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
- -
For the quarterly period ended December 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
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, 1995 there were 51,910,594 shares outstanding of
the registrant's common stock (par value - $1.00), the
registrant's only outstanding class of stock.
- ------------------------------------------------------------------
Total pages 10
1
-
<PAGE>
THE CLOROX COMPANY
PART 1. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Condensed Statements of
Consolidated Earnings
Three and Six Months Ended
December 31, 1995 and 1994 3
Condensed Consolidated Balance
Sheets
December 31, 1995 and June 30,
1995 4
Condensed Statements of Consolidated
Cash Flows
Six Months Ended December 31, 1995
and 1994 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
-
<PAGE>
<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)
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
12/31/95 12/31/94 12/31/95 12/31/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 466,789 $ 414,454 $ 985,275 $ 890,821
Costs and Expenses
Cost of products sold 213,171 183,963 444,504 394,097
Selling, delivery and
administration 102,378 91,885 201,034 181,356
Advertising 66,628 68,007 139,110 138,974
Research and development 11,205 10,817 21,407 20,917
Interest expense 7,588 5,163 15,360 10,089
Other expense (income), net 2,196 (2,164) 1,629 (1,802)
------- ------- ------- -------
Total costs and expenses 403,166 357,671 823,044 743,631
------- ------- ------- -------
Earnings before income taxes 63,623 56,783 162,231 147,190
Income Taxes 25,712 22,688 65,541 59,914
------- ------- ------- -------
Net Earnings $ 37,911 $ 34,095 $ 96,690 $ 87,276
========== ========== ========== ==========
Earnings per Common Share $ 0.73 $ 0.64 $ 1.85 $ 1.64
Dividends per Share $ 0.53 $ 0.48 $ 1.06 $ 0.96
Weighted Average Shares
Outstanding 52,089 53,274 52,222 53,341
See Notes to Condensed Consolidated Financial Statements.
3
-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
-------------------------------------
(In thousands)
12/31/95 6/30/95
---------------- ---------------
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and short-term investments $ 105,866 $ 137,330
Accounts receivable, less allowance 220,371 311,868
Inventories 157,524 121,095
Deferred income taxes 11,575 11,495
Prepaid expenses 16,219 18,543
---------------- ---------------
Total current assets 511,555 600,331
Property, Plant and Equipment - Net 533,208 524,972
Brands, Trademarks, Patents and Other Intangibles 599,880 592,792
Investments in Affiliates 94,225 96,385
Other Assets 120,355 92,192
---------------- ---------------
Total $ 1,859,223 $ 1,906,672
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 89,462 $ 122,763
Accrued liabilities 187,754 234,595
Income taxes payable 11,991 6,283
Commercial paper and notes payable 168,526 115,303
Current maturities of long-term debt 395 379
---------------- ---------------
Total current liabilities 458,128 479,323
Long-term Debt 249,487 253,079
Other Obligations 80,987 85,129
Deferred Income Taxes 136,957 145,228
Put Option Obligations 17,259 -
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 109,068 108,347
Retained earnings 1,011,177 971,380
Treasury shares, at cost (228,813) (168,217)
Cumulative translation adjustments and other (30,449) (23,019)
---------------- ---------------
Stockholders' Equity 916,405 943,913
---------------- ---------------
Total $ 1,859,223 $ 1,906,672
================ ===============
See Notes to Condensed Consolidated Financial Statements.
4
-
</TABLE>
<PAGE>
<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
--------------------------------------
12/31/95 12/31/94
------------- --------------
<S> <C> <C>
Operations:
Earnings from continuing operations $ 96,690 $ 87,276
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 55,669 51,445
Deferred income taxes 3,300 5,400
Other 12,532 10,230
Effects of changes in:
Accounts receivable 91,497 71,938
Inventories (33,505) (50,089)
Prepaid expenses 2,243 2,460
Accounts payable (33,385) (19,886)
Accrued liabilities (44,049) (42,100)
Income taxes payable (5,863) (4,078)
------------- --------------
Net cash provided by operations 145,129 112,596
Investing Activities:
Property, plant and equipment (30,658) (28,803)
Disposal of property, plant and equipment 770 550
Businesses purchased (61,665) (24,165)
Other (22,168) (18,083)
------------- --------------
Net cash used for investment (113,721) (70,501)
Financing Activities:
Short-term borrowings 6,031
Long-term debt and other obligations repayments (12,696) (207)
Commercial paper, net 53,223 44,038
Cash dividends (55,537) (51,298)
Treasury stock purchased (50,150) (26,682)
Employee stock plans 2,288 4,458
------------- --------------
Net cash used for financing (62,872) (23,660)
------------- --------------
(Decrease) Increase in Cash and Short-Term Investments (31,464) 18,435
Cash and Short-Term Investments:
Beginning of period 137,330 115,922
------------- --------------
End of period $ 105,866 $ 134,357
============= ==============
See Notes to Condensed Consolidated Financial Statements.
5
-
</TABLE>
<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, 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 (the
Company) have been made. The results of the three and six
months ended December 31, 1995 and 1994 should not be
considered as necessarily indicative of the results for the
entire year.
(2) Inventories at December 31, 1995 and at June 30, 1995 consisted
of (in thousands):
12/31/95 6/30/95
-------- -------
Finished goods and work
in process $ 99,147 $ 71,102
Raw materials and
supplies 58,377 49,993
-------- --------
Total $157,524 $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 December 31, 1995, 697,000
shares had been repurchased at a cost of $50,150,000.
(4) Acquisitions for the six months ended December 31, 1995 of
$61,665,000 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, 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
-
<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, 1995
------------------------------------------------------
with the Three Months Ended December 31, 1994
---------------------------------------------
Earnings per share increased 14 percent to $.73 from $.64, and net
earnings increased 11 percent to $37,911,000 from $34,095,000 a
year ago principally due to a 13 percent increase in net sales
driven by a 13 percent increase in volume. Record shipments were
recorded for our home cleaning business unit which includes
Formula 409, Soft Scrub, Pine-Sol and Clorox toilet bowl cleaners.
This business unit achieved its twelfth consecutive quarterly
increase in shipments. Combat insecticides and Kingsford charcoal
shipments were also up strongly. Brita water filtration systems
shipped record quarterly volumes reflecting strong growth in all
trade channels and the acquisition in January 1995 of the Brita
business in Canada. 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 45.7 and
44.4 percent in the current and year ago quarters, respectively.
Gross margins are anticipated to remain at approximately 55 percent
for the remainder of the fiscal year.
Selling, delivery, and administration expense increased 11 percent
over the year ago period principally due to continued investment
in international infrastructure, and costs implementing our
customer interface project.
Advertising expense decreased 2 percent over the year ago
period principally due to reductions in sales promotion
activities (e.g. couponing). However, media spending has
increased versus a year ago and we expect it to increase for
the full year in line with sales.
Interest expense increased $2,425,000 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
-
<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, 1995
----------------------------------------------------
with the Six Months Ended December 31, 1994
-------------------------------------------
Earnings per share increased 13 percent to $1.85 from $1.64, and
net earnings increased 11 percent to $96,690,000 from
$87,276,000 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 both the first
and second quarters for our home cleaning business unit
which includes Formula 409, Soft Scrub, Pine-Sol and Clorox
toilet bowl cleaners. Combat insecticides and Kingsford
charcoal shipments were both up in volume versus the year ago
period. 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 45.1 and 44.2 percent in the current
and year ago periods respectively. Gross margins are expected
to remain at approximately 55 percent for the remiander of
the fiscal year.
Selling, delivery and administration expense increased 11
percent over the year ago period principally due to continued
investment in international infrastructure, and costs
implementing our customer interface project.
Advertising expense was about even with 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 $5,271,000 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
-
<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 $32,533,000 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. Decreases in accounts receivable
and accounts payable, and increases in inventory balances from
June 30, 1995 reflect normal seasonal variation, principally
due to the charcoal and insecticides businesses. We expect
inventories to increase during the next fiscal quarter to
support the seasonal charcoal and insecticides businesses.
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 six
month period ended December 31, 1995, 697,000 shares at a cost
of $50,150,000 were reacquired, of which 418,400 shares at a
cost of $31,331,000 were reacquired during the second 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 December 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.
9
-
<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
10
--
<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, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 31862
<SECURITIES> 74004
<RECEIVABLES> 221892
<ALLOWANCES> 1521
<INVENTORY> 157524
<CURRENT-ASSETS> 511555
<PP&E> 928248
<DEPRECIATION> 395040
<TOTAL-ASSETS> 1859223
<CURRENT-LIABILITIES> 458128
<BONDS> 249487
0
0
<COMMON> 55422
<OTHER-SE> 860983
<TOTAL-LIABILITY-AND-EQUITY> 1859223
<SALES> 985275
<TOTAL-REVENUES> 985275
<CGS> 444504
<TOTAL-COSTS> 806055
<OTHER-EXPENSES> 1629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15360
<INCOME-PRETAX> 162231
<INCOME-TAX> 65541
<INCOME-CONTINUING> 96690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96690
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 0
</TABLE>
