EX-99.3 11 dex993.htm RECONCILIATION OF ECONOMIC PROFIT Reconciliation of Economic Profit

Exhibit 99.3

THE CLOROX COMPANY

ECONOMIC PROFIT

 

Dollars in millions

    FY08    FY07    FY06

Earnings from continuing operations before income taxes

    $ 693    $ 743    $ 653

Non-cash restructuring-related and asset impairment costs(1)

      48      4      —

Interest expense(2)

      168      113      127
                    

Earnings from continuing operations before income taxes, non-cash restructuring and asset impairment costs, and interest expense

    $ 909    $ 860    $ 780
                    

Adjusted after tax profit(3)

    $ 604    $ 574    $ 530

Average capital employed(4)

      2,680      2,165      2,024

Capital charge(5)

      241      195      182

Economic profit (Adjusted after tax profit less capital charge)

      363      379      348

 

(1) Current year non-cash restructuring-related and asset impairment costs are added back to earnings and adjusted capital employed to more closely reflect cash earnings and the total capital investment used to generate those earnings.

 

(2) Interest expense is added back to earnings because it is included as a component of the capital charge.

 

(3) Adjusted after tax profit represents earnings from continuing operations before income taxes, non-cash restructuring and asset impairment costs, and interest expense, after tax. The tax rate applied is the effective tax rate on continuing operations which was 33.6%, 33.2%, and 32.1% in fiscal years 2008, 2007, and 2006, respectively.

 

(4) Total capital employed represents total assets less non-interest bearing liabilities. Adjusted capital employed represents total capital employed adjusted to add back current year non-cash restructuring and 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:

 

     FY08    FY07    FY06    FY05

Total assets

    $ 4,708    $ 3,581    $ 3,521    $ 3,546
                           

Less:

            

Accounts payable

      418      329      329      347

Accrued liabilities

      440      507      474      614

Income taxes payable

      48      17      19      26

Other liabilities

      600      516      547      618

Deferred income taxes

      97      5      34      11
                           

Non-interest bearing liabilities

      1,603      1,374      1,403      1,616
                           

Total capital employed

      3,105      2,207      2,118    $ 1,930
               

Non-cash restructuring and asset impairment costs

      48      4      —   
                       

Adjusted capital employed

    $ 3,153    $ 2,211    $ 2,118   
                       

Average capital employed

    $ 2,680    $ 2,165    $ 2,024   
                       

 

(5) Capital charge represents average capital employed multiplied by the weighted-average cost of capital. Weighted-average cost of capital is the blended average of the cost of the Company’s debt and equity capital. The weighted-average cost of capital used to calculate capital charge was 9% for fiscal years 2008, 2007, and 2006.