e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2006.
OR
|
|
|
o |
|
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
(State or other jurisdiction of
incorporation or organization)
|
|
31-0595760
(I.R.S. Employer Identification No.) |
|
|
|
1221 Broadway
Oakland, California
|
|
94612-1888
(Zip code) |
(Address of principal executive offices) |
|
|
(510) 271-7000
(Registrants 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act (Check One):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of December 31, 2006, there were 151,254,683 shares outstanding of the registrants common stock
(par value $1.00), the registrants only outstanding class of stock.
THE CLOROX COMPANY
Page 2
PART I FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements.
The Clorox Company
Condensed Consolidated Statements of Earnings
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Net sales |
|
$ |
1,101 |
|
|
$ |
1,064 |
|
|
$ |
2,262 |
|
|
$ |
2,168 |
|
Cost of products sold |
|
|
639 |
|
|
|
628 |
|
|
|
1,302 |
|
|
|
1,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
462 |
|
|
|
436 |
|
|
|
960 |
|
|
|
902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
|
162 |
|
|
|
161 |
|
|
|
315 |
|
|
|
305 |
|
Advertising costs |
|
|
109 |
|
|
|
99 |
|
|
|
226 |
|
|
|
212 |
|
Research and development costs |
|
|
27 |
|
|
|
25 |
|
|
|
53 |
|
|
|
48 |
|
Restructuring costs |
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
1 |
|
Interest expense |
|
|
29 |
|
|
|
32 |
|
|
|
58 |
|
|
|
62 |
|
Other income, net |
|
|
(5 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes |
|
|
136 |
|
|
|
120 |
|
|
|
311 |
|
|
|
274 |
|
Income taxes on continuing operations |
|
|
45 |
|
|
|
37 |
|
|
|
108 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
91 |
|
|
|
83 |
|
|
|
203 |
|
|
|
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations |
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
96 |
|
|
$ |
83 |
|
|
$ |
208 |
|
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.60 |
|
|
$ |
0.56 |
|
|
$ |
1.34 |
|
|
$ |
1.27 |
|
Discontinued operations |
|
|
0.03 |
|
|
|
|
|
|
|
0.03 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per common share |
|
$ |
0.63 |
|
|
$ |
0.56 |
|
|
$ |
1.37 |
|
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.59 |
|
|
$ |
0.55 |
|
|
$ |
1.32 |
|
|
$ |
1.25 |
|
Discontinued operations |
|
|
0.03 |
|
|
|
|
|
|
|
0.03 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per common share |
|
$ |
0.62 |
|
|
$ |
0.55 |
|
|
$ |
1.35 |
|
|
$ |
1.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
151,413 |
|
|
|
150,080 |
|
|
|
151,278 |
|
|
|
150,457 |
|
Diluted |
|
|
153,885 |
|
|
|
152,264 |
|
|
|
153,705 |
|
|
|
152,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.31 |
|
|
$ |
0.29 |
|
|
$ |
0.60 |
|
|
$ |
0.57 |
|
See Notes to Condensed Consolidated Financial Statements
Page 3
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
12/31/2006 |
|
|
6/30/2006 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
179 |
|
|
$ |
192 |
|
Receivables, net |
|
|
393 |
|
|
|
435 |
|
Inventories |
|
|
340 |
|
|
|
292 |
|
Other current assets |
|
|
67 |
|
|
|
88 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
979 |
|
|
|
1,007 |
|
Property, plant and equipment, net |
|
|
985 |
|
|
|
1,004 |
|
Goodwill |
|
|
801 |
|
|
|
744 |
|
Trademarks and other intangible assets, net |
|
|
608 |
|
|
|
604 |
|
Other assets |
|
|
251 |
|
|
|
257 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,624 |
|
|
$ |
3,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Notes and loans payable |
|
$ |
126 |
|
|
$ |
156 |
|
Current maturities of long-term debt |
|
|
651 |
|
|
|
152 |
|
Accounts payable |
|
|
283 |
|
|
|
329 |
|
Accrued liabilities |
|
|
435 |
|
|
|
474 |
|
Income taxes payable |
|
|
24 |
|
|
|
19 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,519 |
|
|
|
1,130 |
|
Long-term debt |
|
|
1,464 |
|
|
|
1,966 |
|
Other liabilities |
|
|
562 |
|
|
|
547 |
|
Deferred income taxes |
|
|
112 |
|
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,657 |
|
|
|
3,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingencies |
|
|
|
|
|
|
|
|
Stockholders deficit |
|
|
|
|
|
|
|
|
Common stock: $1.00 par value; 750,000,000 shares authorized;
158,741,461 and 249,826,934 shares issued at December 31, 2006 and
June 30, 2006, respectively; and 151,254,683 and 151,298,366 shares
outstanding at December 31, 2006 and June 30, 2006, respectively |
|
|
159 |
|
|
|
250 |
|
Additional paid-in capital |
|
|
437 |
|
|
|
397 |
|
Retained earnings |
|
|
7 |
|
|
|
3,939 |
|
Treasury shares, at cost: 7,486,778 and 98,528,568 shares at
December 31, 2006 and June 30, 2006, respectively |
|
|
(428 |
) |
|
|
(4,527 |
) |
Accumulated other comprehensive net losses |
|
|
(208 |
) |
|
|
(215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders deficit |
|
|
(33 |
) |
|
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit |
|
$ |
3,624 |
|
|
$ |
3,616 |
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements
Page 4
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
208 |
|
|
$ |
192 |
|
Deduct: Earnings from discontinued operations |
|
|
5 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations |
|
|
203 |
|
|
|
191 |
|
Adjustments to reconcile earnings from continuing operations: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
95 |
|
|
|
92 |
|
Share-based compensation |
|
|
28 |
|
|
|
23 |
|
Restructuring activities |
|
|
4 |
|
|
|
|
|
Deferred income taxes |
|
|
(8 |
) |
|
|
(1 |
) |
Other |
|
|
16 |
|
|
|
28 |
|
Changes in: |
|
|
|
|
|
|
|
|
Receivables, net |
|
|
46 |
|
|
|
34 |
|
Inventories |
|
|
(46 |
) |
|
|
(38 |
) |
Other current assets |
|
|
13 |
|
|
|
1 |
|
Accounts payable and accrued liabilities |
|
|
(107 |
) |
|
|
(126 |
) |
Income taxes payable |
|
|
13 |
|
|
|
24 |
|
Income tax settlement payment |
|
|
(2 |
) |
|
|
(151 |
) |
|
|
|
|
|
|
|
Net cash provided by continuing operations |
|
|
255 |
|
|
|
77 |
|
Net cash provided by discontinued operations |
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operations |
|
|
255 |
|
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(68 |
) |
|
|
(83 |
) |
Businesses acquired |
|
|
(56 |
) |
|
|
|
|
Proceeds from life insurance investment |
|
|
|
|
|
|
41 |
|
Low-income housing contributions and other |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities |
|
|
(126 |
) |
|
|
(47 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Notes and loans payable |
|
|
(32 |
) |
|
|
162 |
|
Long-term debt repayments |
|
|
|
|
|
|
(29 |
) |
Treasury stock purchases |
|
|
(89 |
) |
|
|
(135 |
) |
Cash dividends paid |
|
|
(89 |
) |
|
|
(85 |
) |
Issuance of common stock for employee stock plans and other |
|
|
67 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities |
|
|
(143 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(13 |
) |
|
|
(20 |
) |
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
192 |
|
|
|
293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
$ |
179 |
|
|
$ |
273 |
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements
Page 5
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 and six month
periods ended December 31, 2006 and 2005, 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. Certain reclassifications were made in the prior periods
condensed consolidated financial statements to conform to the current periods presentation. The
results for the interim periods ended December 31, 2006, are not necessarily indicative of the
results that may be expected for the fiscal year ending June 30, 2007, or for any future period.
Certain information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP) have been omitted or condensed pursuant to the rules and regulations of the Securities and
Exchange Commission (the 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,
2006, which includes a complete set of footnote disclosures, including the Companys significant
accounting policies.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect reported amounts and related
disclosures. Actual results could differ materially from estimates and assumptions made.
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.
New Accounting Standards
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. (FIN) 48,
Accounting for Uncertainty in Income Taxesan Interpretation of Financial Accounting Standards
Board Statement No. 109. This Interpretation prescribes a consistent recognition threshold and
measurement standard, as well as clear criteria for subsequently recognizing, derecognizing,
classifying and measuring tax positions for financial statement purposes. The interpretation also
requires expanded disclosure with respect to uncertainties as they relate to income tax accounting.
FIN 48 will be adopted by the Company at the beginning of its fiscal year ending June 30, 2008, as
required. Management is currently evaluating the impact of FIN 48 on its consolidated financial
statements. The cumulative effect of the interpretation will be reflected as an adjustment to
beginning retained earnings upon adoption.
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair
Value Measurements. This Statement defines fair value, establishes a framework for measuring fair
value in accordance with U.S. GAAP and expands disclosures about fair value measurements. This
Statement will be adopted by the Company beginning in its fiscal year ending June 30, 2009, as
required. The Company is currently evaluating the impact of SFAS No. 157 on its consolidated
financial statements.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132-R. SFAS No.
158 requires an entity to recognize in its balance sheet the funded status of its defined benefit
postretirement plans, measured as the difference between the fair value of the plan assets and the
benefit obligation. SFAS No. 158 also requires an entity to recognize changes in the funded status
of a defined benefit postretirement plan within accumulated other comprehensive income, to the
extent such changes are not recognized in earnings as components of net periodic benefit cost. The
Company is required to adopt SFAS No. 158 as of the end of its fiscal year ending June 30, 2007,
and is currently evaluating the impact of the provisions of SFAS No. 158.
In August 2006, the Pension Protection Act (the Act) was signed into law. The provisions of the
Act, which include higher minimum funding levels for qualified pension plans, will become effective
for the Companys plan year ending on June 30, 2008. Although the fair value of the Companys
domestic qualified pension plans assets was in excess of its projected benefit obligation as of
its last valuation on June 30, 2006, the provisions of the Act could potentially impact the
Companys funding plans.
Page 6
NOTE 2. RESTRUCTURING
In October 2006, the Company entered into an Information Technology Services (ITS) Agreement with a
third-party service provider. Upon the terms and subject to the conditions set forth in the ITS
Agreement, the third-party service provider will be providing information technology and related
services to the Company for a term of seven years. The services will begin in March 2007. The
total estimated costs of the ITS Agreement are approximately $260. As part of the ITS Agreement,
the Company will also have an operating lease with its third-party service provider for information
technology equipment. Current estimated payments, which are included in the $260, will be based on an annual
service fee that will be adjusted periodically based upon updates to services provided.
In conjunction with implementing the ITS Agreement, the Company is restructuring certain
Information Services (IS) activities. As a result, a number of IS positions are being eliminated.
The Company expects to incur incremental administrative expenses and restructuring costs of
approximately $20 to $22 during its fiscal year ending June 30, 2007, primarily associated with
transition and severance costs. Transition costs of $5 and $8 were recorded in administrative
expense during the three and six months ended December 31, 2006, respectively. Severance and other
related costs of $4 were recorded as restructuring costs during the three and six months ended
December 31, 2006. These costs are reflected in the Companys Corporate segment. Total accrued
restructuring liability at December 31, 2006, was $4. Approximately $8 to $10 of administrative
and restructuring costs are expected to be incurred in the combined third and fourth quarters of
the Companys fiscal year ending June 30, 2007, which are primarily comprised of transition fees to
the third-party service provider and employee severance. The Company expects to complete its
restructuring in fiscal year 2007.
NOTE 3. BUSINESSES ACQUIRED
On December 20, 2006, the Company announced that it had entered into a definitive agreement (the
Agreement) with Colgate-Palmolive Company (Colgate) to purchase Colgates bleach businesses in
Canada and certain countries in Latin America for an aggregate price of approximately $126 plus
consideration for inventory, with the objective of expanding its global bleach business. Under the
Agreement, the Company is acquiring brand trademarks and is also acquiring manufacturing facilities
in Canada and Venezuela. Under the Agreement, employees at these facilities transfer to the
Company. The transaction is structured as an all cash acquisition.
The Company acquired the bleach business in Canada on December 29, 2006, for $56. Net assets,
acquired at fair value, included inventory of $1, property, plant and equipment of $1, goodwill of
$50 and trademarks of $4 (to be amortized over a life of 5 years). The Company anticipates closing
the purchase of the Latin America businesses in the third quarter of its fiscal year 2007. The
closing is subject to regulatory and other customary approvals and closing conditions.
Due to the closing date of the acquired bleach business occurring on December 29, 2006, the Company
did not recognize any operating results related to the acquired bleach business in Canada during
the three and six months ended December 31, 2006. Future operating results of the acquired bleach
business in Canada will be included in consolidated net earnings.
NOTE 4. DISCONTINUED OPERATIONS
On December 22, 2006, the Company sold certain assets remaining from its discontinued operation in
Brazil, which has been accounted for as a discontinued operation. This transaction resulted in an
income tax benefit of $5, which was recorded in discontinued operations during the three and six
months ended December 31, 2006.
The consolidated statements of earnings for the three and six month periods ended December 31,
2005, include discontinued operations related to the Companys exchange of its ownership interest
in a subsidiary for Henkel KGaAs (Henkel) interest in the Companys common stock.
Page 7
NOTE 5. FINANCIAL INSTRUMENTS
The Company utilizes derivative instruments, principally swaps, forwards and options, to manage the
ongoing business risks associated with fluctuations in commodity prices, foreign currencies and
interest rates. These contracts are economic hedges for transactions which have notional balances
and periods consistent with the related exposures and do not constitute investments independent of
these exposures.
At December 31, 2006 and June 30, 2006, the Companys derivative financial instruments are recorded
at fair value in the Condensed Consolidated Balance Sheets as assets (liabilities) as follows:
|
|
|
|
|
|
|
|
|
|
|
12/31/2006 |
|
6/30/2006 |
Current assets: |
|
|
|
|
|
|
|
|
Commodity purchase contracts |
|
$ |
|
|
|
$ |
11 |
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
Commodity purchase contracts |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Commodity purchase contracts |
|
|
(6 |
) |
|
|
|
|
The estimated notional and fair value amounts of the Companys derivative contracts are summarized
below at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2006 |
|
6/30/2006 |
|
|
Notional |
|
Fair Value |
|
Notional |
|
Fair Value |
Foreign exchange |
|
$ |
31 |
|
|
$ |
|
|
|
$ |
47 |
|
|
$ |
|
|
Commodity purchase |
|
|
87 |
|
|
|
(6 |
) |
|
|
84 |
|
|
|
12 |
|
Fair value contracts |
|
|
23 |
|
|
|
|
|
|
|
21 |
|
|
|
|
|
Exposure to counterparty credit risk is considered low because these agreements have been entered
into with creditworthy institutions and the contracts contain appropriate margin requirements.
NOTE 6. INVENTORIES
Inventories consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
12/31/2006 |
|
|
6/30/2006 |
|
Finished goods |
|
$ |
279 |
|
|
$ |
224 |
|
Raw materials and packaging |
|
|
83 |
|
|
|
81 |
|
Work in process |
|
|
3 |
|
|
|
5 |
|
LIFO allowances |
|
|
(21 |
) |
|
|
(14 |
) |
Allowance for obsolescence |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
340 |
|
|
$ |
292 |
|
|
|
|
|
|
|
|
NOTE 7. OTHER ASSETS
Other assets consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
12/31/2006 |
|
|
6/30/2006 |
|
Pension benefit assets |
|
$ |
101 |
|
|
$ |
106 |
|
Equity investments |
|
|
46 |
|
|
|
45 |
|
Investment in low-income housing partnerships |
|
|
25 |
|
|
|
23 |
|
Investment in insurance contracts |
|
|
38 |
|
|
|
39 |
|
Non-qualified retirement plan assets |
|
|
14 |
|
|
|
15 |
|
Other |
|
|
27 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
251 |
|
|
$ |
257 |
|
|
|
|
|
|
|
|
Page 8
NOTE 8. OTHER LIABILITIES
Other liabilities consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
12/31/2006 |
|
|
6/30/2006 |
|
Venture agreement net terminal obligation |
|
$ |
262 |
|
|
$ |
261 |
|
Retirement healthcare benefits |
|
|
83 |
|
|
|
88 |
|
Qualified and nonqualified pension plans |
|
|
50 |
|
|
|
49 |
|
Nonqualified deferred compensation plans |
|
|
56 |
|
|
|
50 |
|
Environmental remediation |
|
|
26 |
|
|
|
27 |
|
Long-term disability post-employment obligation |
|
|
27 |
|
|
|
24 |
|
Other |
|
|
58 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
562 |
|
|
$ |
547 |
|
|
|
|
|
|
|
|
NOTE 9. NET EARNINGS PER COMMON SHARE
Net earnings per common share (EPS) is computed by dividing net earnings by the weighted average
number of common shares outstanding each period on an unrounded basis. Diluted EPS reflects the
earnings dilution that could occur from common shares that may be issued through stock options,
restricted stock awards and performance units. The weighted average number of common shares
outstanding used to calculate basic and diluted EPS was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding for the |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
12/31/2006 |
|
12/31/2005 |
|
12/31/2006 |
|
12/31/2005 |
Basic |
|
|
151,413 |
|
|
|
150,080 |
|
|
|
151,278 |
|
|
|
150,457 |
|
Stock options, restricted stock awards and other |
|
|
2,472 |
|
|
|
2,184 |
|
|
|
2,427 |
|
|
|
2,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
153,885 |
|
|
|
152,264 |
|
|
|
153,705 |
|
|
|
152,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the securities not included in the calculation of diluted EPS
because to do so would be anti-dilutive (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
12/31/2006 |
|
12/31/2005 |
|
12/31/2006 |
|
12/31/2005 |
Stock options |
|
|
31 |
|
|
|
2,634 |
|
|
|
34 |
|
|
|
2,625 |
|
Performance units |
|
|
|
|
|
|
135 |
|
|
|
|
|
|
|
135 |
|
During the three and six months ended December 31, 2006, the Company issued 482,259 and 1,354,535
shares of common stock, respectively, and during the three and six months ended December 31, 2005,
the Company issued 236,605 and 807,529 shares of common stock, respectively, pursuant to stock
option exercises, vested restricted stock awards, performance unit redemption and director fees.
On November 14, 2006, the Company retired 91 million shares of its treasury stock. These shares
are now authorized but unissued. In accordance with Accounting Principles Board Opinion No. 6,
Status of Accounting Research Bulletins, the treasury stock retirement resulted in a reduction of
the following on the Companys Condensed Consolidated Balance Sheet: treasury stock by $4,137,
common stock by $91 and retained earnings by $4,046. There was no effect to the Companys overall
equity position as a result of the retirement.
Page 9
NOTE 10. COMPREHENSIVE INCOME
Comprehensive income includes net earnings and certain adjustments that are excluded from net
earnings, but included as a separate component of stockholders deficit, net of tax. Comprehensive
income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Net earnings |
|
$ |
96 |
|
|
$ |
83 |
|
|
$ |
208 |
|
|
$ |
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive gains (losses), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
5 |
|
|
|
(4 |
) |
|
|
16 |
|
|
|
7 |
|
Net derivative adjustments |
|
|
(3 |
) |
|
|
(7 |
) |
|
|
(9 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
98 |
|
|
$ |
72 |
|
|
$ |
215 |
|
|
$ |
197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 11. RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS
The following table summarizes the components of net periodic benefit cost for the Companys
retirement income and health care plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Income Plans for the |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Components of net periodic benefit cost (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
2 |
|
|
$ |
3 |
|
|
$ |
5 |
|
|
$ |
6 |
|
Interest cost |
|
|
6 |
|
|
|
7 |
|
|
|
13 |
|
|
|
13 |
|
Expected return on plan assets |
|
|
(6 |
) |
|
|
(7 |
) |
|
|
(13 |
) |
|
|
(13 |
) |
Amortization of unrecognized items |
|
|
2 |
|
|
|
4 |
|
|
|
4 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost |
|
$ |
4 |
|
|
$ |
7 |
|
|
$ |
9 |
|
|
$ |
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Plans for the |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Components of net periodic benefit cost (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
1 |
|
Interest cost |
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Amortization of unrecognized Items |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost |
|
$ |
1 |
|
|
$ |
2 |
|
|
$ |
2 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 10
NOTE 12. GUARANTEES
In conjunction with divestitures and other transactions, the Company may provide indemnifications
relating to the enforceability of trademarks, pre-existing legal, tax, environmental and employee
liabilities, as well as provisions for product returns and other items. The Company has
indemnification agreements in effect that specify a maximum possible indemnification exposure. The
Companys aggregate maximum exposure from these agreements is $291, which consists primarily of an
indemnity of up to $250 made to Henkel in connection with the Share Exchange Agreement, subject to
a minimum threshold of $12 before any payments would be made. The general representations and
warranties made by the Company in connection with the Henkel Share Exchange Agreement were made to
guarantee statements of fact at the time of the transaction closing and pertain to environmental,
legal and other matters.
In addition to the indemnifications related to the general representations and warranties, the
Company entered into an agreement with Henkel regarding certain tax matters. The Company made
certain representations of fact as of the closing date of the exchange transaction and certain
representations and warranties regarding future performance designed to preserve the tax-free
status of the exchange transaction. In general, the Company agreed to be responsible for Henkels
taxes on the transaction if the Companys actions result in a breach of the representations and
warranties in a manner that causes the share-exchange to fail to qualify for tax-free treatment.
Henkel has agreed to similar obligations. The Company is unable to estimate the amount of maximum
potential liability relating to the tax indemnification as the agreement does not specify a maximum
amount, and the Company does not have the information that would be required to calculate this
exposure. The Company does note, however, that the potential tax exposure, if any, could be very
significant as the Company believes Henkels tax basis in the shares exchanged is low, and the
value of the subsidiary stock transferred to Henkel in the exchange transaction was approximately
$2,800. Although the agreement does not specify an indemnification term, any exposure under the
agreement would be limited to taxes assessed prior to the expiration of the statute of limitations
period for assessing taxes on the share exchange transaction. Based on the nature of the
representations and warranties as well as other factors, the Company has not accrued any liability
under this indemnity.
The Company is a party to letters of credit of $20, primarily related to one of its insurance
carriers.
The Company has not recorded any liabilities on any of the aforementioned guarantees at December
31, 2006.
Page 11
NOTE 13. CONTINGENCIES
The Company is involved in certain environmental matters, including Superfund and other response
actions at various locations. The Company has a recorded liability of $26 and $27 at December 31,
2006 and June 30, 2006, respectively, for its share of the related aggregate future remediation
cost. One matter in Dickinson County, Michigan, for which the Company is jointly and severally
liable, accounts for a substantial majority of the recorded liability at both December 31, 2006 and
June 30, 2006. The Company is subject to a cost-sharing arrangement with another party for this
matter, under which Clorox has agreed to be liable for 24.3% of the aggregate remediation and
associated costs, other than legal fees, as the Company and the other party are each responsible
for their own such fees. If the other party with whom Clorox shares joint and several liability is
unable to pay its share of the response and remediation obligations, Clorox would likely be
responsible for such obligations. The other party in this matter
recently reported a substantial net loss for 2006 and expectations of
continuing challenges in 2007. In October 2004, the Company and the other party agreed to a consent judgment with the
Michigan Department of Environmental Quality (MDEQ), which sets forth certain remediation goals and
monitoring activities. Based on the current status of this matter, and with the assistance of
environmental consultants, the Company maintains an undiscounted liability representing its best
estimate of its share of costs associated with the capital expenditures, maintenance and other
costs to be incurred over an estimated 30-year remediation period. The most significant components
of the liability relate to the estimated costs associated with the remediation of groundwater
contamination and excess levels of subterranean methane deposits. Currently, the Company cannot
accurately predict the timing of the payments that will likely be made under this estimated
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 timing, varying costs and alternative clean-up technologies that may become
available in the future. Although it is 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.
On August 4, 2006, a derivative action purportedly on behalf of the Company was filed in the
Superior Court of California, Alameda County, against certain current and former directors and
officers of the Company. Specifically, the plaintiff alleges, among other things, breach of
fiduciary duties and waste of corporate assets. These allegations relate to the non-cash
compensation expense the Company recorded during the fourth quarter of fiscal year 2006, following
a review of its stock option practices. The complaint demands, among other forms of relief,
judgment in the form of monetary damages sustained by the Company as a result of such practices.
On September 1, 2006, the Company filed a motion to dismiss the case. On November 3, 2006, the
plaintiff filed an amended complaint naming additional defendants and asserting additional claims
including allegations of violations of Section 16(b) of the Securities Exchange Act of 1934. On
December 1, 2006, the Company removed the case to the United States District Court for the Northern
District of California. On December 22, 2006, the Company filed a motion to dismiss the amended
complaint.
While there can be no assurance as to the ultimate disposition of this action, the Company does not
believe that its resolution will have a material adverse effect on its financial position, results
of operations or cash flows. Since the Company believes that the likelihood of sustaining material
losses is remote, the Company has not accrued a liability at December 31, 2006.
The Company is also subject to various other lawsuits and claims relating to issues such as
contract disputes, product liability, patents and trademarks, advertising, employee and other
matters. Although the results of claims and litigation cannot be predicted with certainty, it is
the opinion of management that the ultimate disposition of these matters, to the extent not
previously provided for, will not have a material adverse effect, individually or in the aggregate,
on the Companys consolidated financial statements taken as a whole.
Page 12
NOTE 14. SEGMENT RESULTS
Information regarding the Companys operating segments is shown below. Each segment is individually
managed with separate operating results that are reviewed regularly by the chief operating decision
makers. The operating segments include:
Household Group North America: Includes United States bleach, cleaning, water-filtration,
automotive-care and professional products; and all products marketed in Canada.
Specialty Group: Includes the plastic bags, wraps and containers businesses marketed in the
United States; charcoal; cat litter; and food products.
International: Includes exports and operations outside the United States and Canada.
Corporate includes certain nonallocated administrative costs, amortization of trademarks and other
intangible assets, interest income, interest expense, foreign exchange gains and losses, and other
nonoperating income and expense.
The table below represents operating segment information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Household Group North America |
|
$ |
484 |
|
|
$ |
495 |
|
|
$ |
1,033 |
|
|
$ |
1,019 |
|
Specialty Group |
|
|
439 |
|
|
|
405 |
|
|
|
890 |
|
|
|
830 |
|
International |
|
|
178 |
|
|
|
164 |
|
|
|
339 |
|
|
|
319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
$ |
1,101 |
|
|
$ |
1,064 |
|
|
$ |
2,262 |
|
|
$ |
2,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Losses) from Continuing Operations Before Income Taxes |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Household Group North America |
|
$ |
147 |
|
|
$ |
161 |
|
|
$ |
325 |
|
|
$ |
331 |
|
Specialty Group |
|
|
107 |
|
|
|
82 |
|
|
|
216 |
|
|
|
171 |
|
International |
|
|
34 |
|
|
|
33 |
|
|
|
68 |
|
|
|
68 |
|
Corporate |
|
|
(152 |
) |
|
|
(156 |
) |
|
|
(298 |
) |
|
|
(296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
$ |
136 |
|
|
$ |
120 |
|
|
$ |
311 |
|
|
$ |
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to the Companys largest customer, Wal-Mart Stores, Inc. and its affiliates, were 26% and
27% of consolidated net sales for the three and six months ended December 31, 2006, respectively,
and 27% of consolidated net sales for the three and six months ended December 31, 2005.
Page 13
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in millions, except per share amounts)
Overview
The Clorox Company and its subsidiaries (the Company or Clorox) is a leading manufacturer and
marketer of consumer products. Clorox markets some of consumers most trusted and recognized brand
names, including its namesake bleach and cleaning products, Armor All® and STP® auto-care products,
Fresh Step® and Scoop Away® cat litters, Kingsford® charcoal briquets, Hidden Valley® and
K C Masterpiece® dressings and sauces, Brita® water-filtration systems, and Glad® bags, wraps and
containers. In addition, the Company has a number of leading brands in international markets,
including those sold under the Poett®, Mistolin® and Ayudin® brand names. With approximately 7,600
employees worldwide, the Company manufactures products in more than 20 countries and markets them
in more than 100 countries.
The Company reports its operations in three operating segments: the Household Group North
America, Specialty Group and International. The Household North America segment includes U.S.
bleach, cleaning, water-filtration, auto-care and professional products and all products marketed
in Canada. The Specialty segment includes the plastic bags, wraps and containers businesses,
charcoal, cat litter and food products marketed in the United States. The International segment
includes operations outside the United States and Canada.
The Company reported solid net earnings and diluted earnings per common share results for the three
and six months ended December 31, 2006. The Company reported net earnings of $96 and $208 and
diluted earnings per common share of $0.62 and $1.35 for the three and six months ended December
31, 2006, respectively. The Company continues to face ongoing challenges from higher commodity
costs, the anticipated impacts of price increases on its volume in the short term, and competitive
activity in the market place. The Company is addressing these challenges through its on-going cost
savings programs, pricing actions, innovative product improvements and new products, and
advertising and trade promotional spending to support its brands.
In addition to the focus on delivering the Companys fiscal year 2007 financial targets, the
Company is refreshing its corporate strategy to help drive long-term growth. This strategy renewal
will build off of the successful strategy that is currently in place.
Other key fiscal year-to-date 2007 highlights are summarized as follows:
|
|
The Companys segments reported an overall 4% increase in net
sales for the six months ended December 31, 2006, primarily driven
by the continued impact of price increases implemented in the
prior fiscal year. These price increases contributed to the
Companys overall volume decline of 1%, as anticipated. |
|
|
|
Donald R. Knauss was named chairman and chief executive officer
(CEO), effective October 2006. He succeeded Robert W. Matschullat
who served as the Companys interim chairman and interim CEO. |
|
|
|
In January 2007, the Company named Larry Peiros as executive vice
president and chief operating officer Clorox North America, Beth
Springer as executive vice president strategy and growth, and
Frank Tataseo as executive vice president functional operations. |
|
|
|
The Company announced on December 20, 2006, that it had entered
into a definitive agreement (the Agreement) with Colgate-Palmolive
Company (Colgate) to purchase its bleach businesses in Canada and
certain countries in Latin America. On December 29, 2006, the
Company acquired the bleach business in Canada and the Company
anticipates closing the purchase of the Latin America businesses
in the third quarter of its fiscal year 2007. |
|
|
|
In October 2006, as part of the Companys continuing efforts to
cut costs and enhance margins, it entered into an Information
Technology Services Agreement (ITS Agreement) with a third-party
service provider. In conjunction with implementing the ITS
Agreement, the Company will restructure certain Information
Services activities. |
Page 14
The following discussion of the Companys financial condition and results of operations should be
read in conjunction with the Companys consolidated financial statements and related notes included
in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, which was filed with the
Securities and Exchange Commission (SEC) on August 25, 2006, and the unaudited condensed
consolidated financial statements and related notes contained in this quarterly report on Form
10-Q.
Results of Operations
Managements discussion and analysis of the results of operations, unless otherwise noted, compares
the three and six months ended December 31, 2006 (the current periods), to the three and six
months ended December 31, 2005 (the prior periods), using percentages calculated on a rounded
basis, except as noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
% of Net Sales |
|
|
12/31/2006 |
|
12/31/2005 |
|
% Change |
|
12/31/2006 |
|
12/31/2005 |
Diluted net earnings per common share
from continuing operations |
|
$ |
0.59 |
|
|
$ |
0.55 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,101 |
|
|
$ |
1,064 |
|
|
|
3 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Gross profit |
|
|
462 |
|
|
|
436 |
|
|
|
6 |
|
|
|
42.0 |
|
|
|
41.0 |
|
Selling and administrative expenses |
|
|
162 |
|
|
|
161 |
|
|
|
1 |
|
|
|
14.7 |
|
|
|
15.1 |
|
Advertising costs |
|
|
109 |
|
|
|
99 |
|
|
|
10 |
|
|
|
9.9 |
|
|
|
9.3 |
|
Research and development costs |
|
|
27 |
|
|
|
25 |
|
|
|
8 |
|
|
|
2.5 |
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
% of Net Sales |
|
|
12/31/2006 |
|
12/31/2005 |
|
% Change |
|
12/31/2006 |
|
12/31/2005 |
Diluted net earnings per common share
from continuing operations |
|
$ |
1.32 |
|
|
$ |
1.25 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
2,262 |
|
|
$ |
2,168 |
|
|
|
4 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Gross profit |
|
|
960 |
|
|
|
902 |
|
|
|
6 |
|
|
|
42.4 |
|
|
|
41.6 |
|
Selling and administrative expenses |
|
|
315 |
|
|
|
305 |
|
|
|
3 |
|
|
|
13.9 |
|
|
|
14.1 |
|
Advertising costs |
|
|
226 |
|
|
|
212 |
|
|
|
7 |
|
|
|
10.0 |
|
|
|
9.8 |
|
Research and development costs |
|
|
53 |
|
|
|
48 |
|
|
|
10 |
|
|
|
2.3 |
|
|
|
2.2 |
|
Diluted net earnings per common share from continuing operations increased by $0.04 and $0.07 in
the current periods, respectively, compared to prior periods. This increase was driven primarily
by increased net sales and improved gross profit, partially offset by increased advertising costs,
transition and restructuring costs associated with the ITS Agreement and a higher effective tax
rate.
Net sales increased 3% and 4% in the current periods, respectively, compared to prior periods,
while volume decreased 1% for both periods. Volume declined as competitive activity contributed to
reduced shipments of Glad® trash bags and certain laundry and home-care products. Also, as
anticipated, price increases taken in fiscal year 2006 continued to have an unfavorable impact on
volume. These decreases were partially offset by increased shipments of cat litter products as
well as increased shipments in Latin America. Net sales growth outpaced the change in volume
primarily due to the benefits of prior year price increases.
Gross profit increased by 100 basis points and 80 basis points as a percentage of sales for the
current periods, respectively, compared to the prior periods. This increase was primarily driven
by price increases and the benefit of on-going cost savings, partially offset by increased
commodity, manufacturing and logistics costs.
Selling and administrative expenses increased by 1% and 3% in the current periods, respectively,
compared to prior periods, primarily due to higher legal and consulting fees, primarily associated
with the ITS Agreement (see Restructuring costs section below). This increase was partially offset
in the three months ended December 31, 2006, by lower incentive compensation expense.
Advertising costs increased by 10% and 7% in the current periods, respectively, compared to the
prior periods. This increase was driven by higher spending to support the health-and-wellness
growth platform and new product launches.
Research and development costs increased by 8% and 10% in the current periods, respectively,
compared to the prior periods, due to increased spending to support new product innovations.
Page 15
Restructuring costs were $4 for the current periods. In October 2006, the Company entered into an
ITS Agreement with a third-party service provider. Upon the terms and subject to the conditions set
forth in the ITS Agreement, the third-party service provider will be providing information
technology and related services to the Company for a term of seven years. The services will begin
in March 2007. The total estimated costs of the ITS Agreement over seven years are approximately
$260. As part of the ITS Agreement, the Company will also have an operating lease with its
third-party service provider for information technology equipment.
Current estimated payments, which are
included in the $260, will be based on an annual service fee that will be adjusted periodically
based upon updates to services provided.
In
conjunction with implementing the ITS Agreement, the Company is restructuring certain Information
Services (IS) activities. As a result, a number of IS positions are being eliminated. The Company
expects to incur incremental restructuring costs and administrative expenses of approximately $20
to $22 during its fiscal year ending June 30, 2007, primarily associated with severance and
transition costs. Severance and other related costs of $4 were recorded as restructuring costs
during the three and six months ended December 31, 2006. Transition costs of $5 and $8 were
recorded in administrative expense during the three and six months ended December 31, 2006,
respectively. These costs are reflected in the Companys Corporate segment. Approximately $8 to
$10 of restructuring and administrative costs are expected to be incurred in the combined third and
fourth quarters of the Companys fiscal year ending June 30, 2007, which are primarily comprised of
transition fees and employee severance. The Company expects to complete its restructuring in
fiscal year 2007.
Interest expense decreased by $3 and $4 in the current periods primarily due to reduced
commercial paper borrowings in the current periods, partially offset by higher interest rates.
Other income, net was $5 and $7, respectively, for the current periods, compared with $1 and zero,
respectively, for the prior periods. Operating losses from the Companys investment in low-income
housing partnerships decreased by $4 and $6 for the current periods. In addition, the current
periods include a $2 gain on the sale of an international trademark. The increases are partly
offset by other smaller items.
The effective tax rate on continuing operations was 33.1% and 34.7% for the current periods,
respectively, as compared to 30.5% and 30.3% for the prior periods, respectively, on an unrounded
basis. The lower rates for both prior year periods were primarily driven by a reduction in
withholding tax on earnings repatriated under the American Jobs Creation Act and changes in the
Companys federal and state tax contingency accruals. The rate
for the current quarter reflects the benefit of the retroactive
extension of the federal research and experimentation credit.
Earnings from discontinued operations were $5 for the current periods. These amounts represent an
income tax benefit related to the sale of certain assets remaining from the Companys discontinued
operations in Brazil. The Company discontinued its operations in Brazil in fiscal year 2003.
Page 16
Segment Results
The table below represents operating segment information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
12/31/2006 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2005 |
|
Household Group North America |
|
$ |
484 |
|
|
$ |
495 |
|
|
$ |
1,033 |
|
|
$ |
1,019 |
|
Specialty Group |
|
|
439 |
|
|
|
405 |
|
|
|
890 |
|
|
|
830 |
|
International |
|
|
178 |
|
|
|
164 |
|
|
|
339 |
|
|
|
319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
$ |
1,101 |
|
|
$ |
1,064 |
|
|
$ |
2,262 |
|
|
$ |
2,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Losses) from Continuing Operations Before Income Taxes |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
Household Group North America |
|
$ |
147 |
|
|
$ |
161 |
|
|
$ |
325 |
|
|
$ |
331 |
|
Specialty Group |
|
|
107 |
|
|
|
82 |
|
|
|
216 |
|
|
|
171 |
|
International |
|
|
34 |
|
|
|
33 |
|
|
|
68 |
|
|
|
68 |
|
Corporate |
|
|
(152 |
) |
|
|
(156 |
) |
|
|
(298 |
) |
|
|
(296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company |
|
$ |
136 |
|
|
$ |
120 |
|
|
$ |
311 |
|
|
$ |
274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Household Group North America
The Household Group North America reported a 2% net sales decline, 5% volume decrease and 9%
decrease in earnings from continuing operations before income taxes (herein defined as earnings
for the Segment Results section) in the current quarter as compared to the year-ago quarter. The
segment also reported 1% net sales growth, 3% volume decrease and 2% decrease in earnings during
the six months ended December 31, 2006, as compared to the year-ago period. Volumes declined, as
anticipated, in the current periods due to the impact of price increases on Clorox® bleach and
auto-care products. Additionally, lower shipments resulted from competitive activity in certain
products, including Clorox® disinfecting wipes and Clorox 2® color-safe bleach. The variance
between net sales and volume was primarily due to the impact of price increases. The decrease in
earnings primarily reflected higher commodity and transportation costs and unfavorable product mix.
These results were partially offset by the benefits of price increases and cost savings.
Specialty Group
The Specialty Group reported 8% net sales growth, flat volume and a 30% increase in earnings for
the current quarter as compared to the year-ago quarter. The segment also reported 7% net sales
growth, 1% volume decrease and a 26% increase in earnings during the six months ended December 31,
2006, as compared to the year-ago period. Net sales growth outpaced the change in volume primarily
due to the benefits of price increases and favorable product mix. The segment delivered increased
shipments of Fresh Step® scoopable cat litter behind a significant product improvement as well as
increased shipments of Kingsford® grilling products as a result of a product improvement and
favorable December 2006 weather. These results were offset by decreased shipments of Glad®
products, particularly trash bags, due to the anticipated impact of fiscal year 2006 price
increases and intense competitive activity in the trash bag category. Growth in earnings primarily
reflected the benefit of price increases, cost savings and favorable product mix, partially offset
by higher commodity costs and other energy-related manufacturing and transportation costs.
Page 17
International
The International segment reported 9% net sales growth, a 10% volume increase and a 3% increase in
earnings in the current quarter as compared to the year-ago quarter. The increase in net sales
was primarily driven by price increases and strong volume growth in Latin America. The volume
growth was driven by category growth in bleach and cleaners and new product launches. The increase
in earnings was driven by net sales growth, cost savings and a gain of $2 on the sale of a
trademark, partially offset by higher commodity costs and increased marketing spending to support
new cleaning products in certain markets.
Compared with the year-ago six month period, the segment reported 6% net sales and volume growth,
and flat earnings during the six months ended December 31, 2006. Drivers impacting the
year-to-date net sales, volume and earnings results are consistent with the second quarter results
(as noted above). However, the year-to-date results were unfavorably impacted by lower volume from
the Companys Australian business. Australias volume has been unfavorably impacted by category
softness, strong competitive activity and the discontinuation of a non-strategic product in the
prior year.
Corporate
Losses from continuing operations before income taxes attributable to the corporate segment
decreased by 3% and increased by 1% for the current periods, respectively, as compared to prior
periods. The decrease of 3% in the three months ended December 31, 2006, as compared to the year
ago quarter, was primarily attributable to decreased incentive
compensation expense, decreased
operating losses from the Companys investment in low-income housing partnerships and lower
interest expense. These results were partially offset by transition and restructuring costs
associated with the ITS Agreement (see Restructuring costs section above) and higher equity
compensation following the adoption of Statement of Financial Accounting Standards (SFAS) No.
123-R, Share-Based Payment. The increase of 1% in the six months ended December 31, 2006, as
compared to the year ago period, was primarily attributable to increased transition and
restructuring costs associated with the ITS Agreement and higher equity compensation following the
adoption of SFAS No. 123-R. These results were partially offset by decreased operating losses from
the Companys investment in low-income housing partnerships and lower interest expense.
Financial Condition, Liquidity and Capital Resources
Operating Activities
The Companys financial condition and liquidity remain strong as of December 31, 2006. Net cash
provided by operations was $255 for the six months ended December 31, 2006, compared with $83 in
the comparable year-ago period. The increase in operating cash flows was primarily due to a $151
income tax settlement payment in the first quarter of fiscal year 2006. Also contributing to the
increase were decreases in payments of accounts payable and accrued liabilities primarily due to
the timing of payments.
Working Capital
The Companys balance of working capital, defined in this context as total current assets net of
total current liabilities, decreased from June 30, 2006 to December 31, 2006, principally due to
increases in current maturities of long-term debt and decreases in receivables, net, partially
offset by increases in inventories and decreases in accounts payable and accrued liabilities.
The increase in current maturities of long-term debt was principally due to the reclassification of
a $500 note from long-term debt to short term due to its maturity in December, 2007. The $42
decrease in receivables, net was primarily driven by the seasonality of sales in the charcoal and
food categories.
The decrease of $85 in accounts payable and accrued liabilities was primarily driven by $61 of
profit sharing and incentive compensation payments, partially offset by year-to-date accruals, and
the timing of payments. The $48 increase in inventories was primarily due to the build up in both
the charcoal and food categories inventory to support seasonal sales.
Investing Activities
Capital expenditures were $68 during the six months ended December 31, 2006, compared to $83 in the
comparable year-ago period. Capital spending as a percentage of net sales was 3.0% during the six
months ended December 31, 2006, compared to 3.8% during the six months ended December 31, 2005.
Lower capital expenditures for the six months ended December 31, 2006, were driven primarily by
higher spending related to software technology system enhancement projects in the year-ago period.
As part of the Companys agreement with Colgate to purchase its bleach businesses in Canada and
certain countries in Latin America, the Company acquired the bleach business in Canada for $56,
effective December 29, 2006. The Company anticipates closing the purchase of the Latin America
businesses in the third quarter of its 2007 fiscal year. The Company is acquiring brand
trademarks, and manufacturing facilities in Canada and Venezuela.
Page 18
Financing Activities
Net cash used for financing activities was $143 for the six months ended December 31, 2006, as
compared with $56 in the comparable year-ago period. The increase reflects higher net repayments
of borrowings as compared to the year-ago period.
Credit Arrangements
As of December 31, 2006, the Company had a $1,300 domestic credit agreement, $165 of which expires
in December 2009 with the remainder expiring in December 2010. There were no borrowings under this
credit agreement, which is available for general corporate purposes and to support commercial paper
issuances. In addition, the Company had $51 of foreign working capital credit lines and other
facilities at December 31, 2006, of which $26 was available for borrowing. The Company is in
compliance with all restrictive covenants and limitations as of December 31, 2006. The Company does
not anticipate any problems in securing future credit agreements.
Share Repurchases
The Company has three share repurchase programs: two open market programs authorized by the Board
of Directors in 2002 and 2003, and a program to offset the impact of share dilution related to
share-based awards (evergreen program). The 2002 open market program is currently subject to a
price cap of $65.00 per share and has $68 remaining authorized for repurchase; the 2003 open market
program is currently subject to a price cap of $55.00 per share and has $700 remaining authorized
for repurchase. There were no repurchases under the open market programs during the three and six
month periods ended December 31, 2006 and 2005.
During the six month period ended December 31, 2006, the Company acquired 1.4 million shares of its
common stock at a total cost of $89 under the evergreen program. In fiscal year 2007, the Company
anticipates repurchasing a total of approximately 2 to 3 million shares under this program to
offset the impact of share dilution from the expected number of annual stock option exercises.
During the six month period ended December 31, 2005, the Company acquired 2.4 million shares of its
common stock at a total cost of $135 under the evergreen program.
Guarantees
In conjunction with divestitures and other transactions, the Company may provide indemnifications
relating to the enforceability of trademarks, pre-existing legal, tax, environmental and employee
liabilities, as well as provisions for product returns and other items. The Company has
indemnification agreements in effect that specify a maximum possible indemnification exposure. The
Companys aggregate maximum exposure from these agreements is $291, which consists primarily of an
indemnity of up to $250 made to Henkel KGaA (Henkel) in connection with the Share Exchange
Agreement, subject to a minimum threshold of $12 before any payments would be made. The general
representations and warranties made by the Company in connection with the Henkel Share Exchange
Agreement were made to guarantee statements of fact at the time of the transaction closing and
pertain to environmental, legal and other matters.
In addition to the indemnifications related to the general representations and warranties, the
Company entered into an agreement with Henkel regarding certain tax matters. The Company made
certain representations of fact as of the closing date of the exchange transaction and certain
representations and warranties regarding future performance designed to preserve the tax-free
status of the exchange transaction. In general, the Company agreed to be responsible for Henkels
taxes on the transaction if the Companys actions result in a breach of the representations and
warranties in a manner that causes the share-exchange to fail to qualify for tax-free treatment.
Henkel has agreed to similar obligations. The Company is unable to estimate the amount of maximum
potential liability relating to the tax indemnification as the agreement does not specify a maximum
amount, and the Company does not have the information that would be required to calculate this
exposure. The Company does note, however, that the potential tax exposure, if any, could be very
significant as the Company believes Henkels tax basis in the shares exchanged is low, and the
value of the subsidiary stock transferred to Henkel in the exchange transaction was approximately
$2,800. Although the agreement does not specify an indemnification term, any exposure under the
agreement would be limited to taxes assessed prior to the expiration of the statute of limitations
period for assessing taxes on the share exchange transaction. Based on the nature of the
representations and warranties as well as other factors, the Company has not accrued any liability
under this indemnity.
The Company is a party to letters of credit of $20, primarily related to one of its insurance
carriers.
The Company has not recorded any liabilities on any of the aforementioned guarantees at December
31, 2006.
Page 19
Contingencies
The Company is involved in certain environmental matters, including Superfund and other response
actions at various locations. The Company has a recorded liability of $26 and $27 at December 31,
2006 and June 30, 2006, respectively, for its share of the related aggregate future remediation
cost. One matter in Dickinson County, Michigan, for which the Company is jointly and severally
liable, accounts for a substantial majority of the recorded liability at both December 31, 2006 and
June 30, 2006. The Company is subject to a cost-sharing arrangement with another party for this
matter, under which Clorox has agreed to be liable for 24.3% of the aggregate remediation and
associated costs, other than legal fees, as the Company and the other party are each responsible
for their own such fees. If the other party with whom Clorox shares joint and several liability is
unable to pay its share of the response and remediation obligations, Clorox would likely be
responsible for such obligations. The other party in this matter
recently reported a substantial net loss for 2006 and expectations of
continuing challenges in 2007. In October 2004, the Company and the other party agreed to a consent judgment with the
Michigan Department of Environmental Quality (MDEQ), which sets forth certain remediation goals and
monitoring activities. Based on the current status of this matter, and with the assistance of
environmental consultants, the Company maintains an undiscounted liability representing its best
estimate of its share of costs associated with the capital expenditures, maintenance and other
costs to be incurred over an estimated 30-year remediation period. The most significant components
of the liability relate to the estimated costs associated with the remediation of groundwater
contamination and excess levels of subterranean methane deposits. Currently, the Company cannot
accurately predict the timing of the payments that will likely be made under this estimated
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 timing, varying costs and alternative clean-up technologies that may become
available in the future. Although it is 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.
New Accounting Standards
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. (FIN) 48,
Accounting for Uncertainty in Income Taxesan Interpretation of Financial Accounting Standards
Board Statement No. 109. This Interpretation prescribes a consistent recognition threshold and
measurement standard, as well as clear criteria for subsequently recognizing, derecognizing,
classifying and measuring tax positions for financial statement purposes. The interpretation also
requires expanded disclosure with respect to uncertainties as they relate to income tax accounting.
FIN 48 will be adopted by the Company at the beginning of its fiscal year ending June 30, 2008, as
required. Management is currently evaluating the impact of FIN 48 on its consolidated financial
statements. The cumulative effect of the interpretation will be reflected as an adjustment to
beginning retained earnings upon adoption.
In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements. This Statement defines fair value, establishes a framework for measuring fair
value in accordance with accounting principles generally accepted in
the United States of America (U.S. GAAP) and expands disclosures
about fair value measurements. This Statement will be adopted by the Company beginning in
its fiscal year ending June 30, 2009, as required. The Company is currently evaluating the impact
of SFAS No. 157 on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132-R. SFAS No.
158 requires an entity to recognize in its balance sheet the funded status of its defined benefit
postretirement plans, measured as the difference between the fair value of the plan assets and the
benefit obligation. SFAS No. 158 also requires an entity to recognize changes in the funded status
of a defined benefit postretirement plan within accumulated other comprehensive income, to the
extent such changes are not recognized in earnings as components of net periodic benefit cost. The
Company is required to adopt SFAS No. 158 as of the end of its fiscal year ending June 30, 2007,
and is currently evaluating the impact of the provisions of SFAS No. 158.
In August 2006, the Pension Protection Act (the Act) was signed into law. The provisions of the
Act, which include higher minimum funding levels for qualified pension plans, will become effective
for the Companys plan year ending on June 30, 2008. Although the fair value of the Companys
domestic qualified pension plans assets was in excess of its projected benefit obligation as of
its last valuation on June 30, 2006, the provisions of the Act could potentially impact the
Companys funding plans.
Page 20
Table of Contents
Cautionary Statement
Except for historical information, matters discussed above, including statements about future
volume, sales, costs, cost savings, earnings, cash outflows, plans, objectives, expectations,
growth, or profitability, are forward-looking statements based on managements estimates,
assumptions and projections. Words such as expects, anticipates, targets, goals,
projects, intends, plans, believes, seeks, estimates, and variations on such words, and
similar expressions, are intended to identify such forward-looking statements. These
forward-looking statements are only predictions, subject to risks and uncertainties, and actual
results could differ materially from those discussed above. Important factors that could affect
performance and cause results to differ materially from managements expectations are described in
the sections entitled Risk Factors and Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Companys Annual Report on Form 10-K for the fiscal
year ended June 30, 2006, as updated from time to time in the Companys SEC filings. These factors
include, but are not limited to, general economic and marketplace conditions and events;
competitors actions; the Companys costs, including changes in exposure to commodity costs such as
resin, diesel and chlor-alkali; increases in energy costs; consumer and customer reaction to price
increases; customer-specific ordering patterns and trends; the Companys actual cost performance;
changes in the Companys tax rate; any future supply constraints which may affect key commodities;
risks inherent in sole-supplier relationships; risks related to customer concentration; risks
arising out of natural disasters; risks related to the handling and/or transportation of hazardous
substances, including but not limited to chlorine; risks inherent in litigation, including the
litigation relating to the cumulative charge resulting from additional stock option compensation
expenses relating to prior periods; international operations; risks inherent in maintaining an
effective system of internal controls including the potential impact of acquisitions or the use of
third-party service providers; the ability to manage and realize the benefit of joint ventures and
other cooperative relationships, including the Companys joint venture regarding the Companys
Glad® plastic bags, wraps and containers business, and the agreement relating to the provision of
information technology and related services by a third party; the success of new products; the
integration of acquisitions and mergers; the divestiture of non-strategic businesses; the
implementation of the Companys updated long-term strategy; and the ability of the Company to
successfully manage tax, regulatory, product liability, intellectual property, environmental and
other legal matters, including the risk resulting from joint and several liability for
environmental contingencies. In addition, the Companys future performance is subject to risks
particular to the share exchange transaction with Henkel KGaA, including the sustainability of cash
flows, the tax indemnification obligations and the actual level of debt costs. Declines in cash
flow, whether resulting from tax payments, debt payments, share repurchases, interest cost
increases greater than management expects, or otherwise, could adversely affect the Companys
earnings.
The Companys forward-looking statements in this document are and will be based on managements
then 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.
Page 21
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
Although the Company has taken a number of measures, including price increases, to respond to the
economic conditions that have led to increased raw-material and energy costs, there have not been
any material changes to the Companys market risk during the three months and six months ended
December 31, 2006. For additional information, refer to the Companys Annual Report on Form 10-K
for the fiscal year ended June 30, 2006.
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 designed and are functioning
effectively to provide reasonable assurance that the information required to be disclosed by the
Company in reports filed under the Securities Exchange Act of 1934 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. There was no
change in the Companys internal control over financial reporting that occurred during the
Companys most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting. On October 3, 2006,
the Company entered into an agreement with Hewlett-Packard (HP) to provide information technology
and related services to the Company beginning during its third quarter of fiscal year 2007. Under
the terms of this agreement, HP will provide application development and maintenance, data center
operations, and network and end-user support for the Companys business. The Company is
implementing certain new control activities in its third fiscal quarter to ensure that internal
controls over financial reporting remain effective.
Page 22
PART II OTHER INFORMATION (Unaudited)
Item 1. Legal Proceedings.
For information regarding Legal Proceedings, please refer to Note 13 under Part I, Item 1 of this
report.
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 year ended June 30, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table sets out the purchases of the Companys securities by the Company and any
affiliated purchasers within the meaning of Rule 10b-18(a)(3) (17 CFR 240.10b-18(a)(3)) during the
second quarter of fiscal year 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[a] |
|
[b] |
|
[c] |
|
[d] |
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Number (or |
|
|
|
|
|
|
|
|
|
|
Shares (or Units) |
|
Approximate Dollar |
|
|
Total Number of |
|
|
|
|
|
Purchased as Part of |
|
Value) that May Yet |
|
|
Shares (or Units) |
|
Average Price Paid |
|
Publicly Announced |
|
Be Purchased Under the |
Period |
|
Purchased(1) |
|
per Share (or Unit) |
|
Plans or Programs |
|
Plans or Programs(2) |
|
October 1 to 31, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
767,723,099 |
|
November 1 to 30, 2006 |
|
|
1,069,800 |
|
|
$ |
64.46 |
|
|
|
1,069,600 |
|
|
$ |
767,723,099 |
|
December 1 to 31, 2006 |
|
|
2,860 |
|
|
$ |
64.15 |
|
|
|
|
|
|
$ |
767,723,099 |
|
|
|
|
(1) |
|
Of the shares purchased in November 2006, 1,069,600 shares were acquired pursuant to
the share repurchase program to offset the potential impact of dilution resulting from the
exercise of stock options, which the Company announced on September 1, 1999, and the Board
of Directors extended on November 15, 2005. The remaining 200 shares relate to the
surrender to the Company of shares of common stock to satisfy withholding obligations in
connection with the vesting of restricted stock granted to employees. The shares purchased
in December 2006 relate entirely to the surrender to the Company of shares of common stock
to satisfy withholding obligations in connection with the vesting of restricted stock
granted to employees. |
|
(2) |
|
The Board of Directors approved a $500,000,000 share repurchase program on August 7,
2001, all of which has been utilized; a $500,000,000 share repurchase program on July 17,
2002, of which $67,723,099 remains available for repurchases; and a $700,000,000 share
repurchase program on July 16, 2003, all of which remains available for repurchases. The
July 17, 2002, program is limited to share repurchases at prices not to exceed $65.00 per
share. The July 16, 2003, program is limited to share repurchases at prices not to exceed
$55.00 per share. On September 1, 1999, the Company also announced a share repurchase
program to reduce or eliminate dilution upon the issuance of shares pursuant to the
Companys stock compensation plans. The program initiated in 1999 has no specified caps on
the price per share or total dollars to be repurchased and therefore is not included in
column [d] above. On November 15, 2005, the Board of Directors authorized the extension of
the 1999 program to reduce or eliminate dilution in connection with issuances of common
stock pursuant to the Companys 2005 Stock Incentive Plan. None of these programs has a
specified termination date. |
Page 23
Item 4. Submission of Matters to a Vote of Security Holders.
At the Companys 2006 Annual Meeting of Stockholders held on November 15, 2006, the following
actions were taken:
The following Directors were elected to hold office until the next annual election of directors:
|
|
|
|
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAINED |
Daniel Boggan, Jr. |
|
129,415,948 |
|
2,385,612 |
|
1,059,072 |
Tully M. Friedman |
|
131,377,704 |
|
425,838 |
|
1,057,090 |
George Harad |
|
131,375,122 |
|
423,481 |
|
1,062,029 |
Donald R. Knauss |
|
129,198,078 |
|
2,558,882 |
|
1,103,671 |
Robert W. Matschullat |
|
129,866,651 |
|
1,632,812 |
|
1,361,170 |
Gary G. Michael |
|
127,681,477 |
|
4,092,719 |
|
1,086,436 |
Jan L. Murley |
|
131,300,877 |
|
482,146 |
|
1,077,610 |
Michael E. Shannon |
|
131,139,434 |
|
557,588 |
|
1,163,610 |
Pamela Thomas-Graham |
|
131,232,642 |
|
528,401 |
|
1,099,589 |
Carolyn M. Ticknor |
|
131,416,624 |
|
381,527 |
|
1,062,481 |
A proposal to ratify the appointment of Ernst & Young LLP as the Companys independent registered
public accountants for the fiscal year ending June 30, 2007, was approved by the stockholders. The
stockholders cast 130,517,505 votes in favor of this proposal and 729,820 votes against. There
were 1,013,307 abstentions.
Item 6. Exhibits.
(a) Exhibits
10.1 |
|
The Clorox Company Replacement Supplemental Executive Retirement Plan for the Benefit of
Donald R. Knauss. |
|
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. |
Page 24
S I G N A T U R E
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: February 5, 2007
|
|
BY
|
|
/s/ Thomas D. Johnson |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Johnson |
|
|
|
|
|
|
Vice President Controller |
|
|
Page 25
EXHIBIT INDEX
Exhibit No.
10.1 |
|
The Clorox Company Replacement Supplemental Executive Retirement Plan for the Benefit of
Donald R. Knauss. |
|
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. |
Page 26