TURNING OUR PROFIT INTO CASH Earning Our Stripes 18 MANAGE FOR CASH Improve Financial Flexibility Grow Net Earnings Increase Return on Invested Capital Reduce Working Capital Prioritize Capital Expenditure 1998 1999 2000 2001 2002 2003 6.0% 4.3% 3.8% 3.7% 3.1% 2.8% Disciplined Capital Expenditure  As % of Net Sales were growing. We expect to reduce core working capital as a percent of sales again in 2004, albeit at a more modest rate. To create value for share owners, profit must be turned into cash. Our  Manage for Cash principle has the entire organization focused on doing just that. For example, in 2003, we reduced core working cap- ital (12 months‘ average trade receivables plus inven- tory, minus trade payables) as a percent of net sales for the third consecutive year. This reduction of working capital has freed up millions of dollars of cash flow during those three years, even as our sales We’ve also remained extremely disciplined on capital expenditure. In 2003, our capital expenditure was approximately 3% of net sales, a level we believe is sustainable. Capital is not free, and this target ensures business discipline and higher returns on investment. When launching a new product, we look first to existing capacity. We seek ways to improve productivity, rather than simply purchasing new equip- ment. We expect to maintain this capital expenditure at 3% of net sales in 2004, as well.  The result of these efforts has been strong cash flow that has exceeded net income over each of the past three years.  In 2004, we expect cash flow to again exceed net income. This strong cash flow allowed us to improve our financial flexibility by paying down more than $550 million of debt in 2003, and to make another cash contribution to our pension and retiree health- care benefit funds. In 2004, we will continue to pay Dec. Dec. Mar. June Sept. Dec. 9.9% 8.8% 8.7% 8.6% 8.4% 8.2% 2001 2002 2003 Fiscal 2003: Improving Working Capital  Core Working Capital as % of Net Sales * Based on last 12 months‘ average trade receivables  and inventory, less trade payables, divided by net sales.