Proctor and Gamble 2002 Annual Report Download - page 5

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We are increasing free cash flow. Cash generation is a key indicator of a company’s underlying
health, and P&G’s management is focused on creating leadership, sustained cash flow growth in
each of our business units. Free cash flow – operating cash after capital spending – was $6.1 billion,
up 83% from last year and more than triple the free cash flow generated two years ago. Capital
spending improvement has been a key driver. Our objective was to reduce capital spending to 6%
of sales by fiscal 2004, and we’ve exceeded that goal two years ahead of schedule. We are now
resetting our capital spending target to below 5% of sales, and continue to look for opportunities
to improve asset efficiencies.
We are delivering superior total shareholder return (TSR). TSR is the key business unit metric
upon which P&G’s business planning and management compensation are based. The combination
of strong earnings growth and focus on cash has resulted in superior business returns over the past
year. P&G’s share price has responded accordingly, outpacing the major indices of Dow Jones and
the S&P 500.
These are substantial achievements, in tough economic times, in a very competitive global market-
place. These are the kinds of results P&G has delivered consistently and reliably for decades. This
is the level of performance that P&G shareholders expect and also that we – the men and women
of P&G – expect of ourselves. I want to commend the dedication, discipline and creativity of P&G
people who delivered these results.
We achieved P&G’s long-
term growth objectives
a year earlier than
projected.
Free Cash Flow
(in billions of dollars)
2000 2001 2002
Capital Spending
(as % of sales)
2000 2001 2002
P&G
DJIA
S&P 500
7.6%
6.3%
4.2%
Total Shareholder Return
(indexed versus July 1999)
1999 2000 2001
JDJDJDJ
50
100
150
1.7
3.3
6.1
Free Cash Flow
(in billions of dollars)
2000 2001 2002
Capital Spending
(as % of sales)
2000 2001 2002
P&G
DJIA
S&P 500
7.6%
6.3%
4.2%
Total Shareholder Return
(indexed versus July 1999)
1999 2000 2001
JDJDJDJ
50
100
150
1.7
3.3
6.1