Proctor and Gamble 2007 Annual Report Download - page 50

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The Procter & Gamble Company
48 Management’s Discussion and Analysis
The following table provides a numerical reconciliation of organic sales
growth to reported net sales growth for scal 2006:
Total
Company Health Care
Reported net sales growth 20% 29%
Less: Acquisitions & divestitures impact -14% -21%
Less: Foreign exchange impact 1% 1%
 7% 9%
Free Cash Flow. Free cash ow is dened as operating cash ow less
capital spending. The Company views free cash ow as an important
measure because it is one factor in determining the amount of cash
available for dividends and discretionary investment. Free cash ow is
also one of the measures used to evaluate senior management and is
a factor in determining their at-risk compensation.
Free Cash Flow Productivity. Free cash ow productivity is dened as
the ratio of free cash ow to net earnings. The Company’s target is to
generate free cash ow at or above 90% of net earnings. Free cash
ow productivity is one of the measures used to evaluate senior
management and is a factor in determining their at-risk compensation.
The following table provides a numerical reconciliation of free cash ow:
Free
Operating Capital Free Net Cash Flow
Cash Flow Spending Cash Flow Earnings Productivity
     
2006 11,375 (2,667) 8,708 8,684 100%
The following table provides a numerical reconciliation of organic sales
growth to reported net sales growth for scal 2007:
Fabric Baby
Total Care and Care and Blades
Company Beauty Health Care Home Care Family Care and Razors
Reported net sales growth 12% 9% 14% 11% 6% 49%
Less: Acquisitions & divestitures impact -5% -1% -6% 0% 0% -37%
Less: Foreign exchange impact -2% -3% -2% -3% -2% -4%
 5% 5% 6% 8% 4% 8%