CINCINNATI, Jan. 31, 2008 The Procter & GambleCompany (NYSE: PG) announced net sales growth of nine percent to $21.6 billionfor the quarter. Sales were up behind strong volume growth from continuedsuccess on key product initiatives and double-digit organic growth indeveloping regions. Organic volume increased six percent and organic saleswere up five percent for the quarter. Diluted earnings per share increased 17percent to $0.98 per share, above the top end of the company's $0.95 to $0.97per share guidance range. Earnings grew as topline growth and continuedGillette synergy benefits more than offset higher commodity costs.
"This quarter is another demonstration of P&G's capability to deliverstrong results in a difficult competitive and commodity cost environment,"said A.G. Lafley, Chairman of the Board and Chief Executive Officer. "Solidtopline growth and a sharp focus on cost control are driving strong profit andcash generation. Looking ahead, we are confident that the strength of thecompany's brand portfolio, initiative pipeline and productivity program willenable P&G to continue delivering at or ahead of its targets."
P&G announced plans to separate its coffee business and create anindependent company named The Folgers Coffee Company. The coffee business hadsales of approximately $1.6 billion and operating income of about $350 millionin fiscal 2007. The new company will employ approximately 1,250 employees atfour 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-taxvalue of the coffee business for P&G shareholders and to minimize earnings pershare dilution. In addition, P&G said this decision will enable the companyto better focus its resources on faster growing categories and, as a result,enhance P&G's ability to consistently deliver its annual financial goals asthe 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 thebusiness will get greater priority and attention as a standalone company.Folgers is the leading retail coffee brand in North America, has attractiveoperating profit margins and is a strong cash generator.
In anticipation of the transaction, P&G has named Mr. Jamie Egasti toserve as Chief Executive Officer of The Folgers Coffee Company. Mr. Egasticurrently serves P&G as President, Coffee and Global Snacks.
Although no decision has been made on the form of the separation, P&Gexpects to do a spin-off or split-off transaction. P&G's current preferenceis to do a split-off transaction which is expected to be tax-free forshareholders and result in lower annual earnings dilution than could beachieved with a spin-off. In a split-off, P&G shareholders would be given theoption of exchanging their P&G shares for shares in the newly formed coffeecompany.
Assuming a split-off, the company expects the deal to be dilutive to EPSby 3 to 5 cents on an annual basis. Also, a split-off transaction wouldresult in a significant one-time gain which would be partially offset by one-time transition costs and a one-time increase in restructuring spendingassociated with eliminating stranded overhead costs and offsetting EPSdilution.
P&G expects to determine the final deal structure during the April-June2008 quarter and complete the transaction during the July-December 2008period. P&G said the deal structure will be dependent on market conditions,and P&G will execute the transaction only if it achieves sufficient marketvaluation.
"We greatly appreciate the contributions of our Coffee employees. For over45 years the Coffee business has been an important contributor to the successof Procter and Gamble," said Mr. Lafley. "This separation allows us to focuson our core businesses and The Fol