earnings and a significant improvement in working capital versus the
year-ago period. Free cash flow was 107% of earnings, well-ahead of
the company's 90% annual target.
P&G announced plans to separate its coffee business and create an independent company named The Folgers Coffee Company. The coffee business had sales of approximately $1.6 billion and operating income of about $350 million in fiscal 2007. The new company will employ approximately 1,250 employees at four sites in the U.S., and will be headquartered in Cincinnati, Ohio.
P&G stated its goals in this transaction are to maximize the after-tax value of the coffee business for P&G shareholders and to minimize earnings per share dilution. In addition, P&G said this decision will enable the company to better focus its resources on faster growing categories and, as a result, enhance P&G's ability to consistently deliver its annual financial goals as the expected growth rate of the coffee business is below P&G's target range.
P&G believes the transaction will be good for the coffee business as the business will get greater priority and attention as a standalone company. Folgers is the leading retail coffee brand in North America, has attractive operating profit margins and is a strong cash generator.
In anticipation of the transaction, P&G has named Mr. Jamie Egasti to serve as Chief Executive Officer of The Folgers Coffee Company. Mr. Egasti currently serves P&G as President, Coffee and Global Snacks.
Although no decision has been made on the form of the separation, P&G
expects to do a spin-off or split-off transaction. P&G's current preference
is to do a split-off transaction which is expected to be tax-free for
shareholders and result in lower annual earnings dilution than could be
achieved with a spin-off. In a split-off, P&G shareholders would be given
|SOURCE The Procter & Gamble Company|
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