EX-99.4 6 d829597dex994.htm EX-99.4 EX-99.4

Exhibit 99.4

THE CLOROX COMPANY

RECONCILIATION OF ECONOMIC PROFIT (UNAUDITED) (1)

 

Dollars in millions

    FY14      FY13      FY12  

Earnings from continuing operations before income taxes

    $ 884       $ 852       $ 778   

Noncash restructuring-related and intangible asset impairment costs

      3         —           4   

Interest expense

      103         122         125   
  

 

 

     

 

 

     

 

 

  

Earnings from continuing operations before income taxes, noncash restructuring-related and intangible asset impairment costs and interest expense

    $ 990       $ 974       $ 907   
  

 

 

     

 

 

     

 

 

  

Income taxes on earnings from continuing operations before income taxes, noncash restructuring-related and intangible asset impairment costs and interest expense(2)

      342         318         283   
  

 

 

     

 

 

     

 

 

  

Adjusted after tax profit

    $ 648       $ 656       $ 624   
  

 

 

     

 

 

     

 

 

  

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)

    $ 423       $ 426       $ 395   
  

 

 

     

 

 

     

 

 

  

 

(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 34.6%, 32.7% and 31.3% 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

      2         —           4   
  

 

 

     

 

 

     

 

 

  

Adjusted capital employed

    $ 2,469       $ 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.