Proctor and Gamble 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 Proctor and Gamble annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 82

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82

Touching & Improving Lives 2010 ANNUAL REPORT

Table of contents

  • Page 1
    Touching & Improving Lives 2010 ANNUAL REPORT

  • Page 2
    ... By market maturity 15% 34% 48% 18% Beauty & Grooming Health and Well-Being Household Care These results exclude net sales in Corporate. 9% 13% 21% 42% North America Western Europe Central & Eastern Europe, Middle East & Africa Latin America Asia 34% 66% Developed Developing Financial...

  • Page 3
    ... in areas such as sustainability and sfcial respfnsibility nft merely tf be a gffd citizen, but mfre impfrtantly, tf create future fppfrtunities tf tfuch and imprfve lives-and, in sf dfing, tf keep fur Cfmpany grfwing. Robert A. McDonald Chairman of the Board, President and Chief Executive Officer

  • Page 4
    ...for a reconciliation of organic sales growth to net sales growth. (2) Core EPS is a measure of the Company's diluted net earnings per share from continuing operations excluding charges for potential competition law fines, a charge related to a tax provision for retiree healthcare su.sidy payments in...

  • Page 5
    ... SymphonyIRI: Tide Total Care, Gillette Venus Embrace, Bounty Extra Soft, Always Infinity and Secret Flawless. Our innovation program is guided by the Company's Purpose-inspired growth strategy: #1 P&G launched 5 of the top 10 most successful new non-food products in 2009, according to SymphonyIRI...

  • Page 6
    ...expanded to other markets around the world, as well. In March, we launched Crest 3D White in North America. 3D White is a new regimen comprised of toothpaste, brush, rinse and Professional Effects whitestrips that work in combination to clean, whiten and protect teeth while providing health benefits...

  • Page 7
    ... products company could create a compara.le partnership with the IOC. $2 .illion "Never Walk Alone" from PtG's Proud Sponsor of Moms campaign- "The best commercial of the [Olympic] Games...Gold." (Stuart Elliott, NMedals for Ads During NBC's Winter Olympics Coverage," New York Times, March 2, 2010...

  • Page 8
    ... the lives of athletes, moms and their families around the world in several ways: • We will continue to support families of Olympians, reapplying on-site activities from the Vancouver 2010 Olympic Winter Games. • As part of the Proud Sponsor of Moms campaign, our Thank You, Mom program will...

  • Page 9
    Leadership brands: 173 years In Octo.er 2010, P&G .rands will have helped to make everyday life a little .etter for 173 years.

  • Page 10
    ...leadership .rands 23 .rands These .rands are some of the world's most well-known household names-including innovative new products that comprised five of the top ten most successful new introductions in 2009.* Num.er of P&G .rands that each generate more than one .illion dollars in annual sales...

  • Page 11
    90 % of sales 90 % of profits These 50 leadership .rands account for 90% of P&G sales. These 50 leadership .rands account for more than 90% of P&G profits.

  • Page 12
    ... have earned a spot on SymphonyIRI Group's list of each year's 25 most successful new products -more than our six largest competitors combined.* *Source: SymphonyIRI Group New Product Pacesettersâ„¢ report (non-food .rands), March 22, 2010 (measured as total year-one dollar sales across food, drug...

  • Page 13
    ... strategy is working. We're carrying it out across all of our businesses, and around the world. From a rural village in Kenya, to a tight-quartered concrete home in India, to the bustling urban centers of the United States, P&G's growth strategy guides our decisions, our innovations, our investments...

  • Page 14
    12 The Procter & Gamble Company More consumers We're touching and improving the lives of more consumers, with innovative products that expand our category portfolios vertically up and down value tiers-delivering the right combination of performance and value to every consumer.

  • Page 15
    The Procter & Gamble Company 13 Delighting Consumers with Crest in China We are reaching more consumers in China with the launch of Crest Pro-Health, P&G's best toothpaste technology, designed to address the seven common oral health issues that dentists check most. In China, millions of consumers ...

  • Page 16
    ... consumers in Indiaʼs laundry market meant developing a detergent with just the right balance of cleaning performance and mildness at an affordable price. About 80% of consumers in India-200 million households-wash their laundry by hand. With their extremely limited laundry detergent budgets, most...

  • Page 17
    ... a very nice scent that helps keep my hands smelling fresh, clean and soft. I no longer need to use a brush, and dirt comes out of our clothes faster and easier-even my kids' clothes. I don't feel it's a chore anymore to wash clothes. My family also complimented me. My husband noticed a difference...

  • Page 18
    16 The Procter & Gamble Company More parts of the world We're touching and improving lives in more parts of the world, by innovating and expanding our business into new geographies where we didn't previously compete.

  • Page 19
    ... & Gamble Company 17 Expanding Olay's Presence in Mexico As the number one facial skin care brand in the world, Olay set its sights on reaching more consumers in Mexico-a market ripe for Olay's unique blend of superior benefit and value over other facial skin care brands. The November 2009 launch...

  • Page 20
    ...lives of some of these African girls in ways that go beyond the benefits of hygiene alone. Today, many girls in Africa miss school during their period because they lack awareness of and access to proper sanitary protection. This can impact their chance to complete their education and succeed in life...

  • Page 21
    ... & Gamble Company 19 "My education is one of the most important things in my life. I first learned about Always from my sister, who told me Always would help keep me dry and comfortable, even when I am in class. Today, I buy Always from the local shop. Without Always, I would be missing school. Now...

  • Page 22
    20 The Procter & Gamble Company More completely We're touching and improving lives more completely by innovating to enhance the performance of existing products, by creating or entering adjacent categories and by driving regimen use that broadens our product portfolios and improves consumers' ...

  • Page 23
    ... and Cruisers in North America, Dry Max was launched in May 2010 in the Pampers New Baby and Active Fit lines in the United Kingdom, where May/June shipments of Active Fit were up more than 20% versus a year ago. Pampers is planning to expand Dry Max to more markets in Europe in fiscal 2011.

  • Page 24
    ... close, comfortable shave. The Fusion ProSeries skin care line features the first mass market men's thermal facial scrub, as well as a sensitive skin face wash and cooling lotion to deliver comfort throughout the shaving process. By expanding the shaving regimen horizontally into adjacent categories...

  • Page 25
    ...of the Fusion ProGlide. Its overall design was enough to catch my attention, but my delight didn't stop there. To make a long story short, the Fusion ProGlide is, hands down, the best Gillette shave I've ever had. Keep up the good work." MARK, UNITED STATES For more, watch Mark at www.pg.com/ar2010...

  • Page 26
    24 The Procter & Gam.le Company P&G Innovations: The Story Continues

  • Page 27
    ...always .een the heart of P&G's success. It is the primary way our Company and our .rands touch and improve lives-and, as a result, grow our .usiness. Today, we have a strong, glo.al, multiyear innovation program that is driving profita.le share growth around the world. Visit www.pginnovation.com for...

  • Page 28
    ...deploy PUR. Many of our employees around the world generously contributed to a special Company-matched fund that was distributed to these partners for the most urgent needs. We also donated products-brands like Pampers, Duracell, Always, Crest, Oral-B and Pantene. The Tide Loads of Hope program also...

  • Page 29
    ... of Operations Segment Results Financial Condition Significant Accounting Policies and Estimates Other Information Audited Consolidated Financial Statements Consolidated Statements of Earnings Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of...

  • Page 30
    ... the United States of America. We monitor these internal controls through control self-assessments conducted by business unit management. In addition to performing financial and compliance audits around the world, including unannounced audits, our Global Internal Audit organization provides training...

  • Page 31
    ... sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law. The Company's internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually by substantially all areas of the Company and is audited...

  • Page 32
    ... that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the...

  • Page 33
    ... Summary of 2010 Results Forward-Looking Statements Results of Operations Segment Results Financial Condition Significant Accounting Policies and Estimates Other Information Effective July 2009, we implemented a number of changes to our organization structure for the Beauty Global Business Unit (GBU...

  • Page 34
    ... segments and markets in which we operate - often holding a leadership or significant market share position. Organizational Structure Our organizational structure is comprised of three Global Business Units (GBUs), along with Global Operations, Global Business Services (GBS) and Corporate Functions...

  • Page 35
    ... global market share. We are the number one or number two baby care competitor in most of the key markets in which we compete, primarily behind Pampers, the Company's largest brand, with annual net sales of approximately $9 billion. Our family care business is predominantly a North American business...

  • Page 36
    ... business outlook and objectives, in annual and quarterly reports, press releases and other written and oral communications. All such statements, except for historical and present factual information, are "forward-looking statements," and are based on financial data and our business plans available...

  • Page 37
    ..., Prestige, Personal Health Care and Pet Care, which have higher than Company average selling prices. Organic sales were up 3%, led by mid-single-digit growth across the Fabric Care and Home Care and the Baby Care and Family Care segments. Unfavorable foreign exchange reduced net sales growth by...

  • Page 38
    ... on working capital balances caused by strengthening of the U.S. dollar. Marketing expenses were down as a percentage of net sales for the total Company and for most reportable segments mainly due to media rate reductions, foreign exchange and reductions in the amount of media purchased primarily...

  • Page 39
    ... diluted net earnings per share from continuing operations excluding charges in 2010 for potential competition law fines and recently enacted legislation which changed the taxation of certain future retiree prescription drug subsidy payments in the United States, the 2009 impact of incremental...

  • Page 40
    ... of these investments are managed as integral parts of the Company's business units, they are accounted for as if they were consolidated subsidiaries for management and segment reporting purposes. This means pretax earnings in the business units include 100% of each pretax income statement component...

  • Page 41
    ... share of the hair care market on a constant currency basis was in line with 2009. Female Beauty volume was up low single digits as higher shipments of female skin care and personal cleansing products in developing regions were partially offset by the discontinuation of Max Factor in North America...

  • Page 42
    ...-digit decline in developing regions, due mostly to market contractions and volume share losses in home and hair care appliances. Global value share of the dry shaving market was up half a point on a constant currency basis. Net earnings increased 9% to $1.5 billion in 2010 behind sales growth and...

  • Page 43
    ... personal health care market has declined over 2 points, including a double-digit share decline of Prilosec OTC. Oral Care volume declined low single digits behind trade inventory reductions and market contractions in North America and CEEMEA. Our global market share of oral care was in line with...

  • Page 44
    ... digits behind new product launches, price reductions and incremental merchandising activity. Global market share of the fabric care category was down about half a point on a constant currency basis. During 2010, the Ace laundry brand became the Company's 23rd billion-dollar brand. Home Care volume...

  • Page 45
    ... lower marketing spending. Corporate Corporate includes certain operating and non-operating activities not allocated to specific business units. These include: the incidental businesses managed at the corporate level; financing and investing activities; other general corporate items; the historical...

  • Page 46
    ... to capacity expansion of our Family Care business in North America as well as increased spending to support innovation in Beauty. Capital spending for our discontinued coffee and pharmaceuticals businesses was $1 million in 2010 and $11 million in 2009. CAPITAL SPENDING (% of net sales) 10 09 08...

  • Page 47
    ... Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and the overall cost of capital...

  • Page 48
    ... course of business. Commitments made under take-or-pay obligations represent future purchases in line with expected usage to obtain favorable pricing. Approximately 45% relates to service contracts for information technology, human resources management and facilities management activities that have...

  • Page 49
    ... useful lives. Our assessment as to brands that have an indefinite life and those that have a determinable life is based on a number of factors including competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment of...

  • Page 50
    ... segment. As a result of the organization changes to the structure of the Beauty GBU effected on July 1, 2009 (see the Recent Business Developments section and Note 11 to our Consolidated Financial Statements), the Salon Professional business recently became a new stand-alone goodwill reporting unit...

  • Page 51
    ... manufacture and sell products and finance operations in a number of countries throughout the world, we are exposed to the impact on revenue and expenses of movements in currency exchange rates. The primary purpose of our currency hedging activities is to reduce the risk that our financial position...

  • Page 52
    ...EPS is also one of the measures used to evaluate senior management and is a factor in determining their at-risk compensation. The tables below provide reconciliations of reported diluted net earnings per share from continuing operations to Core EPS: Years enBeB June 30 2010 2009 2008 Free Cash Flow...

  • Page 53
    ... Procter & Gamble Company 51 Consolidated Statements of Earnings Amounts in millions except per share amounts; Years enBeB June 30 2010 2009 2008 NET SALES Cost of products sold Selling, general and administrative expense OPERATING INCO ME Interest expense Other non-operating income/(expense...

  • Page 54
    ... retirement Accumulated other comprehensive income (loss) Treasury stock, at cost (shares held: 2010 - 1,164.1, 2009 - 1,090.3) Retained earnings Noncontrolling interest TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY See accompanying Notes to Consolidated Financial Statements...

  • Page 55
    ...: Financial statement translation Hedges and investment securities, net of $520 tax Defined benefit retirement plans, net of $465 tax Total comprehensive income Dividends to shareholders: Common Preferred, net of tax benefits Treasury purchases Employee plan issuances Preferred stock conversions...

  • Page 56
    ... acquired Change in investments TOTAL INVESTING ACTIVITIES FINANCING ACTIVITIES Dividends to shareholders Change in short-term debt Additions to long-term debt Reductions of long-term debt Treasury stock purchases Impact of stock options and other TOTAL FINANCING ACTIVITIES EFFECT OF EXCHANGE RATE...

  • Page 57
    ... management's best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, consumer and trade promotion accruals, pensions, postemployment benefits, stock options, valuation of acquired intangible assets, useful lives...

  • Page 58
    ... have acquired brands that have been determined to have indefinite lives due to the nature of our business. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, product life cycles, operating plans...

  • Page 59
    ... AND HEDGING ACTIVITIES On July 1, 2009, we adopted new accounting guidance on noncontrolling interests in consolidated financial statements. The new accounting guidance requires that a noncontrolling interest in the equity of a subsidiary be accounted for and reported as equity, provides revised...

  • Page 60
    ... future foreign exchange rate changes. NOTE 3 SUPPLEMENTAL FINANCIAL INFORMATION Baby Care and Family Care, beginning of year Acquisitions and divestitures Translation and other GOODWILL, JUNE 30 CORPORATE Selected components of current and noncurrent liabilities were as follows: June 30 2010 2009...

  • Page 61
    ... material credit losses on our risk management or other financial instruments. Certain of the Company's financial instruments used in hedging transactions are governed by industry standard netting agreements with counterparties. If the Company's credit rating were to fall below the levels stipulated...

  • Page 62
    ... in earnings. Foreign Currency Risk Management We manufacture and sell our products and finance operations in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchange rates. The purpose of our foreign currency hedging program is to manage the...

  • Page 63
    ... Statements The Procter & Gamble Company 61 The following table sets forth the Company's financial assets and liabilities as of June 30, 2010 and 2009 that were measured at fair value on a recurring basis during the period, segregated by level within the fair value hierarchy: Level 1 June 30 2010...

  • Page 64
    ...The gain or loss on contracts not designated as hedging instruments is included in the Consolidated Statements of Earnings as follows: foreign currency contracts in selling, general and administrative expense and commodity contracts in cost of products sold. Net investment hedges (8) (2) Amounts...

  • Page 65
    ... Statements The Procter & Gamble Company 63 NOTE 6 EARNINGS PER SHARE NOTE 7 STOCK-BASED COMPENSATION Net earnings less preferred dividends (net of related tax benefits) are divided by the weighted average number of common shares outstanding during the year to calculate basic net earnings...

  • Page 66
    ... 15% of total participants' annual wages and salaries in 2010, 2009 and 2008. We maintain The Procter & Gamble Profit Sharing Trust (Trust) and Employee Stock Ownership Plan (ESOP) to provide a portion of the funding for the U.S. DC plan and other retiree benefits. Operating details of the ESOP are...

  • Page 67
    ... no legal requirements or financial incentives provided to companies to pre-fund pension obligations. In these instances, benefit payments are typically paid directly from the Company's cash as they become due. Pension Benefits Years enBeB June 30 2010 2009 Other Retiree Benefits 2010 2009 Benefit...

  • Page 68
    ... Pension Benefits Other Retiree Benefits Net actuarial loss Prior service cost (credit) $146 17 $ 95 (21) Several factors are considered in developing the estimate for the long-term expected rate of return on plan assets. For the defined benefit retirement plans, these factors include historical...

  • Page 69
    ..., as well as payments from the plans, are as follows: Pension Benefits Other Retiree Benefits Years enBing June 30 Other Retiree Benefits Level 1 Level 2 Level 3 Total EXPECTED BENEFIT PAY MENTS ASSETS AT FAIR VALUE: Cash and cash equivalents Company stock Common collective trust fund - equity...

  • Page 70
    ... retiree health care benefits. These shares, net of the ESOP's debt, are considered plan assets of the other retiree benefits plan discussed above. Debt service requirements are funded by preferred stock dividends, cash contributions and advances provided by the Company, of which $336 is outstanding...

  • Page 71
    ...net investment hedges, excess tax benefits from the exercise of stock options and the impacts of certain adjustments to pension and other retiree benefit obligations recorded in shareholders' equity. We have undistributed earnings of foreign subsidiaries of approximately $30 billion at June 30, 2010...

  • Page 72
    ... $301 Such amounts represent future purchases in line with expected usage to obtain favorable pricing. Approximately 45% of our purchase commitments relate to service contracts for information technology, human resources management and facilities management activities that have been outsourced to...

  • Page 73
    ...-Mart Stores, Inc. and its affiliates, accounted for 16% of consolidated net sales in 2010, 2009 and 2008. Under U.S. GAAP, we have six reportable segments: Beauty; Grooming; Health Care; Snacks and Pet Care; Fabric Care and Home Care; and Baby Care and Family Care. The accounting policies of the...

  • Page 74
    ...3,046 HEALTH AND WELL-BEING GBU HEALTH CARE 2010 2009 2008 SNACKS AND PET CARE 2010 2009 2008 HOUSEHOLD CARE GBU FABRIC CARE AND HOME CARE 2010 2009 2008 BABY CARE AND FAMILY CARE 2010 2009 2008 CORPORATE (1) 2010 2009 2008 TOTAL COMPANY 2010 2009 2008 (1) The Corporate reportable segment...

  • Page 75
    ... is included in net earnings from discontinued operations in the Consolidated Statement of Earnings for the year ended June 30, 2010. The pharmaceuticals business had historically been part of the Company's Health Care reportable segment. In accordance with the applicable accounting guidance for the...

  • Page 76
    74 The Procter & Gamble Company Notes to ConsoliBateB Financial Statements NOTE 13 QUARTERLY RESULTS (UNAUDITED) Quarters EnBeB Sept 30 2009 - 2010 2008 - 2009 Dec 31 Mar 31 Jun 30 Total Year NET SALES OPERATING INCO ME 2009 - 2010 2008 - 2009 GROSS MARGIN 2009 - 2010 2008 - 2009 $19,807 20,...

  • Page 77
    ... Passerini President - Global Business Services & Chief Information Officer Marc S. PritcharB Global Brand Building Officer Philip J. Duncan Global Design Officer Joan M. Lewis Global Consumer & Market Knowledge Officer Nancy K. Swanson Vice President - Corporate The following company officers have...

  • Page 78
    ... Procter & Gamble Company Financial Summary (Unaudited) Amounts in millions, except per share amounts 2010 2009 2008 2007 2006 2005 Net Sales Gross Margin Operating Income Net Earnings from Continuing Operations Net Earnings from Discontinued Operations Net Earnings Net Earnings Margin from...

  • Page 79
    ... Staples Index (line of business comparison). The graph and table assume $100 was invested on June 30, 2005, and that all dividends were reinvested. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN P&G 140 130 120 110 100 90 80 2005 2006 2007 2008 2009 2010 Recognition P&G is recognized...

  • Page 80
    ...Gamble Company Shareholder Services Department P.O. Box 5572, Cincinnati, OH 45201-5572 REGISTRAR The Procter & Gamble Shareholder Investment Program (SIP) is a direct stock purchase and dividend reinvestment plan. The SIP is open to current P&G shareholders as well as new investors and is designed...

  • Page 81
    ... 13. (3) Within Live, Learn and Thrive, our signature program is Children's Safe Drinking Water. Methodology for calculating diarrheal days and mortality was developed with Population Services International and Aquaya Institute. Details are provided in P&G's Sustainability Report found at www.pg.com...

  • Page 82
    P&G 2010 Annual Report © 2010 Procter & Gamble 00046011