EX-99.3 11 exhibit99-3.htm RECONCILIATION OF ECONOMIC PROFIT exhibit99-3.htm
Exhibit 99.3
 
THE CLOROX COMPANY
ECONOMIC PROFIT
 
Dollars in millions       FY10       FY09       FY08       FY07
Earnings from continuing operations before income taxes $      925 $      811 $      693 $      743
Non-cash restructuring-related and asset impairment costs(1) 4 10 48 4
Interest expense(2) 139 161 168 113
Earnings from continuing operations before income taxes, non-cash
       restructuring-related and asset impairment costs, and interest expense $ 1,068 $ 982 $ 909 $ 860
Adjusted after tax profit(3) $ 697 $ 650 $ 604 $ 574
Average capital employed(1),(4) 2,928 3,045 2,680 2,165
Capital charge(5) 264 274 241 195
Economic profit (Adjusted after tax profit less capital charge) 433 376 363 379

(1)       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-related and asset impairment costs, and interest expense, after tax. The tax rate applied is the effective tax rate on continuing operations which was 34.8%, 33.8%, 33.6% and 33.2% in fiscal years 2010, 2009, 2008 and 2007, 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-related 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:
 
FY10      FY09      FY08      FY07      FY06
Total assets $     4,555 $     4,576 $     4,712 $     3,621 $     3,563
Less:
       Accounts payable 410 381 418 329 329
       Accrued liabilities 492 472 440 547 516
       Income taxes payable 74 86 52 17 19
       Other liabilities 677 640 632 516 547
       Deferred income taxes   24   23 65 5 34
              Non-interest bearing liabilities 1,677 1,602 1,607 1,414 1,445
Total capital employed 2,878 2,974   3,105   2,207 $ 2,118
Non-cash restructuring and asset impairment costs 4 10 48 4
Adjusted capital employed $ 2,882 $ 2,984 $ 3,153 $ 2,211
Average capital employed $ 2,928 $ 3,045 $ 2,680 $ 2,165  
 
(5)       Capital charge represents average capital employed multiplied by the weighted-average cost of capital. The nominal weighted-average cost of capital used to calculate the capital charge was 9% for all fiscal years presented.