Annual Report Analysis The Cash Flow Statement presenter Ja

							Annual Report Analysis:
The Cash Flow Statement


      presenter:
    Jan Gronosky
   Director - CNCC
                     CREDITS

• Ron Bruyn, MBA from BI National Convention
• Christopher Collins, NAIC Computer Group Director
   Annual Report Analysis:
        Cash Flow

       Financial Section –
    1. Income Statement or
     Statement of Earnings
2. Balance Sheet or Statement of
        Financial Position
   3. Statement of Cash Flow
        Statement of Cash Flow


             Purpose:
Shows the directional flow of money
Indicator of the financial health of the
               company
        Statement of Cash Flow
• Three types:
    • Net Cash Provided by Operations

    • Net Cash Used in Investing
      Activities

    • Net Cash Provided by Financing
      Activities
        Statement of Cash Flow
• Basic Terms

  –   Net Income
  –   Depreciation
  –   Accounts Receivable
  –   Inventory
  –   Cash Provided by Operations
            S. Of CF – Procter & Gamble Co.
            As of June 30, 2003 (in millions)
Operating Activities                        Investing Activities
• Net earnings - - - - - - - - - - -        • Capital Expenditures - - (1482)
  5186                                      • Asset sales - - - - - - - - - - - 143
• Depreciation - - - - - - - - - - - 1703   • Acquisitions - - - - - - - - - - (61)
• Deferred taxes - - - - - - - - - - -      • Change/Investments - - - - (107)
  63                                        TOTAL                              (1507)
• Change/Accts. Receivable - -
  163
• Change/Inventories - - - - - - -
  (56)
• Change/Accts. Payable etc. - -
  936
• Change/assets/liabilities - - - -
  178
              S. Of CF – Procter & Gamble Co.
                       June 30, 2003

                                        Exchange Rate - - - - - - - - - 387
                                        Cash & Cash Equivalents -
Financing Activities                      2485
• Dividends - - - - - - - - - (2246)
• S/T Debt - - - - - - - - - - (2052)   Supplement
• L/T Debt added - - - - - - 1230       • Interest payments - - - - 538
• L/T Debt reduction - - - (1060)       • Income taxes - - - - - - - 1703
• Exercise/stock options - - 269        Cash & Equivalents
• Treasury purchases - - - (1236)       • Beginning of year - - - - 3427
TOTAL                          (5095)   • End of year - - - - - - - - 5912
                                        Gain (Loss)                   2485
        A Detailed Look – Operating Activities
           Year – by – Year Comparison

Years Ending June 30 (in millions)    2003     2002      2001

CASH/EQUIVALENTS Beginning of Yr.    $3,427   $2,306   $1,415
Operating Activities
Net earnings (Loss)                  5,186    4,352    2,922
Depreciation/Amortization            1,703    1,693    2,271
Deferred income taxes                    63     389     (102)
Change/Accts. Receivable                163       96     (122)
Change/Inventories                     (56)     159       (67)
Change/Accts. Payable, etc.             936      684       801
Change/other assets, liabilities       178      (98)        57
Other                                 527       467        44

TOTAL OPERATING ACTIVITIES            8700     7742     5804
     A DETAILED LOOK – INVESTING ACTIVITIES
           YEAR-by-YEAR COMPARISON


YEARS ENDING JUNE 30               2003      2002
  2001

INVESTING ACTIVITIES
Capital expenditures              (1,482)   (1,679)
   (2,486)
Proceeds from asset sales            143      227
   788
Acquisitions                         (61)   (5,471)
   (138)
Change in investment securities    (107)       88
   (7)

TOTAL INVESTING ACTIVITIES        (1,507)   (6,835)
         A DETAILED LOOK – Financing Activities
               Year- by-Year Comparison
YEARS ENDING JUNE 30           2003      2002     2001

Financing Activities
Dividends to Shareholders     (2,246)   (2,095)
   (1,943)
Change in S/T Debt            (2,052)    1,394
   (1,092)
Additions to L/T Debt         1,230      1,690    1,356
Reductions of L/T Debt        (1,060)    (461)
   (226)
Proceeds/stock options           269      237      141
Treasury Purchases            (1,236)    (568)
   (1,250)
Total Financing Activities    (5,095)     197
   (3,014)
           CASH FLOW CHECK LIST

     Category                             Yes     No

1. Net earnings increase consistently     ____    ____
2. Company is deferring taxes             ____    ____
3. Company is deferring Accts. Payable    ____    ____
4. Inventory is decreasing                ____    ____
5. Capital spending is acceptable         ____    ____
6. Dividends are steady or increasing     ____    ____
7. Debt is handled from free cash flow    ____    ____
8. Increase in debt is reasonable         ____    ____
9. Free cash flow is increasing           ____    ____
10.Cash/Cash Equivalents are increasing    ____    ____
    Some Additional Thoughts

• Operating Activities – most crucial element
• Investing & Financing Activities – more difficult to
  interpret
• Multiple Annual Reports
• Multiple approaches
• Compare to industry
• Call the company – Investor Relations Dept.
• WEB site – annualreports.com