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 September 30, 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 October 19, 2015, there were 129,091,085 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 |
|
|
9/30/2015 |
|
9/30/2014 |
Net
sales |
|
$ |
1,390 |
|
|
$ |
1,352 |
|
Cost
of products sold |
|
|
765 |
|
|
|
774 |
|
Gross profit |
|
|
625 |
|
|
|
578 |
|
|
Selling and administrative expenses |
|
|
186 |
|
|
|
180 |
|
Advertising costs |
|
|
123 |
|
|
|
121 |
|
Research and development costs |
|
|
30 |
|
|
|
30 |
|
Interest expense |
|
|
23 |
|
|
|
26 |
|
Other (income) expense, net |
|
|
(1 |
) |
|
|
3 |
|
Earnings from continuing operations before income
taxes |
|
|
264 |
|
|
|
218 |
|
Income taxes on continuing operations |
|
|
91 |
|
|
|
73 |
|
Earnings from continuing operations |
|
|
173 |
|
|
|
145 |
|
Losses from discontinued operations, net of tax |
|
|
(1 |
) |
|
|
(55 |
) |
Net
earnings |
|
$ |
172 |
|
|
$ |
90 |
|
|
Net
earnings (losses) per share |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
1.34 |
|
|
$ |
1.12 |
|
Discontinued
operations |
|
|
(0.01 |
) |
|
|
(0.42 |
) |
Basic net earnings
per share |
|
$ |
1.33 |
|
|
$ |
0.70 |
|
|
Diluted |
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
1.32 |
|
|
$ |
1.10 |
|
Discontinued
operations |
|
|
(0.01 |
) |
|
|
(0.42 |
) |
Diluted net
earnings per share |
|
$ |
1.31 |
|
|
$ |
0.68 |
|
|
Weighted average shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
Basic |
|
|
129,155 |
|
|
|
129,312 |
|
Diluted |
|
|
131,220 |
|
|
|
131,369 |
|
|
Dividend declared per share |
|
$ |
0.77 |
|
|
$ |
0.74 |
|
|
Comprehensive income |
|
$ |
133 |
|
|
$ |
91 |
|
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)
|
|
9/30/2015 |
|
6/30/2015 |
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
383 |
|
|
$
|
382 |
|
Receivables,
net |
|
|
472 |
|
|
|
519 |
|
Inventories,
net |
|
|
408 |
|
|
|
385 |
|
Other
current assets |
|
|
147 |
|
|
|
143 |
|
Total
current assets |
|
|
1,410 |
|
|
|
1,429 |
|
Property, plant and equipment, net
of accumulated depreciation |
|
|
|
|
|
|
|
|
and
amortization of $1,854 and $1,839, respectively |
|
|
885 |
|
|
|
918 |
|
Goodwill |
|
|
1,052 |
|
|
|
1,067 |
|
Trademarks, net |
|
|
533 |
|
|
|
535 |
|
Other intangible assets, net |
|
|
49 |
|
|
|
50 |
|
Other assets |
|
|
166 |
|
|
|
165 |
|
Total assets |
|
$ |
4,095 |
|
|
$ |
4,164 |
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Notes
and loans payable |
|
$ |
131 |
|
|
$ |
95 |
|
Current
maturities of long-term debt |
|
|
300 |
|
|
|
300 |
|
Accounts
payable |
|
|
419 |
|
|
|
431 |
|
Accrued
liabilities |
|
|
464 |
|
|
|
548 |
|
Income
taxes payable |
|
|
37 |
|
|
|
31 |
|
Total
current liabilities |
|
|
1,351 |
|
|
|
1,405 |
|
Long-term debt |
|
|
1,796 |
|
|
|
1,796 |
|
Other liabilities |
|
|
741 |
|
|
|
750 |
|
Deferred income taxes |
|
|
88 |
|
|
|
95 |
|
Total
liabilities |
|
|
3,976 |
|
|
|
4,046 |
|
|
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 September 30, 2015 and June 30, 2015; and 128,787,685 and
128,614,310 |
|
|
|
|
|
|
shares
outstanding at September 30, 2015 and June 30, 2015,
respectively |
|
|
159 |
|
|
|
159 |
|
Additional paid-in
capital |
|
|
790 |
|
|
|
775 |
|
Retained earnings |
|
|
1,993 |
|
|
|
1,923 |
|
Treasury shares, at cost:
29,953,776 and 30,127,151 shares |
|
|
|
|
|
|
|
|
at
September 30, 2015 and June 30, 2015, respectively |
|
|
(2,282 |
) |
|
|
(2,237 |
) |
Accumulated other comprehensive net
loss |
|
|
(541 |
) |
|
|
(502 |
) |
Stockholders equity |
|
|
119 |
|
|
|
118 |
|
Total liabilities and stockholders
equity |
|
$ |
4,095 |
|
|
$ |
4,164 |
|
See Notes to Condensed
Consolidated Financial Statements
4
Table of Contents
The Clorox
Company
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(Dollars in millions)
|
|
Three Months
Ended |
|
|
9/30/2015 |
|
9/30/2014 |
Operating activities: |
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
172 |
|
|
$ |
90 |
|
Deduct:
Losses from discontinued operations, net of tax |
|
|
(1 |
) |
|
|
(55 |
) |
Earnings
from continuing operations |
|
|
173 |
|
|
|
145 |
|
Adjustments
to reconcile earnings from continuing operations to net cash |
|
|
|
|
|
|
|
|
provided
by continuing operations: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
41 |
|
|
|
43 |
|
Share-based
compensation |
|
|
9 |
|
|
|
5 |
|
Deferred
income taxes |
|
|
(5 |
) |
|
|
(4 |
) |
Other |
|
|
(5 |
) |
|
|
(9 |
) |
Changes
in: |
|
|
|
|
|
|
|
|
Receivables,
net |
|
|
39 |
|
|
|
87 |
|
Inventories,
net |
|
|
(30 |
) |
|
|
(26 |
) |
Other
current assets |
|
|
(10 |
) |
|
|
1 |
|
Accounts
payable and accrued liabilities |
|
|
(95 |
) |
|
|
(44 |
) |
Income
taxes payable |
|
|
18 |
|
|
|
36 |
|
Net cash provided by continuing
operations |
|
|
135 |
|
|
|
234 |
|
Net
cash provided by discontinued operations |
|
|
12 |
|
|
|
9 |
|
Net cash provided by
operations |
|
|
147 |
|
|
|
243 |
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(28 |
) |
|
|
(29 |
) |
Other |
|
|
12 |
|
|
|
2 |
|
Net cash used for investing
activities |
|
|
(16 |
) |
|
|
(27 |
) |
|
Financing activities: |
|
|
|
|
|
|
|
|
Notes
and loans payable, net |
|
|
36 |
|
|
|
(90 |
) |
Treasury
stock purchased |
|
|
(103 |
) |
|
|
(8 |
) |
Cash
dividends paid |
|
|
(99 |
) |
|
|
(95 |
) |
Issuance of common stock for employee stock
plans and other |
|
|
46 |
|
|
|
9 |
|
Net cash used for financing
activities |
|
|
(120 |
) |
|
|
(184 |
) |
Effect of exchange rate changes on cash and
cash equivalents |
|
|
(10 |
) |
|
|
(6 |
) |
Net increase in cash and cash
equivalents |
|
|
1 |
|
|
|
26 |
|
Cash
and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
382 |
|
|
|
329 |
|
End
of period |
|
$ |
383 |
|
|
$ |
355 |
|
See Notes to Condensed
Consolidated Financial Statements
5
Table of Contents
The Clorox
Company
Notes to Condensed
Consolidated Financial Statements
(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 months ended September
30, 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 September 30, 2015, are not necessarily
indicative of the results that may be expected for the fiscal year ending June
30, 2016, 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, the Company reclassified
the financial results of Clorox Venezuela as a discontinued operation in the
condensed consolidated financial statements for all periods presented herein.
Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles in the United States
(U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission (SEC). The information in this
report should be read in conjunction with the Companys Annual Report on Form
10-K filed with the SEC for the fiscal year ended June 30, 2015, which includes
a complete set of footnote disclosures including the Companys significant
accounting policies.
Recently Issued Accounting
Standards
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 February 2015, the FASB
issued ASU No. 2015-02, Amendments to the Consolidation Analysis, which
changes the guidance for evaluating whether to consolidate certain legal
entities. The amendments modify the evaluation of whether limited partnerships
and similar legal entities are variable interest entities or voting interest
entities. 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 2015-02 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 effective for the Company beginning in
the first quarter of fiscal year 2019, with the option to early adopt in the
first quarter of fiscal year 2018. The Company is currently evaluating the
impact that adoption of ASU 2014-09 will have on its consolidated financial
statements.
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 of Clorox Venezuela,
thereby reaffirming the government's expropriation of Clorox Venezuelas assets.
Further, President Nicolás Maduro announced the government's 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 for all periods presented.
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 months ended September 30, 2015 and 2014,
respectively.
The following table provides a
summary of losses from discontinued operations for Clorox Venezuela and losses
from discontinued operations other than Clorox Venezuela for the periods
indicated:
|
Three Months
Ended |
|
9/30/2015 |
|
|
9/30/2014 |
Operating losses from Clorox Venezuela before income
taxes |
$ |
- |
|
|
$ |
(6 |
) |
Exit
costs and other related expenses for Clorox Venezuela |
|
- |
|
|
|
(73 |
) |
Total losses from Clorox Venezuela before income
taxes |
|
- |
|
|
|
(79 |
) |
Income tax benefit attributable to Clorox Venezuela |
|
- |
|
|
|
24 |
|
Total losses from Clorox Venezuela, net of tax |
|
- |
|
|
|
(55 |
) |
|
Losses from discontinued operations other than Clorox
Venezuela, net of tax |
|
(1 |
) |
|
|
- |
|
Losses from discontinued operations, net of tax |
$ |
(1 |
) |
|
$ |
(55 |
) |
7
Table of Contents
NOTE 3. INVENTORIES,
NET
Inventories, net, consisted of
the following as of:
|
9/30/2015 |
|
6/30/2015 |
Finished goods |
$ |
331 |
|
|
$ |
316 |
|
Raw materials and
packaging |
|
107 |
|
|
|
101 |
|
Work
in process |
|
2 |
|
|
|
3 |
|
LIFO
allowances |
|
(32 |
) |
|
|
(35 |
) |
Total |
$ |
408 |
|
|
$ |
385 |
|
NOTE 4. OTHER
LIABILITIES
Other liabilities consisted of
the following as of:
|
9/30/2015 |
|
6/30/2015 |
Venture agreement net terminal
obligation |
$ |
296 |
|
$ |
294 |
Employee benefit obligation |
|
293 |
|
|
299 |
Taxes |
|
34 |
|
|
38 |
Other |
|
118 |
|
|
119 |
Total |
$ |
741 |
|
$ |
750 |
NOTE 5. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS
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 September 30, 2015, the
notional amount of commodity derivatives was $52, of which $26 related to jet
fuel swaps and $26 related to soybean oil futures. As of June 30, 2015, the
notional amount of commodity derivatives was $47, of which $27 related to jet
fuel swaps and $20 related to soybean oil futures.
Interest Rate Risk
Management
The Company may also enter
into over-the-counter interest rate derivative instruments to fix a portion of
the benchmark interest rate prior to an anticipated issuance of fixed rate debt
or to manage the Companys level of fixed and floating rate debt. The interest
rate derivative instruments are measured at fair value using information quoted
by U.S. government bond dealers.
As of both September 30, 2015
and June 30, 2015, the Company had no interest rate derivative instruments.
8
Table of Contents
NOTE 5. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
Foreign Currency Risk
Management
The Company may also enter
into certain over-the-counter derivative contracts to manage a portion of the
Companys forecasted foreign currency exposure associated with the purchase of
inventory. These foreign currency contracts generally have durations of no
longer than 2 years. The foreign exchange contracts are measured at fair value
using information quoted by foreign exchange dealers.
The notional amount of
outstanding foreign currency forward contracts used by the Companys
subsidiaries in Canada, Australia and New Zealand were $50, $25 and $5,
respectively, as of September 30, 2015, and $64, $35 and $6, respectively, as of
June 30, 2015.
Counterparty Risk
Management and Derivative Contract 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 $12 and $8 of the derivative instruments reflected in accrued
liabilities as of September 30, 2015 and June 30, 2015, respectively, $9 and $8,
respectively, contained such terms. As of both September 30, 2015 and June 30,
2015, neither the Company nor any counterparty was required to post any
collateral as no counterparty liability position limits were
exceeded.
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 September 30, 2015 and June
30, 2015, the Company and each of its counterparties had been assigned
investment grade credit 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 September 30, 2015 and June 30, 2015, the Company maintained
cash margin balances related to exchange-traded futures contracts of $4 and $2,
respectively, which are classified as other current assets on the condensed
consolidated balance sheets.
Fair Value Measurements
Financial assets and
liabilities measured at fair value on a recurring basis in the condensed
consolidated balance sheets are required to be classified and disclosed in one
of the following three categories of the fair value hierarchy:
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 September 30, 2015 and
June 30, 2015, the Companys financial assets and liabilities that were measured
at fair value on a recurring basis during the applicable periods included
derivative financial instruments, which were all classified as Level 2, and
trust assets to fund certain of the Companys nonqualified deferred compensation
plans, which were classified as Level 1.
9
Table of
Contents
NOTE 5. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
The following table summarizes
the fair value of the Companys financial assets and liabilities for which
disclosure of fair value is required:
|
|
|
|
|
|
9/30/2015 |
|
6/30/2015 |
|
|
Balance
sheet classification |
|
Fair
value hierarchy level |
|
Carrying Amount |
|
Estimated Fair Value |
|
Carrying Amount |
|
Estimated Fair Value |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments including money market |
|
Cash
and cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
funds (a) |
|
equivalents |
|
1 |
|
$ |
223 |
|
$ |
223 |
|
$ |
212 |
|
$ |
212 |
Time
deposits (a) |
|
Cash and cash
equivalents |
|
2 |
|
|
79 |
|
|
79 |
|
|
84 |
|
|
84 |
Foreign exchange derivative contracts |
|
Other current assets |
|
2 |
|
|
7 |
|
|
7 |
|
|
1 |
|
|
1 |
Interest rate contracts |
|
Other current assets |
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Commodity purchase derivative contracts |
|
Other current assets |
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Trust assets for nonqualified deferred compensation
plans |
|
Other assets |
|
1 |
|
|
38 |
|
|
38 |
|
|
38 |
|
|
38 |
|
|
|
|
|
|
$ |
347 |
|
$ |
347 |
|
$ |
335 |
|
$ |
335 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity purchase derivative contracts |
|
Accrued liabilities |
|
2 |
|
$ |
12 |
|
$ |
12 |
|
$ |
8 |
|
$ |
8 |
Interest rate derivative contracts |
|
Accrued liabilities |
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Foreign exchange derivative contracts |
|
Accrued liabilities |
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Commodity purchase derivative contracts |
|
Other liabilities |
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Notes and loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and loans payable
(b) |
|
payable |
|
2 |
|
|
131 |
|
|
131 |
|
|
95 |
|
|
95 |
Long-term debt (c) |
|
Other liabilities |
|
2 |
|
|
2,096 |
|
|
2,160 |
|
|
2,096 |
|
|
2,137 |
|
|
|
|
|
|
$ |
2,239 |
|
$ |
2,303 |
|
$ |
2,199 |
|
$ |
2,240 |
____________________
(a) |
|
Cash
equivalents are composed of time deposits and other interest bearing
investments including money market funds with original maturity dates of
90 days or less. Cash equivalents are recorded at cost, which approximates
fair value. |
|
(b) |
|
Short-term
debt is composed of U.S. commercial paper and/or other similar short-term
debts issued by non-U.S. subsidiaries, all of which are recorded at cost,
which approximates fair value. |
|
(c) |
|
Long-term
debt, which is recorded at cost, includes current maturities. The fair
value of long-term debt was determined using secondary market prices
quoted by corporate bond dealers, and was classified as Level
2. |
Commodity, Interest Rate
and Foreign Exchange Derivatives
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.
10
Table of
Contents
NOTE 5. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
The effects of derivative
instruments designated as hedging instruments on other comprehensive net income
(losses) and the condensed consolidated statements of earnings and comprehensive
income were as follows:
|
|
Three Months
Ended |
|
|
Gains (losses)
recognized in Other Comprehensive Income |
|
Gains (losses)
reclassified from accumulated other comprehensive net income
(losses) and recognized in earnings |
|
|
9/30/2015 |
|
9/30/2014 |
|
9/30/2015 |
|
9/30/2014 |
Commodity purchase derivative contracts |
|
$ |
(7 |
)
|
|
$ |
(6 |
) |
|
$ |
2 |
|
|
$ |
- |
|
Interest rate derivative contracts |
|
|
- |
|
|
|
(3 |
) |
|
|
2 |
|
|
|
(1 |
) |
Foreign exchange derivative contracts |
|
|
6 |
|
|
|
4 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Total |
|
$ |
(1 |
) |
|
$ |
(5 |
) |
|
$ |
3 |
|
|
$ |
(2 |
) |
The gains (losses)
reclassified from accumulated other comprehensive net income (losses) and
recognized in earnings during the three months ended September 30, 2015 and
2014, for commodity purchase and foreign exchange contracts were included in
cost of products sold. The gains (losses) reclassified from accumulated other
comprehensive net income (losses) and recognized in earnings during the three
months ended September 30, 2015 and 2014, for interest rate contracts were
included in interest expense.
The estimated amount of the
existing net gain (loss) in accumulated other comprehensive net income (losses)
as of September 30, 2015, that is expected to be reclassified into earnings
within the next twelve months is $(11). 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 months ended September 30, 2015 and 2014, hedge
ineffectiveness was not significant.
Trust Assets
The Company has held interests
in mutual funds and cash equivalents as part of trust assets 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 interests in 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.
NOTE 6. 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 as of both September 30, 2015 and
June 30, 2015, 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 September 30, 2015 and June 30, 2015. 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.
11
Table of
Contents
NOTE 6. 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, 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. The
Company appealed this decision to Brazils highest court and, in August 2015,
the Company received a favorable decision. As a result of this decision, the
judgment has been set aside and the case will be remanded back to the appellate
court which then must re-hear the case and issue a new decision. If the judgment
had not been set aside, the value of the judgment against the Company, including
interest and foreign exchange fluctuations as of September 30, 2015, would have
been approximately $24. Based on this development, the Company currently
believes that it is not reasonably possible that any decision by the appellate
court will have a material effect on the Companys consolidated financial
statements taken as a whole. Expenses related to this litigation have been, and
any potential gain or expense related to the litigation would be, reflected in
discontinued operations, consistent with the Companys classification of
expenses related to its discontinued Brazil operations.
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, and
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, either
individually or in the aggregate, on the Companys condensed consolidated
financial statements taken as a whole.
Guarantees
In conjunction with
divestitures and other transactions, the Company may provide typical
indemnifications (e.g., indemnifications for representations and warranties and
retention of previously existing environmental, tax and employee liabilities)
that have terms that vary in duration and in the potential amount of the total
obligation and, in many circumstances, are not explicitly defined. The Company
has not made, nor does it believe that it is probable that it will make, any
payments relating to its indemnifications, and believes that any reasonably
possible payments would not have a material adverse effect, either individually
or in the aggregate, on the Companys condensed consolidated financial
statements taken as a whole.
The Company had not recorded
any liabilities on the aforementioned guarantees as of September 30, 2015.
As of September 30, 2015, the
Company was a party to letters of credit of $10 primarily related to one of its
insurance carriers, of which $0 had been drawn upon.
12
Table of
Contents
NOTE 7. COMPREHENSIVE
INCOME
Comprehensive income was as
follows for the periods indicated:
|
|
Three Months
Ended |
|
|
9/30/2015 |
|
9/30/2014 |
Earnings from continuing operations |
|
$ |
173 |
|
|
$ |
145 |
|
Losses from discontinued operations, net of tax |
|
|
(1 |
) |
|
|
(55 |
) |
Net
earnings |
|
|
172 |
|
|
|
90 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments |
|
|
(43 |
) |
|
|
1 |
|
Net unrealized
gains (losses) on derivatives |
|
|
3 |
|
|
|
(2 |
) |
Pension and
postretirement benefit adjustments |
|
|
1 |
|
|
|
2 |
|
Total other comprehensive income (loss), net of tax |
|
|
(39 |
) |
|
|
1 |
|
Comprehensive income |
|
$ |
133 |
|
|
$ |
91 |
|
Changes in accumulated other
comprehensive net income (loss) by component were as follows:
|
|
Three months
ended |
|
|
9/30/2015 |
|
9/30/2014 |
Foreign currency
adjustments |
|
|
|
|
|
|
|
|
Other
comprehensive gains (losses) before reclassifications |
|
$ |
(41 |
) |
|
$ |
(32 |
) |
Amounts
reclassified from accumulated other comprehensive net income
(loss) |
|
|
|
|
|
|
|
|
Recognition
of deferred foreign currency translation loss |
|
|
- |
|
|
|
30 |
|
Income
tax benefit (expense) |
|
|
(2 |
) |
|
|
3 |
|
Foreign currency
adjustments, net of tax |
|
$ |
(43 |
) |
|
$ |
1 |
|
|
Net unrealized gains (losses) on derivatives |
|
|
|
|
|
|
|
|
Other
comprehensive gains (losses) before reclassifications |
|
$ |
- |
|
|
$ |
(6 |
) |
Amounts
reclassified from accumulated other comprehensive net income
(loss) |
|
|
3 |
|
|
|
2 |
|
Income
tax benefit (expense) |
|
|
- |
|
|
|
2 |
|
Net unrealized
gains (losses) on derivatives, net of tax |
|
$ |
3 |
|
|
$ |
(2 |
) |
|
Pension and
postretirement benefit adjustments |
|
|
|
|
|
|
|
|
Other
comprehensive gains (losses) before reclassifications |
|
$ |
- |
|
|
$ |
- |
|
Amounts
reclassified from accumulated other comprehensive net income
(loss) |
|
|
1 |
|
|
|
2 |
|
Income
tax benefit (expense) |
|
|
- |
|
|
|
- |
|
Pension and
postretirement benefit adjustments, net of tax |
|
$ |
1 |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
Total changes in
other comprehensive income (loss), net of tax |
|
$ |
(39 |
) |
|
$ |
1 |
|
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 months ended September 30, 2015 and 2014, other comprehensive net income
(loss) on these loans totaled $(5) and $(2), respectively, and there were no
amounts reclassified from accumulated other comprehensive net income (loss).
13
Table of
Contents
NOTE 8. 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 |
|
|
9/30/2015 |
|
9/30/2014 |
Basic |
|
129,155 |
|
129,312 |
Dilutive effect of stock options and
other |
|
2,065 |
|
2,057 |
Diluted |
|
131,220 |
|
131,369 |
During the three months ended
September 30, 2015 and 2014, there were 1.3 million and zero, respectively, of
stock options and restricted stock units that were considered antidilutive and
excluded from the diluted net EPS calculation.
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 September 30, 2015, and a program to offset the anticipated
impact of share dilution related to share-based awards (the Evergreen Program),
which has no specified cap. During the three months ended September 30, 2015 and
2014, the Company repurchased approximately 1.0 million and 0.1 million shares,
respectively, under its Evergreen Program for an aggregate cost of $112 and $8,
respectively. The Company did not repurchase any shares under the open-market
purchase program during the three months ended September 30, 2015 and
2014.
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 34.5% and 33.7% for the three
months ended September 30, 2015 and 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. EMPLOYEE BENEFIT
PLANS
The following table summarizes
the components of net periodic benefit cost for the Companys retirement income
plans:
|
|
Three Months
Ended |
|
|
9/30/2015 |
|
9/30/2014 |
Service cost |
|
$ |
- |
|
|
$ |
- |
|
Interest cost |
|
|
7 |
|
|
|
6 |
|
Expected return on plan assets |
|
|
(4 |
) |
|
|
(5 |
) |
Amortization of unrecognized
items |
|
|
2 |
|
|
|
3 |
|
Total |
|
$ |
5 |
|
|
$ |
4 |
|
The net periodic benefit cost
for the Companys retirement health care plans was $0 for both the three months
ended September 30, 2015 and 2014.
In July 2015, the Company made
a $15 discretionary contribution to the domestic qualified retirement income
plan (pension plan).
14
Table of
Contents
NOTE 11. 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 the International reportable segment.
● |
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®, 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 |
|
Earnings (losses)
from continuing operations before income taxes |
|
|
Three Months
Ended |
|
Three Months
Ended |
|
|
9/30/2015 |
|
9/30/2014 |
|
9/30/2015 |
|
9/30/2014 |
Cleaning |
|
$ |
497 |
|
$ |
470 |
|
$ |
149 |
|
|
$ |
124 |
|
Household |
|
|
411 |
|
|
392 |
|
|
82 |
|
|
|
52 |
|
Lifestyle |
|
|
231 |
|
|
216 |
|
|
59 |
|
|
|
56 |
|
International |
|
|
251 |
|
|
274 |
|
|
32 |
|
|
|
26 |
|
Corporate |
|
|
- |
|
|
- |
|
|
(58 |
) |
|
|
(40 |
) |
Total |
|
$ |
1,390 |
|
$ |
1,352 |
|
$ |
264 |
|
|
$ |
218 |
|
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% and 26% for the three months ended September
30, 2015 and 2014, respectively.
15
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 included in
the Companys Annual Report on Form 10-K for the fiscal year ended June 30,
2015, which was filed with the Securities and Exchange Commission (SEC) on
August 21, 2015, 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 months ended September 30,
2015 (the current period) to the three months ended September 30, 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 all periods presented
herein, Clorox Venezuela is reflected as a discontinued operation.
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, wholesale
distributors and medical supply distributors. Clorox markets some of the most
trusted and recognized consumer brand names, including its namesake bleach and
cleaning products, Pine-Sol® cleaners, Liquid-Plumr® clog
removers, Poett® home care products, Fresh Step® cat
litter, Glad® bags, wraps and containers, Kingsford®
charcoal, Hidden Valley® 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 Clorox Commercial Solutions®. 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. |
16
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®, 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 |
|
|
9/30/2015 |
|
9/30/2014 |
|
%
Change |
|
9/30/2015 |
|
9/30/2014 |
Diluted net earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing
operations |
|
$ |
1.32 |
|
$ |
1.10 |
|
20 |
% |
|
|
|
|
|
|
Net
sales |
|
|
1,390 |
|
|
1,352 |
|
3 |
|
|
100 |
% |
|
100 |
% |
Gross profit |
|
|
625 |
|
|
578 |
|
8 |
|
|
45.0 |
|
|
42.8 |
|
Selling and administrative expenses |
|
|
186 |
|
|
180 |
|
3 |
|
|
13.4 |
|
|
13.3 |
|
Advertising costs |
|
|
123 |
|
|
121 |
|
2 |
|
|
8.8 |
|
|
8.9 |
|
Research and development costs |
|
|
30 |
|
|
30 |
|
- |
|
|
2.2 |
|
|
2.2 |
|
Diluted net earnings per
share from continuing operations increased $0.22, or 20%, in the current period, primarily due to volume
growth, cost savings, price increases and favorable commodity costs. These
increases were partially offset by higher demand-building investments.
Additionally, the prior period included a one-time benefit of $11, or $0.05
diluted earnings per share, related to changes in the Companys long-term
disability plan.
Net
sales and volume each
increased by 3% in the current quarter. The increase in volume was primarily
driven by higher shipments of Clorox® disinfecting wipes, Hidden
Valley® bottled salad dressings and Burts Bees® natural personal
care products, partially offset by lower shipments of Clorox® liquid
bleach. Net sales growth was driven primarily by volume growth and the benefit
of price increases, partially offset by unfavorable foreign currency exchange
rates and higher trade promotion spending.
Gross
margin, defined as gross
profit as a percentage of net sales, increased 220 basis points in the current
quarter. The increase was driven by strong cost savings, higher sales, which
reflect strong volume growth and price increases, and favorable commodity costs.
These factors were partially offset by higher manufacturing and logistics costs.
Selling and
administrative expenses, as a
percentage of net sales, remained essentially flat in the current
period.
Advertising
costs, as a percentage of net
sales, remained essentially flat in the current period.
Research and development
costs remained flat in the current period reflecting the
Companys continued support of its new products and established brands with an
emphasis on innovation.
Other (income) expense,
net, was $(1) in the current
period and $3 in the prior period. The change in the current period was
primarily driven by foreign currency exchange gains of $(1) compared to foreign
currency exchange losses of $4 in the prior period.
The effective tax rate
on earnings from continuing operations was 34.5% and 33.7% for the current and prior
periods, respectively. The lower tax rate for the prior period was primarily due
to lower tax on foreign earnings, partially offset by higher uncertain tax
position releases in the current period.
17
Table of Contents
DISCONTINUED OPERATIONS
Since the exit of Clorox
Venezuela in the first quarter of fiscal year 2015, the Company has recognized
$49 in after-tax exit costs and other related expenses within discontinued
operations related to the exit of Clorox Venezuela. The Company believes it is
reasonably possible that it will recognize an additional $11 to $21 in after-tax
exit costs and other related expenses within discontinued operations related to
the exit of Clorox Venezuela during fiscal years 2016 through 2019, for a total
of $60 to $70 over the entire five-year period. Of this total, the Company
believes $0 to $5 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 Notes to the Condensed
Consolidated Financial Statements for more information regarding discontinued
operations of Clorox Venezuela.
SEGMENT RESULTS FROM
CONTINUING OPERATIONS
The following sections present
the results from operations of the Companys reportable segments and certain
unallocated costs reflected in Corporate:
Cleaning
|
|
Three Months
Ended |
|
|
|
|
|
9/30/2015 |
|
9/30/2014 |
|
% Change |
Net sales |
|
$ |
497 |
|
$ |
470 |
|
6 |
% |
Earnings from continuing operations before income taxes |
|
|
149 |
|
|
124 |
|
20 |
|
Volume, net sales and earnings
from continuing operations before income taxes increased in the current period.
Volume in the Cleaning segment increased 5%, driven primarily by strong
merchandising in Clorox® disinfecting wipes and gains in both the
health care and cleaning brands in the Professional Products Division. Net sales
growth outpaced volume growth primarily due to the benefit of the February 2015
price increase on Clorox® liquid bleach, partially offset by higher
trade promotion spending. The increase in earnings from continuing operations
before income taxes was primarily due to sales growth, the benefits of favorable
commodity costs and strong cost savings. The increases were partially offset by
higher demand-building investments to support new products and higher
manufacturing and logistics costs.
Household
|
|
Three Months
Ended |
|
|
|
|
|
9/30/2015 |
|
9/30/2014 |
|
% Change |
Net sales |
|
$ |
411 |
|
$ |
392 |
|
5 |
% |
Earnings from continuing operations before income taxes |
|
|
82 |
|
|
52 |
|
58 |
|
Volume, net sales and earnings
from continuing operations before income taxes increased in the current period.
Household segment volume growth was 1%, primarily driven by higher shipments of
Kingsford® charcoal due to strong U.S. Labor Day merchandising,
partially offset by lower shipments of Cat Litter, largely due to continuing
competitive activity. The Bags and Wraps business also contributed to segment
volume growth, with distribution gains and increased merchandising support
behind innovation in premium trash bags. Net sales growth outpaced volume growth
primarily due to favorable product mix and the benefit of the November 2014
price increase in Bags and Wraps as consumers traded up to premium trash bags.
The increase in earnings from continuing operations before income taxes was
primarily due to sales growth, the benefit of favorable commodity costs and
strong cost savings. These increases were partially offset by higher
manufacturing and logistics costs.
18
Table of
Contents
Lifestyle
|
|
Three Months
Ended |
|
|
|
|
|
9/30/2015 |
|
9/30/2014 |
|
% Change |
Net sales |
|
$ |
231 |
|
$ |
216 |
|
7 |
% |
Earnings from continuing operations before income taxes |
|
|
59 |
|
|
56 |
|
5 |
|
Volume, net sales and earnings
from continuing operations before income taxes increased in the current period.
Lifestyle segment volume growth was 8%, primarily driven by higher shipments of
Hidden Valley® bottled salad dressings, including new flavored ranch
products, higher shipments of Burts Bees® natural personal care products,
primarily due to product innovation in face products, strength in towelettes and
the earlier shipments of holiday gift packs as compared to the prior period, and
higher shipments of Brita® water-filtration products due to increased
merchandising behind pour-through products. Volume growth outpaced sales growth
primarily due to higher trade promotion spending. The increase in earnings from
continuing operations before income taxes was primarily due to sales growth and
the benefit of cost savings. These increases were partially offset by higher
demand-building investments to support new products.
International
|
|
Three Months
Ended |
|
|
|
|
|
9/30/2015 |
|
9/30/2014 |
|
% Change |
Net sales |
|
$ |
251 |
|
$ |
274 |
|
(8 |
)% |
Earnings from continuing operations before income taxes |
|
|
32 |
|
|
26 |
|
23 |
|
Volume remained flat and
earnings from continuing operations before income taxes increased, while net
sales decreased in the current period. The flat volume in the International
segment was driven by higher shipments primarily in Mexico and Canada, offset by
lower shipments in certain other Latin American countries. Volume outpaced net
sales primarily due to unfavorable foreign currency exchange rates, partially
offset by the benefit of price increases. The increase in earnings from
continuing operations before income taxes was primarily due to the benefit of
price increases and cost savings as well as favorable mix. These increases were
partially offset by unfavorable foreign currency exchange rates and higher
manufacturing and logistics costs, mainly due to inflation.
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 |
|
|
|
|
|
9/30/2015 |
|
9/30/2014 |
|
%
Change |
Losses from continuing operations before income
taxes |
|
$ |
(58 |
) |
|
$ |
(40 |
) |
|
45 |
% |
19
Table of Contents
The increase in losses from
continuing operations before income taxes attributable to Corporate was
primarily due to a one-time benefit in the prior period of $11 related to
changes in the companys long-term disability plan, higher employee incentive
compensation costs and higher professional services costs.
FINANCIAL CONDITION,
LIQUIDITY AND CAPITAL RESOURCES
Operating
Activities
The Companys financial
condition and liquidity remain strong as of September 30, 2015. Net cash
provided by continuing operations was $135 in the current period, compared with
$234 in the prior period. The year-over-year change reflects higher earnings
from continuing operations in the current period, which was more than offset by
unfavorable changes in working capital, including higher performance-based
employee incentive compensation payments related to the Companys strong fiscal
year 2015 results, the timing of customer collections and higher tax payments.
Another contributing factor was a $15 contribution to the Companys domestic
qualified retirement income plan (pension plan) in the current period.
Investing Activities
Capital expenditures were $28
in the current period, compared with $29 in the prior period. Capital spending
as a percentage of net sales was 2% in both the current and prior periods,
respectively, which was essentially flat due to continued capital spending for
manufacturing and operational efficiencies. Current period investing activities
also include proceeds from the sale of the Companys corporate jet.
Financing
Activities
Net cash used for financing
activities was $120 in the current period, compared with $184 in the prior
period. This decrease was primarily due to the application of higher free cash
flow in the prior period to pay down notes payable balances, partially offset by
the current period increase in the net impact from treasury share repurchases to
offset dilution from employee stock option exercises.
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 September 30, 2015, and a program to offset the impact of
share dilution related to share-based awards (the Evergreen Program), which has
no specified cap.
During the three months ended
September 30, 2015 and 2014, the Company repurchased approximately 1.0 million
and 0.1 million shares, respectively, under its Evergreen Program for an
aggregate amount of $112 and $8, respectively. The Company did not repurchase
any shares under the open-market purchase program during the three months ended
September 30, 2015 and 2014.
During the three months ended
September 30, 2015 and 2014, the Company paid dividends per share of $0.77 and
$0.74, respectively, aggregating to $99 and $95, respectively.
Credit
Arrangements
As of September 30, 2015, the
Company had a $1,100 revolving credit agreement (the Credit Agreement) which
expires in October 2019. There were no borrowings under the Credit Agreement,
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.
20
Table of Contents
The following table sets forth
the calculation of the Consolidated Leverage ratio using Consolidated EBITDA for
the trailing four quarters, as defined in the Credit Agreement:
|
|
9/30/2015 |
Earnings from continuing operations |
|
$ |
634 |
Add back: |
|
|
|
Interest
expense |
|
|
97 |
Income
tax expense |
|
|
333 |
Depreciation
and amortization |
|
|
167 |
Noncash
intangible asset impairment charges |
|
|
3 |
Deduct: |
|
|
|
Interest
income |
|
|
4 |
Consolidated EBITDA |
|
$ |
1,230 |
Total debt |
|
$ |
2,227 |
Consolidated Leverage ratio |
|
|
1.81 |
The Company is in compliance
with all restrictive covenants and limitations in the Credit Agreement as of
September 30, 2015, and
anticipates being in compliance with all restrictive covenants for the
foreseeable future.
As of September 30, 2015, the
Company had $29 of foreign and other credit lines, of which, $4 was outstanding
and the remaining $25 was available for borrowing.
CONTINGENCIES
See Notes to Condensed
Consolidated Financial Statements for information on the Companys
contingencies.
OFF-BALANCE SHEET
ARRANGEMENTS
See Notes to Condensed
Consolidated Financial Statements for information on the Companys off-balance
sheet arrangements.
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
See Notes to Condensed
Consolidated Financial Statements for a summary of recently issued accounting
pronouncements relevant to the Company.
21
Table of Contents
Cautionary
Statement
This Quarterly Report on Form
10-Q (the Report), 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, statements about future volume, sales, foreign
currencies, costs, cost savings, margin, earnings, earnings per share, diluted
earnings per share, foreign currency exchange rates, 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 that reflect our current views with
respect to future events and financial performance, 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. Important factors that could affect performance
and cause results to differ materially from managements expectations are
described in the sections entitled Risk Factors and Managements Discussion
and Analysis of Financial Condition and Results of Operations in the Annual
Report on Form 10-K for the fiscal year ended June 30, 2015, as updated from
time to time in the Companys Securities and Exchange Commission filings. These
factors include, but are not limited to:
● |
intense competition in the Companys
markets; |
● |
worldwide, regional and
local economic conditions and financial market volatility; |
● |
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; |
● |
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 claims, labor
unrest and inflationary pressures, particularly in Argentina; and potential harm and
liabilities from the use, storage and transportation of chlorine in
certain international markets where chlorine is used in the production of
bleach;
|
● |
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; |
● |
volatility and increases in commodity costs
such as resin, sodium hypochlorite and agricultural commodities, and
increases in energy, transportation or other costs; |
● |
supply disruptions and other risks inherent
in reliance on a limited base of suppliers; |
● |
the ability of the Company to develop and
introduce commercially successful products; |
● |
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; |
● |
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;
|
● |
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; |
● |
the success of the Companys business
strategies; |
● |
the ability of the Company to implement and
generate anticipated cost savings and efficiencies; |
● |
the impact of product liability claims,
labor claims and other legal proceedings, including in foreign
jurisdictions and the Companys litigation related to its discontinued
operations in Brazil;
|
● |
the Companys ability to attract and retain
key personnel;
|
● |
the Companys 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 Companys control; |
● |
the Companys 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 Companys indebtedness and
credit rating on its operations and financial results; |
● |
the Companys ability to maintain an
effective system of internal controls; |
● |
uncertainties relating to tax positions, tax
disputes and changes in the Companys tax rate; |
22
Table of Contents
● |
the accuracy of the Companys estimates and
assumptions on which its financial statement projections are
based;
|
● |
the Companys 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.
23
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, 2015. For
additional information, refer to Managements Discussion and Analysis of
Financial Condition and Results of Operations included in Exhibit 99.1 of the
Companys Annual Report on Form 10-K for the fiscal year ended June 30,
2015.
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 first fiscal
quarter of the fiscal year ending June 30, 2016, that has materially affected,
or is reasonably likely to materially affect, the Companys internal control
over financial reporting.
24
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, 2015, 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 Securities Exchange Act Rule 10b-18(a)(3) (17
CFR 240.10b-18(a)(3)) during the first quarter of fiscal year 2016.
|
|
[a] |
|
[b] |
|
[c] |
|
[d] |
|
|
|
|
|
|
|
|
|
Maximum Number (or |
|
|
|
|
|
|
|
Total Number of |
|
Approximate Dollar |
|
|
|
|
|
|
|
Shares Purchased as |
|
Value) of Shares that |
|
|
Total Number of |
|
|
|
|
Part of Publicly |
|
May Yet Be Purchased |
|
|
Shares Purchased |
|
Average Price |
|
Anounced Plans or |
|
Under the Plans or |
Period |
|
(1) |
|
Paid per Share |
|
Programs |
|
Programs |
July 1 to
31, 2015 |
|
264,072 |
|
$ |
107.68 |
|
264,072 |
|
(2) |
August 1 to
31, 2015 |
|
219,575 |
|
|
112.05 |
|
219,575 |
|
(2) |
September 1
to 30, 2015 |
|
522,128 |
|
|
112.37 |
|
522,128 |
|
(2) |
Total |
|
1,005,775 |
|
$ |
111.07 |
|
1,005,775 |
|
(2) |
____________________
(1) |
All of the shares purchased during these
periods were acquired pursuant to the Companys share repurchase program
to offset the impact of share dilution related to share-based awards (the
Evergreen Program). |
(2) |
The Company has two share repurchase
programs: an open-market purchase program with an authorized aggregate
purchase amount of up to $750 million, all of which was available for
share repurchases as of September 30, 2015, and the Evergreen Program, the
purpose of which is to offset the impact of anticipated share dilution
related to share-based awards and which has no specified
cap. |
25
Table of Contents
Item 6.
Exhibits
3.2 |
The Clorox Company Amended and Restated Bylaws (filed as Exhibit
3.2 to the Current Report on Form 8-K, filed August 28, 2015, incorporated
herein by reference). |
10.1* |
Form of Performance Share Award
Agreement under the Companys 2005 Stock Incentive Plan for awards made in
2015. |
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
September 30, 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. |
(*) |
Indicates a management or
director contract or compensatory plan or arrangement required to be filed
as an exhibit to this report. |
26
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:
November 2, 2015 |
BY |
/s/ Thomas D. Johnson |
|
|
|
Thomas D.
Johnson |
|
|
Vice
President Global Business Services and |
|
|
Principal
Accounting Officer |
27
Table of Contents
EXHIBIT INDEX
Exhibit No.
3.2 |
The Clorox Company Amended and Restated Bylaws (filed as Exhibit
3.2 to the Current Report on Form 8-K, filed August 28, 2015, incorporated
herein by reference). |
10.1* |
Form of Performance Share Award
Agreement under the Companys 2005 Stock Incentive Plan for awards made in
2015. |
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
September 30, 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. |
(*) |
Indicates a management or
director contract or compensatory plan or arrangement required to be filed
as an exhibit to this report. |
28
THE CLOROX COMPANY
2005
STOCK INCENTIVE PLAN
PERFORMANCE
SHARE AWARD AGREEMENT
NOTICE OF PERFORMANCE SHARE
GRANT
The Clorox Company, a
Delaware company (the Company), grants to the Grantee named below, in
accordance with the terms of The Clorox Company 2005 Stock Incentive Plan (the
Plan) and this performance share award agreement (the Agreement), the
following number of Performance Shares on the terms set forth below:
GRANTEE: |
|
(refer to UBS Financial Services Inc. (UBS)
account for details) |
TARGET AWARD: |
|
(refer to UBS account for details) |
PERFORMANCE PERIOD: |
|
July
1, 2015 through June 30, 2018 |
DATE OF GRANT: |
|
|
|
SETTLEMENT DATE: |
|
Within 75 days following the last day of the
Performance Period, provided the Grantee has remained in the employment or
service of the Company or its Subsidiaries through such date (except for a
termination of employment or service due to death, Disability or
Retirement, as provided below) |
AGREEMENT
1. |
|
Grant of
Performance Shares. The
Company hereby grants to the Grantee the Target Award set forth above,
payment of which is dependent upon the achievement of certain performance
goals more fully described in Section 3 of this Agreement. This Award is
subject to the terms, definitions and provisions of the Plan and this
Agreement. All terms, provisions, and conditions applicable to the
Performance Shares set forth in the Plan and not set forth herein are
incorporated by reference. To the extent any provision hereof is
inconsistent with a provision of the Plan, the provisions of the Plan will
govern. All capitalized terms that are used in this Agreement and not
otherwise defined herein shall have the meanings ascribed to them in the
Plan. |
|
2. |
|
Nature and
Settlement of Award. The
Performance Shares awarded pursuant to this Agreement represent the
opportunity to receive Shares of the Company and Dividend Equivalents on
such Shares (as described in Section 4 below). The Company shall issue to
the Participant one Share for each vested Performance Share (plus any
Dividend Equivalents accrued with respect to such vested Performance
Shares), rounded down to the nearest whole share, less any Shares withheld
in accordance with the provisions of Section 7 of this Agreement.
Settlement shall occur on a date chosen by the Committee, which date shall
be within seventy-five (75) days following the last day of the Performance
Period, or any deferred settlement date established pursuant to Section 6
of this Agreement, whichever is later (the Settlement Date), and except
as specifically provided in Section 5 of this Agreement, provided the
Grantee has remained in the employment or service of the Company or its
Subsidiaries through the Settlement Date. Although vested within the
meaning of Section 83 of the Internal Revenue Code since no substantial
risk of forfeiture exists at the Settlement Date, the Performance Shares
(and any associated Dividend Equivalents) will not be earned until the
Grantee has fulfilled all of the conditions precedent set forth in this
Agreement, including, but not limited to, the obligations set forth in
Sections 9(b), 9(c), 9(d), 9(e) and Section 10, and the Grantee shall have
no right to retain the Shares or the value thereof upon vesting or
settlement of the Performance Shares until all such conditions precedent
have been satisfied. |
- 1 -
3. |
|
Determination of
Number of Performance Shares Vested. |
|
|
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The number of
Performance Shares vested, if any, for the Performance Period shall be
determined in accordance with the following
formula: |
|
# of Performance Shares =
Payout Percentage x Target Award |
|
|
|
The Payout Percentage is
based on cumulative economic profit (EP), calculated as described in the
paragraph below, at the end of the Performance Period, determined in accordance
with the following table: |
FY16 FY18 |
Payout |
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Performance Period is FY16-FY18 |
Interim percentages to be
interpolated |
|
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Cumulative
EP will be the sum of annual EP results over the Performance Period.
Annual EP is defined as Earnings Before Interest & Taxes (EBIT),
adjusted for non-cash restructuring charges, times one minus the tax rate,
less capital charge. |
|
|
|
Notwithstanding the above, the EP levels in the preceding table
shall be adjusted, fairly and appropriately, in accordance with the Plan
and, as provided in this Agreement, to reflect accurately the direct and
measurable effect of the impact of each of the following events not
otherwise reflected in the determination of the initial EP levels (each,
an Event) including, without limitation, the financial statement impact
on the Company on account of the occurrence or potential occurrence of an
Event: (1) the acquisition or divestiture of a business, (2) a Change in
Control, (3) U.S. Federal changes in tax statutes or the addition or
deletion of taxes to which the Company or any Affiliated Company is
subject, (4) force majeure (including events known as Acts of God), (5)
the adoption of new or revised accounting pronouncements or changes to
application of accounting pronouncements, and (6) any extraordinary,
unusual or non-recurring item not previously listed. Notwithstanding the
foregoing, an event listed in the preceding sentence shall not qualify as
an Event, and therefore no adjustment shall be made to the EP levels,
unless the impact of the occurrence or potential occurrence of such an
event listed in the preceding sentence exceeds $2 million in EP. The
purpose of any adjustments on account of the occurrence of an Event is to
keep the probability of achieving the EP levels the same as if the Event
triggering such adjustment had either not occurred or had not resulted in
any financial statement impact. The determination of any adjustments shall
be based on the Companys accounting as set forth in its books and records
(including business projections) and/or in the annual budget and/or long
range plan of the Company pursuant to which the EP levels were originally
established. The amount of any such adjustment shall be approved by the
Committee in its good faith determination in accordance with the
provisions of this paragraph. To the extent applicable, the Committee
shall condition the determination of the number of Performance Shares
vested under this Section 3 upon the satisfaction of the adjusted EP
levels. All Performance Shares that are not vested for the Performance
Period shall be forfeited as of the last day of the Performance
Period. |
|
4. |
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Dividend
Equivalent Rights. No
Dividend Equivalents shall be paid to the Grantee prior to the settlement
of the award. Rather, such Dividend Equivalent payments will accrue and be
notionally credited to the Grantees Performance Share account and paid
out at the Payout Percentage in the form of additional Shares (the
Dividend Equivalent Shares) upon settlement of the award, as described
in Section 2 above. |
|
5. |
|
Termination of Continuous Service. Except as otherwise provided below, if the
Grantees employment or service with the Company and its Subsidiaries is
terminated for any reason prior to the Settlement Date, all Performance
Shares and Dividend Equivalents subject to this Agreement shall be
immediately forfeited. |
|
|
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a. |
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Termination due to
Death or Disability. If the
Grantees termination of employment or service is due to death or
Disability, all Performance Shares and Dividend Equivalents shall
immediately vest and will be paid upon completion of the Performance
Period based on the level of performance achieved as of the end of such
Performance Period. |
- 2 -
|
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b. |
|
Termination due to
Retirement. If the
Grantees termination of employment or service is due to Retirement and is
more than twelve (12) months from the Date of Grant set forth in this
Agreement, the Performance Shares shall vest on a pro rata monthly basis,
including full credit for partial months elapsed, and will be paid upon
completion of the Performance Period based on the level of performance
achieved as of the end of such Performance Period; provided, however, that
this provision shall not apply in the event the Grantees employment or
service is terminated for Cause. The amount of the vested Award may be
computed under the following formula: Target Award times (number of full
months elapsed in Performance Period divided by number of full months in
Performance Period) times percent performance level achieved as of the end
of the Performance Period. Dividend Equivalents accrued through the
Grantees date of termination due to Retirement shall be paid at the same
time as the settlement of the vested Performance Shares. |
|
|
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c. |
|
Definition of
Retirement. For purposes
of this Agreement, the term Retirement shall mean termination of
employment or service as an Employee after (1) twenty (20) or more years
of vesting service, which solely for purposes of this Agreement, shall
be calculated under Article III of The Clorox Company 401(k) Plan (the
401(k) Plan) entitled Service along with any other relevant provisions
of the 401(k) Plan necessary or desirable to give full effect thereto, or
any successor provisions, regardless of the status of the Grantee with
respect to the 401(k) Plan (Vesting Service), or (2) attaining age
fifty-five with ten (10) or more years of Vesting Service. |
|
|
|
d. |
|
Definition of
Disability. For purposes
of this Agreement, the Grantees employment shall be deemed to have
terminated due to the Grantees Disability if the Grantee is entitled to
long-term disability benefits under the Companys long-term disability
plan or policy, as in effect on the date of termination of the Grantees
employment. |
|
6. |
|
Election
to Defer Settlement. Prior
to the commencement of the last year of the Performance Period, the
Grantee may elect to defer the settlement of the Performance Shares from
the last day of the Performance Period until a date at least two years
following such date, or until the Grantees later termination of
employment or service. If the Grantee makes such an election, it will
become irrevocable on the date of such election. If the Grantee makes such
an election, any Dividend Equivalents awarded with respect to such
deferred Performance Shares shall also be deferred under the same terms.
If the Grantee makes such an election, but a transaction occurs that
subjects the Grantees Performance Shares to Section 19 of the Plan prior
to the settlement date, the Grantees deferral election will terminate and
the Grantees Performance Shares and Dividend Equivalents will be settled
as of the date of that transaction. The Company may terminate any deferral
hereunder if a change in law requires such termination. |
|
7. |
|
Taxes. Pursuant to
Section 16 of the Plan, the Committee shall have the power and the right
to deduct or withhold, or require the Grantee to remit to the Company, an
amount sufficient to satisfy any applicable tax withholding requirements
applicable to this Award. The Committee may condition the issuance of
Shares upon the Grantees satisfaction of such withholding obligations.
The Grantee may elect to satisfy all or part of such withholding
requirement by tendering previously-owned Shares or by having the Company
withhold Shares having a Fair Market Value equal to the minimum statutory
withholding rate that could be imposed on the transaction (or such other
rate that will not result in a negative accounting impact) or in such
other manner as is acceptable to the Company. Such election shall be
irrevocable, made in writing, signed by the Grantee, and shall be subject
to any restriction or limitations that the Committee, in its sole
discretion, deems appropriate. |
|
8. |
|
Transferability of Performance Shares. Performance Shares shall not be
transferable by the Grantee other than by will or by the laws of descent
or distribution. For avoidance of doubt, Shares issued to the Grantee in
settlement of Performance Shares pursuant to Section 2 of this Agreement
shall not be subject to any of the foregoing transferability
restrictions. |
- 3 -
9.
|
Protection of Trade
Secrets and Limitations on Retention. |
|
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|
|
|
a. |
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Definitions. |
|
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|
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i. |
|
Affiliated Company
means any organization controlling, controlled by or under common control
with the Company. |
|
|
|
|
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ii. |
|
Confidential Information means the Companys technical or business or personnel
information not readily available to the public or generally known in the
trade, including inventions, developments, trade secrets and other
confidential information, knowledge, data and know-how of the Company or
any Affiliated Company, whether or not they originated with the Grantee,
or information which the Company or any Affiliated Company received from
third parties under an obligation of confidentiality. |
|
|
|
|
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iii. |
|
Conflicting Product
means any product, process, machine, or service of any person or
organization, other than the Company or any Affiliated Company, in
existence or under development that (1) resembles or competes with a
product, process, machine, or service upon or with which the Grantee shall
have worked during the two years prior to the Grantees termination of
employment with the Company or any Affiliated Company or (2) with respect
to which during that period of time the Grantee, as a result of his/her
job performance and duties, shall have acquired knowledge of Confidential
Information, and whose use or marketability could be enhanced by
application to it of Confidential Information. For purposes of this
section, it shall be conclusively presumed that the Grantee has knowledge
of information to which s/he has been directly exposed through actual
receipt or review of memorandum or documents containing such information
or through actual attendance at meetings at which such information was
discussed or disclosed. |
|
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|
|
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iv. |
|
Conflicting Organization means any person or organization that is engaged in or about to
become engaged in research on or development, production, marketing or
selling of a Conflicting Product. |
|
|
|
b. |
|
Right to Retain
Shares Contingent on Protection of Confidential
Information. In partial
consideration for the award of these Performance Shares, the Grantee
agrees that at all times, both during and after the term of the Grantees
employment with the Company or any Affiliated Company, to hold in the
strictest confidence, and not to use (except for the benefit of the
Company at the Companys direction) or disclose (except for the benefit of
the Company at the Companys direction), regardless of when disclosed to
the Grantee, any and all Confidential Information of the Company or any
Affiliated Company. The Grantee understands that for purposes of this
Section 9(b), Confidential Information further includes, but is not
limited to, information pertaining to any aspect of the business of the
Company or any Affiliated Company which is either information not known
(or known as a result of a wrongful act of the Grantee or of others who
were under confidentiality obligations as to the item or items involved)
by actual or potential competitors of the Company or other third parties
not under confidentiality obligations to the Company. If, prior to the
expiration of the Performance Period or at any time within one (1) year
after the Settlement Date, the Grantee discloses or uses, or threatens to
disclose or use, any Confidential Information other than in the course of
performing authorized services for the Company (or any Affiliated
Company), the Performance Shares, whether vested or not, will be
immediately forfeited and cancelled, and the Grantee shall immediately
return to the Company the Shares or the pre-tax income derived from any
disposition of the Shares. |
- 4 -
|
c. |
|
No Interference
with Customers or Suppliers. In partial consideration for the award of these Performance
Shares, in order to forestall the disclosure or use of Confidential
Information as well as to deter the Grantees intentional interference
with the contractual relations of the Company or any Affiliated Company,
the Grantees intentional interference with prospective economic advantage
of the Company or any Affiliated Company and to promote fair competition,
the Grantee agrees that the Grantees right to the Shares upon settlement
of the Performance Shares is contingent upon the Grantee refraining, for a
period of one (1) year after the date of settlement of the Performance
Shares, for himself/herself or any third party, directly or indirectly,
from using Confidential Information to (1) divert or attempt to divert
from the Company (or any Affiliated Company) any business of any kind in
which it is engaged, or (2) intentionally solicit its customers with which
it has a contractual relationship as to Conflicting Products, or to
interfere with the contractual relationship with any of its suppliers or
customers (collectively, Interfere). If, during the term of the
Performance Period or at any time within one (1) year after the Settlement
Date, the Grantee breaches his/her obligation not to Interfere, the
Grantees right to the Shares upon settlement of the Performance Shares
shall not have been earned and the Performance Shares, whether vested or
not, will be immediately cancelled, and the Grantee shall immediately
return to the Company the Shares or the pre-tax income derived from any
disposition of the Shares. For avoidance of doubt, the term Interfere
shall not include any advertisement of Conflicting Products through the
use of media intended to reach a broad public audience (such as
television, cable or radio broadcasts, or newspapers or magazines) or the
broad distribution of coupons through the use of direct mail or through
independent retail outlets. THE
GRANTEE UNDERSTANDS THAT THIS PARAGRAPH IS NOT INTENDED TO AND DOES NOT
PROHIBIT THE CONDUCT DESCRIBED, BUT PROVIDES FOR THE CANCELLATION OF THE
PERFORMANCE SHARES AND A RETURN TO THE COMPANY OF THE SHARES OR THE GROSS
TAXABLE PROCEEDS OF THE SHARES IF THE GRANTEE SHOULD CHOOSE TO VIOLATE
THIS NO INTERFERENCE WITH CUSTOMERS OR SUPPLIERS PROVISION DURING THE
TERM OF THE PERFORMANCE PERIOD OR WITHIN ONE (1) YEAR AFTER THE SETTLEMENT
DATE. |
|
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d. |
|
No Solicitation of
Employees. In partial
consideration for the award of these Performance Shares, in order to
forestall the disclosure or use of Confidential Information, as well as to
deter the Grantees intentional interference with the contractual
relations of the Company or any Affiliated Company, the Grantees
intentional interference with prospective economic advantage of the
Company or any Affiliated Company, and to promote fair competition, the
Grantee agrees that the Grantees right to the Shares upon settlement of
the Performance Shares is contingent upon the Grantee refraining, for a
period of one (1) year after the date of settlement of the Performance
Shares, for himself/herself or any third party, directly or indirectly,
from soliciting for employment any person employed by the Company, or by
any Affiliated Company, during the period of the solicited persons
employment and for a period of one (1) year after the termination of the
solicited persons employment with the Company or any Affiliated Company
(collectively Solicit). If, during the term of the Performance Period or
at any time within one (1) year after the Settlement Date, the Grantee
breaches his/her obligation not to Solicit, the Grantees right to the
Shares upon settlement of the Performance Shares shall not have been
earned and the Performance Shares, whether vested or not, will be
immediately cancelled, and the Grantee shall immediately return to the
Company the Shares or the pre-tax income derived from any disposition of
the Shares. THE GRANTEE UNDERSTANDS
THAT THIS PARAGRAPH IS NOT INTENDED TO AND DOES NOT PROHIBIT THE CONDUCT
DESCRIBED, BUT PROVIDES FOR THE CANCELLATION OF THE PERFORMANCE SHARES AND
A RETURN TO THE COMPANY OF THE SHARES OR THE GROSS TAXABLE PROCEEDS OF THE
SHARES IF THE GRANTEE SHOULD CHOOSE TO VIOLATE THIS NON-SOLICITATION OF
EMPLOYEES PROVISION DURING THE TERM OF THE PERFORMANCE PERIOD OR WITHIN
ONE (1) YEAR AFTER THE SETTLEMENT DATE. |
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e. |
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Injunctive and
Other Available Relief. By
acceptance of these Performance Shares, the Grantee acknowledges that, if
the Grantee were to breach or threaten to breach his/her obligation
hereunder not to Interfere or Solicit or not to disclose or use any
Confidential Information other than in the course of performing authorized
services for the Company (or any Affiliated Company), the harm caused to
the Company by such breach or threatened breach would be, by its nature,
irreparable because, among other things, damages would be significant and
the monetary harm that would ensue would not be able to be readily proven,
and that the Company would be entitled to injunctive and other appropriate
relief to prevent threatened or continued breach and to such other
remedies as may be available at law or in equity. To the extent not
prohibited by law, any cancellation of the Performance Shares pursuant to
any of Sections 9(b) through 9(d) above shall not restrict, abridge or
otherwise limit in any fashion the types and scope of injunctive and other
available relief to the Company. Notwithstanding any provision of this
Agreement to the contrary, nothing under this Agreement shall limit,
abridge, modify or otherwise restrict the Company (or any Affiliated
Company) from pursuing any or all legal, equitable or other appropriate
remedies to which the Company may be entitled under any other agreement
with the Grantee, any other plan, program, policy or arrangement of the
Company (or any Affiliated Company) under which the Grantee is covered or
participates, or any applicable law, all to the fullest extent not
prohibited under applicable law. |
- 5 -
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f. |
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Permitted Reporting and
Disclosure. Notwithstanding
any language in this Agreement to the contrary, nothing in this Agreement
prohibits Grantee from reporting possible violations of federal law or
regulation to any governmental agency or governmental entity, or making
other disclosures that are protected under federal law or regulation;
provided, that, in each case such communications and disclosures are
consistent with applicable law. Notwithstanding the foregoing, under no
circumstance is Grantee authorized to disclose any information covered by
the Companys attorney-client privilege or attorney work product or the
Companys trade secrets without prior written consent of the Companys
General Counsel. Any reporting or disclosure permitted under this Section
9(f) shall not result in the cancellation of Performance
Shares. |
|
10. |
|
Right to Retain
Shares Contingent on Continuing Non-Conflicting Employment. In partial consideration for the award of
these Performance Shares, in order to forestall the disclosure or use of
Confidential Information, as well as to deter the Grantees intentional
interference with the contractual relations of the Company or any
Affiliated Company, the Grantees intentional interference with
prospective economic advantage of the Company or any Affiliated Company,
and to promote fair competition, the Grantee agrees that the Grantees
right to the Shares upon settlement of the Performance Shares is
contingent upon the Grantee refraining, during the term of the Performance
Period and for a period of one (1) year after the Settlement Date, from
rendering services, directly or indirectly, as director, officer,
employee, agent, consultant or otherwise, to any Conflicting Organization
except a Conflicting Organization whose business is diversified and that,
as to that part of its business to which the Grantee renders services, is
not a Conflicting Organization, provided that the Company shall receive
separate written assurances satisfactory to the Company from the Grantee
and the Conflicting Organization that the Grantee shall not render
services during such period with respect to a Conflicting
Product. If, prior to the expiration of the Performance Period or at any time within one (1) year after the Settlement Date, the Grantee shall render services to any Conflicting Organization other than as expressly permitted herein, the Grantees right to the Shares upon settlement of the Performance Shares shall not have been earned and the Performance Shares, whether vested or not, will be immediately cancelled, and the Grantee shall immediately return to the Company the Shares or the pre-tax income derived from any disposition of the Shares. THE GRANTEE UNDERSTANDS THAT THIS PARAGRAPH IS NOT INTENDED TO AND DOES NOT PROHIBIT THE GRANTEE FROM RENDERING SERVICES TO A CONFLICTING ORGANIZATION, BUT PROVIDES FOR THE CANCELLATION OF THE PERFORMANCE SHARES AND A RETURN TO THE COMPANY OF THE SHARES OR THE GROSS TAXABLE PROCEEDS OF THE SHARES IF THE GRANTEE SHOULD CHOOSE TO RENDER SUCH SERVICES DURING THE TERM OF THE PERFORMANCE PERIOD OR WITHIN ONE (1) YEAR AFTER THE SETTLEMENT DATE. |
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11. |
|
Repayment
Obligation. In the event
that (1) the Company issues a restatement of financial results to correct
a material error and (2) the Committee determines, in good faith, that the
Grantees fraud or willful misconduct was a significant contributing
factor to the need to issue such restatement and (3) some or all of the
Performance Shares that were granted and/or vested prior to such
restatement would not have been granted and/or vested, as applicable,
based upon the restated financial results, the Grantee shall immediately
return to the Company the Performance Shares or any Shares or the pre-tax
income derived from any disposition of the Shares previously received in
settlement of the Performance Shares that would not have been granted
and/or vested based upon the restated financial results (the Repayment
Obligation). The Company shall be able to enforce the Repayment
Obligation by all legal means available, including, without limitation, by
withholding such amount from other sums owed by the Company to the
Grantee. |
|
12. |
|
Miscellaneous
Provisions. |
|
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a. |
|
Rights as a Stockholder. Neither the Grantee nor the Grantees
transferee or representative shall have any rights as a stockholder with
respect to any Shares subject to this Award until the Performance Shares
have been settled and Share certificates have been issued to the Grantee,
transferee or representative, as the case may be. |
|
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b. |
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Choice of Law, Exclusive Jurisdiction and
Venue. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Agreement to
the substantive law of another jurisdiction. The courts of the State of
Delaware shall have exclusive jurisdiction over any disputes or other
proceedings relating to this Agreement, and venue shall reside with the
courts in New Castle County, Delaware, including if jurisdiction shall so
permit, the U.S. District Court for the District of Delaware.
Accordingly, the Grantee
agrees that any claim of any type relating to this Agreement must be
brought and maintained in the appropriate court located in New Castle
County, Delaware, including if jurisdiction will so permit, in the U.S.
District Court for the State of Delaware. The Grantee hereby consents to
the jurisdiction over the Grantee of any such courts and waives all
objections based on venue or inconvenient
forum. |
- 6 -
|
c. |
|
Modification or
Amendment. This Agreement
may be modified or amended by the Board or the Committee at any time;
provided, however, no modification or amendment to this Agreement shall be
made which would materially and adversely affect the rights of the
Grantee, without such Grantees written consent. |
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d. |
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Severability. In the
event any provision of this Agreement shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining
provisions of this Agreement, and this Agreement shall be construed and
enforced to reflect the intent of the parties to the fullest extent not
prohibited by law, and in the event that such provision is not able to be
so construed and enforced, then this Agreement shall be construed and
enforced as if such illegal or invalid provision had not been included. In
amplification of the preceding sentence, in the event that the time period
or scope of any provision is declared by a court or arbitrator of
competent jurisdiction to exceed the maximum time period or scope that
such court or arbitrator deems enforceable, then such court or arbitrator
shall have the power to reduce the time period or scope to the maximum
time period or scope permitted by law. |
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e. |
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References to
Plan. All references to the
Plan shall be deemed references to the Plan as may be
amended. |
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f. |
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Headings. The
captions used in this Agreement are inserted for convenience and shall not
be deemed a part of this Agreement for construction or
interpretation. |
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g. |
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Interpretation. Any
dispute regarding the interpretation of this Agreement shall be submitted
by the Grantee or by the Company forthwith to the Board or the Committee,
which shall review such dispute at its next regular meeting. The
resolution of such dispute by the Board or the Committee shall be final
and binding on all persons. It is the intention of the Company and the
Grantee to make the promises contained in this Agreement reasonable and
binding only to the extent that it may be lawfully done under existing
applicable laws. This Agreement and the Plan constitute the entire and
exclusive agreement between the Grantee and the Company, and it supersedes
all prior agreements or understandings, whether written or oral, with
respect to the grant of Performance Shares set forth in this
Agreement. |
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h. |
|
Section 409A
Compliance. To the extent
applicable, it is intended that the Plan and this Agreement comply with
the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended (the Code) and any related regulations or other guidance
promulgated with respect to such Section by the U.S. Department of the
Treasury or the Internal Revenue Service (Section 409A). Any provision
of the Plan or this Agreement that would cause this Award to fail to
satisfy Section 409A shall have no force or effect until amended to comply
with Section 409A, which amendment may be retroactive to the extent
permitted by Section 409A. |
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Notwithstanding any
provision of the Plan to the contrary, if the Grantee is a specified
employee (as defined in Section 1.409A-1(i) of the Treasury Department
Regulations) at the time of the Grantees separation from service (as
defined in Section 1.409A-1(h) of the Treasury Department Regulations),
and a payment to the Grantee under this Agreement is subject to Section
409A and is being made to the Grantee on account of the Grantees
separation from service, then to the extent not paid on or before March 15
of the calendar year following the calendar year in which the separation
from service occurred, such payment shall be delayed until the earlier of
the date which is six (6) months after the date of the Grantees
separation from service or the date of death of the Grantee. Any payments
that were scheduled to be paid during the six (6) month period following
the Grantees separation from service, but which were delayed pursuant to
this Section 12(h), shall be paid without interest on, or as soon as
administratively practicable after, the first day following the six (6)
month anniversary of the Grantees separation from service (or, if
earlier, the date of the Grantees death). Any payments that were
originally scheduled to be paid following the six (6) months after the
Grantees separation from service shall continue to be paid in accordance
with their predetermined schedule. |
- 7 -
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i. |
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Agreement with
Terms. Receipt of any
benefits under this Agreement by the Grantee shall constitute the
Grantees acceptance of and agreement with all of the provisions of this
Agreement and of the Plan that are applicable to this Agreement, and the
Company shall administer this Agreement
accordingly. |
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THE CLOROX COMPANY |
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/s/
Benno Dorer |
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By:
Benno Dorer |
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Its:
Chief Executive Officer |
THE GRANTEE ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT IS A UNILATERAL CONTRACT AND THAT THE GRANTEES RIGHT
TO THE SHARES PURSUANT TO THIS AGREEMENT IS ACCEPTED AND EARNED ONLY BY
CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER) AND BY
ACHIEVEMENT OF THE PERFORMANCE CRITERIA AND BY COMPLIANCE WITH THE GRANTEES
VARIOUS OBLIGATIONS UNDER THIS AGREEMENT. THE GRANTEE FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE PLAN, SHALL CONFER UPON THE
GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEES RIGHT OR THE COMPANYS RIGHT TO
TERMINATE THE GRANTEES EMPLOYMENT AT ANY TIME, FOR ANY REASON OR NO REASON,
WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT ADVANCE NOTICE EXCEPT AS MAY BE
REQUIRED BY APPLICABLE LAW.
The Grantee acknowledges that a copy of the Plan, Plan Information and the
Companys Annual Report and Proxy Statement (the Prospectus Information) are available for viewing on the
Companys Clorox web site at http://CLOROXWEB.clorox.com/hr/stock.
The Grantee hereby consents to receive the Prospectus Information electronically or, in the alternative, to contact the HR
Service Center at 1-800-709-7095 to request a paper copy of the Prospectus Information. The Grantee represents that s/he is
familiar with the terms and provisions thereof, and hereby accepts this Agreement subject to all of the terms and provisions
thereof. The Grantee has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Agreement and fully understands all provisions of the Agreement. The Grantee
acknowledges and hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee
upon any questions arising under the Plan or this Agreement. The Grantee further agrees to notify the Company upon any
change in the residence address indicated below.
Dated: |
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Signed: |
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Grantee |
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Residence Address: |
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- 8 -
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:
November 2, 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:
November 2, 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 September 30, 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: November 2, 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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