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 March 31, 1995
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 No.)
1221 Broadway - Oakland, California 94612 - 1888
- ---------------------------------------------------------------
(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
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
----- -----
As of March 31, 1995 there were 53,126,523 shares outstanding of
the registrant's common stock (par value - $1.00),
the registrant's only outstanding class of stock.
- ---------------------------------------------------------------
Total pages 11
1
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<PAGE>
THE CLOROX COMPANY
PART 1. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Condensed Statements of Consolidated
Earnings
Three and Nine Months Ended
March 31, 1995 and 1994 3
Condensed Consolidated Balance Sheets
March 31, 1995 and June 30, 1994 4
Condensed Statements of Consolidated
Cash Flows
Nine Months Ended March 31, 1995
and 1994 5
Notes to Condensed Consolidated
Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8-10
2
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<TABLE>
<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)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
3/31/95 3/31/94 3/31/95 3/31/94
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 499,060 $ 481,928 $1,389,881 $1,302,516
Costs and Expenses
Cost of products sold 225,997 211,964 620,094 569,178
Selling, delivery and
administration 100,727 87,640 282,083 249,465
Advertising 66,432 82,363 205,406 226,920
Research and development 10,742 10,945 31,659 31,311
Interest expense 7,213 4,383 17,302 13,051
Other (income) expense, net (2,284) 1,261 (4,086) (7,765)
--------- -------- ---------- ----------
Total costs and expenses 408,827 398,556 1,152,458 1,082,160
--------- -------- ---------- ----------
Earnings from Continuing
Operations before Income
Taxes 90,233 83,372 237,423 220,356
Income Taxes 36,199 33,857 96,113 93,941
--------- -------- ---------- ----------
Earnings from Continuing
Operations 54,034 49,515 141,310 126,415
Earnings from and Gain on
Sale of Discontinued
Operations - - - 32,064
--------- -------- ---------- ----------
Net Earnings $ 54,034 $ 49,515 $ 141,310 $ 158,479
========= ======== ========= ==========
Earnings per Common Share
Continuing Operations $ 1.02 $ 0.93 $ 2.65 $ 2.35
Discontinued Operations - - - 0.59
Total $ 1.02 $ 0.93 $ 2.65 $ 2.94
========= ======== ========= ==========
Dividends per Share $ 0.48 $ 0.45 $ 1.44 $ 1.35
Weighted Average Shares
Outstanding 53,083 53,448 53,255 53,949
See Notes to Condensed Consolidated Financial Statements.
3
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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)
3/31/95 6/30/94
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and short-term investments $ 92,892 $ 115,922
Accounts receivable, less allowance 269,712 249,843
Inventories 162,650 105,948
Deferred income taxes 17,187 18,548
Prepaid expenses 14,434 14,014
------------ -------------
Total current assets 556,875 504,275
Property, Plant and Equipment - Net 519,043 532,600
Brands, Trademarks, Patents and Other Intangibles 564,495 520,042
Investments in Affiliates 84,912 83,368
Other Assets 63,905 57,284
------------ -------------
Total $ 1,789,230 $ 1,697,569
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 90,757 $ 97,728
Accrued liabilities 200,185 227,197
Income taxes payable 30,107 7,599
Commercial paper and notes payable 84,028 42,916
Current maturities of long-term debt 291 392
------------ -------------
Total current liabilities 405,368 375,832
Long-term Debt 215,930 216,088
Other Obligations 88,961 63,187
Deferred Income Taxes 129,539 133,045
Put Option Obligations 10,540 -
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 107,422 106,554
Retained earnings 938,960 876,832
Treasury shares, at cost (133,956) (107,146)
Cumulative translation adjustments and other (28,956) (22,245)
------------ -------------
Stockholders' Equity 938,892 909,417
------------ -------------
Total $ 1,789,230 $ 1,697,569
See Notes to Condensed Consolidated Financial Statements. 4
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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)
(Unaudited)
Nine Months Ended
-------------------------------------
3/31/95 3/31/94
------------- --------------
<S> <C> <C>
Operations:
Earnings from continuing operations $ 141,310 $ 126,415
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization 79,961 70,631
Deferred income taxes 9,000 16,205
Other 8,588 2,820
Effects of changes in:
Accounts receivable (16,158) (48,482)
Inventories (53,623) (36,995)
Prepaid expenses 1,923 (1,362)
Accounts payable (23,613) (16,195)
Accrued liabilities (24,481) (7,834)
Income taxes payable 21,969 921
------------- --------------
Net cash provided by continuing operations 144,876 106,124
Net cash used by discontinued operations - (21,097)
------------- --------------
Net cash provided by operations 144,876 85,027
------------- --------------
Investing Activities:
Property, plant and equipment (39,517) (37,901)
Disposal of property, plant and equipment 7,865 6,790
Businesses sold - 159,293
Businesses purchased (54,015) (139,054)
Other (24,113) (23,732)
------------- --------------
Net cash used for investment (109,780) (34,604)
------------- --------------
Financing Activities:
Short-term borrowings 5,112 -
Long-term borrowings - 17,669
Long-term debt repayments (387) (1,187)
Commercial paper, net 36,000 142,010
Cash dividends (76,762) (73,086)
Treasury stock purchased (29,199) (99,906)
Employee stock plans 7,110 7,243
------------- --------------
Net cash used for financing (58,126) (7,257)
------------- --------------
Net (Decrease) Increase in Cash and Short-Term Investments (23,030) 43,166
Cash and Short-Term Investments:
Beginning of period 115,922 71,164
------------- --------------
End of period $ 92,892 $ 114,330
============= ==============
Non-cash transaction:
Other obligation arising from business purchased $ 17,081 -
------------- --------------
See Notes to Condensed Consolidated Financial Statements. 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
----------------------------------------------------
(1) The summarized financial information for the three and nine
months ended March 31, 1995 and 1994 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 nine months ended March 31,
1995 and 1994 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):
Nine
Months
Ended
---------
3/31/94
---------
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
=========
<TABLE>
<CAPTION
(3) Inventories consisted of (in thousands):
3/31/95 6/30/94
----------- -----------
<S> <C> <C>
Finished goods and work in process $ 106,679 $ 69,280
Raw materials and supplies 55,971 36,668
----------- -----------
Total $ 162,650 $ 105,948
=========== ===========
6
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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
----------------------------------------------------
(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 March 31, 1995, 4,188,415 shares had been
repurchased under this plan to date; of which 513,900
shares ($29,199,000) and 1,883,300 shares ($99,906,000) were
purchased during the nine months ended March 31, 1995 and
1994, respectively.
(5) Put Option Obligations
The Company sold 600,000 put options during the second
quarter of fiscal 1995 with a strike price 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. During the third quarter of fiscal 1995, 400,000
options expired. The aggregate exercise price of the
remaining 200,000 options, $10,540,000, which expired
unexercised on May 4, 1995, has been classified as put
option obligations with a corresponding increase in
treasury stock at March 31, 1995.
(6) Acquisitions
Acquisitions in fiscal 1995, which were funded from cash
and other obligations, include Brita International Holdings,
Inc., a Canadian-based manufacturer and marketer of Brita
water filtration systems, and other foreign investments, all
of which were accounted for as purchases.
On January 31, 1994, the Company acquired and accounted for
as a purchase, the S. O. S products business of Miles, Inc.
for $121,000,000 subject to adjustments as specified in the
purchase agreement. The purchase price was subsequently
adjusted to $116,488,000 by June 30, 1994. At June 30, 1994,
$98,850,000 of the purchase price has been allocated to
brands, trademarks and other intangibles to be amortized over
an estimated life of 40 years. The acquisition was funded
from cash and short term borrowings.
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 Three Months Ended March 31, 1995
---------------------------------------------------
with the Three Months Ended March 31, 1994
------------------------------------------
Net sales increased 4% on a 7% increase in shipments. Products
and businesses contributing to the increase in sales include
the Brita water filtration system, Formula 409, Tilex, S. O. S
steel wool soap pads, Combat insecticides, and international
business expansion, offset by declines in our retail food
business. New product activity included 409 Professional
Strength Cleaner, S.O.S Juniors, Combat ant granules and stakes,
and roach gel. Volume grew at a greater rate than net sales
due to a change in product mix caused by Brita's outstanding
growth in unit volume which has lower average unit revenue
than other brands, and higher levels of trade promotions to
support new product introductions. Trade promotion spending
is reported as a reduction in net sales.
Cost of products sold as a percentage of net sales was 45%
versus 44% in the year ago period. The slight increase reflects
this quarter's shift toward trade promotions for new products,
while on a per unit basis, costs of products sold were about
even with the year ago period. Gross margins are anticipated to
remain at approximately 55% for the remainder of fiscal 1995.
Research and development expense was about even with the year ago
period. New product activity is expected to remain at high
levels with spending to remain about level as a percentage 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 15% over the year ago period principally due
to the investment in International infrastructure necessitated
by growth, and certain costs of implementing our new logistics and
customer interface projects. The strategies of these projects
are to improve our productivity and efficiency internally and
with our customers.
Advertising expense, inclusive of sales promotion costs, was
down 19% versus a year ago principally due to this quarter's
shift in emphasis to trade promotions in support of new product
introductions and a reduction of sales promotion activities to
more efficient levels. Advertising directed to consumers
increased.
Interest expense increased this period versus a year ago
principally due to higher rates for short-term borrowings.
Other income/expense increased versus the year ago period due
to last year's losses recognized on information systems
write-offs.
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.
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
---------------------------------------------
Results of Operations
---------------------
Comparison of the Nine Months Ended March 31, 1995
--------------------------------------------------
with the Nine Months Ended March 31, 1994
-----------------------------------------
Net sales increased 7% on a 10% increase in shipments. Products
contributing to the increase in sales include the Brita water
filtration system, Pine-Sol, Formula 409, Tilex, Combat
insecticides, and continuing growth in our international
businesses through expansion. The acquisition of the S.O.S
soap pad business on January 31, 1994 also contributed to the
increase in sales. Growth in unit volume exceeded that of net
sales due to a shift in product mix caused by the strong growth
of Brita which has a lower than average revenue per unit, and
the third quarter shift in marketing activities toward trade
promotions from advertising expense. This shift toward trade
promotions was due to continued growth in International
businesses, a shift in marketing spending from advertising in
the food business, and the introduction of new products.
Cost of products sold as a percentage of net sales was 45% versus
44% in the year ago period. The slight increase is due to the
third quarter shift toward trade promotions. Per unit costs
were about level with the year ago period. Gross margins are
anticipated to remain at approximately 55% for the remainder
of 1995.
Research and development expense increased slightly over the
year ago period, and declined slightly as a percentage of net
sales. New product activity is expected to remain at high
levels with spending expected to remain level as a percentage
of sales, due to shortened development times and efficiency
improvements. Selling, delivery, and administration expenses
increased 13% over the year ago period primarily due to the
investment in International infrastructure to support growth,
and the costs associated with implementing the new logistics
strategy and our customer interface program.
Advertising expense, inclusive of sales promotion costs,
decreased 10% from the year ago period primarily due to the
third quarter shift toward trade promotions to support new
product introductions. Advertising alone is up on a year to
year basis, while sales promotion activities were reduced to
more efficient levels. We anticipate that for the full year
our total marketing expense, including trade promotions and
advertising, will be about even with fiscal 1994.
Other income declined from the prior year primarily due to
last year's non-recurring gains from sales of idle property
and the Kingsford grill business, offset by a decline in
earnings from the Company's investment in Spain primarily
due to a continuing sluggish Spanish economy, and write-offs
of information systems.
Interest expense increased for the period versus a year ago
primarily due to higher short-term interest rates.
The effective tax rate for the period was 40.5% versus the year
ago period's effective tax rate of 42.6%. The decline was
principally due to $4,000,000 of 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 our 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.
9
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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 remained
strong principally due to cash provided by continuing
operations during the current period. Accounts receivable
have increased from June 30, 1994 due to the growth of the
Brita and International businesses. Inventories have
increased significantly principally due to a change in
Kingsford charcoal's promotional activities which have shifted
sales from the third to the fourth quarter. Accrued expenses
have decreased from June 30, 1994 principally due to the timing
of events and payments. Income taxes payable have increased
versus June 30, 1994 principally due to timing requirements
for interim tax payments.
The Company intends to complete the final phase of the stock
repurchase program this fiscal year by repurchasing approximately
750,000 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 March 31, 1995, 4,188,415 shares at a
cost of $200,426,000 were repurchased. During fiscal 1995 to
date, 513,900 shares at a cost of $29,199,000 were repurchased.
The Company sold 600,000 put options on the Company's stock
during the second quarter in support of the stock repurchase
program, of which 400,000 expired and 200,000, which expired
unexercised on May 4, 1995, were unexercised at March 31, 1995.
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.
10
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<PAGE>
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 BY /s/ HENRY J. SALVO,JR.
------------------ -----------------------
Henry J. Salvo, Jr.
Vice-President -
Controller
11
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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 MARCH 31, 1995, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FILED FOR SUCH PERIOD, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 35938
<SECURITIES> 56954
<RECEIVABLES> 271233
<ALLOWANCES> 1521
<INVENTORY> 162650
<CURRENT-ASSETS> 556875
<PP&E> 866055
<DEPRECIATION> 347012
<TOTAL-ASSETS> 1789230
<CURRENT-LIABILITIES> 405368
<BONDS> 215930
<COMMON> 55422
0
0
<OTHER-SE> 833470
<TOTAL-LIABILITY-AND-EQUITY> 1789230
<SALES> 1389881
<TOTAL-REVENUES> 1389881
<CGS> 620094
<TOTAL-COSTS> 1139242
<OTHER-EXPENSES> 4086
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17302
<INCOME-PRETAX> 237423
<INCOME-TAX> 96113
<INCOME-CONTINUING> 141310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141310
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 0
</TABLE>
