Proctor and Gamble 2003 Annual Report Download - page 25

Table of Contents
Financial Review
This framework also requires some difficult decisions, including the
Company’s announcement in July 2003 to seek strategic alternatives
for its Sunny Delight and Punica juice drink brands. Another example is
the Company’s continuing evaluation of outsourcing arrangements in
areas where the Company can leverage industry expertise and scale
to obtain high quality services at a lower cost. The Company has
announced plans to outsource real estate and facilities management,
information technology and certain other administrative and manufac-
turing processes.
Volume and Net Sales
The Company achieved record sales of $43.38 billion in 2003, exceed-
ing 2002 sales by $3.14 billion, or 8%. Volume growth of 8% was
broad-based, with particular strength in Fabric and Home Care, Beauty
Care and Health Care. In fact, 19 of the Company’s top 20 brands
increased volume as compared to the prior year. Excluding the impacts
of acquisitions and divestitures, volume was also up 8%, as the impact
of the Clairol acquisition in November 2001 was offset by the impact of
the Jif and Crisco spin-off in May 2002. Net sales included a favorable
foreign exchange impact of 2%, as the strength of the Euro was parti-
ally offset by weakness in certain Latin American currencies. The foreign
exchange impact was offset by pricing of 2% to stimulate growth and
remain competitive in key categories, including diapers, tissue, hair care,
feminine care, teeth whitening and coffee. Future pricing activities will
be aimed at providing value to both consumers and customers and will
be influenced by competitive activity and the Company’s product initia-
tive program.
Results of Operations
The Company markets nearly 300 products in more than 160 countries
around the world in five distinct business segments: Fabric and Home
Care, Beauty Care, Baby and Family Care, Health Care and Snacks and
Beverages.
The Company’s results for the fiscal year ended June 30, 2003 reflect
broad-based business strength, with four of the five segments deliver-
ing top-line sales growth and all five business segments delivering net
earnings growth.
The Company continues to make clear choices about where to play and
how to win. The framework for these decisions is grounded in focus
areas that include: building core categories and leading brands, grow-
ing with leading customers and in the biggest geographic markets,
investing in faster-growing, higher-margin businesses and building
leadership in fast-growing developing markets.
Consistent with this framework, in March 2003 the Company reached
an agreement with the controlling shareholders of Wella AG to acquire
77.6% of the voting class shares. In June 2003, the Company complet-
ed a tender offer for the remaining outstanding voting class shares and
preference shares, securing approximately 81% of the total outstanding
Wella AG shares (99% of the voting class shares and 45% of the pref-
erence shares). This acquisition is expected to close in the first quarter
of fiscal 2004. Wella AG is a leading beauty care company selling its
products in more than 150 countries, focused on professional hair care,
retail hair care and cosmetics and fragrances.
Independent Auditors’ Report 34
Audited Consolidated Financial Statements
Earnings 35
Balance Sheets 36
Shareholders’ Equity 38
Cash Flows 39
Notes to Consolidated Financial Statements 40
Financial Review
Results of Operations 23
Segment Results 25
Financial Condition 28
Key Accounting Policies 29
Hedging and Derivative Financial Instruments 31
Restructuring Program 31
Forward-Looking Statements 33
23The Procter & Gamble Company and Subsidiaries