CLOROX CO /DE/, 10-K filed on 8/23/2013
Annual Report
DOCUMENT AND ENTITY INFORMATION (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Jun. 30, 2013
Jul. 31, 2013
Dec. 31, 2012
Document and Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Jun. 30, 2013 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Entity Registrant Name
CLOROX CO /DE/ 
 
 
Entity Central Index Key
0000021076 
 
 
Current Fiscal Year End Date
--06-30 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Common Stock, Shares Outstanding
 
130,429,805 
 
Entity Public Float
 
 
$ 9.5 
CONSOLIDATED STATEMENTS OF EARNINGS (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
CONSOLIDATED STATEMENTS OF EARNINGS [Abstract]
 
 
 
Net sales
$ 5,623 
$ 5,468 
$ 5,231 
Cost of products sold
3,211 
3,164 
2,958 
Gross profit
2,412 
2,304 
2,273 
Selling and administrative expenses
807 
798 
735 
Advertising costs
500 
482 
502 
Research and development costs
130 
121 
115 
Goodwill impairment
258 
Interest expense
122 
125 
123 
Other (income) expense, net
(13)
(23)
Earnings from continuing operations before income taxes
853 
791 
563 
Income taxes on continuing operations
279 
248 
276 
Earnings from continuing operations
574 
543 
287 
(Losses) earnings from discontinued operations, net of tax
(2)
(2)
270 
Net earnings
$ 572 
$ 541 
$ 557 
Net earnings (losses) per share, basic
 
 
 
Continuing operations
$ 4.38 
$ 4.15 
$ 2.09 
Discontinued operations
$ (0.01)
$ (0.01)
$ 1.97 
Basic net earnings per share
$ 4.37 
$ 4.14 
$ 4.06 
Diluted
 
 
 
Continuing operations
$ 4.31 
$ 4.10 
$ 2.07 
Discontinued operations
$ (0.01)
$ (0.01)
$ 1.95 
Diluted net earnings per share
$ 4.30 
$ 4.09 
$ 4.02 
Weighted average shares outstanding (in thousands)
 
 
 
Basic
131,075 
130,852 
136,699 
Diluted
132,969 
132,310 
138,101 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
 
 
 
Net earnings
$ 572 
$ 541 
$ 557 
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments, net of tax
(11)
(41)
54 
Net unrealized gains (losses) on derivatives, net of tax
(37)
Pension and postretirement benefit adjustments, net of tax
37 
(68)
64 
Other
(2)
Total other comprehensive income (loss), net of tax
29 
(146)
121 
Comprehensive income
$ 601 
$ 395 
$ 678 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
 
 
 
Tax on foreign currency translation adjustments
$ (8)
$ (5)
$ 12 
Tax on net unrealized gains (losses) on derivatives
(4)
Tax on pension and postretirement benefit adjustments
$ 22 
$ (37)
$ 39 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Jun. 30, 2012
ASSETS
 
 
Cash and cash equivalents
$ 299 
$ 267 
Receivables, net
580 
576 
Inventories, net
394 
384 
Other current assets
147 
149 
Total current assets
1,420 
1,376 
Property, plant and equipment, net
1,021 
1,081 
Goodwill
1,105 
1,112 
Trademarks, net
553 
556 
Other intangible assets, net
74 
86 
Other assets
138 
144 
Total assets
4,311 
4,355 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
Notes and loans payable
202 
300 
Current maturities of long-term debt
850 
Accounts payable
413 
412 
Accrued liabilities
490 
494 
Income taxes payable
29 
Total current liabilities
1,134 
2,061 
Long-term debt
2,170 
1,571 
Other liabilities
742 
739 
Deferred income taxes
119 
119 
Total liabilities
4,165 
4,490 
Commitments and contingencies
   
   
Stockholders' equity (deficit)
 
 
Preferred stock: $1.00 par value; 5,000,000 shares authorized; none issued or outstanding
Common stock: $1.00 par value; 750,000,000 shares authorized; 158,741,461 shares issued at June 30, 2013 and 2012; and 130,366,911 and 129,562,082 shares outstanding at June 30, 2013 and 2012, respectively
159 
159 
Additional paid-in capital
661 
633 
Retained earnings
1,561 
1,350 
Treasury shares, at cost: 28,374,550 and 29,179,379 shares at June 30, 2013 and 2012, respectively
(1,868)
(1,881)
Accumulated other comprehensive net loss
(367)
(396)
Stockholders' equity (deficit)
146 
(135)
Total liabilities and stockholders' equity (deficit)
$ 4,311 
$ 4,355 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2013
Jun. 30, 2012
CONSOLIDATED BALANCE SHEETS [Abstract]
 
 
Preferred stock, par value
$ 1.00 
$ 1.00 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 1.00 
$ 1.00 
Common stock, shares authorized
750,000,000 
750,000,000 
Common stock, shares issued
158,741,461 
158,741,461 
Common stock, shares outstanding
130,366,911 
129,562,082 
Treasury stock, shares
28,374,550 
29,179,379 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $)
In Millions, except Share data in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Shares [Member]
Accumulated Other Comprehensive Net (Loss) Income [Member]
Total
Balance, amount at Jun. 30, 2010
$ 159 
$ 617 
$ 920 
$ (1,242)
$ (371)
$ 83 
Balance, shares at Jun. 30, 2010
158,741 
 
 
(19,977)
 
 
Net earnings
 
 
557 
 
 
557 
Other comprehensive income
 
 
 
 
121 
121 
Accrued dividends
 
 
(306)
 
 
(306)
Share-based compensation
 
32 
 
 
 
32 
Other employee stock plan activities, amount
 
(17)
(28)
127 
 
82 
Other employee stock plan activities, shares
 
 
 
2,078 
 
 
Treasury stock purchased, amount
 
 
 
(655)
 
(655)
Treasury stock purchased, shares
 
 
 
(9,776)
 
 
Balance, amount at Jun. 30, 2011
159 
632 
1,143 
(1,770)
(250)
(86)
Balance, shares at Jun. 30, 2011
158,741 
 
 
(27,675)
 
 
Net earnings
 
 
541 
 
 
541 
Other comprehensive income
 
 
 
 
(146)
(146)
Accrued dividends
 
 
(320)
 
 
(320)
Share-based compensation
 
27 
 
 
 
27 
Other employee stock plan activities, amount
 
(26)
(14)
114 
 
74 
Other employee stock plan activities, shares
 
 
 
1,915 
 
 
Treasury stock purchased, amount
 
 
 
(225)
 
(225)
Treasury stock purchased, shares
 
 
 
(3,419)
 
 
Balance, amount at Jun. 30, 2012
159 
633 
1,350 
(1,881)
(396)
(135)
Balance, shares at Jun. 30, 2012
158,741 
 
 
(29,179)
 
 
Net earnings
 
 
572 
 
 
572 
Other comprehensive income
 
 
 
 
29 
29 
Accrued dividends
 
 
(348)
 
 
(348)
Share-based compensation
 
35 
 
 
 
35 
Other employee stock plan activities, amount
 
(7)
(13)
141 
 
121 
Other employee stock plan activities, shares
 
 
 
2,304 
 
 
Treasury stock purchased, amount
 
 
 
(128)
 
(128)
Treasury stock purchased, shares
 
 
 
(1,500)
 
 
Balance, amount at Jun. 30, 2013
$ 159 
$ 661 
$ 1,561 
$ (1,868)
$ (367)
$ 146 
Balance, shares at Jun. 30, 2013
158,741 
 
 
(28,375)
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Operating activities:
 
 
 
Net earnings
$ 572 
$ 541 
$ 557 
Deduct: (Losses) earnings from discontinued operations, net of tax
(2)
(2)
270 
Earnings from continuing operations
574 
543 
287 
Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations:
 
 
 
Depreciation and amortization
182 
178 
173 
Share-based compensation
35 
27 
32 
Deferred income taxes
(11)
(12)
73 
Goodwill impairment
258 
Other
20 
(36)
12 
Changes in:
 
 
 
Receivables, net
(8)
(52)
(33)
Inventories, net
(11)
(37)
Other current assets
11 
(3)
21 
Accounts payable and accrued liabilities
(30)
10 
(52)
Income taxes payable
15 
(36)
(44)
Net cash provided by continuing operations
777 
620 
690 
Net cash (used for) provided by discontinued operations
(2)
(8)
Net cash provided by operations
775 
612 
698 
Investing activities:
 
 
 
Capital expenditures
(194)
(192)
(228)
Proceeds from sale of businesses, net of transaction costs
747 
Proceeds from sale-leasebacks, net of transaction costs
135 
Businesses acquired, net of cash acquired
(93)
Other
25 
Net cash (used for) provided by investing activities
(55)
(277)
544 
Financing activities:
 
 
 
Notes and loans payable, net
(98)
(164)
87 
Long-term debt borrowings, net of issuance costs
593 
297 
Long-term debt repayments
(850)
(300)
Treasury stock purchased
(128)
(225)
(655)
Cash dividends paid
(335)
(315)
(303)
Issuance of common stock for employee stock plans and other
133 
86 
93 
Net cash used for financing activities
(685)
(321)
(1,078)
Effect of exchange rate changes on cash and cash equivalents
(3)
(6)
Net increase in cash and cash equivalents
32 
172 
Cash and cash equivalents:
 
 
 
Beginning of year
267 
259 
87 
End of year
299 
267 
259 
Supplemental Cash Flow Information
 
 
 
Interest paid
129 
123 
131 
Income taxes paid, net of refunds
263 
292 
295 
Noncash financing activities:
 
 
 
Cash dividends declared and accrued, but not paid
$ 93 
$ 85 
$ 80 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

The Company is principally engaged in the production, marketing and sales of consumer products through mass merchandisers, retail outlets, e-commerce channels, distributors and medical supply providers. The consolidated financial statements include the statements of the Company and its wholly-owned and controlled subsidiaries. All significant intercompany transactions and accounts were eliminated in consolidation. Certain prior year reclassifications were made in the consolidated financial statements and related notes to consolidated financial statements to conform to the current year presentation.

Use of Estimates

The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Specific areas requiring the application of management's estimates and judgments include assumptions pertaining to accruals for consumer and trade-promotion programs, share-based compensation costs, pension and post-employment benefit costs, future cash flows associated with impairment testing of goodwill and other long-lived assets, the credit worthiness of customers, uncertain tax positions, tax valuation allowances and legal, environmental and insurance matters. Actual results could materially differ from estimates and assumptions made.

Recently Issued Accounting Pronouncements

On February 5, 2013, the Financial Accounting Standards Board (FASB) issued an update to current accounting standards to improve disclosures related to reclassifications out of accumulated other comprehensive income. Substantially all of the information that these amendments require already is required to be disclosed elsewhere in the financial statements. The amendments require an entity to report the effect of significant reclassifications on respective line items in net earnings or cross-reference other required disclosures, depending on the nature of the reclassification. The presentation requirements will be adopted by the Company beginning the first quarter of fiscal year 2014, as required.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments, time deposits and money market funds with an initial maturity at purchase of three months or less. The fair value of cash and cash equivalents approximates the carrying amount.

The Company's cash position includes amounts held by foreign subsidiaries, and, as a result, the repatriation of certain cash balances from some of the Company's foreign subsidiaries could result in additional tax costs. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company's cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries' books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in other (income) expense, net. The Company's cash holdings were as follows as of June 30:

         2013        2012
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   $ 115   $ 81
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     36     35
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries     18     20
U.S. dollar balances held by U.S. dollar functional currency subsidiaries     130     131
Total   $      299   $      267

Inventories
 
Inventories are stated at the lower of cost or market. When necessary, the Company provides allowances to adjust the carrying value of its inventory to the lower of cost or market, including any costs to sell or dispose. Appropriate consideration is given to obsolescence, excessive inventory levels, product deterioration and other factors in evaluating net realizable value for the purposes of determining the lower of cost or market.
 
Property, Plant and Equipment and Finite-Lived Intangible Assets
 
Property, plant and equipment and finite-lived intangible assets are stated at cost. Depreciation and amortization expense are calculated by the straight-line method using the estimated useful lives of the related assets. The table below provides estimated useful lives of property, plant and equipment by asset classification.
    Estimated
Useful Lives
Buildings        10 - 40 years
Land improvements   10 - 30 years
Machinery and equipment   3 - 15 years
Computer equipment   3 years
Capitalized software costs   3 - 7 years

Property, plant and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company's impairment review is based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist. Impairment occurs when the book value of the asset exceeds the estimated future undiscounted cash flows generated by the asset and the impairment is viewed as other than temporary. When an impairment is indicated, an impairment charge is recorded for the difference between the book value of the asset and its estimated fair market value. Depending on the asset, estimated fair market value may be determined either by use of a discounted cash flow model, or by reference to estimated selling values of assets in similar condition.

Capitalization of Software Costs

The Company capitalizes certain significant costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, consultants, interest and payroll and payroll-related costs for employees during the application development stage. Costs incurred prior to the application development stage, costs incurred once the application is substantially complete and ready for its intended use, and other costs not qualifying for capitalization, including training and maintenance costs, are charged to expense. Capitalized software amortization was $21, $18 and $19, in fiscal years 2013, 2012 and 2011, respectively.
 
Impairment Review of Goodwill and Indefinite-Lived Intangible Assets
 
The Company tests its goodwill, trademarks with indefinite lives and other indefinite-lived intangible assets annually in the fiscal fourth quarter unless there are indications during a different interim period that these assets may have become impaired. With respect to goodwill, the Company performs either a qualitative or quantitative evaluation for each of its reporting units. Factors considered in the qualitative test include reporting unit specific operating results as well as new events and circumstances impacting the operations at the reporting unit level. If the result of a qualitative test indicates a potential for impairment, a quantitative test is performed. The quantitative test is a two-step process. In the first step, the Company compares the estimated fair value of each reporting unit to its carrying value. If the estimated fair value of any reporting unit is less than its carrying value, the Company performs a second step to determine the implied fair value of the reporting unit's goodwill. If the carrying amount of a reporting unit's goodwill exceeds its implied fair value, an impairment charge is recorded for the difference between the carrying amount and the implied fair value of the reporting unit's goodwill. For trademarks and other intangible assets with indefinite lives, the Company performs either a qualitative or quantitative analysis to test for impairment. When a quantitative test is performed, the estimated fair value of an asset is compared to its carrying amount. If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value. The Company's estimates of fair value are based primarily on a discounted cash flow approach that requires significant management judgment with respect to future sales volumes, revenue and expense growth rates, changes in working capital, foreign exchange rates, currency devaluation, inflation, and a perpetuity growth rate.

Share-Based Compensation

The Company grants various nonqualified stock-based compensation awards, including stock options and performance units.

For stock options, the Company estimates the fair value of each award on the date of grant using the Black-Scholes valuation model, which requires management to make estimates regarding expected option life, stock price volatility and other assumptions. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company estimates stock option forfeitures based on historical data for each employee grouping and the estimated forfeiture rate is adjusted to reflect actual forfeitures upon vesting of such grouping. The adjustment of the forfeiture rate will result in a cumulative catch-up adjustment in the period the forfeiture estimate is changed. The expense is recorded by amortizing the grant date fair values on a straight-line basis over the vesting period, adjusted for estimated forfeitures.

The Company's performance unit grants provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The performance period is three years and the payout determination is made at the end of the three-year performance period. The fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. The total amount of compensation expense recognized reflects estimated forfeiture rates and the initial assumption that performance goals will be achieved. Compensation expense is adjusted based on management's assessment of the probability that performance goals will be achieved. If such goals are not met or it is determined that achievement of performance goals is not probable, previously recognized compensation expense is trued-up in the current period to reflect the expected payout level. If it is determined that the performance goals will be exceeded, additional compensation expense is recognized, subject to a cap of 150% of target.

Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for share-based payment arrangements (excess tax benefits) are primarily classified as financing cash flows.

Employee Benefits

The Company accounts for its defined benefit retirement income and retirement health care plans using actuarial methods. These methods use an attribution approach that generally spreads "plan events" over the service lives of plan participants. Examples of plan events are plan amendments and changes in actuarial assumptions such as the expected return on plan assets, discount rate, rate of compensation increase, and certain employee-related factors, such as retirement age and mortality. The principle underlying the attribution approach is that employees render service over their employment period on a relatively "smooth" basis, and, therefore, the statement of earnings effects of retirement income and retirement health care plans are recognized in the same pattern.

One of the principal assumptions used in the net periodic benefit cost calculation is the expected return on plan assets. The required use of an expected return on plan assets may result in recognized pension expense or income that differs from the actual returns of those plan assets in any given year. Over time, however, the goal is for the expected long-term returns to approximate the actual returns and, therefore, the expectation is that the pattern of income and expense recognition should closely match the pattern of the services provided by the participants. The Company uses a market-related value method for calculating plan assets for purposes of determining the amortization of actuarial gains and losses. This method employs an asset smoothing approach. The differences between actual and expected returns are recognized in the net periodic benefit cost calculation over the average remaining service period of the plan participants using the corridor approach. Under this approach, only actuarial gains (losses) that exceed 5% of the greater of the projected benefit obligation or the market-related value of assets are amortized to pension expense by the Company. In developing its expected return on plan assets, the Company considers the long-term actual returns relative to the mix of investments that comprise its plan assets and also develops estimates of future investment returns by considering external sources.

The Company recognizes an actuarial-based obligation at the onset of disability for certain benefits provided to individuals after employment, but before retirement, that include medical, dental, vision, life and other benefits.

Environmental Costs

The Company is involved in certain environmental remediation and ongoing compliance activities. Accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The Company's accruals reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given the inherent uncertainties in evaluating environmental exposures. The aggregate accrual for environmental matters is included in other liabilities in the Company's consolidated balance sheets on an undiscounted basis due to uncertainty regarding the timing of future payments.

Revenue Recognition

Sales are recognized as revenue when the risk of loss and title pass to the customer and when all of the following have occurred: a firm sales arrangement exists, pricing is fixed or determinable, and collection is reasonably assured. Sales are recorded net of allowances for returns, trade-promotions, coupons and other discounts. The Company routinely commits to one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. Programs include shelf price reductions, end-of-aisle or in-store displays of the Company's products and graphics and other trade-promotion activities conducted by the customer. Coupons are recognized as a liability when distributed based upon expected consumer redemptions. The Company maintains liabilities at the end of each period for the estimated expenses incurred, but unpaid for these programs. Trade-promotion and coupon costs are recorded as a reduction of sales. The Company provides an allowance for doubtful accounts based on its historical experience and ongoing assessment of its customers' credit risk. Receivables were presented net of an allowance for doubtful accounts of $5 and $7 as of June 30, 2013 and 2012, respectively. The Company's provision for doubtful accounts was $0, $3 and $0 in fiscal years 2013, 2012 and 2011, respectively.

Receivables, net, included non-customer receivables of $13 and $25 as of June 30, 2013 and 2012, respectively.

Cost of Products Sold

Cost of products sold represents the costs directly related to the manufacture and distribution of the Company's products and primarily includes raw materials, packaging, contract packer fees, shipping and handling, warehousing, package design, depreciation, amortization and direct and indirect labor and operating costs for the Company's manufacturing facilities including salary, benefit costs and incentive compensation.

Costs associated with developing and designing new packaging are expensed as incurred and include design, artwork, films and labeling. Expenses for fiscal years ended June 30, 2013, 2012 and 2011 were $10, $10, and $11, respectively, of which $10 were classified as cost of products sold each fiscal year, with the remainder classified as selling and administrative expenses.

Selling and Administrative Expenses

Selling and administrative expenses represent costs incurred by the Company in generating revenues and managing the business and include market research, commissions and certain administrative expenses. Administrative expenses include salary, benefits, incentive compensation, professional fees and services, software and licensing fees and other operating costs associated with the Company's non-manufacturing, non-research and development staff, facilities and equipment.

Advertising and Research and Development Costs

The Company expenses advertising and research and development costs in the period incurred.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases. Management reviews the Company's deferred tax assets to determine whether their value can be realized based upon available evidence. A valuation allowance is established when management believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company's tax provision in the period of change. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet certain recognition thresholds or measurement standards. Amounts for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled.

U.S. income tax expense and foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. Where foreign earnings are indefinitely reinvested, no provision for U.S. income or foreign withholding taxes is made. When circumstances change and the Company determines that some or all of the undistributed earnings will be remitted in the foreseeable future, the Company accrues an expense in the current period for U.S. income taxes and foreign withholding taxes attributable to the anticipated remittance.

Foreign Currency Transactions and Translation

Local currencies are the functional currencies for substantially all of the Company's foreign operations. When the transactional currency is different than the functional currency, transaction gains and losses are included as a component of other (income) expense, net. In addition, certain assets and liabilities denominated in currencies different than a foreign subsidiary's functional currency are reported on the subsidiary's books in its functional currency, with the impact from exchange rate differences recorded in other (income) expense, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Income and expenses are translated at the average monthly exchange rates during the year. Gains and losses on foreign currency translations are reported as a component of other comprehensive income. Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested. The income tax effect of currency translation adjustments related to foreign subsidiaries and joint ventures for which earnings are not considered indefinitely reinvested is recorded as a component of deferred taxes with an offset to other comprehensive income.

Venezuela

The financial statements of the Company's subsidiary in Venezuela are consolidated under the rules governing the preparation of financial statements in a highly inflationary economy. As such, the subsidiary's non-U.S. dollar (non-USD) monetary assets and liabilities are remeasured into USD each reporting period with the resulting gains and losses reflected in other (income) expense, net.

On February 8, 2013, the Venezuelan government announced a devaluation of the official currency exchange rate (CADIVI) from 4.3 to 6.3 bolívares fuertes (VEF) per USD and the elimination of the alternative currency exchange system, SITME. Prior to February 8, 2013, the Company had been utilizing the rate at which it had been obtaining USD through SITME to remeasure its Venezuelan financial statements, which was 5.7 VEF per USD at the announcement date. In response to these developments, the Company began utilizing the CADIVI rate of 6.3 VEF per USD. The Company recorded a remeasurement loss of $4 related to the devaluation in fiscal year 2013, which was reflected in other (income) expense, net.

In March 2013, the Venezuelan government announced the creation of a new alternative currency exchange system (SICAD), which is intended to complement CADIVI. Based on a number of factors, including the limited number of SICAD auctions held to date, restrictions placed on eligible participants, the amount of USD available to purchase through the auction process, and the lack of official information about the resulting exchange rate, the Company does not believe it is appropriate to use the SICAD rate as the official remeasurement rate at this time.

Derivative Instruments

The Company's use of derivative instruments, principally swaps, futures and forward contracts, is limited to non-trading purposes and is designed to partially manage exposure to changes in commodity prices, interest rates and foreign currencies. The Company's contracts are hedges for transactions with notional amounts and periods consistent with the related exposures and do not constitute investments independent of these exposures.

Most commodity, interest rate and foreign exchange derivative contracts are designated as cash flow hedges of certain forecasted raw material purchases, interest payments and finished goods inventory purchases, based on certain hedge criteria. The criteria used to determine if hedge accounting treatment is appropriate are: (a) whether the designation of the hedge is to an underlying exposure and (b) whether there is sufficient correlation between the value of the derivative instrument and the underlying obligation. The changes in the fair value of derivatives are recorded as either assets or liabilities in the balance sheet with an offset to net earnings or other comprehensive income depending on whether, for accounting purposes, the derivative is designated and qualifies as a hedge. The Company de-designates cash flow hedge relationships when it determines that the hedge relationships are no longer highly effective or that the forecasted transaction is no longer probable. Upon de-designation of a hedge, the portion of gains or losses on the derivative instrument that was previously accumulated in other comprehensive income remains in accumulated other comprehensive income until the forecasted transaction is recognized in net earnings, or is recognized in net earnings immediately if the forecasted transaction is no longer probable. From time to time, the Company may have contracts not designated as hedges for accounting purposes, for which it recognizes changes in the fair value in other (income) expense, net. Cash flows from hedging activities are classified as operating activities in the consolidated statements of cash flows.

The Company uses different methodologies, when necessary, to estimate the fair value of its derivative contracts. The estimated fair values of the majority of the Company's contracts are based on quoted market prices, traded exchange market prices, or broker price quotations, and represent the estimated amounts that the Company would pay or receive to terminate the contracts.

SALE OF GLOBAL AUTO CARE BUSINESSES
SALE OF GLOBAL AUTO CARE BUSINESSES

NOTE 2. SALE OF GLOBAL AUTO CARE BUSINESSES

In September 2010, the Company entered into a definitive agreement to sell its global auto care businesses (Auto Businesses) to an affiliate of Avista Capital Partners in an all-cash transaction. In November 2010, the Company completed the sale pursuant to the terms of a Purchase and Sale Agreement (Purchase Agreement) and received cash consideration of $755. The Company also received cash flows of approximately $30 related to net working capital that was retained by the Company as part of the sale. Included in earnings from discontinued operations for the fiscal year ended June 30, 2011, was an after-tax gain on the transaction of $247.

The following table includes financial results included in discontinued operations for the fiscal year ended June 30, 2011:

Net sales         $ 95  
Earnings before income taxes   $ 34  
Income tax expense on earnings     (11 )
Gain on sale, net of tax     247  
Earnings from discontinued operations, net of tax   $       270  
BUSINESSES ACQUIRED
BUSINESSES ACQUIRED

NOTE 3. BUSINESSES ACQUIRED

In December 2011, the Company acquired HealthLink, Aplicare, Inc. and Soy Vay Enterprises, Inc., including each business' workforce, for purchase prices aggregating $97, funded through commercial paper borrowings. The cash amount paid of $93 represents the aggregate purchase prices less cash acquired. Results for HealthLink and Aplicare, Inc., providers of infection control products for the health care industry, are reflected in the Cleaning reportable segment. Results for Soy Vay Enterprises, Inc., a California-based operation that provides the Company a presence in the market for Asian sauces, are reflected in the Lifestyle reportable segment. Pro forma results reflecting the acquisitions were not presented because the acquisitions were not significant, individually or when aggregated, to the Company's consolidated financial results.

INVENTORIES, NET
INVENTORIES, NET

NOTE 4. INVENTORIES, NET

Inventories, net, consisted of the following as of June 30:
 
        2013       2012
Finished goods   $ 321     $ 307  
Raw materials and packaging     121       120  
Work in process     3       4  
LIFO allowances     (40 )     (37 )
Allowances for obsolescence     (11 )     (10 )
Total   $        394     $        384  
 
The last-in, first-out (LIFO) method was used to value approximately 37% and 39% of inventories as of June 30, 2013 and 2012, respectively. The carrying values for all other inventories, including inventories of all international businesses, are determined on the first-in, first-out (FIFO) method. The effect on earnings of the liquidation of LIFO layers was a benefit of $3, $2 and $1 for the fiscal years ended June 30, 2013, 2012 and 2011, respectively.
 
During fiscal years 2013, 2012 and 2011, the Company's inventory obsolescence expense was $12, $13 and $15, respectively.
OTHER CURRENT ASSETS
OTHER CURRENT ASSETS
NOTE 5. OTHER CURRENT ASSETS
 
Other current assets consisted of the following as of June 30:
 
        2013       2012
Deferred tax assets   $ 87   $ 92
Prepaid expenses     41     43
Other     19     14
Total   $        147   $        149
 
As of June 30, 2013 and 2012, Other in the table above included $13 and $9 of restricted cash, respectively. As of June 30, 2013 and 2012, restricted cash of $10 and $3, respectively, was held by a foreign subsidiary as a prepayment received for intercompany services. Restrictions on this balance are being released as those services are performed. As of June 30, 2013 and 2012, $0 and $10, respectively, of related restricted cash was included in other assets (long-term). Additionally, as of June 30, 2013 and 2012, the Company had restricted cash of $3 and $6, respectively, held in escrow related to prior year acquisitions. As of June 30, 2013 and 2012, $0 and $2, respectively, of related restricted cash was included in other assets (long-term).
 
As of June 30, 2013 and 2012, Other in the table above included assets held for sale of $2 and $1, respectively. The assets held for sale as of June 30, 2013 related to two manufacturing facilities and a warehouse expected to be sold in fiscal year 2014.
PROPERTY, PLANT AND EQUIPMENT, NET
PROPERTY, PLANT AND EQUIPMENT, NET
NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET
 
The components of property, plant and equipment, net, consisted of the following as of June 30:
 
         2013        2012
Machinery and equipment   $       1,590     $       1,533  
Buildings     485       646  
Capitalized software costs     362       328  
Land and improvements     119       142  
Construction in progress     96       149  
Computer equipment     80       87  
      2,732       2,885  
Less: accumulated depreciation and amortization     (1,711 )     (1,804 )
Total   $ 1,021     $ 1,081  
 
Depreciation and amortization expense related to property, plant and equipment, net, was $162, $158 and $153 in fiscal years 2013, 2012 and 2011, respectively.
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

NOTE 7. GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill, trademarks and other intangible assets for the fiscal years ended June 30, 2013 and 2012, were as follows:

    Goodwill
        Cleaning       Lifestyle       Household       International       Total
Balance June 30, 2011   $ 275   $ 235   $ 85   $ 475     $ 1,070  
Acquisitions     48     8     -     -       56  
Translation adjustments and other     -     1     -     (15 )     (14 )
Balance June 30, 2012   $ 323   $ 244   $ 85   $ 460     $ 1,112  
Translation adjustments and other     -      -     -     (7 )     (7 )
Balance June 30, 2013   $        323   $        244   $        85   $           453     $        1,105  

    Trademarks   Other intangible assets
subject to amortization
        Subject to
amortization
      Not subject to
amortization
      Total       Technology
and Product
formulae
      Other       Total
Balance June 30, 2011   $ 23     $ 527   $ 550     $ 31     $ 52     $ 83  
Acquisitions     -       10     10       -       18       18  
Amortization     (3 )     -     (3 )     (8 )     (6 )     (14 )
Translation adjustments and other     (1 )     -     (1 )     -       (1 )     (1 )
Balance June 30, 2012     19       537     556       23       63       86  
Amortization     (3 )     -     (3 )     (9 )     (6 )     (15 )
Translation adjustments and other     -       -     -       5       (2 )     3  
Balance June 30, 2013   $             16     $             537   $             553     $             19     $             55     $             74  

Intangible assets subject to amortization were net of total accumulated amortization of $275 and $257 as of June 30, 2013 and 2012, respectively, of which $21 and $18, respectively, related to trademarks. Total accumulated amortization included $136 and $131 as of June 30, 2013 and 2012, respectively, related to intangible assets subject to amortization that were fully amortized, of which $13 and $7, respectively, related to trademarks. Estimated amortization expense for these intangible assets is $16, $12, $7, $7 and $6 for fiscal years 2014, 2015, 2016, 2017 and 2018.

During the fourth quarter of fiscal year 2013 and 2012, the Company completed its annual impairment test of goodwill and indefinite-lived intangible assets and no instances of impairment were identified.

During fiscal year 2011, the Company identified challenges in increasing sales for the Burt's Bees business in certain international markets in accordance with projections. Additionally, during fiscal year 2011, the Company initiated its process for updating the three-year long-range financial and operating plan for the Burt's Bees business. In addition to slower than projected growth of international sales and challenges in the timing of certain international expansion plans, the domestic natural personal care category had not recovered in accordance with the Company's projections. Following a comprehensive reevaluation, the Company recognized a noncash goodwill impairment charge of $258 during fiscal year 2011, of which $164 and $94 was reflected in the Lifestyle and International reportable segments, respectively.

The impairment charge was a result of changes in the assumptions used to determine the fair value of the Burt's Bees business based on slower than forecasted category growth as well as challenges in international expansion plans, which adversely affected the original assumptions for international growth and the estimates of expenses necessary to achieve that growth. The revised assumptions reflected somewhat higher cost levels than previously projected. As a result of this assessment, the Company determined that the book value of the Burt's Bees reporting unit exceeded its fair value, resulting in a noncash goodwill impairment charge of $258 recognized in fiscal year 2011. The noncash goodwill impairment charge was based on the Company's estimates regarding the future financial performance of the Burt's Bees business and macroeconomic factors. There was no substantial tax benefit associated with this noncash charge.

To determine the fair value of the Burt's Bees reporting unit, the Company used a discounted cash flow (DCF) approach, as it believed this approach was the most reliable indicator of the fair value of the business. Under this approach, the Company estimated the future cash flows of the Burt's Bees reporting unit and discounted these cash flows at a rate of return that reflected its relative risk.

The Company's trademarks and indefinite-lived intangible assets for the Burt's Bees reporting unit were tested for impairment in fiscal year 2011, and the Company concluded that these assets were not impaired. No other instances of impairment were identified during fiscal year 2011.

ACCRUED LIABILITIES
ACCRUED LIABILITIES

NOTE 8. ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of June 30:

        2013       2012
Compensation and employee benefit costs   $ 152   $ 165
Trade and sales promotion     116     105
Dividends     96     85
Interest     27     34
Other     99     105
Total   $        490   $        494
DEBT
DEBT

NOTE 9. DEBT

Notes and loans payable, which mature in less than one year, included the following as of June 30:

        2013       2012
Commercial paper   $ 200   $ 289
Foreign borrowings     2     11
Total   $        202   $        300

The weighted average interest rates incurred on average outstanding notes and loans payable during the fiscal years ended June 30, 2013, 2012 and 2011, including fees associated with the Company's revolving credit facilities, were 1.68%, 0.85% and 0.73%, respectively. The weighted average effective interest rates on commercial paper balances as of June 30, 2013 and 2012 were 0.31% and 0.46%, respectively. The carrying value of notes and loans payable as of June 30, 2013 and 2012 approximated its fair value due to its short maturity.

Long-term debt, carried at face value net of unamortized discounts or premiums, included the following as of June 30:

  2013         2012
Senior unsecured notes and debentures:            
       5.45%, $350 due October 2012 $        -   $        350  
       5.00%, $500 due March 2013   -     500  
       5.00%, $575 due January 2015   575     575  
       3.55%, $300 due November 2015   300     300  
       5.95%, $400 due October 2017   399     399  
       3.80%, $300 due November 2021   298     297  
       3.05%, $600 due September 2022   598     -  
Total   2,170     2,421  
Less: Current maturities of long-term debt   -     (850 )
Long-term debt $ 2,170   $ 1,571  

The weighted average interest rates incurred on average outstanding long-term debt during the fiscal years ended June 30, 2013, 2012 and 2011, were 4.76%, 5.21% and 5.22%, respectively. The weighted average effective interest rates on long-term debt balances as of June 30, 2013 and 2012 were 4.56% and 5.18%, respectively. The estimated fair value of long-term debt, including current maturities, was $2,263 and $2,606 as of June 30, 2013 and 2012, respectively. The fair value of long-term debt was determined using secondary market prices quoted by corporate bond dealers, and was classified as Level 2.

In March 2013, $500 in senior notes with an annual fixed interest rate of 5.00% became due and were repaid. The repayment was funded in part with commercial paper borrowings and in part with a portion of the proceeds from the sale-leaseback transaction of the Company's Oakland, Calif. general office building (Note 11).

In October 2012, $350 in senior notes with an annual fixed interest rate of 5.45% became due and were repaid. The repayment was funded with a portion of the proceeds from the September 2012 issuance of $600 in senior notes with an annual fixed interest rate of 3.05%, payable semi-annually in March and September, and a maturity date of September 15, 2022. The remaining proceeds from notes were used to repay commercial paper.

In November 2011, the Company issued $300 in senior notes with an annual fixed interest rate of 3.80%, payable semi-annually in May and November, and a maturity date of November 15, 2021. Proceeds from the notes were used to repay commercial paper.

The senior notes issued in September 2012 and November 2011 rank equally and ratably in right of payment with all of the Company's existing and future senior unsecured indebtedness and senior to any future subordinated unsecured indebtedness. These notes were issued under the Company's shelf registration statement filed in November 2011, which allows the Company to offer and sell an unlimited amount of its senior unsecured indebtedness from time to time and expires in November 2014.

In fiscal year 2011, $300 in senior notes became due and were repaid. The Company funded the debt repayments with commercial paper borrowings and operating cash flows.

The Company's borrowing capacity under other financing arrangements as of June 30 was as follows:

  2013        2012
Revolving credit facility $       1,100   $       1,100
Foreign credit lines   32     31
Other credit lines   13     13
Total $ 1,145   $ 1,144

During fiscal year 2012, the Company entered into a new $1.1 billion revolving credit agreement, which expires in May 2017 and concurrently terminated its prior $1.1 billion revolving credit agreement, which was due to mature in April 2013. No termination fees or penalties were incurred by the Company in connection with the termination of the prior credit agreement. As of June 30, 2013, there were no borrowings under the agreement, and the Company believes that borrowings under the revolving credit facility are and will continue to be available for general corporate purposes. The agreement includes certain restrictive covenants and limitations, with which the Company was in compliance as of June 30, 2013.

Of the $45 of foreign and other credit lines as of June 30, 2013, $3 was outstanding and the remainder of $42 was available for borrowing.

Long-term debt maturities as of June 30, 2013, are $0, $575, $300, $0, $400 and $900 in fiscal years 2014, 2015, 2016, 2017, 2018 and thereafter, respectively.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

NOTE 10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial assets and liabilities carried at fair value in the consolidated balance sheets are required to be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity's own assumptions.

As of both June 30, 2013 and 2012, the Company's financial assets and liabilities that were measured at fair value on a recurring basis during the year included derivative financial instruments, which were all classified as Level 2.

Financial Risk Management and Derivative Instruments

The Company is exposed to certain commodity, interest rate and foreign currency risks related to its ongoing business operations and uses derivative instruments to mitigate its exposure to these risks.

Commodity Price Risk Management

The Company may use commodity exchange traded futures and over-the-counter swap contracts to fix the price of a portion of its forecasted raw material requirements. Contract maturities, which are generally no longer than 18 months, are matched to the length of the raw material purchase contracts. Commodity purchase contracts are measured at fair value using market quotations obtained from commodity derivative dealers.

As of June 30, 2013, the notional amount of commodity derivatives was $51, of which $32 related to jet fuel and $19 related to soybean oil. As of June 30, 2012, the notional value of commodity derivatives was $39, of which $22 related to jet fuel, $14 related to soybean oil, and $3 related to crude oil.

Interest Rate Risk Management

The Company may enter into over-the-counter interest rate forward contracts to fix a portion of the benchmark interest rate prior to the anticipated issuance of fixed rate debt. These interest rate forward contracts generally have durations of less than 12 months. The interest rate contracts are measured at fair value using information quoted by U.S. government bond dealers. During fiscal years 2013 and 2012, the Company paid $4 and $36 to settle interest rate forward contracts, respectively, which were reflected in operating cash flows.

As of June 30, 2013 and 2012, the notional amount of interest rate forward contracts was $0 and $250, respectively. The contracts outstanding as of June 30, 2012 were related to the anticipated issuance of long-term debt issued in September 2012.

Foreign Currency Risk Management

The Company may also enter into certain over-the-counter foreign currency-related derivative contracts to manage a portion of the Company's foreign exchange risk associated with the purchase of inventory and certain intercompany transactions. These foreign currency contracts generally have durations of no longer than 20 months. The foreign exchange contracts are measured at fair value using information quoted by foreign exchange dealers.

The notional amount of outstanding foreign currency forward contracts used by the Company's subsidiaries in Canada, Australia and New Zealand to hedge forecasted purchases of inventory were $18, $22 and $4, respectively, as of June 30, 2013, and $28, $0 and $0, respectively, as of June 30, 2012. The notional amount of outstanding foreign currency forward contracts used by the Company to economically hedge foreign exchange risk associated with certain intercompany transactions was $0 and $17 as of June 30, 2013 and 2012, respectively.

Counterparty Risk Management

Certain terms of the agreements governing the Company's over-the-counter derivative instruments require the Company or the counterparty to post collateral when the fair value of the derivative instruments exceeds contractually defined counterparty liability position limits. The $3 and $4 of derivative instruments reflected in accrued liabilities as of June 30, 2013 and 2012, respectively, contained such terms. As of June 30, 2013, the Company was not required to post any collateral.

Certain terms of the agreements governing the Company's over-the-counter derivative instruments require the credit ratings, as assigned by Standard & Poor's and Moody's to the Company and its counterparties, to remain at a level equal to or better than the minimum of an investment grade credit rating. If the Company's credit ratings were to fall below investment grade, the counterparties to the derivative instruments could request full collateralization on derivative instruments in net liability positions. As of June 30, 2013, the Company and each of its counterparties had been assigned investment grade ratings with both Standard & Poor's and Moody's.

Fair Value of Derivative Instruments

The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as an accounting hedge, and, if so, on the type of hedging relationship. For those derivative instruments designated and qualifying as hedging instruments, the Company must designate the hedging instrument as a fair value hedge or a cash flow hedge. The Company designates its commodity forward and future contracts for forecasted purchases of raw materials, interest rate forward contracts for forecasted interest payments, and foreign currency forward contracts for forecasted purchases of inventory as cash flow hedges. The Company does not designate its foreign currency forward contracts for intercompany transactions as accounting hedges. During the fiscal years ended June 30, 2013, 2012 and 2011, the Company had no hedging instruments designated as fair value hedges.

The Company's derivative instruments designated as hedging instruments were recorded at fair value in the consolidated balance sheets as of June 30 as follows:

  Balance sheet classification       2013       2012
Assets              
Foreign exchange contracts Other current assets   $       4   $       1
Liabilities              
Commodity purchase contracts Accrued liabilities   $ 3   $ 1
Interest rate contracts Accrued liabilities     -     3
      $ 3   $ 4

For derivative instruments designated and qualifying as cash flow hedges, the effective portion of gains or losses is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The estimated amount of the existing net loss in OCI as of June 30, 2013, expected to be reclassified into earnings within the next twelve months is $2. Gains and losses on derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. During each of the fiscal years ended June 30, 2013, 2012 and 2011, hedge ineffectiveness was not material.

The effects of derivative instruments designated as hedging instruments on OCI and the consolidated statements of earnings were as follows during the fiscal years ended June 30:

    Gains (losses)
recognized in OCI
  Gains (losses) reclassified from OCI and
recognized in earnings
        2013       2012       2011       2013       2012       2011
Commodity purchase contracts   $         (1 )   $         (1 )   $         8     $          -     $          4     $          3  
Interest rate contracts     (1 )     (39 )     3       (3 )     (2 )     -  
Foreign exchange contracts     3       3       (4 )     -       2       (3 )
Total   $ 1     $ (37 )   $ 7     $ (3 )   $ 4     $ -  

The gains (losses) reclassified from OCI and recognized in earnings during the fiscal years ended June 30, 2012 and 2011 for commodity purchase contracts and foreign exchange contracts were included in cost of products sold.

The losses reclassified from OCI and recognized in earnings during the fiscal years ended June 30, 2013 and 2012 for interest rate contracts were included in interest expense.

The gain or loss from derivatives not designated as accounting hedges was $0 for each of the fiscal years ended June 30, 2013, 2012 and 2011. Changes in the value of derivative instruments after de-designation were included in other (income) expense, net, and amounted to $0, $0 and $6 for fiscal years 2013, 2012 and 2011, respectively.

Other

During fiscal year 2011, the Company determined that the book value of the Burt's Bees reporting unit exceeded its fair value and recognized a noncash goodwill impairment charge of $258 (Note 7). The implied fair value was based on significant unobservable inputs, and as a result, the fair value measurement was classified as Level 3. During the fiscal years ended June 30, 2013, 2012 and 2011, the Company did not recognize any other significant fair value measurements classified as Level 3.

The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate their fair values as of June 30, 2013 and 2012, due to their short maturity and nature.

OTHER LIABILITIES
OTHER LIABILITIES

NOTE 11. OTHER LIABILITIES

Other liabilities consisted of the following as of June 30:

        2013       2012
Employee benefit obligations   $         270   $         312
Venture agreement net terminal obligation     284     281
Taxes     74     82
Other     114     64
Total   $ 742   $ 739

Venture Agreement

The Company has an agreement with The Procter & Gamble Company (P&G) for its Glad® plastic bags, wraps and containers business. The Company maintains a net terminal obligation liability, which reflects the estimated value of the contractual requirement to repurchase P&G's interest at the termination of the agreement. As of June 30, 2013 and 2012, P&G had a 20% interest in the venture. The Company pays a royalty to P&G for its interest in the profits, losses and cash flows, as contractually defined, of the Glad® business, which is included in cost of products sold.

The agreement, entered into in 2003, has a 20-year term, with a 10-year renewal option and can be terminated under certain circumstances, including at P&G's option upon a change in control of the Company, or, at either party's option, upon the sale of the Glad® business by the Company. Upon termination of the agreement, the Company will purchase P&G's interest for cash at fair value as established by predetermined valuation procedures. Following termination, the Glad® business will retain the exclusive core intellectual property licenses contributed by P&G on a royalty free basis for the licensed products marketed.

Deferred Gain on Sale-leaseback Transaction

In December 2012, the Company completed a sale-leaseback transaction under which it sold its general office building in Oakland, Calif. to an unrelated party for net proceeds of $108 and entered into a 15-year operating lease agreement with renewal options with the buyer for a portion of the building. In December 2012, the Company recorded a liability of $52 ($3 of which was included in accrued liabilities) for the portion of the total gain on the sale that is equivalent to the present value of the lease payments and will continue to amortize such amount to earnings ratably over the lease term. The Company recorded a gain upon sale in December 2012 of $(6), which was included in other (income) expense, net, in the consolidated statements of earnings. As of June 30, 2013, the total deferred gain was $50, of which $47 was included in Other in the table above and $3 was included in accrued liabilities.

OTHER CONTINGENCIES AND GUARANTEES
OTHER CONTINGENCIES AND GUARANTEES

NOTE 12. OTHER CONTINGENCIES AND GUARANTEES

Contingencies

The Company is involved in certain environmental matters, including response actions at various locations. The Company had a recorded liability of $13 and $14 as of June 30, 2013 and 2012, respectively, for its share of aggregate future remediation costs related to these matters. One matter in Dickinson County, Michigan, for which the Company is jointly and severally liable, accounted for a substantial majority of the recorded liability as of both June 30, 2013 and 2012. The Company has agreed to be liable for 24.3% of the aggregate remediation and associated costs for this matter pursuant to a cost-sharing arrangement with a third party. With the assistance of environmental consultants, the Company maintains an undiscounted liability representing its current best estimate of its share of the capital expenditures, maintenance and other costs that may be incurred over an estimated 30-year remediation period. Currently, the Company cannot accurately predict the timing of future payments that may be made under this obligation. In addition, the Company's estimated loss exposure is sensitive to a variety of uncertain factors, including the efficacy of remediation efforts, changes in remediation requirements and the future availability of alternative clean-up technologies. Although it is reasonably possible that the Company's exposure may exceed the amount recorded, any amount of such additional exposures, or range of exposures, is not estimable at this time. In October 2012, a Brazilian appellate court issued an adverse decision in a lawsuit pending in Brazil against the Company and one of its wholly-owned subsidiaries, The Glad Products Company (Glad). The lawsuit was initially filed in a Brazilian lower court in 2002 by two Brazilian companies and one Uruguayan company (collectively Petroplus) related to joint venture agreements for the distribution of STP auto-care products in Brazil with three companies that became subsidiaries of the Company as a result of the Company's merger with First Brands Corporation in January 1999 (collectively, Clorox Subsidiaries). The pending lawsuit seeks indemnification for damages and losses for alleged breaches of the joint venture agreements and abuse of economic power by the Company and Glad. Petroplus had previously unsuccessfully raised the same claims and sought damages from the Company and the Clorox Subsidiaries in an International Chamber of Commerce (ICC) arbitration proceeding in Miami filed in 2001. The ICC arbitration panel unanimously ruled against Petroplus in a final decision in November 2003 (Final ICC Arbitration Award). The Final ICC Arbitration Award was ratified by the Superior Court of Justice of Brazil in May 2007 (Foreign Judgment), and the United States District Court for the Southern District of Florida subsequently confirmed the Final ICC Arbitration Award and recognized and adopted the Foreign Judgment as a judgment of the United States District Court for the Southern District of Florida (U.S. Judgment). Despite this, in March 2008 a Brazilian lower court ruled against the Company and Glad in the pending lawsuit and awarded Petroplus R$23 ($13) plus interest. The value of that judgment, including interest and foreign exchange fluctuations as of June 30, 2013, was approximately $35.

Among other defenses, because the Final ICC Arbitration Award, the Foreign Judgment and the U.S. Judgment relate to the same claims as those in the pending lawsuit, the Company believes that Petroplus is precluded from re-litigating these claims. Based on the unfavorable appellate court decision, the Company believes that it is reasonably possible that a loss could be incurred in this matter in excess of amounts accrued, and that the estimated range of such loss in this matter is from $0 to $29. The Company continues to believe that its defenses are meritorious, and has appealed the decision to the highest courts of Brazil, which could take years to resolve. Expenses related to this litigation and any potential additional loss would be reflected in discontinued operations, consistent with the Company's classification of expenses related to its discontinued Brazil operations.

In a separate action filed in 2004 by Petroplus, a lower Brazilian court in January 2013 nullified the Final ICC Arbitration Award. The Company believes this judgment is inconsistent with the Foreign Judgment and the U.S. Judgment and that it is without merit. The Company has appealed this decision.

Glad and the Clorox Subsidiaries have also filed separate lawsuits against Petroplus alleging misuse of the STP trademark and related matters, which are currently pending before Brazilian courts, and have taken other legal actions against Petroplus, which are pending.

The Company is subject to various other lawsuits and claims relating to issues such as contract disputes, product liability, patents and trademarks, advertising, and employee and other matters. Based on management's analysis of these claims and litigation, it is the opinion of management that the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, individually or in the aggregate, on the Company's consolidated financial statements taken as a whole.

Guarantees

In conjunction with divestitures and other transactions, the Company may provide typical indemnifications (e.g., indemnifications for representations and warranties and retention of previously existing environmental, tax and employee liabilities) that have terms that vary in duration and in the potential amount of the total obligation and, in many circumstances, are not explicitly defined. The Company has not made, nor does it believe that it is probable that it will make, any payments relating to its indemnifications, and believes that any reasonably possible payments would not have a material adverse effect, individually or in the aggregate, on the Company's consolidated financial statements taken as a whole.

As of June 30, 2013, the Company was a party to a letter of credit of $14, related to one of its insurance carriers, of which $0 had been drawn upon.

The Company had not recorded any liabilities on the aforementioned guarantees as of June 30, 2013.

STOCKHOLDERS' EQUITY (DEFICIT)
STOCKHOLDERS' EQUITY (DEFICIT)

NOTE 13. STOCKHOLDERS' EQUITY (DEFICIT)

On May 13, 2013, the Company's board of directors terminated the share repurchase programs previously authorized on May 13, 2008 and May 18, 2011, and authorized a share repurchase program for an aggregate purchase amount of up to $750. This reduces the total dollar value of shares that the Company can repurchase under its open market share repurchase program from $821 to $750. This open market share repurchase program is in addition to the Company's evergreen repurchase program (Evergreen Program), the purpose of which is to offset the impact of share dilution related to share-based awards. The Evergreen Program has no authorization limit as to amount or timing of repurchases.

Share repurchases under authorized programs were as follows during the fiscal years ended June 30:

  2013   2012   2011
  Amount       Shares
(000)
      Amount       Shares
(000)
      Amount       Shares
(000)
Open-market purchase programs $      -   -   $     158        2,429   $     521        7,654
Evergreen Program   128        1,500     67   990     134   2,122
Total $ 128   1,500   $ 225   3,419   $ 655   9,776

During fiscal year 2013, 2012 and 2011, the Company declared dividends per share of $2.63, $2.44 and $2.25, respectively, and paid dividends per share of $2.56, $2.40 and $2.20, respectively.

Accumulated other comprehensive net losses as of June 30, 2013, 2012 and 2011 included the following (losses) gains, net of tax:

  2013   2012   2011
Foreign currency translation adjustments $ (209 )       $ (198 )       $ (157 )
Net derivative unrealized (losses) gains   (30 )     (33 )     4  
Pension and postretirement benefit adjustments   (128 )            (165 )     (97 )
Total $        (367 )   $ (396 )   $        (250 )
NET EARNINGS PER SHARE
NET EARNINGS PER SHARE

NOTE 14. NET EARNINGS PER SHARE

The following is the reconciliation of net earnings to net earnings applicable to common stock:

  2013   2012   2011
Earnings from continuing operations $      574         $      543         $      287
(Losses) earnings from discontinued operations, net of tax   (2 )     (2 )     270
Net earnings   572       541       557
Less: Earnings allocated to participating securities   -       -       2
Net earnings applicable to common stock $ 572     $ 541     $ 555

The following is the reconciliation of the weighted average number of shares outstanding (in thousands) used to calculate basic net earnings per share (EPS) to those used to calculate diluted net EPS:

  2013       2012       2011
Basic 131,075   130,852   136,699
Dilutive effect of stock options and other 1,894         1,458   1,402
Diluted       132,969   132,310         138,101

During fiscal year 2013, the Company included all stock options to purchase shares of the Company's common stock in the calculation of diluted net EPS because the average market price of all outstanding grants was greater than the exercise price.

During fiscal years 2012 and 2011, the Company did not include stock options to purchase approximately 1.8 million and 2.0 million shares, respectively, of the Company's common stock in the calculations of diluted net EPS because their exercise price was greater than the average market price, making them anti-dilutive.

SHARE-BASED COMPENSATION PLANS
SHARE-BASED COMPENSATION PLANS

NOTE 15. SHARE-BASED COMPENSATION PLANS

In November 2012, the Company's stockholders voted to approve the amended and restated 2005 Stock Incentive Plan (Plan). The Plan permits the Company to grant various nonqualified, share-based compensation awards, including stock options, restricted stock, performance units, deferred stock units, restricted stock units, stock appreciation rights and other stock-based awards. The primary amendment reflected in the Plan is an increase of approximately 3 million in the number of common shares that may be issued under the Plan. As of June 30, 2013, the Company is authorized to grant up to approximately 7 million common shares under the Plan, and, as of June 30, 2013, approximately 6 million common shares were available for grant under the Plan.

Compensation cost and the related income tax benefit recognized for share-based compensation plans were classified as indicated below in the fiscal years ended June 30.

  2013   2012   2011
Cost of products sold $ 4       $ 3       $ 4
Selling and administrative expenses         28           22           26
Research and development costs   3     2     2
Total compensation cost $ 35   $ 27   $ 32
Related income tax benefit $ 13   $ 10   $ 12

Cash received during fiscal years 2013, 2012 and 2011 from stock options exercised under all share-based payment arrangements was $121, $79 and $84, respectively. The Company issues shares for share-based compensation plans from treasury stock. The Company may repurchase shares under its Evergreen Program to offset the estimated impact of share dilution related to share-based awards (Note 13).

Details regarding the valuation and accounting for stock options, restricted stock awards, performance units and deferred stock units for non-employee directors follow.

Stock Options

The fair value of each stock option award granted during fiscal years 2013, 2012 and 2011 was estimated on the date of grant using the Black-Scholes valuation model and assumptions noted in the following table:

  2013   2012   2011
Expected life 5.7 years       4.9 - 5.7 years       4.9 - 5.9 years
Weighted-average expected life 5.7 years   5.7 years   5.4 years
Expected volatility 18.7% to 19.2%   21.9% to 25.9%   20.6% to 21.0%
Weighted-average volatility 19.1%   23.5%   20.6%
Risk-free interest rate 0.6% to 0.8%   0.9% to 1.1%   1.5%
Weighted-average risk-free interest rate 0.70%   0.9%   1.5%
Dividend yield 3.2%-3.6%   3.5%-3.8%   3.4%-3.6%
Weighted-average dividend yield 3.6%   3.5%   3.4%

The expected life of the stock options is based on observed historical exercise patterns. Groups of employees having similar historical exercise behavior are considered separately for valuation purposes. The Company estimates stock option forfeitures based on historical data for each separate employee grouping, and adjusts the rate to expected forfeitures periodically. The adjustment of the forfeiture rate will result in a cumulative catch-up adjustment in the period the forfeiture estimate is changed. The expected volatility is based on implied volatility from publicly traded options on the Company's stock at the date of grant, historical implied volatility of the Company's publicly traded options and other factors. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant. Details of the Company's stock option plan as of June 30 are summarized below:

  Number of
Shares
      Weighted-
Average
Exercise
Price
per Share
      Average
Remaining
Contractual
Life
      Aggregate
Value
Intrinsic
  (In thousands)                
Outstanding as of June 30, 2012          10,104     $ 62   6 years   $ 108
Granted 2,644       72          
Exercised (2,119 )     57          
Cancelled (372 )     68          
Outstanding as of June 30, 2013 10,257     $           65   7   $        184
 
Options vested as of June 30, 2013 5,401     $ 62   5   $ 116

The weighted-average fair value per share of each option granted during fiscal years 2013, 2012, and 2011, estimated at the grant date using the Black-Scholes option pricing model, was $6.96, $9.24 and $8.27, respectively. The total intrinsic value of options exercised in fiscal years 2013, 2012 and 2011 was $45, $29 and $38, respectively.

Stock option awards outstanding as of June 30, 2013, have been granted at prices that are either equal to or above the market value of the stock on the date of grant. Stock option grants generally vest over four years and expire no later than ten years after the grant date. The Company recognizes compensation expense ratably over the vesting period. As of June 30, 2013, there was $18 of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of two years, subject to forfeiture changes.

Restricted Stock Awards

The fair value of restricted stock awards is estimated on the date of grant based on the market price of the stock and is amortized to compensation expense on a straight-line basis over the related vesting periods, which are generally three to four years. The total number of restricted stock awards expected to vest is adjusted by estimated forfeiture rates. Restricted stock grants receive dividend distributions earned during the vesting period upon vesting.

As of June 30, 2013, there was less than $1 of total unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a remaining weighted-average vesting period of one year. The total fair value of the shares that vested in fiscal years 2013, 2012 and 2011 was $1, $3 and $4, respectively. The weighted-average grant-date fair value of awards granted was $72.28, $68.52 and $67.58 per share for fiscal years 2013, 2012 and 2011, respectively.

A summary of the status of the Company's restricted stock awards as of June 30 is presented below:

  Number of
Shares
  Weighted-Average
Grant Date
Fair Value
per Share
  (In thousands)          
Restricted stock awards as of June 30, 2012 22     $ 65
Granted 1       72
Vested                (11 )     63
Forfeited (1 )     68
Restricted stock awards as of June 30, 2013 11     $ 68

Performance Units

The Company's performance unit grants provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves certain performance targets. The performance period is three years and the payout determination is made at the end of the three-year performance period. Performance unit grants receive dividends earned during the vesting period upon vesting.

The fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. The total amount of compensation expense recognized reflects estimated forfeiture rates, and the initial assumption that performance goals will be achieved. Compensation expense is adjusted, as necessary, on a quarterly basis based on management's assessment of the probability that performance goals will be achieved. If such goals are not met or it is determined that achievement of performance goals is not probable, any previously recognized compensation expense is trued-up in the current period to reflect the expected payout level. If it is determined that the performance goals will be exceeded, additional compensation expense is recognized, subject to a cap of 150% of target.

The number of shares issued will be dependent upon vesting and the achievement of specified performance targets. As of June 30, 2013, there was $26 in unrecognized compensation cost related to non-vested performance unit grants that is expected to be recognized over a remaining weighted-average performance period of two years. The weighted-average grant-date fair value of awards granted was $72.11, $68.17 and $66.48 per share for fiscal years 2013, 2012 and 2011, respectively.

A summary of the status of the Company's performance unit awards as of June 30 is presented below:

  Number of
Shares
      Weighted-Average
Grant Date
Fair Value
per Share
  (In thousands)        
Performance unit awards as of June 30, 2012               1,370     $ 62
Granted 416       72
Distributed (238 )     57
Forfeited (213 )     62
Performance unit awards as of June 30, 2013 1,335     $ 66
Perfomance units vested and deferred as of June 30, 2013 219     $ 53

The non-vested performance units outstanding as of June 30, 2013 and 2012 were 1,116,000 and 1,160,000, respectively, and the weighted average grant date fair value was $69.01 and $64.04 per share, respectively. Total shares vested during fiscal year 2013 were 246,000, which had a weighted average grant date fair value per share of $57.25. The total fair value of shares vested was $14, $34 and $27 during fiscal years 2013, 2012 and 2011, respectively. Upon vesting, the recipients of the grants receive the distribution as shares or, if previously elected by eligible recipients, as deferred stock. During fiscal years 2013 and 2012, $13 and $33, respectively, of the vested awards were paid by the issuance of shares. During both fiscal years 2013 and 2012, $1 of the vested awards was deferred. Deferred shares continue to earn dividends, which are also deferred.

Deferred Stock Units for Nonemployee Directors

Nonemployee directors receive annual grants of deferred stock units under the Company's director compensation program and can elect to receive all or a portion of their annual retainers and fees in the form of deferred stock units. The deferred stock units receive dividend distributions, which are reinvested as deferred stock units, and are recognized at their fair value on the date of grant. Each deferred stock unit represents the right to receive one share of the Company's common stock following the termination of a director's service.

During fiscal year 2013, the Company granted 18,000 deferred stock units, reinvested dividends of 7,000 units and distributed 15,000 shares, which had a weighted-average fair value on grant date of $74.52, $78.16 and $62.14 per share, respectively. As of June 30, 2013, 233,000 units were outstanding, which had a weighted-average fair value on the grant date of $60.43 per share.

LEASES AND OTHER COMMITMENTS
LEASES AND OTHER COMMITMENTS

NOTE 16. LEASES AND OTHER COMMITMENTS

The Company leases transportation equipment, certain information technology equipment and various manufacturing, warehousing, and office facilities. The Company's leases are classified as operating leases, and the Company's existing contracts will expire by 2027. The Company expects that, in the normal course of business, existing contracts will be renewed or replaced by other leases. Rental expense for all operating leases was $71, $68 and $62 in fiscal years 2013, 2012 and 2011, respectively. The future minimum rental payments required under the Company's existing non-cancelable lease agreements as of June 30, 2013, are expected to be $45, $38, $36, $33, $29 and $117 in fiscal years 2014, 2015, 2016, 2017, 2018 and thereafter, respectively.

In the fourth quarter of fiscal year 2012, the Company began the process of relocating certain employees from its general office building in Oakland, Calif. to a new facility located in Pleasanton, Calif., which the Company has leased since 2011. Employees from its Technical and Data Center in Pleasanton, Calif. were also relocated to this new facility in fiscal year 2013. The facility consists of approximately 343,000 square feet of leased space and houses the Company's research and development group, as well as other administrative and operational support personnel. The future minimum rental payments required under the Company's existing non-cancelable lease agreement for the Pleasanton facility as of June 30, 2013, are expected to be $6, $6, $6, $7, $7 and $36 in fiscal years 2014, 2015, 2016, 2017, 2018 and thereafter, respectively. These amounts are included in the Company's future minimum rental payments disclosed above.

The Company is also a party to certain purchase obligations, which are defined as purchase agreements that are enforceable and legally binding and that contain specified or determinable significant terms, including quantity, price and the approximate timing of the transaction. Examples of the Company's purchase obligations include contracts to purchase raw materials, commitments to contract manufacturers, commitments for information technology and related services, advertising contracts, utility agreements, capital expenditure agreements, software acquisition and license commitments, and service contracts. The raw material contracts are entered into during the regular course of business based on expectations of future purchases. Approximately 19% of the Company's purchase obligations relate to service contracts for information technology that have been outsourced. As of June 30, 2013, the Company's purchase obligations, including the services related to information technology, totaled $357, $141, $62, $46, $41 and $24 for fiscal years 2014 through 2018, and thereafter, respectively.

OTHER (INCOME) EXPENSE, NET
OTHER EXPENSE (INCOME), NET

NOTE 17. OTHER (INCOME) EXPENSE, NET

The major components of other (income) expense, net, for the fiscal years ended June 30 were:

  2013       2012       2011
Income from equity investees $        (12 )   $        (11 )   $ (8 )
Gains on fixed asset sales, net   (4 )     (2 )     (1 )
Low-income housing partnership gains   (4 )     (2 )            (13 )
Income from transition and related services   (3 )     (6 )     (9 )
Interest income   (3 )     (3 )     (3 )
Foreign exchange transaction losses (gains), net (Note 1)   11       1       (2 )
Amortization of trademarks and other intangible assets (Note 7)   9       9       9  
Other, net   6       1       4  
Total $ -     $ (13 )   $ (23 )

Investment in Low-Income Housing Partnerships

The Company owns, directly or indirectly, limited partnership interests of up to 99% in 20 low-income housing partnerships, which are accounted for on the equity basis. The Company's investment balance as of June 30, 2013 and 2012 was $6 and $5, respectively. The purpose of the partnerships is to develop and operate low-income housing rental properties. The general partners, who typically hold 1% of the partnership interests, are third parties unrelated to the Company and its affiliates, and are responsible for controlling and managing the business and financial operations of the partnerships. The partnerships provided the Company with tax benefits from low-income housing tax credits through fiscal year 2012. As a limited partner, the Company is not responsible for any of the liabilities and obligations of the partnerships nor do the partnerships or their creditors have any recourse to the Company other than for the capital requirements. Recovery of the Company's investments in the partnerships is accomplished through the tax benefits of partnership losses and proceeds from the disposition of the properties. The risk that previously claimed low-income housing tax credits might be recaptured or otherwise retroactively invalidated is considered very low. The Company does not consolidate the investment in low-income housing partnerships.

INCOME TAXES
INCOME TAXES

NOTE 18. INCOME TAXES

The provision for income taxes on continuing operations, by tax jurisdiction, consisted of the following as of June 30:

  2013       2012       2011
Current                    
       Federal $ 247     $ 200     $ 139
       State   23       12       19
       Foreign   20       48       45
Total current   290       260       203
Deferred                    
       Federal          (10 )     -       71
       State   (2 )     1       2
       Foreign   1              (13 )     -
Total deferred   (11 )     (12 )     73
Total $ 279     $ 248     $        276

The components of earnings from continuing operations before income taxes, by tax jurisdiction, consisted of the following as of June 30:

  2013       2012       2011
United States $         731   $         655   $         446
Foreign   122     136     117
Total $ 853   $ 791   $ 563

A reconciliation of the statutory federal income tax rate to the Company's effective tax rate on continuing operations follows as of June 30:

  2013       2012       2011
Statutory federal tax rate      35.0 %        35.0 %        35.0 %
State taxes (net of federal tax benefits) 1.7     1.1     2.3  
Tax differential on foreign earnings (1.3 )   (2.5 )   (1.0 )
Domestic manufacturing deduction (2.3 )   (2.2 )   (3.5 )
Noncash goodwill impairment -     -     16.0  
Other differences (0.4 )   -     0.2  
Effective tax rate 32.7 %   31.4 %   49.0 %

The lower effective tax rate for fiscal year 2012 compared to fiscal year 2013 was primarily due to lower taxes on foreign earnings and higher uncertain tax position releases. The effective tax rates for fiscal years 2013 and 2012 also reflected benefits from tax settlements. The substantially different effective tax rate in fiscal year 2011 primarily resulted from the 16.0% impact of the non-deductible noncash goodwill impairment charge of $258 related to the Burt's Bees reporting unit as there was no substantial tax benefit associated with this noncash charge.

Applicable U.S. income taxes and foreign withholding taxes have not been provided on approximately $158 of undistributed earnings of certain foreign subsidiaries as of June 30, 2013, because these earnings are considered indefinitely reinvested. The net federal income tax liability that would arise if these earnings were not indefinitely reinvested is approximately $42. Applicable U.S. income and foreign withholding taxes are provided on these earnings in the periods in which they are no longer considered indefinitely reinvested.

Tax benefits resulting from share-based payment arrangements that are in excess of the tax benefits recorded in net earnings over the vesting period of those arrangements (excess tax benefits) are recorded as increases to additional paid-in capital. Excess tax benefits of approximately $11, $10, and $9, were realized and recorded to additional paid-in capital for the fiscal years 2013, 2012 and 2011, respectively.

The components of deferred tax assets (liabilities) as of June 30 are shown below:

  2013       2012
Deferred tax assets              
       Compensation and benefit programs $ 176     $ 203  
       Basis difference related to Venture Agreement   30       30  
       Accruals and reserves   55       49  
       Inventory costs   20       22  
       Net operating loss and tax credit carryforwards   33       21  
       Other   51       23  
              Subtotal   365       348  
       Valuation allowance   (36 )     (20 )
       Total deferred tax assets   329       328  
 
Deferred tax liabilities              
       Fixed and intangible assets   (273 )     (268 )
       Low-income housing partnerships   (23 )     (29 )
       Unremitted foreign earnings   (18 )     (4 )
       Other   (24 )     (28 )
       Total deferred tax liabilities          (338 )            (329 )
       Net deferred tax liabilities $ (9 )   $ (1 )

The Company periodically reviews its deferred tax assets for recoverability. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Valuation allowances have been provided to reduce deferred tax assets to amounts considered recoverable. Details of the valuation allowance were as follows as of June 30:

  2013       2012
Valuation allowance at beginning of year $        (20 )   $        (14 )
Net decrease in realizability of foreign deferred tax assets   (9 )     (3 )
Net increase in foreign net operating loss carryforward and other   (7 )     (3 )
Valuation allowance at end of year $ (36 )   $ (20 )

As of June 30, 2013, the Company had no foreign tax credit carryforwards for U.S. income tax purposes. Tax credit carryforwards in foreign jurisdictions of $13 have expiration dates between fiscal years 2016 and 2022. Tax benefits from foreign net operating loss carryforwards of $15 have expiration dates between fiscal years 2014 and 2023. Tax benefits from foreign net operating loss carryforwards of $5 may be carried forward indefinitely.

The Company files income tax returns in the U.S. federal and various state, local and foreign jurisdictions. In the first quarter of fiscal year 2011, certain issues relating to 2003, 2004 and 2006 were effectively settled by the Company and the IRS Appeals Division. Tax and interest payments of $18 were made with respect to these issues in the second quarter of fiscal year 2011. Interest payments of $4 were made with respect to these issues in the third quarter of fiscal year 2011. No tax benefits had previously been recognized for the issues related to the 2003, 2004 and 2006 tax settlements. The federal statute of limitations has expired for all tax years through June 30, 2009. Various income tax returns in state and foreign jurisdictions are currently in the process of examination.

Certain issues relating to fiscal years 1996 through 2000 were effectively settled by the Company and the Canadian Revenue Agency in the first quarter of fiscal year 2012, resulting in a net benefit of tax and interest of $7. No tax benefits had previously been recognized for these issues in the Company's consolidated financial statements.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. As of June 30, 2013 and 2012, the total balance of accrued interest and penalties related to uncertain tax positions was $8 and $7, respectively. Interest and penalties included in income tax expense resulted in a net expense of $1, a net benefit of $3, and a net benefit of $3 in fiscal years 2013, 2012 and 2011, respectively. The following is a reconciliation of the beginning and ending amounts of the Company's gross unrecognized tax benefits:

        2013       2012       2011
Unrecognized tax benefits - July 1   $     80     $     97     $     84  
Gross increases - tax positions in prior periods     3       4       3  
Gross decreases - tax positions in prior periods     (19 )     (17 )     (9 )
Gross increases - current period tax positions     7       5       45  
Gross decreases - current period tax positions      -       (1 )     -  
Lapse of applicable statute of limitations     (2 )     (2 )     -  
Settlements     -       (6 )     (26 )
Unrecognized tax benefits - June 30   $ 69     $ 80     $ 97  

Included in the balance of unrecognized tax benefits as of June 30, 2013, 2012 and 2011, are potential benefits of $56, $56 and $68, respectively, which if recognized, would affect the effective tax rate on earnings.

In the twelve months succeeding June 30, 2013, audit resolutions could potentially reduce total unrecognized tax benefits by up to $2, primarily as a result of cash settlement payments. Audit outcomes and the timing of audit settlements are subject to significant uncertainty.

EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS

NOTE 19. EMPLOYEE BENEFIT PLANS

Retirement Income Plans

Effective July 1, 2011, and as part of a set of long-term, cost-neutral enhancements to the Company's overall employee benefit plans, the domestic qualified plan was frozen for service accrual and eligibility purposes for most participants, however, interest credits have continued to accrue on participant balances. As of June 30, 2013 and 2012, the benefits of the domestic qualified plan are based on either employee years of service and compensation or a stated dollar amount per years of service. The Company is the sole contributor to the plan in amounts deemed necessary to provide benefits and to the extent deductible for federal income tax purposes. Assets of the plan consist primarily of investments in cash equivalents, mutual funds and common collective trusts.

The Company did not make any contributions to its domestic qualified retirement income plan during fiscal years 2013 and 2012, and contributed $15 in fiscal year 2011. Contributions made to the domestic non-qualified retirement income plans were $11, $11 and $8 in fiscal years 2013, 2012 and 2011, respectively. The Company has also contributed $1 to its foreign retirement income plans in each of the fiscal years ended June 30, 2013, 2012 and 2011. The Company's funding policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit tax laws plus additional amounts as the Company may determine to be appropriate.

Retirement Health Care

The Company provides certain health care benefits for employees who meet age, participation and length of service requirements at retirement. The plans pay stated percentages of covered expenses after annual deductibles have been met. Benefits paid take into consideration payments by Medicare for the domestic plan. The plans are funded as claims are paid, and the Company has the right to modify or terminate certain plans.

The assumed domestic health care cost trend rate used in measuring the accumulated postretirement benefit obligation (APBO) was 7.6% for medical and 8.2% for prescription drugs for fiscal year 2013. These rates have been assumed to gradually decrease each year until an assumed ultimate trend of 4.5% is reached in 2028. The health care cost trend rate assumption has an effect on the amounts reported. The effect of a hypothetical 100 basis point increase or decrease in the assumed domestic health care cost trend rate on the total service and interest cost components, and the postretirement benefit obligation would have been $0, $1, $0 for the fiscal years ended June 30, 2013, 2012 and 2011, respectively.

Financial Information Related to Retirement Income and Retirement Health Care

Summarized information for the Company's retirement income and retirement health care plans at and for the fiscal years ended June 30 is as follows:

    Retirement
Income
  Retirement
Health Care
        2013       2012       2013       2012
Change in benefit obligations:                                
Projected benefit obligation at beginning of year   $     646     $     566     $     63     $     58  
       Service cost     4       -       1       1  
       Interest cost     24       29       2       3  
       Employee contributions to deferred compensation plans     -       5       -       -  
       Actuarial (gain) loss     (27 )     82       (9 )     3  
       Plan amendments     -       -       (5 )     -  
       Translation adjustment     -       -       -       (1 )
       Benefits paid     (35 )     (36 )     (1 )     (1 )
       Projected benefit obligation at end of year     612       646       51       63  
                                  
Change in plan assets:                                
       Fair value of assets at beginning of year     394       410       -       -  
       Actual return on plan assets     37       9       -       -  
       Employer contributions to nonqualified plans     12       12       1       1  
       Translation adjustment     -       (1 )     -       -  
       Benefits paid     (35 )     (36 )     (1 )     (1 )
Fair value of plan assets at end of year     408       394       -       -  
Accrued benefit cost, net funded status   $ (204 )   $ (252 )   $ (51 )   $ (63 )
  
Amount recognized in the balance sheets consists of:                                
       Current accrued benefit liability   $ (17 )   $ (14 )   $ (4 )   $ (6 )
       Non-current accrued benefit liability     (187 )     (238 )     (47 )     (57 )
       Accrued benefit cost, net   $ (204 )   $ (252 )   $ (51 )   $ (63 )

Retirement income plans with an accumulated benefit obligation (ABO) in excess of plan assets as of June 30 were as follows:

    Pension Plans   Other
Retirement Plans
        2013       2012       2013       2012
Projected benefit obligation   $     529   $     561   $     80   $     84
Accumulated benefit obligation     528     561     80     84
Fair value of plan assets     405     393     -     -

The ABO for all pension plans was $530, $561 and $490 as of June 30, 2013, 2012 and 2011, respectively. The ABO for all retirement income plans decreased by $35 in fiscal year 2013, primarily due to an increase in the discount rate.

The net costs of the retirement income and health care plans for the fiscal years ended June 30 included the following components:

    Retirement Income   Retirement Health Care
        2013       2012       2011       2013       2012       2011
Service cost   $     4     $     -     $     12     $     1     $     1     $     2  
Interest cost     24       29       29       2       3       4  
Expected return on plan assets     (29 )     (31 )     (33 )     -       -       -  
Curtailment gain     -       -       (1 )     -       -       -  
Amortization of unrecognized items     12       8       17       (2 )     (3 )     (2 )
Total   $ 11     $ 6     $ 24     $ 1     $ 1     $ 4  

Items not yet recognized as a component of postretirement expense as of June 30, 2013, consisted of:
 
        Retirement
Income
      Retirement
Health Care
Net actuarial loss (gain)   $       239     $          (29 )
Prior service cost (benefit)     1       (8 )
Net deferred income tax (assets) liabilities     (89 )     14  
Accumulated other comprehensive loss (income)   $ 151     $ (23 )
 
Net actuarial loss (gain) recorded in accumulated other comprehensive net losses for the fiscal year ended June 30, 2013, included the following:
 
        Retirement
Income
      Retirement
Health Care
Net actuarial loss (gain) at beginning of year   $       286     $          (22 )
Amortization during the year     (12 )     2  
Gain during the year     (35 )     (9 )
Net actuarial loss (gain) at end of year   $ 239     $ (29 )
 
The Company uses the straight-line amortization method for unrecognized prior service costs and benefits. In fiscal year 2014, the Company expects to recognize, on a pre-tax basis, approximately $0 of the prior service cost and $9 of the net actuarial loss as a component of net periodic benefit cost for the retirement income plans; and approximately $1 of the prior service credit and $2 of the net actuarial gain as a component of net periodic benefit cost for the retirement health care plans.
 
Weighted-average assumptions used to estimate the actuarial present value of benefit obligations as of June 30 were as follows:
 
    Retirement Income   Retirement Health Care
        2013       2012       2013       2012
Discount rate   4.39 %   3.87 %   4.33 %   3.86 %
Rate of compensation increase   3.44 %   3.71 %   n/a     n/a  
 
Weighted-average assumptions used to estimate the net periodic pension and other postretirement benefit costs as of June 30 were as follows:
 
    Retirement Income
        2013       2012       2011
Discount rate   3.87 %   5.31 %   5.34 %
Rate of compensation increase   3.71 %   3.93 %   4.20 %
Expected return on plan assets   7.50 %   8.12 %   8.11 %
 
    Retirement Health Care
        2013       2012       2011
Discount rate   3.86 %   5.29 %   5.36 %
 
The expected long-term rate of return assumption is based on an analysis of historical experience of the portfolio and the summation of prospective returns for each asset class in proportion to the fund's current asset allocation.
 
Expected benefit payments for the Company's pension and other postretirement plans as of June 30, 2013 were as follows:

        Retirement
Income
      Retirement
Health Care
2014   $ 37   $ 4
2015     37     4
2016     37     3
2017     38     3
2018     39     3
Fiscal years 2019 - 2023     194     14
 

Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.

The target allocations and weighted average asset allocations by asset category of the investment portfolio for the Company's domestic retirement income plans as of June 30 were:

    % Target Allocation   % of Plan Assets
        2013       2012       2013       2012
U.S. equity   20 %   29 %   20 %   29 %
International equity   21     30     21     29  
Fixed income   54     36     54     37  
Other   5     5     5     5  
Total   100 %   100 %   100 %   100 %

The target asset allocation is determined based on the optimal balance between risk and return and, at times, may be adjusted to achieve the plan's overall investment objective to generate sufficient resources to pay current and projected plan obligations over the life of the domestic qualified retirement income plan.

The following table sets forth by level within the fair value hierarchy, the retirement income plans' assets carried at fair value as of June 30:

    2013
        Level 1       Level 2       Total
Cash equivalents   $       3   $      -   $      3
Common collective trusts                  
       Bond funds     -     217     217
       International equity funds     -     93     93
       Domestic equity funds     -     77     77
       Real Estate fund     -     18     18
Total common collective trusts     -     405     405
Total assets at fair value   $ 3   $ 405   $ 408
 
    2012
        Level 1       Level 2       Total
Cash equivalents   $       2   $      -   $      2
Common collective trusts                  
       Bond funds     -     149     149
       International equity funds     -     116     116
       Domestic equity funds     -     106     106
       Real Estate fund     -     21     21
Total common collective trusts     -     392     392
Total assets at fair value   $ 2   $ 392   $ 394
 
The carrying value of cash equivalents approximates its fair value as of June 30, 2013 and 2012.

Common collective trust funds are not publicly traded and, therefore, are classified as Level 2. They are valued at a net asset value unit price determined by the portfolio's sponsor based on the fair value of underlying assets held by the common collective trust fund on June 30, 2013 and 2012.

The common collective trusts are invested in various trusts that attempt to achieve their investment objectives by investing primarily in other collective investment funds which have characteristics consistent with each trust's overall investment objective and strategy.

Defined Contribution Plans

The Company has defined contribution plans for most of its domestic employees. The plans include The Clorox Company 401(k) Plan. Effective July 1, 2011, The Clorox Company 401(k) Plan was amended to enhance the matching of employee contributions and to provide for a fixed and non-discretionary annual contribution in place of the profit sharing component. Prior to July 1, 2011, Company contributions to the profit sharing component above 3% of employee eligible earnings were discretionary and were based on certain Company performance targets for eligible employees. The aggregate cost of the defined contribution plans was $40, $46, and $21 in fiscal years 2013, 2012 and 2011, respectively. Included in the fiscal year 2011 costs was $17 of profit sharing contributions. The Company also has defined contribution plans for certain international employees. The aggregate cost of these foreign plans was $1 for each of the fiscal years ended June 30, 2013, 2012 and 2011.

SEGMENT REPORTING
SEGMENT REPORTING

NOTE 20. SEGMENT REPORTING

The Company operates through strategic business units that are aggregated into four reportable segments: Cleaning, Household, Lifestyle and International.

  • Cleaning consists of laundry, home care and professional products marketed and sold in the United States. Products within this segment include laundry additives, including bleach products under the Clorox® brand and Clorox 2® stain fighter and color booster; home care products, primarily under the Clorox®, Formula 409®, Liquid-Plumr®, Pine-Sol®, S.O.S® and Tilex® brands; naturally derived products under the Green Works® brand; and professional cleaning and disinfecting products under the Clorox®, Dispatch®, Aplicare®, HealthLink® and Clorox HealthcareTM brands.
     
  • Household consists of charcoal, cat litter and plastic bags, wraps and container products marketed and sold in the United States. Products within this segment include plastic bags, wraps and containers under the Glad® brand; cat litter products under the Fresh Step®, Scoop Away® and Ever Clean® brands; and charcoal products under the Kingsford® and Match Light® brands.
     
  • Lifestyle consists of food products, water-filtration systems and filters, and natural personal care products marketed and sold in the United States. Products within this segment include dressings and sauces, primarily under the Hidden Valley®, KC Masterpiece® and Soy Vay® brands; water-filtration systems and filters under the Brita® brand; and natural personal care products under the Burt's Bees® and güd® brands.
     
  • International consists of products sold outside the United States. Products within this segment include laundry, home care, water-filtration, charcoal and cat litter products, dressings and sauces, plastic bags, wraps and containers and natural personal care products, primarily under the Clorox®, Javex®, Glad®, PinoLuz®, Ayudin®, Limpido®, Clorinda®, Poett®, Mistolin®, Lestoil®, Bon Bril®, Nevex®, Brita®, Green Works®, Pine-Sol®, Agua Jane®, Chux®, Kingsford®, Fresh Step®, Scoop Away®, Ever Clean®, KC Masterpiece®, Hidden Valley® and Burt's Bees® brands.

Certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses are reflected in Corporate. Corporate assets include cash and cash equivalents, property and equipment, other investments and deferred taxes.

        Fiscal
Year
      Cleaning       Household       Lifestyle       International       Corporate      

Total
Company

Net sales   2013   $      1,783   $      1,693   $      929   $          1,218   $      -     $      5,623
    2012     1,692     1,676     901     1,199     -       5,468
    2011     1,619     1,611     849     1,152     -       5,231
 
Earnings (losses) from continuing                                          
       operations before income taxes   2013     420     336     259     96     (258 )     853
    2012     381     298     265     119     (272 )     791
    2011     356     278     91     55     (217 )     563
 
Income from equity investees   2013     -     -     -     12     -       12
    2012     -     -     -     11     -       11
    2011     -     -     -     8     -       8
 
Total assets   2013     905     799     878     1,202     527       4,311
    2012     942     818     887     1,219     489       4,355
 
Capital expenditures   2013     57     72     19     28     18       194
    2012     63     79     18     32     -       192
    2011     72     95     24     37     -       228
 
Depreciation and amortization   2013     52     69     19     28     14       182
    2012     45     73     18     25     17       178
    2011     44     73     18     22     16       173
 
Significant noncash charges included                                          
       in earnings before income taxes:                                          
              Share-based compensation   2013     10     9     5     1     10       35
    2012     13     12     6     1     (5 )     27
    2011     14     13     6     2     (3 )     32
 
              Noncash goodwill impairment   2013     -     -     -     -     -       -
    2012     -     -     -     -     -       -
    2011     -     -     164     94     -       258

Fiscal year 2011 earnings from continuing operations before income taxes for the Lifestyle and International reportable segments included a noncash goodwill impairment charge of $164 and $94, respectively, related to the Burt's Bees business. Fiscal year 2011 diluted net earnings per share from continuing operations included the impact of $1.86 from this noncash goodwill impairment charge.

All intersegment sales are eliminated and are not included in the Company's reportable segments' net sales.

Net sales to the Company's largest customer, Walmart Stores, Inc. and its affiliates, were 26%, 26% and 27% for the fiscal years ended 2013, 2012 and 2011, respectively, of consolidated net sales and occurred in each of the Company's reportable segments. No other customers accounted for more than 10% of consolidated net sales in any of these fiscal years. During fiscal years 2013, 2012 and 2011, the Company's five largest customers accounted for 45%, 44% and 44% of its net sales, respectively.

The Company has three product lines that have accounted for 10% or more of consolidated net sales during each of the past three fiscal years. Sales of liquid bleach represented approximately 14% of the Company's consolidated net sales in each of the fiscal years 2013, 2012 and 2011, approximately 26%, 26% and 27% of net sales in the Cleaning segment and approximately 28%, 27% and 27% of net sales in the International segment, respectively. Sales of trash bags represented approximately 13% of the Company's consolidated net sales in each of the fiscal years 2013, 2012 and 2011, approximately 37%, 35% and 34% of net sales in the Household segment and approximately 10%, 10% and 11% of net sales in the International segment, respectively. Sales of charcoal represented approximately 10%, 11% and 11% of the Company's consolidated net sales and approximately 32%, 35% and 34% of net sales in the Household segment in fiscal years 2013, 2012 and 2011, respectively.

Net sales and property, plant and equipment, net, by geographic area as of and for the fiscal years ended June 30 were as follows:

        Fiscal
Year
      United
States
      Foreign       Total
Company
Net sales   2013   $      4,448   $      1,175   $      5,623
    2012     4,316     1,152     5,468
    2011     4,125     1,106     5,231
 
Property, plant and equipment, net   2013   $ 860   $ 161   $ 1,021
    2012     906     175     1,081
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

NOTE 21. RELATED PARTY TRANSACTIONS

The Company holds various equity investments with ownership percentages of up to 50% in a number of consumer products businesses. Transactions with the Company's equity investees typically represent payments for contract manufacturing and purchases of raw materials. Payments to equity investees for such transactions during the fiscal years ended June 30, 2013, 2012 and 2011 were $50, $49 and $47, respectively. Receipts from and ending accounts receivable and payable balances related to the Company's equity investees were not significant during and as of each of the fiscal years presented.

UNAUDITED QUARTERLY DATA
UNAUDITED QUARTERLY DATA

NOTE 22. UNAUDITED QUARTERLY DATA

        September 30       December 31       March 31       June 30       Total Year
Fiscal year ended June 30, 2013                                    
Net sales   $ 1,338   $ 1,325   $      1,413     $      1,547     $       5,623  
Cost of products sold   $ 764   $ 762   $ 818     $ 867     $ 3,211  
Earnings from continuing operations   $ 133   $ 123   $ 134     $ 184     $ 574  
Losses from discontinued operations,                                    
       net of tax   $ -   $ -   $ (1 )   $ (1 )   $ (2 )
Net earnings   $ 133   $ 123   $ 133     $ 183     $ 572  
Per common share:                                    
       Basic                                    
              Continuing operations   $ 1.02   $ 0.94   $ 1.01     $ 1.40     $ 4.38  
              Discontinued operations     -     -     -       (0.01 )     (0.01 )
              Basic net earnings per share   $ 1.02   $ 0.94   $ 1.01     $ 1.39     $ 4.37  
       Diluted                                    
              Continuing operations   $ 1.01   $ 0.93   $ 1.00     $ 1.38     $ 4.31  
              Discontinued operations     -     -     -       (0.01 )     (0.01 )
              Diluted net earnings per share   $ 1.01   $ 0.93   $ 1.00     $ 1.37     $ 4.30  
Dividends declared per common share   $ 0.64   $ 0.64   $ 0.64     $ 0.71     $ 2.63  
Market price (NYSE)                                    
       High   $ 73.65   $ 76.74   $ 88.63     $ 90.10     $ 90.10  
       Low     69.67     71.00     73.50       81.12       69.67  
       Year-end                                 83.14  
 
Fiscal year ended June 30, 2012                                    
Net sales   $ 1,305   $ 1,221   $ 1,401     $ 1,541     $ 5,468  
Cost of products sold   $ 759   $ 714   $ 808     $ 883     $ 3,164  
Earnings from continuing operations   $ 130   $ 105   $ 134     $ 174     $ 543  
Losses from discontinued operations,                                    
       net of tax   $ -   $ -   $ (2 )   $ -     $ (2 )
Net earnings   $ 130   $ 105   $ 132     $ 174     $ 541  
Per common share:                                    
       Basic                                    
              Continuing operations   $ 0.99   $ 0.79   $ 1.03     $ 1.34     $ 4.15  
              Discontinued operations     -     -     (0.01 )     -       (0.01 )
              Basic net earnings per share   $ 0.99   $ 0.79   $ 1.02     $ 1.34     $ 4.14  
       Diluted                                    
              Continuing operations   $ 0.98   $ 0.79   $ 1.02     $ 1.32     $ 4.10  
              Discontinued operations     -     -     (0.01 )     -       (0.01 )
              Diluted net earnings per share   $ 0.98   $ 0.79   $ 1.01     $ 1.32     $ 4.09  
Dividends declared per common share   $ 0.60   $ 0.60   $ 0.60     $ 0.64     $ 2.44  
Market price (NYSE)                                    
       High   $ 75.44   $ 69.61   $ 70.89     $ 73.54     $ 75.44  
       Low     63.56     63.06     66.37       66.72       63.06  
       Year-end                                 72.46  
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Dollars in millions)

Column A   Column B   Column C   Column D   Column E
            Additions   Deductions        
Description       Balance at
beginning
of period
      Charged to
costs and
expenses
     

Credited to
costs and
expenses

      Credited
to other
accounts
      Balance at
end
of period
Allowance for doubtful accounts                                    
       Year ended June 30, 2013   $        (7 )   $        -     $ 2   $ -   $        (5 )
       Year ended June 30, 2012     (5 )     (3 )     1     -     (7 )
       Year ended June 30, 2011     (6 )     -       1     -     (5 )
LIFO allowance                                    
       Year ended June 30, 2013   $ (37 )   $ (3 )   $ -   $ -   $ (40 )
       Year ended June 30, 2012     (29 )     (8 )     -     -     (37 )
       Year ended June 30, 2011     (28 )     (1 )     -     -     (29 )
Valuation allowance on deferred tax assets                                    
       Year ended June 30, 2013   $ (20 )   $ (16 )   $ -   $ -   $ (36 )
       Year ended June 30, 2012     (14 )     (6 )     -     -     (20 )
       Year ended June 30, 2011     (12 )     (2 )     -     -     (14 )
Allowance for inventory obsolescence                                    
       Year ended June 30, 2013   $ (10 )   $ (12 )   $ -   $ 11   $ (11 )
       Year ended June 30, 2012     (11 )     (13 )     -     14     (10 )
       Year ended June 30, 2011     (10 )     (15 )     -     14     (11 )
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)

Nature of Operations and Basis of Presentation

The Company is principally engaged in the production, marketing and sales of consumer products through mass merchandisers, retail outlets, e-commerce channels, distributors and medical supply providers. The consolidated financial statements include the statements of the Company and its wholly-owned and controlled subsidiaries. All significant intercompany transactions and accounts were eliminated in consolidation. Certain prior year reclassifications were made in the consolidated financial statements and related notes to consolidated financial statements to conform to the current year presentation.

Use of Estimates

The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Specific areas requiring the application of management's estimates and judgments include assumptions pertaining to accruals for consumer and trade-promotion programs, share-based compensation costs, pension and post-employment benefit costs, future cash flows associated with impairment testing of goodwill and other long-lived assets, the credit worthiness of customers, uncertain tax positions, tax valuation allowances and legal, environmental and insurance matters. Actual results could materially differ from estimates and assumptions made.

Recently Issued Accounting Pronouncements

On February 5, 2013, the Financial Accounting Standards Board (FASB) issued an update to current accounting standards to improve disclosures related to reclassifications out of accumulated other comprehensive income. Substantially all of the information that these amendments require already is required to be disclosed elsewhere in the financial statements. The amendments require an entity to report the effect of significant reclassifications on respective line items in net earnings or cross-reference other required disclosures, depending on the nature of the reclassification. The presentation requirements will be adopted by the Company beginning the first quarter of fiscal year 2014, as required.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments, time deposits and money market funds with an initial maturity at purchase of three months or less. The fair value of cash and cash equivalents approximates the carrying amount.

The Company's cash position includes amounts held by foreign subsidiaries, and, as a result, the repatriation of certain cash balances from some of the Company's foreign subsidiaries could result in additional tax costs. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company's cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries' books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in other (income) expense, net. The Company's cash holdings were as follows as of June 30:

         2013        2012
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   $ 115   $ 81
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     36     35
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries     18     20
U.S. dollar balances held by U.S. dollar functional currency subsidiaries     130     131
Total   $      299   $      267
Inventories
 
Inventories are stated at the lower of cost or market. When necessary, the Company provides allowances to adjust the carrying value of its inventory to the lower of cost or market, including any costs to sell or dispose. Appropriate consideration is given to obsolescence, excessive inventory levels, product deterioration and other factors in evaluating net realizable value for the purposes of determining the lower of cost or market.
Property, Plant and Equipment and Finite-Lived Intangible Assets
 
Property, plant and equipment and finite-lived intangible assets are stated at cost. Depreciation and amortization expense are calculated by the straight-line method using the estimated useful lives of the related assets. The table below provides estimated useful lives of property, plant and equipment by asset classification.
    Estimated
Useful Lives
Buildings        10 - 40 years
Land improvements   10 - 30 years
Machinery and equipment   3 - 15 years
Computer equipment   3 years
Capitalized software costs   3 - 7 years

Property, plant and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. The Company's impairment review is based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist. Impairment occurs when the book value of the asset exceeds the estimated future undiscounted cash flows generated by the asset and the impairment is viewed as other than temporary. When an impairment is indicated, an impairment charge is recorded for the difference between the book value of the asset and its estimated fair market value. Depending on the asset, estimated fair market value may be determined either by use of a discounted cash flow model, or by reference to estimated selling values of assets in similar condition.

Capitalization of Software Costs

The Company capitalizes certain significant costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, consultants, interest and payroll and payroll-related costs for employees during the application development stage. Costs incurred prior to the application development stage, costs incurred once the application is substantially complete and ready for its intended use, and other costs not qualifying for capitalization, including training and maintenance costs, are charged to expense. Capitalized software amortization was $21, $18 and $19, in fiscal years 2013, 2012 and 2011, respectively.
Impairment Review of Goodwill and Indefinite-Lived Intangible Assets
 
The Company tests its goodwill, trademarks with indefinite lives and other indefinite-lived intangible assets annually in the fiscal fourth quarter unless there are indications during a different interim period that these assets may have become impaired. With respect to goodwill, the Company performs either a qualitative or quantitative evaluation for each of its reporting units. Factors considered in the qualitative test include reporting unit specific operating results as well as new events and circumstances impacting the operations at the reporting unit level. If the result of a qualitative test indicates a potential for impairment, a quantitative test is performed. The quantitative test is a two-step process. In the first step, the Company compares the estimated fair value of each reporting unit to its carrying value. If the estimated fair value of any reporting unit is less than its carrying value, the Company performs a second step to determine the implied fair value of the reporting unit's goodwill. If the carrying amount of a reporting unit's goodwill exceeds its implied fair value, an impairment charge is recorded for the difference between the carrying amount and the implied fair value of the reporting unit's goodwill. For trademarks and other intangible assets with indefinite lives, the Company performs either a qualitative or quantitative analysis to test for impairment. When a quantitative test is performed, the estimated fair value of an asset is compared to its carrying amount. If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value. The Company's estimates of fair value are based primarily on a discounted cash flow approach that requires significant management judgment with respect to future sales volumes, revenue and expense growth rates, changes in working capital, foreign exchange rates, currency devaluation, inflation, and a perpetuity growth rate.

Share-Based Compensation

The Company grants various nonqualified stock-based compensation awards, including stock options and performance units.

For stock options, the Company estimates the fair value of each award on the date of grant using the Black-Scholes valuation model, which requires management to make estimates regarding expected option life, stock price volatility and other assumptions. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company estimates stock option forfeitures based on historical data for each employee grouping and the estimated forfeiture rate is adjusted to reflect actual forfeitures upon vesting of such grouping. The adjustment of the forfeiture rate will result in a cumulative catch-up adjustment in the period the forfeiture estimate is changed. The expense is recorded by amortizing the grant date fair values on a straight-line basis over the vesting period, adjusted for estimated forfeitures.

The Company's performance unit grants provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The performance period is three years and the payout determination is made at the end of the three-year performance period. The fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. The total amount of compensation expense recognized reflects estimated forfeiture rates and the initial assumption that performance goals will be achieved. Compensation expense is adjusted based on management's assessment of the probability that performance goals will be achieved. If such goals are not met or it is determined that achievement of performance goals is not probable, previously recognized compensation expense is trued-up in the current period to reflect the expected payout level. If it is determined that the performance goals will be exceeded, additional compensation expense is recognized, subject to a cap of 150% of target.

Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for share-based payment arrangements (excess tax benefits) are primarily classified as financing cash flows.

Employee Benefits

The Company accounts for its defined benefit retirement income and retirement health care plans using actuarial methods. These methods use an attribution approach that generally spreads "plan events" over the service lives of plan participants. Examples of plan events are plan amendments and changes in actuarial assumptions such as the expected return on plan assets, discount rate, rate of compensation increase, and certain employee-related factors, such as retirement age and mortality. The principle underlying the attribution approach is that employees render service over their employment period on a relatively "smooth" basis, and, therefore, the statement of earnings effects of retirement income and retirement health care plans are recognized in the same pattern.

One of the principal assumptions used in the net periodic benefit cost calculation is the expected return on plan assets. The required use of an expected return on plan assets may result in recognized pension expense or income that differs from the actual returns of those plan assets in any given year. Over time, however, the goal is for the expected long-term returns to approximate the actual returns and, therefore, the expectation is that the pattern of income and expense recognition should closely match the pattern of the services provided by the participants. The Company uses a market-related value method for calculating plan assets for purposes of determining the amortization of actuarial gains and losses. This method employs an asset smoothing approach. The differences between actual and expected returns are recognized in the net periodic benefit cost calculation over the average remaining service period of the plan participants using the corridor approach. Under this approach, only actuarial gains (losses) that exceed 5% of the greater of the projected benefit obligation or the market-related value of assets are amortized to pension expense by the Company. In developing its expected return on plan assets, the Company considers the long-term actual returns relative to the mix of investments that comprise its plan assets and also develops estimates of future investment returns by considering external sources.

The Company recognizes an actuarial-based obligation at the onset of disability for certain benefits provided to individuals after employment, but before retirement, that include medical, dental, vision, life and other benefits.

Environmental Costs

The Company is involved in certain environmental remediation and ongoing compliance activities. Accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The Company's accruals reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given the inherent uncertainties in evaluating environmental exposures. The aggregate accrual for environmental matters is included in other liabilities in the Company's consolidated balance sheets on an undiscounted basis due to uncertainty regarding the timing of future payments.

Revenue Recognition

Sales are recognized as revenue when the risk of loss and title pass to the customer and when all of the following have occurred: a firm sales arrangement exists, pricing is fixed or determinable, and collection is reasonably assured. Sales are recorded net of allowances for returns, trade-promotions, coupons and other discounts. The Company routinely commits to one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. Programs include shelf price reductions, end-of-aisle or in-store displays of the Company's products and graphics and other trade-promotion activities conducted by the customer. Coupons are recognized as a liability when distributed based upon expected consumer redemptions. The Company maintains liabilities at the end of each period for the estimated expenses incurred, but unpaid for these programs. Trade-promotion and coupon costs are recorded as a reduction of sales. The Company provides an allowance for doubtful accounts based on its historical experience and ongoing assessment of its customers' credit risk. Receivables were presented net of an allowance for doubtful accounts of $5 and $7 as of June 30, 2013 and 2012, respectively. The Company's provision for doubtful accounts was $0, $3 and $0 in fiscal years 2013, 2012 and 2011, respectively.

Receivables, net, included non-customer receivables of $13 and $25 as of June 30, 2013 and 2012, respectively.

Cost of Products Sold

Cost of products sold represents the costs directly related to the manufacture and distribution of the Company's products and primarily includes raw materials, packaging, contract packer fees, shipping and handling, warehousing, package design, depreciation, amortization and direct and indirect labor and operating costs for the Company's manufacturing facilities including salary, benefit costs and incentive compensation.

Costs associated with developing and designing new packaging are expensed as incurred and include design, artwork, films and labeling. Expenses for fiscal years ended June 30, 2013, 2012 and 2011 were $10, $10, and $11, respectively, of which $10 were classified as cost of products sold each fiscal year, with the remainder classified as selling and administrative expenses.

Selling and Administrative Expenses

Selling and administrative expenses represent costs incurred by the Company in generating revenues and managing the business and include market research, commissions and certain administrative expenses. Administrative expenses include salary, benefits, incentive compensation, professional fees and services, software and licensing fees and other operating costs associated with the Company's non-manufacturing, non-research and development staff, facilities and equipment.

Advertising and Research and Development Costs

The Company expenses advertising and research and development costs in the period incurred.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases. Management reviews the Company's deferred tax assets to determine whether their value can be realized based upon available evidence. A valuation allowance is established when management believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company's tax provision in the period of change. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet certain recognition thresholds or measurement standards. Amounts for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled.

U.S. income tax expense and foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. Where foreign earnings are indefinitely reinvested, no provision for U.S. income or foreign withholding taxes is made. When circumstances change and the Company determines that some or all of the undistributed earnings will be remitted in the foreseeable future, the Company accrues an expense in the current period for U.S. income taxes and foreign withholding taxes attributable to the anticipated remittance.

Foreign Currency Transactions and Translation

Local currencies are the functional currencies for substantially all of the Company's foreign operations. When the transactional currency is different than the functional currency, transaction gains and losses are included as a component of other (income) expense, net. In addition, certain assets and liabilities denominated in currencies different than a foreign subsidiary's functional currency are reported on the subsidiary's books in its functional currency, with the impact from exchange rate differences recorded in other (income) expense, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Income and expenses are translated at the average monthly exchange rates during the year. Gains and losses on foreign currency translations are reported as a component of other comprehensive income. Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested. The income tax effect of currency translation adjustments related to foreign subsidiaries and joint ventures for which earnings are not considered indefinitely reinvested is recorded as a component of deferred taxes with an offset to other comprehensive income.

Venezuela

The financial statements of the Company's subsidiary in Venezuela are consolidated under the rules governing the preparation of financial statements in a highly inflationary economy. As such, the subsidiary's non-U.S. dollar (non-USD) monetary assets and liabilities are remeasured into USD each reporting period with the resulting gains and losses reflected in other (income) expense, net.

On February 8, 2013, the Venezuelan government announced a devaluation of the official currency exchange rate (CADIVI) from 4.3 to 6.3 bolívares fuertes (VEF) per USD and the elimination of the alternative currency exchange system, SITME. Prior to February 8, 2013, the Company had been utilizing the rate at which it had been obtaining USD through SITME to remeasure its Venezuelan financial statements, which was 5.7 VEF per USD at the announcement date. In response to these developments, the Company began utilizing the CADIVI rate of 6.3 VEF per USD. The Company recorded a remeasurement loss of $4 related to the devaluation in fiscal year 2013, which was reflected in other (income) expense, net.

In March 2013, the Venezuelan government announced the creation of a new alternative currency exchange system (SICAD), which is intended to complement CADIVI. Based on a number of factors, including the limited number of SICAD auctions held to date, restrictions placed on eligible participants, the amount of USD available to purchase through the auction process, and the lack of official information about the resulting exchange rate, the Company does not believe it is appropriate to use the SICAD rate as the official remeasurement rate at this time.

Derivative Instruments

The Company's use of derivative instruments, principally swaps, futures and forward contracts, is limited to non-trading purposes and is designed to partially manage exposure to changes in commodity prices, interest rates and foreign currencies. The Company's contracts are hedges for transactions with notional amounts and periods consistent with the related exposures and do not constitute investments independent of these exposures.

Most commodity, interest rate and foreign exchange derivative contracts are designated as cash flow hedges of certain forecasted raw material purchases, interest payments and finished goods inventory purchases, based on certain hedge criteria. The criteria used to determine if hedge accounting treatment is appropriate are: (a) whether the designation of the hedge is to an underlying exposure and (b) whether there is sufficient correlation between the value of the derivative instrument and the underlying obligation. The changes in the fair value of derivatives are recorded as either assets or liabilities in the balance sheet with an offset to net earnings or other comprehensive income depending on whether, for accounting purposes, the derivative is designated and qualifies as a hedge. The Company de-designates cash flow hedge relationships when it determines that the hedge relationships are no longer highly effective or that the forecasted transaction is no longer probable. Upon de-designation of a hedge, the portion of gains or losses on the derivative instrument that was previously accumulated in other comprehensive income remains in accumulated other comprehensive income until the forecasted transaction is recognized in net earnings, or is recognized in net earnings immediately if the forecasted transaction is no longer probable. From time to time, the Company may have contracts not designated as hedges for accounting purposes, for which it recognizes changes in the fair value in other (income) expense, net. Cash flows from hedging activities are classified as operating activities in the consolidated statements of cash flows.

The Company uses different methodologies, when necessary, to estimate the fair value of its derivative contracts. The estimated fair values of the majority of the Company's contracts are based on quoted market prices, traded exchange market prices, or broker price quotations, and represent the estimated amounts that the Company would pay or receive to terminate the contracts.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
         2013        2012
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   $ 115   $ 81
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     36     35
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries     18     20
U.S. dollar balances held by U.S. dollar functional currency subsidiaries     130     131
Total   $      299   $      267
    Estimated
Useful Lives
Buildings        10 - 40 years
Land improvements   10 - 30 years
Machinery and equipment   3 - 15 years
Computer equipment   3 years
Capitalized software costs   3 - 7 years
SALE OF GLOBAL AUTO CARE BUSINESSES (Tables)
Net Sales and Earnings Attiributable to the Auto Businesses as of June 30, 2011
Net sales         $ 95  
Earnings before income taxes   $ 34  
Income tax expense on earnings     (11 )
Gain on sale, net of tax     247  
Earnings from discontinued operations, net of tax   $       270  
INVENTORIES, NET (Tables)
Schedule of Inventories, Net
        2013       2012
Finished goods   $ 321     $ 307  
Raw materials and packaging     121       120  
Work in process     3       4  
LIFO allowances     (40 )     (37 )
Allowances for obsolescence     (11 )     (10 )
Total   $        394     $        384  
OTHER CURRENT ASSETS (Tables)
Other Current Assets
        2013       2012
Deferred tax assets   $ 87   $ 92
Prepaid expenses     41     43
Other     19     14
Total   $        147   $        149
PROPERTY, PLANT AND EQUIPMENT, NET (Tables)
Schedule of Property, Plant and Equipment
         2013        2012
Machinery and equipment   $       1,590     $       1,533  
Buildings     485       646  
Capitalized software costs     362       328  
Land and improvements     119       142  
Construction in progress     96       149  
Computer equipment     80       87  
      2,732       2,885  
Less: accumulated depreciation and amortization     (1,711 )     (1,804 )
Total   $ 1,021     $ 1,081  
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Tables)
    Goodwill
        Cleaning       Lifestyle       Household       International       Total
Balance June 30, 2011   $ 275   $ 235   $ 85   $ 475     $ 1,070  
Acquisitions     48     8     -     -       56  
Translation adjustments and other     -     1     -     (15 )     (14 )
Balance June 30, 2012   $ 323   $ 244   $ 85   $ 460     $ 1,112  
Translation adjustments and other     -      -     -     (7 )     (7 )
Balance June 30, 2013   $        323   $        244   $        85   $           453     $        1,105  
    Trademarks   Other intangible assets
subject to amortization
        Subject to
amortization
      Not subject to
amortization
      Total       Technology
and Product
formulae
      Other       Total
Balance June 30, 2011   $ 23     $ 527   $ 550     $ 31     $ 52     $ 83  
Acquisitions     -       10     10       -       18       18  
Amortization     (3 )     -     (3 )     (8 )     (6 )     (14 )
Translation adjustments and other     (1 )     -     (1 )     -       (1 )     (1 )
Balance June 30, 2012     19       537     556       23       63       86  
Amortization     (3 )     -     (3 )     (9 )     (6 )     (15 )
Translation adjustments and other     -       -     -       5       (2 )     3  
Balance June 30, 2013   $             16     $             537   $             553     $             19     $             55     $             74  
ACCRUED LIABILITIES (Tables)
Accrued Liabilities
        2013       2012
Compensation and employee benefit costs   $ 152   $ 165
Trade and sales promotion     116     105
Dividends     96     85
Interest     27     34
Other     99     105
Total   $        490   $        494
DEBT (Tables)
        2013       2012
Commercial paper   $ 200   $ 289
Foreign borrowings     2     11
Total   $        202   $        300
  2013         2012
Senior unsecured notes and debentures:            
       5.45%, $350 due October 2012 $        -   $        350  
       5.00%, $500 due March 2013   -     500  
       5.00%, $575 due January 2015   575     575  
       3.55%, $300 due November 2015   300     300  
       5.95%, $400 due October 2017   399     399  
       3.80%, $300 due November 2021   298     297  
       3.05%, $600 due September 2022   598     -  
Total   2,170     2,421  
Less: Current maturities of long-term debt   -     (850 )
Long-term debt $ 2,170   $ 1,571  
  2013        2012
Revolving credit facility $       1,100   $       1,100
Foreign credit lines   32     31
Other credit lines   13     13
Total $ 1,145   $ 1,144
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)
  Balance sheet classification       2013       2012
Assets              
Foreign exchange contracts Other current assets   $       4