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 September 30, 1994
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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
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THE CLOROX COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 31-0595760
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
1221 Broadway - Oakland, California 94612 - 1888
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(Address of principal executive offices)
Registrant's telephone number, (510)-271-7000
(including area code) --------------
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(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 X No
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As of September 30, 1994 there were outstanding 53,490,230 shares
of Registrant's Common Stock (par-value - $1.00), its only class
outstanding.
Total pages 9
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Earnings
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(In thousands, except per-share amounts)
Three Months Ended
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9/30/94 9/30/93
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Net Sales $ 476,367 $ 449,744
Costs and Expenses
Cost of products sold 210,134 193,828
Selling, delivery and administration 89,471 85,122
Advertising 70,967 77,974
Research and development 10,100 10,052
Interest expense 4,926 3,921
Other (income) expense, net 362 (6,670)
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Total costs and expenses 385,960 364,227
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Earnings from Continuing Operations
before Income Taxes 90,407 85,517
Income Taxes 37,226 39,203
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Earnings from Continuing Operations 53,181 46,314
Earnings from and Gain on Sale of Discontinued Operations - 32,064
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Net Earnings $ 53,181 $ 78,378
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Earnings per Common Share
Continuing Operations $ 1.00 $ 0.85
Discontinued Operations - 0.59
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Total $ 1.00 $ 1.44
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Dividends per Share $ 0.48 $ 0.45
Weighted Average Shares Outstanding 53,408 54,426
See Notes to Condensed Consolidated Financial Statements.
2
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
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(In thousands)
9/30/94 6/30/94
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ASSETS
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Current Assets
Cash and short-term investments $ 151,914 $ 115,922
Accounts receivable, less allowance 190,656 249,843
Inventories 114,171 105,948
Deferred income taxes 17,853 18,548
Prepaid expenses 11,895 14,014
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Total current assets 486,489 504,275
Property, Plant and Equipment - Net 530,124 532,600
Brands, Trademarks, Patents and Other Intangibles 29,521 520,042
Investments in Affiliates 83,993 83,368
Other Assets 63,615 57,284
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Total $ 1,693,742 $ 1,697,569
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LIABILITIES AND STOCKHOLDERS' EQUITY
- - - ------------------------------------
Current Liabilities
Accounts payable $ 88,824 $ 97,728
Accrued liabilities 191,349 227,197
Income taxes payable 39,178 7,599
Commercial paper and short-term borrowings 20,982 42,916
Current maturities of long-term debt 201 392
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Total current liabilities 340,534 375,832
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Long-term Debt 216,262 216,088
Other Obligations 66,148 63,187
Deferred Income Taxes 131,270 133,045
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 106,495 106,554
Retained earnings 904,695 876,832
Treasury shares, at cost (102,475) (107,146)
Cumulative translation adjustments and other (24,609) (22,245)
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Stockholders' Equity 939,528 909,417
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Total $ 1,693,742 $ 1,697,569
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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
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(In thousands)
Three Months Ended
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9/30/94 9/30/93
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<S> <C> <C>
Operations:
Earnings from continuing operations $ 53,181 $ 46,314
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 25,305 22,984
Deferred income taxes 3,900 7,800
Other 1,060 (4,574)
Effects of changes in:
Accounts receivable 59,187 39,836
Inventories (7,163) (7,883)
Prepaid expenses 3,235 4,729
Accounts payable (9,904) (18,240)
Accrued liabilities (34,015) (27,188)
Income taxes payable 26,599 36,316
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Net cash provided by continuing operations 121,385 100,094
Net cash used by discontinued operations - (14,964)
Net cash provided by operations 121,385 85,130
Investing Activities:
Property, plant and equipment (11,217) (10,849)
Disposal of property, plant and equipment 124 5,500
Businesses sold - 159,293
Businesses purchased (18,095) -
Other (9,081) (11,830)
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Net cash provided by (used for) investment (38,269) 142,114
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Financing Activities:
Short-term borrowings (3,000) (1,715)
Long-term borrowings 154 -
Long-term debt repayments - (125)
Commercial paper, net (21,934) (34,941)
Cash dividends (25,615) (24,537)
Treasury stock purchased - (43,294)
Employee stock plans 3,271 4,106
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Net cash used for financing (47,124) (100,506)
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Net Increase in Cash and Short-Term Investments 35,992 126,738
Cash and Short-Term Investments:
Beginning of period 115,922 71,164
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End of period $ 151,914 $ 197,902
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4
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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 three months
ended September 30, 1994 and 1993 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 three months ended September 30, 1994
should not be considered as necessarily indicative of
the results for the entire year.
(2) The Company sold the frozen foods business in July 1993
and its bottled water business in September 1993. These
business have been reported as discontinued operations.
Results of discontinued operations are classified
separately in the statements of consolidated earnings
and include (in thousands):
Three Months Ended
------------------
9/30/93
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Net Sales $ 18,700
==================
Earnings from operations before
income taxes $ 1,043
Income taxes 409
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Net earnings from discontinued
operations 634
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Gain on sale of businesses 42,177
Income taxes 10,747
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Net gain on sale of businesses 31,430
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Earnings from and gain on sale of
discontinued operations $ 32,064
=================
3) Inventories at September 30, 1994 and at June 30, 1994
consisted of (in thousands):
9/30/94 6/30/94
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Finished goods and work
in process $ 77,213 $ 69,280
Raw materials and supplies 36,958 36,668
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Total $114,171 $105,948
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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(4) Other expense (income), net consisted of (in thousands):
Three Months Ended
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9/30/94 9/30/93
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Interest income $ (1,513) $ (1,291)
Equity earnings of affiliates (884) (2,007)
Amortization of intangibles 6,035 5,711
Other income (3,276) (9,083)
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Total $ 362 $ (6,670)
</TABLE>
Other income declined from a year ago principally due to
that Period's non-recurring gains from the sale of idle
property and the Kingsford grill business.
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
--------------------
Comparison of the Three Months Ended September 30, 1994
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with the Three Months Ended September 30, 1993
----------- ----------------------------------
Net sales increased 6% primarily due to the acquisition of the
S.O.S soap pad business acquired on January 31, 1994, and
record shipments of the Brita water filtration system, Clorox
liquid bleach, Pine-Sol cleaner, Tilex cleaner and higher
volumes of other products. Price increases were less than
1% of the increase in net sales, after taking into account
price decreases on Pine-Sol and Tilex.
Cost of products sold as percentage of net sales was 44% and
43% in 1994 and 1993, respectively. Material costs and plant
operating expenses during this period were level with those
costs during the same period in 1993 on a per unit basis.
Net sales during this period reflected slightly increased
trade promotional spending, primarily in our Food and
International businesses, which resulted in a 1% decline in
the gross margin. Gross margins are expected to remain within
this range in fiscal 1995.
Research and Development expense was equivalent to the prior
period and declined slightly as a percent of net sales.
New product activity is expected to remain at high levels
with spending expected to remain level as a percent of sales,
due to shortened development times and efficiency improvements
which have been achieved in the Research & Development
function. Selling, delivery, and administration expense
increased 5% over the prior period, but declined slightly
as a percent of customer sales. This improvement reflects
efforts the Company began last year to reduce the growth of
these expenses. Such efforts include sales broker
consolidation, consolidation of advertising agency accounts,
and the implementation of a new logistics strategy utilizing
regional distribution centers. Efforts are expected to
continue to identify and implement additional cost savings.
Advertising expense was 9% less than a year ago principally
due to the timing of last year's introductory spending on
new products, and the shift toward trade promotions during
the current quarter. The Company expects advertising to
increase for the full year over fiscal 1994 as new product
introductions will be at high levels, and established brands
will continue to receive strong support.
Interest expense increased this period versus a year ago due
to higher levels of borrowing by the company's foreign
subsidiaries, the addition of an industrial revenue bond,
higher levels of commercial paper borrowings and higher
interest rates, and a less favorable, but not material,
credit from interest rate swap agreements. Last year's
quarter benefited from cash provided by the sale of
discontinued operations which alleviated the need to borrow.
Other (income) and expense net, declined $7,000,000 this
year, principally due to last year's non-recurring gains
from the sale of idle property and the Kingsford grill
business, offset this year by higher amortization of
intangibles due to recent acquisitions, the start of new
ventures in Central Europe and a decline in earnings from
the Company's investment in Spain primarily due to a
continuing sluggish Spanish economy.
The effective tax rate for the quarter was 41.2% versus the
year ago period's effective tax rate of 45.8%. The decline
was principally due to $4,000,000 of non-recurring prior
year tax charges which arose as a result of 1993 tax
legislation that increased the statutory tax rate 1%.
The retroactive effect on earnings from January 1, 1993
and the increase in deferred tax liabilities were both
recognized in the year-ago quarter.
Income from discontinued operations through September 30,
1993 includes the gain on sale of the food service and
bottled water businesses of $31,430,000, net of $10,747,000
in taxes, and operating income of $634,000, net of $409,000
in taxes. All discontinued operations were sold in the 1993
period.
Earnings per share from continuing operations benefited by
approximately 2 cents per share this period versus a year
ago due to the effect of the stock repurchase program.
7
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PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
---------------------------------------------
Financial Condition
-------------------
The Company's financial position and liquidity have
strengthened since June 30, 1994 principally due to cash
provided by operations during the current period. This is
reflected by higher levels of cash and holdings of marketable
securities, as well as lower levels of commercial paper
borrowings at September 30, 1994. The Company intends to
complete the final phase of the stock repurchase program
this fiscal year by purchasing approximately $79,000,000
of its shares during the remainder of the fiscal year,
subject to market conditions and business opportunities
which may arise. The stock repurchase program was
approved by the Board of Directors in 1989 and authorized
the repurchase of up to 5,000,000 shares of Clorox stock at
a cost not to exceed $250,000,000. Through September 30,
1994, the Company had repurchased 3,674,515 shares at a cost
of $171,000,000. Shares acquired are added to Treasury
shares and are available for employee stock plans and other
corporate purposes.
The Company has approved the use of interest rate derivative
instruments such as interest rate swaps in order to manage
the impact of interest rate movements on interest expense.
These instruments have the effect of converting fixed rate
interest to floating, or floating to fixed. The conditions
under which derivatives can be used are set forth in a
Company Policy Statement and include a restriction on the
amount of such activity to a designated portion of existing
debt, a limit on the term of any derivative transaction,
and a specific prohibition on the use of any leveraged
derivatives. Interest rate swaps in effect were less
favorable this quarter than a year ago, but were not
material.
Decreases in accounts receivable and accounts payable from
June 30, 1994 reflect normal seasonal variations, due to the
charcoal and insecticides businesses. Inventories are higher
versus June 30, 1994 principally due to acquisitions and
new product activities. The Company expects inventories to
increase during the next two fiscal quarters to support the
seasonal charcoal and insecticides businesses.
Management believes the Company has access to additional
capital through existing lines of credit and from public
and private sources should the need arise.
8
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S I G N A T U R E
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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
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(Registrant)
DATE 11/10/94 BY /S/ HENRY J. SALVO, JR.
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Henry J. Salvo, Jr.
Vice-President - Controller
9
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL QUARTER ENDED SEPTEMBER 30,
1994, AS PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FOR SUCH PERIOD, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 22164
<SECURITIES> 129750
<RECEIVABLES> 192177
<ALLOWANCES> 1521
<INVENTORY> 114171
<CURRENT-ASSETS> 486490
<PP&E> 862183
<DEPRECIATION> 332059
<TOTAL-ASSETS> 1693742
<CURRENT-LIABILITIES> 340534
<BONDS> 216262
<COMMON> 55422
0
0
<OTHER-SE> 884106
<TOTAL-LIABILITY-AND-EQUITY> 1693742
<SALES> 476367
<TOTAL-REVENUES> 476367
<CGS> 210134
<TOTAL-COSTS> 380672
<OTHER-EXPENSES> 362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4926
<INCOME-PRETAX> 90407
<INCOME-TAX> 37226
<INCOME-CONTINUING> 53181
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<NET-INCOME> 53181
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</TABLE>
