Student Investment Fund Stock Report Analysts: J anel Logan, Amanda Repp and

Padma Venkatraman

BusinessSummary
Procter&Gamble,foundedin
1837andbasedinCincinnati,OH,
isrecognizedastheworld'slargest
produceranddistributorof
householdandpersonalproducts.
PGisorganizedintothreeglobal
businessunits:Beauty;Healthand
WellBeing;andHouseholdCare.
PGProcterandGambleoperates
inover80countriesandoffers
productsandservicestomore
than180countriesworldwide.PG
hasastrongglobalmarket
presence.In2009,PGgenerated
61%ofitstotalsalesin
internationalmarkets.
Procter & Gamble
NYSE: PG
Highlights
PGisfocusedondevelopingits
consumerunderstanding,
marketing,andbrandbuilding
techniques.
PGmanages23brandsthat
individuallygenerateover$1
billioninannualsalesand20
brandsthatindividuallygenerate
halfofabillioninannualsales.
12ofPGsbilliondollarbrandsare
currentlythe#1globalmarketshare
leaderintheirrespectiveproduct
categories.
InvestmentThesis
Concernsoverasluggisheconomyin2010ledustoPGwe
favorlargecapitalization,lowbeta,defensivestocksthatpay
aboveaveragedividendsandhavestronggrowthpotentialin
foreignmarkets.
PGisthebestconsumerstaplesstockintermsofbrand
management,innovationandconsumerunderstanding.
ProcterandGamblehassuperiorfinancialstandingandhas
providedshareholderswithsubstantialvaluecreationovertime.

PricePerformance
Recommendation: LongTermBuy
RecentPrice(12/04/09):$62.60 Sector:ConsumerStaples
TargetPrice: $65.53 SubSector:ConsumerGoods
52WeekRange:$43.93$64.00 StockClassification:ClassicGrowth
MarketCapt: $178B InstitutionalOwnership:58%
P/ERatio: 17.4 DividendYield:2.8%
EarningsperShare: $4.58 Beta:0.6
Student Investment Fund: Procter & Gamble


BusinessSegments
PGisorganizedintothreeglobalbusinessunits:Beauty,HealthandWellBeing,andHouseholdCare.

BEAUTYIncludestwosubsegments:
o Beauty(2009Sales$18.79B,23.7%ofsalesrevenue)cosmetics,deodorants,hair
care,personalcleansing,prestige,fragrancesandskincareproducts
Billiondollarbrandsinclude:Head&Shoulders,Olay,PanteneandWella
o Grooming(2009Sales$7.54B,9.54%ofsalesrevenue)bladesandrazors,electric
hairremovaldevices,facialproducts,shaveproductsandhomeappliances
Billiondollarbrandsinclude:Braun,Fusion,GilletteandMach3

HEALTHANDWELLBEINGIncludestwosubsegments:
o HealthCare(2009Sales$13.62B,17.23%ofsalesrevenue)femininecare,oralcare
andpersonalhealthcareproducts
Billiondollarbrands
include:Actonel,
Always,CrestandOral
B
o SnacksandPetCare(2009
Sales$3.11B,3.94%ofsales
revenue)petfoodandsnacks
Billondollarbrands
include:Iamsand
Pringles

HOUSEHOLDCAREIncludestwosub
segments:
o FabricCareandHomeCare
(2009Sales$23.19B,29.33%of
salesrevenue)aircare,
batteries,dishcare,fabriccare
andsurfacecare
Billiondollarbrands
include:Ariel,Dawn,Downy,Duracell,GainandTide

o BabyCareandFamilyCare(2009Sales$14.10B,17.84%ofsalesrevenue)babywipes,
bathtissues,diapers,facialtissuesandpapertowels
Billiondollarbrandsinclude:Bounty,CharminandPampers

Student Investment Fund: Procter & Gamble

BusinessDivestures
ProcterandGamblehasrecentlydivestedtwoofitsbusinesssegmentsinordertorefocusonitscorebusiness
segmentsandtocontinuetomaintainitsstrongportfolioofbrands.

Folgers:OnJune4,2008,PGsolditsFolgerscoffeeunittoJ.M.SmuckerCompanyinanallstockdeal
worthapproximately$2.95billion.

Pharmaceuticals:In2006,thecompanybeganwindingdownitsdiscoverphasepharmaceutical
productsinfavoroflicensinglatestagecompounds,andannouncedin2008itwouldexitthedrug
industryentirely.In2009,PGsolditspharmaceuticalunittoWarnerChilcottina$3.1billioncashdeal.
Asaresultofthedivesture,ProcterandGambleexpectstobooka43centpershareearningsboostin
thesecondquarteroffiscalyear2010.

ThesedivestureswillallowPGtoprimarilyfocusonitspersonalcare,beauty,andhouseholdproductdivisions.
Moreover,itisourassessmentthatthesedivesturesrevealProcterandGamblesstrongfocusonmaintaining
asolidportfolioofbrandsthataddvalueforthecompanyratherthangrowingforgrowth'ssake.

ConsistencyinTopManagement
ProcterandGamblerecentlynamedRobertMcDonaldaspresidentandCEO,succeedingA.G.Lafley,effective
asofJuly2009.ThenewCEORobertMcDonald,otherwiseknownasBobMcDonald,comesintotheposition
witharichcompanybackground.McDonaldpreviouslyservedasViceChairofPGsGlobalBusinessUnitsand
Operations.Furthermore,McDonaldhasvastexperienceinbrandbuildingandmarketdevelopment,andhas
over30yearsofexperiencewithProcterandGamble.

ThenewsofBobMcDonaldbeingnamedCEOofthecompany,shortlyfollowedtheannouncementofPGs
CFOClaytDaleysretirement.DaleywasreplacedJanuary1,2009byJonMoeller.Priortoacceptingthenew
CFOposition,MoellerpreviouslyservedastheVicePresidentandTreasurerofProcterandGamble.Moeller
alsoservedasVicePresidentofFinanceandAccountinginvariousglobalbusinessunitswithinthecompany.
SimilartoMcDonald,MoellerhasdevelopedarichhistoryatProcterandGamble.

Lookingforward,ProcterandGamblecanremainconfidentintheirrecentchangesintopmanagement.Both
executivesuccessorsareindividualswhohaveathoroughandwelldevelopedunderstandingofthe
companyscorebusinessesandinternationalmarkets,gainedthroughmanyyearsofexperiencewithProcter
andGamble.

Student Investment Fund: Procter & Gamble

Competitors
ProcterandGambleprovideslargestandbroadestportfolioofproductsinthehouseholdandpersonalcare
industrywith24billiondollarbrands.PGgenerates43%morerevenuethanitsclosestcompetitor,Unilever
(UL).PGalsomaintainsarelativelyhighoperatingmarginof20.46%in2009,thehighestamongstits
competitors.Moreover,thecompanyinvestsmorethan$2billionannuallyinResearchandDevelopment
nearlytwicethatofUnilever,andequaltothecombinedtotalofitsothermajorcompetitorsAvon,Clorox
Company(CLX),ColgatePalmoliveCompany(CL),EnergizerHoldings(ENR),Henkel,KimberlyClark(KMB),
L'Oreal,andReckittBenckiser.

REVENUE
(INMILLIONS)

NETINCOME
(INMILLIONS)

OPERATING
MARGIN
DIVIDEND
YIELD

BILLIONDOLLARBRAND(S)

PROCTER&
GAMBLE

$79,029

$11,010

20.79% 3.0%

PAMPERS,PANTENE,CREST,
TIDE,BOUNTY,DURACELL,
CHARMIN

UNILEVER

$56,546

$7,015 N/A

1.38%
DOVE,AXE,LIPTON, VASELINE,
SLIMFAST,BEN&JERRYS

CLOROX
COMPANY

$5,440

$566

20.12%

3.3%
CLOROXBLEACH,PINESOL,
GLAD,BRITAWATERFILTERS,
BURTSBEES

KIMBERLY
CLARK

$18,730

$,1810

15.95%

3.8%
HUGGIES,KLEENEX,SCOTT
PAPERTOWELS

COLGATE
PALMOLIVE

$1,4910

$2,310

22.68%

2.2%
COLGATETOOTHPASTE,
PALMOLIVEDISHWASHING
LIQUID,SOFTSOAP,SPEEDSTICK
Student Investment Fund: Procter & Gamble


GlobalPresence
ProcterandGambleoperatesinover80countriesandoffersproductsandservicesinmorethan180countries
worldwide.

Salesaredividedintofourmainsegments:

NorthAmericaaccountedfor44%oftotalsalesin2009or$34.8billion.

WesternEuropeaccountedfor22%oftotalsalesin2009or$17.4billion.

NorthEastAsiaaccountedfor4%oftotalsalesin2009or$3.2billion.

DevelopingMarketsaccountedfor30%oftotalsalesin2009or$23.7billion.

Student Investment Fund: Procter & Gamble

WheretoPlay:
1)Growleading,globalbrandsandcore
categories
2)Buildbusinesswithunderservedand
unservedconsumers
3)Continuetogrowanddevelopfaster
growing,structurallyattractivebusinesseswith
globalleadershippotential

Currently,internationalsales(salesoutsideofNorthAmerica)generateroughly61%ofProcterandGambles
totalrevenue.Overthepastfiveyears,theaveragegrowthrateforPGsinternationalsaleswas12%which
isalmostthreetimesthatofPGsdomesticmarketsalesgrowthof5%.

Inrecentyears,ProcterandGamblehasheavilypenetrateddevelopingmarkets.Developingmarketsinclude
LatinAmerica,Central&EasternEurope/MiddleEastandAfrica,GreaterChinaand
ASEAN/Australasia/India/Korea.ProcterandGamblessalesindevelopingmarketscomprise30%ofitstotal
salesrevenueupasignificant20%sincethebeginningofthedecade.

InternationalMarketShare
ProcterandGamblemaintainsastrongfocusonitsmarketshare,asthisisakeyfactorforsuccessinthe
ConsumerStaplessectorinwhichtheycompetein.Eachfirmmustcompeteformarketshareandviabilityof
growingfuturesalesforthecompany.Aseconomiesaroundtheworldcontinuetorecoverfollowingthe
globaldownturn,ProcterandGamblerecognizesthatitispertinenttohaveanestablishedmarketsharein
ordertotakeadvantageofnewgrowthopportunitiesandincreasetheirsalesinthefuture.

Developingmarketscurrentlymakeup86%oftheworldspopulation.ProcterandGamblehasalready
establishedastrongmarketshareinthemostcrucialareasofthesedevelopingmarkets:Central&Eastern
Europe,MiddleEast&AfricaRegion,LatinAmerica,GreaterChinaandDevelopingAsia.Itisimportantthat
PGtakesadvantageofopportunitiesintheseparticularmarketsastheseareasprovidethelargest
internationalgrowthopportunities.ProcterandGamblehasestablishedthemselvesastheleaderinmarket
shareintheBladesandRazorsmarkets.TheyarealsofirstandsecondinmarketshareintheShampoosand
Diapersmarkets,respectively.Additionally,theymaintainfirst,secondandthirdmarketsharepositionsinthe
Laundry,FeminineCareandOralCareproductmarkets,respectively.

PurposedInspiredMacroStrategyforGrowth
ProcterandGambleistakingafocusedapproach
towardsitsgrowthopportunities.PGlooksto
growitsleading,globalbrandsandcorecategories.
PGwillachievethisbynarrowingthefocusoftheir
portfolio.Therecentdivestureoftheir
pharmaceuticalbusinessisjustoneexampleofhow
theyarenarrowingtheirfocus.ThiswillallowPGto
focusmoreheavilyontheir43billionandhalf
billiondollarbrandsthatgenerate85%oftheir
revenues.Furthermore,focusingontheexpansion
ofthese43corebrandsintomarkets,wherethey
arecurrentlyunderrepresented.

Student Investment Fund: Procter & Gamble

AnotherfocusforProcterandGambleisonbuildingitsbusinessthroughunderservedandunserved
consumers.Aspreviouslymentioned,developingmarketsmakeupmorethan86%oftheworldspopulation.
PGssalesindevelopingmarketstotalednearly$24billionin2009nearlyfivetimesgreaterthantheir
averagecompetitorssalesindevelopingmarkets.ProcterandGamblecontinuestoaimtowardsgrowingits
current19%shareindevelopingmarkets.ThisallowsanattractiveopportunityforPGtofurtheritsgrowth
outreach.InarecentinterviewwithFortuneMagazine,ProcterandGamblesCEOBobMcDonaldexplained
thatthecompanycurrentlyservesapproximately3.84billionoftheworlds7.5billiontotalpopulation.
Moreover,McDonaldexpressedPGsplanstoadd1billionmorecustomersoverthenextfiveyears.

PGsfinalstrategytakesafocusedapproachtowardsgrowingstructurallysoundbusinesses,ratherthan
growingforgrowthssake.Thecompanymaintainsasolidstrategyforfuturegrowththataddsvalue.

KeyStrategiesforSuccess
ConsumerUnderstanding
o Eachyear,ProcterandGambleinteractswithnearly5millionconsumersinover60countries
worldwide.
o ItisimportantforProcterandGambletogaininsightonconsumerunderstandinginorderto
discoverinnovationopportunitiesandtofindwaysinwhichthecompanycanbetterserveits
customers.ItisespeciallyimportantforPGtorecognizeandadjusttoculturaldifferences
amongitsinternationalmarkets.
BrandBuilding
o ProcterandGamblecurrentlyhas23brandswithinitsproductportfoliothatindividually
generateoveronebilliondollarsinsalesannually.PGalsohas20brandsthatgeneratehalfofa
billiondollarsinannualsales.Combined,these43brandsaccountfor85%ofPGstotalsales
and90%ofPGsprofit.PGmaintainsthestrongestperformingportfolioofbrandswithinits
industry.Moreover,PGmaintainsitskeycompetitiveadvantagefortheoverallsuccessofthe
firm.
Innovation
o ProcterandGambleistheindustryleaderintermsofinnovation.EachyearintheU.S.,theIRI
NewProductPacesetterReportranksthebestsellingnewproductswithintheconsumer
market.Overthepast14years,ProcterandGamblehashad114top25pacesettersmore
thansixtimesthenumberofpacesettersoftheirlargestcompetitorscombined.(Pacesetteris
definedasanew,innovativeConsumerPackagedBrandthatexceeds$7.5Minitsfirstyear).
EstablishedGoToMarketCapability
o ProcterandGambleisrankedasthepreferredsupplierandindustryleaderinawiderangeof
capabilitiesincludingclearestcompanystrategy,brandsmostimportanttoretailers,strong
businessfundamentalsandinnovativemarketingprograms.
Scale
o ProcterandGambleisabletotakeadvantageofitsabilitytooperateonalargescale.This
allowsPGtoshareprocessesandproceduresamongthecategoriesunderwhichtheyoperate.
ThisalsocreatestheabilityforPGtocapitalizeonitsinternationalexpansionopportunities
sincetheyhavethecapabilitiesandresourcesforsuchventures.
Student Investment Fund: Procter & Gamble


ValuationAnalysis
OurvaluationanalysisforPGwasconductedusing
conservativemodelassumptions.Ourdiscounted
cashflowmodelestimatesPGsintrinsicvalueat
$65.53persharefor2009,reaching$82.91by2019.

IncomeStatementInputs:

RevenueGrowth:Despitehavingasolid5year
historicalgrowthof8.6%,PGfacedrevenuegrowth
of3.3%during2009.In2009,PGsawtheadverse
affectsofaweakconsumerspendingenvironment,
whichwasexacerbatedbyitsinabilitytofurther
lowerpricesonitshigherpricedpremiumproducts
duringtherecession.Wethereforeforecasted
revenuegrowthonayeartoyearbasis.For2010,
weagainpenalizedPGsrevenuegrowthtoalevelof
3%,andused2%in2011.WeexpectPGsrevenue
growthtobouncebackoutoftherecessionwitha
moderategrowthrateof5%in2012.Following
2012,weforecastthegrowthofrevenuetotaper
downtoalongtermgrowthrateof3%by2019.
Selling,GeneralandAdministrativeExpenses:PGs
historicalaverageSG&A/Salesexpensewas30.4%.
Forourforecast,weincreasedSG&A/Salesto32%
duetoPGsstatedintentiontoincreaseadvertising
expendituresinthefuture.
CostofGoodsSold:PGoperatedwithahistorical
averageCOGS/Salesof48.6%.Thisaveragewas
maintainedthroughouttheforecastedyears.
ResearchandDevelopment:PGchargesitsR&D
coststoitsSG&Aexpenses,whichisprimarilywhy
R&D/Saleswere0%asofthepastthreeyears.We
maintained.5%R&D/Salesfortheforecast.
TaxRate:SincePGstaxratehasbeensteadily
decliningfromits30.6%highin2005,wemaintained
itshistoricalaveragerateof28.2%forthe
forecastedyears.
ShareGrowth:In2007,PGannounceditsplanfora
repurchaseof$24$30billionofitscommonstock
through2010.Therefore,weheldPGssharegrowth
to0%throughtheforecastedyears.

DividendGrowth:Despiteasolidhistoricalyearto
yeardividendgrowthrateof16.9%,dividendgrowth
hasbeendecreasingfromits2005highof37%growth
tomoremoderatemeasures.Forecasteddividend
growthwasreducedtoalevelof10%fortheforecast.

BalanceStatementInputs:
Property,PlantandEquipment:PGsfiveyear
historicalaveragePPE/Salesof25.8%andhasbeen
improvingoverthepastthreeyears.DespitePGs
recentefficiencywithmanagingitscapital
investments,westeadilygrewPPE/Salesthroughout
ourforecastfrom24.0%in2010to26%by2019.
Thismoreaccuratelyreflectsitshistoricalaverage
andreflectsmoreofaworstcasescenario
assumption.

CapitalAssetPricingModel
CostofEquity:Costofequityof7.85%was
calculatedusingariskfreerateof4.25%,marketrisk
premiumof6%andbetaof0.6.Conductinga
regressionanalysisonPGshistoricalpricessince
2002yieldedabetaestimateof.49.Tomaintain
conservatisminourmodel,weincreasedthebeta
estimateto0.6toallowforreversiontothemean.

WeightedAverageCostofCapitalAssumptions

WeightedAverageCostofCapital:WACCof7.4%
wascalculatedusingcostsof2.7%inshortterm
debtand5.28%inlongtermdebt.Costofequity
wascalculatedat7.85%asdescribedabove.

LongtermHorizonValueGrowthRate:Weapplied
alongtermhorizongrowthrateof3%forPGto
maintainaconservativeoutlookforthecompany's
longtermprospects.

Student Investment Fund: Procter & Gamble

Profitability
Returns:PGmaintainsstablelevelsofreturnson
assetsandequitythroughouttheforecast.PG
generatedahistoricalaverage8.7%returnon
assets.This8.7%isslightlycompressedtoan
average8%returnonassetsthrough2019.PGalso
generatedanaverage21.1%returnonequityover
thepastfiveyears.Ourconservativemodeling
approachisreflectedinanarrowingofPGsaverage
returnonequityto14%throughouttheforecasted
years.

EarningsPerShare&DividendsPerShare:PG's
abilitytogenerateprofitsforshareholdersis
reflectedinitsearningspershareanddividendsper
sharemetrics.PGgeneratedahistoricalaverage
growthinearningspershareof8.1%.Whileour
conservativemodelreducesthisratetonearlya
quarterofitshistoricalaverageEPSgrowth,PGs
forecastedEPSgrowthremainsapositive2.2%
through2019.PGalsodeliveredamodesthistorical
averageDPSof11.4%toitsshareholders.PGsDPS
wastightenedtoalevelof8.2%annualgrowthfor
theforecast.Evencompressedtotheserates,PG
managestogrowbothEPSandDPSathealthyand
sustainablelevelsthrough2019.

ValueCreationMetrics
FreeCashFlow:Overthepastfiveyears,PGhas
successfullyshownitsabilitytocreatefreecash
flow.Aftergrowingatahistoricalyearlyaverage
rateof17.7%,PGsFCFwasdrasticallyreducedtoa
sustainablelevelof2.7%averagegrowthforthe
forecast.
NetOperatingProfitAfterTax:
Historically,PGhasgrownitsNOPATatanaverage
rateof11.03%.Followingasignificantreductionin
NOPATin2010,weforecastNOPATtogrowatan
averageyearlygrowthrateof3%.

Student Investment Fund: Procter & Gamble

EconomicValueAdded:In2009,PGcreated$10.2
billionineconomicprofit.OurforecasttightensEVA
to$8.7billionand$8.5billionin2010and2011,
respectively.ThisdecreaseinEVAwasduetoour
projectedforecastsof3%and2%revenuegrowth
fortheyears,inrespectiveorder.Despitethisdip,
economicprofitforPGgrowsatasteadyaveragerate
of3%peryearfortheforecast.

MarketValueAdded:PGcreatedMVAof$143.4
billionin2009.For2010,thismetricgrewto$148
billion.PGsMVAisprojectedtocontinueitsgrowth
atayearlyrateof3%through2019.

ValueSpread:ROICvs.WACC

ROIC:Historicalaveragereturnoninvestedcapital
was46.7%forPG.In2009,generatedasignificantly
higherROICof54.4%.Fortheforecast,ROICwas
slimmedtoanaverage42.4%through2019.
WACC:Weightedaveragecostofcapitalwas
calculatedat7.4%.Asdescribedabove,the
riskfreerate,beta,andmarketriskpremiumwere
increasedtomaintainconservatism.
ValueSpread(ROICWACC):ProcterandGambles
historicalaveragevaluespreadwas39.9%.In2009,
PGsvaluespreadwas44%.PGsforecastedvalue
spreadaverages35%.Evenwithaconsiderably
lowerforecastedvaluespread,PGdisplays
considerablepotentialtofurtherincreaseitsvalue
creationbeyondourforecastedROICWACCspread
measure.

Student Investment Fund: Procter & Gamble

RelativeValuation
PricetoEarnings:ProcterandGamblecurrently
tradesatalowerPEmultipleof13.5,whichislower
thantwoofitstopcompetitors,ColgatePalmolive
(CL)andClorox(CLX),withPEmultiplesof19and15
respectively.

PricetoCashFlow:PGspricetocashflowof11is
anadditionalrelativevaluationmetricthatfavorsPG
comparedtoColgatePalmolivessignificantlyhigher
PCFof16;CloroxsPCFisalso11.

ValuationMeasures
AltmanZScoreTestforBankruptcy:
TheAltmanZScorewasdevelopedtopredicta
companyslikelihoodofbankruptcyusingfive
financialmetrics.Companiesscoringabove2.9are
consideredtobefinanciallyhealthy.Lowerscores
reflectahigherlikelihoodoffailureofafirm.
Historically,PGscoredanaverage3.19wellabove
thesafezone.ProcterandGamblealsoscoredinthe
safezonewithanaverage3.92fortheforecast.

PiotroskisFinancialFitnessScorecard
Thisscorecardevaluatescompaniesbasedon
incomestatementandbalancesheetperformance.
Firmscanscoreuptoamaximumof11points.
Historically,ProcterandGamblescoredanaverage
of7out11.PGsaveragescorefortheforecasted
yearsis8outof11,whichsuggestsincreased
financialstabilitythrough2019.

Student Investment Fund: Procter & Gamble

GrahamandDodd
ThomsonReutersmetriciscomputedusinga
GrahamandDoddapproachtovaluation.PG,ranked
inthe7
th
Decile,indicatesthatProcterandGambles
investorsarepayingalowerpremiumforfuture
earningsthan70%ofinvestorsintheS&P500.This
isindicativeofundervaluation.

EarningsMomentum
ProcterandGamblehasfavorableearnings
momentumdespiterecenttougheconomictimes.
PGsearningsmomentumisbetterthan87%of
stocksintheS&P500.

OtherAnalystsRecommendation
Rankedonascalefrom1to5(1beingastrongby
and5beingastrongsell)PGhasameananalysts
recommendationof1.9,indicatingabuysignalfrom
analysts

CorrelationwithStudentInvestmentFundStocks
Correlationsarecalculatedbetweenstockreturnsto
revealhowinvestmentsmoveinrelationtoone
anotherwithinaportfolio.Lowcorrelationsare
favorableandindicateaweak
relationinperformance
betweentwoequities.Inorder
toensureProcterandGamble
wouldfitfavorablyinto
WashburnsStudent
InvestmentFund,werana
correlationofProcterand
Gambleshistoricalreturns
since2004withrespecttothe
historicalreturnsofstocks
currentlyheldintheSIFover
thesametimeperiod.Procter
andGamblesstrongestcorrelationof.49was
sharedbetweenJohnsonandJohnson(JNJ)and
UnitedTechnologiesIncorporated(UTX).PG'slow
correlationwiththerestoftheportfolioshould
ensuretheStudentInvestmentFundmaintainsits
lowerthanaveragebetaexposure.

InsiderTrading
Overtime,netinsiderstendtosellofftheirpositions
inordertodiversifytheirholdings.Mostrecently,
PGsnetinsidershaveslowedthesellingoftheir
positions.Overall,netinsidershavedivestedan
aggregate$43millionsince2004.

DaystoCover
Thisratiomeasurestheperiodoftimeitwilltake
shortsellerstocovertheirpositionsrelativetothe
stockstotaltradingvolume.AsofJanuary2006,
PGsstabledaystocoverratioremainslow,
suggestingshortsellershavelittleinterestinthe
stock.

Procter and Gambl e Techni cal Appendi x, Page 1 of 8

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A B C D E F G H I J K L M N
Enter Fi rm Ti cker PG
Enter fi rst fi nanci al statement year i n cel l B6 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Average Manual
Total revenue 56,741 68,222 74,832 81,748 79,029 Revenue Growth 20.2% 9.7% 9.2% -3.3% 8.6%
Cost of goods sold 27,872 33,125 35,659 39,536 38,898 COGS % of Sales 49.1% 48.6% 47.7% 48.4% 49.2% 48.6%
Gross profi t 28,869 35,097 39,173 42,212 40,131
SG&A expense 16,460 19,773 24,170 25,575 24,008 SG&A % of Sales 29.0% 29.0% 32.3% 31.3% 30.4% 30.4% 32.0%
Research & Development 1,940 2,075 0 0 0 R&D % of Sales 3.4% 3.0% 0.0% 0.0% 0.0% 1.3% 0.5%
Depreciation/Amortization 0 0 0 0 0 D&A % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Interest expense (income), operating 0 0 0 0 0 Inc. Exp. Oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Non-recurring expenses 0 0 0 0 0 Exp. Non-rec 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other operating expenses 0 0 0 0 0 Other exp. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Operati ng Income 10,469 13,249 15,003 16,637 16,123
Interest income (expense), non-operating 0 0 0 0 0 Int. inc. non-oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Gain (loss) on sale of assets 0 0 0 0 0 Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other income, net 346 283 565 462 560 Other income, net 0.6% 0.4% 0.8% 0.6% 0.7% 0.6%
Income before tax 9,981 12,413 14,264 15,632 15,325
Income tax 3,058 3,729 4,201 3,834 4,032 Tax rate 30.6% 30.0% 29.5% 24.5% 26.3% 28.2%
Income after tax 6,923 8,684 10,063 11,798 11,293
Minority interest 0 0 0 0 0 Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Equity in affiliates 0 0 0 0 0 Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
U.S. GAAP adjustment 0 0 0 0 0 U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net i ncome before extraordi nary i tems 6,923 8,684 10,063 11,798 11,293
Extraordinary items, total 0 0 277 277 2,143 Extrordinary items
Net i ncome 6,923 8,684 10,340 12,075 13,436
Total adjustments to net income (136) (148) (161) (176) (192) Adjustments to NI
Basic weighted average shares 2,516 3,055 3,159 3,081 2,952 Share growth 21.4% 3.4% -2.5% -4.2% 4.1% 0.0%
Basic EPS excluding extraordinary items 2.75 2.84 3.19 3.83 3.83
Basic EPS including extraordinary items 2.75 2.84 3.27 3.92 4.55
Diluted weighted average shares 2,737 3,286 3,399 3,317 3,154 Diluted share growth 20.1% 3.4% -2.4% -4.9% 3.6% 0.0%
Diluted EPS excluding extraordinary items 2.53 2.64 2.96 3.56 3.58
Diluted EPS including extraordinary items 2.53 2.64 3.04 3.64 4.26
Dividends per share -- common stock 1.03 1.16 1.28 1.45 1.64
Gross dividends -- common stock 2,595 3,555 4,048 4,479 4,852 Dividend growth 37.0% 13.9% 10.6% 8.3% 16.9% 10.0%
Retai ned earni ngs 4,328 5,129 6,292 7,596 8,584
Data Source: Thomson/Reuters
values in millions
Too unpredictable to forecast, set to zero in the forecast
Too unpredictable to forecast, set to zero in the forecast
Forecasti ng Percentages Hi stori cal Income Statements
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted i ncome statement i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n
the manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether
the hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Procter and Gambl e Techni cal Appendi x, Page 2 of 8
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O P Q R S T U V W X Y Z
Year-by-year revenue growth -3.00% -2.00% 5.00% 5.00% 4.00% 4.00% 3.50% 3.00% 3.00% 3.00%
year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Total revenue 76,658 75,125 78,881 82,825 86,138 89,584 92,719 95,501 98,366 101,317
Cost of goods sold 37,242 36,497 38,322 40,238 41,848 43,522 45,045 46,396 47,788 49,222
Gross profi t 39,416 38,628 40,559 42,587 44,290 46,062 47,674 49,104 50,577 52,095
SG&A expense 24,531 24,040 25,242 26,504 27,564 28,667 29,670 30,560 31,477 32,421
Research & Development 383 376 394 414 431 448 464 478 492 507
Depreciation/Amortization 0 0 0 0 0 0 0 0 0 0
Interest expense (income), operating 0 0 0 0 0 0 0 0 0 0
Non-recurring expenses 0 0 0 0 0 0 0 0 0 0
Other operating expenses 0 0 0 0 0 0 0 0 0 0
Operati ng Income 14,502 14,212 14,923 15,669 16,295 16,947 17,540 18,067 18,609 19,167
Interest income (expense), non-operating (957) (651) (596) (657) (653) (672) (748) (785) (865) (993)
Gain (loss) on sale of assets 0 0 0 0 0 0 0 0 0 0
Other income, net 468 459 482 506 526 547 566 583 601 619
Income before tax 14,014 14,019 14,808 15,517 16,169 16,822 17,359 17,864 18,345 18,793
Income tax 3,951 3,953 4,175 4,375 4,559 4,743 4,894 5,037 5,172 5,298
Income after tax 10,063 10,067 10,633 11,142 11,610 12,079 12,465 12,828 13,173 13,495
Minority interest 0 0 0 0 0 0 0 0 0 0
Equity in affiliates 0 0 0 0 0 0 0 0 0 0
U.S. GAAP adjustment 0 0 0 0 0 0 0 0 0 0
Net i ncome before extraordi nary i tems 10,063 10,067 10,633 11,142 11,610 12,079 12,465 12,828 13,173 13,495
Extraordinary items, total 0 0 0 0 0 0 0 0 0 0
Net i ncome 10,063 10,067 10,633 11,142 11,610 12,079 12,465 12,828 13,173 13,495
Total adjustments to net income 0 0 0 0 0 0 0 0 0 0
Basic weighted average shares 2,952 2,952 2,952 2,952 2,952 2,952 2,952 2,952 2,952 2,952
Basic EPS excluding extraordinary items 3.41 3.41 3.60 3.77 3.93 4.09 4.22 4.35 4.46 4.57
Basic EPS including extraordinary items 3.41 3.41 3.60 3.77 3.93 4.09 4.22 4.35 4.46 4.57
Diluted weighted average shares 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154
Diluted EPS excluding extraordinary items 3.19 3.19 3.37 3.53 3.68 3.83 3.95 4.07 4.18 4.28
Diluted EPS including extraordinary items 3.19 3.19 3.37 3.53 3.68 3.83 3.95 4.07 4.18 4.28
Dividends per share -- common stock 1.81 1.99 2.19 2.41 2.65 2.91 3.20 3.52 3.88 4.26
Gross dividends -- common stock 5,337 5,871 6,458 7,104 7,814 8,596 9,455 10,401 11,441 12,585
Retai ned earni ngs 4,725 4,196 4,175 4,038 3,796 3,484 3,010 2,427 1,732 910
Forecasted Income Statements -- 10 Years
Revenues grow at the same rate each year unl ess a growth val ue i s manual l y entered i n the cel l above the forecast year, i n whi ch case the year-by-year val ue
overri des the hi stori cal or manual average. It makes sense to start taperi ng the growth forecasts 5 or 6 years i nto the forecast peri od.
Revenues grow at the same rate each year unl ess a growth val ue i s manual l y entered i n the cel l above the forecast year, i n whi ch case the year-by-year val ue
overri des the hi stori cal or manual average. It makes sense to start taperi ng the growth forecasts 5 or 6 years i nto the forecast peri od.
Revenues grow at the same rate each year unl ess a growth val ue i s manual l y entered i n the cel l above the forecast year, i n whi ch case the year-by-year val ue
overri des the hi stori cal or manual average. It makes sense to start taperi ng the growth forecasts 5 or 6 years i nto the forecast peri od.
Procter and Gambl e Techni cal Appendi x, Page 3 of 8
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AA AB AC AD AE AF AG AH AI AJ AK AL AM AN
Enter Fi rm Ti cker PG
year 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Average Manual
Assets PPE Growth 31.0% 4.1% 5.6% -5.7% 1.2%
Cash & equivalents 6,389 6,693 5,354 3,313 4,781 Cash % of Sales 11.3% 9.8% 7.2% 4.1% 6.0% 7.7%
Short term investments 1,744 1,133 202 228 0 ST Invest. % of Sales 3.1% 1.7% 0.3% 0.3% 0.0% 1.1%
Receivables, total 4,185 5,725 6,629 6,761 5,836 Receivables % Sales 7.4% 8.4% 8.9% 8.3% 7.4% 8.1%
Inventory, total 5,006 6,291 6,819 8,416 6,880 Inventory % of Sales 8.8% 9.2% 9.1% 10.3% 8.7% 9.2%
Prepaid expenses 1,924 2,876 3,300 3,785 3,199 Pre. Exp. % of Sales 3.4% 4.2% 4.4% 4.6% 4.0% 4.1%
Other current assets, total 1,081 1,611 1,727 2,012 1,209 Other CA % of Sales 1.9% 2.4% 2.3% 2.5% 1.5% 2.1%
Total Current Assets 20,329 24,329 24,031 24,515 21,905
Property, plant and equipment (net) 14,332 18,770 19,540 20,640 19,462 Net PPE % of Sales 25.3% 27.5% 26.1% 25.2% 24.6% 25.8%
Goodwill 19,816 55,306 56,552 59,767 56,512 Goodwill % of Sales 34.9% 81.1% 75.6% 73.1% 71.5% 67.2%
Intangibles 4,347 33,721 33,626 34,233 32,606 Intangibles % of Sales 7.7% 49.4% 44.9% 41.9% 41.3% 37.0%
Long term investments 0 0 0 0 0 LT Invest. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Notes receivable -- long term 0 0 0 0 0 Notes Rec. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other long term assets, total 2,703 3,569 4,265 4,837 4,348 Other LT ass. % Sales 4.8% 5.2% 5.7% 5.9% 5.5% 5.4%
Other assets, total 0 0 0 0 0 Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total assets 61,527 135,695 138,014 143,992 134,833
Li abi l i ti es and Sharehol ders' Equi ty
Accounts payable 3,802 4,910 5,710 6,775 5,980 Acc. Payable % Sales 6.7% 7.2% 7.6% 8.3% 7.6% 7.5%
Payable/accrued 0 0 0 0 0 Pay/accured % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Accrued expenses 7,531 9,587 9,586 10,154 7,879 Acc. Exp. % of Sales 13.3% 14.1% 12.8% 12.4% 10.0% 12.5%
Notes payable/short term debt 8,835 198 9,495 13,084 0 Notes payable % Sales 15.6% 0.3% 12.7% 16.0% 0.0% 8.9%
Current portion of LT debt/Capital leases 2,606 1,930 2,544 0 16,320 Curr. debt % of Sales 4.6% 2.8% 3.4% 0.0% 20.7% 6.3%
Other current liabilities 2,265 3,360 3,382 945 722 Other curr liab % Sales 4.0% 4.9% 4.5% 1.2% 0.9% 3.1%
Total Current Li abi l i ti es 25,039 19,985 30,717 30,958 30,901
Long term debt, total 12,887 35,976 23,375 23,581 20,652 LT debt % of Sales
Deferred income tax 1,896 12,354 12,015 11,805 10,752 Def. inc. tax % Sales 3.3% 18.1% 16.1% 14.4% 13.6% 13.1%
Minority interest 0 0 0 0 0 Min. Int. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other liabilities, total 3,230 4,472 5,147 8,154 9,429 Other liab. % of Sales 5.7% 6.6% 6.9% 10.0% 11.9% 8.2%
Total Li abi l i ti es 43,052 72,787 71,254 74,498 71,734
Preferred stock (redeemable) 1,483 1,451 1,406 1,366 1,324
Preferred stock (unredeemable) 0 0 0 0 0
Common stock 2,977 3,976 3,990 4,002 4,007
Additonal paid-in capital 3,030 57,856 59,030 60,307 61,118
Retained earnings (accumluated deficit) 31,004 35,666 41,797 48,986 57,309
Treasury stock -- common (17,194) (34,235) (38,772) (47,588) (55,961)
ESOP Debt Guarantee (1,259) (1,288) (1,308) (1,325) (1,340)
Other equity, total (1,566) (518) 617 3,746 (3,358)
Total Sharehol ders' Equi ty 18,475 62,908 66,760 69,494 63,099
Total Li abi l i ti es and Sharehol ders' Equi ty 61,527 135,695 138,014 143,992 134,833
Diluted weighted average shares 2,737 3,286 3,399 3,317 3,154 Diluted share growth 20.1% 3.4% -2.4% -4.9% 3.6% 0.0%
Total preferred shares outstanding 0 0 0 0 0 Preferred share growth
values in millions
Hi stori cal Bal ance Sheets
Set to last historical year's level throughout the forecasts.
Set to last historical year's level throughout the forecasts.
LT debt is manually adjusted for AFN in the pro formas
Forecasti ng Percentages
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Forecasted bal ance sheet i tems are based on 5 years of hi stori cal average rati os unl ess a val ue i s entered i n the
manual cel l , i n whi ch case the manual entry overri des the hi stori cal average. The i dea i s to consi der whether the
hi stori cal average i s trul y representati ve of what the fi rm can achi eve i n the future.
The model uses the more conservati ve di l uted common shares
number for total shares outstandi ng.
Procter and Gambl e Techni cal Appendi x, Page 4 of 8
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AO AP AQ AR AS AT AU AV AW AX AY AZ
0.07 20,824 22,282 23,842 25,511 27,296 29,207 31,252 33,439 35,780 38,285
Year-by-year PPE/Sal es 24.00% 24.00% 24.00% 25.00% 25.00% 25.00% 26.00% 26.00% 26.00% 26.00%
year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Assets
Cash & equivalents 6,800 6,800 6,047 6,349 6,603 6,867 7,107 7,321 7,540 7,766
Short term investments 810 794 833 875 910 947 980 1,009 1,039 1,071
Receivables, total 6,176 6,052 6,355 6,673 6,939 7,217 7,470 7,694 7,925 8,162
Inventory, total 7,077 6,935 7,282 7,646 7,952 8,270 8,559 8,816 9,081 9,353
Prepaid expenses 3,173 3,109 3,265 3,428 3,565 3,708 3,838 3,953 4,071 4,193
Other current assets, total 1,620 1,587 1,667 1,750 1,820 1,893 1,959 2,018 2,079 2,141
Total Current Assets 25,655 25,278 25,448 26,721 27,790 28,901 29,913 30,810 31,735 32,687
Property, plant and equipment (net) 18,398 18,030 18,931 20,706 21,535 22,396 24,107 24,830 25,575 26,342
Goodwill 51,542 50,511 53,037 55,689 57,916 60,233 62,341 64,211 66,138 68,122
Intangibles 28,388 27,820 29,211 30,672 31,899 33,175 34,336 35,366 36,427 37,520
Long term investments 0 0 0 0 0 0 0 0 0 0
Notes receivable -- long term 0 0 0 0 0 0 0 0 0 0
Other long term assets, total 4,157 4,074 4,277 4,491 4,671 4,858 5,028 5,179 5,334 5,494
Other assets, total 0 0 0 0 0 0 0 0 0 0
Total assets 128,140 125,713 130,906 138,279 143,810 149,563 155,725 160,396 165,208 170,164
Li abi l i ti es and Sharehol ders' Equi ty
Accounts payable 5,731 5,617 5,898 6,192 6,440 6,698 6,932 7,140 7,354 7,575
Payable/accrued 0 0 0 0 0 0 0 0 0 0
Accrued expenses 9,586 9,395 9,864 10,357 10,772 11,203 11,595 11,943 12,301 12,670
Notes payable/short term debt 6,831 6,694 7,029 7,381 7,676 7,983 8,262 8,510 8,765 9,028
Current portion of LT debt/Capital leases 4,825 4,729 4,965 5,213 5,422 5,639 5,836 6,011 6,192 6,377
Other current liabilities 2,377 2,330 2,446 2,569 2,671 2,778 2,875 2,962 3,051 3,142
Total Current Li abi l i ti es 29,351 28,764 30,202 31,712 32,981 34,300 35,501 36,566 37,663 38,792
Long term debt, total 14,624 8,915 7,693 8,677 8,438 8,653 9,936 10,523 11,895 14,183
Deferred income tax 10,050 9,849 10,342 10,859 11,293 11,745 12,156 12,521 12,896 13,283
Minority interest 0 0 0 0 0 0 0 0 0 0
Other liabilities, total 6,291 6,165 6,473 6,797 7,069 7,351 7,609 7,837 8,072 8,314
Total Li abi l i ti es 60,316 53,693 54,710 58,045 59,780 62,049 65,201 67,446 70,526 74,573
Preferred stock (redeemable) 1,324 1,324 1,324 1,324 1,324 1,324 1,324 1,324 1,324 1,324
Preferred stock (unredeemable) 0 0 0 0 0 0 0 0 0 0
Common stock 4,007 4,007 4,007 4,007 4,007 4,007 4,007 4,007 4,007 4,007
Additonal paid-in capital 61,118 61,118 61,118 61,118 61,118 61,118 61,118 61,118 61,118 61,118
Retained earnings (accumluated deficit) 62,034 66,230 70,406 74,444 78,240 81,723 84,733 87,160 88,892 89,802
Treasury stock -- common (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961)
ESOP Debt Guarantee (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340)
Other equity, total (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358)
Total Sharehol ders' Equi ty 67,824 72,020 76,196 80,234 84,030 87,513 90,523 92,950 94,682 95,592
Total Li abi l i ti es and Sharehol ders' Equi ty 128,140 125,713 130,906 138,279 143,810 149,563 155,725 160,396 165,208 170,164
Total common shares (diluted) 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154
Total preferred shares outstanding 0 0 0 0 0 0 0 0 0 0
AFN (i nteracti ve wi th 3 i tems bel ow) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adjustment to LT Debt (use Goal Seek) (6,028.4) (5,708.8) (1,221.9) 984.3 (239.5) 215.1 1,283.4 586.7 1,372.4 2,287.6
Issue Common Stock to Fund AFN
Set Balance Sheet Cash Lower to Fund AFN 6,800.0 6,800
Forecasted Bal ance Sheets -- 10 Years
Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49 Model mai ntai ns a fi xed rati o of ST debt/sal es. LT debt i s adj usted for shortfal l s/surpl uses of AFN. Every ti me somethi ng changes that affects the forecasts, set row 49
Procter and Gambl e Techni cal Appendi x, Page 5 of 8
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BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BP
Enter Fi rm Ti cker PG
2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Liquidity
Current 0.81 1.22 0.78 0.79 0.71 0.87 0.88 0.84 0.84 0.84 0.84 0.84 0.84 0.84 0.84
Quick 0.61 0.90 0.56 0.52 0.49 0.63 0.64 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
Net Working Capital to Total Assets (0.08) 0.03 (0.05) (0.04) (0.07) (0.03) (0.03) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04)
Asset Management
Days Sales Outstanding 26.92 30.63 32.33 30.19 26.95 29.41 29.41 29.41 29.41 29.41 29.41 29.41 29.41 29.41 29.41
Inventory Turnover 11.33 10.84 10.97 9.71 11.49 10.83 10.83 10.83 10.83 10.83 10.83 10.83 10.83 10.83 10.83
Fixed Assets Turnover 3.96 3.63 3.83 3.96 4.06 4.17 4.17 4.17 4.00 4.00 4.00 3.85 3.85 3.85 3.85
Total Assets Turnover 0.92 0.50 0.54 0.57 0.59 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
Debt Management
Long-Term Debt to Equity 69.8% 57.2% 35.0% 33.9% 32.7% 21.6% 12.4% 10.1% 10.8% 10.0% 9.9% 11.0% 11.3% 12.6% 14.8%
Total Debt to Total Assets 35.3% 26.7% 23.8% 25.5% 15.3% 16.7% 12.4% 11.2% 11.6% 11.2% 11.1% 11.7% 11.9% 12.5% 13.6%
Times Interest Earned N/A N/A N/A N/A N/A 15.2 21.8 25.0 23.8 25.0 25.2 23.5 23.0 21.5 19.3
Profitability
Gross Profit Margin 50.9% 51.4% 52.3% 51.6% 50.8% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4%
Operating Profit Margin 18.5% 19.4% 20.0% 20.4% 20.4% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9%
Net After-Tax Profit Margin 12.2% 12.7% 13.8% 14.8% 17.0% 13.1% 13.4% 13.5% 13.5% 13.5% 13.5% 13.4% 13.4% 13.4% 13.3%
Total Assets Turnover 0.92 0.50 0.54 0.57 0.59 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
Return on Assets 11.3% 6.4% 7.5% 8.4% 10.0% 7.9% 8.0% 8.1% 8.1% 8.1% 8.1% 8.0% 8.0% 8.0% 7.9%
Equity Multiplier 3.33 2.16 2.07 2.07 2.14 1.89 1.75 1.72 1.72 1.71 1.71 1.72 1.73 1.74 1.78
Return on Equity 37.5% 13.8% 15.5% 17.4% 21.3% 14.8% 14.0% 14.0% 13.9% 13.8% 13.8% 13.8% 13.8% 13.9% 14.1%
Free Cash Flow Per Share $1.48 $3.10 $4.04 $3.48 $3.29 $3.34 $3.38 $2.94 $3.40 $3.53 $3.40 $3.84 $3.96 $4.07
EPS (using diluted shares, excluding extraordinary item 2.53 2.64 2.96 3.56 3.58 3.19 3.19 3.37 3.53 3.68 3.83 3.95 4.07 4.18 4.28
DPS (dividends per share) 0.95 1.08 1.19 1.35 1.54 1.69 1.86 2.05 2.25 2.48 2.73 3.00 3.30 3.63 3.99
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
NOPAT (net operating profit after tax) 7,261 9,269 10,584 12,557 11,881 10,413 10,205 10,715 11,251 11,701 12,169 12,595 12,973 13,362 13,763
ROIC (return on invested capital) 39.1% 40.3% 45.9% 56.6% 51.4% 45.0% 44.7% 46.9% 45.3% 45.3% 45.3% 43.9% 43.9% 43.9% 43.9%
EVA (economic value added) 5,886 7,568 8,879 10,913 10,171 8,701 8,517 9,024 9,414 9,790 10,182 10,470 10,784 11,107 11,440
FCF (free cash flow) N/A 4,866 10,520 13,402 10,982 10,381 10,532 10,668 9,280 10,708 11,137 10,728 12,111 12,475 12,849
Weighted Average Cost of Capital 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%
Net Operating Working Capital (NOWC) 4,247 4,212 3,506 1,561 3,638 4,735 4,776 3,921 4,118 4,282 4,454 4,609 4,748 4,890 5,037
Operating Long Term Assets 14,332 18,770 19,540 20,640 19,462 18,398 18,030 18,931 20,706 21,535 22,396 24,107 24,830 25,575 26,342
Total Operating Capital 18,579 22,982 23,046 22,201 23,100 23,133 22,806 22,853 24,824 25,817 26,850 28,716 29,578 30,465 31,379
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Long-term Horizon Value Growth Rate (user-supplied) 3.00%
PV of Forecasted FCF, discounted at 7.40% $222,563 $228,656 $235,048 $241,777 $250,391 $258,216 $266,191 $275,166 $283,420 $291,923 $300,681
Value of Non-Operating Assets $4,781 $7,610 $7,594 $6,880 $7,224 $7,513 $7,814 $8,087 $8,330 $8,580 $8,837
Total Intrinsic Value of the Firm $227,344 $236,266 $242,642 $248,657 $257,616 $265,729 $274,005 $283,253 $291,750 $300,503 $309,518
Intrinsic Market Value of the Equity $206,692 $215,614 $221,990 $228,005 $236,964 $245,077 $253,353 $262,601 $271,098 $279,851 $288,866
Per Share Intrinsic Value of the Firm $65.53 $68.36 $70.38 $72.29 $75.13 $77.70 $80.33 $83.26 $85.95 $88.73 $91.58
MVA (market value added) $143,593 $147,789 $149,969 $151,809 $156,730 $161,047 $165,840 $172,078 $178,148 $185,169 $193,274
Item Val ue Percent Cost Wei ghted Cost Risk Free Rate 4.25%
ST Debt (from most recent balance sheet) 0 0.00% 2.70% 0.00% Beta 0.60
LT Debt (from most recent balance sheet) 20,652 11.05% 5.28% 0.42% Market Risk Prem. 6.00%
MV Equity (look up stock's mkt. cap and enter in cell BB53 166,245 88.95% 7.85% 6.98% Cost of Equity 7.85%
Weighted Average Cost of Capital 7.40%
Wei ghted Average Cost of Capi tal Cal cul ati ons Capi tal Asset Pri ci ng Model
Forecasted Rati os and Val uati on Model -- 10 Years
Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions) Forecasted Valuation Metrics -- 10 Years
values in millions
Hi stori cal Rati os and Val uati on Model
Val uati on (i n mi l l i ons) -- through year 2019
Procter and Gambl e Techni cal Appendi x, Page 6 of 8
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BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH
Inputs 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Per share value (hist. & DCF est.) $57.88 $64.27 $73.42 $61.82 $58.00 $68.36 $70.38 $72.29 $75.13 $77.70 $80.33 $83.26 $85.95 $88.73 $91.58
Market capitalization $145,603 $196,338 $231,934 $190,455 $171,228 $201,812 $207,780 $213,410 $221,795 $229,389 $237,136 $245,791 $253,745 $261,937 $270,375
EBITDA $9,981 $12,413 $14,541 $15,909 $17,468 $14,970 $14,671 $15,404 $16,174 $16,821 $17,494 $18,107 $18,650 $19,209 $19,786
Enterprise Value $162,419 $227,270 $260,856 $225,173 $188,423 $217,790 $217,913 $223,409 $232,828 $240,224 $248,228 $258,206 $266,781 $276,381 $287,144
Mul ti pl es
Price/Sales 2.57 2.88 3.10 2.33 2.17 2.63 2.77 2.71 2.68 2.66 2.65 2.65 2.66 2.66 2.67
Price/EBITDA 14.59 15.82 15.95 11.97 9.80 13.48 14.16 13.85 13.71 13.64 13.56 13.57 13.61 13.64 13.67
Price/Free Cash Flow N/A 33.23 21.32 14.57 16.27 19.44 19.73 20.00 23.90 21.42 21.29 22.91 20.95 21.00 21.04
Enterprise Value/EBITDA 16.27 18.31 17.94 14.15 10.79 14.55 14.85 14.50 14.39 14.28 14.19 14.26 14.30 14.39 14.51
Price/Earnings 22.88 24.32 24.80 17.38 16.20 21.43 22.05 21.44 21.27 21.11 20.97 21.07 21.13 21.24 21.41
Free Cash Flow Yield 2.3% 4.2% 6.5% 6.0% 4.8% 4.7% 4.7% 3.9% 4.4% 4.4% 4.1% 4.5% 4.5% 4.4%
Dividend Yield 1.64% 1.68% 1.62% 2.18% 2.65% 2.48% 2.64% 2.83% 3.00% 3.19% 3.39% 3.60% 3.84% 4.09% 4.36%
Hi stori cal Overri de
Val uati on Esti mates Based On: Average w/Manual 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Price/Sales 2.61 $63.38 $62.12 $65.22 $68.48 $71.22 $74.07 $76.66 $78.96 $81.33 $83.77
Price/EBITDA 13.63 $69.09 $67.71 $71.10 $74.65 $77.64 $80.74 $83.57 $86.08 $88.66 $91.32
Price/Free Cash Flow 21.35 16.27 $57.21 $58.04 $58.79 $51.14 $59.01 $61.37 $59.12 $66.75 $68.75 $70.81
Enterprise Value/EBITDA 15.49 $78.56 $76.99 $80.84 $84.88 $88.27 $91.81 $95.02 $97.87 $100.81 $103.83
Price/Earnings 21.12 16.20 $55.22 $55.24 $58.35 $61.14 $63.71 $66.28 $68.40 $70.39 $72.28 $74.05
Low Price $55.22 $55.24 $58.35 $51.14 $59.01 $61.37 $59.12 $66.75 $68.75 $70.81
High Price $78.56 $76.99 $80.84 $84.88 $88.27 $91.81 $95.02 $97.87 $100.81 $103.83
DCF Price $68.36 $70.38 $72.29 $75.13 $77.70 $80.33 $83.26 $85.95 $88.73 $91.58
Hi stori cal Rati os and Val uati on Forecasted Rati os and Val uati on
Forecasted Stock Pri ces Based on Hi stori cal Mul ti pl es -- 10 Years
Inthissectionwearegoingtoexaminehistoricalandforecastedratios(or"multiples")typicallyusedtovaluestocks P/CF,EnterpriseValue/EBITDA,etc.Wefirst wanttocomparethehistoricaltrends
intheseratiostothetrendsintheirforecastedvalues.Ifourforecastedmultiplesaresystematicallyincreasingordecreasingourforecastsmaybetoooptimisticorpessimistic,andourforecast
assumptionsmayhavetobeadjusted.Second,wewanttocompareourdiscountedcashflowvaluationestimateswiththosederivedfromthevariousmultiples.Onceagain,ifthereisalarge
discrepancybetweenourDCFvaluationestimateofthecompany'sstockandtherangeofvaluesobtainedfromthevariousmultiples,wemaywanttoadjustourforecastassumptions.
1.You willneedtolookupthe company'syearendstockpricesandentertheminthefirst5(historical)yearsofthe"persharevalue"category.
2.UsetheestimatedDCFpricepershareintheforecastedperiod(linktoyourforecastedpricesincellsBG47BP47.
3.MarketcapitalizationwillbecalculatedasbasicweightedsharesxhistoricalyearendpricesandthenforecastedbasicweightedsharesxDCFforecastedprices.
4.Aswithpreviouscalculations,historicalmultiplesuseactualhistoricalvaluesandforecastedmultiplesuseforecastedvalues.
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Price/Sales EnterpriseValue/EBITDA HistoricalorDCFPrice
Procter and Gambl e Techni cal Appendi x, Page 7 of 8
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CI CJ CK CL CM CN CO CP CQ CR CS CT CU CV CW CX CY CZ DA DB
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Price/EarningsRatio DividendYield
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GrossMargin OperatingMargin NetMargin
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ReturnonAssets ReturnonEquity ReturnonInvestedCapital
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NOPAT FreeCashFlow
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$7,000
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EarningsPerShare DividendsPerShare
Procter and Gambl e Techni cal Appendi x, Page 8 of 8
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PG CL CLX
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i
o
DaystoCoverRatio(ShortInterest/Volume)
DaystoCover
8
10
12
14
16
18
20
22
8
10
12
14
16
18
20
22
P
G
C
L

&

C
L
X
PeerComparison:Price/CashFlowRatio
PG CL CLX
0
1
2
3
4
5
C
L

&

C
L
X
PeerComparison:Price/SalesRatio
PG CL CLX