1994-95 792 750 631 472 2,645 - ------------------------------------------------------------------------------------------------------- Net Earnings 1995-96 1.27 1.18 1.07 .77 4.29 Per Common Share 1994-95 1.12 1.06 .88 .65 3.71 - ------------------------------------------------------------------------------------------------------- Fully Diluted Net Earnings 1995-96 1.18 1.11 1.01 .72 4.02 Per Common Share 1994-95 1.05 .99 .81 .63 3.48 - -------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Millions of Dollars Except Per Share Amounts) 1996 1995 1994 1993 1992 - -------------------------------------------------------------------------------------------------------- Net Sales 35,284 33,482 30,385 30,498 29,390 Operating Income 4,815 4,244 3,670 521 2,895 Net Earnings/(Loss) 3,046 2,645 2,211 (656) 1,872 Net Earnings Margin 8.6% 7.9% 7.3% -- 6.4% Net Earnings/(Loss) Per Common Share 4.29 3.71 3.09 (1.11) 2.62 Dividend Per Common Share 1.60 1.40 1.24 1.10 1.025 Research and Development Expense 1,221 1,148 964 868 782 Advertising Expense 3,254 3,284 2,996 2,973 2,693 Total Assets 27,730 28,125 25,535 24,935 24,025 Capital Expenditures 2,179 2,146 1,841 1,911 1,911 Long-Term Debt 4,670 5,161 4,980 5,174 5,223 Shareholders' Equity 11,722 10,589 8,832 7,441 9,071 Cash Flow from Operations 4,158 3,568 3,649 3,338 3,025 - --------------------------------------------------------------------------------------------------------- Operating income includes a pre-tax charge totaling $2,705 for restructuring. Net earnings and net earnings per common share include an after-tax charge totaling $1,746 or $2.57 per share for restructuring and an after-tax charge of $925 or $1.36 per share for the prior years' effect of accounting changes.
SHAREHOLDER INFORMATION
COMMON STOCK PRICE RANGE AND DIVIDENDS Price Range Dividends - --------------------------------------------------------------------------------------------------------------------- 1995-96 1994-95 1995-96 1994-95 - --------------------------------------------------------------------------------------------------------------------- Quarter Ended High Low High Low - --------------------------------------------------------------------------------------------------------------------- September 30 $78.50 $66.13 $60.88 $53.13 $.40 $.35 December 31 89.50 76.50 64.63 58.25 .40 .35 March 31 90.63 81.13 70.38 60.63 .40 .35 June 30 93.88 79.38 74.25 65.88 .40 .35
SHAREHOLDER RECORDS Shareholder records are maintained by the Company. Questions concerning shareholder accounts, stock transfer or name changes should be directed to the Shareholder Services address shown at right or by calling 1-800-742-6253. Stock certificates are valuable and should be safeguarded since replacement takes time and requires a service charge to the shareholder. If a stock certificate is lost, stolen or destroyed, notify Shareholder Services promptly. CERTIFICATE SAFEKEEPING P&G offers a Certificate Safekeeping Service. You deposit your P&G stock certificates with the Company and receive a statement. If interested, please contact Shareholder Services. ADDRESS CHANGES Please notify Shareholder Services in writing of any address change. This will help prevent returned dividend checks and other financial mailings. DUPLICATE MAILINGS Financial reports must be mailed for each separate account unless you instruct us otherwise. To help us reduce costs by discontinuing multiple mailings to your address, please contact Shareholder Services. SHAREHOLDER INVESTMENT PROGRAM This programs allows participants to reinvest their dividends and make optional cash purchases of Procter & Gamble Common Stock directly through the Program. For a copy of the prospectus, please contact Shareholder Services. DIRECT DEPOSIT OF DIVIDENDS Shareholders of record may have their dividends electronically deposited into their bank account. If you are interested in this service, please contact Shareholder Services. SHAREHOLDERS' MEETING The next annual meeting of the shareholders will be held on Tuesday, October 8, 1996, at the Company's General Offices, Two Procter & Gamble Plaza, Cincinnati, OH 45202. 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 PNC Bank, Ohio, N.A. P.O. Box 1198 Cincinnati, Ohio 45201-1198 EXCHANGE LISTING New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Antwerp, Brussels, Tokyo. SHAREHOLDERS OF COMMON STOCK There were 216,271 Common Stock shareholders of record, including participants in the Shareholder Investment Program, as of July 19, 1996. FORM 10-K Beginning in October 1996, shareholders may obtain a copy of the Company's 1996 report to the Securities and Exchange Commission on Form 10-K by sending a request to Mr. Robert J. Thompson, Manager, Shareholder Services, at the above Shareholder Services address. COMPANY INFORMATION Financial information is available 24 hours a day, seven days a week, by dialing 1-800-764-7483. This report printed on recycled paper made from 50% recycled fiber including 10% post-consumer waste. EX-21 6 EXHIBIT (21) THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Subsidiaries of the Registrant ------------------------------ The Procter & Gamble Company [Ohio] Arbora Capital, S.A. [Spain] Arbora Holding, S.A. [Spain] Ausonia Higiene, S.L. [Spain] Ausonia Portuguesa-Productos de Higiene, S.A. [Portugal] Richvest B.V. [Netherlands] Cotonificio Medical S.A. [Spain] Deterperu S.A. [Peru] Deterperu Industrial S.A. [Peru] The Dover Wipes Company [Ohio] Fisher Nut Company [Ohio] The Folger Coffee Company [Ohio] P&G Consultoria E Servicos Ltda. [Brazil] FPG Oleochemicals Sdn. Bhd. [Malaysia] Giorgio Beverly Hills, Inc.[Delaware] Giorgio Beverly Hills (Europe) Ltd. [United Kingdom] Industria de Concentrados Crush Limitada [Uruguay] Industrias Inextra, S.A. [Colombia] 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] Jetco Chemicals, Inc. [Texas] 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] P&G Brands Comercio S.A. [Brazil] Procter & Gamble do Brasil S.A. [Brazil] Phebo do Nordeste S/A [Brazil] P&G Holding B.V. [Netherlands] P&G Tissues B.V. [Netherlands] Richardson-Vicks B.V. [Netherlands] Richardson-Vicks Overseas Finance N.V. [Netherlands Antilles] Tempo Italiana SrL [Italy] 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] Pantene A.G. [Switzerland] Procter & Gamble Austria 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 (Chengdu) Ltd. [PRC] Procter & Gamble (China) Ltd. [PRC] Procter & Gamble Detergent (Guangzhou) Ltd. [PRC] Procter & Gamble (Guangzhou) Ltd. [PRC] Procter & Gamble Oral Care (Guangzhou) [China] 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 Panda Detergent Co. Ltd Beijing [PRC] Procter & Gamble Paper (Guangzhou) Ltd. [PRC] Procter & Gamble Personal Cleansing (Tianjin) 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 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 Benelux [Belgium] Procter & Gamble do Brazil, Inc. [Delaware] Procter & Gamble do Brasil & Cia [Brazil] The Procter & Gamble Cellulose Company [Delaware] Procter & Gamble Chile, Inc. [Ohio] The Procter & Gamble Commercial Company [Ohio] PROGAM Leasing, Inc. [Puerto Rico] 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] Procter & Gamble Bulgaria Ltd. [Bulgaria] Procter & Gamble Croatia [Croatia] Procter & Gamble Marketing Federal Republic of Yugoslavia Ltd. [Serbia] 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 Kereskedelmi BT [Hungary] Procter & Gamble Marketing & Commercial Activities d.o.o. [Slovenia] 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 T.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 S.A. [Belgium] Procter & Gamble European Manufacturing Company [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] Procter & Gamble Asia Pte. Ltd. [Singapore] Procter & Gamble India Holdings, Inc. [Ohio] Procter & Gamble Bangladesh Private Ltd. [Bangladesh] Procter & Gamble Home Products (India) 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 (Vietnam) Ltd. [Vietnam] Procter & Gamble FED, Inc. [Delaware] Procter & Gamble Finance Corporation [Canada] The Procter & Gamble Global Finance Company [Ohio] Procter & Gamble Inc. [Ontario, Canada] Crest Toothpaste Inc. [Canada] Procter & Gamble Financial Services [Ireland] Procter & Gamble Mississauga Real Estate Company [Canada] Procter & Gamble Services Company S.A. [Belgium] Shulton de Venezuela, C.A. S.A.[Venezuela] Procter & Gamble Inversiones S.A. [Chile] Productos Sanitarios S.A. [Chile] Procter & Gamble Investment Corporation [Canada] Procter & Gamble Italia, S.p.A. [Italy] Eurocos Italia S.p.A. [Italy] Fater S.p.A. [Italy] Fameccanica Data S.p.A. [Italy] Procter & Gamble Distributing Company (Europe) [Belgium] Procter & Gamble Holding S.p.A.[Italy] Procter & Gamble Pharmaceuticals Italia S.p.A. [Italy] Procter & Gamble Tissues Italia S.p.A. [Italy] Progasud S.p.A. [Italy] Procter & Gamble Pescara Technical Center S.p.A. [Italy] Procter & Gamble Portugal S.A. (Portugal) Neoblanc-Produtos de Higiene e Limpeza Lda. [Portugal] Procter & Gamble Tuketim Mallari Sanayii A.S. [Turkey] Eczacibasi Procter & Gamble Dagitim Ve Satis AS [Turkey] Panel Piyasa Arastima Ve Danismanlik AS [Turkey] PROGAVI S.p.A. [Italy] Rapik S.p.A. [Italy] Sanipak Saglik Urunleri Sanayi Ve Ticaret A.S. [Turkey] 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.] Gala Cosmetics & Fragrances Limited [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 [United Kingdom] Procter & Gamble (Health & Beauty Care) Limited [U.K.] Noxell Limited [U.K.] Noxell (Malaysia) Sdn. Bhd. [Malaysia] Noxell (Singapore) Pte. Ltd. [Singapore] Procter & Gamble (Cosmetics and Fragrances) Limited [U.K.] Shulton (Great Britain) Ltd. [U.K.] Colfax Laboratories (India) Ltd. [India] Procter & Gamble (NTC) Limited [U.K.] Procter & Gamble Pharmaceuticals U.K., Limited [U.K.] Procter & Gamble Product Supply (U.K.) Limited [U.K.] Procter & Gamble (Properties) Ltd. [U.K.] The Procter & Gamble Manufacturing Company [Ohio] Procter & Gamble Manufacturing (Thailand) Limited [Thailand] Procter & Gamble de Mexico, S.A. de C.V. [Mexico] Max Factor Mexicana, S.A. de C.V. [Mexico] 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] Riverfront Music Publishing Co., Inc. [Ohio] Sycamore Productions, Inc. [Ohio] Procter & Gamble S.A. [France] Fonciere des 96 et 104 Avenue Charles de Gaulle [France] Laboratoire Lachartre SNC [France] Procter & Gamble Amiens SNC [France] Procter & Gamble France S.N.C.[France] Procter & Gamble Hygiene Beaute France SNC [France] Procter & Gamble Pharmaceuticals France S.A. [France] Procter & Gamble Tissues France Laboratoires Sofabel S.A.R.L. [France] Procter & Gamble Brionne S.N.C. [France] Procter & Gamble Scandinavia, Inc. [Ohio] Procter & Gamble Hygien AB [Sweden] Procter & Gamble Hygien A/S [Norway] Procter & Gamble Hygien OY [Finland] The Procter & Gamble U.K. Tissue Company [Ohio] Productos Sanitarios S.A. [Argentina] Eguimad S.A. [Argentina] Topsy S.A. [Argentina] Promotora de Bienes y Valores, S.A. de C.V. [Mexico] REVAC 2 Corp. [Delaware] Richardson-Vicks Inc. [Delaware] Celtic Insurance Company Limited [Bermuda] 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 GmbH [Germany] Beautycos Cosmetic GmbH [Germany] Betrix Cosmetic GmbH [Germany] Blendax GmbH [Germany] Blendax Unterstutzungskasse GmbH [Germany] Buscher GmbH [Germany] Cover Girl Cosmetic GmbH [Germany] Eurocos Cosmetic GmbH [Germany] Eurocos Cosmetic Warenvertrieb GmbH [Austria] EURO-Juice G.m.b.H. Import und Vertrieb [Germany] Euro-Juice y Compania, S. en C. [Spain] HELIX Speditions-und Lagerei GmbH [Germany] Medimas Media-und Marketing Service GmbH I.L. [Germany] Procter & Gamble Central & Eastern Europe Services GmbH [Germany] Procter & Gamble European Service GmbH [Germany] Procter & Gamble GmbH & Co. Manufacturing OHG [Germany] Exquisit - Kosmetik GmbH [Germany] Noris Transport GmbH [Germany] Papierhygiene GmbH [Germany] Tempo AG [Switzerland] Bess Hygiene AG [Switzerland] Tempo Holding GmbH I.G. [Germany] Bess Hygiene GmbH I.G. [Germany] 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] Temca Chemische Union Vertriebs GmbH [Germany] TRAPOFA Leonhard-Speditions GmbH I.L. [Germany] Trapofa GmbH [Austria] Procter & Gamble Health & Beauty Care-Europe Limited [U.K.] Procter & Gamble Health & Beauty Care Sweden AB [Sweden] 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] Procter & Gamble Ecuador Compania Anonima [Ecuador] Procter & Gamble Interamericas de Costa Rica, S.A. [Costa Rica] Procter & Gamble Interamericas de Nicaragua, S.A. [Nicaragua] Procter & Gamble (Malaysia) Sdn. Berhad [Malaysia] Procter & Gamble Pharmaceuticals, Inc. [Ohio] Norwich Overseas, Inc. [Delaware] Norwich Pharmacal Company del Peru [Peru] 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 International Corporation [Delaware] 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] 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.] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EX-23 7 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 August 8, 1996, incorporated by reference in this Annual Report on Form 10-K of The Procter & Gamble Company for the year ended June 30, 1996. 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. 33-49111 on Form S-3 for The Procter & Gamble Stock Investment Program; 6. Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble Commercial Company Employees' Savings Plan; 7. Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble 1993 non-employee Directors' Stock Plan; 8. Amendment No. 1 to Registration Statement No. 33-55471 on Form S-3 for The Procter & Gamble Company Debt Securities and Warrants; 9. Registration Statement No. 333-03821 on Form S-3 for The Procter & Gamble Company Debt Securities and Warrants; 10. Registration Statement No. 333-05715 on Form S-8 for The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan; and 11. Amendment No. 1, Post-Effective Amendment No. 1 to Registration Statement No. 33-59257 on Form S-3 for The Procter & Gamble Shareholder Investment Program. /S/DELOITTE & TOUCHE LLP September 10, 1996 EX-27 8
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1996 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-30-1996 JUL-01-1995 JUN-30-1996 1 2,074 446 2,841 0 3,130 10,807 18,112 6,994 27,730 7,825 4,670 0 1,886 686 9,150 27,730 35,284 35,284 20,762 9,707 0 0 484 4,669 1,623 3,046 0 0 0 3,046 4.29 4.02
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