Table of
Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) |
☒ |
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the quarterly period
ended March 31, 2015. |
|
|
|
OR |
|
|
☐ |
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For
the transition period
from
to
Commission File
Number: 1-07151
_________________________
THE CLOROX
COMPANY
(Exact name of
registrant as specified in its charter)
Delaware |
31-0595760 |
(State or other jurisdiction
of |
(I.R.S. Employer Identification
No.) |
incorporation or
organization) |
|
|
1221
Broadway |
|
Oakland,
California |
94612-1888 |
(Address of principal executive
offices) |
(Zip
code) |
(510)
271-7000 |
(Registrant's telephone number,
including area code) |
|
(Former name, former address and
former fiscal year, if changed since last report) |
_________________________ |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by
check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☑ No ☐
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See definitions
of large accelerated filer accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☑ |
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller Reporting Company ☐ |
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☑
As of April 20, 2015, there
were 131,178,212 shares outstanding of the registrants common stock ($1.00
par value).
Table of
Contents
The Clorox Company
2
Table of
Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The Clorox Company
Condensed Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
(Dollars in millions, except per share amounts)
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Net
sales |
|
$ |
1,401 |
|
|
$ |
1,366 |
|
|
$ |
4,098 |
|
|
$ |
4,017 |
|
Cost
of products sold |
|
|
796 |
|
|
|
791 |
|
|
|
2,343 |
|
|
|
2,303 |
|
Gross profit |
|
|
605 |
|
|
|
575 |
|
|
|
1,755 |
|
|
|
1,714 |
|
|
Selling and administrative expenses |
|
|
206 |
|
|
|
178 |
|
|
|
577 |
|
|
|
568 |
|
Advertising costs |
|
|
124 |
|
|
|
120 |
|
|
|
372 |
|
|
|
362 |
|
Research and development costs |
|
|
34 |
|
|
|
28 |
|
|
|
97 |
|
|
|
90 |
|
Interest expense |
|
|
25 |
|
|
|
25 |
|
|
|
77 |
|
|
|
77 |
|
Other income, net |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
- |
|
|
|
(4 |
) |
Earnings from continuing operations before
income taxes |
|
|
217 |
|
|
|
226 |
|
|
|
632 |
|
|
|
621 |
|
Income taxes on continuing operations |
|
|
73 |
|
|
|
75 |
|
|
|
215 |
|
|
|
213 |
|
Earnings from continuing operations |
|
|
144 |
|
|
|
151 |
|
|
|
417 |
|
|
|
408 |
|
Earnings (losses) from discontinued operations,
net of tax |
|
|
30 |
|
|
|
(14 |
) |
|
|
(28 |
) |
|
|
(20 |
) |
Net
earnings |
|
$ |
174 |
|
|
$ |
137 |
|
|
$ |
389 |
|
|
$ |
388 |
|
|
Net
earnings (losses) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
1.09 |
|
|
$ |
1.16 |
|
|
$ |
3.20 |
|
|
$ |
3.15 |
|
Discontinued
operations |
|
|
0.22 |
|
|
|
(0.11 |
) |
|
|
(0.22 |
) |
|
|
(0.16 |
) |
Basic
net earnings per share |
|
$ |
1.31 |
|
|
$ |
1.05 |
|
|
$ |
2.98 |
|
|
$ |
2.99 |
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
1.08 |
|
|
$ |
1.14 |
|
|
$ |
3.14 |
|
|
$ |
3.10 |
|
Discontinued
operations |
|
|
0.22 |
|
|
|
(0.10 |
) |
|
|
(0.21 |
) |
|
|
(0.16 |
) |
Diluted
net earnings per share |
|
$ |
1.30 |
|
|
$ |
1.04 |
|
|
$ |
2.93 |
|
|
$ |
2.94 |
|
|
Weighted average shares outstanding (in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
131,833 |
|
|
|
129,318 |
|
|
|
130,566 |
|
|
|
129,743 |
|
Diluted |
|
|
134,115 |
|
|
|
131,555 |
|
|
|
133,090 |
|
|
|
132,004 |
|
|
Dividends declared per share |
|
$ |
0.74 |
|
|
$ |
0.71 |
|
|
$ |
2.22 |
|
|
$ |
2.13 |
|
|
Comprehensive income |
|
$ |
146 |
|
|
$ |
106 |
|
|
$ |
325 |
|
|
$ |
337 |
|
See Notes to Condensed
Consolidated Financial Statements
3
Table of Contents
The Clorox Company
Condensed Consolidated Balance Sheets
(Dollars in millions, except per
share amounts)
|
|
3/31/2015 |
|
6/30/2014 |
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
378 |
|
|
$ |
329 |
|
Receivables,
net |
|
|
528 |
|
|
|
546 |
|
Inventories |
|
|
440 |
|
|
|
386 |
|
Other
current assets |
|
|
149 |
|
|
|
134 |
|
Total
current assets |
|
|
1,495 |
|
|
|
1,395 |
|
Property, plant and equipment, net of
accumulated depreciation |
|
|
|
|
|
|
|
|
and
amortization of $1,824 and $1,776, respectively |
|
|
917 |
|
|
|
977 |
|
Goodwill |
|
|
1,067 |
|
|
|
1,101 |
|
Trademarks, net |
|
|
535 |
|
|
|
547 |
|
Other intangible assets, net |
|
|
52 |
|
|
|
64 |
|
Other assets |
|
|
162 |
|
|
|
174 |
|
Total assets |
|
$ |
4,228 |
|
|
$ |
4,258 |
|
|
LIABILITIES AND STOCKHOLDERS
EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Notes
and loans payable |
|
$ |
70 |
|
|
$ |
143 |
|
Current
maturities of long-term debt |
|
|
300 |
|
|
|
575 |
|
Accounts
payable |
|
|
397 |
|
|
|
440 |
|
Accrued
liabilities |
|
|
533 |
|
|
|
472 |
|
Income
taxes payable |
|
|
- |
|
|
|
8 |
|
Total
current liabilities |
|
|
1,300 |
|
|
|
1,638 |
|
Long-term debt |
|
|
1,796 |
|
|
|
1,595 |
|
Other liabilities |
|
|
733 |
|
|
|
768 |
|
Deferred income taxes |
|
|
97 |
|
|
|
103 |
|
Total
liabilities |
|
|
3,926 |
|
|
|
4,104 |
|
|
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 both March 31, 2015 and June 30, 2014; and 131,013,553 and
128,796,228 |
|
|
|
|
|
|
|
|
shares
outstanding at March 31, 2015 and June 30, 2014, respectively |
|
|
159 |
|
|
|
159 |
|
Additional paid-in capital |
|
|
762 |
|
|
|
709 |
|
Retained earnings |
|
|
1,832 |
|
|
|
1,739 |
|
Treasury shares, at cost: 27,727,908 and
29,945,233 shares |
|
|
|
|
|
|
|
|
at
March 31, 2015 and June 30, 2014, respectively |
|
|
(1,970 |
) |
|
|
(2,036 |
) |
Accumulated other comprehensive net
loss |
|
|
(481 |
) |
|
|
(417 |
) |
Stockholders equity |
|
|
302 |
|
|
|
154 |
|
Total liabilities and stockholders
equity |
|
$ |
4,228 |
|
|
$ |
4,258 |
|
See Notes to Condensed Consolidated Financial Statements
4
Table of Contents
The Clorox Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars
in millions)
|
|
Nine Months
Ended |
|
|
3/31/2015 |
|
3/31/2014 |
Operating activities: |
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
389 |
|
|
$ |
388 |
|
Deduct: Loss from
discontinued operations, net of tax |
|
|
(28 |
) |
|
|
(20 |
) |
Earnings from
continuing operations |
|
|
417 |
|
|
|
408 |
|
Adjustments to
reconcile earnings from continuing operations to net cash |
|
|
|
|
|
|
|
|
provided
by continuing operations: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
126 |
|
|
|
131 |
|
Share-based
compensation |
|
|
21 |
|
|
|
29 |
|
Deferred
income taxes |
|
|
(6 |
) |
|
|
5 |
|
Settlement
of interest rate forward contracts |
|
|
(25 |
) |
|
|
- |
|
Other |
|
|
(6 |
) |
|
|
(5 |
) |
Changes
in: |
|
|
|
|
|
|
|
|
Receivables,
net |
|
|
3 |
|
|
|
22 |
|
Inventories |
|
|
(77 |
) |
|
|
(59 |
) |
Other
current assets |
|
|
1 |
|
|
|
(4 |
) |
Accounts
payable and accrued liabilities |
|
|
37 |
|
|
|
(38 |
) |
Income
taxes payable |
|
|
(10 |
) |
|
|
(45 |
) |
Net
cash provided by continuing operations |
|
|
481 |
|
|
|
444 |
|
Net cash provided by (used for)
discontinued operations |
|
|
14 |
|
|
|
(14 |
) |
Net
cash provided by operations |
|
|
495 |
|
|
|
430 |
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(83 |
) |
|
|
(87 |
) |
Other |
|
|
3 |
|
|
|
(1 |
) |
Net
cash used for continuing operations |
|
|
(80 |
) |
|
|
(88 |
) |
Net cash used for discontinued
operations |
|
|
- |
|
|
|
(1 |
) |
Net
cash used for investing activities |
|
|
(80 |
) |
|
|
(89 |
) |
|
Financing activities: |
|
|
|
|
|
|
|
|
Notes and loans
payable, net |
|
|
(73 |
) |
|
|
191 |
|
Long-term debt
borrowings, net of issuance costs |
|
|
496 |
|
|
|
- |
|
Long-term debt
repayments |
|
|
(575 |
) |
|
|
- |
|
Treasury stock
purchased |
|
|
(144 |
) |
|
|
(260 |
) |
Cash dividends
paid |
|
|
(288 |
) |
|
|
(277 |
) |
Issuance of common
stock for employee stock plans and other |
|
|
236 |
|
|
|
79 |
|
Net
cash used for continuing operations |
|
|
(348 |
) |
|
|
(267 |
) |
Net cash used for discontinued
operations |
|
|
- |
|
|
|
- |
|
Net
cash used for financing activities |
|
|
(348 |
) |
|
|
(267 |
) |
|
Effect of exchange rate changes on
cash and cash equivalents |
|
|
(18 |
) |
|
|
(9 |
) |
Net
increase in cash and cash equivalents |
|
|
49 |
|
|
|
65 |
|
Cash and cash
equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
329 |
|
|
|
299 |
|
End of period |
|
$ |
378 |
|
|
$ |
364 |
|
See Notes to Condensed Consolidated Financial
Statements
5
Table of
Contents
The Clorox
Company
Notes to Condensed
Consolidated Financial Statements (Unaudited)
(Dollars in millions, except
per share amounts)
NOTE 1. INTERIM FINANCIAL
STATEMENTS
Basis of
Presentation
The unaudited interim
condensed consolidated financial statements for the three and nine months ended
March 31, 2015 and 2014, in the opinion of management, reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
the consolidated results of operations, financial position and cash flows of The
Clorox Company and its subsidiaries (the Company) for the periods presented. The
results for the interim period ended March 31, 2015, are not necessarily
indicative of the results that may be expected for the fiscal year ending June
30, 2015, or for any other future period.
Effective September 22, 2014,
the Companys Venezuela affiliate, Corporación Clorox de Venezuela S.A. (Clorox
Venezuela), discontinued its operations. Consequently, for the three and nine
months ended March 31, 2015 and 2014, Clorox Venezuela is reflected as a
discontinued operation in the Companys financial statements.
Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles in the United States of
America (U.S. GAAP) have been omitted or condensed pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). The information in
this report should be read in conjunction with the Companys audited financial
statements for the fiscal year ended June 30, 2014, which includes a complete
set of footnote disclosures, including the Companys significant accounting
policies, filed with the SEC in Exhibit 99.2 of the Companys Current Report on
Form 8-K on December 4, 2014.
Recently Issued Accounting
Pronouncements
In April 2015, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2015-03, Simplifying the Presentation of Debt Issuance Cost, which
requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The new guidance is
effective for the Company beginning in the first quarter of fiscal year 2017,
with early adoption permitted. The Company is currently evaluating the impact
that adoption of ASU 2015-03 will have on its consolidated financial statements.
In May 2014, the FASB issued
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which
replaces most existing U.S. GAAP revenue recognition guidance and is intended to
improve and converge with international standards the financial reporting
requirements for revenue from contracts with customers. The core principle of
ASU 2014-09 is that an entity should recognize revenue for the transfer of goods
or services equal to the amount that it expects to be entitled to receive for
those goods or services. ASU 2014-09 also requires additional disclosures about
the nature, timing and uncertainty of revenue and cash flows arising from
contracts with customers, including information about significant judgments and
changes in judgments. The new guidance is expected to be effective for the
Company beginning in the first quarter of fiscal year 2018, with no early
adoption permitted. The Company is currently evaluating the impact that adoption
of ASU 2014-09 will have on its consolidated financial statements.
In April 2014, the FASB issued
ASU No. 2014-08 Reporting Discontinued Operations and Disclosures of Disposals
of Components of an Entity (Topic 205), 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. The
Company will adopt this ASU beginning in the first quarter of fiscal year 2016,
as required. Adoption of the new standard will not impact the Companys
reporting or disclosures for discontinued operations of Clorox Venezuela.
6
Table of
Contents
NOTE 2. DISCONTINUED
OPERATIONS
On September 22, 2014, Clorox
Venezuela announced that it was discontinuing its operations, effective
immediately, and seeking to sell its assets. Since fiscal year 2012, Clorox
Venezuela was required to sell more than two thirds of its products at prices
frozen by the Venezuelan government. During this same period, Clorox Venezuela
experienced successive years of hyperinflation resulting in significant
sustained increases in its input costs, including packaging, raw materials,
transportation and wages. As a result, Clorox Venezuela had been selling its
products at a loss, resulting in ongoing operating losses. Clorox Venezuela
repeatedly met with government authorities in an effort to help them understand
the rapidly declining state of the business, including the need for immediate,
significant and ongoing price increases and other critical remedial actions to
address these adverse impacts. Based on the Venezuelan governments
representations, Clorox Venezuela had expected significant price increases would
be forthcoming much earlier; however, the price increases subsequently approved
were insufficient and would have caused Clorox Venezuela to continue operating
at a significant loss into the foreseeable future. As such, Clorox Venezuela was
no longer financially viable and was forced to discontinue its
operations.
On September 26, 2014, the
Company reported that Venezuelan Vice President Jorge Arreaza announced, with
endorsement by President Nicolás Maduro, that the Venezuelan government had
occupied the Santa Lucía and Guacara production facilities of Clorox Venezuela.
On November 6, 2014, the Company reported that the Venezuelan government had
published a resolution granting a government-sponsored Special Administrative
Board full authority to restart and operate the business formerly operated by
Clorox Venezuela, thereby reaffirming the governments expropriation of Clorox
Venezuelas assets. Further, President Nicolás Maduro announced the governments
intention to facilitate the resumed production of bleach and other cleaning
products at Clorox Venezuela plants. He also announced his approval of a
financial credit to invest in raw materials and production at the plants. These
actions by the Venezuelan government were taken without the consent or
involvement of Clorox Venezuela, its parent Clorox Spain S.L. (Clorox Spain) or
any of their affiliates. Clorox Venezuela, Clorox Spain and their affiliates
reserved their rights under all applicable laws and treaties.
With this exit, the financial
results of Clorox Venezuela are reflected as discontinued operations in the
Companys condensed consolidated financial statements. The results of Clorox Venezuela
have historically been part of the International reportable segment.
Net sales for Clorox Venezuela
were $0 and $11 for the three and nine months ended March 31, 2015,
respectively, and $20 and $63 for the three and nine months ended March 31,
2014, respectively.
The following table provides a
summary of benefits (losses) from discontinued operations for Clorox Venezuela
and gains (losses) from discontinued operations other than Clorox Venezuela for
the periods indicated:
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Operating losses from Clorox Venezuela |
|
$ |
- |
|
$ |
(12 |
) |
|
$ |
(6 |
) |
|
$ |
(18 |
) |
Exit
costs and other related expenses for Clorox Venezuela |
|
|
- |
|
|
- |
|
|
|
(77 |
) |
|
|
- |
|
Total losses from Clorox Venezuela before income
taxes |
|
|
- |
|
|
(12 |
) |
|
|
(83 |
) |
|
|
(18 |
) |
Income tax benefit attributable to Clorox Venezuela |
|
|
- |
|
|
- |
|
|
|
25 |
|
|
|
2 |
|
Total losses from Clorox Venezuela, net of tax |
|
|
- |
|
|
(12 |
) |
|
|
(58 |
) |
|
|
(16 |
) |
|
Gains (losses) from discontinued operations other
than Clorox Venezuela,
net of tax |
|
|
30 |
|
|
(2 |
) |
|
|
30 |
|
|
|
(4 |
) |
Gains (losses) from discontinued operations, net of
tax |
|
$ |
30 |
|
$ |
(14 |
) |
|
$ |
(28 |
) |
|
$ |
(20 |
) |
Unrelated to Clorox Venezuela,
in the three months ended March 31, 2015, $30 of gross unrecognized tax benefits
relating to other discontinued operations for periods prior to fiscal year 2015
were recognized upon the expiration of the applicable statute of limitations.
Recognition of these previously disclosed tax benefits had no impact on the
Companys cash flow or earnings from continuing operations for the three or nine
months ended March 31, 2015. See Note 9 Income Taxes below.
7
Table of
Contents
NOTE 2. DISCONTINUED
OPERATIONS (Continued)
Summary of Operating
Losses, Asset Charges and Other Costs
The following provides a
breakdown of benefits (losses) from discontinued operations for Clorox Venezuela
and gains (losses) from discontinued operations other than Clorox Venezuela for
the periods indicated:
|
Three Months
Ended |
|
Nine Months
Ended |
|
3/31/2015 |
|
3/31/2015 |
Operating losses from Clorox Venezuela |
$ |
- |
|
|
$ |
(6 |
) |
Net
asset charges: |
|
|
|
|
|
|
|
Inventories |
|
- |
|
|
|
(11 |
) |
Property, plant and
equipment |
|
- |
|
|
|
(16 |
) |
Trademark and other
intangible assets |
|
- |
|
|
|
(6 |
) |
Other
assets |
|
1 |
|
|
|
(3 |
) |
Other exit and business termination costs: |
|
|
|
|
|
|
|
Severance |
|
- |
|
|
|
(3 |
) |
Recognition of
deferred foreign currency translation loss |
|
- |
|
|
|
(30 |
) |
Other |
|
(1 |
) |
|
|
(8 |
) |
Total losses from Clorox Venezuela before income
taxes |
|
- |
|
|
|
(83 |
) |
Income tax benefit attributable to Clorox Venezuela |
|
- |
|
|
|
25 |
|
Total losses from Clorox Venezuela, net of tax |
|
- |
|
|
|
(58 |
) |
|
Gains from discontinued operations other than Clorox Venezuela,
net of tax |
|
30 |
|
|
|
30 |
|
Gains (losses) from discontinued operations, net of
tax |
$ |
30 |
|
|
$ |
(28 |
) |
Prior to Clorox Venezuela
being consolidated under the rules governing the preparation of financial
statements in a highly inflationary economy, cumulative translation gains
(losses) were included as a component of accumulated other comprehensive net
loss. The charge of $30 to discontinued operations in September 2014 represents
the recognition of these losses as a result of Clorox Venezuela discontinuing
its operations effective September 22, 2014.
Goodwill related to Clorox
Venezuela was previously 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%. In the
first quarter of fiscal year 2015, after Clorox Venezuela discontinued its
operations, the Company reviewed the relative fair value of its components of
the Latin America reporting unit and concluded no goodwill should be allocated
to the Clorox Venezuela component and that there were no indicators of
impairment within the remaining Latin America reporting unit.
Financial Reporting:
Hyperinflation and the Selection of Exchange Rates
Due to a sustained
inflationary environment, the financial statements of Clorox Venezuela were
consolidated under the rules governing the preparation of financial statements
in a highly inflationary economy. As such, Clorox Venezuelas non-U.S. dollar
(non-USD) monetary assets and liabilities were remeasured into U.S. dollars
(USD) each reporting period with the resulting gains and losses reflected in
discontinued operations.
For all periods presented
prior to March 1, 2014, the Company recorded the results of its business
operations and remeasured the non-USD denominated monetary assets and
liabilities of Clorox Venezuela using the CENCOEX (previously referred to as
CADIVI) rate of 6.3 bolivares fuertes (VEF) per USD. Beginning March 1, 2014,
the Company utilized the SICAD I rate for financial reporting purposes. In
connection with Clorox Venezuelas announced exit from the country in September
2014, Clorox Venezuelas parent, Clorox Spain, infused cash through SICAD II to
settle obligations, including those resulting from the decision to exit. As a
result, the Company began utilizing the SICAD II rate in September 2014, which
was 49.7 VEF per USD as of September 30, 2014.
Subsequent to Clorox Venezuela
discontinuing operations, the Venezuelan government has continued to evolve its
currency exchange mechanisms; however, these changes have not had a material
impact on the Companys financial results (see Major Classes of Remaining Assets and
Liabilities below).
8
Table of Contents
NOTE 2. DISCONTINUED
OPERATIONS (Continued)
Major Classes of
Remaining Assets and Liabilities
The following is a summary of
the remaining assets and liabilities for the local books of Clorox Venezuela as
of:
|
3/31/2015 |
|
6/30/2014 |
Cash
and cash equivalents |
$ |
- |
|
|
$ |
5 |
|
Receivables, net |
|
- |
|
|
|
4 |
|
Inventories |
|
- |
|
|
|
11 |
|
Other current assets |
|
- |
|
|
|
2 |
|
Property, plant and equipment, net |
|
- |
|
|
|
16 |
|
Trademarks and other intangible assets, net |
|
- |
|
|
|
6 |
|
Other assets |
|
- |
|
|
|
9 |
|
Accounts payable and accrued liabilities |
|
(1 |
) |
|
|
(11 |
) |
Net
(liability) asset position |
$ |
(1 |
) |
|
$ |
42 |
|
In addition to the above, as
of March 31, 2015 and June 30, 2014, the Company held $14 and $17, respectively,
of tax asset balances related to Clorox Venezuela in the Corporate reportable
segment.
NOTE 3.
INVENTORIES
Inventories consisted of the
following as of:
|
3/31/2015 |
|
6/30/2014 |
Finished goods |
$ |
370 |
|
|
$ |
312 |
|
Raw materials and
packaging |
|
103 |
|
|
|
108 |
|
Work
in process |
|
2 |
|
|
|
2 |
|
LIFO allowances |
|
(35 |
) |
|
|
(36 |
) |
Total |
$ |
440 |
|
|
$ |
386 |
|
NOTE 4. OTHER ASSETS
Investments 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 Companys
investment balance as of March 31, 2015 and June 30, 2014 was $1 and $4,
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.
9
Table of Contents
NOTE 5. OTHER
LIABILITIES
Other liabilities consisted of
the following as of:
|
|
3/31/2015 |
|
6/30/2014 |
Venture agreement net terminal obligation |
|
$ |
293 |
|
$ |
290 |
Employee benefit obligations |
|
|
281 |
|
|
289 |
Taxes |
|
|
40 |
|
|
76 |
Other |
|
|
119 |
|
|
113 |
Total |
|
$ |
733 |
|
$ |
768 |
NOTE 6. DEBT
In December 2014, under a
shelf registration statement filed with the SEC that will expire in December
2017, the Company issued $500 of senior notes with an annual fixed interest rate
of 3.50%. Interest on the notes is payable semi-annually in June and December
and the notes have a maturity date of December 15, 2024. The notes carry an
effective interest rate of 4.10%, which includes the impact from the settlement
of interest rate forward contracts in December 2014 (see Note 13 Financial
Instruments and Fair Value Measurements). The notes rank equally with all of the
Companys existing senior indebtedness.
In January 2015, $575 of the
Companys senior notes with an annual fixed interest rate of 5.00% matured and
were repaid using the net proceeds from the December 2014 debt issuance and
commercial paper.
Revolving Credit Agreement
On October 1, 2014, the
Company entered into a $1,100 revolving credit agreement (the Credit Agreement),
which expires in October 2019. This agreement replaced a prior $1,100 revolving
credit agreement in place since May 2012. There were no borrowings under the
Credit Agreement as of March 31, 2015, and the Company believes that borrowings
under the Credit Agreement are and will continue to be available for general
corporate purposes.
NOTE 7. 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:
|
Three Months
Ended |
|
Nine Months
Ended |
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Basic |
131,833 |
|
129,318 |
|
130,566 |
|
129,743 |
Dilutive effect of stock options and
other |
2,282 |
|
2,237 |
|
2,524 |
|
2,261 |
Diluted |
134,115 |
|
131,555 |
|
133,090 |
|
132,004 |
During the three and nine
months ended March 31, 2015, the number of stock options and restricted stock
units that were considered antidilutive and excluded from the diluted net EPS
calculation were approximately zero and 0.3 million shares, respectively. During
the three and nine months ended March 31, 2014, the Company included all stock
options and restricted stock units in the calculations of diluted net EPS.
The Company has two share
repurchase programs: an open-market purchase program with an authorized
aggregate purchase amount of up to $750, all of which was available for share
repurchases as of March 31, 2015, and a program to offset the impact of share
dilution related to share-based awards (the Evergreen Program), which has no
authorization limit as to amount or timing of repurchases.
During the three and nine
months ended March 31, 2015, the Company repurchased approximately 1.4 and 1.5
million shares, respectively, under its Evergreen Program, for an aggregate
amount of $150 and $158, respectively. During the three and nine months ended
March 31, 2014, the Company repurchased approximately 1.5 and 3.0 million
shares, respectively, under its Evergreen Program, for an aggregate amount of
$130 and $260, respectively.
The Company did not repurchase
any shares under the open-market purchase program during the three and nine
months ended March 31, 2015 and 2014.
10
Table of Contents
NOTE 8. COMPREHENSIVE
INCOME
Comprehensive income was as
follows for the periods indicated:
|
Three Months
Ended |
|
Nine Months
Ended |
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Earnings from continuing operations |
$ |
144 |
|
|
$ |
151 |
|
|
$ |
417 |
|
|
$ |
408 |
|
Earnings (losses) from discontinued operations, net of
tax |
|
30 |
|
|
|
(14 |
) |
|
|
(28 |
) |
|
|
(20 |
) |
Net
earnings |
|
174 |
|
|
|
137 |
|
|
|
389 |
|
|
|
388 |
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
adjustments |
|
(32 |
) |
|
|
(28 |
) |
|
|
(51 |
) |
|
|
(47 |
) |
Net unrealized
income (losses) on derivatives |
|
3 |
|
|
|
(4 |
) |
|
|
(17 |
) |
|
|
(2 |
) |
Pension and
postretirement benefit adjustments |
|
1 |
|
|
|
1 |
|
|
|
4 |
|
|
|
(2 |
) |
Total other comprehensive loss, net of tax |
|
(28 |
) |
|
|
(31 |
) |
|
|
(64 |
) |
|
|
(51 |
) |
Comprehensive income |
$ |
146 |
|
|
$ |
106 |
|
|
$ |
325 |
|
|
$ |
337 |
|
Changes in accumulated other
comprehensive net losses by component were as follows:
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Foreign currency adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss before
reclassifications |
|
$ |
(33 |
) |
|
$ |
(22 |
) |
|
$ |
(88 |
) |
|
$ |
(37 |
) |
Amounts reclassified from accumulated
other comprehensive net losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of deferred foreign currency translation loss |
|
|
- |
|
|
|
- |
|
|
|
30 |
|
|
|
- |
|
Income
tax benefit (expense) |
|
|
1 |
|
|
|
(6 |
) |
|
|
7 |
|
|
|
(10 |
) |
Foreign currency
adjustments, net of tax |
|
$ |
(32 |
) |
|
$ |
(28 |
) |
|
$ |
(51 |
) |
|
$ |
(47 |
) |
|
Net unrealized losses on
derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss) before reclassifications |
|
$ |
2 |
|
|
$ |
(6 |
) |
|
$ |
(21 |
) |
|
$ |
(4 |
) |
Amounts
reclassified from accumulated other comprehensive net losses |
|
|
3 |
|
|
|
- |
|
|
|
6 |
|
|
|
- |
|
Income
tax (expense) benefit |
|
|
(2 |
) |
|
|
2 |
|
|
|
(2 |
) |
|
|
2 |
|
Net unrealized income (losses) on
derivatives, net of tax |
|
$ |
3 |
|
|
$ |
(4 |
) |
|
$ |
(17 |
) |
|
$ |
(2 |
) |
|
Pension and postretirement benefit adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss before reclassifications |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(2 |
) |
|
$ |
(8 |
) |
Amounts
reclassified from accumulated other comprehensive net losses |
|
|
2 |
|
|
|
2 |
|
|
|
7 |
|
|
|
5 |
|
Income
tax (expense) benefit |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
1 |
|
Pension and
postretirement benefit adjustments, net of tax |
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
4 |
|
|
$ |
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss, net of
tax |
|
$ |
(28 |
) |
|
$ |
(31 |
) |
|
$ |
(64 |
) |
|
$ |
(51 |
) |
Included in foreign currency
adjustments are re-measurement losses on long term intercompany loans where
settlement is not planned or anticipated in the foreseeable future. For the
three and nine months ended March 31, 2015, other comprehensive losses on these
loans totaled $4 and $8, respectively, and there were no amounts reclassified
from accumulated other comprehensive net losses. For the three and nine months
ended March 31, 2014, other comprehensive losses on these loans totaled $6 and
$11, respectively, and there were no amounts reclassified from accumulated other
comprehensive net losses.
11
Table of Contents
NOTE 9. INCOME
TAXES
In determining its quarterly
provision for income taxes, the Company uses an estimated annual effective tax
rate, which is based on expected annual income, statutory tax rates and tax
planning opportunities available in the various jurisdictions in which the
Company operates. Certain significant or unusual items are separately recognized
in the quarter in which they occur and can be a source of variability in the
effective tax rates from quarter to quarter.
The effective tax rate on
earnings from continuing operations was 33.4% and 34.0% for
the three and nine months ended March 31, 2015, respectively, and 33.2% and
34.3% for the three and nine months ended March 31, 2014, respectively. The
higher tax rate for the current three month period was primarily due to higher
tax on foreign earnings. The lower tax rate for the current nine month period
was primarily due to higher uncertain tax position releases.
Included in the balance of
unrecognized tax benefits as of March 31, 2015 and June 30, 2014, are potential
benefits of $28 and $58, respectively, which if recognized, would affect net
earnings. In the three months ended March 31, 2015, $30 of gross unrecognized
tax benefits relating to other discontinued operations for periods prior to
fiscal year 2015 were recognized upon the expiration of the applicable statute
of limitations. Recognition of these previously disclosed tax benefits had no
impact on the Companys cash flow or earnings from continuing operations for the
three or nine months ended March 31, 2015.
The total balance of accrued
interest and penalties related to uncertain tax positions was $9 and $11 as of
March 31, 2015 and June 30, 2014, respectively. Interest and penalties related to uncertain
tax positions included in income tax expense resulted in net benefit of $2 for
both the three and nine months ended March 31, 2015, and net
expense of $2 and $3 for the three and nine months ended March 31, 2014,
respectively.
The Company files income tax
returns in U.S. federal and various state, local and foreign jurisdictions. The
federal statute of limitations has expired for all tax years through June 30,
2011. Various income tax returns in state and foreign jurisdictions are
currently in the process of examination.
NOTE 10. RETIREMENT INCOME
AND HEALTH CARE BENEFIT PLANS
The following table summarizes
the components of net periodic benefit cost for the Companys retirement income
plans:
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Service cost |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1 |
|
|
$ |
1 |
|
Interest cost |
|
|
7 |
|
|
|
7 |
|
|
|
19 |
|
|
|
20 |
|
Expected return on plan assets |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(15 |
) |
|
|
(18 |
) |
Amortization of unrecognized items |
|
|
3 |
|
|
|
2 |
|
|
|
9 |
|
|
|
8 |
|
Total |
|
$ |
5 |
|
|
$ |
4 |
|
|
$ |
14 |
|
|
$ |
11 |
|
The net periodic benefit cost
for the Companys retirement health care plans was a credit of $1 and $2 for the
three and nine months ended March 31, 2015, respectively, and $0 and $1 for the three and nine
months ended March 31, 2014, respectively.
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 $12 and $14 as of March 31, 2015 and
June 30, 2014, 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 March 31, 2015 and June 30, 2014.
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 Companys 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
Companys exposure may exceed the amount recorded, any amount of such additional
exposures, or range of exposures, is not estimable at this time.
12
Table of Contents
NOTE 11. OTHER
CONTINGENCIES AND GUARANTEES (Continued)
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, which was initially filed in a Brazilian lower
court in 2002 by two Brazilian companies and one Uruguayan company
(collectively, Petroplus), relates 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 Companys 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. The value of the judgment against
the Company, including interest and foreign exchange fluctuations as of March
31, 2015, was approximately $29.
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, however, 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 $24.
The Company continues to
believe that its defenses are meritorious, and has appealed the decision to the
highest courts of Brazil. In December 2013, in the first stage of the appellate
process, the appellate court declined to admit the Companys appeals to the
highest courts. The Company then appealed directly to the highest courts. While
in May 2014 the Superior Court of Justice originally agreed to consider the
Companys appeal, in December 2014 the same court declined to admit the appeal
based on procedural grounds. The Company is appealing that decision. It is
possible that a final decision in this case could be issued as early as the
fourth quarter of fiscal year 2015. Expenses related to this litigation have
been, and any potential additional loss would be, reflected in discontinued
operations, consistent with the Companys classification of expenses related to
its discontinued Brazil operations.
In a separate action filed in
2004 by Petroplus, in January 2013, a lower Brazilian court 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
Brazils 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 other lawsuits, claims and loss contingencies relating to issues such as
contract disputes, product liability, patents and trademarks, advertising,
commercial, administrative, employee and other matters. Based on managements
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 Companys 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
material 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 Companys consolidated financial
statements taken as a whole.
The Company had not recorded
any liabilities on the aforementioned guarantees as of March 31, 2015.
As of March 31, 2015, the
Company was a party to letters of credit of $11, primarily related to one of its
insurance carriers, of which $0 had been drawn upon.
13
Table of Contents
NOTE 12. SEGMENT
RESULTS
The Company operates through
strategic business units that are aggregated into four reportable segments:
Cleaning, Household, Lifestyle and International. As a result of Clorox
Venezuela being reported as discontinued operations, the results of Clorox
Venezuela are no longer included in earnings from continuing operations of the
International reportable segment (see Note 2 Discontinued Operations).
● |
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 Burts 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®, Brita®, Green Works®, Pine-Sol®, Agua Jane®, Chux®, Kingsford®, Fresh Step®, Scoop
Away®, Ever Clean®, KC Masterpiece®, Hidden
Valley® and Burts 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.
The table below presents
reportable segment information and a reconciliation of the segment information
to the Companys consolidated net sales and earnings from continuing operations
before income taxes, with amounts that are not allocated to the reportable
segments reflected in Corporate.
|
|
Net sales |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Cleaning |
|
$ |
442 |
|
|
$ |
437 |
|
|
$ |
1,359 |
|
|
$ |
1,348 |
|
Household |
|
|
451 |
|
|
|
428 |
|
|
|
1,214 |
|
|
|
1,152 |
|
Lifestyle |
|
|
243 |
|
|
|
237 |
|
|
|
705 |
|
|
|
692 |
|
International |
|
|
265 |
|
|
|
264 |
|
|
|
820 |
|
|
|
825 |
|
Total |
|
$ |
1,401 |
|
|
$ |
1,366 |
|
|
$ |
4,098 |
|
|
$ |
4,017 |
|
|
|
|
Earnings (losses) from continuing
operations before income taxes |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Cleaning |
|
$ |
100 |
|
|
$ |
93 |
|
|
$ |
331 |
|
|
$ |
325 |
|
Household |
|
|
102 |
|
|
|
76 |
|
|
|
205 |
|
|
|
169 |
|
Lifestyle |
|
|
71 |
|
|
|
67 |
|
|
|
200 |
|
|
|
189 |
|
International |
|
|
17 |
|
|
|
23 |
|
|
|
67 |
|
|
|
87 |
|
Corporate |
|
|
(73 |
) |
|
|
(33 |
) |
|
|
(171 |
) |
|
|
(149 |
) |
Total |
|
$ |
217 |
|
|
$ |
226 |
|
|
$ |
632 |
|
|
$ |
621 |
|
All intersegment sales are
eliminated and are not included in the Companys reportable segments net sales.
Net sales to the Companys
largest customer, Wal-Mart Stores, Inc. and its affiliates, as a percentage of
consolidated net sales, were 27% for each of the three months ended
March 31, 2015 and 2014, and 26% for each of the nine months ended March 31, 2015 and 2014.
14
Table of Contents
NOTE 13. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Financial assets and
liabilities measured at fair value on a recurring basis in the consolidated
balance sheets are required to be classified and disclosed in one of the
following fair value hierarchies:
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 entitys own assumptions.
As of March 31, 2015 and June
30, 2014, the Companys financial assets and liabilities that were measured at
fair value on a recurring basis during the period included derivative financial
instruments, which were all Level 2, and trust assets to fund certain of the
Companys nonqualified deferred compensation plans, which were classified as
Level 1.
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 March 31, 2015, the
notional amount of commodity derivatives was $56, of which $30 related to jet
fuel and $26 related to soybean oil. As of June 30, 2014, the notional amount of
commodity derivatives was $36, of which $19 related to jet fuel and $17 related
to soybean oil.
Interest Rate Risk
Management
The Company may enter into
over-the-counter interest rate forward contracts to fix a portion of the
benchmark interest rate prior to the anticipated issuance of fixed rate debt.
These interest rate forward contracts generally have durations of less than 12
months. The interest rate contracts are measured at fair value using information
quoted by U.S. government bond dealers.
As of March 31, 2015 and June
30, 2014, the notional amounts of interest rate forward contracts were $0 and
$288, respectively.
In December 2014, the Company
paid $25 to settle interest rate forward contracts related to the December 2014
issuance of $500 in senior notes. The settlement payments are reflected as
operating cash flows in the Condensed Consolidated Statements of Cash Flows for
the nine months ended March 31, 2015. The loss is reflected in accumulated other
comprehensive net loss on the Condensed Consolidated Balance Sheet as of March
31, 2015, and will be amortized into interest expense on the Condensed
Consolidated Statement of Earnings and Comprehensive Income over the 10-year
term of the notes.
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 Companys forecasted foreign currency exposure
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 amounts of
outstanding foreign currency forward contracts used by the Companys
subsidiaries in Canada, Australia and New Zealand to hedge forecasted purchases
of inventory were $83, $42 and $7, respectively, as of March 31, 2015, and $54,
$28 and $5, respectively, as of June 30, 2014.
15
Table of Contents
NOTE 13. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
Counterparty Risk
Management and Broker Margin Requirements
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 $14 and $17 of derivative instruments reflected in a liability
position as of March 31, 2015 and June 30, 2014, respectively, $6 and $11,
respectively, contained such terms. As of both March 31, 2015 and June 30, 2014,
neither the Company nor any counterparty was required to post any collateral.
Certain terms of the
agreements governing the Companys over-the-counter derivative instruments
require the credit ratings, as assigned by Standard & Poors and Moodys 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 Companys 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 March 31, 2015 and
June 30, 2014, the Company and each of its counterparties had been assigned
investment grade ratings by both Standard & Poors and Moodys.
Certain of the Companys
exchange-traded futures contracts used for commodity price risk management
include requirements for the Company to post collateral in the form of a cash
margin account held by the Companys broker for trades conducted on that
exchange. As of March 31, 2015 and June 30, 2014, the Company maintained cash
margin balances related to exchange-traded futures contracts of $4 and $1,
respectively, which are classified as other current assets on the Condensed
Consolidated Balance Sheets.
Fair Value of Derivative
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. During the three and nine months ended March 31, 2015 and 2014, the
Company had no hedging instruments designated as fair value hedges.
Trust Assets
The Company has held 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.
16
Table of Contents
NOTE 13. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
The Companys derivative
instruments designated as hedging instruments and trust assets related to
certain of the Companys nonqualified deferred compensation plans were recorded
at fair value in the consolidated balance sheets as follows:
|
Balance sheet |
|
3/31/2015 |
|
6/30/2014 |
|
classification |
|
Level 1 |
|
Level 2 |
|
Level 1 |
|
Level
2 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange derivative contracts |
Other current assets |
|
$ |
- |
|
$ |
5 |
|
$ |
- |
|
$ |
- |
Commodity purchase derivative
contracts |
Other current assets |
|
|
- |
|
|
- |
|
|
- |
|
|
1 |
Trust assets for nonqualified
deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation
plans |
Other assets |
|
|
37 |
|
|
- |
|
|
31 |
|
|
- |
|
|
|
$ |
37 |
|
$ |
5 |
|
$ |
31 |
|
$ |
1 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity purchase derivative
contracts |
Accrued liabilities |
|
$ |
- |
|
$ |
11 |
|
$ |
- |
|
$ |
1 |
Interest rate derivative contracts |
Accrued liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
13 |
Foreign exchange derivative contracts |
Accrued liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
3 |
Commodity purchase derivative
contracts |
Other liabilities |
|
|
- |
|
|
3 |
|
|
- |
|
|
- |
|
|
|
$ |
- |
|
$ |
14 |
|
$ |
- |
|
$ |
17 |
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 loss 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 accumulated
other comprehensive net loss as of March 31, 2015, expected to be reclassified
into earnings within the next 12 months is $10. 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 the three and nine months ended March 31, 2015 and 2014, hedge ineffectiveness was not significant. The Company
de-designates cash flow hedge relationships whenever it determines that the
hedge relationships are no longer highly effective or that the forecasted
transaction is no longer probable. The portion of gains or losses on the
derivative instrument previously accumulated in other comprehensive loss for
de-designated hedges remains in accumulated other comprehensive net loss until
the forecasted transaction is recognized in earnings, or is recognized in
earnings immediately if the forecasted transaction is no longer probable.
Changes in the value of the
trust assets related to certain of the Companys nonqualified deferred
compensation plans were $6 versus June 30, 2014, primarily due to current
quarter employees contributions to these plans.
17
Table of Contents
NOTE 13. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
The effects of derivative
instruments designated as hedging instruments on OCI and the Condensed
Consolidated Statements of Earnings and Comprehensive Income were as
follows:
|
|
Gain (loss) recognized in
OCI |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Commodity purchase derivative
contracts |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(16 |
) |
|
$ |
1 |
|
Interest rate derivative
contracts |
|
|
- |
|
|
|
(4 |
) |
|
|
(12 |
) |
|
|
(4 |
) |
Foreign exchange derivative contracts |
|
|
2 |
|
|
|
(2 |
) |
|
|
7 |
|
|
|
(1 |
) |
Total |
|
$
|
2 |
|
|
$
|
(6 |
) |
|
$
|
(21 |
) |
|
$
|
(4 |
) |
|
|
|
Loss reclassified from accumulated
other comprehensive net loss |
|
|
and recognized in
earnings |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
3/31/2015 |
|
3/31/2014 |
|
3/31/2015 |
|
3/31/2014 |
Commodity purchase derivative
contracts |
|
$ |
(3 |
) |
|
$ |
- |
|
|
$ |
(3 |
) |
|
$ |
- |
|
Interest rate derivative
contracts |
|
|
- |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(3 |
) |
Foreign exchange derivative contracts |
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
3 |
|
Total |
|
$ |
(3 |
) |
|
$ |
- |
|
|
$ |
(6 |
) |
|
$ |
- |
|
The gains reclassified from accumulated other comprehensive net loss and recognized in
earnings during the three and nine months ended March 31, 2015 and 2014 for
foreign exchange contracts were included in cost of products sold. The losses
reclassified from accumulated other comprehensive net loss and recognized in
earnings during the three and nine months ended March 31, 2015 and 2014 for
interest rate contracts were included in interest expense.
Other Financial
Instruments
The carrying values of cash
and cash equivalents, accounts receivable, notes and loans payable and accounts
payable approximated their estimated fair values as of March 31, 2015 and June
30, 2014, due to their generally short maturities. The estimated fair value of
long-term debt, including current maturities, was $2,190 and $2,265 as of March
31, 2015 and June 30, 2014, respectively. The estimated fair value of long-term
debt was determined using secondary market prices quoted by corporate bond
dealers, and was classified as Level 2.
NOTE 14. SUBSEQUENT
EVENTS
On April 30, 2015, a
low-income housing partnership, in which the Company is a limited partner, sold
its real estate holdings. The Company estimates that the real property sale
and subsequent partnership dissolution will result in $14 in cash proceeds from
investing activities and a gain of $13 that will be recorded to other income,
net, on the consolidated statement of earnings for the year ended June 30, 2015.
The sale is also expected to result in approximately $8 of cash income tax payments that will be paid in
the first quarter of fiscal year 2016 and reflected as operating activities in
the Condensed Consolidated Statement of Cash Flows for the three months ended
September 30, 2015.
18
Table of Contents
Item 2. Managements
Discussion and Analysis of
Financial Condition and Results of
Operations
The Clorox Company
(Dollars in millions, except per share amounts)
Managements Discussion and
Analysis of Financial Condition and Results of Operations (MD&A) is designed
to provide a reader of The Clorox Companys (the Company or Clorox) financial
statements with a narrative from the perspective of management on the Companys
financial condition, results of operations, liquidity and certain other factors
that may affect future results. The following discussion of the Companys
financial condition and results of operations should be read in conjunction with
MD&A and the consolidated financial statements and related notes for the
fiscal year ended June 30, 2014, which were filed with the Securities and
Exchange Commission (SEC) on December 4, 2014, in Exhibit 99.2 of the Companys
Current Report on Form 8-K, and the unaudited condensed consolidated financial
statements and related notes contained in this Quarterly Report on Form 10-Q
(this Report). Unless otherwise noted, MD&A compares the three and nine
months ended March 31, 2015 (the current period) to the three and nine months
ended March 31, 2014 (the prior period) using percentages and basis point
changes calculated on a rounded basis.
Effective September 22, 2014,
the Companys Venezuela affiliate, Corporación Clorox de Venezuela S.A. (Clorox
Venezuela) discontinued its operations. Consequently, for the three and nine
months ended March 31, 2015 and 2014, Clorox Venezuela is reflected as a
discontinued operation in the Companys financial statements.
The following sections are
included herein:
● |
Overview |
● |
Results of Operations
|
● |
Financial Condition,
Liquidity and Capital Resources |
● |
Contingencies
|
● |
Off-Balance Sheet Arrangements
|
● |
Recently Issued Accounting Pronouncements
|
OVERVIEW
Clorox is a leading
multinational manufacturer and marketer of consumer and professional products
with approximately 7,700 employees worldwide. Clorox sells its products
primarily through mass retail outlets, e-commerce channels, distributors and
medical supply providers. Clorox markets some of the most trusted and recognized
consumer brand names, including its namesake bleach and cleaning products,
Kingsford® charcoal, Pine-Sol® cleaners, Poett®
home care products, Fresh Step® cat litter, Glad® bags,
wraps and containers, Hidden Valley® and KC Masterpiece®
dressings and sauces, Brita® water-filtration products and Burts
Bees® natural personal care products. The Company also markets brands
for professional services, including Clorox Healthcare® and
Dispatch® infection control products for the healthcare industry. The
Company manufactures products in more than a dozen countries and markets them in
more than 100 countries.
The Company primarily markets
its leading brands in midsized categories considered to be financially
attractive. Most of the Companys products compete with other nationally
advertised brands within each category and with private label brands.
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.
|
19
Table of Contents
● |
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 Burts
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®,
Brita®, Green Works®, Pine-Sol®, Agua
Jane®, Chux®, Kingsford®, Fresh
Step®, Scoop Away®, Ever Clean®, KC
Masterpiece®, Hidden Valley® and Burts Bees®
brands.
|
RESULTS OF
OPERATIONS
CONSOLIDATED RESULTS
FROM CONTINUING OPERATIONS
|
|
Three Months
Ended |
|
|
|
|
% of Net
Sales |
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
Diluted net earnings per share from
continuing operations |
|
$ |
1.08 |
|
$ |
1.14 |
|
(5 |
) |
|
|
|
|
|
|
Net
sales |
|
|
1,401 |
|
|
1,366 |
|
3 |
|
|
100.0 |
% |
|
100.0 |
% |
Gross profit |
|
|
605 |
|
|
575 |
|
5 |
|
|
43.2 |
|
|
42.1 |
|
Selling and administrative expenses |
|
|
206 |
|
|
178 |
|
16 |
|
|
14.7 |
|
|
13.0 |
|
Advertising costs |
|
|
124 |
|
|
120 |
|
3 |
|
|
8.9 |
|
|
8.8 |
|
Research and development costs |
|
|
34 |
|
|
28 |
|
21 |
|
|
2.4 |
|
|
2.0 |
|
|
|
|
Nine Months
Ended |
|
|
|
|
% of Net
Sales |
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
Diluted net earnings per share from
continuing operations |
|
$ |
3.14 |
|
$ |
3.10 |
|
1 |
|
|
|
|
|
|
|
Net
sales |
|
|
4,098 |
|
|
4,017 |
|
2 |
|
|
100.0 |
% |
|
100.0 |
% |
Gross profit |
|
|
1,755 |
|
|
1,714 |
|
2 |
|
|
42.8 |
|
|
42.7 |
|
Selling and administrative expenses |
|
|
577 |
|
|
568 |
|
2 |
|
|
14.1 |
|
|
14.1 |
|
Advertising costs |
|
|
372 |
|
|
362 |
|
3 |
|
|
9.1 |
|
|
9.0 |
|
Research and development costs |
|
|
97 |
|
|
90 |
|
8 |
|
|
2.4 |
|
|
2.2 |
|
Diluted net earnings per
share from continuing operations decreased $0.06, or 5%, in the current quarter, primarily due to higher
expense for performance-based incentive compensation, higher manufacturing and
logistics costs, increased investments in total demand-building programs, and
the impact of unfavorable foreign currency exchange rates. These decreases were
partially offset by higher sales as well as the benefits of cost savings and
price increases.
Diluted net earnings per share from continuing operations
increased $0.04, or 1%, in the current nine month period, primarily due to
higher sales and volume, as well as the benefits of cost savings and price
increases, and a one-time benefit related to changes in the Companys long-term
disability plan to bring it more in line with the marketplace. These increases
were partially offset by higher expense for performance-based incentive
compensation, increased investments in total demand-building programs and the
impact of unfavorable foreign currency exchange rates.
Net
sales and volume increased by
3% and 1%, respectively, in the current quarter. Net sales and volume each
increased by 2% in the current nine month period.
The increase in volume in the
current quarter was driven by growth in the Cleaning, Lifestyle, and
International segments. Volume results reflected higher shipments of
Kingsford® charcoal products behind increased merchandising support
in anticipation of the grilling season, higher shipments of Clorox®
disinfecting wipes reflecting increased merchandising driven by the flu season
and innovation, and higher shipments of toilet cleaners. These increases were
partially offset by lower shipments of Glad® products due to price
increases, lower shipments of Greenworks® laundry detergent, lower
shipments of Cat Litter largely due to continuing competitive activity, and
lower shipments of Clorox® liquid bleach due to the recent price
increase. Net sales growth was driven by the benefit of price increases,
favorable mix and assortment, and higher volume; partially offset by unfavorable
foreign currency exchange rates and increased trade promotion spending.
20
Table of Contents
The increase in volume in the
current nine month period was driven by higher shipments of Burts
Bees® natural personal care products, largely due to innovation in
lip and face care products combined with distribution gains; higher product
shipments in the International segment, primarily due to growth in Latin
America, Canada and Europe; higher shipments of Kingsford® charcoal
products behind increased merchandising support to launch the start of the
grilling season; higher shipments of cleaning and healthcare products in the
Professional Products business, which were driven, in part, by Ebola and
Enterovirus concerns in the second quarter of the fiscal year; and higher
shipments of Clorox® toilet bowl cleaner due to increased
merchandising activities and distribution gains. Volume results also reflected
lower shipments of Greenworks® laundry detergent; lower shipments of
Clorox® liquid bleach due to the recent price increase, category
softness and increased competition; lower shipments of Glad® products
due to pricing actions and increased competition; the distribution loss of
Clorox® disinfecting wipes at a major club customer in calendar year
2014, partially offset by double-digit gains at other retailers; and lower
shipments of Brita® water-filtration products, primarily due to lower
merchandising support and increased competition. Net sales growth was driven by
the benefit of price increases and higher volume, partially offset by
unfavorable foreign currency exchange rates and higher trade promotion
spending.
Gross margin percentage, defined as gross profit as a percentage of net
sales, increased 110 basis points in the current quarter and increased 10 basis
points in the current nine month period.
The increase in the current
quarter was driven by the benefits of cost savings and price increases, as well
as favorable mix and assortment and flat commodity costs. The increases were
partially offset by higher manufacturing and logistics costs and higher expense
for performance-based incentive compensation.
The increase in the current
nine month period was driven by the benefits of cost savings and price
increases, largely offset by higher manufacturing and logistics costs, higher
expense for performance-based incentive compensation, higher commodity costs,
higher trade promotion spending, and unfavorable foreign currency exchange
rates.
Selling and
administrative expenses
increased by 16% in the current quarter, primarily due to higher expense for
performance-based incentive compensation. In the current year, the Company
anticipates that it will exceed its annual performance-based incentive targets;
whereas, in the prior year, the Company fell significantly below these targets.
Selling and administrative expenses increased by 2% in the current nine month
period due to higher expense for performance-based incentive compensation and
continued inflationary pressures in international markets. These increases were
partially offset by the benefit of cost savings, one-time costs in the year-ago period related to the change in information technology (IT)
service providers, foreign currency exchange rates, and a
one-time benefit related to a change in the Companys long-term disability plan
to bring it more in line with the marketplace.
Advertising
costs as a percentage of net
sales increased 10 basis points in both the current quarter and nine month
period, reflecting continued strong support behind the Companys brands,
particularly to drive trial of new products. The Companys U.S. retail
advertising spend was approximately 10% of sales in the current quarter.
Research and development
costs as a percentage of net sales increased 40 basis
points in the current quarter and increased 20 basis points in the current nine
month period driven by higher accruals for performance-based incentive
compensation.
Other income,
net, was $1 and $0 in the
current three and nine month periods, respectively, and $2 and $4 in the prior
three and nine month periods, respectively.
Other income, net, in the
current three month period included $3 of income from equity investees,
partially offset by $2 of foreign currency exchange losses. Other income, net,
in the current nine month period included $11 of income from equity investees
and $3 of interest income, offset by $8 of foreign currency exchange losses and
$6 of amortization of trademarks and other intangible assets.
Other income, net, in the
prior three month period included $3 of income from equity investees. Other
income, net, in the prior nine month period included $11 of income from equity
investees, partially offset by $6 of amortization of trademarks and other
intangible assets.
The effective tax rate
on earnings from continuing operations was 33.4% and 34.0% for the current three and nine
month periods, respectively, and 33.2% and 34.3% for the prior three and nine
month periods, respectively. The higher tax rate for the current three month
period was primarily due to higher tax on foreign earnings. The lower tax rate
for the current nine month period was primarily due to higher uncertain tax
position releases.
21
Table of Contents
DISCONTINUED OPERATIONS
Including fiscal year-to-date
results, the Company believes it is reasonably possible that it will recognize
$60 to $65 in after-tax exit costs and other related expenses in discontinued
operations for Clorox Venezuela during fiscal year 2015, and $10 to $15 in
fiscal years 2016 through 2018, for a total of $70 to $80 over the entire three
year period. Of this total, the Company believes $5 to $10 will be after-tax
cash expenditures. Further significant changes to the exchange rate used for financial reporting
purposes, among many other external factors, could have a significant impact on
the above estimated costs.
See Note 2 Discontinued
Operations to the Condensed Consolidated Financial Statements for more
information regarding discontinued operations of Clorox Venezuela.
In the three months ended
March 31, 2015, the Company recognized $30 of previously unrecognized tax
benefits relating to other discontinued operations upon the expiration of the
applicable statute of limitations. Recognition of these previously disclosed tax
benefits had no impact on the Companys cash flows or earnings from continuing
operations for the three or nine months ended March 31, 2015.
SEGMENT RESULTS FROM
CONTINUING OPERATIONS
The following sections present
the results from operations of the Companys reportable segments:
Cleaning
|
|
Three Months
Ended |
|
|
|
|
Nine Months
Ended |
|
|
|
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
Net
sales |
|
$ |
442 |
|
$ |
437 |
|
1 |
% |
|
$ |
1,359 |
|
$ |
1,348 |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before
income taxes |
|
|
100 |
|
|
93 |
|
8 |
|
|
|
331 |
|
|
325 |
|
2 |
|
Volume, net sales, and
earnings from continuing operations before income taxes increased by 1%, 1%, and
8%, respectively, in the current quarter. Both volume and sales grew primarily
due to higher shipments in Home Care of both Clorox® disinfecting
wipes, behind increased merchandising support and product innovation, and toilet
cleaners. The increase is partially offset by lower shipments in Laundry of
Greenworks® laundry detergent and Clorox® liquid bleach
due to the impact of the recent price increase. The increase in earnings from
continuing operations before income taxes was primarily driven by volume growth,
the benefit of cost savings and price increases, partially offset by an increase
in demand-building investments.
Volume, net sales, and
earnings from continuing operations before income taxes increased by 1%, 1%, and
2%, respectively, in the current nine month period. Both volume and sales grew
primarily due to higher shipments of Clorox® toilet bowl cleaner in
Home Care. The Professional Products Division also grew volume, which was
driven, in part, by Ebola and Enterovirus and concerns. The increase is
partially offset by lower shipments of Clorox liquid bleach in Laundry, due
mainly to category softness and continuing competitive activity. The increase in
earnings from continuing operations before income taxes were driven by the
benefit of cost savings and volume growth, partially offset by an increase in
demand-building investments.
Household
|
|
Three Months
Ended |
|
|
|
|
Nine Months
Ended |
|
|
|
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
Net
sales |
|
$ |
451 |
|
$ |
428 |
|
5 |
% |
|
$ |
1,214 |
|
$ |
1,152 |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before
income taxes |
|
|
102 |
|
|
76 |
|
34 |
|
|
|
205 |
|
|
169 |
|
21 |
|
22
Table of Contents
Net sales and earnings from
continuing operations before income taxes increased by 5% and 34%, respectively,
in the current quarter, while volume remained flat. Volume was driven by higher
shipments in Charcoal from increased merchandising support in anticipation of
the grilling season, offset by lower shipments of Bags & Wraps, primarily
due to the impact of price increases; and lower shipments of Cat Litter, largely
due to continuing competitive activity. Net sales growth outpaced volume growth
primarily due to the benefit of price increases in Bags & Wraps. The
increase in earnings from continuing operations before income taxes was mainly
due to higher sales, the benefits from cost savings and price increases,
partially offset by higher logistics costs and an increase in demand-building
investments.
Volume, net sales, and
earnings from continuing operations before income taxes increased by 2%, 5%, and
21%, respectively, in the current nine month period. Volume grew primarily due
to higher shipments in Charcoal from increased merchandising support in
anticipation of the grilling season, partially offset by lower shipments of Bags
& Wraps, primarily due to price increases. Net sales growth outpaced volume
growth primarily due to the benefit of price increases. The increase in earnings
from continuing operations before income taxes was primarily due to strong sales
growth and the benefit of cost savings, partially offset by an increase in
demand-building investments and higher commodity costs.
Lifestyle
|
|
Three Months
Ended |
|
|
|
|
Nine Months
Ended |
|
|
|
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
Net
sales |
|
$ |
243 |
|
$ |
237 |
|
3 |
% |
|
$ |
705 |
|
$ |
692 |
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income
taxes |
|
|
71 |
|
|
67 |
|
6 |
|
|
|
200 |
|
|
189 |
|
6 |
|
Volume, net sales, and
earnings from continuing operations before income taxes increased 2%, 3%, and
6%, respectively, in the current quarter. Volume grew primarily due to higher
shipments of Burts Bees® natural personal care products, due to
innovation in lip and face care products, and higher shipments of Hidden
Valley® dry mixes and
dips. These increases were partially offset by lower shipments of
Brita® water-filtration products, primarily due to category softness
and continued competitive activity. The increase in earnings from continuing
operations before income taxes was driven by lower commodity costs, higher
volume and the benefit of cost savings, partially offset by higher manufacturing
and logistics costs and an increase in demand-building investments.
Volume, net sales, and
earnings from continuing operations before income taxes increased by 2%, 2%, and
6%, respectively, in the current nine month period. Volume grew primarily due to
high shipments of Burts Bees® natural personal care products, due to
innovation and distribution gain in lip and face care products, partially offset
by lower shipments of Brita® water-filtration products, primarily due
to category softness and continued competitive activity. The variance between
net sales and volume was primarily due to unfavorable mix. The increase in
earnings from continuing operations before income taxes was driven by lower
commodity costs, cost savings and favorable mix. These increases were partially
offset by higher manufacturing
and logistics costs.
International
|
|
Three Months
Ended |
|
|
|
|
Nine Months
Ended |
|
|
|
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
Net
sales |
|
$ |
265 |
|
$ |
264 |
|
- |
% |
|
$ |
820 |
|
$ |
825 |
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income
taxes |
|
|
17 |
|
|
23 |
|
(26 |
) |
|
|
67 |
|
|
87 |
|
(23 |
) |
Volume increased by 1% while
net sales remained flat and earnings from continuing operations before income
taxes decreased by 26% in the current quarter. Volume grew primarily due to
higher shipments in Mexico and Canada, partially offset by lower shipments in
Argentina and Asia. Volume growth outpaced net sales growth primarily due to
unfavorable foreign currency exchange rates across most countries, partially
offset by the benefit of price increases and favorable mix and assortment. The
decrease in earnings from continuing operations before income taxes was
primarily driven by the impact of higher selling and administrative expenses,
driven by inflation and higher performance-based incentive compensation
accruals; unfavorable foreign currency exchange rates; higher manufacturing and
logistics costs; and higher commodity costs. These decreases were partially
offset by the benefit of price increases, favorable mix and assortment and cost
savings.
23
Table of Contents
Volume increased by 4% while
net sales and earnings from continuing operations before income taxes decreased
by 1% and 23%, respectively, in the current nine month period. Volume in the
International segment grew in the current nine month period, driven by higher
shipments in Latin America, Canada, and Europe. Volume growth outpaced net sales
growth primarily due to unfavorable foreign currency exchange rates, partially
offset by the benefit of price increases and favorable mix and assortment. The
decrease in earnings from continuing operations before income taxes was
primarily due to the impact of unfavorable foreign currency exchange rates.
Additionally, the Company continued to face inflationary pressures in Latin
America, which resulted in higher selling and administrative expenses and
manufacturing and logistics costs. These decreases were partially offset by the
benefit of price increases and higher volume.
Corporate
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.
|
|
Three Months
Ended |
|
|
|
|
Nine Months
Ended |
|
|
|
|
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
3/31/2015 |
|
3/31/2014 |
|
%
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses from continuing operations before income
taxes |
|
$ |
73 |
|
$ |
33 |
|
121 |
% |
|
$ |
171 |
|
$ |
149 |
|
15 |
% |
The increase in losses from
continuing operations before income taxes attributable to Corporate in the
current quarter was primarily due to higher performance-based incentive
compensation expense. In the current year, the Company anticipates that it will
exceed its annual performance-based incentive targets; whereas, in the prior
year, the Company fell significantly below these targets.
The increase in losses from
continuing operations before income taxes attributable to Corporate in the
current nine month period was primarily due to higher performance-based
incentive compensation expense and foreign currency exchange losses. These
increases were partially offset by a one-time benefit related to a change in the
Companys long-term disability plan to bring it more in line with the
marketplace and one-time IT service provider transition costs in the prior
period.
FINANCIAL CONDITION,
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
The Companys financial
condition and liquidity remain strong as of March 31, 2015. Net cash provided by
continuing operations was $481 in the current nine month period, compared with
$444 in the prior nine month period. Contributing factors include lower
incentive compensation and tax payments in the current period, as well as the
initial funding of the Companys non-qualified deferred compensation plan in the
year-ago period. These benefits were partially offset by $25 million in payments
to settle interest-rate hedges related to the Company's issuance of long-term
debt in December 2014. The company continues to use its cash flow to invest in
its business, maintain debt leverage within its targeted range and return excess
cash to stockholders through dividends and share repurchases. In the nine months
ended March 31, 2015, the Company has repurchased about 1.5 million shares of
its common stock at a cost of approximately $158 million.
Investing Activities
Capital expenditures were $83
in the current nine month period, compared with $87 in the prior nine month
period. Capital spending as a percentage of net sales was approximately 2% in
both the current and prior periods, respectively, which was essentially flat due
to capital spending for manufacturing efficiencies at the same level in each
period.
Financing
Activities
Net cash used for financing
activities was $348 in the current nine month period, compared with $267 in the
prior nine month period. The change was primarily due to the repayment of $575
of long-term debt that matured in January 2015, partially offset by the issuance
of $500 of long-term debt in December 2014. The proceeds from the debt issuance
in December were primarily used for the debt repayment in January.
24
Table of Contents
Share Repurchases and
Dividends
The Company has two share
repurchase programs: an open-market purchase program with an authorized
aggregate purchase amount of up to $750, all of which was available for share
repurchases as of March 31, 2015, and a program to offset the impact of share
dilution related to share-based awards (the Evergreen Program), which has no
authorization limit as to amount or timing of repurchases.
During the current periods,
the Company repurchased approximately 1.4 and 1.5 million shares, respectively,
under its Evergreen Program, for an aggregate amount of $150 and $158,
respectively. During the prior periods, the Company repurchased approximately
1.5 and 3.0 million shares, respectively, under its Evergreen Program, for an
aggregate amount of $130 and $260, respectively. The Company did not repurchase
any shares under the open-market purchase program during the current or prior
periods.
During the current periods,
the Company paid dividends per share of $0.74 and $2.22, respectively,
equivalent to $97 and $288, respectively. During the prior periods, the Company
paid dividends per share of $0.71 and $2.13, respectively, equivalent to $93 and
$277, respectively.
Credit
Arrangements
On October 1, 2014, the
Company entered into a $1,100 revolving credit agreement (the Credit Agreement),
which expires in October 2019. This agreement replaced a prior $1,100 revolving
credit agreement in place since May 2012.
There were no borrowings under
the Credit Agreement as of March 31, 2015, and the Company believes that
borrowings under the Credit Agreement are and will continue to be available for
general corporate purposes. The Credit Agreement includes certain restrictive
covenants and limitations. The primary restrictive covenant is a maximum ratio
of total debt to earnings before interest, taxes, depreciation and amortization
and intangible asset impairment (Consolidated EBITDA) for the trailing four
quarters (Consolidated Leverage ratio), as defined and described in the Credit
Agreement, of 3.50.
The following table sets forth the calculation of
the Consolidated Leverage ratio as of March 31, using Consolidated EBITDA for the
trailing four quarters, as contractually defined:
|
|
2015 |
Earnings from continuing operations |
|
$ |
588 |
Add
back: |
|
|
|
Interest
expense |
|
|
103 |
Income tax
expense |
|
|
307 |
Depreciation and amortization |
|
|
172 |
Noncash
intangible asset impairment charges |
|
|
2 |
Deduct: |
|
|
|
Interest
income |
|
|
3 |
Consolidated EBITDA |
|
$
|
1,169 |
Total debt |
|
$ |
2,166 |
Consolidated Leverage ratio |
|
|
1.85 |
The Company is in compliance
with all restrictive covenants and limitations in the Credit Agreement as of
March 31, 2015, and anticipates being in compliance with all restrictive
covenants for the foreseeable future.
The Company had $37 of foreign
and other credit lines as of March 31, 2015; $4 was outstanding and the
remainder of $33 was available for borrowing.
25
Table of Contents
CONTINGENCIES
See Note 11 Other
Contingencies and Guarantees to the Condensed Consolidated Financial Statements
for information on the Companys contingencies.
OFF-BALANCE SHEET
ARRANGEMENTS
See Note 11 Other
Contingencies and Guarantees to the Condensed Consolidated Financial Statements
for information on the Companys off-balance sheet arrangements.
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
See Note 1 Interim Financial
Statements to the Condensed Consolidated Financial Statements for a summary of
recently issued accounting pronouncements relevant to the Company.
26
Table of Contents
Cautionary
Statement
This Quarterly Report on Form
10-Q, including the exhibits hereto and the information incorporated by
reference herein, contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and such forward-looking statements
involve risks and uncertainties. Except for historical information, matters
discussed above, including statements about future volume, sales, costs, cost
savings, earnings, cash flows, plans, objectives, expectations, growth, or
profitability, are forward-looking statements based on managements estimates,
assumptions and projections. Words such as could, may, expects,
anticipates, targets, goals, projects, intends, plans, believes,
seeks, estimates and variations on such words, and similar expressions, are
intended to identify such forward-looking statements. These forward-looking
statements are only predictions, subject to risks and uncertainties, and actual
results could differ materially from those discussed above. Important factors
that could affect performance and cause results to differ materially from
managements expectations are described in the sections entitled Risk Factors
in the Annual Report on Form 10-K for the fiscal year ended June 30, 2014, and
Managements Discussion and Analysis of Financial Condition and Results of
Operations in Exhibit 99.2 of the Companys Current Report on Form 8-K filed on
December 4, 2014, as updated from time to time in the Companys SEC filings.
These factors include, but are not limited to:
● |
risks related to
international operations, including political instability;
government-imposed price controls or other regulations; foreign currency
exchange rate controls, including periodic changes in such controls,
fluctuations and devaluations; labor unrest and inflationary pressures,
particularly in Argentina and other challenging markets; |
● |
risks related to the
possibility of nationalization, expropriation of assets or other
government action in foreign jurisdictions; |
● |
risks related to the
Companys discontinuation of operations in Venezuela; |
● |
intense competition in
the Company's markets; |
● |
changes in the Companys
leadership; |
● |
worldwide, regional and
local economic conditions and financial market volatility;
|
● |
volatility and increases
in commodity costs such as resin, sodium hypochlorite and agricultural
commodities, and increases in energy, transportation or other costs;
|
● |
the ability of the
Company to drive sales growth, increase price and market share, grow its
product categories and achieve favorable product and geographic mix;
|
● |
dependence on key
customers and risks related to customer consolidation and ordering
patterns; |
● |
costs resulting from
government regulations; |
● |
the ability of the
Company to successfully manage global political, legal, tax and regulatory
risks, including changes in regulatory or administrative activity;
|
● |
supply disruptions and
other risks inherent in reliance on a limited base of
suppliers; |
● |
the ability of the
Company to implement and generate anticipated cost savings and
efficiencies; |
● |
the success of the
Company's business strategies; |
● |
the impact of product
liability claims, labor claims and other legal proceedings, including in
foreign jurisdictions and the Company's litigation related to its
discontinued operations in Brazil;
|
● |
the ability of the
Company to develop and introduce commercially successful
products; |
● |
risks relating to
acquisitions, new ventures and divestitures, and associated costs,
including the potential for asset impairment charges related to, among
others, intangible assets and goodwill; |
● |
risks related to
reliance on information technology systems, including potential security
breaches, cyber attacks or privacy breaches that result in the
unauthorized disclosure of consumer, customer, employee or Company
information, or service interruptions;
|
● |
the Company's ability to
attract and retain key personnel; |
● |
the Company's ability to
maintain its business reputation and the reputation of its
brands; |
● |
environmental matters,
including costs associated with the remediation of past contamination and
the handling and/or transportation of hazardous substances;
|
● |
the impact of natural
disasters, terrorism and other events beyond the Company's
control; |
● |
the Company's ability to
maximize, assert and defend its intellectual property rights; |
● |
any infringement or
claimed infringement by the Company of third-party intellectual property
rights; |
● |
the effect of the
Company's indebtedness and credit rating on its operations and financial
results; |
● |
the Company's ability to
maintain an effective system of internal controls; |
● |
uncertainties relating
to tax positions, tax disputes and changes in the Company's tax
rate; |
27
Table of Contents
● |
the accuracy of the
Company's estimates and assumptions on which its financial statement
projections are based; |
● |
the Company's ability to
pay and declare dividends or repurchase its stock in the future;
and |
● |
the impacts of potential
stockholder activism. |
The Companys forward-looking
statements in this Report are based on managements current views and
assumptions regarding future events and speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by the federal securities laws.
In this Report, unless the
context requires otherwise, the terms the Company and Clorox refer to The
Clorox Company and its subsidiaries.
28
Table of
Contents
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
There have not been any
material changes to the Companys market risk since June 30, 2014. For
additional information, refer to Managements Discussion and Analysis of
Financial Condition and Results of Operations included in Exhibit 99.2 of the
Companys Current Report on Form 8-K filed on December 4, 2014.
Item 4. Controls and
Procedures
The Companys management, with
the participation of the Companys chief executive officer and chief financial
officer, evaluated the effectiveness of the Companys disclosure controls and
procedures as of the end of the period covered by this Report. Based on that
evaluation, the chief executive officer and chief financial officer concluded
that the Companys disclosure controls and procedures, as of the end of the
period covered by this Report, were effective such that the information required
to be disclosed by the Company in reports filed under the Exchange Act is (i)
recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms and (ii) accumulated and communicated to
management, including the chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding disclosure.
No change in the Companys
internal control over financial reporting occurred during the third fiscal
quarter of the fiscal year ending June 30, 2015, that has materially affected,
or is reasonably likely to materially affect, the Companys internal control
over financial reporting.
29
Table of Contents
PART II OTHER
INFORMATION
Item 1.A. Risk
Factors
For information regarding Risk
Factors, please refer to Item 1.A. in the Companys Annual Report on Form 10-K
for the fiscal year ended June 30, 2014, and the information in Cautionary
Statement included in this Report.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds
The following table sets forth
the purchases of the Companys securities by the Company and any affiliated
purchasers within the meaning of Rule 10b-18(a)(3) (17 CFR 240.10b-18(a)(3))
during the third quarter of fiscal year 2015.
|
|
[a] |
|
[b] |
|
[c] |
|
[d] |
|
Period |
|
Total Number
of Shares Purchased(1) |
|
Average Price
Paid per Share |
|
Total Number
of Shares Purchased
as Part of Publicly Announced Plans or Programs |
|
Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or
Programs(2) |
January 1 to 31, 2015 |
|
- |
|
$ |
- |
|
- |
|
$ |
750,000,000 |
February 1 to 28, 2015 |
|
- |
|
$ |
- |
|
- |
|
$ |
750,000,000 |
March 1 to 31, 2015 |
|
1,371,965 |
|
$ |
109.33 |
|
1,371,965 |
|
$ |
750,000,000 |
Total |
|
1,371,965 |
|
$ |
109.33 |
|
1,371,965 |
|
|
|
____________________
(1) |
|
All of the shares
purchased in March 2015 were acquired pursuant to the Companys program to
offset the potential impact of share dilution related to stock-based
awards. |
|
|
|
(2) |
|
On May 13, 2013, the
Companys board of directors approved a share repurchase program
authorizing up to $750 million in share repurchases. As of March 31, 2015,
all of the $750 million remained available for repurchases. Since 1999,
the Company has also had a share repurchase program, the purpose of which
is to offset the impact of stock dilution related to share-based awards.
On November 15, 2005, the board of directors approved the extension of the
program, which has no specified cap. Neither of these programs has a
specified termination date. |
30
Table of Contents
Item 6.
Exhibits
31.1 |
|
Certification by the Chief Executive Officer of the Company
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification by the Chief Financial Officer of the Company
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32 |
|
Certification by the Chief Executive Officer and Chief Financial
Officer of the Company Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
|
101 |
|
The
following materials from The Clorox Companys Quarterly Report on Form
10-Q for the period ended March 31, 2015, are formatted in eXtensible
Business Reporting Language (XBRL): (i) the Condensed Consolidated
Statements of Earnings and Comprehensive Income, (ii) the Condensed
Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements
of Cash Flows, and (iv) Notes to Condensed Consolidated Financial
Statements. |
31
Table of Contents
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
THE
CLOROX COMPANY (Registrant) |
|
|
|
|
|
|
DATE: May 4,
2015 |
BY |
/s/ Thomas D. Johnson |
|
|
Thomas
D. Johnson |
|
|
Vice
President Global Business Services and |
|
|
|
Principal
Accounting Officer |
32
Table of Contents
EXHIBIT INDEX
Exhibit No.
31.1 |
|
Certification by the Chief Executive Officer of the Company
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification by the Chief Financial Officer of the Company
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32 |
|
Certification by the Chief Executive Officer and Chief Financial
Officer of the Company Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
|
101 |
|
The
following materials from The Clorox Companys Quarterly Report on Form
10-Q for the period ended March 31, 2015, are formatted in eXtensible
Business Reporting Language (XBRL): (i) the Condensed Consolidated
Statements of Earnings and Comprehensive Income, (ii) the Condensed
Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements
of Cash Flows, and (iv) Notes to Condensed Consolidated Financial
Statements. |
33
Exhibit
31.1
CERTIFICATION
I, Benno Dorer, certify that:
1. |
I have
reviewed this quarterly report on Form 10-Q of The Clorox
Company; |
|
|
2. |
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report; |
|
3. |
Based on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report; |
|
4. |
The
registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
a) |
designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared; |
|
|
|
|
b) |
designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
c) |
evaluated the
effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and |
|
|
d) |
disclosed in this
report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial
reporting. |
|
5. |
The
registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrants auditors and the audit committee of the registrants
board of directors (or persons performing the equivalent
functions): |
|
|
a) |
all significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize
and report financial information; and |
|
|
b) |
any fraud, whether or
not material, that involves management or other employees who have a
significant role in the registrants internal control over financial
reporting. |
Date: May 4, 2015
/s/ Benno Dorer |
Benno Dorer |
Chief Executive
Officer |
Exhibit
31.2
CERTIFICATION
I, Stephen M. Robb, certify that:
1. |
I have
reviewed this quarterly report on Form 10-Q of The Clorox
Company; |
|
|
2. |
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report; |
|
3. |
Based on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report; |
|
4. |
The
registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
a) |
designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared; |
|
|
|
|
b) |
designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
c) |
evaluated the
effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and |
|
|
d) |
disclosed in this
report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial
reporting. |
|
5. |
The
registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrants auditors and the audit committee of the registrants
board of directors (or persons performing the equivalent
functions): |
|
|
a) |
all significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize
and report financial information; and |
|
|
b) |
any fraud, whether or
not material, that involves management or other employees who have a
significant role in the registrants internal control over financial
reporting. |
Date: May 4, 2015
/s/ Stephen M. Robb |
Stephen M. Robb |
Executive Vice President - Chief Financial
Officer |
Exhibit 32
CERTIFICATION
In connection with the
periodic report of The Clorox Company (the "Company") on Form 10-Q for the
period ended March 31, 2015, as filed with the Securities and Exchange
Commission (the "Report"), we, Benno Dorer, Chief Executive Officer of the
Company, and Stephen M. Robb, Chief Financial Officer of the Company, hereby
certify as of the date hereof, solely for purposes of Title 18, Chapter 63,
Section 1350 of the United States Code, that to our knowledge:
|
(1) |
|
the Report
fully complies with the requirements of Section 13(a) or 15(d), as
applicable, of the Securities Exchange Act of 1934, and |
|
|
|
|
|
(2) |
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company
at the dates and for the periods indicated. |
This Certification has not
been, and shall not be deemed, filed with the Securities and Exchange
Commission.
Date: May 4, 2015
/s/ Benno Dorer |
Benno Dorer |
Chief Executive
Officer |
/s/ Stephen M. Robb |
Stephen M. Robb |
Executive Vice President - Chief Financial
Officer |
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