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Management’sDiscussionandAnalysis TheProcter&GambleCompany 55

Ourdiscussionofnancialresultsincludesseveral“non-GAAP”
nancialmeasures.Webelievethesemeasuresprovideourinvestors
withadditionalinformationaboutourunderlyingresultsandtrends,as
wellasinsighttosomeofthemetricsusedtoevaluatemanagement.
WhenusedinMD&A,wehaveprovidedthecomparableGAAP
measureinthediscussion.Thesemeasuresinclude:
Organic Sales Growth. Organicsalesgrowthmeasuressalesgrowth
excludingtheimpactsofforeignexchange,acquisitionsanddivestitures
fromyear-over-yearcomparisons.TheCompanybelievesthisprovides
investorswithamorecompleteunderstandingofunderlyingresults
andtrendsbyprovidingsalesgrowthonaconsistentbasis.
Thefollowingtableprovidesanumericalreconciliationoforganic
salesgrowthtoreportednetsalesgrowthforscal2008:
 Fabric
   Total    Snacks,Coffee Careand BabyCareand
   Company Beauty Grooming HealthCare andPetCare HomeCare FamilyCare
Reportednetsalesgrowth 9% 9% 11% 9% 7% 11% 9%
Acquisitions&divestituresimpact  +1% +1% 0% -1% 0% 0% +3%
Foreignexchangeimpact  -5% -6% -7% -5% -3% -5% -4%
  5% 4% 4% 3% 4% 6% 8%
Thefollowingtableprovidesanumericalreconciliationoforganic
salesgrowthtoreportednetsalesgrowthforscal2007:
  Total
  Company Grooming HealthCare
Reportednetsalesgrowth  12% 45% 13%
Acquisitions&divestituresimpact -5% -35% -4%
Foreignexchangeimpact  -2% -4% -2%
  5% 6% 7%
Free Cash Flow. Freecashowisdenedasoperatingcashowless
capitalspending.TheCompanyviewsfreecashowasanimportant
measurebecauseitisonefactorindeterminingtheamountofcash
availablefordividendsanddiscretionaryinvestment.Freecashow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owproductivityisdenedas
theratiooffreecashowtonetearnings.TheCompany’stargetisto
generatefreecashowatorabove90%ofnetearnings.Freecash
owproductivityisoneofthemeasuresusedtoevaluatesenior
managementandisafactorindeterminingtheirat-riskcompensation.
Thefollowingtableprovidesanumericalreconciliationoffreecashow:
 Free
  Operating Capital Free Net CashFlow
CashFlow Spending CashFlow Earnings Productivity
     
2007 $13,435 $(2,945) $10,490 $10,340 101%