The J.M. Smucker Company 425
Filed by The J. M. Smucker Company
Pursuant to Rule 425 under the Securities Act of 1933
and Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: The Procter & Gamble Company
Commission File No.: 001-00434
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
CORPORATE PARTICIPANTS
Mark Belgya
The J.M. Smucker Company CFO
Tim Smucker
The J.M. Smucker Company Chairman & Co-CEO
Richard Smucker
The J.M. Smucker Company President & Co-CEO
A.G. Lafley
Procter & Gamble Chairman & CEO
CONFERENCE CALL PARTICIPANTS
Eric Katzman
Deutsche Bank Analyst
Eric Serotta
Merrill Lynch Analyst
Christina McGlone
Deutsche Bank Analyst
PRESENTATION
Operator
Good morning, ladies and gentlemen and welcome to The J.M. Smucker Company and Procter & Gamble
conference call. At this time, I would like to inform you that this conference is being recorded
and that all participants are in a listen-only mode. At the request of the companies, we will open
the conference up for questions and answers after the presentation. I will now turn the conference
over to Mr. Mark Belgya, Chief Financial Officer. Please go ahead, sir.
Mark Belgya - The J.M. Smucker Company CFO
Good morning and thank you for joining us. I would like to welcome you to the joint conference call
between The J.M. Smucker Company and Procter & Gamble to discuss the merger of the Folgers coffee
business into Smucker.
Joining me today from Smuckers are Tim Smucker, Chairman and co-CEO; Richard Smucker, President
and co-CEO; Vince Byrd, Senior Vice President of our Consumer Market; Steve Oakland, Vice President
and General Manager of our Consumer Oils and Baking business.
And from Procter & Gamble this morning, we have A.G. Lafley, Chairman and CEO and Clayton Daley,
Vice Chairman and CFO.
If you have not seen todays press release, it is available on both our websites at Smuckers.com
and PG.com. If you have any follow-up questions or comments after todays call, please feel free to
contract Mark Erceg or John Chevalier of Investor Relations at P&G or at Smucker, please contact
Sonal Robinson in Investor Relations or me.
I would like to remind you that certain statements in this presentation and during the
question-and-answer period that follows may relate to future events and expectations for both
Smucker and P&G and as such, constitute forward-looking statements within the meaning of the
Private Securities Legislation Reform Act of 1995. Actual results could differ materially from
those projected in the forward-looking statements. I invite you to read the full disclosure
statement of Smucker and P&G concerning such forward-looking statements in our press release. With
that, Ill turn the call over to Tim.
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
1
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
Tim Smucker - The J.M. Smucker Company Chairman & Co-CEO
Thank you, Mark and good morning, everyone and thank you for joining us. We are pleased to announce
a truly remarkable transaction that brings one of Americas best-known brands into the Smucker
family of brands and allows us to offer consumers yet another number one brand in a key category.
We have reached an agreement with Procter & Gamble to merge the Folgers coffee business into the
Smucker company. We are proud to welcome the Folgers and Millstone brands into our widely
recognized portfolio of brands that includes Smuckers, Jif, Crisco, Pillsbury, Eagle Brand, Hungry
Jack, Robin Hood and Bicks.
Folgers, founded in 1850, is similar to our core brands with a rich heritage, high-quality product
offerings and strong consumer loyalty. Over the years, Folgers has created some of the most
memorable marketing and advertising messages, including the well-known tagline the best part of
waking up is Folgers in your cup.
As you well know, our company and people are about more than making and marketing products. Indeed
at Smucker, our purpose is to help families share memorable meals and moments. The Smucker family
of brands is a trusted part of everyday meals, casual get-togethers and special occasions, all of
which foster family connections and lasting memories. Folgers has a long tradition of being part of
memorable meals and is undoubtedly a perfect fit in our family of brands. A freshly brewed cup of
coffee is the perfect complement to breakfast or desert, two areas we know a lot about. Not
surprisingly, these categories share very similar core consumer segments, opening up many
opportunities for brand marketing strategies.
Let me briefly discuss the rationale behind the transaction and why we are so enthusiastic about
the Folgers business. First, it is a great strategic fit. As the number one retail packaged coffee
brand in the US, the addition of Folgers clearly aligns with our strategy to own and market number
one food brands in North America.
Second, the addition of Folgers strengthens our portfolio of brands, adding our 10th number one
brand. We will cross a new threshold in terms of size and scale with the addition of our $1 billion
brand.
Third, the transaction is value-creating and financially compelling. For Smucker, the transaction
will be accretive in a full-year basis, increases annual net sales to almost $5 billion in the
first full year, expands margins and increases earnings and significantly increases free cash flow.
With the addition of Folgers, the size of the categories in which we participate increases to
approximately $15 billion. Coffee, light fruit spreads, peanut butter, cooking oils and flour are
staple items included in more than 80% of household pantries. We will be well-positioned for the
long term to meet a wide variety of consumer needs. This powerful combination provides us with
increased size and scale that will benefit all of our businesses, position us for future growth and
deliver long-term shareholder value.
Smucker and Procter & Gamble have a proven track record of working together. We added P&Gs Jif and
Crisco brands in 2002 and demonstrated our collective ability to transition the business. We are
confident that Smucker is a great home for Folgers brands and the Folgers people. And we expect
both to prosper as part of the Smucker family of brands. The combination will provide greater
opportunities for all employees, both existing Smucker employees and the Folgers employees. Now I
would like to turn the call over to Richard to provide some additional transaction details and the
financial benefits.
Richard Smucker - The J.M. Smucker Company President & Co-CEO
Thank you, Tim and good morning. First, let me say that I share Tims enthusiasm as we add one of
Americas best-known brands into the Smucker family. We look forward to building upon its heritage
and equity.
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
2
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
Now let me describe the transaction. It will be structured as an all stock reverse Morris Trust
transaction that is tax-free to Smucker, P&G and P&G shareholders. P&G shareholders will receive
approximately 63 million Smucker shares and own 53.5% of the combined company. Current Smucker
shareholders will own approximately 46.5% of the combined company. At the completion of the
transaction, Smuckers will have approximately 118 million shares outstanding. As part of the
transaction, Smucker will assume 350 million of Folgers debt.
Prior to the merger, Smucker shareholders, as of the record date, will receive a special dividend
of $5.00 per share. The transaction is expected to close in the fourth quarter of calendar 2008,
subject to customary closing conditions, including regulatory and Smucker shareholder approvals.
We expect to incur approximately $100 million in one-time costs related to the transaction over the
next 12 to 24 months. We expect synergies in excess of $80 million with a portion of these savings
realized during fiscal 2009 and the entire amount by the end of fiscal 2010. Most of these savings
will be achieved through efficiencies gained by combining the businesses and supply chain
enhancements.
As part of the transaction, we expect our debt to increase by approximately $650 million. Due to
the nature of the reverse Morris Trust structure, Smuckers will have a stronger balance sheet with
a conservative leveraged portfolio or profile as our debt to equity ratio will be below two times.
Free cash flows are expected to be approximately $400 million and will allow Smucker to continue
its strong dividend practice and continue to make strategic acquisitions and to repurchase share.
The merger provides significant financial benefits. Assuming Folgers was owned for all of fiscal
2009, net sales are expected to increase to approximately $4.7 billion. We expect the transaction
to be accretive by approximately 9% to fiscal 2009s earnings per share, including the synergies
and excluding merger and integration costs and after giving effect to the impact of the special
dividend to Smucker shareholders.
The profit contribution from Folgers, along with full synergy benefits, are expected to result in
EBITDA of approximately $820 million. This represents an increase in the EBITDA margin of nearly
300 basis points. Results for fiscal 2009 will depend on the actual closing date. Assuming the
transaction closes early in the fourth quarter of fiscal 2008, we expect 2009 net sales of
approximately $4 billion. Fiscal 2009s earnings per share before one-time costs associated with
the transaction of between $3.45 to $3.50 per share and fiscal 2009s earnings per share before
one-time costs associated with the transaction of between $3.62 and $3.72.
Post-integration, we are committed to a long-term strategic net sales growth of 6% with
acquisitions continuing to play a key role. We expect long-term strategic earnings per share growth
of 8% or greater. Our earnings per share will grow at a slightly higher rate than net income with
share repurchases. We remain committed to the long-term view of managing our brands and remain
confident in the opportunity for profitable growth that they offer.
At Smuckers, we feel privileged to be invited to family tables everyday. We value our relationship
with consumers and take seriously the confidence they place in us to provide the highest quality,
best tasting foods for their families. It is our ongoing quest to evolve the categories that we
participate in by bringing consumers foods that are good and good for you, that are easier and more
convenient to use and that bring a smile to their families. Folgers is a brand that has been
nurtured with the exceptionally high standards of Procter & Gamble. We look forward to continuing
Folgers rich history of being the leader in the coffee category. Now I would like to turn the call
over to A.G. for comments from P&G.
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
3
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
A.G. Lafley - Procter & Gamble Chairman & CEO
Thank you, Richard and good morning, everyone. When P&G announced its intention to separate the
coffee business back on January 31, we told our shareholders and employees that are goal was to
maximize the after-tax value of the business and minimize EPS dilution. The agreement we are
announcing with Smucker accomplishes both those objectives.
The coffee business will be separated from P&G and simultaneously merged with Smucker in a manner
that is tax-free for P&G and its shareholders. We plan to finalize the transaction structure for
the separation in the early fall of 2008 and we will notify shareholders of those details at that
time.
This transaction creates value for P&G shareholders that would not have existed if we had continued
on the path of creating a standalone company. Smucker has identified significant cost synergies
that will be shared by the owners of both companies.
Folgers has been a great brand for P&G for 45 years. And the people working in the coffee business
are truly outstanding. As Tim said, the Jif and Crisco experience has proven that this type of
transaction is a recipe for success and I fully expect the people and the brands to flourish as
part of Smucker. Now I would like to turn the call back to Tim for some closing remarks.
Tim Smucker - The J.M. Smucker Company Chairman & Co-CEO
Thank you, A.G. We look forward to getting to know the Folgers people as they work to build this
new organization. As we prepare to merge the Folgers coffee business into Smucker during the fourth
quarter of this calendar year, we have asked Vince Byrd to serve as President of the coffee
business. Vince has been with Smucker for 31 years and is currently the Senior Vice President for
our Consumer business, which includes general management responsibilities for our Smuckers, Jif
and Hungry Jack businesses. He also has responsibility for our US retail sales team and is a member
of our Board of Directors.
Of course, between now and the closing of the transaction, Jamie Egasti will continue to manage the
Folgers business.
So in summary, the addition of Folgers clearly aligns with our strategy and we are enthusiastic
about adding another number one brand into our strong and growing portfolio of brands. Like
Smucker, Folgers is a business rich in history and tradition and we look forward to the integration
of the iconic brand and the talented employees into our company. The transaction is accretive to
earnings with compelling financial benefits. And finally, this transaction brings significant value
to both Procter & Gamble and Smucker shareholders.
As you know, this has and will continue to require a great deal of effort by many people throughout
both companies. We believe the many common values shared by our organizations represent a great
foundation for a smooth integration of the integrated of the talented Folgers employees and the
market-leading brands into Smucker. We are confident in the future growth and opportunities for our
company and our constituents, our consumers, customers, employees, suppliers, communities and our
shareholders. Now I would like to turn the call over to Mark before we open to the Q&A.
Mark Belgya - The J.M. Smucker Company CFO
Thank you, Tim. As we prepare for the Q&A portion of the call, we would ask that you limit your
questions to this transaction. If you have any questions on other company-related topics, please
directly contact Investor Relations at either company after the call. Please keep in mind that
Smucker is in its quiet period as it relates to its 2008 year-end results. Smucker will be
releasing year-end earnings on June 19. We thank your for your time and now we will be happy to
answer your questions.
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
4
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
QUESTIONS AND ANSWERS
Operator
(OPERATOR INSTRUCTIONS). Eric Katzman, Deutsche Bank.
Eric Katzman - Deutsche Bank Analyst
Hi, good morning, everybody. My congratulations. I guess if I am limited to one question, I guess
the question would be, in terms of the structure of the deal, why what was the motivation behind
the special
dividend and is that essentially a means of offsetting what would otherwise be dilution to the
Smucker shareholder?
Tim Smucker - The J.M. Smucker Company Chairman & Co-CEO
Its several factors. Thats part of it. It is also the opportunity to recognize our loyal
shareholders over many years and we think this is the right moment to do that. It does help
equalize some of the valuation of the transaction, so both of those are key factors.
Eric Katzman - Deutsche Bank Analyst
Okay. So the special dividend I assume is that is taxable to the current shareholders?
Mark Belgya - The J.M. Smucker Company CFO
Yes, at the current rate.
Eric Katzman - Deutsche Bank Analyst
Okay, I will pass it on.
Operator
Eric Serotta, Merrill Lynch.
Eric Serotta - Merrill Lynch Analyst
Good morning. Just wondering whether you could talk a bit about the changed long-term growth
targets for Smucker. Previously, you were talking about 8% organic Im sorry 8% top-line
growth and 8% EPS growth [if] that half coming from acquisitions. It looks like after the deal
here, you are looking at 6% per year, including acquisitions on the top line. Wondering what you
are ballparking the average contribution from acquisitions to be and then is the lower all-in
target assumption of these typical tuck-in acquisitions that you do having a lower impact on the
larger base or is it a function of the Folgers business being dilutive to Smuckers previous
long-term organic top-line growth or some combination of the two?
Richard Smucker - The J.M. Smucker Company President & Co-CEO
Well, first of all, obviously we are almost doubling our size, so our base is going to be larger,
so it is harder to grow, as you know, from a company of $5 billion in sales versus a company that
is $2.5 billion in sales, but we still expect the bottom line to be able
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
5
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
to leverage that. So we definitely expect that the bottom-line growth rate will be at or greater
than our current growth rate of 8% plus. So we still expect the bottom line to grow faster.
Second is that we expect acquisitions to still contribute roughly half of our growth. Our core
businesses have been growing between 3% to 4% a year, which includes share of market growth and new
product growth and we think that is pretty solid growth rates. If you look back every year for the
last 10 years, we have been able to grow our base business between 3% to 5%. We still expect that
to be possible, especially with the brands that we have and also the concentration that we now have
in the grocery stores. But it is primarily the fact that we are a larger company and it is just
harder to grow the top line.
Eric Serotta - Merrill Lynch Analyst
Okay, but are you looking I presume that you are looking for Folgers to be growing less than 3%
to 5% on the top line?
Richard Smucker - The J.M. Smucker Company President & Co-CEO
Well, our growth rates are
Eric Serotta - Merrill Lynch Analyst
Longer term?
Richard Smucker - The J.M. Smucker Company President & Co-CEO
All of our brands are roughly around 3% of the top line unless we have an acquisition to add to
them, but we have been able to do that consistently.
Eric Serotta - Merrill Lynch Analyst
Okay, I will pass it on. Thanks a lot.
Operator
(OPERATOR INSTRUCTIONS). Cristina McGlone, Deutsche Bank.
Christina McGlone - Deutsche Bank Analyst
Good morning. I just wanted to go over the source of the synergies because with the Jif and Crisco
transaction, there really werent many synergies because I think the overhead stays with Proctor,
so where do you expect to kind of garner this $80 million?
Mark Belgya - The J.M. Smucker Company CFO
Christina, this is Mark. As we went through the last several weeks, we have looked at the
organization. I think it is a combination. Clearly as a larger company, we [think] in great detail
about what scale will bring and we think there will be opportunities getting our cost of goods sold
side through items, for example, such as volume purchasing. Also we have talked a long time about
the infrastructure of existing Smucker being able to support a larger company. So we do see
synergies coming in our administrative
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
6
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
area as we take advantage of our current infrastructure. Obviously, there will be opportunities as
we move forward, but I would say the majority, or at least the larger portion of it, are more in
the administrative, but we have identified some across our organization in all functional areas.
Tim Smucker - The J.M. Smucker Company Chairman & Co-CEO
And we should say, Christina, we built these up from the bottom, bottom up from kind of a
zero-based budgeting, so we feel very confident in those numbers.
Christina McGlone - Deutsche Bank Analyst
Okay, and even getting them by fiscal 2010 when you give the IMC synergies, it was a three-year
time period, so this is a little accelerated?
Mark Belgya - The J.M. Smucker Company CFO
Thats right. We would expect to see those pretty much in the first year.
Christina McGlone - Deutsche Bank Analyst
Okay, thank you.
Tim Smucker - The J.M. Smucker Company Chairman & Co-CEO
Full year.
Operator
And that will conclude todays question-and-answer session. I will turn the call back over to Mr.
Smucker for closing remarks.
Tim Smucker - The J.M. Smucker Company Chairman & Co-CEO
Thank you very much for your attention. We appreciate your interest and we look forward to talking
further. This is a great transaction and one thing I just want to close by saying thank you to the
Proctor & Gamble folks for this is a great brand that they have built and most importantly are
the people that this transaction will bring into the Smucker fold. So we look forward to the
transaction. All the best, have a great day.
Operator
That will conclude your conference for today. We do thank you for your participation. Everyone,
please have a wonderful day.
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
7
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
F I N A L T R A N S C R I P T
Jun. 04. 2008 / 9:00AM, PG - Smucker - Folgers Merger
DISCLAIMER
Thomson Financial reserves the right to make changes to documents, content, or other information on
this web site without obligation to notify any person of such changes.
In the conference calls upon which Event Transcripts are based, companies may make projections or
other forward-looking statements regarding a variety of items. Such forward-looking statements are
based upon current expectations and involve risks and uncertainties. Actual results may differ
materially from those stated in any forward-looking statement based on a number of important
factors and risks, which are more specifically identified in the companies most recent SEC
filings. Although the companies may indicate and believe that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove inaccurate or
incorrect and, therefore, there can be no assurance that the results contemplated in the
forward-looking statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE
COMPANYS CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE
MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE
CONFERENCE CALLS. IN NO WAY DOES THOMSON FINANCIAL OR THE APPLICABLE COMPANY ASSUME ANY
RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON
THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANYS
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANYS SEC FILINGS BEFORE MAKING ANY INVESTMENT OR
OTHER DECISIONS.
©2008, Thomson Financial. All Rights Reserved.
|
|
|
|
|
|
|
|
|
www.streetevents.com
|
|
Contact Us
|
|
8
|
© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Additional Information
In connection with the proposed transaction between Smucker and P&G, Smucker will file a
registration statement with the SEC, which will include Smuckers proxy statement/prospectus.
Shareholders are urged to read the proxy statement/prospectus and any other relevant documents when
they become available, because they will contain important information. The proxy
statement/prospectus and other documents relating to the proposed transaction (when they are
available) can be obtained free of charge from the SECs website at www.sec.gov, or by contacting
The J. M. Smucker Company, Shareholder Relations, Strawberry Lane, Orrville, Ohio 44667 or by
calling (330) 684-3838.
Smucker, P&G, and certain of their respective directors and executive officers may be deemed to be
participants in the solicitation of proxies from shareholders in connection with the proposed
transaction. Information about the directors and executive officers of Smucker and P&G may be found
in their most recent Annual Reports on Form 10-K and definitive proxy statements for their most
recent annual meetings of shareholders filed with the SEC. Additional information regarding the
interests of these participants will also be included in the proxy statement/prospectus when it
becomes available. Smucker documents can be obtained free of charge from the sources indicated
above. P&G documents are available free of charge on the SECs website and also may be obtained by
contacting The Procter & Gamble Company, Shareholder Services Department, PO Box 5572, Cincinnati,
Ohio 45201-5572 or by calling (800) 742-6253.
The J. M. Smucker Company Forward Looking Information
This communication contains certain forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially. These include statements
regarding estimates of future earnings and cash flows and expectations as to the closing of the
transaction. Other uncertainties include, but are not limited to, general economic conditions
within the U.S., strength of commodity markets from which raw materials are procured and the
related impact on costs, the ability to obtain regulatory and shareholders approval without
unexpected delays or conditions, integration of the merged businesses in a timely and cost
effective manner, retention of supplier and customer relationships and key employees, the ability
to achieve synergies and cost savings in the amounts and within the time frames currently
anticipated, and other factors affecting share prices and capital markets generally. Other risks
and uncertainties that may materially affect Smucker are detailed from time to time in reports
filed by Smucker with the SEC, including Forms 10-Q, 10-K and 8-K.
The Procter & Gamble Company Forward Looking Information
All statements, other than statements of historical fact included in this communication, are
forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act
of 1995. Such statements are based on financial data, market assumptions and business plans
available only as of the time the statements are made, which may become out of date or incomplete.
We assume no obligation to update any forward-looking statement as a result of new information,
future events or other factors. Forward-looking statements are inherently uncertain, and investors
must recognize that events could differ significantly from our expectations. In addition to the
risks and uncertainties noted in this release, there are certain factors that could cause actual
results to differ materially from those anticipated by some of the statements made. These include:
(1) the ability to achieve business plans, including with respect to lower income consumers and
growing existing sales and volume profitably despite high levels of competitive activity,
especially with respect to the product categories and geographical markets (including developing
markets) in which the Company has chosen to focus; (2) the ability to successfully execute, manage
and integrate key acquisitions and mergers, including (i) the Domination and Profit Transfer
Agreement with Wella, and (ii) the Companys merger with The Gillette Company, and to achieve the
cost and growth synergies in accordance with the stated goals of these transactions; (3) the
ability to manage and maintain key customer relationships; (4) the ability to maintain key
manufacturing and supply sources (including sole supplier and plant manufacturing sources); (5) the
ability to successfully manage regulatory, tax and legal matters (including product liability,
patent, and intellectual property matters as well as those related to the integration of Gillette
and its subsidiaries), and to resolve pending matters within current estimates; (6) the ability to
successfully implement, achieve and sustain cost improvement plans in manufacturing and overhead
areas, including the Companys outsourcing projects; (7) the ability to successfully manage
currency (including currency issues in volatile countries), debt, interest rate and commodity cost
exposures; (8) the ability to manage continued global political and/or economic uncertainty and
disruptions, especially in the Companys significant geographical markets, as well as any political
and/or economic uncertainty and disruptions due to terrorist activities; (9) the ability to
successfully manage competitive factors, including prices, promotional incentives and trade terms
for products; (10) the ability to obtain patents and respond to technological advances attained by
competitors and patents granted to competitors; (11) the ability to successfully manage increases
in the prices of raw materials used to make the Companys products; (12) the ability to stay close
to consumers in an era of increased media fragmentation; (13) the ability to stay on the leading
edge of innovation and maintain a positive reputation on our brands; and (14) the ability to
successfully separate the companys coffee business. For additional information concerning factors
that could cause actual results to materially differ from those projected herein, please refer to
our most recent 10-K, 10-Q and 8-K reports.