UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(MARK ONE) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
X OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 1996
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 (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, (including (510)-271-7000
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 March 31, 1996 there were 51,639,671 shares outstanding of
the registrant's common stock (par value - $1.00), the
registrant's only outstanding class of stock.
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Total pages 10
1
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THE CLOROX COMPANY
PART 1. Financial Information Page No.
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Item 1. Financial Statements
Condensed Statements of Consolidated
Earnings
Three and Nine Months Ended
March 31, 1996 and 1995 3
Condensed Consolidated Balance Sheets
March 31, 1996 and June 30, 1995 4
Condensed Statements of Consolidated
Cash Flows
Nine Months Ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 7-9
2
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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 Nine Months Ended
--------------------------------- --------------------------------
3/31/96 3/31/95 3/31/96 3/31/95
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<S> <C> <C> <C> <C>
Net Sales $ 560,091 $ 499,060 $1,545,366 $1,389,881
Costs and Expenses
Cost of products sold 255,570 225,997 700,070 620,094
Selling, delivery and
administration 114,686 100,727 315,720 282,083
Advertising 67,543 66,432 206,653 205,406
Research and development 11,103 10,742 32,510 31,659
Interest expense 10,753 7,213 26,113 17,302
Other expense (income), net 432 (2,284) 2,061 (4,086)
------- --------- --------- ----------
Total costs and expenses 460,087 408,827 1,283,131 1,152,458
Earnings before income taxes 100,004 90,233 262,235 237,423
Income Taxes 40,405 36,199 105,946 96,113
------- --------- --------- ----------
Net Earnings $ 59,599 $ 54,034 $ 156,289 $ 141,310
========== ========== ========= =========
Earnings per Common Share $ 1.15 $ 1.02 $ 3.00 $ 2.65
Dividends per Share $ 0.53 $ 0.48 $ 1.59 $ 1.44
Weighted Average
Shares Outstanding 51,767 53,083 52,070 53,255
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 Consolidated Balance Sheets
---------------------------------------
(In thousands)
3/31/96 6/30/95
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<S> <C> <C>
ASSETS
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Current Assets
Cash and short-term investments $ 88,433 $ 137,330
Accounts receivable, less allowance 320,797 311,868
Inventories 175,613 121,095
Deferred income taxes 11,113 11,495
Prepaid expenses 24,736 18,543
------------- ----------
Total current assets 620,692 600,331
Property, Plant and Equipment - Net 540,441 524,972
Brands, Trademarks, Patents and Other
Intangibles 673,810 592,792
Investments in Affiliates 98,690 96,385
Other Assets 246,936 92,192
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Total $ 2,180,569 $ 1,906,672
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 122,938 $ 122,763
Accrued liabilities 211,399 234,595
Income taxes payable 23,214 6,283
Commercial paper and notes payable 294,044 115,303
Current maturities of long-term debt 269 379
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Total current liabilities 651,864 479,323
Long-term Debt 356,902 253,079
Other Obligations 101,903 85,129
Deferred Income Taxes 133,062 145,228
Put Option Obligations 17,259 -
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 110,951 108,347
Retained earnings 1,041,057 971,380
Treasury shares, at cost (256,362) (168,217)
Cumulative translation adjustments and other (31,489) (23,019)
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Stockholders' Equity 919,579 943,913
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Total $ 2,180,569 $ 1,906,672
============== ============
See Notes to Condensed Consolidated Financial Statements.
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<CAPTION>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Cash Flows
-----------------------------------------------
(In thousands)
Nine Months Ended
----------------------------------
3/31/96 3/31/95
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<S> <C> <C>
Operations:
Earnings from continuing operations $ 156,289 $ 141,310
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 90,677 79,961
Deferred income taxes 4,300 9,000
Other 9,084 8,588
Effects of changes in:
Accounts receivable 23,741 (16,158)
Inventories (43,062) (53,623)
Prepaid expenses (13,885) 1,923
Accounts payable (37,385) (23,613)
Accrued liabilities (23,203) (24,481)
Income taxes payable 25,714 21,969
----------- -----------
Net cash provided by operations 192,270 144,876
Investing Activities:
Property, plant and equipment (53,678) (39,517)
Disposal of property, plant and equipment 2,791 7,865
Businesses purchased (131,025) (54,015)
Investment in other assets (110,045)
Other (58,448) (24,113)
----------- -----------
Net cash used for investment (350,405) (109,780)
Financing Activities:
Short-term borrowings 11,160 5,112
Long-term debt borrowings 110,268 -
Long-term debt and other obligations repayments (15,021) (387)
Commercial paper, net 154,840 36,000
Cash dividends (83,082) (76,762)
Treasury stock purchased (82,932) (29,199)
Employee stock plans 14,005 7,110
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Net cash used for financing 109,238 (58,126)
Increase (Decrease) in Cash and Short-Term Investments (48,897) (23,030)
Cash and Short-Term Investments:
Beginning of period 137,330 115,922
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End of period $ 88,433 $ 92,892
=========== ===========
Non-cash transaction:
Other obligation arising from business purchased $ 12,968 $ 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, 1996 and 1995 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 and nine months ended March 31, 1996
and 1995 should not be considered as necessarily indicative of
the results for the entire year.
(2) Inventories at March 31, 1996 and at June 30, 1995 consisted
of (in thousands):
3/31/96 6/30/95
Finished goods and
work in process $ 112,476 $ 71,102
Raw materials and
supplies 63,137 49,993
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Total $ 175,613 $ 121,095
========= =========
(3) Stock Repurchases
The Company's Board of Directors in July 1995, authorized a
$100,000,000 share repurchase program which is planned for
completion during fiscal year 1996. The shares will be
purchased on the open market. Shares reacquired will be
held as treasury shares and are available for reissuance for
corporate uses. Through March 31, 1996, 1,069,400 shares
had been repurchased at a cost of $82,932,000.
(4) Acquisitions for the nine months ended March 31, 1996 of
$131,025,000 were funded from cash provided from operations
and included the Black Flag line of insecticides, the
acquisition of the remaining minority interest of our
business in Argentina, the Poet San Juan business in
Argentina, the Electroquimicas S.A.C.I., business in Chile,
and other business interests in Mexico. These acquisitions
were accounted for as purchases.
(5) Put Option Obligations
The Company sold 240,000 put options and purchased 240,000
call options during the second quarter of fiscal 1996 with
various strike prices (average of $71.91 per share) that
expire at various times through September 30, 2005. Upon
exercise, each put option obligates the Company to purchase
one share of its common stock at the strike price and each
call option allows the Company to purchase one share of its
common stock at the strike price. The aggregate exercise
price of $17,259,000 has been classified as put option
obligations with a corresponding increase in treasury stock
at December 31, 1995.
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
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Comparison of the Three Months Ended March 31, 1996
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with the Three Months Ended March 31, 1995
------------------------------------------
Earnings per share increased 13 percent to $1.15 from $1.02,
and net earnings increased 10 percent to $59,599,000 from
$54,034,000 a year ago principally due to a 12 percent increase
in net sales driven by a 11 percent increase in volume. Record
shipments were recorded for our home cleaning business unit and
were led by Pine-Sol. This unit achieved its
thirteenth consecutive quarterly increase in shipments. Both
Combat insecticides and Kingsford charcoal experienced reduced
shipments due to the cold weather in the Eastern part of the
country. Brita water filtration systems shipped record quarterly
volumes reflecting strong growth in all trade channels. Our
international business growth during the quarter was
principally due to volume from businesses acquired in fiscal
1995.
Cost of products sold as a percentage of net sales was 45.6 and
45.3 percent in the current and year ago quarters, respectively.
Gross margins are anticipated to remain at approximately 55
percent for the remainder of this fiscal year.
Selling, delivery, and administration expense increased 14
percent over the year ago period principally due to continued
investment in international infrastructure and costs
implementing our customer interface project.
Advertising expense increased 2 percent over the year ago period
principally due to increased media spending offset by reductions
in sales promotion activities (e.g. couponing).
Interest expense increased $3,540,000 over the year ago period
due to higher levels and rates on commercial paper, and
additional indebtedness related to the Brita Canada acquisition
of January 1995.
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 Nine Months Ended March 31, 1996
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with the Nine Months Ended March 31, 1995
-----------------------------------------
Earnings per share increased 13 percent to $3.00 from $2.65,
and net earnings increased 11 percent to $156,289,000 from
$141,310,000 a year ago principally due to a 11 percent
increased in net sales driven by a 10 percent increase in
volume. Record shipments were recorded in the first three
quarters for our home cleaning business unit including
Formula 409, Soft Scrub, Pine-Sol and Clorox toilet bowl
cleaners. Brita water filtration systems shipped record
volumes that reflect continued strong growth in all trade
channels and the acquisition in January 1995 of the Brita
business in Canada. International volume growth was
principally due to volume from businesses acquired in
fiscal 1995.
Cost of products sold was 45.3 and 44.6 percent in the current
and year ago periods respectively. Gross margins are expected
to remain at approximately 55 percent for the remainder of
this fiscal year.
Selling, delivery and administration expense increased 12 percent
over the year ago period principally due to continued investment
in international infrastructure, and costs implementing our
customer interface project.
Advertising expense was up slightly from a year ago. Included in
advertising expense is a shift from sales promotion to media
spending which improves the overall efficiency of the advertising
effort.
Interest expense increased $8,811,000 over a year ago due to higher
levels and rates on commercial paper, and additional indebtedness
related to the Brita Canada acquisition of January 1995.
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 remain strong
due to cash provided by operations which increased
$47,394,000 over the year ago period, principally due to the
liquidation of June 30, 1995 receivables including those with
seasonal dating terms for payment this period. Increases in
accounts receivable and inventory balances from June 30, 1995
reflect normal seasonal variation, principally due to the
charcoal and insecticides businesses. Increases in Brands,
Trademarks, and Other Intangibles reflects the numerous business
acquisitions made during the year. In connection with the
acquisition of certain foreign operations, an investment in
other assets has been made to create cost efficient funding.
Increases in commercial paper borrowings and additional long-
term debt were used to supplement cash provided by operations
to fund acquisitions, the increase in other assets, and the
share repurchase program.
In July 1995, the Board of Directors approved a $100,000,000
share repurchase program which is planned for completion
during this fiscal year, subject to market conditions and
business opportunities which may arise. Through the nine month
period ended March 31, 1996, 1,069,400 shares at a cost of
$82,932,000 were reacquired, of which 372,400 shares at a
cost of $32,782,000 were reacquired during the third quarter.
The Company also sold 240,000 put options on the Company's
stock during the second quarter as a hedge of certain future
stock option exercises. The options sold were unexpired and
unexercised at March 31, 1996.
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
interest rate 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 transaction, and a specific
prohibition on the use of any leveraged transaction.
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 May 14, 1996 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 MARCH 31, 1996, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FOR SUCH PERIOD, AND IS QUALFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 51788
<SECURITIES> 36645
<RECEIVABLES> 322318
<ALLOWANCES> 1521
<INVENTORY> 175613
<CURRENT-ASSETS> 620692
<PP&E> 956426
<DEPRECIATION> 415985
<TOTAL-ASSETS> 2180569
<CURRENT-LIABILITIES> 651864
<BONDS> 356902
0
0
<COMMON> 55422
<OTHER-SE> 864157
<TOTAL-LIABILITY-AND-EQUITY> 2180569
<SALES> 1545366
<TOTAL-REVENUES> 1545366
<CGS> 700074
<TOTAL-COSTS> 1254957
<OTHER-EXPENSES> 2061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26113
<INCOME-PRETAX> 262235
<INCOME-TAX> 105946
<INCOME-CONTINUING> 156289
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 156289
<EPS-PRIMARY> 3.00
<EPS-DILUTED> 0
</TABLE>
