UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
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 (I.R.S. Employer
of incorporation or organization) Identification number
1221 Broadway - Oakland, California 94612 - 1888
(Address of principal executive offices)
Registrant's telephone number, (including area code) (510)-271-7000
(Former name, former address and former fiscal year, if changed
since last report) Indicate by check mark whether the registrant
(1) has filed all report 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 X No
As of December 31, 1993 there were outstanding 53,629,697
shares of Registrant's Common Stock (par-value - $1.00),
its only class outstanding.
Total pages 10 1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Earnings
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
12/31/93 12/31/92 12/31/93 12/31/92
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Net Sales $ 370,844 $ 327,354 $ 820,588 $ 722,011
Costs and Expenses
Cost of products sold 163,386 141,272 357,214 311,407
Selling, delivery and administration 76,703 69,833 161,825 145,517
Advertising 66,583 60,685 144,557 122,963
Research and development 10,314 10,371 20,366 19,984
Interest expense 4,747 4,637 8,668 9,347
Other income, net (2,356) (3,952) (9,026) (4,926)
Total costs and expenses 319,377 282,846 683,604 604,292
Earnings from Continuing Operations
before Income Taxes 51,467 44,508 136,984 117,719
Income Taxes 20,881 17,476 60,084 46,294
Earnings from Continuing Operations 30,586 27,032 76,900 71,425
Earnings from and Gain on Sale of
Discontinued Operations - 211 32,064 414
Net Earnings $ 30,586 $ 27,243 $ 108,964 $ 71,839
Earnings per Common Share
Continuing Operations $ 0.57 $ 0.50 $ 1.42 $ 1.31
Discontinued Operations - - 0.59 0.01
Total $ 0.57 $ 0.50 $ 2.01 $ 1.32
Dividends per Share $ 0.45 $ 0.42 $ 0.90 $ 0.84
Weighted Average Shares Outstanding 53,971 54,653 54,199 54,616
See Notes to Condensed Consolidated Financial Statements.
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
12/31/93 6/30/93
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ASSETS
Current Assets
Cash and short-term investments $ 135,333 $ 71,164
Accounts receivable, less allowance 143,916 226,675
Inventories 142,955 105,890
Deferred income taxes 21,041 19,360
Prepaid expenses 12,336 16,369
Net assets of discontinued operations - 2,320
Total current assets 455,581 531,778
Property, Plant and Equipment - Net 533,890 538,101
Brands, Trademarks, Patents and Other Intangibles 464,220 463,941
Investments in Affiliates 68,536 68,179
Other Assets 64,449 47,231
Total $ 1,586,676 $ 1,649,230
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 67,735 $ 84,243
Accrued liabilities 200,717 226,775
Income taxes payable 21,681 20,585
Commercial paper 5,776 39,486
Current maturities of long-term debt 520 481
Total current liabilities 296,429 371,570
Long-term Debt 216,869 204,000
Other Obligations 59,942 50,663
Deferred Income Taxes 147,521 143,703
Put Option Obligations 9,704 -
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 105,573 105,483
Retained earnings 824,041 762,162
Treasury shares, at cost (103,320) (23,357)
Cumulative translation adjustments (25,505) (20,416)
Stockholders' Equity 856,211 879,294
Total $ 1,586,676 $ 1,649,230
See Notes to Condensed Consolidated Financial Statements. 3
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(In thousands)
Six Months Ended
12/31/93 12/31/92
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Operations:
Earnings from continuing operations $ 76,900 $ 71,425
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 45,887 40,567
Deferred income taxes 11,706 10,800
Other 1,011 (1,149)
Effects of changes in:
Accounts receivable 85,753 78,788
Inventories (36,573) (32,258)
Prepaid expenses 4,089 2,342
Accounts payable (17,376) (53,935)
Accrued liabilities (35,010) (56,093)
Income taxes payable (1,421) 1,467
Net cash provided by continuing operations 134,966 61,954
Net cash (used) provided by discontinued operations (21,097) 4,823
Net cash provided by operations 113,869 66,777
Investing Activities:
Property, plant and equipment (28,347) (39,296)
Disposal of property, plant and equipment 5,086 2,043
Businesses sold 159,293 -
Businesses purchased (20,920) -
Other (19,825) (21,910)
Net cash provided by (used for) investment 95,287 (59,163)
Financing Activities:
Long-term borrowings 13,049 -
Long-term debt repayments (258) (317)
Commercial paper, net (33,710) 24,906
Cash dividends (48,973) (45,862)
Treasury stock purchased (82,084) -
Employee stock plans 6,989 3,899
Net cash used for financing (144,987) (17,374)
Net Increase (Decrease) in Cash and Short-Term Investments 64,169 (9,760)
Cash and Short-Term Investments:
Beginning of period 71,164 69,024
End of period $ 135,333 $ 59,264
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(1) The summarized financial information for the six months
ended December 31, 1993 and 1992 has not been audited,
but in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary
for a fair presentation of the results of operations,
financial position, and cash flows of The Clorox Company
and subsidiaries (the Company) have been made. The results
of the six months ended December 31, 1993 should not be
considered as necessarily indicative of the results for
the entire year.
(2) The Company sold Prince Castle in June 1993, the frozen foods
business in July 1993 and its bottled water business in
September 1993. These businesses have been reported as
discontinued operations.
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Results of discontinued operations are classified separately in the statements of consolidated earnings and include
(in thousands):
Three
Months
Ended Six Months Ended
12/31/92 12/31/93 12/31/92
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Net Sales $ 42,165 $ 18,700 $ 88,451
Earnings from operations before income taxes $ 381 1,043 $ 653
Income taxes 170 409 239
Net earnings from discontinued operations 211 634 414
Gain on sale of businesses - 42,177 -
Income taxes - 10,747 -
Net gain on sale of businesses - 31,430 -
Earnings from and gain on sale of
discontinued operations $ 211 $ 32,064 $ 414
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The net assets of the discontinued operations were segregated
in the June 30, 1993 consolidated balance sheet and were
comprised of the following (in thousands):
Assets $ 105,678
Liabilities 13,358
Net assets $ 92,320
The assets consisted primarily of accounts receivable,
inventories, property, plant and equipment and intangibles,
and liabilities consisted primarily of accounts payable and
accrued liabilities.
5
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(3) Inventories consisted of (in thousands):
12/31/93 6/30/93
Finished goods and work
in process $ 96,985 $ 64,162
Raw materials and
supplies 45,970 41,728
Total $ 142,955 $ 105,890
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(4) Other income, net consisted of (in thousands):
Three Months Ended Six Months Ended
12/31/93 12/31/92 12/31/93 12/31/92
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Interest income $ (1,492) $ (689) $ (2,783) $ (1,599)
Equity earnings of affiliates (1,488) (2,240) (3,495 (4,738)
Amortization of intangibles 5,815 5,282 11,526 10,703
Other income (5,191) (6,305) (14,274) (9,292)
Total $ (2,356) $ (3,952) $ (9,026) $ (4,926)
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(5) Put Option Obligations
The Company sold 600,000 put options during the first quarter
of fiscal 1994 with various strike prices (average of $49.31 per
share) that expire at various times through February 1994.
Upon exercise, each put option obligates Clorox to purchase
one share of its Common Stock at the strike price. During the
second quarter of fiscal 1994, 400,000 options expired. The
aggregate exercise price of the remaining 200,000 options
(average of $48.52 per share) totalling $9,704,000 has been
classified as put option obligations with a corresponding
increase to Treasury Stock at December 31, 1993.
(6) Stock Repurchases
In 1989, the Company commenced a program to repurchase up to 5
million shares of its outstanding stock through periodic open
market and block transactions. These shares will be held in
the Company's treasury and reissued for corporate uses. Through
December 31, 1993, 3,363,615 shares had been repurchased
under this plan to date, with 1,552,400 shares repurchased
in July through December of 1993.
(7) Subsequent Event
The Company has agreed to purchase the assets of the S.O.S.
products business from Miles Inc. on January 31, 1994, subject
to final regulatory approval. The asset purchase includes trade
receivables, inventories, property, plant and equipment and
intangible assets including trademarks. Brands acquired include
S.O.S. steel wool soap pads, Tuffy plastic scouring pads, and
other S.O.S. cleaning products.
6
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PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Comparision of the Three Months Ended December 31, 1993
with the Three Months Ended December 31, 1992
Net sales were a second quarter record and increased 13% primarily
due to successful new product introductions, and the consolidation
of an Argentine subsidiary in which Clorox increased its interest
to 90% in June, 1994. New products which provided second quarter's
sales and volume growth included Liquid Plumr build up remover,
Tilex soap scum remover, Formula 409 glass and surface cleaner,
and two Clorox toilet bowl cleaners. Net sales for the
Company's Brita water filteration business were up strongly
versus the year ago quarter. Price increases contributed less
than 1% to the increase in sales. Clorox' bleach brands,
salad dressings and other food brands volumes were flat versus
the year ago quarter.
Gross margins were 56% in 1993 and 57% in 1992. The slight
decline was due to the consolidation of the Company's Argentine
subsidiary. Materials and plant operating costs remained flat
on a per unit basis versus the year ago period. Gross margins
are expected to remain at approximately the fiscal 1993 level
for most of the Company's domestic product lines this fiscal
year.
Research and development expense was flat versus the prior year
and down as a percentage of sales. New product activity is
expected to remain at a high level though spending should
continue at current levels due to efforts made to shorten
development times and improvements in efficiency in the
research and development function. Selling, delivery, and
administration expenses were up 9.8% principally due to the
consolidation of the Argentine subsidiary. These costs were
down slightly for the domestic businesses, and were down
slightly as a percentage of sales. The reduction in the
growth of these expenses continued as the Company makes
progress towards its objective of achieving a $25 million
reduction in annual operating expenses by the end of fiscal
1995.
Advertising expense was up 9.7% versus 1992 and the Company
expects it to be up significantly for the year as new product
introductions will continue to be at high levels and established
brands will continue to receive strong support.
Other income was down principally due to last year's reversal
of 1991 restructuring allowances due to lower than anticipated
costs.
The effective tax rate for the quarter was 40.6% versus 39.3%
for 1992, and reflects the recently enacted 1% increase in
statutory rates resulting in approximately $500,000 in additional
taxes versus the prior year. The 1% rate increase will affect all
future quarters.
7
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PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Comparision of the Six Months Ended December 31, 1993
with the Six Months Ended December 31, 1992
Net sales were a first six months record and increased 14%
primarily due to successful new product introductions, and the
consolidation of an Argentine subsidiary in which Clorox
increased its interest to 90% in June 1994. New products which
provided this period's sales and volume growth included Liquid
Plumr build up remover, Tilex soap scum remover, Formula 409
glass and surface cleaner and two Clorox toilet bowl cleaners.
Net sales for the Company's Brita water filtration business were
up strongly versus the year ago period.
Gross margins were 57% in both 1993 and 1992. Material and plant
operating costs were flat on a per unit basis. The Company does
not anticipate that material costs will rise significantly during
the year and efforts continue to contain plant operating costs
growth. Gross margins should remain at approximately this level
for most of the Company's domestic product lines this fiscal year.
Research and development expense increased slightly versus a year
ago, but has declined slightly as a percent of sales. New product
activity is expected to remain at a high level, though spending
should continue at current levels due to efforts made to shorten
development times and improve efficiency in the research and
development function. Selling, delivery and administration
expenses were up 11.2% principally due to the consolidation of the
Argentine subsidiary, but were down slightly as percentage of
sales versus 1992. Six month earnings reflect the continuing
efforts to reduce the growth of these expenses that began in first
quarter. The reduction in the growth of these expenses continued
as the Company makes progress towards its objective of achieving a
$25 million reduction in annual operating expenses by the end of
fiscal 1995.
Advertising expense increased 17.6% versus 1992, and the Company
expects it to be up significantly this year as new product
introductions will continue at high levels and established
brands will continue to receive strong support.
Interest expense is down due to lower commercial paper borrowing
in 1993 versus 1992.
Other income was up $4,100,000 versus 1992 principally due to one
time gains from the sales of idle property and the Company's
grill business and higher royalty income. Offsetting these
increases were lower equity earnings and higher amortization of
intangibles, both attributable to the increase in ownership of
the Argentine business, and 1992's one time reversal of 1991
restructuring allowances due to lower than anticipated costs.
The effective tax rate was 43.9% in 1993 versus 39.3% in 1992.
The increase is primarily due to the recently enacted tax law
that increased the statutory tax rate by 1%, and the retroactive
effect of the increase for the January through June 1993 period,
and an adjustment of deferred taxes. The 1% increase in the
statutory tax rate resulted in approximately $1,400,000
additional tax expense, while the two latter items increased
this period's expense by $4,000,000.
Income from discontinued operations in 1993 includes the gain on
sale of the food service and the bottled water businesses of
$31,430,000 net of $10,747,000 in taxes, and operating income
of $1,043,000 net of $409,000 in taxes. All discontinued
operations were sold by the end of the first quarter.
8
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PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Financial Position
The Company's financial position and liquidity have strengthened
since June 30, 1993 principally due to cash provided by operations,
and the completed sales of the bottled water and frozen foods
discontinued operations during the first quarter. This is
reflected by higher cash and short term investments balances,
and significantly lower levels of commercial paper borrowing
at December 31, 1993. Decreases in receivables and accounts
payables and increases in inventories since June 30, 1993
reflect the normal seasonal pattern of the charcoal briquet
and insecticides businesses. Accrued liabilities were down from
June 30, 1993 due to a heavier emphasis on promotional spending
versus advertising during the second quarter. Furthermore,
the Company expects inventories to increase during the next
fiscal quarters for the charcoal and insecticide businesses
in anticipation of the 1994 seasons. Cumulative translation
adjustments increased from June 30, 1993 due to the depreciation
of the Spanish Peseta, the functional currency of the
Company's HIBSA joint venture. Cash provided by operations
was up significantly from the year ago period principally due
to the timing of prior year payments for accounts payable and
accrued liabilities.
The Board of Directors approved a stock repurchase program in
1989. The program authorized the repurchase of up to 5,000,000
shares of Clorox stock at a cost not to exceed $250,000,000.
Through December 31, 1993, 3,343,615 shares at a cost of
$153,404,000 were repurchased. The Company intends to repurchase
approximately $100,000,000 of Clorox stock this year, and during
the first and second quarters, repurchased $82,084,000
(1,552,400 shares) for Treasury Shares. The Company anticipates
completing this phase of the repurchase program during this year,
subject to market conditions and business opportunities which may
arise. The Company sold 600,000 put options on Clorox stock
during the first quarter in support of the shares repurchase
program, of which 200,000 remain unexpired at December 31, 1993.
Management believes that the Company has sufficient access to
additional capital at favorable terms through existing lines of
credit and from public and private services should the need arise.
9
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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 January 24, 1994 BY/HENRY J. SALVO/
Henry J. Salvo, Jr.
Vice-President
- Controller
10
