THEEST{E LAUDER COMPANIES INC. 58 See notes to consolidated financial statements. YEAR ENDED JUNE 30 2003 2002 2001 (In millions) Cash Flows from Operating Activities Net earnings $ 319.8 $ 191.9 $ 305.2 Adjustments to reconcile net earnings to net cash flows provided by operating activities: Depreciation and amortization 174.8 162.0 156.3 Amortization of purchased royalty rights — — 6.6 Deferred income taxes 36.5 (22.6) 4.7 Minority interest 6.7 4.7 1.9 Non-cash stock compensation 1.5 (0.1) 0.7 Cumulative effect of a change in accounting principle — 20.6 2.2 Non-cash portion of restructuring and other non-recurring expenses — 58.0 27.1 Other non-cash items 0.9 0.9 — Changes in operating assets and liabilities: Decrease (increase) in accounts receivable, net 38.6 (15.4) (57.3) Decrease (increase) in inventory and promotional merchandise, net (15.7) 102.2 (102.1) Increase in other assets (15.3) (11.7) (53.6) Increase (decrease) in accounts payable (8.4) (32.6) 14.2 Increase in accrued income taxes 5.4 28.8 5.9 Increase (decrease) in other accrued liabilities 52.7 59.6 (23.4) Increase (decrease) in other noncurrent liabilities (49.0) (28.3) 17.0 Net cash flows provided by operating activities 548.5 518.0 305.4 Cash Flows from Investing Activities Capital expenditures (163.1) (203.2) (192.2) Acquisition of businesses, net of acquired cash (50.4) (18.5) (16.0) Proceeds from disposition of long-term investments 21.0 4.7 1.9 Net cash flows used for investing activities (192.5) (217.0) (206.3) Cash Flows from Financing Activities Increase (decrease) in short-term debt, net 2.9 0.6 (0.1) Proceeds from issuance of long-term debt, net — 247.2 24.5 Repayments of long-term debt (135.8) (256.6) (30.1) Net proceeds from employee stock transactions 16.7 7.7 13.3 Payments to acquire treasury stock (352.5) (49.7) (0.1) Dividends paid (81.7) (71.0) (71.0) Net cash flows used for financing activities (550.4) (121.8) (63.5) Effect of Exchange Rate Changes on Cash and Cash Equivalents 11.6 21.0 (9.2) Net Increase (Decrease) in Cash and Cash Equivalents (182.8) 200.2 26.4 Cash and Cash Equivalents at Beginning of Year 546.9 346.7 320.3 Cash and Cash Equivalents at End of Year $ 364.1 $ 546.9 $ 346.7 Supplemental disclosures of cash flow information  (see Note 17) Cash paid during the year for: Interest $ 17.7 $ 17.6 $ 26.7 Income Taxes $ 134.7 $ 120.5 $ 176.6 CONSOLIDATED STATEMENTS OF CASH FLOWS