EX-99.2 9 fy19clxex99210k.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2
THE CLOROX COMPANY
RECONCILIATION OF ECONOMIC PROFIT (UNAUDITED) (1) 
Dollars in millions
 
FY19
 
FY18
 
FY17
Earnings from continuing operations before income taxes
 
$
1,024

 
$
1,054

 
$
1,033

Add back:
 
 
 
 
 
 
Non-cash U.S. GAAP restructuring and intangible asset impairment charges
 
2

 
2

 
4

Interest expense
 
97

 
85

 
88

Earnings from continuing operations before income taxes,
non-cash U.S. GAAP restructuring and intangible asset impairment charges, and interest expense
 
1,123

 
$
1,141

 
1,125

Less:
 
 
 
 
 
 
Income taxes on earnings from continuing operations before
income taxes, non-cash U.S. GAAP restructuring and intangible asset impairment charges and interest expense (2)
 
222

 
249

 
359

Adjusted after tax profit
 
901

 
892

 
766

Average capital employed (3)
 
3,231

 
2,977

 
2,680

Less: Capital charge (4)
 
291

 
268

 
241

Economic profit (1) (Adjusted after tax profit less capital charge)
 
$
610

 
$
624

 
$
525


(1) Economic profit (EP) is defined by the Company as earnings from continuing operations before income taxes, excluding non-cash U.S. GAAP restructuring and intangible asset impairment charges, and interest expense; less income taxes (calculated utilizing the Company’s effective tax rate), and less a capital charge (calculated as average capital employed multiplied by a cost of capital rate). EP is a key financial metric that the Company’s management uses to evaluate business performance and allocate resources, and is a component in determining employee 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 earnings from continuing operations, which was 19.8%, 21.8% and 31.9% in fiscal years 2019, 2018 and 2017, 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 after tax noncash U.S. GAAP restructuring and intangible asset impairment charges. Average capital employed is the 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.
(4) Capital charge represents average capital employed multiplied by a cost of capital, which was 9% for all fiscal years presented. The calculation of capital charge includes the impact of rounding numbers.
Dollars in millions
 
FY19
 
FY18
 
FY17
Total assets
 
$
5,116

 
$
5,060

 
$
4,573

Less:
 
 
 
 
 
 
       Accounts payable and accrued liabilities (5)
 
1,033

 
1,000

 
1,002

Income taxes payable
 
9

 

 

       Other liabilities (5)
 
774

 
778

 
770

Deferred income taxes
 
50

 
72

 
61

Non-interest bearing liabilities
 
1,866

 
1,850

 
1,833

Total capital employed
 
3,250

 
3,210

 
2,740

Add back:
 
 
 
 
 
 
After tax non-cash U.S. GAAP restructuring
and intangible asset impairment charges
 
1

 
1

 
2

Adjusted capital employed
 
$
3,251

 
$
3,211

 
$
2,742

Average capital employed
 
$
3,231

 
$
2,977

 
$
2,680


(5) Accounts payable and accrued liabilities and Other Liabilities are adjusted to exclude interest-bearing liabilities.

1