Page 668 - Accounting Principles (A Business Perspective)

16. Analysis using the statement of cash flows

compared with USD 43 billion at the end of 2002. The Company's book equity position amounted to USD 1.92
billion at the end of 2003, compared with USD 3.06 billion at the end of 2002 and USD 4.54 billion at the end of
2001. The decreases in book equity in 2003 and 2002 were due primarily to the Gillette share repurchase program,

as well as to the effect of foreign currency translation.
Net cash provided by operating activities in 2003 was USD 1.60 billion, compared with USD 1.43 billion in 2002
and USD .96 billion in 2001. The current ratio of the Company was .86 for 2003, compared with ratios of 1.39 for
2002 and 1.40 for 2001. The decrease in the 2003 current ratio was primarily attributable to the Company's
reclassification of all commercial paper borrowings to short-term debt, due to the Company's credit facility
agreements expiring within 2001. Capital spending in 2003 amounted to USD 793 million, compared with USD
889 million in 2002 and USD 952 million in 2001. Spending in all three years reflected substantial investments in

the blade and razor, Duracell and Braun Products segments.
In 2003, the Company sold the Stationery Products business for USD 528 million. In 2001, the Company made
acquisitions in the Duracell Products segment for USD 100 million and sold the Jafra business for USD 200
million.
Share repurchase funding in 2003, net of proceeds received from the sale of put options on Company stock,
amounted to USD 921 million, compared with USD 1,949 million in 2002 and USD 1,010 million in 2001.
Strong cash inflows from operations, proceeds from the sale of the Stationery Products business and alternate
financing sources enabled the Company to reduce its USD 2.0 billion revolving credit facility in 2003 to USD 1.4
billion, expiring October 2004, and its USD 1.1 billion credit facility, expiring December 2004, to USD 550 million

in January 2004. Both facilities are used by the Company to complement its commercial paper program.
In order to increase flexibility in sourcing short-term borrowing, the Company launched a USD 1 billion Euro
commercial paper program in 2003. At year-end 2003, there was USD 586 million outstanding under this program
and USD 1.45 billion outstanding under the US program, compared with USD 2.41 billion at the end of 2002 and
USD 1.66 billion at the end of 2001.
During 2003, the Company issued Euro-denominated notes for USD 228 million, due December 2005, and
entered into a USD 264 million Euro-denominated debt obligation, with redemption rights in December 2004.

During 2002, the Company issued Euro-denominated notes for USD 343 million, due February 2007, and entered
into a USD 325 million Euro-denominated debt obligation, with redemption rights in March 2005, and a USD 437
million Euro-denominated debt obligation, with redemption rights in January 2007. The net proceeds were used to
refinance existing short-term debt associated with the Company's share repurchase program.
During 2003, both Standard & Poor's and Moody's maintained the Company's current credit ratings. Standard &
Poor's rates the Company's long-term debt at AA, while Moody's rating is Aa3. The commercial paper rating is A1+
by Standard & Poor's and P1 by Moody's.
Gillette will continue to have capital available for growth through both internally generated funds and significant
credit resources. The Company has substantial unused lines of credit and access to worldwide financial market

sources for funds.
Source: The Gillette Company's 2000 annual report, p. 22.
a. Does the company use the direct or indirect method of calculating net cash provided by operating activities?
b. Determine whether each of the current assets (other than cash) and current liabilities increased or decreased
during 2003.

669