UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- -- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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
- ---------------------------------------------------------------
(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 No.)
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) ---------------
- ---------------------------------------------------------------
(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, 1994 there were 53,054,770 shares outstanding
of the registrant's common stock (par value - $1.00),
the registrant's only outstanding class of stock.
- ---------------------------------------------------------------
Total pages 10
1
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<CAPTION>
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
-------------------- ------------------
12/31/94 12/31/93 12/31/94 12/31/93
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 414,454 $ 370,844 $ 890,821 $ 820,588
--------- --------- --------- ----------
Costs and Expenses
Cost of products sold 183,963 163,386 394,097 357,214
Selling, delivery and administration 91,885 76,703 181,356 161,825
Advertising 68,007 66,583 138,974 144,557
Research and development 10,817 10,314 20,917 20,366
Interest expense 5,163 4,747 10,089 8,668
Other income, net (2,164) (2,356) (1,802) (9,026)
--------- --------- --------- ----------
Total costs and expenses 357,671 319,377 743,631 683,604
--------- --------- --------- ----------
Earnings from Continuing Operations
before Income Taxes 56,783 51,467 147,190 136,984
Income Taxes 22,688 20,881 59,914 60,084
--------- --------- --------- ----------
Earnings from Continuing Operations 34,095 30,586 87,276 76,900
Earnings from and Gain on Sale of
Discontinued Operations - - - 32,064
--------- --------- --------- ----------
Net Earnings $ 34,095 $ 30,586 $ 87,276 $ 108,964
========= ========= ========= ==========
Earnings per Common Share
Continuing Operations $ 0.64 $ 0.57 $ 1.64 $ 1.42
Discontinued Operations - - - 0.59
--------- --------- --------- ----------
Total $ 0.64 $ 0.57 $ 1.64 $ 2.01
========= ========= ========= ==========
Dividends per Share $ 0.48 $ 0.45 $ 0.96 $ 0.90
Weighted Average Shares Outstanding 53,274 53,971 53,341 54,199
See Notes to Condensed Consolidated Financial Statements.
2
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
-------------------------------------
(In thousands)
12/31/94 6/30/94
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<S> <C> <C>
ASSETS
Current Assets
Cash and short-term investments $ 134,357 $ 115,922
Accounts receivable, less allowance 178,308 249,843
Inventories 157,418 105,948
Deferred income taxes 17,807 18,548
Prepaid expenses 12,685 14,014
------------ ------------
Total current assets 500,575 504,275
Property, Plant and Equipment - Net 530,092 532,600
Brands, Trademarks, Patents and Other Intangibles 525,602 520,042
Investments in Affiliates 78,511 83,368
Other Assets 64,771 57,284
------------ ------------
Total $ 1,699,551 $ 1,697,569
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 78,836 $ 97,728
Accrued liabilities 182,632 227,197
Income taxes payable 12,623 7,599
Commercial paper and notes payable 92,987 42,916
Current maturities of long-term debt 398 392
------------ ------------
Total current liabilities 367,476 375,832
Long-term Debt 215,972 216,088
Other Obligations 67,892 63,187
Deferred Income Taxes 128,602 133,045
Put Option Obligations 31,620 -
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 106,642 106,554
Retained earnings 912,305 876,832
Treasury shares, at cost (158,285) (107,146)
Cumulative translation adjustments and other (28,095) (22,245)
------------ ------------
Stockholders' Equity 887,989 909,417
------------ ------------
Total $ 1,699,551 $ 1,697,569
============ ============
See Notes to Condensed Consolidated Financial Statements.
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<TABLE>
<CAPTION>
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
----------------------------------------
12/31/94 12/31/93
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<S> <C> <C>
Operations:
Earnings from continuing operations $ 87,276 $ 76,900
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization 51,445 45,887
Deferred income taxes 5,400 11,706
Other 10,230 1,011
Effects of changes in:
Accounts receivable 71,938 85,753
Inventories (50,089) (36,573)
Prepaid expenses 2,460 4,089
Accounts payable (19,886) (17,376)
Accrued liabilities (42,100) (35,010)
Income taxes payable (4,078) (1,421)
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Net cash provided by continuing operations 112,596 134,966
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Net cash used by discontinued operations - (21,097)
Net cash provided by operations 112,596 113,869
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Investing Activities:
Property, plant and equipment (28,803) (28,347)
Disposal of property, plant and equipment 550 5,086
Businesses sold - 159,293
Businesses purchased (24,165) (20,920)
Other (18,083) (19,825)
------------- --------------
Net cash provided by (used for) investment (70,501) 95,287
------------- --------------
Financing Activities:
Short-term borrowings 6,031 -
Long-term borrowings - 13,049
Long-term debt repayments (207) (258)
Commercial paper, net 44,038 (33,710)
Cash dividends (51,298) (48,973)
Treasury stock purchased (26,682) (82,084)
Employee stock plans 4,458 6,989
------------- --------------
Net cash used for financing (23,660) (144,987)
------------- --------------
Net Increase in Cash and Short-Term Investments 18,435 64,169
Cash and Short-Term Investments:
Beginning of period 115,922 71,164
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End of period $ 134,357 $ 135,333
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4
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<PAGE>
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 and six
months ended December 31, 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 (collectively,
the "Company") have been made. The results of the three and
six months ended December 31, 1994 and 1993 should not be
considered as necessarily indicative of the results for the
entire year.
(2) The Company sold its frozen foods business in July 1993
and its bottled water business in September 1993. These businesses
have been reported as discontinued operations.
Results of discontinued operations are classified separately in
the statements of consolidated earnings and include
(in thousands):
Six
Months
Ended
------------
12/31/93
------------
Net Sales $ 18,700
=============
Earnings from operations before
income taxes $ 1,043
Income taxes 409
------------
Net earnings from
discontinued operations 634
------------
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 $ 32,064
=============
(3) Inventories consisted of (in thousands):
12/31/94 6/30/94
---------- ---------
Finished goods and work
in process $103,249 $ 69,280
Raw materials and supplies 54,169 36,668
---------- ---------
Total $157,418 $105,948
========== =========
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
----------------------------------------------------
(4) Stock Repurchases
The Company has 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,
1994, 4,145,715 shares had been repurchased under this plan to
date; of which 471,200 shares and 3,363,615 shares were
purchased during the six months ended December 31, 1994 and
1993, respectively.
(5) Put Option Obligations
The Company sold 600,000 put options during the second quarter
of fiscal 1995 with various strike prices (average of $52.70
per share) that expire at various times through May 1995. Upon
exercise, each put option obligates the Company to purchase one
share of its common stock at the strike price. The aggregate
exercise price of $31,620,000 has been classified as put option
obligations with a corresponding increase in treasury stock at
December 31, 1994.
(6) Subsequent Event
On February 3, 1995 the Company acquired the assets and assumed
certain liabilities of Brita International Holding, Inc., a
Canadian-based manufacturer and marketer of Brita water
filtration systems. This acquisition expands the Company's
water filtration systems business which had been focused in
the United States.
6
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<PAGE>
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 December 31, 1994
------------------------------------------------------
with the Three Months Ended December 31, 1993
---------------------------------------------
Net sales increased 12% primarily due to record shipments of
Clorox liquid bleach, Pine-Sol cleaner, Formula 409, Soft Scrub
cleanser, Kingsford charcoal briquets, and the Brita water
filtration system. The acquisition of the S.O.S soap pad
business acquired on January 31, 1994 also contributed to the
increase in sales. New products contributing to the sales
increase include S.O.S Juniors steel wool soap pads, Formula
409 Professional Strength, Liquid-Plumr Septic Tank Treatment,
and Hidden Valley ready-to-eat dips.
Cost of products sold as a percentage of net sales was 44% in
both periods. Material costs and plant operation expenses
during this period were level with those costs during the same
period a year ago, on a per unit basis. Gross margins are
anticipated to remain at this level for the remainder of fiscal
1995.
Research and development expense was up slightly from the year
ago period but 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 and Development
function. Selling, delivery, and administration expenses
increased 20% over the year ago period and increased slightly
as a percent of sales. Included in this quarter were costs
associated with a Company initiative to simplify the way the
Company does business with its trade customers.
Advertising expense was up slightly from the year ago period
and reflects introductory spending during the quarter on Hidden
Valley ready-to-eat dips. The Company expects advertising to
increase for the full year over fiscal 1994 as new product
introductions are expected to continue at high levels and
established brands are expected to 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. Last year's quarter benefited from cash
provided by the sale of discontinued operations which
alleviated the need to borrow.
Earnings per share from continuing operations benefited by
approximately 1 cent per share this period versus a year ago
due to the effect of the stock repurchase program.
7
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<PAGE>
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 Six Months Ended December 31, 1994
----------------------------------------------------
with the Six Months Ended December 31, 1993
-------------------------------------------
Net sales increased 9% primarily due to record shipments of
Clorox liquid bleach, Pine-Sol cleaner, Formula 409, Soft
Scrub cleanser, Kingsford charcoal briquets, and the Brita
water filtration system. The acquisition of the S.O.S soap
pad business acquired on January 31, 1994 also contributed to
the increase in sales. New products contributing to the sales
increase include S.O.S Juniors steel wool soap pads, Formula
409 Professional Strength, Liquid-Plumr Septic Tank Treatment,
and Hidden Valley ready-to-eat dips.
Cost of products sold as a percentage of net sales was 44% in
both periods. Material costs and plant operation expenses
during this period were level with those costs during the same
period a year ago, on a per unit basis. Gross margins are
anticipated to remain at this level for the remainder of
fiscal 1995.
Research and development expense was up slightly from the year
ago period but 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 and Development
function. Selling, delivery, and administration expenses
increased 12% over the year ago period and increased slightly
as a percent of sales. Included in this period were costs
associated with a Company initiative to simplify the way the
Company does business with its trade customers.
Advertising expense was down slightly from the year ago period
principally due to the timing of last year's introductory
spending for new products. The Company expects advertising to
increase for the full year over fiscal 1994 as new product
introductions will continue at high levels, and established
brands are expected to continue to receive strong support.
Other income net, declined $7 million this year, principally
due to non-recurring gains from the sale of idle property and
the Kingsford grill business in the prior year, offset this
year by higher amortization of intangibles due to recent
acquisitions and a decline in earnings from the Company's
investment in Spain primarily due to a continuing sluggish
Spanish economy.
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. Last year's quarter benefited from cash
provided by the sale of discontinued operations which
alleviated the need to borrow.
The effective tax rate for the period was 40.7% versus the
year ago period's effective tax rate of 43.8%. 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 by 1%.
The retroactive effect on earnings from January 1, 1993
and the increase in deferred tax liabilities were both
recognized in the year-ago period.
Income from discontinued operations through December 31,
1993 includes the gain on sale of its frozen foods 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.
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.
8
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<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
---------------------------------------------
Liquidity and Capital Resources
-------------------------------
The Company's financial position and liquidity have relatively
remained strong principally due to cash provided by operations
during the current period. Decreases in receivables and
accounts payable and increases in inventories since June 30,
1994 primarily reflect the normal seasonal pattern of the
charcoal briquet and insecticides businesses. Accrued
liabilities were down from June 30, 1994 due to a greater
emphasis on promotional spending versus advertising during
the second quarter. The Company expects inventories to
increase during the next fiscal quarter for the charcoal
and insecticides businesses in anticipation of the 1995
seasons.
The Company intends to complete the final phase of the stock
repurchase program this fiscal year by repurchasing shares
during the remainder of the fiscal year, subject to market
conditions and business opportunities which may arise.
The Board of Directors approved the stock repurchase program
in 1989. Through December 31, 1994, 4,145,715 shares at a
cost of $197,909,000 were repurchased. During the second
fiscal quarter of 1995, 471,200 shares at a cost of $26,682,000
were repurchased for Treasury shares. The Company sold 600,000
put options on the Company's stock during the second quarter
in support of the stock repurchase program, which were
unexercised and unexpired at December 31, 1994.
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.
Management believes the Company has access to additional
capital through existing lines of credit and from public and
private sources 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 02/13/95 BY /S/ HENRY J. SALVO, JR.
-------- -------------------------
Henry J. Salvo, Jr.
Vice-President - Controller
10
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1994,
AS PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FILED FOR SUCH PERIOD, AND IS
QUALIFIED IN ITE ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 26814
<SECURITIES> 107543
<RECEIVABLES> 179829
<ALLOWANCES> 1521
<INVENTORY> 157418
<CURRENT-ASSETS> 500575
<PP&E> 876738
<DEPRECIATION> 346646
<TOTAL-ASSETS> 1699551
<CURRENT-LIABILITIES> 367476
<BONDS> 215972
<COMMON> 55422
0
0
<OTHER-SE> 832567
<TOTAL-LIABILITY-AND-EQUITY> 1699551
<SALES> 890821
<TOTAL-REVENUES> 890821
<CGS> 394097
<TOTAL-COSTS> 735344
<OTHER-EXPENSES> 1802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10089
<INCOME-PRETAX> 147190
<INCOME-TAX> 59914
<INCOME-CONTINUING> 87276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87276
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 0
</TABLE>
