P&G Reports Fourth Quarter EPS of $0.92 and Operating Profit Growth of 13%, Behind...

P&G Reports Fourth Quarter EPS of $0.92 and Operating Profit Growth of 13%,
Behind Balanced 5% Organic Sales and Volume Growth

CINCINNATI, Aug. 5 /PRNewswire-FirstCall/ -- The Procter & Gamble Company
(NYSE: PG) announced net sales growth of 10 percent for the April - June
quarter to $21.3 billion and nine percent net sales growth for the fiscal year
to $83.5 billion. Organic sales were up five percent for both the quarter and
the fiscal year. This marks the seventh year and 24th consecutive quarter in
which P&G delivered top-line growth at or above the company's targets.
Diluted net earnings per share increased 37 percent for the quarter to
$0.92 and 20 percent to $3.64 for the fiscal year. The quarter and fiscal
year included net tax benefits of $0.12 and $0.14 respectively, due to a
number of significant adjustments to tax reserves in the U.S. and other
countries. Quality of earnings growth was strong as operating profit
increased 13 percent for the quarter and 11 percent for the fiscal year behind
sales growth and operating margin improvement. Operating margin was up due to
overhead productivity improvements and increased pricing, which combined, more
than offset a significant increase in commodity and energy costs.
"Once again, P&G delivered top and bottom line growth at or above the
company's targets -- while also successfully completing the integration of
Gillette," said Chairman of the Board and Chief Executive Officer, A.G.
Lafley. "We're leading innovations across the brand portfolio, building value
for consumers and customers which is critical to delivering good results in a
difficult economic environment. The strength of the portfolio and our focus
on innovation and productivity give us confidence that we will continue to
deliver sustained growth in the coming year and beyond."
Executive Summary
-- Net sales increased 10 percent for the quarter to $21.3 billion and
nine percent for the fiscal year to $83.5 billion. Organic sales, which
exclude the impacts of acquisitions, divestitures and foreign exchange, were
up five percent for both the quarter and the fiscal year. Net sales in
developing regions continued to grow double-digits.
-- Net earnings were up 33 percent for the quarter to $3.0 billion and 17
percent for the fiscal year to $12.1 billion.
-- Diluted net earnings per share increased 37 percent for the quarter and
20 percent for the fiscal year to $0.92 and $3.64, respectively. Net tax
benefits, attributed to a number of significant adjustments to tax reserves in
the U.S. and other countries, added $0.12 to the quarter and $0.14 to the
fiscal year. Excluding these tax adjustments, adjusted net earnings per share
was $0.80 for the quarter and $3.50 for the fiscal year.
-- The fiscal year represents the successful integration of Gillette.
Cost synergies exceeded $1.2 billion and revenue synergies from distribution
gains and new product launches are on-track. The elimination of prior year
Gillette dilution effects contributed an estimated $0.10 - $0.12 to EPS growth
for the fiscal year.
-- Operating margin improved 50-basis points for the quarter and 30-basis
points for the fiscal year as a reduction in overhead spending as a percent of
net sales more than offset a decline in gross margin.
-- For the fiscal year, operating cash flow was $15.8 billion and free
cash flow was $12.8 billion. Free cash flow productivity was 106% of net
earnings, well above P&G's annual target of 90%. Capital spending was 3.6% of
net sales, well below the company's 4.0% annual target.
April - June Quarter Discussion
Net sales for the quarter increased 10 percent to $21.3 billion. Organic
volume, which excludes a negative one percent impact from the Western European
tissue divestiture, increased four percent. Price increases added three
percent to net sales. Favorable foreign exchange contributed six percent to
sales growth. Disproportionate growth in developing regions and product mix
shifts drove a negative two percent mix impact. Organic sales increased five
percent. Several new initiatives were launched during the quarter including
Pantene Beautiful Lengths, Gillette Hair Care, Pampers UnderJams, Oral-B
CrossAction Pro-Health, Actonel Once-a-Month and Olay Regenerist 14 Day Skin
Intervention and Definity Color Recapture Moisturizer.
Net earnings increased 33 percent to $3.0 billion behind strong sales
growth, improved operating margin and a lower tax rate. Operating margin
increased 50-basis points as overhead productivity improvements more than
offset a decline in gross margin. Diluted net earnings per share increased 37
percent for the quarter to $0.92.
Gross margin declined by 160-basis points to 49.2% during the quarter.
Higher commodity and energy costs reduced gross margin by about 300-basis
points. About half was offset by pricing, cost savings projects and scale
leverage from volume growth.
Selling, general and administrative expenses (SG&A) were down 210-basis
points for the quarter to 31.1% of net sales primarily due to volume scale
leverage, Gillette-related cost synergies and overhead productivity
improvements.
Operating cash flow was up 14% to $4.1 billion for the quarter behind
strong earnings growth and an increase in accounts payable. Inventory was up
primarily due to higher material costs. Free cash flow, defined as operating
cash flow less capital expenditures, was $2.9 billion during the quarter and
96% of net earnings. Capital expenditures were 5.6% of net sales during the
quarter, bringing the fiscal year level to 3.6% of net sales.
The company repurchased $2.0 billion of P&G stock during the quarter as
part of the company's previously announced three-year $24 - $30 billion share
repurchase program. The company has repurchased $10 billion of P&G stock
since the inception of this program in July 2007. Combined with $4.7 billion
in dividends, P&G distributed nearly $15 billion to shareholders in the fiscal
year and over 120% of net earnings.
Business Segment Discussion for the Quarter
The following provides perspective on the company's April - June quarter
results by business segment.
Beauty GBU
-- Beauty net sales increased 11 percent during the quarter to $5.0
billion. Net sales were up behind a two percent increase in volume, a two
percent pricing impact and a seven percent favorable foreign exchange impact.
Cosmetics volume grew high-single digits behind the Cover Girl Lash Blast
mascara initiative. Skin Care volume grew mid-single digits behind strong
growth in developing regions. Hair Care volume grew low-single digits as
strong growth on Head & Shoulders, Rejoice and Nice 'N Easy were partially
offset by declines in Professional Hair Care and on Pantene in North America.
Net earnings were flat during the quarter at $569 million as higher net sales
and a lower tax rate were offset by increased overhead spending and higher
commodity costs.
-- Grooming net sales were up 12 percent to $2.1 billion for the quarter.
Volume grew three percent and favorable foreign exchange contributed eight
percent to net sales growth. Price increases taken across premium shaving
systems added two percent to net sales. Product mix had a negative one
percent impact on net sales as favorable product mix from growth on Fusion was
more than offset by the impact of double-digit growth in developing regions.
Volume in Blades & Razors grew low-single digits as double-digit growth in
developing regions behind the continued successful geographic expansion of
Fusion was partially offset by lower shipments in developed regions. Fusion
volume grew over 30 percent globally in the quarter versus the prior year
period. Volume for Braun was down low-single digits as strong growth in
developing regions was more than offset by the announced exits of the U.S.
home appliance business and the Tassimo coffee appliance business. Net
earnings increased 31 percent to $396 million for the quarter. Earnings grew
behind sales growth, lower overhead spending as a percentage of net sales and
high base period marketing spending to support Fusion expansion.
Health & Well-Being GBU
-- Health Care net sales were up seven percent during the quarter to $3.6
billion. Sales growth was driven by two percent volume growth, six percent
favorable foreign exchange and a one percent increase in pricing. This was
partially offset by a negative two percent product mix impact driven primarily
by lower volume on Prilosec OTC and disproportionate growth in developing
regions. Feminine Care volume was up mid-single digits as double-digit growth
on Always and Naturella was partially offset by the divestiture of the Adult
Incontinence business in North East Asia. Feminine Care organic volume, which
excludes the impacts of acquisitions and divestitures, was up high-single
digits. Oral Care volume increased low-single digits primarily behind growth
in Oral-B toothbrushes. Volume in Pharmaceuticals and Personal Health
declined low-single digits as a double-digit decline in Prilosec OTC due to
the loss of marketplace exclusivity more than offset high-single digit growth
on Actonel and the addition of the Swiss Precision Diagnostics joint venture.
Net earnings increased 15 percent for the quarter to $526 million as sales
growth, lower overhead and marketing spending as a percentage of net sales and
a lower tax rate more than offset higher commodity costs.
-- Snacks, Coffee and Pet Care net sales increased eight percent to $1.2
billion for the quarter. Net sales increased due to one percent volume
growth, a six percent pricing impact from increases in Coffee and Pet Care
prices and a four percent favorable foreign exchange impact. These were
partially offset by a negative three percent product mix impact from a decline
in Coffee volume. Snacks volume increased high-single digits driven by
Pringles Stix and Extreme Flavors initiatives in North America. Pet Care
volume increased mid-single digits due to the expansion of Iams Dog ProActive
Health and Iams Cat Healthy Naturals in North America and mid-teens growth in
Western Europe. Coffee volume declined double-digits primarily due to
reductions in trade inventory levels ahead of an upcoming product restage and
higher price gaps versus branded competition after P&G took price increases to
recover higher commodity costs. Net earnings increased six percent to $132
million for the quarter. Net earnings increased as sales growth and lower
overhead and marketing spending as a percentage of net sales were partially
offset by significantly higher commodity costs.
Household Care GBU
-- Fabric Care and Home Care net sales increased 13 percent during the
quarter to $6.1 billion. Volume grew four percent and was broad-based with
growth in every region. Price increases added four percent to net sales and
foreign exchange contributed six percent to sales growth. These were
partially offset by a negative one percent mix impact primarily from shifts
toward larger sizes in Fabric Care. Fabric Care volume was up mid-single
digits due to solid growth on Tide, Ariel, Gain and Downy and continued
success on the liquid laundry detergent compaction expansion in North America.
Home Care volume grew high-single digits as a result of continued success of
Febreze Candles and Air Effects initiatives and trade inventory increases
prior to announced price increases on Dawn and Swiffer in North America.
Volume in Batteries was up low-single digits behind mid-single digit growth in
developing regions. Net earnings increased 11 percent to $843 million as
strong sales growth, lower overhead and marketing expenses as a percentage of
net sales and manufacturing cost savings projects more than offset higher
commodity costs.
-- Baby Care and Family Care net sales increased 10 percent during the
quarter to $3.6 billion. Volume grew three percent, including a negative six
percent impact from the Western European Tissue divestiture. Favorable
foreign exchange added six percent and price increases added two percent to
net sales growth for the quarter. Disproportionate growth in developing
regions as well as product mix shifts toward larger pack sizes and mid-tier
brands resulted in a negative one percent mix impact on sales. Organic sales
were up 10 percent behind a nine percent increase in organic volume. Baby
Care volume grew high-single digits driven by strong growth on Pampers and
Luvs. Family Care organic volume increased high-single digits behind
continued success of product initiatives on Bounty and Charmin. Net earnings
increased 22 percent for the quarter to $409 million as sales growth and cost
savings projects more than offset higher commodity and energy costs and higher
marketing spending as a percentage of net sales.
Fiscal Year Discussion
Net sales in fiscal 2008 increased nine percent to $83.5 billion behind
four percent volume growth. Volume growth was driven by continued double-
digit growth in developing regions. Growth from new innovations on key brands
was driven by the Head & Shoulders brand restage, Always Envive, Gucci by
Gucci, Venus Embrace, Cover Girl Lash Blast, Nice 'N Easy Perfect 10, Febreze
Candles and the Dunkin Donuts(R) coffee expansion. Fusion became the
company's 24th billion-dollar brand. Price increases added one percent to net
sales and favorable foreign exchange contributed five percent. Mix had a
negative one percent impact on sales primarily due to disproportionate growth
in developing regions. Organic sales and volume were both up five percent with
each reportable segment delivering year-on-year growth.
Net earnings grew 17 percent during the fiscal year to $12.1 billion
behind sales growth, operating margin improvement and a lower tax rate.
Operating margin improved 30-basis points as the company was able to more than
offset a commodity cost driven decline in gross margin by focusing on overhead
productivity improvements. Diluted net earnings per share increased 20 percent
to $3.64 including a $0.14 benefit from a number of significant adjustments to
previously existing tax reserves. The elimination of prior year Gillette
dilution effects contributed an estimated four percentage points to EPS growth
for the fiscal year.
Gross margin was down 70-basis points to 51.3% during the fiscal year.
Higher commodity and energy costs had a negative impact of about 200-basis
points. These were largely offset by scale leverage from volume growth, cost
savings projects and pricing.
Total selling, general and administrative expenses (SG&A) were down 100-
basis points as a percentage of net sales due to volume scale leverage, a
focus on overhead productivity and Gillette synergy savings. Advertising
spending remained constant as a percent of sales for the year.
Operating cash flow was $15.8 billion for the fiscal year, an increase of
18 percent behind earnings growth and an improvement in both accounts
receivable and accounts payable. Inventory was up for the year primarily due
to higher material costs from increased commodity prices. Free cash flow was
$12.8 billion for the year and 106% of net earnings, well-ahead of the
company's 90% annual target. Capital expenditures were 3.6% of net sales,
better than the company's 4.0% target.
The company has repurchased $10.0 billion of P&G stock since the inception
of the previously announced three-year $24 - $30 billion share repurchase
program. Combined with $4.7 billion in dividends, P&G distributed nearly $15
billion to shareholders in the fiscal year and over 120% of net earnings.
Fiscal Year Business Segment Discussion
Beauty GBU
-- Beauty net sales increased nine percent in 2008 to $19.5 billion. Net
sales increased behind two percent volume growth and six percent of favorable
foreign exchange. Favorable product mix had a one percent impact on net sales
primarily due to higher growth in Skin Care. Volume in Skin Care was up mid-
single digits driven by growth on Olay behind the Definity and Regenerist
initiatives. Prestige Fragrances volume was up low-single digits and organic
volume was up high-single digits behind new product launches on Dolce &
Gabbana and Hugo Boss. Hair Care volume grew low-single digits as strong
growth on Head & Shoulders, Rejoice and Nice 'N Easy were partially offset by
declines in Professional Hair Care, Herbal Essences and on Pantene in North
America. Net earnings in Beauty increased five percent to $2.7 billion in
2008 as sales growth and a lower tax rate more than offset a commodity cost
driven decline in gross margin.
-- Grooming net sales increased 11 percent to $8.3 billion in 2008. Net
sales were up behind five percent volume growth, a seven percent favorable
foreign exchange impact and a two percent positive pricing impact. Product
mix had a negative three percent impact on net sales as positive product mix
from growth on the premium-priced Fusion brand was more than offset by the
impact of disproportionate growth in developing regions. Blades & Razors
volume increased high-single digits behind double-digit growth in developing
regions driven primarily by Fusion geographic expansion and the Prestobarba3
launch in Latin America. In developed regions, Blades & Razors volume was
down low-single digits as strong growth on Fusion was more than offset by
lower shipments on legacy systems. Fusion delivered more than $1 billion in
net sales in 2008, making it the company's 24th billion-dollar brand and the
fastest ever to reach this milestone. Braun volume was down mid-single digits
primarily due to supply constraints at a contract manufacturer, the announced
exit of certain home appliance businesses and the divestiture of the
thermometer and blood pressure devices business. Net earnings in Grooming
were up 21% in 2008 to $1.7 billion behind net sales growth and lower overhead
spending as a percentage of net sales.
Health & Well-Being GBU
-- Health Care net sales increased nine percent in 2008 to $14.6 billion
behind a four percent increase in volume. Foreign exchange had a positive
five percent impact on net sales and price increases added one percent to net
sales. Disproportionate volume growth in developing regions resulted in a
negative one percent mix impact. Feminine Care volume increased mid-single
digits and organic volume was up high-single digits behind double-digit growth
on Naturella and high-single digit growth on Always. Oral Care volume was up
mid-single digits behind initiative-driven growth on Oral-B toothbrushes and
Crest. Volume in Pharmaceuticals and Personal Health was up low-single digits
as the impact of adding the Swiss Precision Diagnostics business was largely
offset by lower shipments in Pharmaceuticals and Prilosec OTC. Net earnings
in Health Care were up 12 percent in 2008 to $2.5 billion as net sales growth
and lower overhead and marketing spending as a percentage of net sales more
than offset higher commodity costs.
-- Snacks, Coffee and Pet Care net sales increased seven percent to $4.9
billion in 2008. Net sales grew behind a two percent volume increase, a
positive three percent price impact and a three percent favorable foreign
exchange impact. Product mix had a negative one percent impact on net sales
from a decline in Coffee volume, which has higher selling prices than the
segment average. Snacks volume was up high-single digits behind the launch of
Rice Infusion in Western Europe, Extreme Flavors and Pringles Stix in North
America. Coffee volume declined low-single digits as growth from the launch
of the Dunkin' Donuts(R) line was more than offset by lower volume on the
balance of the business. In Pet Care, volume was down low-single digits due
to negative impacts from the voluntary wet pet food recall in the U.S. Net
earnings in Snacks, Coffee and Pet Care were flat at $477 million in 2008 as
sales growth and lower overhead and marketing spending as a percentage of net
sales were offset by higher commodity costs.
Household Care GBU
-- Fabric Care and Home Care net sales in 2008 increased 11 percent to
$23.8 billion behind six percent volume growth. Price increases added one
percent and favorable foreign exchange added five percent to net sales growth.
This was partially offset by a negative one percent mix impact primarily from
disproportionate growth in developing regions and a shift toward large sizes
in Fabric Care. Fabric Care volume increased mid-single digits behind growth
in developing regions, the liquid laundry detergent compaction launch in North
America and initiative activity on Tide, Gain, Ariel and Downy. Home Care
volume was up mid-single digits due to double-digit growth in developing
regions and high-teens growth of Febreze from the launch of Febreze Candles.
Batteries volume was up mid-single digits behind double-digit growth in
developing regions. Net earnings in Fabric Care and Home Care increased nine
percent to $3.4 billion in 2008 as net sales growth and lower overhead
spending as a percentage of net sales more than offset a commodity-driven
decline in gross margin.
-- Baby Care and Family Care net sales increased nine percent in 2008 to
$13.9 billion. Volume was up four percent, price increases contributed one
percent and foreign exchange had a positive four percent impact on net sales.
Organic volume and organic sales both grew eight percent. Baby Care volume
was up high-single digits behind double-digit growth on Pampers. Family Care
volume was down low-single digits due to a divestiture but was up high-single
digits on an organic basis behind the Bounty and Charmin product restages.
Net earnings in Baby Care and Family Care were up 20 percent to $1.7 billion
in 2008 behind sales growth, operating margin expansion and a lower tax rate.
Fiscal Year 2009 Guidance
For fiscal year 2009, P&G expects its underlying business to deliver the
company's annual target growth rates including organic sales growth of four to
six percent and earnings per share growth of 10%. Fiscal year 2009 GAAP
results will include several large impacts from the divestiture of the Folgers
business. The gain on the sale of the business will increase EPS by an
estimated $0.50 per share. This gain will be partially offset by a temporary
increase in restructuring spending of approximately $400 million after tax, or
about $0.12 per share. These restructuring programs are designed to generate
savings to offset the earnings dilution from the loss of the Folgers business
and related stranded overhead costs. Earnings dilution from Folgers is
estimated to be $0.04 per share for the fiscal year. The one-time gain from
the sale is expected to occur in the October - December 2008 quarter. The
Folgers transaction is a non-cash event. It will not impact operating profit
results, but will result in substantial additional share repurchase. The
incremental restructuring costs will be incurred throughout the fiscal year
and are expected to reduce fiscal year 2009 operating margins by approximately
50-basis points. The company estimates the incremental restructuring spending
will affect quarterly EPS results by the following approximate amounts:
Quarterly EPS Impact from Incremental Restructuring
Jul - Sep Oct - Dec Jan - Mar Apr - Jun Fiscal Year
'08 '08 '09 '09 2009
~($0.04) ~($0.04) ~($0.02) ~($0.02) ~($0.12)

Fiscal year 2009 organic sales are expected to increase four to six
percent. Organic volume is expected to grow two to three percent and the
combination of pricing and product mix is also expected to contribute two to
three percent to organic sales growth. In addition, foreign exchange is
forecast to add approximately two to three percent, and the net impact of
acquisitions and divestitures is estimated to reduce sales growth by one to
two percent. Total sales are expected to increase five to seven percent.
P&G said it expects gross margin for fiscal year 2009 to decline 75 to
125-basis points. Commodity and energy costs are estimated to be up $3
billion versus fiscal year 2008. Price increases are being implemented at
levels sufficient to offset the dollar value of higher commodity and energy
costs and maintain profit, but not at levels necessary to maintain gross or
operating margins. As a result, the combined impact of pricing and commodity
cost is expected to reduce gross margins by about 180-basis points, which is
included in the guidance range above. This impact will be partially offset
by ongoing cost savings projects and fixed cost leverage on higher volume.
P&G expects SG&A expenses to decrease 75 to 125-basis points with benefits
from productivity efforts more than offsetting approximately 50-basis points
of incremental restructuring charges related to the Folgers transaction.
The company expects operating margins to be flat versus the previous year.
The tax rate is expected to be between 27% and 28% for the fiscal year.
P&G said it expects fiscal year 2009 GAAP EPS of $4.18 to $4.25. This
range includes the estimated $0.50 gain from the Folgers sale and the $0.12
investment in incremental restructuring, described above. Excluding these
items, P&G expects Fiscal 2009 adjusted EPS of $3.80 to $3.87 per share, which
includes $0.04 of Folgers dilution.
July - September 2008 Quarter Guidance
For the July - September quarter, the company expects organic sales to
increase four to six percent. Organic volume is expected to grow two to three
percent and the combination of pricing and product mix is expected to add two
to three percent. In addition, foreign exchange is forecast to add
approximately four to five percent, and the net impact of acquisitions and
divestitures is estimated to reduce sales growth by about one percent. Total
sales are expected to increase seven to ten percent.
P&G said it expects earnings per share of $0.98 to $1.00 for the quarter.
Operating margin is expected to decline by 80 to 140-basis points as
significant productivity improvements in SG&A will be more than offset by
lower gross margins. Gross margin is expected to decline by 250 to 300-basis
points due to peak commodity cost pressure versus prior year. Gross margins
are expected to improve sequentially during the balance of the fiscal year.
Other income will be up versus the previous fiscal year due to the timing
of minor brand divestitures such as ThermaCare which was announced in July.
The company expects the effective tax rate for the quarter to be about 28%.
Forward Looking Statements
All statements, other than statements of historical fact included in this
release, are forward-looking statements, as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such statements are based on
financial data, market assumptions and business plans available only as of the
time the statements are made, which may become out of date or incomplete. We
assume no obligation to update any forward-looking statement as a result of
new information, future events or other factors. Forward-looking statements
are inherently uncertain, and investors must recognize that events could
differ significantly from our expectations. In addition to the risks and
uncertainties noted in this release, there are certain factors that could
cause actual results to differ materially from those anticipated by some of
the statements made. These include: (1) the ability to achieve business plans,
including with respect to lower income consumers and growing existing sales
and volume profitably despite high levels of competitive activity, especially
with respect to the product categories and geographical markets (including
developing markets) in which the Company has chosen to focus; (2) the ability
to successfully execute, manage and integrate key acquisitions and mergers,
including (i) the Domination and Profit Transfer Agreement with Wella, and
(ii) the Company's merger with The Gillette Company, and to achieve the cost
and growth synergies in accordance with the stated goals of these
transactions; (3) the ability to manage and maintain key customer
relationships; (4) the ability to maintain key manufacturing and supply
sources (including sole supplier and plant manufacturing sources); (5) the
ability to successfully manage regulatory, tax and legal matters (including
product liability, patent, intellectual property, and competition law
matters), and to resolve pending matters within current estimates; (6) the
ability to successfully implement, achieve and sustain cost improvement plans
in manufacturing and overhead areas, including the Company's outsourcing
projects; (7) the ability to successfully manage currency (including currency
issues in volatile countries), debt, interest rate and commodity cost
exposures; (8) the ability to manage continued global political and/or
economic uncertainty and disruptions, especially in the Company's significant
geographical markets, as well as any political and/or economic uncertainty and
disruptions due to terrorist activities; (9) the ability to successfully
manage competitive factors, including prices, promotional incentives and trade
terms for products; (10) the ability to obtain patents and respond to
technological advances attained by competitors and patents granted to
competitors; (11) the ability to successfully manage increases in the prices
of raw materials used to make the Company's products; (12) the ability to stay
close to consumers in an era of increased media fragmentation; (13) the
ability to stay on the leading edge of innovation and maintain a positive
reputation on our brands; and (14) the ability to successfully separate the
Company's coffee business. For additional information concerning factors that
could cause actual results to materially differ from those projected herein,
please refer to our most recent 10-K, 10-Q and 8-K reports.
About Procter & Gamble
Three billion times a day, P&G brands touch the lives of people around the
world. The company has one of the strongest portfolios of trusted, quality,
leadership brands, including Pampers(R), Tide(R), Ariel(R), Always(R),
Whisper(R), Pantene(R), Mach3(R), Bounty(R), Dawn(R), Gain(R), Pringles(R),
Folgers(R), Charmin(R), Downy(R), Lenor(R), Iams(R), Crest(R), Oral-B(R),
Actonel(R), Duracell(R), Olay(R), Head & Shoulders(R), Wella(R), Gillette(R),
and Braun(R). The P&G community consists of 138,000 employees working in over
80 countries worldwide. Please visit http://www.pg.com for the latest news and
in-depth information about P&G and its brands.

The Procter & Gamble Company

Exhibit 1: Non-GAAP Measures
In accordance with the SEC's Regulation G, the following provides
definitions of the non-GAAP measures used in the earnings release and the
reconciliation to the most closely related GAAP measure.
Organic Sales Growth. Organic sales growth is a non-GAAP measure of sales
growth excluding the impacts of acquisitions, divestitures and foreign
exchange from year-over-year comparisons. We believe this provides investors
with a more complete understanding of underlying sales trends by providing
sales growth on a consistent basis.

The reconciliation of reported sales growth to organic sales in the 2008
fiscal year:

Total P&G Baby Care & Family Care
Apr - Jun FY 2008 Apr - Jun FY 2008
Total Sales Growth 10% 9% 10% 9%
Less: Foreign Exchange -5% -6% -4%
Impact -6%
Less: 1% 6% 3%
Acquisition/Divestiture
Impact 1%
Organic Sales Growth 5% 5% 10% 8%

Free Cash Flow. Free cash flow is defined as operating cash flow less
capital spending. We view free cash flow as an important measure because it
is one factor in determining the amount of cash available for dividends and
discretionary investment. Free cash flow is also one of the measures used to
evaluate senior management and is a factor in determining their at-risk
compensation.
Free Cash Flow Productivity. Free cash flow productivity is defined as
the ratio of free cash flow to net earnings. The company's long-term target
is to generate free cash at or above 90 percent of net earnings. Free cash
flow productivity is also one of the measures used to evaluate senior
management. The reconciliation of free cash flow and free cash flow
productivity is provided below ($ millions):

Operating Capital Free Cash Net Free Cash Flow
Cash Flow Spending Flow Earnings Productivity

Apr - Jun '08 $4,096 $(1,194) $2,902 $3,016 96%

Fiscal 2008 $15,814 $(3,046) $12,768 $12,075 106%

Adjusted Net Earnings Per Share. Adjusted net earnings per share exclude
the net tax benefits from a number of significant adjustments to tax reserves
during fiscal year 2008. We believe this provides investors with a more
consistent and comparable reference point for assessing the underlying
earnings growth since we do not view items of this magnitude as part of our
sustainable results.

Apr - Jun FY 2008
Diluted Net Earnings Per Share $0.92 $3.64
Less: Significant adjustments to tax reserves ($0.12) ($0.14)
Adjusted Net Earnings Per Share $0.80 $3.50

Exhibit 2: FY 2009 Guidance
The following provides FY 2009 earnings per share guidance in a tabular
format to provide better clarity and transparency.

FY 2009 Adjusted EPS Guidance
(includes $0.04 Folgers dilution) $3.80 - $3.87
(compares to prior guidance of $3.80 - $3.85)

Add: Temporary Restructuring Increase
(approximately $400 million) ($0.12)

Add: One-time Gain on Folgers transaction $0.50

FY 2009 GAAP EPS Guidance $4.18 - $4.25

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Cash Flows Information

Twelve Months Ended June 30
2008 2007

BEGINNING CASH $5,354 $6,693

OPERATING ACTIVITIES
NET EARNINGS 12,075 10,340
DEPRECIATION AND AMORTIZATION 3,166 3,130
SHARE BASED COMPENSATION EXPENSE 555 668
DEFERRED INCOME TAXES 1,214 253
CHANGES IN:
ACCOUNTS RECEIVABLE 432 (729)
INVENTORIES (1,050) (389)
ACCOUNTS PAYABLE, ACCRUED AND OTHER
LIABILITIES 134 (273)
OTHER OPERATING ASSETS & LIABILITIES (1,239) (157)
OTHER 527 592

TOTAL OPERATING ACTIVITIES 15,814 13,435

INVESTING ACTIVITIES
CAPITAL EXPENDITURES (3,046) (2,945)
PROCEEDS FROM ASSET SALES 928 281
ACQUISITIONS, NET OF CASH ACQUIRED (381) (492)
CHANGE IN INVESTMENT SECURITIES (50) 673

TOTAL INVESTMENT ACTIVITIES (2,549) (2,483)

FINANCING ACTIVITIES
DIVIDENDS TO SHAREHOLDERS (4,655) (4,209)
CHANGE IN SHORT-TERM DEBT 1,844 8,981
ADDITIONS TO LONG TERM DEBT 7,088 4,758
REDUCTION OF LONG TERM DEBT (11,747) (17,929)
IMPACT OF STOCK OPTIONS AND OTHER 1,867 1,499
TREASURY PURCHASES (10,047) (5,578)

TOTAL FINANCING ACTIVITIES (15,650) (12,478)

EXCHANGE EFFECT ON CASH 344 187

CHANGE IN CASH AND CASH EQUIVALENTS (2,041) (1,339)

ENDING CASH $3,313 $5,354

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Balance Sheet Information

June 30, 2008 June 30, 2007

CASH AND CASH EQUIVALENTS $3,313 $5,354
INVESTMENTS SECURITIES 228 202
ACCOUNTS RECEIVABLE 6,761 6,629
TOTAL INVENTORIES 8,416 6,819
OTHER 5,797 5,027
TOTAL CURRENT ASSETS 24,515 24,031

NET PROPERTY, PLANT AND EQUIPMENT 20,640 19,540
NET GOODWILL AND OTHER INTANGIBLE ASSETS 94,000 90,178
OTHER NON-CURRENT ASSETS 4,837 4,265

TOTAL ASSETS $143,992 $138,014

ACCOUNTS PAYABLE $6,775 $5,710
ACCRUED AND OTHER LIABILITIES 10,154 9,586
TAXES PAYABLE 945 3,382
DEBT DUE WITHIN ONE YEAR 13,084 12,039
TOTAL CURRENT LIABILITIES 30,958 30,717

LONG-TERM DEBT 23,581 23,375
OTHER 19,959 17,162
TOTAL LIABILITIES 74,498 71,254

TOTAL SHAREHOLDERS' EQUITY 69,494 66,760

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $143,992 $138,014

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions Except Per Share Amounts)
Consolidated Earnings Information

AMJ QUARTER FYTD
% 6/30/ 6/30/ %
AMJ 08 AMJ 07 CHG 2008 2007 CHG

NET SALES $21,266 $19,272 10% $83,503 $76,476 9%
COST OF PRODUCTS SOLD 10,808 9,477 14% 40,695 36,686 11%
GROSS MARGIN 10,458 9,795 7% 42,808 39,790 8%
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE 6,618 6,395 3% 25,725 24,340 6%
OPERATING INCOME 3,840 3,400 13% 17,083 15,450 11%
TOTAL INTEREST EXPENSE 355 328 1,467 1,304
OTHER NON-OPERATING
INCOME, NET 67 136 462 564
EARNINGS BEFORE INCOME
TAXES 3,552 3,208 11% 16,078 14,710 9%
INCOME TAXES 536 940 4,003 4,370

NET EARNINGS $3,016 $2,268 33% $12,075 $10,340 17%

EFFECTIVE TAX RATE 15.1% 29.3% 24.9% 29.7%

PER COMMON SHARE:
BASIC NET EARNINGS $0.97 $0.71 37% $3.86 $3.22 20%
DILUTED NET EARNINGS $0.92 $0.67 37% $3.64 $3.04 20%
DIVIDENDS $0.40 $0.35 14% $1.45 $1.28 13%
AVERAGE DILUTED SHARES
OUTSTANDING 3,270.1 3,378.2 3,316.8 3,398.6

COMPARISONS AS A % OF NET Basis Basis
SALES Pt Chg Pt Chg

COST OF PRODUCTS SOLD 50.8% 49.2% 160 48.7% 48.0% 70
GROSS MARGIN 49.2% 50.8% (160) 51.3% 52.0% (70)
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE 31.1% 33.2% (210) 30.8% 31.8% (100)
OPERATING MARGIN 18.1% 17.6% 50 20.5% 20.2% 30
EARNINGS BEFORE INCOME
TAXES 16.7% 16.6% 10 19.3% 19.2% 10
NET EARNINGS 14.2% 11.8% 240 14.5% 13.5% 100

THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
(Amounts in Millions)
Consolidated Earnings Information

Three Months Ended June 30, 2008

% % %
Change Earnings Change Change
Versus Before Versus Versus
Net Year Income Year Net Year
Sales Ago Taxes Ago Earnings Ago

Beauty $5,036 11% $740 -6% $569 0%
Grooming 2,101 12% 538 32% 396 31%
Beauty GBU 7,137 11% 1,278 7% 965 11%

Health Care 3,596 7% 767 10% 526 15%
Snacks, Coffee and Pet Care 1,220 8% 206 7% 132 6%
Health and Well-Being GBU 4,816 8% 973 9% 658 13%

Fabric Care and Home Care 6,094 13% 1,251 10% 843 11%
Baby Care and Family Care 3,573 10% 631 18% 409 22%
Household Care GBU 9,667 12% 1,882 13% 1,252 14%

Total Business Segments 21,620 11% 4,133 10% 2,875 13%
Corporate (354) N/A (581) N/A 141 N/A
Total Company $21,266 10% $3,552 11% $3,016 33%

Twelve Months Ended June 30, 2008

% % %
Change Earnings Change Change
Versus Before Versus Versus
Net Year Income Year Net Year
Sales Ago Taxes Ago Earnings Ago

Beauty $19,515 9% $3,528 3% $2,730 5%
Grooming 8,254 11% 2,299 21% 1,679 21%
Beauty GBU 27,769 10% 5,827 9% 4,409 10%

Health Care 14,578 9% 3,746 11% 2,506 12%
Snacks, Coffee and Pet
Care 4,852 7% 762 0% 477 0%
Health and Well-Being GBU 19,430 8% 4,508 9% 2,983 10%

Fabric Care and Home Care 23,831 11% 5,078 9% 3,422 9%
Baby Care and Family Care 13,898 9% 2,700 18% 1,728 20%
Household Care GBU 37,729 10% 7,778 12% 5,150 13%

Total Business Segments 84,928 10% 18,113 10% 12,542 11%
Corporate (1,425) N/A (2,035) N/A (467) N/A
Total Company $83,503 9% $16,078 9% $12,075 17%

APRIL - JUNE NET SALES
INFORMATION
(Percent Change vs. Year Ago) *

Volume Volume
With Without
Acqui- Acqui-
sitions/ sitions/ Net
Divesti- Divesti- Foreign Mix/ Sales
tures tures Exchange Price Other Growth

Beauty GBU
Beauty 2% 2% 7% 2% 0% 11%
Grooming 3% 3% 8% 2% -1% 12%

Health and Well-Being GBU
Health Care 2% 3% 6% 1% -2% 7%
Snacks, Coffee and Pet
Care 1% 1% 4% 6% -3% 8%

Household Care GBU
Fabric Care and Home Care 4% 4% 6% 4% -1% 13%
Baby Care and Family Care 3% 9% 6% 2% -1% 10%

Total Company 3% 4% 6% 3% -2% 10%

FISCAL YEAR 2007/2008 NET SALES
INFORMATION
(Percent Change vs. Year Ago) *

Volume Volume
With Without
Acqui- Acqui-
sitions/ sitions/
Divesti- Divesti- Foreign Mix/ Total
tures tures Exchange Price Other Impact
Beauty GBU
Beauty 2% 3% 6% 0% 1% 9%
Grooming 5% 6% 7% 2% -3% 11%

Health and Well-Being GBU
Health Care 4% 4% 5% 1% -1% 9%
Snacks, Coffee and Pet
Care 2% 2% 3% 3% -1% 7%

Household Care GBU
Fabric Care and Home Care 6% 6% 5% 1% -1% 11%
Baby Care and Family Care 4% 8% 4% 1% 0% 9%

Total Company 4% 5% 5% 1% -1% 9%

* These sales percentage changes are approximations based on quantitative
formulas that are consistently applied.

SOURCE The Procter & Gamble Company

Media, Paul Fox, +1-513-983-3465, or Jennifer Chelune, +1-513-983-2570;
Investor Relations, Mark Erceg, +1-513-983-2414, all of P&G