Annual Report of P&G

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Designed to Lead
2009 Annual Report

A.G. Lafley Letter to Shareholders Bob McDonald Letter to Shareholders Touching Lives P&G Brands — Designed to Be Leaders Billion- and Half-Billion Dollar Brands Improving Life P&G Leaders — Built from Within Corporate Officers Board of Directors P&G at a Glance Financial Contents Shareholder Information 11-Year Financial Summary 1 5 8 10 12 16 18 24 25 26 27 72 73

Financial Highlights
Amounts in millions, except per share amounts 2009 2008 2007 2006 2005

Net Sales Operating Income Net Earnings Net Earnings Margin from Continuing Operations Diluted Net Earnings per Common Share from Continuing Operations Diluted Net Earnings per Common Share Dividends per Common Share

$79,029 16,123 13,436 14.3% $ 3.58 4.26 1.64

$81,748 16,637 12,075 14.4% $ 3.56 3.64 1.45

$74,832 15,003 10,340 13.4% $ 2.96 3.04 1.28

$66,724 12,916 8,684 12.7% $ 2.58 2.64 1.15

$55,292 10,026 6,923 12.0% $ 2.43 2.53 1.03

(in billions of dollars)

(per common share)

05 06 07 08

$55.3 $66.7 $74.8 $81.7 $79.0

05 06 07 08

$2.53 $2.64 $3.04 $3.64 $4.26

(in billions of dollars)

05 06 07 08

$8.6 $11.4 $13.4 $15.0 $14.9

Note: Previous period results have been amended to exclude the results of the Folgers coffee business from continuing operations. For more information refer to Note 12 on page 71.

The Procter & Gamble Company


A.G. Lafley Chairman of the Board

When I became CEO in 2000, P&G faced some of the most demanding challenges in the Company’s long history. We made the strategic choices necessary to get P&G back on track to sustainable growth. Overcoming the challenges in 2000 made us a better and more focused company, and in the years since, we have designed P&G to grow consistently and reliably. We faced even greater challenges in fiscal 2009 as we encountered one of the most difficult economic environments in decades. Shortly after we began the fiscal year, oil reached an all-time high of $147 per barrel. In September, following the Lehman Brothers bankruptcy, credit markets stopped functioning normally. This impacted suppliers, retailers and distributors, some of whom went out of business and many of whom significantly reduced inventory levels to conserve cash. The credit crisis, combined with falling housing prices and equity markets, led to a severe economic contraction in the U.S. and most other developed countries. Nearly 30 million people lost their jobs worldwide and consumer behavior changed dramatically. Consumers pulled back on discretionary purchases and pushed relentlessly for the best value in nondiscretionary categories. Global economic growth stopped — GDP declined from +4% during the first quarter of calendar 2008 to -6% in the fourth quarter, a ten-point swing. Economies also slowed in developing markets — in China, Central and Eastern Europe and the Middle East. These markets, which had been growing GDP about + 6%, slowed to an average - 1% during the fourth quarter of 2008 — a seven-point swing. Global anxiety and risk aversion drove a flight to the safety of U.S. dollars, resulting in the swiftest, broadest and deepest foreign exchange move in modern times. Commodity cost and currency exchange rate volatility placed tremendous pressure on our business. We incurred roughly $2 billion in net commodity and energy costs this year, on top of about $1 billion in the prior year. Foreign exchange reduced P&G’s fiscal 2009 sales by about four percentage points, or approximately $4 billion, and profit by more than $1 billion. Consumer spending declined and volume growth in the broad majority of categories in which we compete slowed to an average of 1–2%, versus 3–4% in the prior year. BALANCING NEAR-TERM RESULTS AND LONG-TERM GROWTH

We made two critical choices to deal with this macroeconomic environment: (1) to focus on disciplined cash and cost...
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