Mauboussin Cashing Up

26 June 2003
Americas/United States
Investment Strategy
Equity Research
Cashing Up
The Dow’s Quality of Earnings
Weighted-Average Cash Flow as a Percentage of Operating Net Income
D o w Jo nes Ind ust r i al 3 0
100%
90%
80%
70%
60%
50%
1997 1998 1999 2000 2001 2002
For the exclusive use of Evgenia Plotnikova (evgenia@dawncapital.com) at Dawn Capital LLP
Source: Company data, CSFB estimates.
• Large companies continue to show a trend of improving cash flows. Cash flow
was 97% of operating net income for the DJIA companies in 2002, the highest
ratio in the past six years.
• Capital spending was down in 2002 for the second straight year, and we expect
very measured capital allocation for the foreseeable future.
• Debt levels were essentially flat in 2002, but the ratio of cash flow to debt
improved materially. This development, combined with lower interest rates,
suggests that the aggregate balance sheet for the DJIA has improved markedly
in the last two years.
research team • Working capital remained in check as well, which is no surprise given the
sluggish pace of economic growth.
Michael Mauboussin
212 325 3108
michael.mauboussin@csfb.com
Kristen Bartholdson
212 325 2788
kristen.bartholdson@csfb.com
FOR IMPORTANT DISCLOSURE INFORMATION relating to analyst certification, please refer to the Disclosure Section at the
end of the report. For important disclosure regarding the Firm's investment banking relationships, if any, with companies
mentioned in this report and regarding the Firm's rating system, valuation methods, and potential conflicts of interest,
please visit the website at www.csfb.com/researchdisclosures or call +1 (877) 291-2683.
Cashing Up 26 June 2003
Executive Summary
Intelligent investors have always looked past accounting numbers to focus on the true
cash-generating capabilities of a business. The income statement does not, and was
never meant to, establish the value of a business. Understanding a business requires a
thorough study of income statements, balance sheets, and cash flow statements.
Last year, we published a report that gauged the earnings quality of the companies in
the Dow Jones Industrial Average by reconciling their operating net income and cash
flows. Highlights of our analysis this year include:
• Cash flow was 97% of operating net income on a weighted basis for the DJIA
companies in 2002. This ratio is the highest in the past six years.
• Capital spending for these companies dipped 17%, to roughly $89 billion. This was
the second year in a row of declining capital spending. In fact, aggregate capital
spending (net of depreciation) for the U.S. reached its lowest level as a percentage of
GDP since the end of World War II.
• Debt levels rose modestly (industrial companies only). But the cash flow-to-debt ratio
jumped from 33% in 2001 to 40% in 2002. This, combined with lower interest rates,
suggests that large-company balance sheets are in solid shape for the most part.
• Working capital needs increased modestly (again, industrial companies only). We

expect a tug of war to develop between high working capital, as a result of renewed
economic growth, and lower working capital, due to technology. (See Paddy Jilek’s
report, “Corporate Sector Focus: A Killer App?,” June 17, 2003.)
• We anticipate that companies will increase their rate of investment, but that increases
in spending will be very measured. In the late 1990s, investors gave managers the
benefit of the doubt, assuming that they were judicious capital allocators. Today,
investors feel strongly that they can allocate capital more efficiently than managers
can, and hence, are demanding dividends and share repurchases. We sense that this
trend will persist for some time.
To gauge the quality of earnings, and the trend in earnings quality, we reconciled cash
flow and operating earnings for all the companies in the Dow Jones Industrial Average
(DJIA) for each of the past six years. The DJIA companies comprise about one-third of
the market capitalization for the Standard & Poor’s 500 Composite Index. We define
cash flow as the difference between cash flow from operations and capital expenditures.
For 2002, the weighted-average cash flow-to-earnings ratio reached 97%. (See Exhibit
1.) Naturally, this average gives no indication of the range of results, which spanned
from a negative 405% (Hewlett-Packard) to a positive 686% (AT&T). Neither a high nor
a low cash flow ratio is necessarily desirable: The important question is why a
company’s ratio is where it is and what it suggests about future cash flow.
2
Exhibit 1: Cash Flow as a Percentage of Operating Net Income, 2002

US$ in millions
Operating Cash Flow as a % of

Net Income Cash Flow Operating Net Income
AA Alcoa Inc. 498 569 114%

AXP American Express Co. 2,671 8,004 300%
BA Boeing Co. 2,820 3,374 120%
C Citigroup Inc. 13,539 24,415 180%
CAT Caterpillar Inc. 718 1,638 228%
DD E.I. DuPont de Nemours 1,841 773 42%
DIS Walt Disney Co. 1,083 1,200 111%
EK Eastman Kodak Co. 787 1,627 207%
GE General Electric Co. 15,133 16,137 107%
GM General Motors Corp. 1,736 9,666 557%
HD* Home Depot Inc. 3,664 2,053 56%
HON Honeywell International Inc. 1,630 1,709 105%
HPQ Hewlett-Packard Co. -923 3,734 -405%
IBM International Business Machines 5,334 9,035 169%
INTC Intel Corp. 3,665 4,426 121%
IP International Paper Co. 295 1,089 369%
JNJ Johnson & Johnson 5,899 6,077 103%
JPM J.P. Morgan & Co. 16,631 -25,134 -151%
KO Coca-Cola Co. 3,976 3,891 98%
MCD McDonald's Corp. 2,113 886 42%
MMM 3M 2,066 2,229 108%
MO Altria 10,790 8,603 80%
MRK Merck & Co. 7,150 7,159 100%
MFST Microsoft Corp. 10,722 13,739 128%
PG Procter & Gamble Co. 4,497 6,063 135%
SBC SBC Communications Inc. 7,473 8,402 112%
T AT&T Corp. 963 6,605 686%
UTX United Technologies Corp. 2,236 2,267 101%
WMT* Wal-Mart Stores 8,039 3,175 39%
XOM Exxon Mobil Corp. 11,011 9,831 89%
Weighted Mean 96.7%

* Indicates FY2003.
Also noteworthy is the general trend in the cash flow-to-earnings ratio. Exhibit 2 shows
that 2002’s weighted and median ratios were the highest in the past half-decade. So
notwithstanding lingering concerns about accounting misrepresentations, the earnings
for the companies in the Dow seem to have relatively good, and generally improving,
correlations with cash flows.
3
Exhibit 2: Cash Flow as a Percentage of Operating Net Income, 1997–2002

2002 2001 2000 1999 1998 1997
AA Alcoa Inc. 114% 111% 72% 98% 94% 48%

AXP American Express Co. 300% 249% 193% 231% 186% 242%
BA Boeing Co. 120% 73% 195% 239% 29% 88%
C Citigroup Inc. 180% 170% 3% 83% 57% 55%
CAT Caterpillar Inc. 228% 98% 107% 177% 56% 76%
DD E.I. DuPont de Nemours 42% 74% 109% 98% 63% 106%
DIS Walt Disney Co. 111% 82% 115% 29% -24% 5%
EK Eastman Kodak Co. 207% 198% 3% 50% 27% 13%
GE General Electric Co. 107% 118% 68% 85% 112% 71%
GM General Motors Corp. 557% 54% 253% 350% 256% 104%
HD* Home Depot Inc. 56% 84% -30% -6% -9% -37%
HON Honeywell International Inc. 105% 63% 50% 64% 49% 56%
HPQ Hewlett-Packard Co. -405% 166% 55% 63% 117% 64%
IBM International Business Machines 169% 112% 45% 54% 53% 46%
INTC Intel Corp. 121% 37% 51% 108% 88% 79%
IP International Paper Co. 369% 345% 128% 107% 203% 41%
JNJ Johnson & Johnson 103% 121% 104% 94% 102% 89%
JPM J.P. Morgan & Co. -151% -91% -239% 1% 64% 38%
KO Coca-Cola Co. 98% 80% 79% 88% 74% 76%
MCD McDonald's Corp. 42% 45% 41% 59% 50% 20%
MMM 3M 108% 120% 65% 112% 62% 25%
MO Altria 80% 79% 111% 122% 118% 109%
MRK Merck & Co. 100% 87% 73% 61% 64% 105%
MFST Microsoft Corp. 128% 122% 110% 124% 130% 121%
PG Procter & Gamble Co. 135% 75% 39% 72% 62% 110%
SBC SBC Communications Inc. 112% 45% 13% 97% 53% 67%
T AT&T Corp. 686% 18% 3% -20% 46% 30%
UTX United Technologies Corp. 101% 108% 87% 242% 120% 107%
WMT* Wal-Mart Stores 39% 27% 25% 36% 127% 108%
XOM Exxon Mobil Corp. 89% 145% 86% 50% 42% 155%
Weighted Mean 96.7% 95.1% 57.5% 89.4% 81.6% 83.4%

* Indicates FY2003.
4
Why Earnings and Cash Flow Differ

Investors must always bear in mind that accountants are not in the business of
estimating economic value. The appropriate objective of corporate financial reporting is
1
to provide useful information to investors who seek to estimate value. Since
accountants can calculate earnings using a wide variety of acceptable methods, all
earnings are not created equal.
Here are some of the primary reasons that earnings and cash flow diverge:
• Changes in working capital. Working capital equals current assets (less excess cash)
minus noninterest-bearing current liabilities. Inventories and account receivables are
typically the largest component of current assets, while accounts payable is often the
largest current liability item.
Companies typically need to grow working capital at a pace consistent with their
business’s growth. Investors can consider working capital increases as an investment
(cash outflow) to support business growth.
Exhibit 3 examines the change in working capital from 2001 to 2002.
Exhibit 3: Working Capital Percentage Change, 2001–2002

US$ in millions
2002 2001 % change
AA Alcoa Inc. 1,439 1,037 39%

BA Boeing Co. -5,288 -4,354 -21%
CAT Caterpillar Inc. 2,975 2,724 9%
DD E.I. DuPont de Nemours 2,220 886 151%
DIS Walt Disney Co. -1,209 -33 -3564%
EK Eastman Kodak Co. -1,412 -1,185 -19%
HD* Home Depot Inc. 1,629 1,314 24%

HON Honeywell International Inc. 1,600 2,281 -30%
HPQ Hewlett-Packard Co. 336 3,005 -89%
IBM International Business Machines 1,127 949 19%
INTC Intel Corp. 1,544 737 109%
IP International Paper Co. 2,085 1,590 31%
JNJ Johnson & Johnson 342 2,457 -86%
KO Coca-Cola Co. -2,334 -3,192 27%
MCD McDonald's Corp. -1,037 -847 -22%
MMM 3M 984 1,171 -16%
MO Altria -2,206 -3,319 34%
MRK Merck & Co. -2,513 -1,869 -34%
MFST Microsoft Corp. -2,820 -1,644 -72%
PG Procter & Gamble Co. -4,161 -1,465 -184%
SBC SBC Communications Inc. -4,161 -12,071 66%
T AT&T Corp. -4,135 -13,579 70%
UTX United Technologies Corp. 1,768 1,334 33%
WMT* Wal-Mart Stores -4,892 -1,565 -213%
XOM Exxon Mobil Corp. -2,113 -980 -116%
Mean -154%
* Indicates FY2003.
5
• Capital expenditures. Companies often need to increase capacity or upgrade

equipment to remain competitive. Capital expenditures, too, are investments that don’t
show up on the income statement (except via depreciation expense).
Exhibit 4: Capital Expenditures, 1999–2002

US$ in millions
2002 2001 2000 1999
CapX % change CapX % change CapX % change CapX
AA Alcoa Inc. 1,270 8% 1,177 5% 1,121 22% 920

BA Boeing Co. 1,001 -6% 1,068 15% 932 -25% 1,236
CAT Caterpillar Inc. 728 -34% 1,100 19% 928 2% 913
DD E.I. DuPont de Nemours 1,280 -14% 1,494 -22% 1,925 -6% 2,055
DIS Walt Disney Co. 1,086 -39% 1,795 -11% 2,013 -6% 2,134
EK Eastman Kodak Co. 577 -22% 743 -21% 945 -16% 1,127
HD* Home Depot Inc. 2,749 -19% 3,393 -5% 3,558 38% 2,581
HON Honeywell International Inc. 671 -23% 876 3% 853 -13% 986
HPQ Hewlett-Packard Co. 1,710 12% 1,527 -12% 1,737 53% 1,134
IBM International Business Machines 4,753 -16% 5,660 1% 5,616 -6% 5,959
INTC Intel Corp. 4,703 -36% 7,309 10% 6,674 96% 3,403
IP International Paper Co. 1,005 3% 975 -18% 1,194 5% 1,139
JNJ Johnson & Johnson 2,099 21% 1,731 2% 1,689 -7% 1,822
KO Coca-Cola Co. 851 11% 769 5% 733 -31% 1,069
MCD McDonald's Corp. 2,004 5% 1,906 -2% 1,945 4% 1,868
MMM 3M 763 -22% 980 -12% 1,115 6% 1,050
MO Altria 2,009 1% 1,992 18% 1,682 -4% 1,749
MRK Merck & Co. 2,370 -13% 2,725 0% 2,728 7% 2,561
MFST* Microsoft Corp. 770 -30% 1,103 25% 879 -45% 1,611
PG Procter & Gamble Co. 1,679 -32% 2,486 -18% 3,018 7% 2,828
SBC SBC Communications Inc. 6,808 -39% 11,189 -15% 13,124 27% 10,304
T AT&T Corp. 3,878 -58% 9,300 -19% 11,511 -3% 11,876
UTX United Technologies Corp. 586 -26% 793 -15% 937 23% 762
WMT* Wal-Mart Stores 9,325 11% 8,383 4% 8,042 30% 6,183
XOM Exxon Mobil Corp. 11,437 14% 9,989 18% 8,446 -22% 10,849
* Indicates FY2003.
Capital expenditures for the Dow companies declined in 2002 for the second
consecutive year. (See Exhibit 4.) While we expect capital spending to pick up from
these deeply depressed levels (see Exhibit 5), we also expect that executives will
remain very measured in their capital spending. Whereas in the late 1990s investors
largely granted executives the benefit of the doubt with regard to capital allocation,
excess investment and subsequent poor returns have caused investors to demand
very tight standards for spending. As a result, we anticipate healthy levels of cash to
be available for dividends and share repurchases.
Exhibit 5: Capital Expenditures as a Percentage of GDP, 1945–2002E

6%
5%
4%
3%
2%
1% 2002 estimate
0%
1945 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
Source: CSFB estimates.
6
• Noncash charges and gains. Prominent examples include depreciation, amortization,

and pension income. The income statement does reflect these items, but they do not
represent true cash outlays. All our reconciliations take into account pension gains
and losses.
• Asset and liability revaluations. Examples include goodwill impairment, inventory
write-downs, and bad-debt provisions.
• Taxes. Companies generally have two sets of books. Public books generally show
straight-line depreciation, and hence, maximize reported earnings. Books for tax
purposes assume accelerated depreciation, and hence, reduce the current tax bill.
Deferred income tax is the difference between what the company shows for its tax
provision on the income statement and what it actually paid. For growing companies,
deferred taxes are a cash flow boost.
The recent boom in employee stock options has also distorted the tax picture. Upon
exercise, an option’s intrinsic value becomes a tax deduction for the issuing
corporation. So in years of substantial option exercise, a company’s reported taxes
and the taxes it actually pays can be significantly different. For instance, Microsoft’s
stock option tax benefits were $1.596 billion in fiscal 2002, slicing over 40% off its
$3.684 billion reported tax provision.
• Pension accounting. Pension accounting relies on numerous assumptions, including a

plan discount rate, a rate of compensation increase, and an expected return on plan
assets. But the key economic issues are what the future pension obligations are likely
to be and how a company is likely to meet those obligations. So while pension
accounting can influence net income, pension benefits and cost do not affect cash
flow. (See David Zion’s report, “Don’t Forget about the Pension Plan,” June 2, 2003.)
• Employee stock options. ESOs represent a very real cost to firms, but accounting
standards do not require that they be recorded as an expense on the income

statement. While our cash flow numbers do not reflect ESO expense, we have noted
the pro forma earnings under SAFS 123.
In our analysis, we show both reported net income—which includes so-called

nonrecurring items—as well operating net income. Operating net income treats certain
items as onetime, including some of the items we enumerated above. We relied on the
discretion of company reports to determine operating net income.
Follow the Cash

There has always been a chasm between economic reality and accounting convention.
Recent scandals have made investors more leery than ever about the quality of the
information in financial statements. Our analysis tries to cut through the accounting
clutter to get to the real cash flow numbers. Our conclusion is brighter than what the
negative headlines and poor-performing market suggest.
Exhibits 6-35 present the earnings and cash flow reconciliations for all the companies in
the DJIA for the most recent reported fiscal year. Please contact us if you would like any
of the data behind the six-year calculations.
7
Exhibit 6: Alcoa Inc.

US$ in millions, unless otherwise stated
Cash flow as a %
Earnings Adjustment Cash Flow of income stmt item
Sales $20,263.0
Other income - net
Decrease in receivables 411.0
Reduction in deferred hedging gains 20,674.0 102.0%
Cost of revenue (16,247.0)
Decrease in inventories 202.0
Decrease in payables and accrued expenses (318.0)
Reduction in prepaid expenses and other current assets 36.0
Net change in noncurrent assets and liabilities (239.0)
Other 121.0 (16,445.0) 101.2%
Operating, selling, general and administrative expenses (1,147.0)
Research and development expenses (214.0) (1,361.0)
Depreciation and amortization (1,108.0)
Depreciation and amortization (cash flow impact) 1,116.0
Capital expenditures (1,270.0) (1,262.0) 113.9%
Special items (407.0)
Other items 179.0
Impairment of goodwill (44.0) 44.0
Interest Expense (350.0) (578.0)
Provision for taxes on income (292.0)
Change in deferred taxes (178.0)
Increase in taxes, including taxes on income (232.0) (702.0) 240.4%
Minority interests (135.0)
Dividends paid and return of capital to minority interests 135.0 non-cash
Loss from discontined operations (112.0) 112.0
Cummulative effect of accounting change 34.0 (34.0)
Cash used for discontinued operations (75.0)
Other operating cash items
Equity earnings before additional taxes, net of dividends (40.0)
Gains from investing activities sale of assets (52.0)
Provision for doubtful accounts 16.0
Book value of disposal assets 394.0 243.0
Reported Net Income 420.0
Operating Net Income 498.0
Cash Flow 569.0 114.3%
Employee stock option expense 113.0
Net Income with ESO expense 385.0
Pension expense (benefit) 35.0
Per share data:
Reported Net Income $0.50

Operating Net Income $0.59
Cash Flow $0.67
Employee stock option expense $0.13
Pension expense (benefit) $0.04
Net Income with stock option expense $0.46
Shares outstanding 845.0
Additional cash flow items
Financing
Net additions (reduction) to short-term borrowings (382.0)
Common stock issued and treasury stock sold 55.0
Repurchase of common stock (224.0)
Dividends paid to shareholders (509.0)
Dividends paid to minority interests (197.0)
Net change in commercial paper 445.0
Additions to long-term debt 1,636.0
Payments on long-term debt (231.0)
Net cash from (used for) financing
Investing 593.0
Acquisitions, net of cash acquired (1,253.0)
Sale of assets 127.0
Sale of (additions to) investments (112.0)
Changes in minority interests 26.0
Changes in short term investments (54.0)
Other (8.0)
Net cash from (used for) investing (1,274.0)
Total cash used for investments and financing (681.0)
Effect of exchange rate changes on cash (56.0)
Net change in cash and cash equivalents (168.0)
8
Exhibit 7: Altria Group, Inc.

Cash flow as a %
Sales $80,408.0
Increase in accounts receivable (161.0) 80,247.0 99.8%
Cost of sales (32,748.0)
Increase in inventories 38.0
Decrease in accounts payable (640.0)
Accrued liabilities and other current assets 257.0
Other 86.0
Other (financial) (27.0) (33,034.0) 100.9%
Excise taxes on products (18,226.0)
Marketing, administration and research costs (12,282.0)
Integration costs and loss on sale of a food factory (111.0) 111.0
Seperation programs and asset impairments (223.0) 223.0
Provision for airline industry exposure (290.0) 290.0
Settlement charges (189.0) (30,697.0)
Amortization of goodwill (7.0)
Depreciation and amortization expense 1,331.0
Capital expenditures (2,009.0) (685.0) 9785.7%
Interest and other debt expense, net (1,134.0) (1,134.0)
Gains on sales of businesses 80.0 (80.0)
Gain on Miller Brewing transaction 2,631.0 (2,631.0)
Escrow bond for domestic tabacco litigation 0.0
Pension plan obligations (1,104.0)
Income taxes (6,424.0)
Increase in deferred income taxes 1,310.0
Income taxes (151.0)
Increase in deferred income taxes (financial) 275.0 (6,094.0) 94.9%
Minority interest in earnings (572.0) 572
Cummulative effect of accounting change
Reported Net Income 11,102.0
Operating Net Income 10,790.0
Cash Flow 8,603.0 79.7%
Net Income with ESO expense 10,653.0
Per share data:

Cash Flow $3.94
Net Income with ESO expense $4.88
Shares outstanding 2,183.7
Financing
Consumer products
Net issuance (repayment) of short-term borrowings (473.0)
Long-term debt proceeds 5,325.0
Long-term debt repaid (2,024.0)
Financial services
Net issuance (repayment) of short-term borrowings (512.0)
Long-term debt proceeds 440.0
Long-term debt repaid
Repurchase of common stock (6,390.0)
Dividends paid (5,068.0)
Issuance of common stock 724.0
Other (187.0)
Net cash from (used for) financing (8,165.0)
Investments
Consumer products
Purchase of businesses, net of acquired cash (147.0)
Proceeds from sales of businesses 221.0
Other 54.0
Financial services
Investments in finance assets (950.0)
Proceeds from finance assets 360.0
Total cash used for investments (462.0)
Total cash used for investments and financing (8,627.0)
Effect of exchange rates on cash and cash equivalents 136.0
Net change in cash and cash equivalents 112.0
9
Exhibit 8: American Express Co.

Cash flow as a %
Revenues
Discount revenue $7,931.0
Interest and dividends, net 2,991.0
Management and distribution fees 2,285.0
Securitization income 1,941.0
Net card fees 1,726.0
Travel commissions and fees 1,408.0
Other commissions and fees 2,113.0
Cardmember lending net finance charge 1,485.0
Life and other insurance revenues 802.0
Other 1,125.0
Accounts receivable 484.0
24,291.0
Expenses
Human resources (5,725.0)
Provisions for losses and benefits:
Annuities and investment certificates (1,217.0)
Life insurance, international banking and other (1,040.0)
Increase in insurance reserves 271.0
Charge card (960.0)
Cardmember lending (1,369.0)
Provisions for losses and benefits 2,988.0
Other assets (473.0)
Accounts payable and other liabilities 1,365.0
Professional services (2,021.0)
Occupancy and equipment (1,458.0)
Depreciation and amortization 951.0
Capital expenditures (670.0)
Interest (1,082.0)
Marketing and promotion (1,548.0)
Communications (514.0)
Restructuring charges 7.0
Non-cash portion of restructuring charge (7.0)
Disaster recovery charge 7.0
Non-cash portion of disaster recovery charge (7.0)
Other (3,160.0)
(Decrease) increase in Travelers Cheques outstanding 431.0 (15,231.0) 482.0%
Pretax income 3,727.0
Income tax provision (1,056.0) (1,056.0)

Operating Net Income
Cash Flow 8,004.0 299.7%
Pension expense (benefit) (99.0)
Per share data:
Cash Flow $ 6.06
Pension expense (benefit) ($0.08)
10
Exhibit 8: American Express Co. (continued)

Financing
Net increase in customer deposits 3,246.0
Sales of annuities and investment certificates 9,950.0
Redemption of annuities and investment certificates (5,782.0)
Net (decrease) increase in debt with maturities of 3 Mo. Or less (7,201.0)
Issuance of debt 19,392.0
Principal payments on debt (14,167.0)
Issuance of American Express common shares 161.0
Repurchase of American Express common shares (1,153.0)
Dividends paid (430.0)
Net cash from (used for) financing 4,016.0
Investments
Sale of investments 13,155.0
Maturity and redemption of investments 6,410.0
Purchase of investments (24,961.0)
Net increase in Cardmember loans/receivables (7,793.0)
Cardmember loans/receivables sold to trust, net 4,339.0
Proceeds from repayment of loans (115.0)
Issuance of loans
Sale of land, buildings and equipment 125.0
(Acquisitions) dispositions, net of cash acquired/sold (58.0)
Net cash from (used for) investments (8,898.0)
Effect of exchange rate changes on cash (56.0)
Net change in cash and cash equivalents 3,066.0

11
Exhibit 9: AT&T Corp.

Cash flow as a %
Revenues $37,827.0
Increase in receivables 707.0 38,534.0 101.9%
Operating expenses:
Cost of services and products (8,363.0)
Access and other interconnection (10,790.0)
Depreciation and other amortization (4,888.0)
Selling, general and administrative expenses (7,988.0)
Amortization of goodwill, franchise cost and other purchased intangibles
Restructuring and other charges (1,437.0) 1,418.0
Depreciation and amortization 4,888.0
Capital expenditures (3,878.0)
Provision for uncollectibles 1,058.0
Decrease in accounts payables (175.0)
Net change in other operating assets and liabilities (1,400.0)
Other adjustments for noncash items (129.0) (31,684.0) 126.2%
Other income, net (77.0)
Gains on sales (30.0) (107.0) 139.0%
Interest expense (1,448.0)
Provision for income taxes (1,587.0) 2,631.0
Minority interest income 114.0 (114.0)
Equity losses from Liberty Media Group
Net losses related to other equity investments (400.0) 512.0
Cost investment impairment charges 146.0
Net revaluation of certain financial instruments 8.0
Put settlement loss and mark-to-market charges (138.0)
Income from discontinued operations (14,513.0)
Gain on sale of discontinued operations 1,324.0
Cummulative effect of accounting change (856.0) Non-cash
Reported Net Income (13,082.0)
Income from continuing operations 963.0
Cash Flow 6,605.0 685.9%
Per share data:
Reported Net Income ($17.54)
Cash Flow $ 8.85

Financing
Proceeds from long-term debt issuances 79.0
Retirements of long-term debt (1,091.0)
Increase in short-term borrowings (7,157.0)
Issuance of AT&T common shares 2,684.0
Dividends paid on common stock (555.0)
Other (1.0)
Investments
Proceeds from sale or disposal of property, plant, equipment 468.0
Sales of marketable securities 10.0
Purchases of marketable securities (2.0)
Decrease in AT&T Canada obligation -3449
Proceeds from AT&T Broadband 5,849.0
Increase in restricted cash (442.0)
Net dispositions of businesses, net of cash acquired (18.0)
Other investing activities 33.0
Net cash from (used for) investments 2,449.0
Net cash provided by discontinued operations (5,679.0)
Net change in cash and cash equivalents (2,666.0)
12
Exhibit 10: Boeing Co.

Cash flow as a %
Sales $54,069.0
Increase in receivables (155.0) 53,914.0 99.7%
Decrease in inventories 1,510.0
Decrease in payables and accrued expenses (823.0)
Advances in excess of related costs (898.0)
Other (75.0) (45,785.0) 100.6%
Depreciation and Amortization
Depreciation and Amortization 1,409.0
Capital expenditures (1,001.0) 408.0 71.0%
General and administrative expenses (2,534.0)
Research and development expenses (1,639.0) (4,173.0)
Share-based plans (447.0)

Share-based plans 447.0
Accrued retiree health care 67.0 67.0
Equity in income from joint ventures (128.0)
Gain on dispositions 44.0 (44.0)
Special charges from 9/11 2.0
Customer and commercial financing valuation provision 219.0
Deferred lease income (80.0)
Prepaid pension expense (866.0)
Goodwill and other acquired intangibles 440.0
Other income 42.0
Interest Expense (730.0) (1,101.0)
Change in deferred taxes 905.0 44.0 (5.1)%
Cummulative effect of accounting change (1,827.0) 1,827.0
Cash Flow 3,374.0 119.6%
Per share data:

Cash Flow $4.13
Net Income with additional expenses $2.91
Financing
New borrowings 2,814.0
Debt repayments (1,564.0)
Common shares purchased
Stock options exercised, other 67.0
Net cash from (used for) financing 746.0
Investing
Contributions less proceeds for investments (365.0)
Customer and commercial financing additions (3,090.0)
Customer and commercial financing reductions 900.0
Acquisitions net of cash acquired (22.0)
Proceeds from dispositions 157.0
13
Exhibit 11: Caterpillar Inc.

Cash flow as a %
Revenues:
Sales of Machinery and Engines $18,648.0
Revenues of Financial Products 1,504.0
Increase in receivables (50.0) 20,102.0 99.8%
Cost of goods sold (14,709.0)
Increase in inventory 162.0
Increase in payables 164.0
Other 72.0 (13,819.0) 93.9%
Selling, general and administrative (2,531.0)
Research and development expenses (656.0)
Interest expense of Financial Products (521.0)
Interest expense excluding Financial Products (279.0)
Other operating expenses (416.0)
Other income 74.0
Provision for income taxes (312.0)
Equity in profit of unconsolidated affiliated companies (4.0) (4,645.0)

Cash Flow 1,638.0 228.1%
Per share data:

Cash Flow $4.77
Financing
Common stock issued, including treasury shares reissued 10.0
Treasury shares purchased
Net intercompany borrowings
Proceeds from longterm debt issued 4,137.0
Payments on longterm debt (3,339.0)
Shortterm borrowings net (102.0)
Investments
Expenditures for equipment leased to others (1,045.0)
Proceeds from disposals of property, plant, equipment 561.0
Additions to finance receivables (15,338.0)
Collection of finance receivables 11,866.0
Proceeds from sale of finance receivables 2,310.0
Net intercompany borrowings
Investments and acquisitions (294.0)
Other net (40.0)
Effect of exchange rate changes on cash 26.0
14
Exhibit 12: Citigroup, Inc.

Cash flow as a %
Revenues:
Loan interest, including fees $ 37,903.0
Other interest and dividends 21,036.0
Insurance premiums 3,410.0
Commissions and fees 15,258.0
Principal transactions 4,513.0
Asset management and administration fees 5,146.0
Realized gains from sales of investments (485.0)
Other income 5,775.0
Change in brokerage receivables net of brokerage payables (1,070.0) 91,486.0 98.8%
Interest expense (21,248.0) (21,248.0)
Provisions for benefits, claims and credit losses:
Policyholder benefits and claims (3,478.0)
Provision for credit losses (9,995.0)
- Amortization of deferred policy acquisition costs and value of insurance force 405.0
+ Additions to deferred policy acquisition costs (865.0)
- Change in insurance policy and claims reserves 3,272.0 (10,661.0)
Operating expenses:
Non-insurance compensation and benefits (18,650.0)
Insurance underwriting, acquisition, and operating (992.0)
Restructuring charges and merger related costs 15.0
Other operating (17,671.0)
Capital expenditures on premises and equipment (1,377.0)
Provision for credit losses 9,995.0
Change in trading account assets (10,625.0)
Change in trading account liabilities 10,883.0
Change in federal funds sold and securities purchased under agreements to resell (2,127.0)
Change in federal funds sold and securities purchased under agreements to repurchase 7,176.0
Net gain on sale of securities 485.0
Venture capital activity 577.0
Restructuring charges and merger-related costs (15.0)
Other (6,827.0) (27,632.0) 74.1%
Provision for income taxes (6,998.0)
Deferred tax benefit (204.0) (7,202.0)
Minority interest (91.0) (328.0)
Cummulative effect of accounting change (47.0) 47.0
Income from discontinued operations 1,875.0
Net cash used in discontinued operations (237.0)
Cash Flow 24,415.0 180.3%
Per share data:
Reported Net Income $ 2.99

Income from continuing operations $ 2.65
Cash Flow $ 4.78
Employee stock option expense $ 0.15
Net Income with additional expenses $ 2.50
Pension expense (benefit) $ (0.00)
15
Exhibit 12: Citigroup Inc. (continued)

Financing
Issuance of preferred stock
Issuance of mandatory redeemable securities of subsidiary 0.0
Redemption of mandatory redeemable securities of subsidiary (400.0)
Redemption of preferred stock (125.0)
Treasury stock acquired (5,483.0)
Stock tendered for payment of withholding taxes (475.0)
Issuance of on-term debt 39,520.0
Payment and redemption of long-term debt (47,169.0)
Change in deposits 30,554.0
Change in short-term borrowings including investment banking and brokerage borrowings 11,988.0
Contract holder fund deposits 8,548.0
Contract holder fund withdrawals (5,815.0)
Other
Investments
Change in deposits at interest with banks 2,935.0
Change in loans (40,780.0)
Proceeds from sales of loans and credit card receivables 17,005.0
Purchases of investments (393,344.0)
Proceeds from sales of investments 280,234.0
Proceeds from maturities of investments 78,505.0
Other investments, primarily short-term, net (531.0)
Proceeds from sales of premises and equipment, subsidiaries and affiliates, and other real estate owned 2,184.0
Business acquisitions (3,953.0)
Other, net
Effect of exchange rate changes 98.0
Proceeds from sale of stock by subsidiary 4,093.0

16
Exhibit 13: Coca-Cola Co.

Cash flow as a %
Sales $19,564.0 19,564.0
- Foreign currency adjustments (76.0)
+ Change in operating assets and liabilitites (407.0)
- Other 291.0 (7,297.0) 102.7%
Depreciation and Amortization 806.0
Capital expenditures (851.0) (45.0)
Other operating charges 0.0
Stock based compensation expense 365.0 (6,636.0)
Interest Income 209.0
Interest expense (199.0) 10.0
Equity Income 384.0
+ Equity income, net of dividends (256.0) 128.0 33.3%
Other income (353.0)

- Gains on sales of assets, including bottling interests 3.0 (350.0) 99.2%
Gains on issuances of stock by equity investees
+ Change in deferred taxes 40.0 (1,483.0)
Cummulative Effect of Accounting Change (net of taxes) (926.0) 926.0 0.0
Cash Flow 3,891.0 97.9%
Cash Flow $ 1.57
Employee stock option expense $ -
Net Income with ESO expense $ 1.60
Pension expense (benefit) $ 0.03
Financing
Issuances of debt 1,622.0
Payments of debt (2,378.0)
Issuances of stock 107.0
Purchase of stock for treasury (691.0)

Dividends (1,987.0)
Investing
Acquisitions and investments, principally bottling companies (544.0)
Purchases of investments and other assets (156.0)
Proceeds from disposals of investments and other assets 243.0
Proceeds from other divestitures and investments 69.0
Other investing activities 52.0
Net cash from (used for) investing (336.0)
Effect of exchange rate changes on cash and cash equivalents 32.0
17
Exhibit 14: Walt Disney Co.

Cash flow as a %
Revenues $25,329.0
Change in receivables (535.0) 24,794.0 97.9%
Costs and expenses (22,924.0)
Other 364.0
Increase in inventories (35.0)
Other, current (86.0)
Accounts and taxes payable and accrued liabilities 225.0
Film and television broadcast rights (97.0) (22,553.0) 98.4%
Amortization of intangible assets (21.0)
Amortization of film and television costs
Film and television costs 404.0
Depreciation 1,021.0
Investments in property (1,086.0)
Amortization of intangible assets 21.0 339.0 -1614%
Restructuring charges - -
Gain on sale of businesses 34.0
Gain on sale of businesses (34.0) 0.0 0.0%
Equity in income of investees 225.0 (225.0)
Equity in Infoseek loss 0.0 0.0%
Corporate activities and other
Net interest expense (453.0)
Income taxes (853.0)
Change in Deferred taxes (74.0) (1,380.0) 105.7%
Minority interests (101.0) 101.0
Cummulative effect of accounting changes in film - -

Cummulative effect of accounting changes in derivatives -
Cash Flow 1,200.0 110.8%
Per share data:

Income from continuing operations $0.53

Cash Flow $0.59
Financing
Borrowings g (4,038.0
, )
Repurchases of common stock -
Dividends (428.0)
Exercise of stock options and other 47.0
Commercial paper borrowings (33.0)
Investments
Acquisitions (2,845.0)
Dispositions 200.0
Proceeds from sale of marketable securities and other investments 601.0
Purchases of marketable securities (9.0)
Other (37.0)
18
Exhibit 15: E.I. DuPont de Nemours

Cash flow as a %
Sales $24,006.0
Other income 516.0
Cost of goods sold and other operating charges (16,296.0)

Other noncash charges and credits 447.0
Decrease in inventory (476.0)
Increase in payable (106.0)
Increase in accrued interest and income taxes (1,611.0) 110.7%
(18,042.0)
Selling, general and administrative expenses (2,699.0) (2,699.0) 100.0%
Depreciation and Amortization (1,515.0) 1,515.0

Research and development (1,264.0)

Interest expense (359.0)
Gain on sale of DuPont Pharmaceuticals 25.0 (25.0)
Employee separation costs and writedown of assets (290.0) (1,913.0)
Provision for taxes (185.0) (185.0)
Minority interest (98.0) (98.0)
Noncash items
Income from operations of discontinued business, net of income taxes
Gain on disposal of discontinued business
Cummulative effect of accounting change (2,944.0)
Reported Net Income (1,103.0)
Cash Flow 773.0 42.0%
Cash Flow $0.77
Shares Outstanding 998.0
Financing
Dividends paid to stockholders (1,401.0)
Net increase in shortterm borrowings 607.0

Longterm and other borrowings receipts 934.0
Longterm and other borrowings payments (1,699.0)
Acquisition of treasury stock (470.0)
Repurchase of warrants
Proceeds from exercise of stock options 34.0
Increase in minority interests
Investments
Investments in affiliates (136.0)
Payments for businesses (697.0)
Proceeds from sales of assets 196.0
Net proceeds from sale of DuPont Pharmaceuticals (122.0)
Net decrease in shortterm financial instruments (318.0)
Miscellaneous net 28.0
Net cash flow from discontinued operations

Effect of exchange rate on cash and cash equivalents 186.0
19
Exhibit 16: Eastman Kodak Co.

Cash flow as a %
Sales $ 12,835.0
Decrease in liabilities excluding borrowings 29.0
Other 285.0 (7,582.0) 92.2%
Selling, general and adminsisrative expenses (2,530.0)
Research and development costs (762.0)
Goodwill amortization -
Restructuring costs and other (98.0) 85.0
Interest expense (173.0) (3,478.0) 100.4%
Other income (101.0)
Gain on sale/retirement of assets 81.0 (20.0) 19.8%
Provision for taxes (153.0)
Provision for deferred taxes (224.0) (377.0) 246.4%
Loss from discontinued operations, net of income tax benefits (23.0) 9.0 (14.0)
Cash Flow 1,627.0 206.7%
Net income with ESO expense 879.0
Per share data:
Income from continuing operations $2.70
Cash Flow $5.58
Net income with ESO expense $3.02
Financing
Net increase in borrowings with original maturities of 90 days or less (210.0)
Proceeds from other borrowinngs 759.0
Repayment of other borrowings (1,146.0)

Dividends to shareholders (525.0)
Exercise of employee stock options 51.0
Stock repurchase programs (260.0)
Investments
Proceeds from sale of assets 27.0
Investments in unconsolidated affiliates (123.0)
Acquisitions, net of cash acquired (72.0)
Marketable securities sales 88.0
Marketable securities purchases (101.0)
Net cash from (used for) investments (181.0)
Effect of exchange rate on cash and cash equivalents 6.0
20
Exhibit 17: Exxon Mobil Corp.

Cash flow as a %
Revenue:
Sales and other operating revenue, including excise taxes $200,949.0
Earnings from equity interests and other revenue 3,557.0
Accounts receivable (305.0)
Dividends received greater than equity in current earnings of equity companies (170.0) 204,031.0 99.8%
Costs and expenses:
Crude oil and product purchases (90,950.0)
Decrease in inventories 353.0 (90,597.0) 99.6%
Operating expenses (17,831.0)
Decrease accounts and other payables 365.0
Annuity and accrued liability provisions (590.0)
Other 1,307.0 (16,749.0) 93.9%
Selling, general and administrative expenses (12,356.0) (12,356.0)
Depreciation and depletion (8,310.0)
Depreciation and depletion 8,310.0
Exploration expenses, including dry holes (920.0)
Merger related expense (410.0)
Excise taxes (22,040.0)
Other taxes and duties (33,572.0)
Extraordinary gain before income tax (57,340.0)
Income applicable to minority and preferred interests (209.0)
Cash dividends to minority interests 209.0 0.0
Deferred income tax charges 297.0
Prepaid taxes and expenses 32.0 (6,170.0) 94.9%
Discontinued operations 449.0 449.0
Net Income 11,460.0
Cash Flow 9,831.0 89.3%
Per share data:
Cash Flow $1.45

Shares Outstanding 6,780.0
Financing
Additions to long-term debt 396.0
Reductions in long-term debt (246.0)
Additions to short-term debt 751.0
Reductions in short-term debt (927.0)
Additions in debt with less than 90 day maturity (281.0)
Cash dividends to Exxon shareholders (6,217.0)
Cash dividends to minority interests (169.0)
Changes in minority interests and sales of affiliate stock (161.0)
Common stock acquired (4,798.0)
Common stock sold 299.0
Investments
Sales of subsidiaries and plant, property and equipment 2,793.0
Additional investments and advances (2,012.0)
Sales of investments and collection of advances 898.0
Additions to other marketable securities
Sales of other marketable securities
Effect of exchange rate changes on cash 525.0
21
Exhibit 18: General Electric Co.

Cash flow as a %
Revenues:
Sales of goods $55,096.0
Sales of services 21,138.0
GECS revenue from services 54,451.0
Decrease in receivables (409.0) 131,289.0 99.7%
Depreciation 5,998.0
Amortization of goodwill and other intangibles
Decrease in inventory (87.0)
Other (6,329.0) (52,375.0) 134.9%
Cost of services sold (14,023.0)
Interest and other financial charges (10,216.0) (24,239.0)
Insurance losses and policyholder and annuity benefits (17,608.0)
Increase in insurance liabilities, reserves and annuity benefits 9,454.0 (8,154.0) 46.3%
Provision for losses on financing receivables (3,087.0)
Provision for losses on financing receivables 3,087.0 non-cash
Other costs and expenses (28,714.0)
Minority interest in net earnings of consolidated affiliates (326.0) (29,040.0)
Provision for taxes (3,758.0)
Change in Deferred taxes 2,414.0 (1,344.0) 35.8%
Cash Flow 16,137.0 106.6%
Pension expense (benefit) 1,556.0
Per share data:
Cash Flow $1.62

Financing
Net increase in borrowings (17,347.0)
Newly issued debt 95,008.0
Repayments and other reductions (40,454.0)
Net purchase of GE shares for treasury (985.0)
Dividends paid to share owners (7,157.0)
All other financing activities 3,873.0
Investments
Dispositions of property, plant and equipment 6,007.0
Net increase in GECS financing receivables (17,945.0)
Payments for principal businesses purchased (21,570.0)
All other investing activities (15,090.0)
22
Exhibit 19: General Motors Corp.

Cash flow as a %
Revenues: $ 186,763.0
Manufactured products sales and revenues
Financing revenues
Costs and expenses:
Cost of sales and other operating charges (153,344.0)
Postretirement benefits other than pensions, net of payments and VEBA contributions (208.0)
Pension expense, net of contributions (3,380.0)
Net change in mortgage loans (4,376.0)
Net change in mortgage securities (656.0)
Rental fleet vehicle - acquisitions (5,595.0)
Rental fleet vehicle - dispositions 4,774.0
Change in other investments and miscellaneous assets 6,195.0
Change in other operating assets and liabilities 4,600.0
Other 1,081.0 (150,909.0) 98.4%
Depreciation and amortization expense
Expenditures for property (7,443.0) 5,495.0
Other expense
Income tax expense (533.0)
Minority interests 189.0
Losses of nonconsolidated associates (8,059.0)
Dividends on preference stocks (47.0)
Cash Flow 9,666.0 556.8%
Pension expense (benefit) 1,805.0
Per share data:
Cash Flow $18.77
Financing
Net increase in loans payable (404.0)
Increase in long-term debt 28,255.0
Repurchases of common and preference stock (97.0)
Net financing activity with Automotive Communications Services
Proceeds from issuing common stocks 62.0

Proceeds from sales of treasury stocks 19.0
Cash dividends paid to shareholders (1,168.0)
Investments
Investments in other marketable securities - acquisitions (39,386.0)
Investments in other marketable securities - liquidations 35,688.0
Mortgage servicing rights - net change (1,711.0)
Finance receivables - increase (143,166.0)
Proceeds from sales of finance receivables 117,276.0

Operating leases - acquisitions (16,624.0)
Operating leases - liquidations 13,994.0
Proceeds from borrowings of Hughes Defense prior to the Hughes defense spin-off
Investments in companies, net of cash acquired (872.0)
Net investing activity with Financing and Insuranee Operations
Other 867.0
23
Exhibit 20: Hewlett-Packard Co.

Cash flow as a %
Revenues:
Products $45,955.0
Services 10,178.0
Financing 455.0
Costs and expenses:
Cost of products sold (34,573.0)
Decrease in inventory 1,124.0
Other current assets (1,289.0)
Other 138.0 (33,796.0) 97.8%
Cost of services (6,817.0)
Restructuring charges (1,780.0) 1,780.0
In-process research and development charges (793.0)
Acquisition-related charges (701.0) 1,494.0
Amortization of purchased intangible assets and goodwill (402.0)
Interest income and other, net 52.0
Net investment gains (106.0) 106.0
Provision for doubtful accounts 299.0
Litigation settlement 14.0
Losses on divestitures (19,199.0)
Financing interests (189.0) (189.0)

Provision for taxes 129.0
Change in Deferred taxes (351.0)
Taxes on earnings (368.0)
Tax benefit from employee stock options 21.0
Extraordinary item 20.0 (20.0)
Cummulative effect of accounting change (569.0) -441.1%
Reported Net Income (903.0)
Operating Net Income (923.0)
Cash Flow 3,734.0 (404.6)%
Employee stock option expense (776.0)
Net Income with ESO expense (1,699.0)

Per share data:
Operating Net Income ($0.37)
Cash Flow $1.49
Employee stock option expense ($0.31)
Net Income with ESO expense ($0.68)
Financing
Change in notes payable and short-term borrowings (2,402.00)
Issuance of long-term debt 2,529.00
Payment of long-term (472.00)
Issuance of common stock under employee stock plans 377.00
Repurchase of common stock (671.00)
Dividends (801.00)
Repurchase of zero-coupon subordinated convertible notes (127.00)
Investments
Disposition of property, plant and equipment 362.00
Purchase of investments (351.00)
Maturities of investments 381.00
Cash acquired through business acquisitions 3,557.00
Other 879.00
Total cash used for investments and financing 3,261.00
24
Exhibit 21: Home Depot Inc.

Cash flow as a %
Net Sales 58,247.0
+ Decrease in receivables (38.0) 100.2%
Increase in deferred revenue 147.0 58,356.0
Cost of Merchandise Sold (40,139.0) (40,139.0)
Operating Expenses:
Selling and store operating (11,180.0)
Pre-opening (96.0)
General and administrative (1,002.0)
Non-recurring charge
- Depreciation and amortization 903.0
+ Capital expenditures (2,749.0)
+ Increase in merchandise inventories (1,592.0)
- Increase in accounts payable 1,394.0
- Other 68.0 (14,254.0) 116.1%
Interest, net 42.0 42.0
Income Taxes (2,208.0)
- Deferred income tax 173.0
- Increase in income taxes payable 83.0 (1,952.0)
Net Income 3,664.0
Cash Flow 2,053.0 56.03%
Pension expense (benefit) -
Income from continuing operations $ -
Cash Flow $ 0.88
Financing
Issuance of commercial paper obligations, net (754.0)
Proceeds from long-term borrowings 532.0
Repayments of notes receivable from ESOP
Principal repayments of long-term debt

Proceeds from sale of common stock, net 445.0
Cash dividends paid to stockholders (396.0)
Minority interest contributions to partnership
Net cash from (used for) financing (173.0)
Investments
Purchase of remaining interest in Home Depot Canada (190.0)
Proceeds from sales of property and equipment 126.0
Proceeds from sales of business, net 64.0
Purchases of investments (85.0)
Proceeds from maturities of investments 25.0
Other (13.0)

Effect of exchange rate changes on cash and cash and equivalents (14.0)
25
Exhibit 22: Honeywell International Inc.

Cash flow as a %
Revenues:
Revenue $22,274.0
Merger repositioning and other charges 634.0
Litton settlement payment (162.0)
Retirement benefit plan (408.0)
Other current assets 51.0
Accrued liabilities (418.0)
Other (46.0) (17,568.0) 99.7%
Loss on sale of non-strategic businesses (124.0) 124.0
Asbestos related litigation charges, net of insurance (1,548.0) 1,548.0
Business impairment charges (877.0) 877.0
Equity in loss of affiliated companies 42.0 (55.0)
Other income 4.0
Interest and other financial charges (344.0)
(3,110.0)
Tax provision 725.0
Deferred income taxes (793.0)
Net taxes paid (68.0)
Cash Flow 1,709.0 104.8%
Per share data:

Cash Flow $2.10

Financing
Net increase in commercial paper 198.0
Net increase in short-term borrowings (46.0)
Proceeds from issuance of common stock 41.0
Proceeds from issuance of long-term debt 6.0
Payments of long-term debt (428.0)
Repurchases of common stock
Cash dividends on common stock (614.0)
Other (39.0)
Investments
Proceeds from disposals of property, plant, equipment 41.0
Derease in investments 91.0
Cash paid for acquisitions (520.0)
Proceeds from sale of businesses 183.0
Decrease in short-term investments 6.0
26
Exhibit 23: Intel Corp.

Cash flow as a %
Sales $26,764.0
Net loss on retirements of property, plant and equipment 301.0
Decrease in inventories (26.0)
Decrease in payables (226.0)
Increase in accrued liabilities 107.0
Other (21.0) (13,311.0) 99.0%
Depreciation and Amortization
Depreciation expense 4,676.0
Capital expenditures (4,703.0) (27.0) 100.6%
Marketing, general and administrative (4,334.0)
Purchased inprocess research and development (20.0) 20.0
Amortization and impairment of acquisition-related intangibles and costs (548.0) 668.0
Gains on equity securities (372.0) 372.0
Loss on investment in Convera
Trading assets (444.0)
Interest income and other, net 194.0 (8,498.0)
Provision for taxes (1,087.0)
Deferred taxes 110.0
Income taxes payable 175.0
Tax benefit of employee stock options 270.0 (532.0) 48.9%
Net Income 3,117.0
Cash Flow 4,426.0 120.8%
Employee stock option expense 1,170.0
Per share data:
Cash Flow $0.67
Financing
Increase in short-term debt, net (101.0)
Additions to long-term debt 55.0
Retirement of long-term debt (18.0)
Proceeds from sales of shares 681.0
Proceeds from exercise of warrants
Proceeds from sale of warrants
Repurchase and retirement of common stock (4,014.0)
Payment of dividends to stockholders (533.0)
Investments
Acquisitions net of cash acquired (57.0)
Purchase of available-for-sale investments (6,309.0)
Sales and maturities of available-for-sale investments 5,634.0
Other investing activities (330.0)
27
Exhibit 24: International Business Machines

Cash flow as a %
Sales:
Hardware segments $27,456.0
Global services segment 36,360.0
Software segment 13,074.0
Global financing segment 3,232.0
Enterprise investments segment/other 1,064.0
- Increase in accounts receivable 4,125.0 85,311.0 105.1%
Costs and expenses:
Hardware segments (20,020.0)
Global services segment (26,812.0)
Software segment (2,043.0)
Global financing segment (1,416.0)
Enterprise investments segment/other (611.0)
- Depreciation 3,691.0
+ Capital expenditures (4,753.0)
- Inventories 793.0
+ Gain on asset sales (343.0)
- Other assets (4,157.0)
- Accounts payable (55.0)
- Write down of impaired assets 58.0
- Other liabilities 2,371.0 (53,297.0) 104.7%
Selling, general and administrative (18,738.0) (18,738.0)
Research, development and engineering (4,750.0)

- Amortization of software 688.0 (4,062.0)
Intellectual property and custom development income 1,100.0 1,100.0
Other (income) and expense (227.0)
Non-cash portion of special actions 1,350.0
Interest expense (145.0) 978.0
- Deferred income taxes (67.0) (2,257.0) 103.1%
(Loss)/income from discontinued operations (1,755.0)
Preferred stock dividends
Cash Flow 9,035.0 252.4%
Employee stock option expense 1,203.0


Cash Flow $ 5.30
Pension expense (benefit) $ (0.31)
Financing
Proceeds from new debt 6,726.0
Short-term borrowings less than 90 days - net (4,087.0)
Payments to settle debt (5,812.0)
Common stock transactions (3,087.0)
Cash dividends (1,005.0)
Investments
Proceeds from disposition of plant, rental machines and other property 775.0
Divesture of business 1,233.0
Investment in software (597.0)
Purchases of marketable securities and other investments (1,582.0)
Proceeds and marketable securities and other investments 1,185.0
Effect of exchange rate changes on cash and cash equivalents (83.0)
28
Exhibit 25: International Paper Co.

Cash flow as a %
Sales $24,976.0
Accounts receivable 127.0 25,103.0 100.5%
Inventories 89.0
Accounts payable and accrued liabilities 199.0
Accrued liabilities (42.0)
Other (8.0) (18,018.0) 98.7%
Selling and administrative expenses (2,046.0) (2,046.0)
Distribution expenses (1,098.0)
Taxes other than payroll and income taxes (249.0) (1,347.0)
Oil and gas impairment charge
Merger integration cost Non-cash
Reversals of reserves no longer required 68.0 (68.0)
Payments related to restructuring reserves, legal reserves, and MA integration (340.0)
Restructuring charge / write-off (695.0) 695.0 (340.0) (500.0)%
Gains on sales of investments and businesses
Net loss and impairments of investments and businesses held for sale 41.0 41.0
Interest expense (783.0) (783.0)
Income tax provision 54.0
Deferred income tax provision (399.0) (345.0) (638.9)%
Minority interest expense (130.0)
Net loss and impairments of investments and businesses held for sale (41.0) (171.0)
Cash Flow 1,089.0 369.2%
Net Income with ESO expense (921.0)
Per share data:
Cash Flow $2.26
Net Income with ESO expense ($1.91)

Financing
Purchases of treasury stock (169.0)
Issuance of debt 2,011.0
Reduction of debt (3,017.0)
Change in bank overdrafts (33.0)
Other (95.0)
Cash used for financing activities (1,732.0)
Investments
Businesses sold and held for sale (4.0)
Mergers and acquisitions, net of cash acquired (28.0)
Proceeds from divestitures 535.0
Other 22.0
Cash used for investing activities 525.0
Effect of exchange rates (32.0)
Change in cash and temporary investments (150.0)
29
Exhibit 26: Johnson & Johnson

Cash flow as a %
Sales $ 36,298.0
Cost of products sold (includes $60 of inventory write-offs for restructuring) (10,447.0)
Increase in accounts payable 1,420.0
Decrease in either current and non-current assets (1,429.0)
Increase in either current and non-current liabilities 436.0
Accounts receivable reserves (6.0)
Selling, marketig and administrative expenses (12,216.0) (12,216.0) 100.0%

Research expense (3,957.0) (3,957.0)
Purchased in-process research and development (189.0)
Interest income 256.0 256.0
Interest expense, net of portion capitalized (160.0) (160.0)
Other expense, net (294.0) (294.0)

Decrease in deferred income taxes (74.0) (2,768.0)

Cash Flow 6,077.0 103.0%

Cash Flow $ 2.03
Pension expense (benefit) $ 0.04
Financing
Dividends of common stock (2,381.0)
Repurchase of common stock (6,538.0)
Proceeds from short-term debt 2,359.0
Retirement of short-term debt (560.0)
Proceeds from long-term debt 22.0
Retirement of long-term debt (245.0)

Proceeds from the exercise of stock options 390.0
Investments
Proceeds from the disposal of assets 156.0
Acquisition of businesses, net of cash acquired (478.0)
Purchase of investments (6,923.0)
Sale of investments 7,353.0
Other (206.0)

Effect of exchange rate changes on cash and equivalents 110.0
30
Exhibit 27: J.P. Morgan Chase & Co.

Cash flow as a %
Revenues:
Investment banking fees $2,763.0
Trading revenue 2,594.0
Net change in trading related assets (58,183.0)
Fees and Commissions 10,756.0
Private equity realized gains (105.0)
Private equity unrealized gains (641.0) 641.0
Securities gains 1,563.0
Securities borrowed 2,437.0
Other revenue 1,158.0
Other assets 5,735.0
Accrued interest and accounts receivable 677.0
Other, net (1,235.0) (31,840.0) -176.0%
Costs and expenses:

Interest income 25,284.0
Trading related liabilities 25,402.0
Accounts payable and other liabilities (12,964.0)
Provision for loan losses (4,331.0) 4,331.0
23,964.0 94.8%
Employee compensation and benefits (10,983.0)
Occupancy expense (1,606.0)
Technology and communications expense (2,554.0)
Merger and restructuring costs (1,210.0)
Amortization of intangibles (323.0)
Other expenses (4,788.0)
Surety settlement and litigation reserve (1,300.0) 1300.0
Income tax benefit (856.0)
Deferred tax provision 1636.0
Accounting change (17,258.0)

Cash Flow (25,134.0) (1511.4)%
Employee stock option expense (878.0)
Per share data:

Cash Flow ($12.31)
Employee stock option expense ($0.43)
31
Exhibit 27: J.P. Morgan Chase & Co. (continued)

Financing
Domestic deposits 9,985.0
Foreign deposits 1,118.0
Federal funds purchased and securities sold under repo agreements 41,038.0
Commercial paper and other borrowed funds (4,675.0)
Other, net
Proceeds from issuance of long-term debt 11,971.0
Repayments of long-term debt (12,185.0)
Proceeds from the issuance of stock and stock-related rewards 725.0
Redemption of preferred stock (550.0)
Treasury stock purchased
Investments
Net increase in interest earning deposits with subsidiary bank 3,801.0
Proceeds from held to maturity securities 85.0
Purchases of held to maturity securities (40.0)
Federal funds sold and securities purchased under resale agreements (2,082.0)
Loans due to sales and securitizations 97,004.0
Other loans, net (98,695.0)
Other, net (3,398.0)
Available for sale securities proceeds from maturities 5,094.0
Available for sale securities proceeds from sales 219,385.0
Available for sale securities purchases (244,547.0)
Cash used in acquisitions (72.0)
Proceeds from divestitures of nonstrategic business assets 121.0
Total cash used for investments and financing 21,299.0
Effect of exchange rate 453.0

32
Exhibit 28: McDonald’s Corp.

Cash flow as a %
Sales:
Sales by company operated restaurants $11,499.6
Revenues from franchised and affiliated restaurants 3,906.1
Increase in accounts receivable 1.6 15,407.3 100.0%
Costs and expenses:
Operating costs and expenses (9,906.6)
Occupancy and other operating expenses
Franchised restaurants occupancy expenses (840.1)
Made for you costs
Special charges (2,552.9)
Other operating expense net (833.3)
Other 98.6 (734.7) 88.2%
McDonald's Japan IPO gain -
Non-operating expense (76.7) (450.8)
Cummulative effect of accounting change (98.6)
Increase in deferred income taxes (44.6)
Taxes and other liabilities 939.5 126.3 -16.4%
Cash Flow 886.3 41.9%
Pension expense (benefit)
Per share data:
Cash Flow $0.69

Financing
Net short-term borrowings (606.8)
Long-term financing issuances 1502.6
Long-term financing repayments (750.3)
Treasury stock purchases (670.2)
Common and preferred stock dividends (297.4)
Series E preferred stock redemption
Other 310.9
Investments
Purchases of restaurant businesses (548.4)
Sales of restaurant businesses and property 369.5
Other (283.9)
33
Exhibit 29: Merck & Co.

Cash flow as a %
Sales $51,790.3
Materials and production (33,053.6)
Increase in accounts payable 503.1
Accrued and other current liabilities 106.8
Non-current liabilities (338.7)

Other (388.3) (33,004.3) 99.9%
Marketing and administrative (6,186.8) (6,186.8)
Research and development expense (2,677.2)
Acquired research
Gains on sales of businesses Non-cash
Equity income in affiliates 644.7
Other expense, net (303.8) 340.9
Income taxes paid 486.4 69.6%
Deferred income taxes 444.8 (2,132.9)
Cash Flow 7,159.0 100.1%
Per share data:
Operating Net Income -
Cash Flow $3.17
Financing
Net change in short-term borrowings (508.4)
Proceeds from issuance of debt 2,618.5
Payments of debt (2,504.9)
Proceeds from issuance of preferred stock of subsidiary
Purchase of treasury stock (2,091.3)
Dividends paid to stockholders (3,191.6)
Proceeds from exercise of stock options 318.3

Other (172.5)
Investments
Purchase of securities (37,555.0)
Proceeds from sale of securities 35,913.8
Proceeds from sale of businesses
Other 0.1
Effect of exchange rate changes on cash and equivalents 113.2
34
Exhibit 30: Microsoft Corp.

Cash flow as a %
Sales:
Sales by company operated restaurants $11,499.6
Revenues from franchised and affiliated restaurants 3,906.1
Increase in accounts receivable 1.6 15,407.3 100.0%
Costs and expenses:
Operating costs and expenses (9,906.6)
Occupancy and other operating expenses
Franchised restaurants occupancy expenses (840.1)
Made for you costs
Special charges (2,552.9)
Other operating expense net (833.3)
Other 98.6 (734.7) 88.2%
McDonald's Japan IPO gain -
Non-operating expense (76.7) (450.8)
Cummulative effect of accounting change (98.6)
Increase in deferred income taxes (44.6)
Taxes and other liabilities 939.5 126.3 -16.4%
Cash Flow 886.3 41.9%
Pension expense (benefit)
Per share data:
Cash Flow $0.69

Financing
Net short-term borrowings (606.8)
Long-term financing issuances 1502.6
Long-term financing repayments (750.3)
Treasury stock purchases (670.2)
Common and preferred stock dividends (297.4)
Series E preferred stock redemption
Other 310.9
Investments
Purchases of restaurant businesses (548.4)
Sales of restaurant businesses and property 369.5
Other (283.9)
35
Exhibit 31: Minnesota Mining & Manufacturing Co.

Cash flow as a %
Sales $16,332.0

Decrease in inventories 279.0
Accounts payable (33.0)
Other assets net of amortization (54.0)
Other liabilities 113.0
Other 74.0 (8,059.0) 94.9%
Depreciation and Amortization 954.0

Capital expenditures (763.0) 191.0 80.0%

Interest Expense (80.0)
Investment and other income net 39.0
Gain on divestiture net
Income tax paid related to divestiture
Pension company contributions (1,086.0) (1,127.0)

Deferred income tax provision 579.0
Income taxes payable (11.0)
Minority interests (65.0)
Extraordinary loss from early extinguishment of debt (463.0)

Cash Flow 2,229.0 107.9%
Per share data:
Cash Flow $5.72

Financing
Change in short term debt (204.0)
Repayment of long-term debt (497.0)
Proceeds from long-term debt 1,146.0
Purchases of treasury stock (942.0)
Reissuances of treasury stock 522.0
Payment of dividends (968.0)
Distributions to minority interests (78.0)
Other
Investing
Proceeds from sale of property, plant and equipment 82.0
Acquisitions and other investments (1,258.0)
Proceeds from sale of businesses 1.0
Purchases of investments (7.0)
Proceeds from sale of investments 18.0
Effect of exchange rate changes on cash and cash equivalents (42.0)
36
Exhibit 32: Procter & Gamble Co.

Cash flow as a %
Sales $40,238.0
Increase in payables and accrued expenses 684.0
Increase in other operating current assets (98.0)
Other 467.0 (19,777.0) 94.2%
Capital expenditures (1,679.0) 14.0 99.2%
Marketing, research and administrative expenses (12,571.0)
Interest Expense (603.0)
Other income, net 308.0 (12,866.0)
Provision for taxes on income (2,031.0)
Change in deferred taxes 389.0 (1,642.0) 80.8%
Cash Flow 6,063.0 134.8%
Per share data:
Cash Flow $4.54
Financing
Dividends to shareholders (2,095.0)
Change in short-term debt 1,394.0
Additions to long-term debt 1,690.0
Reductions of long-term debt (461.0)
Proceeds from stock options 237.0
Treasury purchases (568.0)
Investing
Proceeds from asset sales 227.0
Change in investment securities 88.0
37
Exhibit 33: SBC Communications Inc.

Cash flow as a %
Sales:
Voice $24,752.0
Wireless subscriber
Data 9,639.0
Long distance service 2,324.0
Directory advertising 4,504.0
Other 1,919.0
Increase in accounts receivable (571.0)
Provision for uncollectible accounts 1,407.0 43,974.0 101.9%
Costs and expenses:
Operations and support (25,937.0)
Decrease in accounts payable and accrued liabilities (1,943.0)
Other, net (280.0) (27,674.0) 106.7%
Amortization of investment tax credits (30.0)
Interest expense (821.0) (821.0)
Equity in net income of affiliates 1,921.0
Undistributed earnings from investments in equity affiliates (1,586.0) 335.0 17.4%
Other income 734.0
Gain on sale of investments (794.0) (60.0)
Income Taxes (2,984.0)
Increase in deferred income taxes 2,470.0 (514.0) 17.2%
Extraordinary loss from early extinguishment of debt, net of tax
Cumulative effect of accounting change (1,820.0) 1,820.0 Non-cash
Cash Flow 8,402.0 112.4%
Pension expense (benefit) (1,137.0)
Per share data:
Cash Flow $2.52

Financing
Net change in short term borrowings with original maturities of three months or less (1,791.0)
Issuance of other short-term borrowings 4,618.0
Repayment of other short-term borrowings (7,718.0)
Issuance of long-term debt 2,251.0
Repayment of long-term debt (1,499.0)
Early extinguishment of corp-obligated mandatorily redeemable pref. Securities
Issuance of trust originated preferred securities 43.0
Redemption of preferred shares of subsidiaries
Issuance of common shares
Purchase of treasure shares (1,456.0)
Issuance of treasury shares 147.0
Other (56.0)
Investments
Investments in affiliates (139.0)
Purchase of short-term investments
Proceeds from short-term investments
Dispositions 4,349.0
Acquisitions (731.0)
Other 1.0
38
Exhibit 34: United Technologies Corp.

Cash flow as a %
Sales:
Product sales $21,189.0
Service sales 6,791.0
Financing revenue and other income, net 232.0
Decrease in accounts receivable 80.0 28,292.0 100.3%
Costs and expenses:
Increase in inventories and contracts in progress 327.0
Decrease in other current assets 10.0
Increase in accounts payable (301.0)
Contribution to domestic pension plans (500.0)
Other, net (197.0) (16,378.0) 104.2%
Depreciation expense 727.0
Capital expenditures (586.0) 141.0 80.6%
Cost of services sold (4,444.0)
Interest (381.0) (9,219.0)
Income Taxes (887.0)
Decrease in deferred income taxes 318.0 (569.0) 64.1%
Minority interests subsidiaries' earnings (153.0)
Dividends to minority interests and other 153.0 non-cash
Cash Flow 2,267.0 101.4%
Per share data:

Cash Flow $4.73

Financing
Issuance of long-term debt 500.0
Repayment of long-term debt (231.0)
Increase (decrease) in short-term borrowings (357.0)
Common stock issued under employee stock plans 183.0
Dividends paid on common stock (462.0)
Common stock repurchase (700.0)
Dividends to minority interest and other (184.0)
Investments
Increase in customer financing assets (386.0)
Decrease in customer financing assets 222.0
Acquisitions of businesses (402.0)
Dispositions of businesses 26.0
Other, net 38.0
Effect of exchange rates 8.0
39
Exhibit 35: Wal-Mart Stores

Cash flow as a %
Sales $ 244,524.0
Other income - net 2,001.0
Change in accounts receivable 246,525.0 100.8%

Change in inventories (2,236.0)
Change in payables 1,546.0
Change in accrued liabilities 1,133.0
Other 608.0 (190,787.0) 99.5%
Capital expenditures (9,325.0) (5,915.0)
Operating, selling, general and administrative expenses (41,043.0) (41,043.0)
Interest Costs:
Debt (803.0)
Capital leases (260.0)
Interest income 138 (925.0)
Income tax expense (4,487.0)
Deferred taxes (4,487.0) 100.0%
Minority interest and equity in unconsolidated subsidiaries (193.0) (193.0)
Net Income 8,039.0

Cash Flow 3,175.0 39.5%
Difference

Cash Flow $ 0.72
Financing
Increase in commercial paper 1,836.0
Proceeds from issuance of long-term debt 2,044.0
Proceeds from issuance of common stock 0.0
Purchase of company stock (3,232.0)
Payment of long-term debt (1,263.0)
Payment of capital lease obligations
Other financing activities (273.0)
Dividends (1,328.0)
Investments
Proceeds from termination of net investment hedges -
Disposal of Assets 445.0
Other investment activity (54.0)
Investment in international operations (749.0)

Effect of exchange rates on cash (4.0)
40
Endnotes
1
Alfred Rappaport and Michael J. Mauboussin, The Trouble With Earnings and
Price/Earnings Multiples, http://www.expectationsinvesting.com/pdf/earnings.pdf.
41
Disclosure Section
Michael Mauboussin & Kristen Bartholdson each certify, with respect to the companies or securities that he
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42
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26 June 2003

D o w Jo nes Ind ust r i al 3 0

Source: Company data, CSFB estimates.

• Working capital needs increased modestly (again, industrial companies only). We

Exhibit 1: Cash Flow as a Percentage of Operating Net Income, 2002

Operating Cash Flow as a % of

AA Alcoa Inc. 498 569 114%

XOM Exxon Mobil Corp. 11,011 9,831 89%

Weighted Mean 96.7%

Exhibit 2: Cash Flow as a Percentage of Operating Net Income, 1997–2002

AA Alcoa Inc. 114% 111% 72% 98% 94% 48%

Weighted Mean 96.7% 95.1% 57.5% 89.4% 81.6% 83.4%

Why Earnings and Cash Flow Differ

Exhibit 3 examines the change in working capital from 2001 to 2002.

Exhibit 3: Working Capital Percentage Change, 2001–2002

2002 2001 % change

AA Alcoa Inc. 1,439 1,037 39%

HD* Home Depot Inc. 1,629 1,314 24%

• Capital expenditures. Companies often need to increase capacity or upgrade

Exhibit 4: Capital Expenditures, 1999–2002

AA Alcoa Inc. 1,270 8% 1,177 5% 1,121 22% 920

Exhibit 5: Capital Expenditures as a Percentage of GDP, 1945–2002E

Source: CSFB estimates.

• Noncash charges and gains. Prominent examples include depreciation, amortization,

• Pension accounting. Pension accounting relies on numerous assumptions, including a

standards do not require that they be recorded as an expense on the income

In our analysis, we show both reported net income—which includes so-called

Follow the Cash

Exhibit 6: Alcoa Inc.

Reported Net Income $0.50

Source: Company data, CSFB estimates.

Exhibit 7: Altria Group, Inc.

Operating Net Income $4.94

Source: Company data, CSFB estimates.

Exhibit 8: American Express Co.

Reported Net Income 2,671.0

Source: Company data, CSFB estimates.

Exhibit 8: American Express Co. (continued)

Effect of exchange rate changes on cash (56.0)

Net change in cash and cash equivalents 3,066.0

Source: Company data, CSFB estimates.

Exhibit 9: AT&T Corp.

Pension expense (benefit) ($0.31)

Source: Company data, CSFB estimates.

Exhibit 10: Boeing Co.

Share-based plans (447.0)

Reported Net Income $0.60

Source: Company data, CSFB estimates.

Exhibit 11: Caterpillar Inc.

Reported Net Income 798.0

Per share data:

Total cash used for investments and financing (1,755.0)

Effect of exchange rate changes on cash 26.0

Net change in cash and cash equivalents (91.0)

Source: Company data, CSFB estimates.

Exhibit 12: Citigroup, Inc.

Reported Net Income $ 2.99

Source: Company data, CSFB estimates.

Exhibit 12: Citigroup Inc. (continued)

Source: Company data, CSFB estimates.

Exhibit 13: Coca-Cola Co.

Other income (353.0)

Purchase of stock for treasury (691.0)