CLOROX CO /DE/, 10-K filed on 8/25/2014
Annual Report
DOCUMENT AND ENTITY INFORMATION (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Jun. 30, 2014
Jul. 31, 2014
Dec. 31, 2013
Document and Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Jun. 30, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
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
 
128,845,437 
 
Entity Public Float
 
 
$ 11.9 
CONSOLIDATED STATEMENTS OF EARNINGS (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2012
CONSOLIDATED STATEMENTS OF EARNINGS [Abstract]
 
 
 
Net sales
$ 5,591 
$ 5,623 
$ 5,468 
Cost of products sold
3,231 
3,211 
3,164 
Gross profit
2,360 
2,412 
2,304 
Selling and administrative expenses
765 
807 
798 
Advertising costs
504 
500 
482 
Research and development costs
125 
130 
121 
Interest expense
103 
122 
125 
Other expense (income), net
(13)
Earnings from continuing operations before income taxes
861 
853 
791 
Income taxes on continuing operations
299 
279 
248 
Earnings from continuing operations
562 
574 
543 
Losses from discontinued operations, net of tax
(4)
(2)
(2)
Net earnings
$ 558 
$ 572 
$ 541 
Net earnings (losses) per share, basic
 
 
 
Continuing operations
$ 4.34 
$ 4.38 
$ 4.15 
Discontinued operations
$ (0.03)
$ (0.01)
$ (0.01)
Basic net earnings per share
$ 4.31 
$ 4.37 
$ 4.14 
Net earnings (losses) per share, diluted
 
 
 
Continuing operations
$ 4.26 
$ 4.31 
$ 4.10 
Discontinued operations
$ (0.03)
$ (0.01)
$ (0.01)
Diluted net earnings per share
$ 4.23 
$ 4.30 
$ 4.09 
Weighted average shares outstanding (in thousands)
 
 
 
Basic
129,558 
131,075 
130,852 
Diluted
131,742 
132,969 
132,310 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
 
 
 
Net earnings
$ 558 
$ 572 
$ 541 
Other comprehensive (losses) income:
 
 
 
Foreign currency translation adjustments, net of tax
(37)
(11)
(41)
Net unrealized (losses) gains on derivatives, net of tax
(9)
(37)
Pension and postretirement benefit adjustments, net of tax
(4)
37 
(68)
Total other comprehensive (losses) income, net of tax
(50)
29 
(146)
Comprehensive income
$ 508 
$ 601 
$ 395 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
 
 
 
Tax on foreign currency translation adjustments
$ 11 
$ (5)
$ (1)
Tax on net unrealized (losses) gains on derivatives
(6)
(4)
Tax on pension and postretirement benefit adjustments
$ 4 
$ (22)
$ 37 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jun. 30, 2014
Jun. 30, 2013
Current assets
 
 
Cash and cash equivalents
$ 329 
$ 299 
Receivables, net
546 
580 
Inventories, net
386 
394 
Other current assets
134 
147 
Total current assets
1,395 
1,420 
Net property, plant and equipment
977 
1,021 
Goodwill
1,101 
1,105 
Trademarks, net
547 
553 
Other intangible assets, net
64 
74 
Other assets
174 
138 
Total assets
4,258 
4,311 
Current liabilities
 
 
Notes and loans payable
143 
202 
Current maturities of long-term debt
575 
Accounts payable
440 
413 
Accrued liabilities
472 
490 
Income taxes payable
29 
Total current liabilities
1,638 
1,134 
Long-term debt
1,595 
2,170 
Other liabilities
768 
742 
Deferred income taxes
103 
119 
Total liabilities
4,104 
4,165 
Commitments and contingencies
   
   
Stockholders' equity
 
 
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, 2014 and 2013; and 128,796,228 and 130,366,911 shares outstanding at June 30, 2014 and 2013, respectively
159 
159 
Additional paid-in capital
709 
661 
Retained earnings
1,739 
1,561 
Treasury shares, at cost: 29,945,233 and 28,374,550 shares at June 30, 2014 and 2013, respectively
(2,036)
(1,868)
Accumulated other comprehensive net loss
(417)
(367)
Stockholders' equity
154 
146 
Total liabilities and stockholders' equity
$ 4,258 
$ 4,311 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2014
Jun. 30, 2013
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
128,796,228 
130,366,911 
Treasury stock, shares
29,945,233 
28,374,550 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (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 (Losses) Income [Member]
Total
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 (losses) income
 
 
 
 
(146)
(146)
Accrued dividends
 
 
(320)
 
 
(320)
Stock-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 (losses) income
 
 
 
 
29 
29 
Accrued dividends
 
 
(348)
 
 
(348)
Stock-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)
 
 
Net earnings
 
 
558 
 
 
558 
Other comprehensive (losses) income
 
 
 
 
(50)
(50)
Accrued dividends
 
 
(374)
 
 
(374)
Stock-based compensation
 
36 
 
 
 
36 
Other employee stock plan activities, amount
 
12 
(6)
92 
 
98 
Other employee stock plan activities, shares
 
 
 
1,476 
 
 
Treasury stock purchased, amount
 
 
 
(260)
 
(260)
Treasury stock purchased, shares
 
 
 
(3,046)
 
 
Balance, amount at Jun. 30, 2014
$ 159 
$ 709 
$ 1,739 
$ (2,036)
$ (417)
$ 154 
Balance, shares at Jun. 30, 2014
158,741 
 
 
(29,945)
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2012
Operating activities:
 
 
 
Net earnings
$ 558 
$ 572 
$ 541 
Deduct: Losses from discontinued operations, net of tax
(4)
(2)
(2)
Earnings from continuing operations
562 
574 
543 
Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations:
 
 
 
Depreciation and amortization
180 
182 
178 
Stock-based compensation
36 
35 
27 
Deferred income taxes
(10)
(11)
(12)
Funding of non-qualified deferred compensation plans
(26)
Other
36 
20 
(36)
Changes in:
 
 
 
Receivables, net
24 
(8)
(52)
Inventories, net
(11)
Other current assets
11 
(3)
Accounts payable and accrued liabilities
(17)
(30)
10 
Income taxes payable
(21)
15 
(36)
Net cash provided by continuing operations
771 
777 
620 
Net cash used for discontinued operations
(4)
(2)
(8)
Net cash provided by operations
767 
775 
612 
Investing activities:
 
 
 
Capital expenditures
(138)
(194)
(192)
Proceeds from sale-leasebacks, net of transaction costs
135 
Businesses acquired, net of cash acquired
(93)
Other
Net cash used for investing activities
(138)
(55)
(277)
Financing activities:
 
 
 
Notes and loans payable, net
(60)
(98)
(164)
Long-term debt borrowings, net of issuance costs
593 
297 
Long-term debt repayments
(850)
Treasury stock purchased
(260)
(128)
(225)
Cash dividends paid
(368)
(335)
(315)
Issuance of common stock for employee stock plans and other
96 
133 
86 
Net cash used for financing activities
(592)
(685)
(321)
Effect of exchange rate changes on cash and cash equivalents
(7)
(3)
(6)
Net increase in cash and cash equivalents
30 
32 
Cash and cash equivalents:
 
 
 
Beginning of year
299 
267 
259 
End of year
329 
299 
267 
Supplemental cash flow information:
 
 
 
Interest paid
76 
129 
123 
Income taxes paid, net of refunds
312 
263 
292 
Noncash financing activities:
 
 
 
Cash dividends declared and accrued, but not paid
$ 95 
$ 93 
$ 85 
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 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 the 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, stock-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

In May 2014, the Financial Accounting Standards Board (FASB) issued an update to current accounting standards, which establishes a single, comprehensive revenue recognition model for all contracts with customers, and will supersede most current revenue recognition guidance. It requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for the Company beginning in the first quarter of fiscal year 2018. Early adoption is not permitted. The Company is currently in the process of evaluating the impact of the adoption of these requirements on its consolidated financial statements.

In April 2014, the FASB issued an update to current accounting standards, which will change the criteria for reporting discontinued operations. The amendments will also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments are effective for the Company for new disposals (or classifications as held for sale) of components of the Company, should they occur, beginning in the first quarter of fiscal year 2016. Early adoption is permitted for disposals (or classifications as held for sale) that have not been previously reported.

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 expense (income), net. The Company's cash holdings were as follows as of June 30:

        2014       2013
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent   $      180   $      130
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     132     115
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     12     36
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries     5     18
Total   $ 329   $ 299

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 or lives determined by lease contracts of the related assets. The table below provides estimated useful lives of property, plant and equipment by asset classification.

        Estimated
Useful Lives
Buildings and leasehold improvements   10 - 40 years
Land improvements   10 - 30 years
Machinery and equipment   3 - 15 years
Computer equipment   3 - 5 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 fully recoverable. The risk of impairment is initially assessed 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 expense was $22, $21 and $18, in fiscal years 2014, 2013 and 2012, 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 for impairment 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 maturity and stability of the reporting unit, magnitude of excess fair value over book value from past year's impairment testing, other 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 of a reporting unit, 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 the 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 a quantitative analysis to test for impairment and compares the estimated fair value of an asset 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 or income 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.

Stock-based Compensation

The Company grants various nonqualified stock-based compensation awards to eligible employees, 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. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative catch-up adjustment in the period of change. Compensation 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 stock-based payment arrangements (excess tax benefits) are classified as financing cash inflows.

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 or expected lifetime (for frozen plans) 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 or expected lifetime (for frozen plans) 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 related to these programs for the estimated expenses incurred, but not paid, at the end of each period. Trade-promotion and coupon redemption 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 $3 and $5 as of June 30, 2014 and 2013, respectively. The Company's provision for doubtful accounts was $0, $0 and $3 in fiscal years 2014, 2013 and 2012, respectively.

Receivables, net, included non-customer receivables of $15 and $13 as of June 30, 2014 and 2013, 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, direct and indirect labor and operating costs for the Company's manufacturing and distribution facilities including salary, benefit costs and incentive compensation, and royalties and amortization related to the Company's Glad Venture Agreement (see Note 10 - Other Liabilities).

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, 2014, 2013 and 2012 were $12, $10 and $10, respectively, all of which were reflected in cost of products sold in the consolidated statements of earnings.

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 expense (income), 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 expense (income), net. Except for Venezuela as discussed below, assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, while 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.

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

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 expense (income), 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.

BUSINESSES ACQUIRED
BUSINESSES ACQUIRED

NOTE 2. 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 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.

INVENTORIES, NET
INVENTORIES, NET

NOTE 3. INVENTORIES, NET

Inventories, net, consisted of the following as of June 30:

  2014       2013
Finished goods $       321     $       321  
Raw materials and packaging   113       121  
Work in process   2       3  
LIFO allowances   (36 )     (40 )
Allowances for obsolescence   (14 )     (11 )
Total $ 386     $ 394  

The last-in, first-out (LIFO) method was used to value approximately 34% and 37% of inventories as of June 30, 2014 and 2013, 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 $2, $3 and $2 for the fiscal years ended June 30, 2014, 2013 and 2012, respectively.

The Company had inventory consigned to others of $4 and $2 as of June 30, 2014 and 2013, respectively.

During fiscal years 2014, 2013 and 2012, the Company's inventory obsolescence expense was $13, $12 and $13, respectively.

OTHER CURRENT ASSETS
OTHER CURRENT ASSETS

NOTE 4. OTHER CURRENT ASSETS

Other current assets consisted of the following as of June 30:

  2014       2013
Deferred tax assets $      81   $      87
Prepaid expenses   42     41
Other   11     19
Total $ 134   $ 147

As of June 30, 2014 and 2013, Other in the table above included $9 and $13 of restricted cash, respectively. As of June 30, 2014 and 2013, restricted cash of $5 and $10, respectively, was held by a foreign subsidiary as a prepayment received for intercompany services. Subsequent to June 30, 2014, this balance is no longer restricted as all services have been performed. Additionally, as of June 30, 2014 and 2013, the Company had restricted cash of $3 and $3, respectively, held in escrow related to fiscal year 2012 acquisitions.

PROPERTY, PLANT AND EQUIPMENT, NET
PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 5. PROPERTY, PLANT AND EQUIPMENT, NET

The components of property, plant and equipment, net, consisted of the following as of June 30:

        2014       2013
Machinery and equipment   $      1,593     $      1,590  
Buildings     506       485  
Capitalized software costs     374       362  
Land and improvements     122       119  
Construction in progress     79       96  
Computer equipment     79       80  
      2,753       2,732  
Less: accumulated depreciation and amortization     (1,776 )     (1,711 )
Total   $ 977     $ 1,021  

Depreciation and amortization expense related to property, plant and equipment, net, was $161, $162 and $158 in fiscal years 2014, 2013 and 2012, respectively.

GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

NOTE 6. 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, 2014 and 2013, were as follows:

    Goodwill
        Cleaning       Lifestyle       Household       International       Total
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  
Translation adjustments and other     -     -     -     (4 )     (4 )
Balance June 30, 2014   $ 323   $ 244   $ 85   $ 449     $ 1,101  

    Trademarks   Other intangible assets
        Subject to
amortization
      Not subject to
amortization
      Total       Technology
and product
formulae
      Other       Total
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  
Acquisitions and other additions     -       -       -       -       5       5  
Amortization     (1 )     -       (1 )     (9 )     (6 )     (15 )
Impairment     -       (4 )     (4 )     -       -       -  
Translation adjustments and other     (1 )     -       (1 )     -       -       -  
Balance June 30, 2014   $ 14     $ 533     $ 547     $ 10     $ 54     $ 64  

Intangible assets subject to amortization were net of total accumulated amortization of $291 and $275 as of June 30, 2014 and 2013, respectively, of which $22 and $21, respectively, related to trademarks. Total accumulated amortization included $142 and $136 as of June 30, 2014 and 2013, respectively, related to intangible assets subject to amortization that were fully amortized, of which $13 and $13, respectively, related to trademarks. Estimated amortization expense for these intangible assets is $9, $5, $5, $4 and $3 for fiscal years 2015, 2016, 2017, 2018 and 2019, respectively.

In fiscal year 2014, the Company entered into an exclusivity agreement with a manufacturer. In connection with the agreement, the Company recorded an Other Intangible Asset valued at $4 that will be amortized over the 7-year term of the agreement. The agreement may be renewed for an additional 3 years at no cost upon mutual consent.

As a result of the effective devaluation of the Venezuelan currency in the third quarter of fiscal year 2014, the Company assessed whether recorded values of intangible assets attributable to the Venezuela subsidiary and goodwill of the reporting unit which included Venezuela were impaired. As a result of its assessment, the Company identified indications of impairment and recorded noncash tax deductible impairment charges on trademark values totaling $4. The Company used an income approach, the relief-from-royalty method, to estimate the fair value of the trademarks, and as such, the fair value measurement was classified as Level 3. The impairment charge was reflected in other expense (income), net, in the International reportable segment. For a further discussion on Venezuela intangible and other balances, refer to Note 19 - Segment Reporting.

During the fourth quarter of fiscal years 2014, 2013 and 2012, the Company completed its annual impairment tests of goodwill and indefinite-lived intangible assets and no instances of impairment were identified.

ACCRUED LIABILITIES
ACCRUED LIABILITIES

NOTE 7. ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of June 30:

  2014       2013
Trade and sales promotion $      113   $      116
Compensation and employee benefit costs   102     152
Dividends   100     96
Interest   27     27
Insurance   18     20
Derivatives   17     3
Royalties   11     11
Other   84     65
Total $ 472   $ 490
DEBT
DEBT

NOTE 8. DEBT

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

  2014       2013
Commercial paper $      141   $      200
Foreign borrowings   2     2
Total $ 143   $ 202

The weighted average interest rates incurred on average outstanding notes and loans payable during the fiscal years ended June 30, 2014, 2013 and 2012, including fees associated with the Company's undrawn revolving credit facility, were 0.97%, 1.68% and 0.85%, respectively. The weighted average effective interest rates on commercial paper balances as of June 30, 2014 and 2013, were 0.28% and 0.31%, respectively. The carrying value of notes and loans payable as of June 30, 2014 and 2013, approximated their fair value due to their short maturity.

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

  2014       2013
Senior unsecured notes and debentures:            
       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       298
       3.05%, $600 due September 2022   598       598
Total   2,170       2,170
Less: Current maturities of long-term debt   (575 )     -
Long-term debt $ 1,595     $ 2,170

The weighted average interest rates incurred on average outstanding long-term debt during the fiscal years ended June 30, 2014, 2013 and 2012, were 4.56%, 4.76% and 5.21%, respectively. The weighted average effective interest rate on long-term debt balances as of June 30, 2014 and 2013, was 4.56%.

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 10 - Other Liabilities).

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 the September 2012 issuance 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.

As of June 30, 2014, the Company had interest rate forward contracts with a notional amount of $288 related to the anticipated refinancing of senior notes maturing in January 2015.

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

  2014       2013
Revolving credit facility $ 1,100   $      1,100
Foreign credit lines   31     32
Other credit lines   13     13
Total $      1,144   $ 1,145

As of June 30, 2014, the Company had a $1.1 billion revolving credit agreement, which expires in May 2017. 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, 2014.

Of the $44 of foreign and other credit lines as of June 30, 2014, $5 was outstanding and the remainder of $39 was available for borrowing.

Long-term debt maturities as of June 30, 2014, are $575, $300, $0, $400, $0 and $900 in fiscal years 2015, 2016, 2017, 2018, 2019 and thereafter, respectively.

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

NOTE 9. 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 June 30, 2014, the Company's financial assets and liabilities that were measured at fair value on a recurring basis during the period included derivative financial instruments, which were all classified as Level 2, and trust assets to fund certain of the Company's nonqualified deferred compensation plans, which were classified as Level 1. As of June 30, 2013, the Company's financial assets and liabilities that were measured at fair value on a recurring basis during the period 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 2 years, 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, 2014, the notional amount of commodity derivatives was $36, of which $19 related to jet fuel swaps and $17 related to soybean oil futures. As of June 30, 2013, the notional value of commodity derivatives was $51, of which $32 related to jet fuel swaps and $19 related to soybean oil futures.

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 twelve months. The interest rate contracts are measured at fair value using information quoted by U.S. government bond dealers. During fiscal years 2014 and 2013, the Company paid $0 and $4 to settle interest rate forward contracts, respectively, which were reflected in operating cash flows.

As of June 30, 2014 and 2013, the notional amount of interest rate forward contracts was $288 and $0, respectively. The interest rate forward contracts outstanding as of June 30, 2014, were related to the anticipated refinancing of senior notes maturing in January 2015.

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 $54, $28 and $5, respectively, as of June 30, 2014, and $18, $22 and $4, respectively, as of June 30, 2013. There were no outstanding contracts to economically hedge foreign exchange risk associated with intercompany transactions as of June 30, 2014 and 2013, respectively.

Counterparty Risk Management

The Company utilizes a variety of financial institutions as counterparties for over-the counter derivative instruments. The Company enters into agreements governing the use of over-the-counter derivative instruments and sets internal limits on the aggregate over-the-counter derivative instrument positions held with each counterparty. Certain terms of these agreements require the Company or the counterparty to post collateral when the fair value of the derivative instruments exceeds contractually defined counterparty liability position limits. Of the $17 and $3 of the derivative instruments reflected in accrued liabilities as of June 30, 2014 and 2013, respectively, $11 and $3, respectively, contained such terms. As of both June 30, 2014 and 2013, neither the Company nor any counterparty was 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 both June 30, 2014 and 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 Financial Instruments

Derivatives

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, 2014, 2013 and 2012, the Company had no hedging instruments designated as fair value hedges.

Trust Assets

Beginning in December 2013, the Company holds mutual funds and cash equivalents as part of trusts related to certain of its nonqualified deferred compensation plans. The trusts represent variable interest entities, for which the Company is considered the primary beneficiary, and therefore, trust assets are consolidated and included in other assets in the condensed consolidated balance sheets. The mutual funds are measured at fair value using quoted market prices. The Company has designated these marketable securities as trading investments. The participants in the deferred compensation plans may select among certain mutual funds in which their compensation deferrals are invested in accordance with the terms of the plans and within the confines of the trusts which hold the marketable securities.

The Company's derivative instruments designated as hedging instruments and trust assets related to certain of the Company's nonqualified deferred compensation plans were recorded at fair value in the consolidated balance sheets as of June 30 as follows:

  Balance sheet
classification
  2014   2013
    Level 1   Level 2   Level 1   Level 2
Assets                                          
Foreign exchange derivative contracts Other current assets   $ -   $ -   $ -   $ 4
Commodity purchase derivative contracts Other current assets     -     1     -     -
Trust assets for nonqualified deferred                          
       compensation plans Other assets     31     -     -     -
      $        31   $        1   $        -   $        4
 
Liabilities                          
Commodity purchase derivative contracts Accrued liabilities   $ -   $ 1   $ -   $ 3
Interest rate contracts Accrued liabilities     -     13     -     -
Foreign exchange derivative contracts Accrued liabilities     -     3     -     -
      $ -   $ 17   $ -   $ 3

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, 2014, expected to be reclassified into earnings within the next twelve months is $8. 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, 2014, 2013 and 2012, hedge ineffectiveness was not significant.

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
        2014       2013       2012       2014       2013       2012
Commodity purchase derivative contracts   $ 2     $ (1 )   $ (1 )   $ -     $ -     $ 4  
Interest rate contracts             (13 )             (1 )             (39 )             (4 )             (3 )             (2 )
Foreign exchange derivative contracts     (3 )     3       3       4       -       2  
Total   $ (14 )   $ 1     $ (37 )   $ -     $ (3 )   $ 4  

The gains reclassified from OCI and recognized in earnings during the fiscal years ended June 30, 2014 and 2012, for commodity purchase 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, 2014, 2013 and 2012, for interest rate contracts were included in interest expense.

Changes in the value of the trust assets related to certain of the Company's nonqualified deferred compensation plans were $(1) for the fiscal year ended June 30, 2014, and were reflected in other expense (income), net, in the consolidated statements of earnings.

Other

The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate their fair values as of June 30, 2014 and 2013, due to their short maturity and nature. The estimated fair value of long-term debt, including current maturities, was $2,265 and $2,263 as of June 30, 2014 and 2013, 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.

OTHER LIABILITIES
OTHER LIABILITIES

NOTE 10. OTHER LIABILITIES

Other liabilities consisted of the following as of June 30:

  2014       2013
Venture agreement net terminal obligation $ 290   $ 284
Employee benefit obligations   289     270
Taxes   76     74
Other   113     114
Total $      768   $      742

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, 2014 and 2013, 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. The Company deferred recognition of the portion of the total gain on the sale that was equivalent to the present value of the lease payments and will continue to amortize such amount to earnings ratably over the lease term. As of June 30, 2014 and 2013, the long-term portion of the deferred gain of $43 and $47, respectively, was included in Other in the table above.

OTHER CONTINGENCIES AND GUARANTEES
OTHER CONTINGENCIES AND GUARANTEES

NOTE 11. 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 $14 and $13 as of June 30, 2014 and 2013, 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, 2014 and 2013. 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, Florida, 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, 2014, was approximately $39.

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 $33. The Company continues to believe that its defenses are meritorious, and has appealed the decision to the highest courts of Brazil. In the first stage of the appellate process, in December 2013 the appellate court declined to admit the Company's appeals to the highest courts. The Company then appealed directly to the highest courts and in May 2014, the Supreme Court of Justice agreed to consider the Company's appeal. 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 appealed this decision, and the lower court decision was overturned by the appellate court in April 2014. Petroplus has appealed this decision to Brazil's highest court.

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. Additionally, in November 2013, the Clorox Subsidiaries initiated a new ICC arbitration seeking damages against Petroplus.

The Company is subject to various lawsuits, claims and other loss contingencies relating to issues such as contract disputes, product liability, patents and trademarks, advertising, and employee and other matters. Based on management's analysis, 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.

The Company had not recorded any liabilities on the aforementioned guarantees as of June 30, 2014 and 2013.

As of June 30, 2014, the Company was a party to letters of credit of $12, primarily related to one of its insurance carriers, of which $0 had been drawn upon.

STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY

NOTE 12. STOCKHOLDERS' EQUITY

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 new share repurchase program for an aggregate purchase amount of up 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 stock dilution related to stock-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:

  2014   2013   2012
  Amount       Shares
(000)
      Amount       Shares
(000)
      Amount       Shares
(000)
Open-market purchase programs $ -   -   $ -   -   $ 158        2,429
Evergreen Program   260   3,046     128   1,500     67   990
Total $      260        3,046   $      128        1,500   $      225   3,419

During fiscal years 2014, 2013 and 2012, the Company declared dividends per share of $2.87, $2.63 and $2.44, respectively, and paid dividends per share of $2.84, $2.56 and $2.40, respectively.

In February 2013, the FASB issued an update to current accounting standards related to disclosures of reclassifications out of accumulated other comprehensive income. The presentation requirements were adopted by the Company effective July 1, 2013, and are reflected below.

Changes in accumulated other comprehensive net losses by component were as follows:

        Foreign
currency
translation
adjustments
      Net unrealized
(losses) gains on
derivatives
      Pension and
postretirement
benefit
adjustments
      Total
Balance as of June 30, 2012, net of tax   $        (198 )   $                (33 )   $           (165 )   $       (396 )
       Other comprehensive (loss) income                                
              before reclassifications     (11 )     -       31       20  
       Amounts reclassified from accumulated other                                
              comprehensive net losses     -       3       6       9  
Net other comprehensive (loss) income     (11 )     3       37       29  
Balance as of June 30, 2013, net of tax   $ (209 )   $ (30 )   $ (128 )   $ (367 )
       Other comprehensive losses                                
              before reclassifications     (37 )     (9 )     (9 )     (55 )
       Amounts reclassified from accumulated other                                
              comprehensive net losses     -       -       5       5  
Net other comprehensive losses     (37 )     (9 )     (4 )     (50 )
Balance as of June 30, 2014, net of tax   $ (246 )   $ (39 )   $ (132 )   $ (417 )

Pension and postretirement benefit reclassification adjustments are reflected in cost of products sold and selling and administrative expenses.

NET EARNINGS PER SHARE (EPS)
NET EARNINGS PER SHARE (EPS)

NOTE 13. NET EARNINGS PER SHARE (EPS)

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

        2014       2013       2012
Basic   129,558   131,075   130,852
Dilutive effect of stock options and other   2,184   1,894   1,458
Diluted        131,742        132,969        132,310

During fiscal years 2014 and 2013, the Company included all stock options to purchase shares of the Company's common stock in the calculations of diluted net EPS because the average market price was greater than the exercise price of all outstanding options.

During fiscal year 2012, the Company did not include stock options to purchase approximately 1.8 million shares 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.

STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS

NOTE 14. STOCK-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 stock-based compensation awards, including stock options, restricted stock, performance units, deferred stock units, stock appreciation rights and other stock-based awards. The primary amendment reflected in the Plan was an increase of approximately 3 million common shares that may be issued for stock-based compensation purposes. As of June 30, 2014, the Company is authorized to grant up to approximately 7 million common shares under the Plan and, as of June 30, 2014, approximately 6 million shares were available for grant.

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

        2014       2013       2012
Cost of products sold   $ 4   $ 4   $ 3
Selling and administrative expenses     29     28     22
Research and development costs     3     3     2
Total compensation cost   $      36   $      35   $      27
                    
Related income tax benefit   $ 13   $ 13   $ 10

Cash received during fiscal years 2014, 2013 and 2012 from stock options exercised under all stock-based payment arrangements was $86, $121 and $79, respectively. The Company issues shares for stock-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 stock-based awards (Note 12 - Stockholders' Equity).

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 2014, 2013 and 2012 was estimated on the date of grant using the Black-Scholes valuation model and assumptions noted in the following table:

  2014       2013       2012
Expected life 5.7 years   5.7 years   4.9 - 5.7 years
Weighted-average expected life 5.7 years   5.7 years   5.7 years
Expected volatility 18.4% to 18.5%   18.7% to 19.2%   21.9% to 25.9%
Weighted-average volatility 18.5%   19.1%   23.5%
Risk-free interest rate 1.8% to 1.9%   0.6% to 0.8%   0.9% to 1.1%
Weighted-average risk-free interest rate 1.8%   0.7%   0.9%
Dividend yield 3.4%   3.2%-3.6%   3.5%-3.8%
Weighted-average dividend yield 3.4%   3.6%   3.5%

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 employee groups. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures.

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 activities are summarized below:

        Number of
Shares
      Weighted-
Average
Exercise
Price
per Share
      Average
Remaining
Contractual
Life
      Aggregate
Intrinsic
Value
    (In thousands)                
Options outstanding as of June 30, 2013   10,257     $ 65   7 years   $ 184
Granted   1,795       84          
Exercised   (1,450 )     60          
Cancelled   (234 )     75          
Options outstanding as of June 30, 2014              10,368     $ 69   6 years   $ 232
 
Options vested as of June 30, 2014   5,772     $ 64   5 years   $ 159

The weighted-average fair value per share of each option granted during fiscal years 2014, 2013 and 2012, estimated at the grant date using the Black-Scholes option pricing model, was $9.69, $6.96 and $9.24, respectively. The total intrinsic value of options exercised in fiscal years 2014, 2013 and 2012 was $42, $45 and $29, respectively.

Stock option awards outstanding as of June 30, 2014, 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, 2014, there was $17 of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of one year, 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 actual and estimated forfeitures. Restricted stock grants receive dividend distributions earned during the vesting period upon vesting.

As of June 30, 2014, there was $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 2014, 2013 and 2012 was less than $1, $1 and $3, respectively. The weighted-average grant-date fair value of awards granted was $89.25, $72.28 and $68.52 per share for fiscal years 2014, 2013 and 2012, 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, 2013 11     $ 68
Granted                  13       89
Vested (3 )     67
Forfeited -       -
Restricted stock awards as of June 30, 2014 21     $ 81

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 final 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 actual and estimated forfeitures, 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 adjusted 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 the grant day target.

The number of shares issued will be dependent upon vesting and the achievement of specified performance targets. As of June 30, 2014, there was $19 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 one year. The weighted-average grant-date fair value of awards granted was $84.45, $72.11 and $68.17 per share for fiscal years 2014, 2013 and 2012, 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, 2013 1,335     $ 66
Granted 347       84
Distributed (35 )     54
Forfeited (426 )     67
Performance unit awards as of June 30, 2014             1,221     $ 73
 
Perfomance units vested and deferred as of June 30, 2014 168     $ 56

The non-vested performance units outstanding as of June 30, 2014 and 2013, were 1,053,000 and 1,116,000, respectively, and the weighted average grant date fair value was $74.68 and $69.01 per share, respectively. No shares vested during fiscal year 2014. The total fair value of shares vested was $0, $14 and $34 during fiscal years 2014, 2013 and 2012, 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 year 2013, $13 of the vested awards was paid by the issuance of shares. During fiscal year 2013, $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 completion of a director's service.

During fiscal year 2014, the Company granted 16,000 deferred stock units, reinvested dividends of 7,000 units and distributed 23,000 shares, which had a weighted-average fair value on grant date of $91.79, $88.96 and $66.79 per share, respectively. As of June 30, 2014, 233,000 units were outstanding, which had a weighted-average fair value on the grant date of $62.84 per share.

LEASES AND OTHER COMMITMENTS
LEASES AND OTHER COMMITMENTS

NOTE 15. 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, $71 and $68 in fiscal years 2014, 2013 and 2012, respectively. The future minimum rental payments required under the Company's existing non-cancelable lease agreements as of June 30, 2014, are expected to be $47, $45, $41, $37, $32 and $127 in fiscal years 2015, 2016, 2017, 2018, 2019 and thereafter, respectively.

The future minimum rental payments required under the Company's existing non-cancelable lease agreement's for the corporate headquarters and primary research and development facility as of June 30, 2014, are expected to be $10, $11, $11, $11, $11 and $69 in fiscal years 2015, 2016, 2017, 2018, 2019 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. Approximately 17% of the Company's purchase obligations in fiscal years 2015 through 2019 relate to service contracts for information technology that has been outsourced. The contracts included above are entered into during the regular course of business based on expectations of future needs. Many of these contracts are short term in nature and are flexible to allow for changes in the Company's business and related requirements. As of June 30, 2014, the Company's purchase obligations, including the services related to information technology, totaled $246, $87, $65, $51, $33 and $7 for fiscal years 2015, 2016, 2017, 2018, 2019 and thereafter, respectively.

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

NOTE 16. OTHER EXPENSE (INCOME), NET

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

        2014       2013       2012
Foreign exchange transaction losses, net (Note 1)   $ 11     $ 11     $ 1  
Amortization of trademarks and other intangible assets (Note 6)     8       9       9  
Intangible asset impairment charges (Note 6)     4       -       -  
Income from equity investees           (13 )           (12 )           (11 )
Interest income     (3 )     (3 )     (3 )
Income from transition and related services     (1 )     (3 )     (6 )
Low-income housing partnership gains     -       (4 )     (2 )
Other, net     (4 )     2       (1 )
Total   $ 2     $ -     $ (13 )

Investment in Low-Income Housing Partnerships

The Company owns, directly or indirectly, limited partnership interests in low-income housing partnerships, which are accounted for using the equity method of accounting. The Company's investment balance as of June 30, 2014 and 2013, was $4 and $6, respectively. These partnerships are considered to be variable interest entities; however, the Company does not consolidate them because it does not have the power to direct the partnerships' activities that significantly impact their economic performance. 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. 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. All available tax benefits from low-income housing tax credits provided by the partnerships were claimed as of fiscal year 2012. The risk that previously claimed low-income housing tax credits might be recaptured or otherwise retroactively invalidated is considered remote.

INCOME TAXES
INCOME TAXES

NOTE 17. INCOME TAXES

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

    2014   2013   2012
Current                                    
       Federal   $ 231     $ 247     $ 200  
       State     33       23       12  
       Foreign     45       20       48  
Total current     309       290       260  
Deferred                        
       Federal     (10 )     (10 )     -  
       State     2       (2 )     1  
       Foreign     (2 )     1       (13 )
Total deferred     (10 )     (11 )     (12 )
Total   $      299     $      279     $      248  

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

        2014       2013       2012
United States   $ 756   $ 731   $ 655
Foreign     105     122     136
Total   $       861   $       853   $       791

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

  2014   2013   2012
Statutory federal tax rate      35.0 %            35.0 %            35.0 %
State taxes (net of federal tax benefits) 2.7     1.7     1.1  
Tax differential on foreign earnings (1.3 )   (3.3 )   (2.5 )
Domestic manufacturing deduction (2.4 )   (2.3 )   (2.2 )
Change in Valuation Allowance 2.8     2.0     0.8  
Other differences (2.1 )   (0.4 )   (0.8 )
Effective tax rate 34.7 %   32.7 %   31.4 %

The lower effective tax rate for fiscal year 2013 compared to fiscal year 2014 was primarily due to favorable tax settlements and lower taxes on foreign earnings.

Applicable U.S. income taxes and foreign withholding taxes have not been provided on approximately $186 of undistributed earnings of certain foreign subsidiaries as of June 30, 2014, because these earnings are considered indefinitely reinvested. The net federal income tax liability that could arise if these earnings were not indefinitely reinvested is approximately $50. 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 stock-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, $11, and $10, were realized and recorded to additional paid-in capital for the fiscal years 2014, 2013 and 2012, respectively.

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

  2014   2013
Deferred tax assets                  
       Compensation and benefit programs $ 171     $ 176  
       Basis difference related to Venture Agreement   30       30  
       Accruals and reserves   53       55  
       Inventory costs   20       20  
       Net operating loss and tax credit carryforwards   37       33  
       Other   63       51  
              Subtotal   374       365  
       Valuation allowance   (51 )     (36 )
       Total deferred tax assets   323       329  
 
Deferred tax liabilities              
       Fixed and intangible assets         (269 )           (273 )
       Low-income housing partnerships   (24 )     (23 )
       Unremitted foreign earnings   (8 )     (18 )
       Other   (26 )     (24 )
       Total deferred tax liabilities   (327 )     (338 )
       Net deferred tax liabilities $ (4 )   $ (9 )

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:

  2014       2013
Valuation allowance at beginning of year $ (36 )     $        (20 )
Net decrease in realizability of foreign deferred tax assets          (12 )       (9 )
Net increase in foreign net operating loss carryforward and other   (3 )       (7 )
Valuation allowance at end of year $ (51 )     $ (36 )

As of June 30, 2014, the Company had foreign tax credit carryforwards of $19 for U.S. income tax purposes. Tax credit carryforwards in foreign jurisdictions of $14 have expiration dates in fiscal year 2016. Tax benefits from foreign net operating loss carryforwards of $19 have expiration dates between fiscal years 2016 and 2025. Tax benefits from foreign net operating loss carryforwards of $4 may be carried forward indefinitely.

The Company files income tax returns in the U.S. federal and various state, local and foreign jurisdictions. The federal statute of limitations has expired for all tax years through June 30, 2010. 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, 2014 and 2013, the total balance of accrued interest and penalties related to uncertain tax positions was $11 and $8, respectively. Interest and penalties included in income tax expense resulted in a net expense of $3, a net expense of $1, and a net benefit of $3 in fiscal years 2014, 2013 and 2012, respectively. The following is a reconciliation of the beginning and ending amounts of the Company's gross unrecognized tax benefits:

        2014       2013       2012
Unrecognized tax benefits - July 1   $ 69     $ 80     $ 97  
Gross increases - tax positions in prior periods     3       3       4  
Gross decreases - tax positions in prior periods     (5 )     (19 )     (17 )
Gross increases - current period tax positions     7       7       5  
Gross decreases - current period tax positions     -       -       (1 )
Lapse of applicable statute of limitations     (1 )     (2 )     (2 )
Settlements     (2 )     -       (6 )
Unrecognized tax benefits - June 30   $       71     $       69     $       80  

Included in the balance of unrecognized tax benefits as of June 30, 2014, 2013 and 2012, are potential benefits of $58, $56 and $56, respectively, which if recognized, would affect the effective tax rate on earnings.

In the twelve months succeeding June 30, 2014, it is reasonably possible that up to $30 of other unrecognized tax benefits may be recognized. Audit outcomes and the timing of audit settlements are subject to significant uncertainty.

EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS

NOTE 18. 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, 2014 and 2013, 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 2014, 2013 and 2012. The Company's funding policy for its qualified plans 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.

Contributions made to the domestic nonqualified retirement income plans were $13, $11 and $11 in fiscal years 2014, 2013 and 2012, respectively. Contributions made to the foreign retirement income plans were $2, $1 and $1 in fiscal years 2014, 2013 and 2012, respectively.

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 or stated reimbursements up to a specified dollar subsidy amount. 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 was 7.3% for medical and 7.7% for prescription drugs for fiscal year 2014. 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, $0 and $1 for the fiscal years ended June 30, 2014, 2013 and 2012, 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
        2014       2013       2014       2013
Change in benefit obligations:                                
Projected benefit obligation at beginning of year   $ 612     $ 646     $ 51     $ 63  
       Service cost     3       4       1       1  
       Interest cost     27       24       2       2  
       Actuarial (gain) loss     47       (27 )     (2 )     (9 )
       Plan amendments     -       -       (2 )     (5 )
       Translation and other adjustment     (6 )     -       -       -  
       Benefits paid     (42 )     (35 )     (1 )     (1 )
       Projected benefit obligation at end of year     641       612       49       51  
                                  
Change in plan assets:                                
       Fair value of assets at beginning of year     408       394       -       -  
       Actual return on plan assets     51       37       -       -  
       Employer contributions to nonqualified plans     15       12       1       1  
       Benefits paid     (42 )     (35 )     (1 )     (1 )
Fair value of plan assets at end of year     432       408       -       -  
Accrued benefit cost, net funded status   $       (209 )   $       (204 )   $       (49 )   $       (51 )
 
Amount recognized in the balance sheets consists of:                                
       Pension benefit assets   $ 2     $ -     $ -     $ -  
       Current accrued benefit liability   $ (14 )   $ (17 )   $ (4 )   $ (4 )
       Non-current accrued benefit liability     (197 )     (187 )     (45 )     (47 )
       Accrued benefit cost, net   $ (209 )   $ (204 )   $ (49 )   $ (51 )

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
        2014       2013       2014       2013
Projected benefit obligation   $        538   $        529   $        78   $        80
Accumulated benefit obligation     538     528     78     80
Fair value of plan assets     405     405     -     -

The ABO for all pension plans was $563, $530 and $561 as of June 30, 2014, 2013 and 2012, respectively. The ABO for all retirement income plans increased by $31 in fiscal year 2014, primarily due to a decrease in the discount rate assumption.

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
        2014       2013       2012       2014       2013       2012
Service cost   $ 3     $ 4     $ -     $ 1     $ 1     $ 1  
Interest cost     27       24       29       2       2       3  
Expected return on plan assets     (25 )     (29 )     (31 )     -       -       -  
Amortization of unrecognized items     11       12       8       (4 )     (2 )     (3 )
Total   $       16     $       11     $       6     $       (1 )   $       1     $       1  

Items not yet recognized as a component of postretirement expense as of June 30, 2014, consisted of:

    Retirement
Income
  Retirement
Health Care
Net actuarial loss (gain)       $ 247         $ (29 )
Prior service cost (benefit)     1       (9 )
Net deferred income tax (assets) liabilities     (92 )     14  
Accumulated other comprehensive loss (income)   $       156     $          (24 )

Net actuarial loss (gain) recorded in accumulated other comprehensive net losses for the fiscal year ended June 30, 2014, included the following:

    Retirement
Income
  Retirement
Health Care
Net actuarial loss (gain) at beginning of year       $ 239         $ (29 )
Amortization during the year     (11 )     2  
Loss (gain) during the year     19       (2 )
Net actuarial loss (gain) at end of year   $          247     $          (29 )

The Company uses the straight-line amortization method for unrecognized prior service costs and benefits. In fiscal year 2015, the Company expects to recognize, on a pre-tax basis, approximately less than $1 of the prior service cost and $11 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 $3 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
        2014       2013       2014       2013
Discount rate   4.05 %   4.39 %   4.00 %   4.33 %
Rate of compensation increase   4.46 %   3.44 %   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
        2014       2013       2012
Discount rate        4.39 %        3.87 %        5.31 %
Rate of compensation increase   3.44 %   3.71 %   3.93 %
Expected return on plan assets   6.61 %   7.50 %   8.12 %
 
    Retirement Health Care
    2014   2013   2012
Discount rate   4.33 %   3.86 %   5.29 %

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, 2014, were as follows:

    Retirement
Income
  Retirement
Health Care
2015       $ 38       $ 4
2016     39     4
2017     40     3
2018     41     3
2019     39     3
Fiscal years 2020 through 2024     196     13

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
        2014       2013       2014       2013
U.S. equity           11 %           20 %           11 %   20 %
International equity   12     21     12     21  
Fixed income   74     54     74     54  
Other   3     5     3     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:

    2014
        Level 1       Level 2       Total
Cash equivalents   $ 3   $ -   $ 3
Common collective trusts                  
       Bond funds     -     309     309
       International equity funds     -     64     64
       Domestic equity funds     -     44     44
       Real Estate fund     -     12     12
Total common collective trusts     -     429     429
Total assets at fair value   $ 3   $ 429   $ 432
   
    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

The carrying value of cash equivalents approximates its fair value as of June 30, 2014 and 2013.

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, 2014 and 2013.

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, The Clorox Company 2011 Nonqualified Defined Benefit Plan and the Executive Retirement Plan. The aggregate cost of the domestic defined contribution plans was $43, $45 and $50 in fiscal years 2014, 2013 and 2012, respectively. Included in the aggregate cost was the cost of The Clorox Company 401(k) Plan of $38, $40 and $46 in fiscal years 2014, 2013 and 2012, respectively. The Company also has defined contribution plans for certain international employees. The aggregate cost of these foreign plans was $3, $1 and $1 for the fiscal years ended June 30, 2014, 2013 and 2012, respectively.

SEGMENT REPORTING
SEGMENT REPORTING

NOTE 19. 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 Healthcare® 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® brand.
  • 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.

Venezuela

Net sales from the Company's Venezuela subsidiary (the Venezuela business) represented approximately 1%, 2% and 2% of the Company's consolidated net sales for the fiscal years ended June 30, 2014, 2013 and 2012, respectively. The operating environment in Venezuela is challenging, with high inflation, political instability, governmental restrictions in the form of currency exchange, price and margin controls, and the possibility of government actions such as further devaluations, business occupations or intervention and expropriation of assets. In addition, the foreign exchange controls in Venezuela limit the Venezuela business's ability to remit dividends and pay intercompany balances.

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

On February 8, 2013, the Venezuelan government announced a devaluation of its currency exchange commission (CADIVI) rate from 4.3 to 6.3 bolivares 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 to translate the financial statements of the Venezuela business.

In March 2013, the Venezuelan government announced the creation of a new alternative currency exchange system, a government-controlled auction process referred to as SICAD I, whereby companies meeting certain qualifications may periodically bid to acquire USD. In January 2014, the Venezuelan government announced further changes to the regulations governing the currency exchange systems. Among the changes was the creation of a new government agency, CENCOEX, to administer the currency exchange mechanism previously administered by CADIVI.

In February 2014, the Venezuelan government established another currency exchange mechanism, SICAD II, that provides an additional method to exchange VEF at exchange rates significantly higher than the CENCOEX and SICAD I rates. As of June 30, 2014, the posted rate of the SICAD II exchange system was 50.0 VEF per USD.

Based on an analysis of the published exchange regulations and an assessment of currency requirements applicable to the Venezuela business, the Company has concluded that the SICAD I rate is currently the most appropriate rate for it to use for financial reporting purposes. The Company began using the SICAD I rate to record the results of business operations and remeasure the gain or loss on non-USD monetary assets and liabilities in Venezuela beginning on March 1, 2014. As a result, the Company recorded a non-tax deductible remeasurement loss of $10 for the year ended June 30, 2014, reflecting the effective devaluation from the CENCOEX rate of 6.3 to the June 30, 2014 posted SICAD I rate of 10.6.

As of June 30, 2014, using the SICAD I rate of 10.6, the Venezuela business had total assets of $68 including cash and cash equivalents of $5, a long-term value added tax (VAT) receivable from the Venezuelan government of $9, inventories of $11, net property, plant and equipment of $16, and intangible assets excluding goodwill of $6. Goodwill for Venezuela is aggregated and assessed for impairment at the Latin America reporting unit level, which is a component of the Company's International segment. Based on the results of the annual impairment test performed in the fourth quarter of fiscal year 2014, the fair value of the Latin America reporting unit exceeded its recorded value by more than 40%. The Venezuela subsidiary operated at a profit for the years ended June 30, 2012 and 2013. The subsidiary operated at a loss for the fiscal year ended June 30, 2014, including a reduction of 14 cents diluted net earnings per share (EPS) due to the remeasurement losses described above, impairment charges on trademark values (Note 6 - Goodwill, Trademarks and Other Intangible Assets), and other charges related to the effective devaluation of the Venezuelan currency.

Considerable uncertainty remains regarding the viability of these currency exchanges, the availability of USD under these exchanges, and whether a new system will emerge. The Company is monitoring developments to assess the implications of these systems for business operations, future cash flow and financial reporting for the Venezuela business.

Argentina

The operating environment in Argentina also presents business challenges, including price controls on some of the Company's products, a devaluing currency and inflation. For the fiscal years ended June 30, 2014, 2013 and 2012, the value of the Argentine peso (ARS) per USD declined 34%, 16% and 9%, respectively. In addition, in July 2014, the Argentine government defaulted on debt payment agreements. As of June 30, 2014, using an exchange rate of 8.1 ARS per USD, the Company's Argentina subsidiary had total assets of $105, including cash and cash equivalents of $25, net receivables of $20, inventories of $15, net property, plant and equipment of $20 and intangible assets excluding goodwill of $5. Goodwill for Argentina is aggregated and assessed for impairment at the Latin America reporting unit level, which is a component of the Company's International segment. Based on the results of the annual impairment test performed in the fourth quarter of fiscal year 2014, the fair value of the Latin America reporting unit exceeded its recorded value by more than 40%. Net sales from the Company's Argentina subsidiary represented approximately 3% of the Company's consolidated net sales for each of the fiscal years ended June 30, 2014, 2013 and 2012. The Company is closely monitoring developments in Argentina and is taking steps intended to mitigate the adverse conditions.

    Fiscal
Year
  Cleaning   Household   Lifestyle   International   Corporate   Total
Company
Net sales       2014       $       1,776       $       1,709       $       936       $       1,170       $ -       $       5,591
    2013     1,783     1,693     929     1,218     -     5,623
    2012     1,692     1,676     901     1,199     -     5,468
 
Earnings (losses) from continuing                                        
       operations before income taxes   2014     428     326     258     76     (227 )   861
    2013     420     336     259     96     (258 )   853
    2012     381     298     265     119     (272 )   791
 
Income from equity investees   2014     -     -     -     13     -     13
    2013     -     -     -     12     -     12
    2012     -     -     -     11     -     11
 
Total assets   2014     887     745     869     1,190     567     4,258
    2013     905     799     878     1,202     527     4,311
 
Capital expenditures   2014     37     53     11     32     5     138
    2013     57     72     19     28     18     194
    2012     63     79     18     32     -     192
 
Depreciation and amortization   2014     49     67     19     28     17     180
    2013     52     69     19     28     14     182
    2012     45     73     18     25     17     178
 
Significant noncash charges included                                        
       in earnings (losses) from continuing                                        
       operations before income taxes:                                        
              Share-based compensation   2014     11     9     5     1     10     36
    2013     10     9     5     1     10     35
    2012     13     12     6     1     (5 )   27

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% of consolidated net sales for each of the fiscal years ended 2014, 2013 and 2012, 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 2014, 2013 and 2012, the Company's five largest customers accounted for 45%, 45% 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. In fiscal years 2014, 2013 and 2012, sales of liquid bleach represented approximately 13%, 14% and 14% of the Company's consolidated net sales, respectively, approximately 26%, 26% and 26% of net sales in the Cleaning segment, respectively, and approximately 27%, 28% 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 2014, 2013 and 2012, approximately 36%, 37% and 35% of net sales in the Household segment and approximately 8%, 10% and 10% of net sales in the International segment, respectively. Sales of charcoal represented approximately 11%, 10% and 11% of the Company's consolidated net sales and approximately 34%, 32% and 35% of net sales in the Household segment in fiscal years 2014, 2013 and 2012, 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       2014       $       4,466       $       1,125       $       5,591
    2013     4,448     1,175     5,623
    2012     4,316     1,152     5,468
 
Property, plant and equipment, net   2014   $ 825   $ 152   $ 977
    2013     860     161     1,021
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

NOTE 20. RELATED PARTY TRANSACTIONS

The Company holds various equity investments with ownership percentages of up to 50% in a number of consumer products businesses, most of which operate outside the United States. The Company has no ongoing capital commitments, loan requirements, guarantees or any other types of arrangements under the terms of its agreements that would require any future cash contributions or disbursements arising out of an equity investment.

Transactions with the Company's equity investees typically represent payments for contract manufacturing and purchases of raw materials. Payments to related parties, including equity investees, for such transactions during the fiscal years ended June 30, 2014, 2013 and 2012 were $57, $50 and $49, respectively. Receipts from and ending accounts receivable and payable balances related to the Company's related parties were not significant during and as of the end of each of the fiscal years presented.

UNAUDITED QUARTERLY DATA
UNAUDITED QUARTERLY DATA

NOTE 21. UNAUDITED QUARTERLY DATA

    Quarters Ended    
        September 30       December 31       March 31       June 30       Total Year
Fiscal year ended June 30, 2014                                        
Net sales   $       1,364     $       1,330     $       1,386     $       1,511     $       5,591  
Cost of products sold   $ 779     $ 773     $ 807     $ 872     $ 3,231  
Earnings from continuing operations   $ 137     $ 116     $ 139     $ 170     $ 562  
Losses from discontinued operations,                                        
       net of tax   $ (1 )   $ (1 )   $ (2 )   $ -     $ (4 )
Net earnings   $ 136     $ 115     $ 137     $ 170     $ 558  
Per common share:                                        
       Basic                                        
              Continuing operations   $ 1.05     $ 0.90     $ 1.06     $ 1.32     $ 4.34  
              Discontinued operations     (0.01 )     (0.01 )     (0.01 )     (0.01 )     (0.03 )
              Basic net earnings per share   $ 1.04     $ 0.89     $ 1.05     $ 1.31     $ 4.31  
       Diluted                                        
              Continuing operations   $ 1.04     $ 0.88     $ 1.05     $ 1.30     $ 4.26  
              Discontinued operations     (0.01 )     (0.01 )     (0.01 )     (0.01 )     (0.03 )
              Diluted net earnings per share   $ 1.03     $ 0.87     $ 1.04     $ 1.29     $ 4.23  
Dividends declared per common share   $ 0.71     $ 0.71     $ 0.71     $ 0.74     $ 2.87  
Market price (NYSE)                                        
       High   $ 87.60     $ 96.76     $ 92.75     $ 93.43     $ 96.76  
       Low     81.25       80.20       83.70       86.56       80.20  
       Year-end                                     91.40  
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
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, 2014   $ (5 )   $ -     $ 2   $ -   $ (3 )
       Year ended June 30, 2013     (7 )     -       2     -     (5 )
       Year ended June 30, 2012     (5 )     (3 )     1     -     (7 )
LIFO allowance                                    
       Year ended June 30, 2014   $ (40 )   $ -     $ 3   $ 1   $ (36 )
       Year ended June 30, 2013     (37 )     (3 )     -     -     (40 )
       Year ended June 30, 2012     (29 )     (8 )     -     -     (37 )
Valuation allowance on deferred tax assets                                    
       Year ended June 30, 2014   $ (36 )   $ (25 )   $ -   $ 10   $ (51 )
       Year ended June 30, 2013     (20 )     (16 )     -     -     (36 )
       Year ended June 30, 2012     (14 )     (6 )     -     -     (20 )
Allowance for inventory obsolescence                                    
       Year ended June 30, 2014   $           (11 )   $           (13 )   $           -   $           10   $           (14 )
       Year ended June 30, 2013     (10 )     (12 )     -     11     (11 )
       Year ended June 30, 2012     (11 )     (13 )     -     14     (10 )
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 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 the 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, stock-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

In May 2014, the Financial Accounting Standards Board (FASB) issued an update to current accounting standards, which establishes a single, comprehensive revenue recognition model for all contracts with customers, and will supersede most current revenue recognition guidance. It requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for the Company beginning in the first quarter of fiscal year 2018. Early adoption is not permitted. The Company is currently in the process of evaluating the impact of the adoption of these requirements on its consolidated financial statements.

In April 2014, the FASB issued an update to current accounting standards, which will change the criteria for reporting discontinued operations. The amendments will also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments are effective for the Company for new disposals (or classifications as held for sale) of components of the Company, should they occur, beginning in the first quarter of fiscal year 2016. Early adoption is permitted for disposals (or classifications as held for sale) that have not been previously reported.

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 expense (income), net. The Company's cash holdings were as follows as of June 30:

        2014       2013
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent   $      180   $      130
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     132     115
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     12     36
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries     5     18
Total   $ 329   $ 299

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 or lives determined by lease contracts of the related assets. The table below provides estimated useful lives of property, plant and equipment by asset classification.

        Estimated
Useful Lives
Buildings and leasehold improvements   10 - 40 years
Land improvements   10 - 30 years
Machinery and equipment   3 - 15 years
Computer equipment   3 - 5 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 fully recoverable. The risk of impairment is initially assessed 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 expense was $22, $21 and $18, in fiscal years 2014, 2013 and 2012, 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 for impairment 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 maturity and stability of the reporting unit, magnitude of excess fair value over book value from past year's impairment testing, other 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 of a reporting unit, 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 the 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 a quantitative analysis to test for impairment and compares the estimated fair value of an asset 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 or income 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.

Stock-based Compensation

The Company grants various nonqualified stock-based compensation awards to eligible employees, 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. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative catch-up adjustment in the period of change. Compensation 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 stock-based payment arrangements (excess tax benefits) are classified as financing cash inflows.

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 or expected lifetime (for frozen plans) 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 or expected lifetime (for frozen plans) 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 related to these programs for the estimated expenses incurred, but not paid, at the end of each period. Trade-promotion and coupon redemption 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 $3 and $5 as of June 30, 2014 and 2013, respectively. The Company's provision for doubtful accounts was $0, $0 and $3 in fiscal years 2014, 2013 and 2012, respectively.

Receivables, net, included non-customer receivables of $15 and $13 as of June 30, 2014 and 2013, 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, direct and indirect labor and operating costs for the Company's manufacturing and distribution facilities including salary, benefit costs and incentive compensation, and royalties and amortization related to the Company's Glad Venture Agreement (see Note 10 - Other Liabilities).

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, 2014, 2013 and 2012 were $12, $10 and $10, respectively, all of which were reflected in cost of products sold in the consolidated statements of earnings.

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 expense (income), 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 expense (income), net. Except for Venezuela as discussed below, assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, while 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.

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

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 expense (income), 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)
        2014       2013
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent   $      180   $      130
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     132     115
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries     12     36
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries     5     18
Total   $ 329   $ 299
        Estimated
Useful Lives
Buildings and leasehold improvements   10 - 40 years
Land improvements   10 - 30 years
Machinery and equipment   3 - 15 years
Computer equipment   3 - 5 years
Capitalized software costs   3 - 7 years
INVENTORIES, NET (Tables)
Schedule of Inventories, Net
  2014       2013
Finished goods $       321     $       321  
Raw materials and packaging   113       121  
Work in process   2       3  
LIFO allowances   (36 )     (40 )
Allowances for obsolescence   (14 )     (11 )
Total $ 386     $ 394  
OTHER CURRENT ASSETS (Tables)
Other Current Assets
  2014       2013
Deferred tax assets $      81   $      87
Prepaid expenses   42     41
Other   11     19
Total $ 134   $ 147
PROPERTY, PLANT AND EQUIPMENT, NET (Tables)
Schedule of Property, Plant and Equipment, Net
        2014       2013
Machinery and equipment   $      1,593     $      1,590  
Buildings     506       485  
Capitalized software costs     374       362  
Land and improvements     122       119  
Construction in progress     79       96  
Computer equipment     79       80  
      2,753       2,732  
Less: accumulated depreciation and amortization     (1,776 )     (1,711 )
Total   $ 977     $ 1,021  
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS (Tables)
    Goodwill
        Cleaning       Lifestyle       Household       International       Total
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  
Translation adjustments and other     -     -     -     (4 )     (4 )
Balance June 30, 2014   $ 323   $ 244   $ 85   $ 449     $ 1,101  
    Trademarks   Other intangible assets
        Subject to
amortization
      Not subject to
amortization
      Total       Technology
and product
formulae
      Other       Total
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  
Acquisitions and other additions     -       -       -       -       5       5  
Amortization     (1 )     -       (1 )     (9 )     (6 )     (15 )
Impairment     -       (4 )     (4 )     -       -       -  
Translation adjustments and other     (1 )     -       (1 )     -       -       -  
Balance June 30, 2014   $ 14     $ 533     $ 547     $ 10     $ 54     $ 64  
ACCRUED LIABILITIES (Tables)
Accrued Liabilities
  2014       2013
Trade and sales promotion $      113   $      116
Compensation and employee benefit costs   102     152
Dividends   100     96
Interest   27     27
Insurance   18     20
Derivatives   17     3
Royalties   11     11
Other   84     65
Total $ 472   $ 490
DEBT (Tables)
  2014       2013
Commercial paper $      141   $      200
Foreign borrowings   2