Attached files
Exhibit 99.3
THE CLOROX
COMPANY
RECONCILIATION OF
ECONOMIC PROFIT (1)
| Dollars in millions | FY14 | FY13 | FY12 | ||||||
| Earnings from continuing operations before income taxes | $ | 861 | $ | 853 | $ | 791 | |||
| Noncash restructuring-related and intangible asset impairment costs | 4 | - | 4 | ||||||
| Interest expense | 103 | 122 | 125 | ||||||
| Earnings from continuing operations before income taxes, | |||||||||
| noncash restructuring-related and intangible asset impairment costs | |||||||||
| and interest expense | $ | 968 | $ | 975 | $ | 920 | |||
| Income taxes on earnings from continuing operations before | |||||||||
| income taxes, noncash restructuring-related and intangible asset | |||||||||
| impairment costs and interest expense(2) | 336 | 319 | 289 | ||||||
| Adjusted after tax profit | $ | 632 | $ | 656 | $ | 631 | |||
| Average capital employed(3) | 2,494 | 2,552 | 2,544 | ||||||
| Capital charge(4) | 225 | 230 | 229 | ||||||
| Economic profit(1) (Adjusted after tax profit less capital charge) | $ | 407 | $ | 426 | $ | 402 | |||
| (1) | Economic profit (EP) is defined by the Company as earnings from continuing operations before income taxes, excluding noncash restructuring-related and intangible asset impairment costs, and interest expense; less an amount of tax based on the effective tax rate, and less a charge equal to average capital employed multiplied by the weighted-average cost of capital. EP is a key financial metric the Company’s management uses to evaluate business performance and allocate resources, and is a component in determining management’s incentive compensation. The Company’s management believes EP provides additional perspective to investors about financial returns generated by the business and represents profit generated over and above the cost of capital used by the business to generate that profit. |
| (2) | The tax rate applied is the effective tax rate on continuing operations, which was 34.7%, 32.7% and 31.4% in fiscal years 2014, 2013 and 2012, respectively. |
| (3) | Total capital employed represents total assets less non-interest bearing liabilities. Adjusted capital employed represents total capital employed adjusted to add back current year noncash restructuring-related and intangible asset impairment costs. Average capital employed represents a two-point average of adjusted capital employed for the current year and total capital employed for the prior year, based on year-end balances. See below for details of the average capital employed calculation: |
| FY14 | FY13 | FY12 | |||||||
| Total assets | $ | 4,258 | $ | 4,311 | $ | 4,355 | |||
| Less: | |||||||||
| Accounts payable | 440 | 413 | 412 | ||||||
| Accrued liabilities | 472 | 490 | 494 | ||||||
| Income taxes payable | 8 | 29 | 5 | ||||||
| Other liabilities | 768 | 742 | 739 | ||||||
| Deferred income taxes | 103 | 119 | 119 | ||||||
| Non-interest bearing liabilities | 1,791 | 1,793 | 1,769 | ||||||
| Total capital employed | 2,467 | 2,518 | 2,586 | ||||||
| After tax Noncash restructuring-related and | |||||||||
| intangible asset impairment costs | 3 | - | 4 | ||||||
| Adjusted capital employed | $ | 2,470 | $ | 2,518 | $ | 2,590 | |||
| Average capital employed | $ | 2,494 | $ | 2,552 | $ | 2,544 | |||
| (4) | Capital charge represents average capital employed multiplied by the weighted-average cost of capital. The weighted-average cost of capital used to calculate capital charge was 9% for all fiscal years presented. |
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