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P&G Reports Accelerated Sales and Unit Volume Growth
Date:1/28/2010

CINCINNATI, Jan. 28, 2010 /PRNewswire-FirstCall/ -- The Procter & Gamble Company (NYSE: PG) delivered net sales growth of six percent for the October - December quarter to $21.0 billion.  Organic sales grew five percent which was at the top of the Company's guidance range.  Diluted net earnings per share were $1.49 and diluted net earnings per share from continuing operations were $1.01.  Core EPS increased 22 percent to $1.10 for the quarter, above the Company's guidance range, on better than expected sales growth and margin expansion.  The Company raised its expectations of fiscal 2010 organic sales growth and Core EPS.

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"We are pleased with the top- and bottom-line underlying results for the quarter," said Chairman of the Board, President and Chief Executive Officer Bob McDonald.  "Our investments in innovation, portfolio expansion, marketing support and consumer value are working.  We continue to drive simplification and leverage our scale to create cost advantages and accelerate growth.  While economic uncertainty remains, we're confident these strategies will enable P&G to serve more consumers in more parts of the world, more completely and deliver profitable market share growth."  

Executive Summary

  • Diluted net earnings per share were $1.49.  Core EPS grew 22 percent to $1.10. Core EPS is earnings per share from continuing operations excluding a legal reserve established in the current period and incremental Folgers-related restructuring charges in the base period.  
  • Net sales increased six percent for the quarter to $21.0 billion on higher unit volume and favorable foreign exchange. Organic sales growth, which excludes the impacts of acquisitions, divestitures and foreign exchange, was five percent.  
  • Operating margin expanded 160 basis points for the quarter behind a 330 basis point improvement in gross margin, partially offset by a 170 basis point increase in selling, general and administrative (SG&A) expenses.
  • Operating cash flow was $3.3 billion for the quarter, an increase of 50 percent.  Adjusted free cash flow, which is operating cash flow less capital spending and the impacts of the global pharmaceuticals divestitures, was $3.1 billion and over 96 percent of net earnings excluding the impacts of the global pharmaceuticals divestitures.  

Key Financial Highlights

Net sales increased six percent during the October - December quarter to $21.0 billion on a five percent increase in unit volume.  Organic sales grew five percent driven by initiative activity, strengthened marketing plans, targeted improvements in consumer value, market growth in some businesses and a base period that was impacted by trade inventory reductions and consumption declines.  Price increases contributed one percent to net sales growth as the impact of prior period increases taken in developing regions to offset currency devaluations were partially offset by pricing investments to improve consumer value.  Negative geographic mix impacts reduced net sales by two percent.  Favorable foreign exchange added two percent to net sales growth as key foreign currencies strengthened versus the U.S. dollar.  Volume growth was broad-based with growth in all geographic regions.  

Diluted net earnings per share from continuing operations increased 13 percent to $1.01 for the second fiscal quarter, including a charge of $0.09 related to pending European legal matters.  Net earnings from continuing operations were $3.1 billion.  The effective tax rate on continuing operations increased 450 basis points primarily due to lower audit settlements and foreign tax credits and the non-deductibility of certain unusual items.  Core EPS grew 22 percent to $1.10 driven by net sales growth and margin expansion.

Diluted net earnings per share declined six percent for the quarter to $1.49.  Net earnings decreased seven percent due to lower current-period after-tax gains on the sale of discontinued operations, partially offset by an increase in earnings from continuing operations.  The current period gain on the sale of the global pharmaceuticals business was $1.5 billion versus a $2.0 billion gain on the sale of the Folgers business in the prior year period.  

Operating margin increased 160 basis points versus the prior year period due to higher gross margin, partially offset by an increase in SG&A as a percentage of net sales.  Gross margin expanded to 53.7 percent of net sales, an increase of 330 basis points mainly due to lower commodity costs and manufacturing cost savings.  SG&A as a percentage of net sales increased 170 basis points due to increased marketing spending, higher foreign currency exchange costs and the aforementioned legal item, partially offset by lower overhead spending as a percentage of net sales.

Operating cash flow was $3.3 billion during the second fiscal quarter, up 50 percent versus the prior year mainly due to reductions in working capital balances driven by higher current period accruals and taxes payable.  Adjusted free cash flow was $3.1 billion and 96 percent of net earnings excluding the impacts of the global pharmaceuticals divestitures.  Capital expenditures were 3.4 percent of net sales.  

Business Segment Discussion

Beauty and Grooming GBU

  • Beauty net sales increased seven percent in the second fiscal quarter to $5.2 billion on a two percent increase in unit volume.  Organic sales increased four percent versus the prior year period.  Price increases, primarily in developing regions to offset currency impacts, and favorable foreign exchange added two percent and three percent, respectively, to net sales growth.  Organic volume, which excludes acquisitions and divestitures, was up three percent behind mid-single-digits growth in developing regions.  Organic volume in Hair Care increased mid-single digits mainly due to strong growth in Asia.  Volume in Female Beauty increased low single digits primarily due to higher shipments of female skin care and personal cleansing products.  Volume in Salon Professional was down double digits due to the exit of non-strategic businesses, while organic volume declined mid-single digits mainly behind continued market contractions.  Volume in Prestige decreased low single digits as continued contraction of the fragrance market was mostly offset by trade inventory reductions in the prior year period.  Net earnings were up seven percent versus the prior year period to $876 million on higher net sales and operating margin expansion, partially offset by a higher tax rate.  Gross margin expansion, primarily due to price increases and manufacturing cost savings, was partially offset by higher SG&A as a percentage of sales behind increased marketing spending and higher foreign currency exchange costs.

  • Grooming net sales grew three percent to $2.1 billion for the quarter on a two percent decline in unit volume.  Organic sales were consistent with the prior year period as volume declines and negative mix impacts were offset by price increases.  Favorable foreign exchange contributed three percent to net sales.  Price increases, taken mainly in developing regions to offset currency impacts, added four percent to net sales for the quarter.  Negative mix impacts reduced net sales by two percent as volume declines disproportionately affected developed markets and premium shaving systems, both of which have higher than segment average selling prices.  Male Blades and Razors organic volume was in line with the prior year period as market contractions in developed regions and share losses in Western Europe were offset by initiative-driven growth in developing regions.  Volume declines in premium shaving systems were mostly offset by growth in lower priced systems and disposables.  Male Personal Care volume declined high single digits behind increased competitive promotional activity on shave preparation products and distribution declines on a non-strategic deodorant brand.  Braun volume decreased low single digits behind a double-digit decline in developing regions mainly due to market contractions.  Net earnings increased 10 percent to $433 million for the quarter due to net sales growth and operating margin expansion driven by higher gross margin, partially offset by higher SG&A as a percentage on net sales.  Gross margin increased due to price increases and lower commodity costs.  SG&A as a percentage of net sales increased behind higher foreign currency exchange costs, partially offset by lower overhead and marketing spending as a percentage of net sales.

Health & Well-Being GBU

  • Health Care net sales were up five percent for the quarter to $3.1 billion on a three percent increase in unit volume.  Organic sales grew two percent.  Favorable foreign exchange and positive pricing impacts added three percent and one percent, respectively, to net sales growth.  These impacts were partially offset by a two percent negative mix impact resulting from disproportionate growth in developing regions and unfavorable product mix.  Volume in developing regions grew high single digits, while developed regions grew low single digits.  Personal Health Care volume increased mid-single digits behind double-digit growth of Vicks due to higher cold and flu levels and double-digit growth of diagnostics products, partially offset by lower shipments of Prilosec OTC in North America due to increased competitive activity.  Feminine Care volume was up low single digits due mainly to growth in the CEEMEA and Asia regions, partially offset by share losses in Latin America following price increases.  Oral Care volume grew mid-single digits behind initiative-driven growth in Western Europe, Latin America and Asia and trade inventory reductions in the base period.  Net earnings grew eight percent in the quarter to $534 million on higher net sales and net earnings margin expansion.  An increase in gross margin due to price increases and manufacturing cost savings was partially offset by higher SG&A as a percentage of net sales driven by higher foreign currency exchange costs and increased investments to support business growth.

  • Snacks and Pet Care net sales increased six percent to $835 million for the quarter on a one percent increase in unit volume.  Organic sales increased three percent.  The carryover impact of pricing to recover higher commodity costs added five percent to net sales.  This was partially offset by negative mix impacts of two percent driven by the discontinuation of premium snack products which had higher than segment average selling prices.  Favorable foreign exchange contributed two percent to net sales growth.  Volume in Snacks declined low single digits driven by lower merchandising activity in North America and the discontinuation of some premium snack products.  Volume in Pet Care increased mid-single digits behind continued success of product initiatives and increased promotional activity.  Net earnings increased 56 percent versus the prior year period to $98 million behind higher gross margin resulting from price increases, lower commodity costs and manufacturing cost savings.  SG&A as a percentage of net sales increased primarily due to higher marketing spending.

Household Care GBU

  • Fabric Care and Home Care net sales grew nine percent in the second fiscal quarter to $6.3 billion on an eight percent increase in unit volume.  Organic sales increased seven percent.  Pricing investments to improve consumer value reduced net sales by one percent.  Favorable foreign exchange added two percent to net sales growth.  All major brands contributed to volume growth for the segment.  Fabric Care volume increased high single digits mainly due to a low base period, which included trade inventory reductions, and initiative-driven growth in the current period.  Volume growth was broad-based in Fabric Care, with growth in all regions.  Home Care volume grew double digits due to initiative activity in all regions, market growth in North America and CEEMEA and trade inventory reductions in the prior year period.  Batteries volume increased low single digits due to market growth in developing regions and trade inventory reductions in the prior year period.  Net earnings grew 47 percent to $965 million primarily due to gross margin expansion and net sales growth, partially offset by higher SG&A as a percentage of net sales.  Gross margin increased behind manufacturing cost savings and lower commodity costs.  SG&A as a percentage of net sales increased mainly due to increased marketing spending, partially offset by overhead spending efficiencies.

  • Baby Care and Family Care net sales increased 10 percent to $3.8 billion for the quarter on 10 percent volume growth.  Organic sales grew eight percent behind volume growth, partially offset by negative two percent product mix impacts due to a shift toward larger count packages, which have lower than segment average selling prices.  Favorable foreign exchange added two percent to net sales growth.  Baby Care volume was up high single digits behind incremental initiative activity and merchandising support, as well as market growth.  Family Care volume grew double digits due to initiatives launched in the previous quarter and incremental merchandising activity.  Net earnings were up 39 percent for the quarter to $579 million driven by gross margin expansion and net sales growth.  Gross margin increased behind lower commodity costs and manufacturing cost savings.  

Fiscal Year 2010 Guidance

Net sales growth is estimated to be three to six percent for fiscal year 2010.  Foreign exchange is expected to increase net sales by zero to one percent, while the net impact of acquisitions and divestitures is not expected to have a material impact on net sales.  The Company increased its expectations for organic sales growth by one percent to three to five percent versus previous guidance of two to four percent.  The Company maintained its previously communicated diluted net earnings per share guidance of $4.02 to $4.12.  Diluted net earnings per share from continuing operations are expected to be $3.44 to $3.54.  Core EPS guidance increased to $3.53 to $3.63, recognizing improvement in the underlying business.  Core EPS is expected to be up two to five percent versus year ago.

January - March 2010 Quarter Guidance

For the January - March quarter, net sales are expected to increase seven to ten percent.  Organic sales are expected to grow four to six percent.  Foreign exchange is expected to increase net sales by three to four percent, while the net impact of acquisitions and divestitures is not expected to have a material impact on net sales.  Diluted net earnings per share, diluted net earnings per share from continuing operations and Core EPS are each expected to be $0.77 to $0.82.  Diluted net earnings per share are expected to decline two to eight percent, while diluted net earnings per share from continuing operations and Core EPS are expected to be down five to up one percent versus the prior year period, reflecting commodity, market and investment trends.

Forward-Looking Statements

All statements, other than statements of historical fact included in this release or presentation, 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 or presentation, 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 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 manage ongoing acquisition and divestiture activities to achieve the cost and growth synergies in accordance with the stated goals of these transactions without impacting the delivery of base business objectives; (3) the ability to successfully manage ongoing organizational changes designed to support our growth strategies, while successfully identifying, developing and retaining key employees; (4) the ability to manage and maintain key customer relationships; (5) the ability to maintain key manufacturing and supply sources (including sole supplier and plant manufacturing sources); (6) the ability to successfully manage regulatory, tax and legal requirements and matters (including product liability, patent, intellectual property, competition law matters, and tax policy), and to resolve pending matters within current estimates; (7) the ability to successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead areas, including the Company's outsourcing projects; (8) the ability to successfully manage currency (including currency issues in certain countries, such as Venezuela, China and India), debt, interest rate and commodity cost exposures and significant credit or liquidity issues; (9) 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 a global or regional credit crisis or terrorist and other hostile activities; (10) the ability to successfully manage competitive factors, including prices, promotional incentives and trade terms for products; (11) the ability to obtain patents and respond to technological advances attained by competitors and patents granted to competitors; (12) the ability to successfully manage increases in the prices of raw materials used to make the Company's products; (13) the ability to stay close to consumers in an era of increased media fragmentation; (14) the ability to stay on the leading edge of innovation and maintain a positive reputation on our brands; and (15) the ability to rely on and maintain key information technology systems.  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

Four 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®, Tide®, Ariel®, Always®, Whisper®, Pantene®, Mach3®, Bounty®, Dawn®, Gain®, Pringles®, Charmin®, Downy®, Lenor®, Iams®, Crest®, Oral-B®, Actonel®, Duracell®, Olay®, Head & Shoulders®, Wella®, Gillette®, Braun® and Fusion®. The P&G community includes approximately 135,000 employees working in about 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 for the October - December quarter is as follows:

    
    
    
                              Net       Foreign      Acquisition/    Organic
                             Sales      Exchange     Divestiture      Sales
    Oct - Dec '09            Growth      Impact         Impact*      Growth
                             ------     --------     ------------    -------
    Beauty                      7%         -3%            0%             4%
    Grooming                    3%         -3%            0%             0%
    Health Care                 5%         -3%            0%             2%
    Snacks and Pet Care         6%         -2%           -1%             3%
    Fabric Care and Home Care   9%         -2%            0%             7%
    Baby Care and Family Care  10%         -2%            0%             8%
    --------------------      ---         ---           ---            ---
    Total P&G                   6%         -2%            1%             5%
    ---------                 ---         ---           ---            ---
    
    *Acquisition/Divestiture Impact includes rounding impacts necessary to 
    reconcile net sales to organic sales.

Core EPS:  This is a measure of the Company's diluted net earnings per share from continuing operations excluding a charge for pending European legal matters and incremental restructuring charges incurred to offset the dilutive impact of the Folgers divestiture.  We do not view these items to be part of our sustainable results.  We believe the core EPS measure provides an important perspective of underlying business trends and results and provides a more comparable measure of year-on-year earnings per share growth.  The table below provides a reconciliation of reported diluted net earnings per share from continuing operations to core earnings per share:

    
    
    
                                                       OND 08       OND 09
                                                       ------       ------
    Diluted Net Earnings Per Share - Continuing
     Operations                                         $0.89        $1.01
    Incremental Folgers-related Restructuring Charges   $0.01            -
    Charge for Pending European Legal Matters              -         $0.09
                                                          ---        -----
    Core EPS                                            $0.90        $1.10
    Core EPS Growth                                                    22%
    
    
                                                        JFM 09      JFM 10
                                                        ------      ------
    Diluted Net Earnings Per Share - Continuing
     Operations                                         $0.78  $0.77 to $0.82
    Incremental Folgers-related Restructuring
     Charges                                            $0.03         -
                                                        -----   --------------
    Core EPS                                            $0.81  $0.77 to $0.82
    Core EPS Growth                                              -5% to 1%
    
    
                                                        FY 2009    FY 2010
                                                        -------    -------
    Diluted Net Earnings Per Share                      $4.26  $4.02 to $4.12
    Folgers Results of Operations and Gain
     on the Sale                                       ($0.68)        -
    Gain on the Sale of Pharmaceuticals                   -        ($0.47)
    Gain on the Sale of Actonel in Japan                  -        ($0.04)
    Pharmaceuticals Results of Operations              ($0.19)     ($0.07)
                                                       ------      ------
    Diluted Net Earnings Per Share -
     Continuing Operations                              $3.39  $3.44 to $3.54
    Incremental Folgers-related
     Restructuring Charges                              $0.09         -
    Charge for Pending European Legal Matters             -         $0.09
    Rounding Impacts                                   ($0.01)        -
                                                       ------  --------------
    Core EPS                                            $3.47  $3.53 to $3.63
    Core EPS Growth                                               2% to 5%
    

Adjusted Free Cash Flow: Adjusted free cash flow is defined as operating cash flow less capital spending and the after-tax impacts of the global pharmaceuticals divestitures (including Actonel in Japan).  We exclude the after-tax impacts of the global pharmaceuticals divestitures on adjusted free cash flow because we do not view these impacts to be part of our underlying business results.  We view adjusted 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.

    
    
                                      Tax Payments -
                                          Global      
                Operating   Capital   Pharmaceuticals   Adjusted Free
                Cash Flow   Spending    Divestitures      Cash Flow
                ---------   --------  ---------------   -------------
    Oct – 
     Dec 09       $3,294     ($722)         $490           $3,062
    -------       ------      -----         ----           ------

Adjusted Free Cash Flow Productivity: Adjusted free cash flow productivity is defined as the ratio of free cash flow to net earnings excluding the gains on the divestiture of the global pharmaceuticals business, including Actonel in Japan.  Given the size of these gains and our view that they are not part of our sustainable business, we have excluded the gains from our calculation.  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.  We believe this provides a better perspective of our underlying liquidity trends.  The reconciliation of adjusted free cash flow productivity is provided below (amounts in millions):

    
    
                                                Net Earnings
           Adjusted                      Global    Excluding   Adjusted Free
             Free             Actonel    Pharma-    Certain      Cash Flow
             Cash     Net      Japan   ceuticals  Divestiture     Produc-
             Flow   Earnings   Gain       Gain       Gain         tivity
           -------- --------  -------  --------- ------------  -------------
    Oct – 
     Dec 09  $3,062 $4,659       -       $1,464      $3,195         96%
    -------  ------ ------      ---      ------      ------         ---
    
    
    
                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                  (Amounts in Millions Except Per Share Amounts)              
                         Consolidated Earnings Information                    
                                                                              
                                         ------------------------------------ 
                                         Three Months Ended December 31, 2009 
                                         ------------------------------------ 
                                                                              
                                             OND 09      OND 08          % CHG
                                             ------      ------          -----
    NET SALES                               $21,027     $19,763            6% 
      COST OF PRODUCTS SOLD                   9,736       9,799           (1)%
                                              -----       -----               
    GROSS MARGIN                             11,291       9,964           13% 
       SELLING, GENERAL & ADMINISTRATIVE                                      
        EXPENSE                               6,636       5,909           12% 
                                              -----       -----               
    OPERATING INCOME                          4,655       4,055           15% 
      TOTAL INTEREST EXPENSE                    224         354          (37)%
      OTHER NON-OPERATING INCOME, NET            53          67          (21)%
                                                ---         ---               
    EARNINGS FROM CONTINUING                                                  
     OPERATIONS BEFORE INCOME TAXES           4,484       3,768           19% 
      INCOME TAXES                            1,335         955               
                                                                              
    NET EARNINGS FROM CONTINUING                                              
     OPERATIONS                               3,149       2,813           12% 
                                              -----       -----               
                                                                              
    NET EARNINGS FROM DISCONTINUED                                            
     OPERATIONS                               1,510       2,191          (31)%
                                              -----       -----               
                                                                              
    NET EARNINGS                              4,659       5,004           (7)%
                                              =====       =====               
                                                                              
    EFFECTIVE TAX RATE FROM CONTINUING                                        
     OPERATIONS                                29.8%       25.3%              
                                                                              
                                                                              
    PER COMMON SHARE:                                                         
       BASIC NET EARNINGS - CONTINUING                                        
        OPERATIONS                            $1.06       $0.94               
       BASIC NET EARNINGS -                                                  
        DISCONTINUED OPERATIONS               $0.52       $0.74               
                                              -----       -----               
       BASIC NET EARNINGS                     $1.58       $1.68               
                                                                              
        DILUTED NET EARNINGS -                                                
         CONTINUING OPERATIONS                $1.01       $0.89           13% 
        DILUTED NET EARNINGS  -                                               
         DISCONTINUED OPERATIONS              $0.48       $0.69          (30)%
                                              -----       -----               
        DILUTED NET EARNINGS                  $1.49       $1.58           (6)%
                                                                              
        DIVIDENDS                             $0.44       $0.40           10% 
    AVERAGE DILUTED SHARES OUTSTANDING      3,118.5     3,170.8               
                                                                              
                                                                              
                                                                              
    COMPARISONS AS A % OF NET SALES                              Basis Pt Chg 
    -------------------------------                                           
      COST OF PRODUCTS SOLD                    46.3%       49.6%        (330) 
      GROSS MARGIN                             53.7%       50.4%         330  
      SELLING, GENERAL & ADMINISTRATIVE                                      
       EXPENSE                                 31.6%       29.9%         170  
      OPERATING MARGIN                         22.1%       20.5%         160  
      EARNINGS FROM CONTINUING                                              
       OPERATIONS BEFORE INCOME TAXES          21.3%       19.1%         220  
      NET EARNINGS FROM CONTINUING                                           
       OPERATIONS                              15.0%       14.2%          80  
                                                                              
                                                                              
                                         ----------------------------------- 
                                                         FYTD                 
                                         ----------------------------------- 
                                                                              
                                         12/31/2009  12/31/2008         % CHG 
                                         ----------  ----------         ----- 
    NET SALES                               $40,834     $40,746            0% 
      COST OF PRODUCTS SOLD                  19,134      20,357           (6)%
                                             ------      ------               
    GROSS MARGIN                             21,700      20,389            6% 
      SELLING, GENERAL & ADMINISTRATIVE                                      
       EXPENSE                               12,597      11,948            5% 
                                             ------      ------               
    OPERATING INCOME                          9,103       8,441            8% 
      TOTAL INTEREST EXPENSE                    511         693          (26)%
      OTHER NON-OPERATING INCOME, NET            76         347          (78)%
                                                ---         ---               
    EARNINGS FROM CONTINUING                                                  
     OPERATIONS BEFORE INCOME TAXES           8,668       8,095            7% 
      INCOME TAXES                            2,492       2,167               
                                                                              
    NET EARNINGS FROM CONTINUING                                              
     OPERATIONS                               6,176       5,928            4% 
                                              -----       -----               
                                                                              
    NET EARNINGS FROM DISCONTINUED                                            
     OPERATIONS                               1,790       2,424          (26)%
                                              -----       -----               
                                                                              
    NET EARNINGS                              7,966       8,352           (5)%
                                              =====       =====               
                                                                              
    EFFECTIVE TAX RATE FROM CONTINUING                                        
     OPERATIONS                                28.7%       26.8%              
                                                                              
                                                                              
    PER COMMON SHARE:                                                         
       BASIC NET EARNINGS - CONTINUING                                        
        OPERATIONS                            $2.08       $1.96               
       BASIC NET EARNINGS -                                                  
        DISCONTINUED OPERATIONS               $0.61       $0.81               
                                              -----       -----               
       BASIC NET EARNINGS                     $2.69       $2.77               
                                                                              
       DILUTED NET EARNINGS -                                                
        CONTINUING OPERATIONS                 $1.98       $1.85            7% 
       DILUTED NET EARNINGS  -                                               
        DISCONTINUED OPERATIONS               $0.58       $0.76          (24)%
                                              -----       -----               
       DILUTED NET EARNINGS                   $2.56       $2.61           (2)%
                                                                              
       DIVIDENDS                              $0.88       $0.80           10% 
    AVERAGE DILUTED SHARES OUTSTANDING      3,114.5     3,205.1               
                                                                              
                                                                              
                                                                              
    COMPARISONS AS A % OF NET SALES                              Basis Pt Chg 
    -------------------------------                                           
      COST OF PRODUCTS SOLD                    46.9%       50.0%        (310) 
      GROSS MARGIN                             53.1%       50.0%         310  
      SELLING, GENERAL & ADMINISTRATIVE                                      
       EXPENSE                                 30.8%       29.3%         150  
      OPERATING MARGIN                         22.3%       20.7%         160  
      EARNINGS FROM CONTINUING                                              
       OPERATIONS BEFORE INCOME TAXES          21.2%       19.9%         130  
      NET EARNINGS FROM CONTINUING                                           
       OPERATIONS                              15.1%       14.5%          60  
    
    
    
              THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES          
                          (Amounts in Millions)                      
                   Consolidated Cash Flows Information               
                                                                     
                                               ----------------------------  
                                               Six Months Ended December 31  
                                               ---------------------------- 
                                                        2009    2008 
                                                        ----    ---- 
                                                                     
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD    $4,781  $3,313 
                                                                     
    OPERATING ACTIVITIES                                             
        NET EARNINGS                                   7,966   8,352 
        DEPRECIATION AND AMORTIZATION                  1,529   1,503 
        SHARE-BASED COMPENSATION EXPENSE                 205     223 
        DEFERRED INCOME TAXES                             (7)    192 
        GAIN ON SALE OF BUSINESSES                    (2,637) (2,304)
        CHANGES IN:                                                  
            ACCOUNTS RECEIVABLE                         (826)   (775)
            INVENTORIES                                   48    (825)
            ACCOUNTS PAYABLE, ACCRUED AND OTHER                      
             LIABILITIES                               1,313    (668)
            OTHER OPERATING ASSETS & LIABILITIES         312    (150)
        OTHER                                            (54)     92 
                                                         ---     --- 
                                                                     
      TOTAL OPERATING ACTIVITIES                       7,849   5,640 
                                                       -----   ----- 
                                                                     
    INVESTING ACTIVITIES                                             
        CAPITAL EXPENDITURES                          (1,274) (1,421)
        PROCEEDS FROM ASSET SALES                      3,039   1,017 
        ACQUISITIONS, NET OF CASH ACQUIRED               (70)   (323)
        CHANGE IN INVESTMENTS                            (49)     52 
                                                         ---      -- 
                                                                     
      TOTAL INVESTING ACTIVITIES                       1,646    (675)
                                                       -----    ---- 
                                                                     
    FINANCING ACTIVITIES                                             
        DIVIDENDS TO SHAREHOLDERS                     (2,672) (2,493)
        CHANGE IN SHORT-TERM DEBT                     (2,902)  4,096 
        ADDITIONS TO LONG-TERM DEBT                    1,495   2,912 
        REDUCTIONS OF LONG-TERM DEBT                  (5,169) (2,183)
        TREASURY STOCK PURCHASES                      (1,414) (5,243)
        IMPACT OF STOCK OPTIONS AND OTHER                318     551 
                                                         ---     --- 
                                                                     
      TOTAL FINANCING ACTIVITIES                     (10,344) (2,360)
                                                     -------  ------ 
                                                                     
    EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH                 
     EQUIVALENTS                                         198    (265)
                                                         ---    ---- 
                                                                     
    CHANGE IN CASH AND CASH EQUIVALENTS                 (651)  2,340 
                                                        ----   ----- 
                                                                     
    CASH AND CASH EQUIVALENTS, END OF PERIOD          $4,130  $5,653 
                                                      ======  ====== 
    
    
    
                  THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES             
                              (Amounts in Millions)                         
                     Consolidated Balance Sheet Information                 
                                                                            
                                             December 31, 2009 June 30, 2009
                                             ----------------- -------------
                                                                            
    CASH AND CASH EQUIVALENTS                           $4,130        $4,781
    ACCOUNTS RECEIVABLE                                  6,544         5,836
    TOTAL INVENTORIES                                    6,864         6,880
    OTHER                                                4,223         4,408
                                                         -----         -----
    TOTAL CURRENT ASSETS                                21,761        21,905
                                                                            
    NET PROPERTY, PLANT AND EQUIPMENT                   19,646        19,462
    NET GOODWILL AND OTHER INTANGIBLE ASSETS            89,603        89,118
    OTHER NON-CURRENT ASSETS                             4,283         4,348
                                                         -----         -----
                                                                            
    TOTAL ASSETS                                      $135,293      $134,833
                                                      ========      ========
                                                                            
                                                                            
    ACCOUNTS PAYABLE                                    $5,433        $5,980
    ACCRUED AND OTHER LIABILITIES                       10,463         8,601
    DEBT DUE WITHIN ONE YEAR                             7,780        16,320
                                                         -----        ------
    TOTAL CURRENT LIABILITIES                           23,676        30,901
                                                                            
    LONG-TERM DEBT                                      22,309        20,652
    OTHER                                               20,361        19,898
                                                        ------        ------
    TOTAL LIABILITIES                                   66,346        71,451
                                                        ------        ------
                                                                            
                                                        ------        ------
    TOTAL SHAREHOLDERS' EQUITY                          68,947        63,382
                                                        ------        ------
                                                                            
                                                      --------      --------
    TOTAL LIABILITIES & SHAREHOLDERS' EQUITY          $135,293      $134,833
                                                      ========      ========
                                                                            
    Certain amounts for prior periods were reclassified to conform with the 
    fiscal 2010 presentation                                               
    
    
    
              THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
                       (Amounts in Millions)
                 Consolidated Earnings Information
    
                           Three Months Ended December 31, 2009
                           ------------------------------------
                                   Earnings                 
                                       From                
                            %    Continuing       %         Net         %
                         Change  Operations     Change    Earnings    Change
                         Versus      Before     Versus      From     Versus
                  Net      Year      Income      Year    Continuing    Year
                 Sales      Ago       Taxes       Ago    Operations     Ago
                ------    -----     -------     -----    ----------   -----
    
    Beauty and
     Grooming
     GBU
      Beauty     $5,217        7%      $1,137        8%        $876        7%
      Grooming    2,095        3%         613       11%         433       10%
    
    Health and
     Well-Being
     GBU
      Health
       Care       3,071        5%         790        9%         534        8%
      Snacks and 
       Pet Care     835        6%         143       39%          98       56%
    
    Household
     Care GBU
      Fabric
       Care and
       Home Care  6,311        9%       1,433       40%         965       47%
      Baby Care
       and Family
       Care       3,817       10%         925       39%         579       39%
    
    Total
     Business
     Segments    21,346        7%       5,041       22%       3,485       22%
    Corporate      (319)     N/A         (557)     N/A         (336)     N/A
                   ----      ---         ----      ---         ----      ---
    Total
     Company     21,027        6%       4,484       19%       3,149       12%
    
    
    
                             Six Months Ended December 31, 2009
                             ----------------------------------
                                     Earnings                
                                       From          
                            %       Continuing    %          Net        %   
                          Change   Operations   Change     Earnings   Change 
                          Versus      Before    Versus       From     Versus
                    Net     Year      Income      Year    Continuing    Year
                  Sales      Ago       Taxes       Ago    Operations     Ago
                 ------    -----     -------     -----    ----------   -----
    
    Beauty and
     Grooming
     GBU
      Beauty     $10,138        1%      $2,164        4%      $1,653        3%
      Grooming     3,953       -4%       1,102       -5%         784       -6%
    
    Health and
     Well-Being 
     GBU
      Health
       Care        6,050        0%       1,620        9%       1,084        9%
      Snacks and
       Pet Care    1,590       -1%         256       33%         172       46%
    
    Household
     Care GBU
      Fabric
       Care and
       Home Care  12,441        1%       2,943       29%       1,974       33%
      Baby Care
       and Family
       Care        7,406        2%       1,810       23%       1,136       22%
    
    Total
     Business
     Segments     41,578        1%       9,895       14%       6,803       14%
    Corporate       (744)     N/A       (1,227)     N/A         (627)     N/A
                    ----      ---       ------      ---         ----      ---
    Total
     Company      40,834        0%       8,668        7%       6,176        4%
    
    
    
                        OCTOBER - DECEMBER NET SALES INFORMATION 
                              (Percent Change vs. Year Ago) * 
    
                   Volume       Volume                                  
                    With        Without      
                Acquisitions/ Acquisitions/ Foreign                  Net Sales
                Divestitures  Divestitures  Exchange Price Mix/Other  Growth
                ------------  ------------ --------  ----- ---------  ------ 
    Beauty and 
     Grooming GBU 
      Beauty          2%           3%         3%      2%      0%         7%
      Grooming       -2%          -2%         3%      4%     -2%         3%
                 
    Health and 
     Well-Being GBU                                     
      Health Care     3%           3%         3%      1%     -2%         5%
      Snacks and
       Pet Care       1%           1%         2%      5%     -2%         6%
                                                     
    Household
     Care GBU                                        
      Fabric Care
       and Home
       Care           8%           8%         2%     -1%      0%         9%
      Baby Care
       and Family                                    
       Care          10%          10%         2%      0%     -2%        10%
                                                     
    Total Company     5%           5%         2%      1%     -2%         6%
    
    
    
                     FISCAL YEAR 2010/2009 NET SALES INFORMATION  
                            (Percent Change vs. Year Ago) * 
                              
                   Volume       Volume                                        
                    With        Without                                       
                Acquisitions/ Acquisitions/ Foreign                  Net Sales
                Divestitures  Divestitures  Exchange Price Mix/Other  Growth
                ------------  ------------  -------- ----- ---------  ------ 
    Beauty and
     Grooming GBU                         
      Beauty          0%           1%        -2%      3%      0%         1%
      Grooming       -5%          -5%        -3%      5%     -1%        -4%
                                          
    Health and
     Well-Being GBU                       
      Health Care     1%            1%       -3%      2%      0%         0%
      Snacks and
       Pet Care      -5%           -5%       -1%      5%      0%        -1%
                                          
    Household
     Care GBU                             
      Fabric Care
       and Home                           
       Care           3%            3%       -3%      1%      0%         1%
      Baby Care 
       and Family                         
       Care           4%            4%       -2%      1%     -1%         2%
                                          
    Total Company     1%            1%       -3%      2%      0%         0%
    
    * These sales percentage changes are approximations based on quantitative 
    formulas that are consistently applied.  

SOURCE Procter & Gamble

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