UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transmission period from to
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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, CA 94612-1888
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (510) 271-7000
including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $1 par value New York Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE.
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
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
Aggregate market value of voting stock held by non-affiliates of
the registrant at July 31, 1998: $10,620,440,671.
Number of shares of common stock outstanding at July 31,
1998: 103,684,744.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders
for the Year Ended June 30, 1998 are incorporated by reference
into Parts I, II and IV of this Report. Portions of the
registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on November 18, 1998, which will be
filed with the United States Securities and Exchange Commission
within 120 days after the end of the registrant's fiscal year
ended June 30, 1998, are incorporated by reference into Part III
of this Report.
PART I
ITEM l. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
The Company (the term "Company" as used herein includes the
registrant identified on the facing sheet, The Clorox Company,
and its subsidiaries, unless the context indicates otherwise)
was originally founded in Oakland, California in 1913 as the
Electro-Alkaline Company. It was reincorporated as Clorox
Chemical Corporation in 1922, as Clorox Chemical Co. in 1928,
and as The Clorox Company (an Ohio corporation) in 1957, when
the business was acquired by The Procter & Gamble Company.
The Company was fully divested by The Procter & Gamble Company
in 1969 and, as an independent company, was reincorporated in
1973 in California as The Clorox Company. In 1986, the
Company was reincorporated in Delaware.
Portions of The Clorox Company Annual Report for the Year
Ended June 30, 1998 ("Annual Report") to its stockholders are
incorporated herein by specific reference.
During fiscal year 1998, the Company continued to focus
on expanding its domestic business, through internal
development of new products and line extensions of existing
products, and on the completion of the integration of the
"Armor All" business purchased in fiscal year 1997. The
Company introduced 13 new products in the United States
during fiscal year 1998, including "Clorox 2" bleach-free
laundry booster, "Tilex Fresh Shower" daily shower cleaner
and Lemon Fresh "Formula 409" all-purpose cleaner.
Internationally, the Company continued implementing its
strategy to expand its laundry, household cleaning and
insecticide businesses to markets where these categories
are not yet fully developed, but where it believes high
potential exists. The Company made six international
acquisitions in fiscal year 1998. Three of the acquisitions
were in Brazil, consisting of the "Clorosul" brand of
liquid bleach, the "Super Globo" brand of bleach and
cleaners, and the "X-14" brand of cleaners. Also, household
cleaner businesses were purchased in Southeast Asia and
Chile and an insecticide business was purchased in Australia.
In addition, the Company introduced 28 new products or
line extensions in previously established international
operations.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company's operations are predominantly in one
segment -- non-durable household consumer products.
Such operations include the production and marketing of
non-durable consumer products sold primarily through
grocery and other retail stores. Financial information for
the last three fiscal years attributable to the Company's
operations is set forth in the Consolidated Financial
Statements, on pages 34 through 47 of the Annual Report,
incorporated herein by this reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
PRINCIPAL PRODUCTS. Products currently marketed in the
United States and certain foreign countries are listed on
pages 25 through 29 of the Annual Report, incorporated
herein by this reference.
PRINCIPAL MARKETS - METHODS OF DISTRIBUTION. Most non-durable
household consumer products are nationally advertised and
sold within the United States to grocery stores through a
network of brokers, and to mass merchandisers, warehouse
clubs, military and other retail stores primarily through
a direct sales force. The Company also sells within the
United States institutional versions of specialty food
and non-food products. Outside the United States, the
Company sells consumer products through subsidiaries,
licensees, distributors and joint-venture arrangements
with local partners.
SOURCES AND AVAILABILITY OF RAW MATERIALS. The Company
has obtained ample supplies of all required raw materials
and packaging supplies, which, with a few exceptions,
were available from a wide variety of sources during fiscal
year 1998. Contingency plans have been developed for
single-sourced supplier materials.
PATENTS AND TRADEMARKS. Although some products are
covered by patents, the Company does not believe that
patents, patent licenses or similar arrangements are
material to its business. Most of the Company's brand
name consumer products are protected by registered
trademarks. Its brand names and trademarks are extremely
important to its business and the Company pursues a
course of vigorous action against apparent infringements.
SEASONALITY. The portions of the operations of the
Company that have any significant degree of seasonality
are the marketing of charcoal briquets, insecticides,
and automotive appearance products. Most sales of
these product lines occur in the third and fourth fiscal
quarters. Working capital to carry inventories built
up in the off-season and to extend terms to customers
is generally provided by internally generated funds plus
commercial paper lines of credit.
CUSTOMERS AND ORDER BACKLOG. During fiscal years 1998,
1997 and 1996, revenues from the Company's sales of
its products to Wal-Mart Stores, Inc. and its affiliated
companies were 16%, 15% and 14%, respectively, of the
Company's gross consolidated revenues. Except for this
relationship, the Company is not dependent upon any
other single customer or a few customers. Order backlog
is not a significant factor in the Company's business.
RENEGOTIATION. None of the Company's operations is
subject to renegotiation or termination at the election
of the Federal government.
COMPETITION. The markets for consumer products are
highly competitive and most of the Company's products
compete with other nationally advertised brands within
each category, and with "private label" brands and
"generic" non-branded products of grocery chains and
wholesale cooperatives. Competition is encountered from
similar and alternative products, many of which are
produced and marketed by major national concerns having
financial resources greater than those of the Company.
Depending on the competitive product, the Company's
products compete on price, quality or other benefits
to consumers.
A newly introduced consumer product (whether improved or
newly developed) usually encounters intense competition
requiring substantial expenditures for advertising and
sales promotion. If a product gains consumer acceptance,
it normally requires continuing advertising and
promotional support to maintain relative market position.
RESEARCH AND DEVELOPMENT. The Company's operations
incurred expenses of approximately $56,005,000, $50,489,000
and $45,821,000 in fiscal years 1998, 1997 and 1996, respectively,
on research activities relating to the development of new
products or the maintenance and improvement of existing
products. None of such research activity was customer-
sponsored.
ENVIRONMENTAL MATTERS. Historically, the Company has
not made material capital expenditures for environmental
control facilities or to comply with environmental laws
and regulations. However, in general, the Company does
anticipate spending increasing amounts annually for facility
upgrades and for environmental programs. The amount of
capital expenditures for environmental compliance was not
material in fiscal year 1998 and is not expected to be
material in the next fiscal year.
In addition, the Company is involved in certain other
environmental matters, including:
(i) The Company sold its architectural coatings
business in fiscal year 1990. In connection with the
disposition of those manufacturing facilities, the Company
retained responsibility for certain environmental
obligations. The financial reserve established at the
time of the sale is expected to be adequate to cover the
financial responsibilities for environmental matters that
may arise in the future.
(ii) In April 1992, the Company was named as a
potentially responsible party ("PRP") by the Environmental
Protection Agency pursuant to the Spill Compensation and
Control Act, the Sanitary Landfill Closure and Contingency
Fund Act, and a section of the Solid Waste Management Act,
for a site in New Jersey. Based on the Company's experience
and because the Company's level of involvement is extremely
limited, the Company does not expect that this matter will
represent a material cost to the Company in the future.
(iii) In July 1995, an explosion attributed to
methane caused property damage and personal injury in a
residential area near a site formerly operated by a
predecessor of a subsidiary of the Company in Kingsford,
Michigan. In October 1996, The Company was named
as a PRP and jointly with another PRP is investigating the
area. The Company's investigation of the area is ongoing
and the Company's potential liability is not expected to
be material in the future.
(iv) In June 1995, Armor All Products Corporation,
subsequently acquired by the Company, was named as a PRP
by the Environmental Protection Agency for a landfill site
in Whittier, California. Based on the Company's experience
and because the Company's level of involvement was
extremely limited, the Company does not expect that this
matter will represent a material cost to the Company in
the future.
(v) In July 1997, the Company was served with a
Notice of Violation ("NOV") by the Environmental Protection
Agency pursuant to the Clean Air Act for a site operated by
its subsidiary in Beryl, West Virginia. In March 1998,
the Environmental Protection Agency filed suit based on the
NOV and alleged prior Clean Air Act violations, the majority
of which had been resolved between the Company's subsidiary
and the State of West Virginia in March 1997. Based on
the Company's experience, the Company does not expect that
this matter will represent a material cost to the Company
in the future.
(vi) In September 1997, the Company was served with an
NOV by the Environmental Protection Agency pursuant to the Clean
Air Act for a site in Chicago, Illinois; and in August
1998, the Company was served with an NOV by the Missouri
Department of Natural Resources pursuant to the Missouri
Air Pollution Control Program for a site in Belle, Missouri.
Based on the Company's experience, the Company does not
expect that either of these matters will represent a material
cost to the Company in the future.
Although the potential cost to the Company related to
ongoing environmental matters is uncertain due to such
factors as: the unknown magnitude of possible pollution
and clean-up costs; the complexity and evolving nature of
governmental laws and regulations and their interpretations;
and the timing, varying costs and effectiveness of alternative
clean-up technologies; based on its experience and without
offsetting for expected insurance recoveries or discounting
for present value, the Company does not expect that such costs
individually and in the aggregate will represent a material
cost to the Company or affect its competitive position.
NUMBER OF PERSONS EMPLOYED. At the end of fiscal year 1998,
approximately 6,600 persons were employed by the Company.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS. Except for
historical information, matters discussed in this Form 10-K,
including statements about future growth, are forward-looking
statements based on management's estimates, assumptions and
projections. In addition, from time to time, the Company may
publish forward-looking statements relating to such matters
as anticipated financial performance, business prospects, new
products, research and development activities, plans for
international expansion, acquisitions, and similar matters.
The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements. In order to
comply with the terms of the safe harbor, the Company notes
that a variety of factors could cause the Company's actual
results and experience to differ materially from the
anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and
uncertainties that may affect operations, performance, product
development, and results of the Company's business include,
without limitation, those discussed elsewhere in this Form 10-K,
marketplace conditions and events, and the following:
Fluctuations in Quarterly Operating Results and Stock Price.
Although the Company's recent historical operating results
have improved when compared with the same quarter in the
previous fiscal year, there can be no assurance that such
quarter-to-quarter comparisons will continue to improve, or
that if any improvement is shown, the degree of improvement
will meet investors' expectations. In addition, sales volume
growth, whether due to acquisitions or to internal growth,
can place burdens on the Company's management resources and
financial controls which, in turn, can have a negative
impact on operating results. The Company's quarterly
operating results will be influenced by a host of factors,
which include the following: the seasonality of its brands;
the extent of competition; the degree of market acceptance
of new products and line extensions; the mix of products
sold in a given quarter; changes in pricing policies by the
Company and by its competitors; acquisition costs and
restructuring and other charges associated with acquisitions;
the ability of the Company to develop, introduce and market
successful new products and line extensions; the ability of
the Company to control its internal costs and costs of its
raw materials and packaging materials; the Company's success
in expanding its international operations; changes in the
Company's strategy; personnel changes; and general economic
conditions. To a certain extent, the Company bases its
expense levels in anticipation of future revenues. If
revenue levels come in below such expectations, operating
results are likely to be adversely affected. Because of
all of these factors, the Company believes that quarter-to-quarter
comparisons of its results of operations should not be relied
upon as indications of future performance.
Future announcements concerning the Company or its competitors,
quarterly variations in operating results, the introduction
of new products and line extensions or changes in product
pricing policies by the Company or its competitors, changes
in earning estimates by analysts, or changes in accounting
policies, among other factors, could cause the market price
of the Company's common stock to fluctuate substantially and
have an adverse effect on the price of the Company's common
stock. In addition, stock markets have experienced price
and volume volatility and such volatility in the future could
have an adverse impact on the Company's market price.
International Operations. The Company believes that its
international sales, which were 18% of net sales in fiscal
year 1998, are likely to comprise an increasing percentage
of its total sales. As a result, the Company will be
increasingly subject to the risks associated with foreign
operations including economic or political instability in
its overseas markets, shipping delays and fluctuations in
foreign currency exchange rates that may make its products
more expensive in its foreign markets, all of which could
have a significant impact on the Company's ability to sell
its products on a timely and competitive basis in foreign
markets and may have a materially adverse effect on the
Company's results of operations or financial position. The
Company seeks to limit foreign currency exchange risks
through the use of foreign currency forward contracts when
practical, but there can be no assurance that this strategy
will be successful. In addition, the Company's international
operations are subject to the risk of new and different legal
and regulatory requirements in local jurisdictions, potential
difficulties in staffing and managing local operations,
credit risk of local customers and distributors, and potentially
adverse tax consequences.
Importance of New Products and Line Extensions. In most
categories in which the Company competes, there are frequent
introductions of new products and line extensions.
Accordingly, an important factor in the Company's future
performance will be its ability to identify emerging consumer
and technological trends and to maintain and improve the
competitiveness of its products. However, there can be no
assurance that the Company will successfully achieve those
goals. Continued product development and marketing efforts
are subject to all the risks inherent in the development of
new products and line extensions, including development
delays, the failure of new products and line extensions to
achieve anticipated levels of market acceptance, as well as
the cost of failed product introductions.
Integration of Acquisitions. One of the Company's strategies
is to increase its revenues and the markets it serves through
the acquisition of other businesses in the United States and
internationally. There can be no assurance that the Company
will be able to identify, acquire, or profitably manage
additional companies or operations or successfully integrate
recent or future acquisitions into its operations. In
addition, there can be no assurance that companies or
operations acquired will be profitable at the time of their
acquisition or will achieve sales levels and profitability
that justify the investment made.
Environmental Matters. The Company is subject to various
environmental laws and regulations in the jurisdictions in
which it operates, including those relating to air emissions,
water discharges, the handling and disposal of solid and
hazardous wastes, and the remediation of contamination
associated with the use and disposal of hazardous substances.
The Company has incurred, and will continue to incur, capital
and operating expenditures and other costs in complying with
such laws and regulations in the United States and
internationally. The Company is currently involved in or
has potential liability with respect to the remediation of
past contamination in the operation of certain of its present
and formerly owned and leased facilities. In addition,
certain of the Company's present and former facilities have
been or had been in operation for many years, and over such
time, some of these facilities may have used substances or
generated and disposed of wastes that are or may be considered
hazardous. It is possible that such sites, as well as
disposal sites owned by third parties to which the Company
has sent waste, may in the future be identified and become
the subject of remediation. Accordingly, although the
Company believes that it is currently in substantial
compliance with applicable environmental requirements, it
is possible the Company could become subject to additional
environmental liabilities in the future that could result
in a material adverse effect on the Company's results of
operations or financial condition.
Intellectual Property. The Company relies on trademark,
trade secret, patent and copyright law to protect its
intellectual property. There can be no assurance that
such intellectual property rights can be successfully
asserted in the future or will not be invalidated,
circumvented or challenged. In addition, laws of certain
foreign countries in which the Company's products are or
may be sold do not protect the Company's intellectual
property rights to the same extent as the laws of the
United States. The failure of the Company to protect
its proprietary information and any successful intellectual
property challenges or infringement proceedings against
the Company could have a material adverse effect on the
Company's business, operating results and financial condition.
Government Regulations. The manufacture, packaging,
storage, distribution and labeling of the Company's
products and the Company's business operations generally
are all subject to extensive federal, state, and foreign
laws and regulations. For example, in the United States,
many of the Company's products are subject to regulation by
the Environmental Protection Agency, the Food and Drug
Administration, and the Consumer Product Safety Commission.
Most states have agencies that regulate in parallel to these
federal agencies. The failure to comply with applicable laws
and regulations in these or other areas could subject the
Company to civil remedies, including fines, injunctions,
recalls or seizures, as well as potential criminal sanctions,
any of which could have a material adverse effect on the
Company. Loss of or failure to obtain necessary permits and
registrations could delay or prevent the Company from
introducing new products, building new facilities or
acquiring new businesses and could adversely effect operating
results.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES.
Net sales, pretax earnings and identifiable assets related
to foreign operations (excluding Puerto Rico and exports)
were 17%, 7% and 29%, respectively, for fiscal year 1998.
See Note 16 of Notes to Consolidated Financial Statements,
on page 46 of the Annual Report, incorporated herein by
this reference.
ITEM 2. PROPERTIES
PRODUCTION FACILITIES. The Company operates production and
major warehouse facilities for its operations in 17
locations throughout the United States, and in 29 locations
internationally. Most of the space is owned. Some space,
mainly for warehousing, is leased. The Company also leases
six domestic regional distribution centers for the Company's
products which are operated by service providers. None of
the Company's facilities were either closed or sold during
fiscal year 1998 except for the sale of an idle site
previously operated by a subsidiary in Elk Grove, California.
The Company considers its manufacturing and warehousing
facilities to be adequate to support its business.
OFFICES AND TECHNICAL CENTER. The Company's general office
building is owned and is located in Oakland, California.
The Company's Technical Center and Data Center are owned and
are located in Pleasanton, California. Leased sales and
other office facilities are located at a number of manufacturing
and other locations.
ENCUMBRANCES. None of the Company's owned facilities are
encumbered to secure debt owed by the Company, except that
the manufacturing facility in Belle, Missouri, secures
industrial revenue bond indebtedness incurred in relation
to the construction or upgrade thereof.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and current positions of the executive
officers of the Company are set forth below:
Name (Age) and Year
Elected to Current Position Title and Current Position(s)
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G. C. Sullivan (58) 1992 Chairman of the Board, Chief Executive
Officer and President
P. D. Bewley (52) 1998 Senior Vice President - General Counsel
and Secretary
G. E. Johnston (51) 1996 Group Vice President
P. N. Louras, Jr. (48) 1992 Group Vice President
K. M. Rose (50) 1997 Group Vice President - Finance and Chief
Financial Officer
C. T. Alcantara (48) 1998 Vice President - Worldwide Business
Development
A. W. Biebl (49) 1992 Vice President - Product Supply
R. H. Bolte (58) 1995 Vice President - Corporate Marketing
Services
J. M. Brady (44) 1993 Vice President - Human Resources
R. T. Conti (43) 1996 Vice President - Kingsford Products
C. M. Couric (52) 1995 Vice President - Brita Products
S. D. House (37) 1997 Vice President - Treasurer
R. C. Klaus (53) 1995 Vice President - Corporate Administration
L. S. Peiros (43) 1998 Vice President - Household Products
H. J. Salvo, Jr. (50) 1991 Vice President - Controller
G. R. Savage (42) 1997 Vice President - Food Products
D. G. Simpson (44) 1997 Vice President - Strategy and Planning
K. R. Tandowsky (41) 1998 Vice President - Information Services
F. A. Tataseo (44) l994 Vice President - Sales
S. A. Weiss (42) 1998 Vice President - Asia Middle East
There is no family relationship between any of the above named
persons, or between any of such persons and any of the directors
of the Company or any persons nominated for election as a
director of the Company. See Item 10 of Part III of this Form 10-K.
G. C. Sullivan, P. N. Louras, Jr., A. W. Biebl, J. M. Brady
and H .J. Salvo have been employed by the Company for at least
the past five years in the same respective positions as listed
above. The other executive officers have held the respective
positions described below for at least the past five years:
P. D. Bewley joined the Company in February 1998 as Senior Vice
President-General Counsel and Secretary. From 1994 through
January 1998, he was employed by Nova Care, Inc., as Senior Vice
President-General Counsel and Secretary, and prior to that was
employed by Johnson & Johnson as Associate General Counsel.
G. E. Johnston joined the Company in July 1981 as Regional Sales
Manager-Special Markets. Prior to his election as Group Vice
President effective July 1, 1996, he was Vice President-Kingsford
Products from November 17, 1993 through June 1996, Vice President-
Corporate Development from June 1992 through November 16, 1993,
Director of Corporate Development from 1991 through May 1992, and
Director of Business Development from September 1989 through 1991.
K. M. Rose joined the Company in 1978 as a Financial Analyst.
Prior to her election as Group Vice President-Finance and
Chief Financial Officer effective December 1, 1997, she was
Vice President-Treasurer from July 1992 through November 1997
and Controller, Household Products from July 1988 through
July 1992.
C. T. Alcantara joined the Company in 1992 as Area General
Manager-Latin America. Prior to his election as Vice President-
Worldwide Business Development effective June 1, 1998, he was
Vice President-Latin America from July 1, 1996 though May 1998.
He left the Company briefly from December 8, 1995 through
March 31, 1996.
R. H. Bolte joined the Company in April 1982. Prior to his
election as Vice President-Corporate Marketing Services in
July 1995, he was Director of Advertising and Promotion from
June 1993 through June 1995 and Director of Media Services
from May 1982 through May 1993.
R. T. Conti joined the Company in 1982 as Associate Region
Sales Manager, Household Products. Prior to his election as
Vice President-Kingsford Products effective July 1, 1996, he
was Vice President-International from June 1992 through June
1996, Area General Manager-International for Europe, Middle
East and Africa from 1990 through May 1992 and Manager of
Sales Planning for Household Products from 1987 through 1990.
C. M. Couric joined the Company in 1973 as a brand assistant
in the Household Products marketing organization. Prior to
his election in July 1995 as Vice President-Brita Products,
he had served as Director, Brita Operations from 1988 through
June 1995 and as a Manager of Business Development from 1984
through 1988.
S. D. House joined the Company in 1983 as a staff accountant,
and was elected Vice President-Treasurer effective December 1,
1997. Prior to that, he had served as Director of Finance for
the international business and also had held various positions
in auditing, financial analysis and forecasting.
R. C. Klaus joined the Company in 1977 as Regional Sales Manager
(Baltimore) for the Company's household products business.
Prior to his election as Vice President-Corporate Administration
in November 1995, he was Vice President-Clorox Professional
Products from March 1994 through October 1995, and Vice President-
Food Service Products from May 1990 through March 1994.
L. S. Peiros joined the Company in 1982 and was elected Vice
President-Household Products effective June 1, 1998. Prior
to that, he had served as Vice President-Food Products from
July 1995 until election to his current position, and from
September 1993 until July 1995 he served as Vice President-
Corporate Marketing Services. From June 1992 through August
1993 he was Director of Marketing-Household Products and from
August 1991 through June 1992 he was Director of Marketing-
Kingsford Products. Prior to that he had served in various
marketing positions in both Household Products and Kingsford
Products.
G. R. Savage joined the Company in 1983 as an Associate
Marketing Manager, and was elected Vice President-Food
Products effective December 1, 1997. Prior to that, he
had served as Director of Marketing for the household products
business from 1993.
D. G. Simpson joined the Company in 1979 in the brand
management function, and was elected Vice President-Strategy
and Planning effective December 1, 1997. Prior to that, he
had served as head of corporate strategic planning.
K. R. Tandowsky joined the Company in 1981 as a staff accountant
and was elected Vice President-Information Services effective
February 7, 1998. Prior to that, he had served as Director
of Finance for the Kingsford products business from 1994 and
Director of Corporate Finance, Treasury from 1992.
F. A. Tataseo joined the Company in October 1994 as Vice
President-Sales. Previously, he was employed by The
Pillsbury Company (Division of Grand Metropolitan Inc.) as
Vice President, Sales (March - September 1994), and as Vice
President, Direct Sales Force (June 1993 - February 1994);
and by The Procter & Gamble Company as Sales Merchandising
Division Manager, Soap Sector (May 1992 - May 1993); as
Division Sales Manager, Laundry Products Category (November
1990 - April 1993); and as Division Sales Manager, Fabric
Care Category (July 1988 - October 1990).
S. A. Weiss joined the Company in 1994 as an area general
manager for the Pacific Rim business, and held the position
of Area General Manager Asia-Middle East before being elected
Vice President-Asia Middle East effective June 1, 1998.
Prior to that, he had been employed by Bristol Myers Squibb
in international and domestic marketing assignments.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION.
The principal markets for Clorox Common Stock are the
New York Stock Exchange and the Pacific Exchange. The
high and low sales prices quoted for New York Stock
Exchange-Composite Transactions Report for each quarterly
period during the past two fiscal years appears under
"Quarterly Data," on page 48 of the Annual Report,
incorporated herein by this reference, and on July 31,
1998, the closing price for the Company's stock was $102.75
per share.
(b) HOLDERS.
The approximate number of record holders of Clorox Common
Stock as of July 31, 1998 was 13,752 based on information
provided by the Company's transfer agent.
(c) DIVIDENDS.
The amount of quarterly dividends paid with respect to
Clorox Common Stock during the past two fiscal years appears
under "Quarterly Data," on page 48 of the Annual Report,
incorporated herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
This information appears under "Five-Year Financial Summary,"
on page 49 of the Annual Report, incorporated herein by this
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
This information appears under "Management's Discussion and
Analysis,"on pages 31 through 34 of the Annual Report,
incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
This information appears under "Market-Sensitive Derivatives
and Financial Instruments" in the "Management's Discussion
and Analysis," on pages 32-33 of the Annual Report, incorporated
herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
These statements and data appear on pages 34 through 48 of
the Annual Report, incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM l0. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding each nominee for election as a director,
including those who are executive officers of the Company,
appears under "Nominees for Election as Directors" of the
definitive Proxy Statement of the Company, which will be filed
with the United States Securities and Exchange Commission
within 120 days after the end of the registrant's fiscal year
ended June 30, 1998 ("Proxy Statement"), incorporated herein
by this reference.
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K,
information regarding the executive officers of the registrant
is reported in Part I of this Report.
The information required by Item 405 of Regulation S-K appears
under "Section 16(a) Beneficial Ownership Reporting Compliance"
of the Proxy Statement, incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K appears
under "Organization of the Board of Directors," "Summary
Compensation Table," "Options and Stock Appreciation Rights,"
"Comparative Stock Performance," "Compensation Interlocks and
Insider Participation," and "Pension Benefits" of the Proxy
Statement, all incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
Information concerning the only entity or person known to the
Company to be the beneficial owner of more than 5% of its
Common Stock appears under "Beneficial Ownership of Voting
Securities" of the Proxy Statement, incorporated herein by
this reference.
(b) SECURITY OWNERSHIP OF MANAGEMENT.
Information concerning the beneficial ownership of the
Company's Common Stock by each nominee for election as a
director and by all directors and executive officers as a
group appears under "Beneficial Ownership of Voting Securities"
of the Proxy Statement, incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning transactions with directors,
nominees for election as directors, management and the
beneficial owner of more than 5% of the Company's Common
Stock appears under "Certain Relationships and Transactions"
of the Proxy Statement, incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) Financial Statements: Page
Financial Statements and Independent Auditors' Copy
Report included in the Annual Report, incorporated Included
herein by this reference:
Statements of Consolidated Earnings for the years
ended June 30, 1998, l997 and l996
Consolidated Balance Sheets, June 30, 1998 and l997
Statements of Consolidated Stockholders' Equity for
the years ended June 30, 1998, l997 and l996
Statements of Consolidated Cash Flows for the years
ended June 30, 1998, l997 and l996
Notes to Consolidated Financial Statements
Independent Auditors' Report
Quarterly Data
(2) Financial Statement Schedules have been
omitted because of the absence of conditions
under which they are required, or because the
information is shown elsewhere in this
Form 10-K.
(3) Executive Compensation Plans and Arrangements:
Long-Term Compensation Program dated October 21,
1987, amended 11/17/93 (Exhibit 10(ii) to the
Annual Report on Form 10-K for the year ended
June 30, 1994)
Officer Employment Agreement (form) (Exhibit
10(xi) to the Annual Report on Form 10-K for
the year ended June 30, 1996)
Officer Change of Control Employment Agreement
(form) (Exhibit 10(xii) to the Annual Report on
Form 10-K for the year ended June 30, 1996)
Supplemental Executive Retirement Plan dated
July 17, 1991 (Exhibit 10(x) to the Annual
Report on Form 10-K for the year ended June 30,
1993)
Non-Qualified Deferred Compensation Plan (Exhibit
10(xiii) to the Annual Report on Form 10-K for
the year ended June 30, 1996)
The Clorox Company 1995 Performance Unit Plan
(Exhibit 10(xiv) to the Annual Report on Form
10-K for the year ended June 30, 1996)
The Clorox Company 1996 Stock Incentive Plan
(Exhibit 10(xv) to the Annual Report on Form
10-K for the year ended June 30, 1996)
The Clorox Company 1996 Executive Incentive
Compensation Plan (Exhibit 10(xvi) to the
Annual Report on Form 10-K for the year ended
June 30, 1996)
The Clorox Company Value Sharing Plan, formerly
The Clorox Company Tax Reduction Investment Plan
(Exhibit 4.3 to Amendment No. 2 dated July 12, 1996
to Registration Statement on Form S-8 No. 33-41131
dated June 10, 1991)
The Clorox Company Value Sharing Plan for Puerto
Rico (Exhibit 4 to Registration Statement on
Form S-8 No. 333-16969 dated November 27, 1996)
The Clorox Company Independent Directors' Stock
Based Compensation Plan (Exhibit 10 (xix) to the
Annual Report on Form 10-K for the year ended June
30, 1997)
(b) Current Reports on Form 8-K during the fourth quarter
of fiscal year 1998:
None.
(c) Exhibits:
Index to Exhibits follows.
(d) (Not applicable)
Index to Exhibits
(3) (i) Restated Certificate of Incorporation (filed as
Exhibit 4.1 to Registration Statement on Form S-8
No. 333-44675 dated January 22, 1998, incorporated herein
by this reference)
(ii) Bylaws (restated) of the Company (filed as Exhibit 3(ii)
to this Annual Report on Form 10-K for the year ended
June 30, 1998)
(4) (i) Form of Indenture between the Company and Wachovia
Bank & Trust Company, N.A. as Trustee, regarding
$200,000,000 in 8.8% Notes due 2001 (filed as
Exhibit 4 to Registration Statement on Form S-3
No. 33-4083 dated May 24, 1991,
incorporated herein by this reference)
(ii) Prospectus Supplement (to Prospectus dated July
9, 1991) giving terms of the Indenture referenced
in Exhibit 4 (i) above (filed on July 18, 1991,
supplementing the Registration Statement on Form S-3
No. 33-4083 dated May 24, 1991, and incorporated
herein by this reference)
(10) Material contracts:
(i) Long-Term Compensation Program dated October 21, 1987
(Amended 11/17/93) (filed as Exhibit 10(ii) to the
Annual Report on Form 10-K for the year ended June 30,
1994, incorporated herein by this reference)
(ii) Agreement between Henkel KGaA and the Company dated
June l8, l981 (filed as Exhibit (l0)(v) to Form 8
dated August 11, l983, incorporated herein by this
reference)
(iii) Agreement between Henkel GmbH (now Henkel KGaA) and
the Company dated July 3l, l974 (filed as Exhibit
(l0)(vi) to Form 8 dated August 11, l983, incorporated
herein by this reference)
(iv) Agreement between Henkel KGaA and the Company dated
November l6, 1981 (filed as Exhibit (l0)(vii) to
Form 8 dated August 11, l983, incorporated herein
by this reference)
(v) Agreement between Henkel KGaA and the Company dated
July 16, 1986 (filed as Exhibit B to Current Report
on Form 8-K for March 19, 1987, incorporated herein
by this reference)
(vi) Agreement between Henkel KGaA and the Company dated
March 18, 1987 (filed as Exhibit A to Current Report
on Form 8-K for March 19, 1987, incorporated herein
by this reference)
(vii) Agreement between Henkel KGaA and the Company dated
January 16, 1992 (filed as Exhibit 10(xi) to the
Annual Report on Form 10-K for the year ended June 30,
1992, incorporated herein by this reference)
(viii) Supplemental Executive Retirement Plan dated July 17,
1991 (filed as Exhibit 10(x) to the Annual Report on
Form 10-K for the year ended June 30, 1993, incorporated
herein by this reference)
(ix) 1993 Directors' Stock Option Plan dated November 17,
1993 (filed as Exhibit 10(xi) to the Annual
Report on Form 10-K for the year ended
June 30, 1994, incorporated herein by this
reference)
(x) Officer Employment Agreement (form) (filed as
Exhibit 10(xi) to the Annual Report on Form 10-K for
the year ended June 30, 1996, incorporated herein by
this reference)
(xi) Officer Change of Control Employment Agreement (form)
(filed as Exhibit 10(xii) to the Annual Report on Form
10-K for the year ended June 30, 1996, incorporated
herein by this reference)
(xii) Non-Qualified Deferred Compensation Plan (filed as
Exhibit 10(xiii) to the Annual Report on Form 10-K for
the year ended June 30, 1996, incorporated herein
by this reference)
(xiii) The Clorox Company 1995 Performance Unit Plan
(filed as Exhibit 10(xiv) to the Annual Report on Form
10-K for the year ended June 30, 1996, incorporated
herein by this reference)
(xiv) The Clorox Company 1996 Stock Incentive Plan (filed
as Exhibit 10(xv) to the Annual Report on Form 10-K
for the year ended June 30, 1996, incorporated herein
by this reference)
(xv) The Clorox Company 1996 Executive Incentive
Compensation Plan (filed as Exhibit 10(xvi) to the
Annual Report on Form 10-K for the year ended June 30,
1996, incorporated herein by this reference)
(xvi) The Clorox Company Value Sharing Plan, formerly The
Clorox Company Tax Reduction Investment Plan (Exhibit
4.3 to Amendment No. 2 dated July 12, 1996 to
Registration Statement on Form S-8 No. 33-41131
dated June 10, 1991, incorporated herein by this
reference)
(xvii) The Clorox Company Value Sharing Plan for Puerto
Rico (Exhibit 4 to Registration Statement on Form
S-8 No. 333-16969 dated November 27, 1996,
incorporated herein by this reference)
(xviii) The Clorox Company Independent Directors'
Stock-Based Compensation Plan (filed as
Exhibit 10 (xix) to the Annual Report on Form
10-K for the year ended June 30, 1997, incorporated
herein by this reference)
(13) Excerpts of 1998 Annual Report to Stockholders
(21) Subsidiaries of the Company
(23) Independent Auditors' Consent
(24) Power of Attorney (see pages 16-17)
(27) Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the
Securities Exchange Act of l934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE CLOROX COMPANY
Date: September 16, 1998 By: /s/G. C. Sullivan
G. C. Sullivan, Chairman of
the Board and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints
Peter D. Bewley, Karen M. Rose, and Henry J. Salvo, Jr.,
jointly and severally, attorneys-in-fact and agents,
with full power of substitution, for her or him in any
and all capacities to sign any and all amendments to
this Form 10-K, and to file the same and all exhibits
thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said
attorneys-in-fact and agents, and his or their substitute
or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange
Act of l934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CATPION>
Signature Title Date
<S> <C> <C>
/s/G.C. Sullivan Chairman of the Board & Director September 16, 1998
G. C. Sullivan (Chief Executive Officer)
/s/D. Boggan, Jr. Director September 16, 1998
D. Boggan, Jr.
/s/J. W. Collins Director September 16, 1998
J. W. Collins
/s/U. Fairchild Director September 16, 1998
U. Fairchild
/s/T. M. Friedman Director September 16, 1998
T. M. Friedman
/s/J. Manch Director September 16, 1998
J. Manchot
/s/D. O. Morton Director September 16, 1998
D. O. Morton
- ----------------- Director September 16, 1998
/s/K. Morwind
/s/E. L. Scarff Director September 16, 1998
E. L. Scarff
/s/L. R. Scott Director September 16, 1998
L. R. Scott
/s/J. A. Vohs Director September 16, 1998
J. A. Vohs
/s/C. A. Wolfe Director September 16, 1998
C. A. Wolfe
/s/K. M. Rose Group Vice President - Finance September 16, 1998
K. M. Rose and Chief Financial Officer
(Principal Financial Officer)
/s/H. J. Salvo, Jr. Vice President-Controller September 16, 1998
H. J. Salvo, Jr. (Principal Accounting Officer)
</TABLE>
EXHIBIT 13
EXCERPT FROM 1999 ANNUAL REPORT TO STOCKHOLDERS
List of Principal Products
From pages 25 through 29 of the Annual Report:
laundry additives
Clorox Liquid bleach
Clorox 2 Dry and liquid color-safe bleaches
Stain Out Soil and stain removerhome cleaning
Clorox Toilet bowl cleanser, automatic toilet bowl cleaner
Clorox Clean-Up Dilutable household cleaner, spray cleaner
Formula 409 All-purpose spray cleaner, glass and surface cleaner,
carpet cleaner
Lestoil Heavy-duty cleaner
Liquid-Plumr Drain opener, buildup remover, septic treatment
Pine-Sol Dilutable cleaner, all-purpose spray cleaner
Soft Scrub Mild abrasive liquid cleanser, gel
S.O.S Steel wool soap pads, scrubber sponges
Tilex Instant mildew remover, soap scum remover
Tilex Fresh Shower Daily shower cleaner
Tuffy Mesh scrubber
automotive appearance
Armor All Protectants, cleaners, tire products, waxes and washes
Rain Dance Wax and washes
Rally Wax
No.7 Cleaning compound, washes
charcoal
BBQ Bag Single-use, lightable bag of charcoal briquets
Kingsford Charcoal briquets, lighter fluid, grill cleaner
Match Light Instant-lighting charcoal briquets
insecticides
Black Flag Ant and roach, flying insect and other aerosols and
Roach Motel
Combat Roach bait stations and gel, ant bait stations, stakes
and granules
cat litter
Fresh Step Cat litter
Fresh Step Scoop Scoopable cat litter
retail food
Hidden Valley Bottled dressing, dry dressing mix, dry dip mix
Hidden Valley Salad Crispins Seasoned mini-croutons
K.C. Masterpiece Barbecue sauce
Kitchen Bouquet Browning and seasoning sauce and gravy aid
water filtration systems
Brita Water _ltration systems
professional products
Clorox Germicidal bleach
Clorox Toilet bowl cleanser
Clorox Quat sanitizer and disinfectant
Clorox Clean-Up Dilutable cleaner
Pine-Sol Cleaner
Formula 409 Cleaners
S.O.S Pot & pan detergent, steel wool soap pads
Tilex Instant mildew remover, soap scum remover
Liquid-Plumr Drain opener
Hidden Valley Pourable, dry and portion-pack dressings
K.C. Masterpiece Barbecue sauce
Kitchen Bouquet Browning and seasoning sauce and gravy aid
Combat Insecticides
Maxforce Professional insecticides
Management's Discussion and Analysis, Financial Statements
Pages 31 through 48 of the Annual Report:
Management's Discussion and Analysis
the clorox company 1998 Annual report
results of worldwide operations
The Clorox Company (the Company) in 1998 achieved record unit
volumes,sales and earnings per share for the third year in a row.
Shipments for the Company's products grew by 9% over 1997 and were
the primary driver of the 8% increase in net customer sales. Net
sales were up due to volume increases in the Company's base domestic
and international businesses, the inclusion of the Armor All
business for a full year vs. six months in 1997 and the
acquisition of other businesses in 1998 and 1997. Record volumes
were achieved by Clorox 2 color-safe bleaches, Pine-Sol
cleaners, Formula 409 carpet cleaner, Tilex cleaners, Hidden
Valley bottled dressings, Match Light instant-lighting charcoal
briquets, Fresh Step Scoop scoopable cat litter and Brita water
filtration systems. In 1998, the Company also introduced 41 new
products, including Clorox 2 bleach-free laundry booster,
Tilex Fresh Shower daily shower cleaner and Lemon Fresh Formula 409
all-purpose cleaner. The growth in 1997 volume and net customer sales was
principally due to the Armor All and other acquisition activities, and
record volumes for Clorox liquid bleach, Kingsford and Match Light brands
of charcoal briquets, Fresh Step and Fresh Step Scoop cat litters, K.C.
Masterpiece barbecue sauce and Brita water filtration systems.
Cost of products sold as a percentage of sales improved in 1998 to 43.5%
from 44.4%, following a one percentage point improvement in 1997 over
1996. This trend reflects continued improvements in Latin American product
costs due to efficiencies from consolidation of production activities and
economies of scale achieved from acquisitions. The improvement in 1998 also
reflects efficiencies resulting from cost-savings initiatives implemented
in current and prior years throughout the supply chain, slight price
declines in several of the Company's raw materials, and further integration
of the Company's Armor All business.
Advertising expense increased 4% in 1998, reflecting increased spending in
media and sales promotion support. In 1997, advertising expense increased
22% over 1996 due to higher levels of media and sales promotion spending to
support the introduction of new products, to ensure that the Company's
established brand equities remain strong, and, in particular, to solidify
Brita's brand equity and category leadership.
Other income (expense), net was $3,546,000 income, $5,260,000 income and
$6,365,000 expense in 1998, 1997 and 1996, respectively. The decrease in
1998 was principally due to higher amortization of intangibles and lower
interest income somewhat offset by higher amounts of equity earnings of
affiliates and royalty income. The increase in income in 1997 compared to
1996 was principally due to a higher level of sales of non-operating
property in 1997, non-recurring 1996 costs for manufacturing strategy
implementation, a higher level of investment earnings in 1997 from
tax-advantaged investments, offset by higher levels of amortization
expense from intangible assets acquired in both 1996 and 1997.
Interest expense increased by $14,079,000, $17,335,000 and $13,168,000 in
1998, 1997 and 1996, respectively, due to borrowings to fund acquisitions
and the Company's share-repurchase programs.
The effective tax rate was 36.9% in 1998, and 40% in 1997 and 1996. The
lower tax rate for 1998 was primarily attributable to international
investment activities and international operations. The Company anticipates
that the annual effective tax rate for the next few fiscal years is likely
to approximate the rate in 1998.
Diluted earnings per share increased $.45, $.25 and $.24 over 1997, 1996
and 1995, respectively, representing a 14% compound annual growth rate
since 1995. This per-share growth is primarily a function of volume growth
described above, improved gross margins, the reduction in the effective
tax rate, and the effect of share repurchase programs.
foreign operations
Foreign net sales (excluding exports and Puerto Rico) were $459,003,000, an
increase of 18% from 1997, and now represent 17% of the Company's net
sales. Growth in foreign net sales is due to growth in the base businesses
and additional acquisitions made in 1998 in Brazil, Chile, Asia and
Australia. Volume expansion was achieved in all international markets
except in the Republic of Korea. The Company continued to realize
improvements in its foreign gross margins in 1998 due to cost-saving
programs and consolidation efforts. These improvements were offset by
increases in goodwill amortization and other costs associated with
acquisitions. The Company expects continued improvement in operating profit
margins in the future as it grows this part of the business, begins to
realize economies of scale from strategic acquisitions, and the benefits
of newly initiated brand strategies are realized.
Foreign net sales in 1997 increased 29% over 1996 and represented 15% of
the Company's revenue. This increase was due to growth in the base
business and acquisitions in Argentina, Chile and Colombia.
The local currency is the functional currency in most of the Company's
businesses abroad. Therefore, the effects of changes in foreign exchange
rates are reflected on the balance sheet as cumulative deferred
translation adjustments. Unrealized losses which total $42,160,000,
$14,324,000 and $11,545,000 are included in the consolidated stockholders'
equity for the years ended June 30, 1998, 1997 and 1996, respectively.
financial position and liquidity
Cash provided by operations was $313,000,000 in 1998 and $362,000,000 in
1997. The decrease was due principally to increased working capital
requirements. Working capital changes from 1997 included increases in
accounts receivable and inventories and a decrease in accrued liabilities.
The increase in accounts receivable is principally due to an increase in
June 1998 sales compared to June 1997, and international, Armor All and
Brita businesses, which have longer collection terms, becoming a larger
part of the Company's portfolio. Inventory levels in 1998 are up from 1997
due to international acquisitions, the Company's assumption of ownership
of Armor All finished goods inventory, and new product launches and other
promotional activity in the Company's domestic businesses. Accrued
liabilities decreased from 1997 mainly due to the payment of Armor All
transition costs, lower levels of accrued advertising at year end, and a
payment associated with an additional investment in Mexico.
Commercial paper borrowings increased over a year ago to fund increases
in accounts receivable and inventories discussed above. In September 1997,
the Company refinanced $192,000,000 of commercial paper by entering into a
sterling denominated financing arrangement. The Company plans to refinance
this debt in 1999 along with redeemable subsidiary preference shares
issued in 1997. Accordingly, these amounts have been classified as other
short-term debt in 1998.
During 1998, the Company invested $148,374,000 in new international
businesses. These acquisitions included the Clorosul bleach business, the
Super Globo bleach and cleaner business and the X-14 cleaner business in
Brazil, the Arela cleaning business in Chile, two smaller acquisitions in
Southeast Asia and Australia, and an additional investment in Mexico.
During 1997, we invested $469,701,000 in new businesses including Armor
All, purchased for $360,144,000. Other businesses acquired were in Latin
America and included the Shell Group's non-core line of household products
in Chile, the Pinoluz brand of pine cleaner in Argentina, and the Limpido
brand of liquid bleach and an increase in equity ownership in Tecnoclor
S.A. in Colombia.
During 1996, the Company invested $165,231,000 in new businesses. Foreign
acquisitions included the Poett San Juan home products business in
Argentina, and the Electroquimicas Unidos S.A.C.I. bleach business in
Chile. Domestic acquisitions included the Black Flag line of insecticides
and the Lestoil brand of home cleaning products.
Dividends paid in 1998 were $132,382,000 or $1.28 per share. On July 14,
1998, the Company announced a 12.5% increase in the quarterly dividend rate
to $.36 from $.32 per share for a new annual rate of $1.44. This is the
22nd consecutive annual dividend increase. The Company made a 2-for-1
stock split on September 2, 1997 to stockholders of record as of July 28,
1997. All share and per-share information in the accompanying
Consolidated Financial Statements reflects the stock split.
In 1998, 1997 and 1996, cash flow from operations exceeded cash needs for
capital expenditures, dividends and scheduled debt service. The Company
believes that cash flow from operations, supplemented by financing expected
to be available from external sources, will provide sufficient liquidity
for the foreseeable future. At June 30, 1998, the Company had a
$350,000,000 credit agreement expiring April 30, 2002, and two additional
credit agreements for $100,000,000 each that expire in December 1998 and
January 1999, respectively. These agreements are with a syndication of
banks and can be used as a supplement to internal cash flows. There were no
borrowings under these agreements at June 30, 1998. Depending upon
conditions in the financial markets and other factors, the Company may
consider the issuance of debt or other securities to finance acquisitions,
refinance debt, or for other general business purposes.
In September 1996, the Board of Directors authorized a share-repurchase
program to offset the dilutive effect of employee stock-option exercises.
Based on its historical experience, the Company currently expects to issue
between 1,200,000 and 1,500,000 shares of stock each year pursuant to its
stock-based compensation plans, although such amounts may vary. The Company
intends to repurchase approximately the same number of shares issued over
time, subject to market conditions and business opportunities that may
arise. During 1998, 846,800 shares at a cost of $70,136,000 were
reacquired. As part of the repurchase program during 1998, the Company
entered into two transactions for the future delivery of 400,000 shares of
Clorox stock on October 27, 2000, and 400,000 shares of Clorox stock on
October 23, 2002. The aggregate redemption cost is $68,041,000, including
a premium of $13,193,000 on the transaction. During 1997, the Company
repurchased 927,000 shares at a cost of $54,063,000. During 1996, the
Company completed a stock-repurchase program authorized in July 1995 by its
Board of Directors, under which 2,533,812 shares were repurchased at a
cost of $98,112,000. Reacquired shares are held as treasury shares and are
available for reissuance for corporate use.
market-sensitive derivatives and financial instruments
The Company is exposed to the impact of interest rates and foreign currency
fluctuations and changes in the market value of its investments. Conditions
under which derivatives can be used are set forth in a Company Policy
Statement. They 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 as to the use of any leveraged
instrument. All derivative contracts are entered into for non-trading
purposes with several major financial institutions, thereby decreasing the
risk of credit loss. In the normal course of business the Company employs
established policies and procedures to manage its exposure to changes in
interest rates and fluctuation in the value of foreign currency using a
variety of financial instruments.
The Company's objective in managing its exposure to interest rate changes
and foreign currency fluctuations is to limit the impact of interest rate
changes on earnings and cash flow and, in the case of interest rate
changes, to lower its overall borrowings costs. To achieve its objective,
the Company primarily uses interest rate swaps and forward and futures
contracts to manage its net exposure to interest rate changes related to
its portfolio of borrowings, foreign currency and commodity risks.
For 1998 and 1997, the Company's exposure to market risk has been estimated
using sensitivity analysis, which is defined as the change in the fair
value of a derivative or financial instrument assuming a hypothetical 10%
adverse change in market rates or prices. The Company believes that the
sensitivity analysis is a better portrayal of its value at risk and is more
readily understood than the tabular presentation used in 1997, and, as a
result, has changed to the sensitivity analysis presented. The results of
the sensitivity analyses are summarized below. Actual changes in interest
rates or market prices may differ from the hypothetical changes.
The Company's major market risk exposure is changing interest rates,
primarily in the United States. Interest rate risk is managed through the
use of a combination of fixed and floating rate debt. Interest rate swaps
may be used to adjust interest rate risk exposures when appropriate, based
on market conditions. These instruments have the effect of converting fixed
rate instruments to floating, or floating to fixed. Changes in interest
rates would result in gains or losses in the market value of our fixed-rate
debt due to differences between current market rates and the stated rates
for these instruments. Based on the results of the sensitivity analysis, at
June 30, 1998 and June 30, 1997, the Company's estimated market exposure
for interest rates was $5,100,000 and $12,700,000, respectively.
The Company seeks to minimize the impact of foreign currency fluctuations
by hedging transactional exposures with foreign currency forward contracts.
In addition, the Company has hedged certain net investments with similar
instruments. The Company's foreign currency transactional exposures exist
primarily with the Canadian dollar and Japanese yen. Cash flow exposure
related to the Company's hedge of a foreign investment is in the Argentine
peso. At June 30, 1998 and June 30, 1997, there were no material foreign
currency transaction or cash exposures that were not hedged. The
foreign-exchange sensitivity analysis includes forward contracts and other
financial instruments affected by foreign-exchange risk. Based on the
hypothetical change in foreign currency exchange rates, the net unrealized
losses at June 30, 1998 and June 30, 1997 would be $2,663,000 and
$2,325,000, respectively.
Commodity futures and swap contracts are used to manage cost exposures on
certain raw material purchases resulting in relatively stable costs for
these commodities. The Company does not consider commodity price risk to be
material to consolidated financial position, results of operations or cash
flows.
year 2000
Many financial information and operational systems in use today may not be
able to interpret dates after December 31, 1999 because such systems allow
only two digits to indicate the year in a date. As a result, such systems
are unable to distinguish January 1, 2000 from January 1, 1900, which could
have adverse consequences on the operations of an entity and the integrity
of information processing. This potential problem is referred to as the
"Year 2000" or "Y2K" issue.
In 1997, the Company established a corporate- wide program to address the
Y2K issue. The effort encompasses software, hardware, electronic data
interchange, networks, PCs, manufacturing and other facilities, and
supplier and customer readiness. The target date to resolve the most
critical system problems is by March 30, 1999, except for our
manufacturing plant floor and facilities, for which the target date is
September 30, 1999. The Company is currently on schedule and is over 40%
complete. If necessary modifications and conversions by the Company are not
made on a timely basis, or if key third parties are not Y2K-ready, Y2K
problems could have a material adverse effect on the Company's operations.
There is some uncertainty as to whether the Company will be able to solve
all potential Y2K issues, and therefore the Company has begun its
contingency planning. The Company has identified the critical operations
that will require written contingency plans and expects to complete its
contingency planning by June 30, 1999.
Costs related to the Y2K issue are expensed as incurred and are funded
through operating cash flows. Through 1998, the Company has expensed
incremental remediation costs of $15,450,000, with remaining incremental
remediation costs estimated at $15,427,000. In addition, through 1998, the
Company has expensed accelerated strategic upgrade costs of $8,014,000,
with anticipated remaining accelerated strategic upgrade costs of
$8,204,000. Time and cost estimates are based on currently available
information and could be affected by the ability to correct all relevant
computer codes and equipment, and the Y2K readiness of the Company's
business partners, among other factors.
environmental matters
The Company is committed to an ongoing program of comprehensive, long-term
environmental assessment of its facilities. This program is implemented by
the Company's health, safety and environment department, with guidance from
legal counsel. During each facility assessment, compliance with applicable
environmental laws and regulations is evaluated and the facility is
reviewed in an effort to identify possible future environmental
liabilities. Although not material, at June 30, 1998 and June 30, 1997,
expected costs have been accrued for the probable future costs of
environmental liabilities without offset for expected insurance recoveries
or discounting for present value.
cautionary statement
Except for historical information, matters discussed above, including
statements about future growth, are forward-looking statements based on
management's estimates, assumptions and projections. Important factors that
could cause results to differ materially from management's expectations are
described in "Forward-Looking Statements and Risk Factors" in the Company's
SEC Form 10-K for the year ending June 30, 1998. Those factors include, but
are not limited to, marketplace conditions and events, the Company's costs,
risks inherent in international operations, the success of new products,
integration of acquisitions, and environmental, regulatory and intellectual
property matters.
Statements of Consolidated Earnings
the clorox company 1998 Annual report
<TABLE>
<CAPTION>
Years ended June 30 (in thousands, except per-share amounts) 1998 1997 1996
<S> <C> <C> <C>
net sales $2,741,270 $2,532,651 $2,217,843
- ---------------------------------------------------------------------------------------------------------
costs and expenses
Cost of products sold 1,192,534 1,123,459 1,007,200
Selling, delivery and administration 592,557 543,804 464,767
Advertising 362,093 348,521 285,015
Research and development 56,005 50,489 45,821
Interest expense 69,702 55,623 38,288
Other (income) expense, net (3,546) (5,260) 6,365
- ---------------------------------------------------------------------------------------------------------
Total costs and expenses 2,269,345 2,116,636 1,847,456
- ---------------------------------------------------------------------------------------------------------
earnings before income taxes 471,925 416,015 370,387
income taxes 173,965 166,573 148,295
- ---------------------------------------------------------------------------------------------------------
net earnings $ 297,960 $ 249,442 $ 222,092
=========================================================================================================
earnings per common share
Basic $ 2.88 $ 2.41 $ 2.14
Diluted 2.82 2.37 2.12
=========================================================================================================
weighted average shares outstanding
Basic 103,507 103,292 103,869
Diluted 105,635 105,100 105,006
=========================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
Consolidated Balance Sheets
the clorox company 1998 Annual report
<TABLE>
<CAPTION>
Years ended June 30 (in thousands, except share amounts) 1998 1997
<S> <C> <C>
assets
current assets
Cash and short-term investments $ 89,681 $ 101,046
Accounts receivable, less allowance 428,510 356,996
Inventories 211,913 170,340
Prepaid expenses and other 45,354 22,534
Deferred income taxes 23,242 22,581
- ---------------------------------------------------------------------------------------------
Total Current Assets 798,700 673,497
- ---------------------------------------------------------------------------------------------
property, plant and equipment-net 596,293 570,645
- ---------------------------------------------------------------------------------------------
brands, trademarks, patents and other intangibles-net 1,240,532 1,186,951
- ---------------------------------------------------------------------------------------------
investments in affiliates 84,449 93,004
- ---------------------------------------------------------------------------------------------
other assets 310,018 253,855
- ---------------------------------------------------------------------------------------------
total $3,029,992 $2,777,952
=============================================================================================
liabilities and stockholders' equity
current liabilities
Accounts payable $ 154,348 $ 143,360
Accrued liabilities 285,225 358,785
Short-term debt 768,616 369,973
Income taxes payable 15,370 17,049
Current maturities of long-term debt 1,517 3,551
- ---------------------------------------------------------------------------------------------
Total Current Liabilities 1,225,076 892,718
- ---------------------------------------------------------------------------------------------
long-term debt 316,260 565,926
- ---------------------------------------------------------------------------------------------
other obligations 203,000 112,539
- ---------------------------------------------------------------------------------------------
deferred income taxes 200,421 170,723
- ---------------------------------------------------------------------------------------------
stockholders' equity
Common stock-authorized, 375,000,000 shares, $1 par value 110,844 110,844
Additional paid-in capital 84,124 66,803
Retained earnings 1,382,943 1,207,524
Treasury shares, at cost (391,864) (289,075)
Cumulative translation adjustments and other (100,812) (60,050)
- ---------------------------------------------------------------------------------------------
Stockholders' Equity 1,085,235 1,036,046
- ---------------------------------------------------------------------------------------------
total $3,029,992 $2,777,952
=============================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
Statements of Consolidated Stockholders' Equity
the clorox company 1998 Annual report
<TABLE>
<CAPTION>
cumulative
(In thousands, except share common stock additional treasury shares translation
and per-share amounts ---------------------- paid-in retained ------------------ adjustments
shares amount capital earnings shares amount and other
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
balance, june 30, 1995 110,844,594 $110,844 $52,925 $ 971,380 (6,040,630) $(168,217) $ (23,019)
Net earnings 222,092
Dividends ($1.06 per share) (110,447)
Employee stock plans and other 3,435 (4,236) 725,500 14,936 (9,949)
Treasury stock acquired (2,533,812) (98,112)
Translation adjustments (11,545)
- -----------------------------------------------------------------------------------------------------------------------
balance, june 30, 1996 110,844,594 110,844 56,360 1,078,789 (7,848,942) (251,393) (44,513)
Net earnings 249,442
Dividends ($1.16 per share) (119,963)
Employee stock plans and other 10,443 (744) 1,095,886 16,381 (1,213)
Treasury stock acquired (927,000) (54,063)
Translation adjustments (14,324)
- -----------------------------------------------------------------------------------------------------------------------
balance, june 30, 1997 110,844,594 110,844 66,803 1,207,524 (7,680,056) (289,075) (60,050)
Net earnings 297,960
Dividends ($1.28 per share) (132,382)
Employee stock plans and other 17,321 9,841 1,313,398 35,388 1,398
Treasury stock acquired (846,800) (70,136)
Share repurchase obligations (800,000) (68,041)
Translation adjustments (42,160)
- -----------------------------------------------------------------------------------------------------------------------
balance, june 30, 1998 110,844,594 $110,844 $84,124 $1,382,943 (8,013,458) $(391,864) $(100,812)
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Consolidated Cash Flows
the clorox company 1998 Annual report
Years ended June 30 (in thousands) 1998 1997 1996
<S> <C> <C> <C>
operations
Net earnings $297,960 $249,442 $222,092
Adjustments to reconcile to net cash provided by
operations:
Depreciation and amortization 137,559 126,386 116,534
Deferred income taxes 32,223 2,120 2,020
Other 2,699 (3,864) 16,057
Effects of changes in:
Accounts receivable (69,896) (1,706) 27,447
Inventories (38,944) (24,299) (5,132)
Prepaid expenses 2,321 (4,458) 7,653
Accounts payable 8,285 (26,024) 17,890
Accrued liabilities (52,940) 37,866 2,561
Income taxes payable (6,600) 6,625 (457)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operations 312,667 362,088 406,665
- ----------------------------------------------------------------------------------------------------------
investing activities
Property, plant and equipment (98,979) (95,188) (84,804)
Businesses purchased (148,374) (469,701) (165,231)
Disposal of property, plant and equipment 10,461 6,116 2,671
Other (73,318) (13,871) (47,312)
- ----------------------------------------------------------------------------------------------------------
Net cash used for investment (310,210) (572,644) (294,676)
- ----------------------------------------------------------------------------------------------------------
financing activities
Long-term borrowings 3,279 199,077 110,000
Long-term debt and other obligations repayments (65,390) (22,678) (14,732)
Forward purchase financing agreements - - (110,045)
Short-term borrowings 201,450 193,926 50,763
Cash dividends (132,382) (119,963) (110,447)
Treasury stock acquired (83,329) (54,063) (98,112)
Employee stock plans and other 62,550 24,475 14,082
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing (13,822) 220,774 (158,491)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments (11,365) 10,218 (46,502)
Cash and short-term investments
Beginning of year 101,046 90,828 137,330
End of year $ 89,681 $101,046 $ 90,828
- ----------------------------------------------------------------------------------------------------------
supplemental disclosure
Cash paid for
Interest (net of amounts capitalized) $ 71,893 $ 51,813 $ 36,576
Income taxes 96,504 120,223 116,799
Non-cash transactions
Liabilities assumed with businesses purchased $ 28,115 $107,227 $ 75,690
Share repurchase and other obligations 79,179 - -
===========================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
Notes to Consolidated Financial Statements
the clorox company 1998 Annual report
1 significant accounting policies
nature of operations and principles of consolidation
The Company is principally engaged in the production and marketing of
non-durable consumer products through grocery stores, mass merchandisers
and other retail outlets. The consolidated financial statements include the
statements of the Company and its majority-owned and controlled
subsidiaries. Minority investments in foreign entities are accounted for
under the equity method, the most significant of which is an investment of
a 20% equity ownership in Henkel Iberica, S.A. of Spain. All significant
intercompany transactions and accounts are eliminated in consolidation.
stock-split
On July 15, 1997, the Company's Board of Directors authorized a 2-for-1
split of its common stock effective September 2, 1997, in the form of a
stock dividend for stockholders of record at the close of business on July
28, 1997. All share and per share amounts in the accompanying consolidated
financial statements have been restated to give effect to the stock split.
accounting estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts and related
disclosures. Actual results could differ from estimates and assumptions
made.
short-term investments
Short-term investments consist of money market and other high quality
instruments with an initial maturity of three months or less and are stated
at cost, which approximates market value.
inventories
Inventories are stated at the lower of cost or market. Cost of the majority
of inventories is determined on the last-in, first-out (LIFO) method. Cost
of the remainder of the inventories is determined generally on the
first-in, first-out (FIFO) method.
property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated by the straight-line method over the estimated useful lives
ranging from 20-30 years for improvements, 20-40 years for buildings and
3-10 years for machinery and equipment. Carrying values are reviewed
periodically for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
brands, trademarks, patents and other intangibles
Brands, trademarks, patents and other intangible assets arising from
transactions after October 30, 1970 are amortized over their estimated
useful lives not to exceed 40 years. Carrying values are reviewed
periodically and a determination of impairment is made based on estimates
of future cash flows, undiscounted and without interest charges.
forward purchase financing agreements
In connection with the financing of an acquisition in Argentina in 1996 and
the acquisition of the Brita water systems business in Canada in 1995, the
Company entered into forward purchase agreements with third parties whereby
the Company has purchased preferred stock of certain of its foreign
subsidiaries for future delivery from third parties who have the right to
acquire this preferred stock according to the terms of certain subscription
agreements. The forward purchases of the preferred stock are recorded as
other assets and are being accreted to other income on a straight-line
basis over the terms of the agreements. If the third parties fail to
acquire the subsidiary preferred stock at maturity of the subscription
agreements, the accreted amounts of the forward purchase agreement will be
due to the Company.
income taxes
The Company uses the asset and liability method to account for income taxes.
foreign currency translation
Local currencies are the functional currencies for most of the Company's
foreign operations. Assets and liabilities are translated using the
exchange rates in effect at the balance sheet date. Income and expenses are
translated at the average exchange rates during the year. Translation gains
and losses and the effects of exchange rate changes on transactions
designated as hedges of net foreign investments are reported in
stockholders' equity. Transaction and foreign currency translation gains
and losses where the U.S. dollar is the functional currency are included in
other income.
earnings per common share
Basic earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding each period. Diluted
earnings per share is computed by dividing net earnings by the diluted
weighted average number of common shares outstanding during the period.
Diluted earnings per share reflects the potential dilution from common
shares issuable through stock options and restricted stock grants.
major customer
Sales to the Company's largest customer, Wal-Mart Stores, Inc. and its
affiliates, were 16%, 15% and 14% of consolidated net sales in 1998, 1997
and 1996, respectively.
derivative financial instruments
The use of financial instruments principally swap, forward and option
contracts, is limited to purposes other than trading and includes
management of interest rate movements, foreign currency exposure and
commodity exposure. They are treated as off-balance sheet items. Interest
rate swap agreements are accounted for using the settlement basis of
accounting. As such, no gains or losses are recorded for movements in the
swaps' values during the term of the agreements. Foreign currency forward
contracts are used to hedge certain short-term and long-term debt
instruments. Gains or losses on hedges of existing assets are included in
the carrying amounts and are recognized in earnings when those assets are
liquidated. Gains or losses arising from hedges of firm commitments and
anticipated transactions are deferred and recognized in earnings or as an
adjustment of carrying amounts when the hedged transaction occurs.
stock-based compensation
The Company continues to account for stock-based compensation using the
intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Compensation
cost for stock options, if any, is measured as the excess of the quoted
market price of the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock. Restricted stock awards are
recorded as compensation cost over the requisite vesting periods based on
the market value on the date of grant. Compensation cost for shares issued
under performance share plans is recorded based upon the current market
value of the Company's stock at the end of each period.
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," established accounting and disclosure
requirements using a fair-value-based method of accounting for stock-based
employee compensation plans. The Company has elected to remain on its
current method of accounting as described above, and has adopted the
disclosure requirements of SFAS No. 123.
impact of new accounting standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement is effective for fiscal years beginning after June
15, 1999 and is not to be applied retroactively to financial statements for
prior periods. If adopted at June 30, 1998, the application of the standard
would not have a material effect on the Company's consolidated financial
position or results of operations.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which standardizes to
the extent practicable the disclosure requirements for pensions and other
postretirement benefits. In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income", which requires that an entity report, by
major components and as a single total, the change in its net assets during
the period from nonowner sources; and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which establishes
annual and interim reporting standards for an entity's operating segments
and related disclosures about its products, services, geographic areas and
major customers. Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash flows, and
any effect will be limited to the form and content of its disclosures.
These statements are effective for the Company's fiscal year 1999.
2 acquisitions
International acquisitions in 1998 totaled $148,374,000 and included the
Clorosul bleach business, the Super Globo bleach and cleaner business and
the X-14 cleaner business in Brazil, the Arela bleach and cleaning business
in Chile, two smaller acquisitions in Southeast Asia and Australia, and an
additional investment in Mexico. Approximately $143,400,000 of the
acquisition cost has been allocated to brands, trademarks and other
intangibles to be amortized over estimated lives not to exceed 40 years.
Purchases included, at fair value, assets of $34,164,000 and the
assumption of liabilities of $29,190,000.
Acquisitions in 1997 totaled $469,701,000 and included the acquisition of
Armor All Products Corporation for $360,144,000 on December 31, 1996. Armor
All markets the leading line of automotive appearance products. Net assets
acquired, at fair values, included working capital assets of $51,183,000
and liabilities of $67,485,000, and property plant and equipment of
$7,659,000. Intangible assets of $368,787,000, principally brands and
trademarks, are being amortized over 40 years. Other businesses purchased
for $109,557,000 included the Shell Group's non-core line of household
products in Chile, the Pinoluz brand of pine cleaner in Argentina, and the
Limpido brand of liquid bleach and an increase in ownership in Tecnoclor
S.A., both in Colombia. Net assets acquired at fair value, included net
working capital of $9,427,000; property, plant and equipment of $2,425,000;
and brands, trademarks and intangibles of $97,705,000, which will be
amortized over periods of up to 40 years.
Acquisitions in 1996 totaled $165,231,000 and included Black Flag
insecticides, Lestoil cleaner, the Poett San Juan home cleaning products
business in Argentina, and the Electroquimicas Unidas S.A.C.I. business in
Chile. Approximately $143,019,000 of the acquisition cost has been
allocated to brands, trademarks and other intangibles to be amortized over
estimated lives not to exceed 40 years. Purchases included, at fair value,
assets of $97,902,000, and the assumption of liabilities of $75,690,000.
Operating results of acquired businesses are included in consolidated net
earnings from the date of acquisition. All acquisitions were accounted for
as purchases and were funded from cash provided by operations, long-term
debt, or commercial paper.
3 inventories
The major classes are (in thousands):
1998 1997
Finished goods and work in process $130,185 $109,189
Raw materials and supplies 81,728 61,151
-------- --------
Total $211,913 $170,340
Had the cost of inventories been determined using the FIFO method,
inventories would have been higher by approximately $13,093,000 at June
30, 1998 and $14,614,000 at June 30, 1997. The LIFO method was used to
value approximately 65% of the inventory at June 30, 1998 and 60% at June
30, 1997.
4 property, plant and equipment
The major classes are (in thousands):
1998 1997
Land and improvements $ 75,226 $ 68,772
Buildings 309,997 292,846
Machinery and equipment 675,761 647,158
Construction in progress 61,683 36,631
---------- ----------
Total 1,122,667 1,045,407
Less accumulated depreciation 526,374 474,762
---------- ----------
Net $ 596,293 $ 570,645
========== ==========
Depreciation expense was $78,231,000 in 1998, $72,498,000 in 1997 and
$72,619,000 in 1996.
5 brands, trademarks, patents and other intangibles-net
The major classes are (in thousands):
1998 1997
Brands and trademarks $1,337,379 $1,204,479
Patents and other intangibles 138,680 173,437
---------- ----------
Total 1,476,059 1,377,916
Less accumulated amortization 235,527 190,965
---------- ----------
Net $1,240,532 $1,186,951
At June 30, 1998 and 1997, brands and trademarks totaling $1,140,120,000
and $1,073,574,000 are amortized over 40 years, and $24,835,000 and
$30,472,000 are amortized over 30 years and $130,716,000 and $58,725,000
are amortized over 20 years, respectively. Amounts totaling $41,708,000
relating to transactions prior to October 31, 1970 are not amortized.
Patents and other intangibles are amortized over lives ranging from 5 to 20
years.
6 other assets
The major components are (in thousands):
1998 1997
Forward purchase financing agreements $167,314 $156,919
Other 142,704 96,936
-------- --------
Total $310,018 $253,855
Forward purchase financing agreements represent the cost to acquire
preferred stock of certain foreign subsidiaries at various dates in the
future. The difference between original cost and the third- party
subscription price of the preferred stock is being accreted on a
straight-line basis over five years. The amount of accretion included in
other income was $10,395,000 in 1998 and 1997 and $5,341,000 in 1996.
7 accrued liabilities
Advertising costs included in accrued liabilities at June 30, 1998 and 1997
were $135,485,000 and $167,847,000, respectively.
8 debt
Short-term debt includes (in thousands):
1998 1997
Commercial paper $379,205 $225,167
Other 389,411 144,806
-------- --------
Total $768,616 $369,973
In 1998 and 1997, the Company entered into agreements for the issuance of
redeemable subsidiary preference shares to private investors. These shares
have no voting rights and have a preference as to distributions.
Simultaneous with the issuance of the shares, the Company and the private
investors entered into a series of agreements that effectively enforce
redemption of the shares and provide the private investors with no risk of
ownership. The agreements are sterling-denominated and the Company has
entered into swap agreements that cover both foreign currency and interest
rate exposures. Dividend payments on the preference shares are classified
as interest expense. The Company plans to redeem the preference shares
issued in 1997 and 1998. The carrying value of these shares at June 30,
1998 was $195,540,000 and $192,000,000, respectively. The Company plans to
redeem the preference shares in 1999; accordingly, such amounts have been
classified as other short-term debt in 1998. Other short-term debt in 1997
includes $136,000,000 of subsidiary preference shares that were refinanced
with commercial paper in July 1997.
Long-term debt includes (in thousands):
1998 1997
8.8% Non-callable notes due August 2001 $200,000 $200,000
Redeemable subsidiary preference shares due
April 2002 with a preferred dividend
rate of 5.3% - 195,540
Bank loans due through March 2001, at rates
ranging from 6.5% to 7.9% 101,553 154,730
Other 14,707 15,656
-------- --------
Total $316,260 $565,926
At June 30, 1998 and June 30, 1997, the Company had interest rate swaps
that converted $100,000,000 of the 8.8% notes from a fixed to a floating
rate resulting in effective borrowing rates of 8.3% in 1998 and 8.5% in
1997 and 1996.
The weighted average interest rate for short-term debt outstanding was
5.1%, 5.5% and $5.4% for 1998, 1997 and 1996, respectively. At June 30,
1998 and 1997, net of foreign currency swap agreements, the fair value of
long-term debt was $332,200,000 and $585,500,000, respectively, and the
fair value of short-term debt approximates the carrying value for those
years.
The Company has a $350,000,000 credit agreement expiring on April 30,
2002, and two additional credit agreements for $100,000,000 each, which
expire in December 1998 and January 1999, respectively. There are no
borrowings under any of these agreements and they are available for general
corporate purposes and for the support of additional commercial paper
issuance. The credit agreements require maintenance of minimum net worth of
$704,000,000.
Long-term debt repayments are scheduled to be $30,675,000, $70,878,000,
$200,107,000, $1,600,000 and $13,000,000 in 2000, 2001, 2002, 2003 and
2004, respectively.
9 financial instruments
The Company utilizes derivative financial instruments, principally swaps,
forward contracts and options to enhance its ability to manage risk,
including interest rate, foreign currency, commodity prices and share
repurchases which exist as part of ongoing business operations. These
contracts hedge transactions and balances for periods consistent with the
related exposures and do not constitute investments independent of these
exposures. The Company does not hold or issue financial instruments for
trading purposes, nor is it a party to any leveraged contracts.
Interest rate swap agreements are used to reduce financing costs and to
achieve a desired proportion of variable and fixed rate debt. Amounts paid
or received on hedges related to debt are included in interest expense. At
June 30, 1998 and June 30, 1997, the notional amount of interest rate swaps
was $100,000,000 and $125,665,000 and the unrealized (gain) or loss was
($464,000) and $2,460,000, respectively.
The Company uses foreign exchange contracts, including swap and forward
foreign currency contracts, to hedge existing foreign-exchange exposures.
Foreign currency contracts require the Company, at a future date, either to
buy or sell foreign currency in exchange for U.S. dollars to offset an
unhedged exposure. Such currency contracts existed at June 30, 1998 and
1997 for Argentine pesos, Canadian dollars and Japanese yen.
Foreign-exchange contracts with notional amounts totaling $62,216,000 and
$96,177,000 with unrealized losses of $617,000 and $804,000 were
outstanding at June 30, 1998 and 1997, respectively. Expiration dates on
these contracts range from July 1998 to April 1999. The Company manages its
future sterling exposure with foreign currency swap agreements (see Note
8). These agreements provide for an exchange of notional amounts at a
future date, allowing the Company to offset future foreign currency cash
exposures and converting sterling liability to U.S. dollar liability. This
thereby minimizes exposure to increasing costs associated with foreign
currency movements.
The Company uses commodity futures contracts to hedge the price on a
portion of raw material purchases used in the manufacturing process and
swap contracts to hedge the market risk of diesel fuel included as part of
carrier contracts. Contract maturities correlate to actual purchases and
contract values are reflected in the cost of the related commodity.
Unrealized losses on open contracts at June 30, 1998 were $2,268,000.
Equity put options and forward contracts are used in connection with the
repurchase of the Company's common shares as described in Note 10.
The carrying values of cash, short-term investments, accounts receivable
and payable, forward purchase financing agreements and other financial
instruments all approximate their fair values at June 30, 1998 and 1997.
The Company has used market information for similar instruments and applied
judgment in estimating fair values. Fair values of short-term and long-term
debt are shown in Note 8.
Exposure to counterparty credit risk is considered minimal because these
agreements have been entered into with major financial institutions with
strong credit ratings and they are expected to perform fully under the
terms of the agreements.
10 stockholders' equity
In addition to common stock, the Company is authorized to issue 5,000,000
shares of preferred stock with a par value of $1 per share, none of which
is outstanding.
The Company entered into two share repurchase transactions during 1998
whereby Clorox contracted for the future delivery of 400,000 shares of
Clorox stock on October 27, 2000 and 400,000 shares of Clorox stock on
October 23, 2002. The specified strike prices are $68.50 and $68.62 per
share. The aggregate redemption cost of $54,848,000 is included in other
obligations with a corresponding increase in treasury stock. The Company
paid an aggregate cash premium of $13,193,000 on these transactions which
has been recorded as treasury stock.
The Company sold and purchased 1,100,000 and 480,000 put and call options
during 1997 and 1996, respectively, with various strike prices (average of
$47.87 per share) that expire on various dates through September 30, 2005.
Upon exercise, each put option requires the Company to purchase, and each
call option allows the Company to purchase, one share of its common stock
at the strike price.
11 stock compensation plans
The Company has three stock option plans that provide for the granting of
stock options to officers, key employees and directors. The 1996 Stock
Incentive Plan ("1996 Plan") is the only plan with stock option awards
available for grant; prior plans have shares exercisable at June 30, 1998.
The Company is authorized to grant options for up to 7,000,000 common
shares under the 1996 Plan, of which, 622,000 have been granted. Options
outstanding under the Company's three plans have been granted at prices
which are either equal to or above the market value of the stock on the
date of grant, vest over a one- to four-year period, and expire 10 years
after the grant date.
The status of the Company's stock options plans at June 30 is summarized below:
weighted
number average
of shares exercise
(in thousands) price
- -------------------------------------------------------------
Outstanding at June 30, 1995 4,760 $23
Granted 2,958 41
Exercised (834) 19
Cancelled (116) 30
- -------------------------------------------------------------
Outstanding at June 30, 1996 6,768 32
Granted 646 48
Exercised (1,064) 23
Cancelled (374) 41
- -------------------------------------------------------------
Outstanding at June 30, 1997 5,976 34
Granted 634 73
Exercised (1,259) 29
Cancelled (210) 49
- -------------------------------------------------------------
Outstanding at June 30, 1998 5,141 $40
=============================================================
Options exercisable at:
June 30, 1998 3,427 $32
June 30, 1997 2,760 26
June 30, 1996 2,848 23
Had compensation expense for the Company's three stock-based compensation
plans been determined based upon fair values at the grant dates for awards
under those plans in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated on the
next page. The pro forma effects of applying SFAS 123 are not indicative
of future amounts because this statement does not apply to awards granted
prior to fiscal year 1996.
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net earnings
(in thousands)
As reported $297,960 $249,442 $222,092
Pro forma 291,002 244,357 220,576
Earnings per share
Basic
As reported $2.88 $2.41 $2.14
Pro forma 2.81 2.37 2.12
Diluted
As reported $2.82 $2.37 $2.12
Pro forma 2.75 2.32 2.10
</TABLE>
The weighted average fair value of each option granted during 1998, 1997
and 1996 estimated on the date of grant using the Black-Scholes
option-pricing model was $17.43, $11.46 and $9.92, respectively. The fair
value of the 1998, 1997 and 1996 options granted is estimated on the date
of grant using the following assumptions: dividend yield of 2% for each
year, expected volatility of 21% for 1998 and 19% for 1997 and 1996;
risk-free interest rate range of 5.3% to 6.6% depending on grant date, and
an expected life ranging from 3 to 5 years for 1998, 4 to 6 years in 1997,
and 4 to 9 years for 1996.
Summary information about the Company's stock options outstanding at June
30, 1998:
<TABLE>
<CAPTION>
weighted weighted weighted
range of outstanding average average exercisable average
exercise at 6/30/98 contractual exercise at 6/30/98 exercise
price (in thousands) periods in years price (in thousands) price
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$16-$29 1,672 4.5 $24 1,672 $24
32- 45 2,083 7.4 39 1,609 39
48- 60 783 8.1 48 143 48
66- 77 560 9.3 72 3 72
79- 92 43 9.8 85 - -
- -----------------------------------------------------------------------------------------------------
$16-$92 5,141 7.4 $40 3,427 $32
=====================================================================================================
</TABLE>
12 leases
The Company leases transportation equipment and a limited number of its
manufacturing, warehousing and office facilities. Most leases are
classified as operating leases and will expire over the next six years.
Future total minimum lease payments are $9,363,000, and do not exceed
$4,370,000 in any one year. Rental expense was $14,015,000 in 1998,
$11,234,000 in 1997 and $9,899,000 in 1996.
Space not occupied by the Company in its headquarters building is let to
other tenants under operating leases expiring by 2008. Future minimum
rentals to be received are $4,527,000 and do not exceed $884,000 in any one
year.
13 other (income) expense, net
The major components are (in thousands):
1998 1997 1996
Amortization of intangibles $44,562 $40,193 $30,439
Equity in earnings of affiliates (17,228) (14,045) (9,793)
Interest income (4,605) (7,724) (8,132)
Royalty income (11,366) (8,391) (7,622)
Other, net (14,909) (15,293) 1,473
- ---------------------------------------------------------------
Total $(3,546) $(5,260) $ 6,365
===============================================================
14 income taxes
Income tax expenses are (in thousands):
1998 1997 1996
Current
Federal $112,288 $129,762 $109,964
State 15,367 19,189 22,532
Foreign 14,087 15,502 13,779
- --------------------------------------------------------------
Total current 141,742 164,453 146,275
- --------------------------------------------------------------
Deferred
Federal 25,502 501 778
State 3,556 277 709
Foreign 3,165 1,342 533
- --------------------------------------------------------------
Total deferred 32,223 2,120 2,020
- --------------------------------------------------------------
Total expense $173,965 $166,573 $148,295
==============================================================
The effective income tax rates were 36.9%, 40% and 40% in 1998, 1997 and
1996, respectively. The lower tax rate for 1998 was primarily attributable
to international investment activities and international operations. The
difference between the U.S. statutory rate of 35% and the effective tax
rate in each year is due to state income taxes, net of federal benefits, of
2.8%, 3.0% and 4.0% in 1998, 1997 and 1996, respectively, and taxes on
foreign earnings of 1.7% and 1.8% in 1997 and 1996.
Undistributed earnings of foreign subsidiaries that are considered to be
reinvested indefinitely totaled $56,910,000 at June 30, 1998.
The net deferred income tax liabilities (assets), both current and
non-current at June 30, result from the tax effects of the following
temporary differences (in thousands):
1998 1997
Amortization/depreciation $ 84,962 $ 71,092
Safe harbor lease
agreements 20,925 23,170
Unremitted foreign earnings 49,050 44,052
Post employment benefits (25,833) (21,706)
Other 48,075 31,534
- ---------------------------------------------------
Net deferred tax liability $177,179 $148,142
===================================================
15 employee benefit plans
retirement income plans
The Company has defined benefit pension plans for substantially all its
domestic employees. Benefits are based on either employee years of service
and compensation or stated dollar amount per year of service. The Company
is the sole contributor to the plans in amounts deemed necessary to provide
benefits and to the extent deductible for federal income tax purposes.
Assets of the plans consist primarily of stocks and bonds. The components
of pension expense are (in thousands):
1998 1997 1996
Service cost-
benefits earned
in current year $ 6,741 $ 5,877 $ 6,238
Interest on
projected benefit
obligation 10,661 10,162 9,343
Return on plan
assets:
Actual gain (38,320) (30,131) (25,026)
Deferral of the
actual gain in
excess of the
assumed rate of 8.75%
in 1998, 1997 and 1996 22,360 16,146 12,831
Other gains, including
amortization over 15
years of the net pension
transition asset
at July 1, 1985 (2,126) (1,212) (1,075)
- ----------------------------------------------------------------
Total pension
expense (benefit) $ (684) $ 842 $ 2,311
=================================================================
The plans' funded status at June 30 is as follows (in thousands):
1998 1997
Actuarial present value of
the accumulated benefit
obligation, including
vested benefits of
$144,578 in 1998
and $120,961 in 1997 $149,703 $125,393
==================================================================
Plans' assets at market value 217,281 188,172
Projected benefit obligation,
determined using a discount
rate of 7% in 1998 and
8% in 1997 and including
the effect of an assumed
annual increase in future
compensation levels of 4.5% 163,993 140,389
- ------------------------------------------------------------------
Excess of plans' assets over
projected benefit obligation 53,288 47,783
Less deferrals:
Remaining unamortized balance of
net pension transition asset
at July 1, 1985 (3,750) (5,397)
Prior service cost 2,471 (1,256)
Other net gains (28,645) (19,799)
- ------------------------------------------------------------------
Accrued pension asset
included in other assets $ 23,364 $ 21,331
==================================================================
The Company has defined contribution plans for most of its domestic
employees not covered by collective bargaining agreements. The Company's
cost is based on the Clorox Value Measure economic value measurement
system, determined by net operating earnings after tax less a capital
charge for net assets employed. The Company also participates in
multi-employer pension plans for certain of its hourly paid production
employees and contributes to those plans based on collective bargaining
agreements. The aggregate cost of the defined contribution and
multi-employer pension plans was $22,767,000 in 1998, $20,800,000 in 1997
and $17,006,000 in 1996.
retirement health care
The Company provides certain health-care benefits for employees who meet
age, participation and length of service requirements at retirement. The
plans pay stated percentages of covered expenses after annual deductibles
have been met. Benefits paid take into consideration payments by Medicare.
The plans are not prefunded and the Company has the right to modify or
terminate certain of these plans.
Postretirement health-care expense consists of the following
(in thousands):
1998 1997 1996
Service cost-benefits
earned in the
current year $2,073 $2,038 $2,738
Interest on accumulated
benefit obligation 3,549 3,392 3,365
- -----------------------------------------------------------------------
Total postretirement
health-care expense $5,622 $5,430 $6,103
=======================================================================
Benefits paid were $2,609,000, $2,437,000 and $1,306,000 in fiscal years
1998, 1997 and 1996, respectively.
The accumulated postretirement benefit obligation (APBO) at June 30
includes the following (in thousands):
1998 1997
Retirees $24,771 $16,909
Active employees 28,986 30,150
Deferral of net gains 5,666 9,351
- ----------------------------------------------------------------------
Total unfunded accrued benefit
obligation included in other
obligations $59,423 $56,410
======================================================================
The assumed health-care cost trend rate used in measuring the APBO was 6%
for 1998, gradually declining to 5% in 2000 and years thereafter. Changes
in these rates can have a significant effect on amounts reported. A one
percentage point increase in the trend rates would increase the June 30,
1998 accumulated postretirement benefit obligation by $4,189,000 and
increase 1998 expense by $934,000. The discount rate used to determine the
APBO was 7%.
16 industry segment information
The Company's operations are predominately in the non-durable consumer
products industry and include the manufacture and marketing of products
through grocery and other retail stores. Operations include those in the
United States, Puerto Rico, and foreign countries. Foreign operations are
principally in Latin American countries including Argentina, Brazil, Chile
and Mexico. Earnings before income taxes for domestic and foreign
operations represent operating profits, while corporate pretax earnings and
identifiable assets include interest income and expense and other
non-allocable items of earnings, all cash, marketable securities, forward
purchase financing agreements and the corporate headquarters facility.
Financial information by geographic area for 1998, 1997 and 1996 is
summarized as follows (in thousands):
1998 1997 1996
net sales
Domestic $2,282,267 $2,143,519 $1,915,268
Foreign 459,003 389,132 302,575
- ------------------------------------------------------------------
Total $2,741,270 $2,532,651 $2,217,843
==================================================================
earnings before income taxes
Domestic $ 563,929 $ 486,836 $ 442,694
Foreign 33,001 32,659 14,525
Corporate (125,005) (103,480) (86,832)
- ------------------------------------------------------------------
Net $ 471,925 $ 416,015 $ 370,387
==================================================================
identifiable assets
Domestic $1,671,309 $1,587,921 $1,210,884
Foreign 892,258 747,944 534,251
Corporate 466,425 442,087 433,759
- ------------------------------------------------------------------
Total $3,029,992 $2,777,952 $2,178,894
17 contingent liabilities
The Company is subject to various lawsuits and claims arising out of its
businesses which include contracts, environmental issues, product
liability, patent and trademark matters, advertising and taxes. In the
opinion of management, after consultation with counsel, the disposition of
these matters will not have a material adverse effect, individually or in
the aggregate, on the Company's Consolidated Financial Statements taken as
a whole.
18 earnings per share
The weighted average number of shares outstanding (denominator) used to
calculate basic earnings per share is reconciled to those used in
calculating diluted earnings per share as follows (in thousands):
weighted average number
of shares outstanding
1998 1997 1996
Basic 103,507 103,292 103,869
Stock options 2,071 1,779 1,129
Other 57 29 8
- -------------------------------------------------------------------
Diluted 105,635 105,100 105,006
===================================================================
Responsibility for Consolidated Financial Statements
The Company's management is responsible for the integrity and objectivity
of the financial statements included in this Annual Report. In fulfilling
this responsibility, management maintains an effective system of internal
accounting controls and supports a comprehensive internal audit program.
The Board of Directors has an Audit Committee consisting of independent
directors. The Audit Committee meets regularly with management, internal
auditors and Deloitte & Touche LLP, independent auditors. Deloitte & Touche
LLP and the internal auditors have full authority to meet with the Audit
Committee, either with or without management representatives present.
Deloitte & Touche LLP have completed their audit of the accompanying
consolidated financial statements; their report appears on the next page.
DELOITTE & TOUCHE LLP
[logo]
Independent Auditors' Report
the clorox company 1998 Annual report
the stockholders and board of directors of the clorox company:
We have audited the accompanying consolidated balance sheets of The Clorox
Company and its subsidiaries (the Company) as of June 30, 1998 and 1997,
and the related statements of consolidated earnings, consolidated
stockholders' equity and consolidated cash flows for the years ended June
30, 1998, 1997, and 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at June 30,
1998 and June 30, 1997, and the results of their operations and their cash
flows for the years ended June 30, 1998, 1997 and 1996 in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Oakland, California
July 30, 1998
Quarterly Data
the clorox company 1998 Annual report
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
In thousands, except per share amounts quarter quarter quarter quarter year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
year ended june 30, 1998
Net Sales $649,284 $591,795 $680,540 $819,651 $2,741,270
Cost of Products Sold 279,694 258,189 290,209 364,442 1,192,534
Net Earnings 74,363 49,483 75,949 98,165 297,960
per common share
Net Earnings(a)
Basic $ 0.72 $ 0.48 $ 0.73 $ 0.95 $ 2.88
Diluted 0.71 0.47 0.72 0.93 2.82
Dividends 0.32 0.32 0.32 0.32 1.28
Market Price (NYSE)
High 74 3/8 80 1/8 89 15/16 96 5/8 96 5/8
Low 62 64 7/8 74 3/8 79 1/8 62
Year-end 95 5/8
year ended june 30, 1997
Net Sales $590,773 $530,215 $649,209 $762,454 $2,532,651
Cost of Products Sold 257,361 235,626 287,862 342,610 1,123,459
Net Earnings 65,510 43,915 65,620 74,397 249,442
per common share
Net Earnings(a)
Basic $ 0.64 $ 0.42 $ 0.63 $ 0.72 $ 2.41
Diluted 0.63 0.42 0.62 0.71 2.37
Dividends 0.29 0.29 0.29 0.29 1.16
Market Price (NYSE)
High 50 1/4 55 1/8 63 11/16 67 3/32 67 3/32
Low 43 7/16 47 1/2 48 5/8 55 43 7/16
Year-end 66 3/32
=======================================================================================================================
(a) Restated to reflect the adoption of SFAS No. 128 "Earnings per Share."
</TABLE>
<TABLE>
<CAPTION>
Five-Year Financial Summary
the clorox company 1998 Annual report
Years ended June 30 (in thousands, except per-share data) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
operations
Net sales $2,741,270 $2,532,651 $2,217,843 $1,984,170 $1,836,949
- ---------------------------------------------------------------------------------------------------------------------
Percent change 8.2 14.2 11.8 8.0 12.4
- ---------------------------------------------------------------------------------------------------------------------
Cost of products sold 1,192,534 1,123,459 1,007,200 892,172 820,434
Operating expenses 1,010,655 942,814 795,603 732,941 690,584
Other 66,156 50,363 44,653 21,163 19,298
- ---------------------------------------------------------------------------------------------------------------------
Total costs and expenses 2,269,345 2,116,636 1,847,456 1,646,276 1,530,316
- ---------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 471,925 416,015 370,387 337,894 306,633
Income taxes 173,965 166,573 148,295 137,062 126,640
- ---------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 297,960 249,442 222,092 200,832 179,993
Earnings from discontinued operations - - - - 32,064(a)
- ---------------------------------------------------------------------------------------------------------------------
Net earnings $ 297,960 $ 249,442 $ 222,092 $ 200,832 $ 212,057
=====================================================================================================================
Percent change, continuing operations 19.5 12.3 10.6 11.6 7.2
common stock
Weighted average shares outstanding
Basic 103,507 103,292 103,869 106,295 107,600
Diluted 105,635 105,100 105,006 107,085 108,338
Basic earnings per common share:
Earnings from continuing operations $ 2.88 $ 2.41 $ 2.14 $ 1.89 $ 1.68
Earnings from discontinued operations - - - - 0.29(a)
- ---------------------------------------------------------------------------------------------------------------------
Net earnings
Basic $ 2.88 $ 2.41 $ 2.14 $ 1.89 $ 1.97
Diluted 2.82 2.37 2.12 1.88 1.96
Dividends 1.28 1.16 1.06 $ 0.96 $ 0.90
Stockholders' equity at end of year 10.47 10.04 9.23 9.01 8.52
other data
Continuing operations
Property, plant and equipment - net 596,293 570,645 551,437 524,972 532,600
Property additions 98,979 95,188 84,804 62,911 56,627
Long-term debt 316,260 565,926 356,267 253,079 216,088
Percent return on net sales 10.9 9.8 10.0 10.1 9.8
Total assets 3,029,992 2,777,952 2,178,894 1,906,672 1,697,569
Stockholders' equity 1,085,235 1,036,046 950,087 943,913 909,417
Percent return on average stockholders' equity 28.4 25.4 23.7 21.7 24.2
=====================================================================================================================
(a) Includes net gain on the sale of discontinued business of $31,430 or $.29 per share.
</TABLE>
EXHIBIT 21
(to Form 10-K)
THE CLOROX COMPANY
SUBSIDIARIES OF THE REGISTRANT
(100% owned unless otherwise indicated)
Subsidiaries Jurisdiction of Incorporation
- ----------------------- -----------------------------
1109346 Ontario Ltd. Canada
1216899 Ontario Inc. Canada
Aldiv Transportation, Inc. California
American Sanitary Company S.A. Costa Rica
American Sanitary Company Cayman Islands
(Overseas) Inc. (51%)
Amesco Ltd. (49%) Cayman Islands
Andover Properties, Inc. Delaware
Argus Holdings Inc. Delaware
Armor All Products Corporation Delaware
Armor All Products GmbH Germany
Brita America, Inc. Nevada
Brita (Canada) Inc. Canada
Brita Ltd. (50%) Canada
The Brita Products Company Delaware
Brita (South America) Inc. (50%) Canada
Camello Cayman Co. Cayman Islands
Chesapeake Assurance Limited Hawaii
Clorosul Ltda. Brazil
Clorox Argentina S.A. Argentina
Clorox (Australia) Pty. Ltd. Australia
Clorox (Barbados) Inc. Barbados
Clorox do Brasil Ltda. Brazil
The Clorox Company of Canada
Canada, Ltd.
Clorox (Cayman Islands) Ltd. Cayman Islands
Clorox Chile S.A. Chile
The Clorox China Company Delaware
Clorox Export Company, Inc. Barbados
The Clorox Far East Company Hong Kong
Limited
Clorox Germany GmbH Germany
The Clorox (Guangzhou) Company People's Republic of China
Ltd. (95%)
The Clorox International Company Delaware
Clorox Japan Limited Japan
Clorox Korea Ltd. Korea
Clorox (Malaysia) Malaysia
Industries Sdn. Bhd.
Clorox (Malaysia) Sdn. Bhd. Malaysia
Clorox de Mexico, Mexico
S. de R. L. de C. V.
Clorox Mexicana, Mexico
S. de R. L. de C. V.
Clorox Netherlands B. V. The Netherlands
The Clorox Company of New New Zealand
Zealand Limited
Clorox del Pacifico S.A. Peru
Clorox de Panama S.A. Panama
Clorox del Peru S.A. Peru
Clorox Products Manufacturing Delaware
Company
Clorox Professional Products Delaware
Company
The Clorox Company of Delaware
Puerto Rico
The Clorox Sales Company Delaware
Clorox Services Company Delaware
Clorox Servicios Corporativos, Mexico
S. de R.L. de C.V.
The Clorox South Asia Company Delaware
Clorox Uruguay S.A. Uruguay
CLX Realty Co. Delaware
Corporacion Clorox de Venezuela
Venezuela, S.A.
EcuaClorox S.A. Ecuador
Electroquimicas Unidas S.A.C.I. Chile
Henkel Iberica, S.A. (20%) Spain
The Household Cleaning Products Egypt
Company of Egypt, Ltd. (49%)
The HV Food Products Company Delaware
HV Manufacturing Company Delaware
Invermark S.A. Argentina
Kaflex S.A. Argentina
Kingsford Manufacturing Company Delaware
The Kingsford Products Company Delaware
Lynley Limited Delaware
The Mexco Company Delaware
Mohammed Ali Abudawood and Saudi Arabia
Company for Industry (30%)
National Cleaning Products Saudi Arabia
Company Limited (30%)
Pacico Alliance (Singapore) Singapore
Pte. Ltd.
Pacico International Limited Hong Kong
Pacico International The Philippines
Philippines Inc. (60%)
Pacico Marketing (HK) Limited Hong Kong
Pacific Brands (Malaysia) Malaysia
Sdn. Bhd.
Percenta Enterprise Sdn. Bhd. Malaysia
Productos Del Hogar, C. Dominican Republic
por A. (49%)
PT Clorox Indonesia Indonesia
Rocha Color S.A. Uruguay
The Rotanco Corporation Delaware
Sarah Resources Limited Canada
Tecnoclor S.A. (60%) Colombia
Traisen S.A. Uruguay
United Cleaning Products Mfg. Yemen Arab Republic
Co. Ltd. (33%)
Yuhan-Clorox Co., Ltd. (50%) Korea
DELOITTE & TOUCHE LLP
(LOGO)
1111 Broadway, Suite 2100
Oakland, CA 94607-4036
Telephone (510) 287-2700
Facsimile (510) 835-4888
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in The Clorox Company
Registration Statements No. 33-4083 on Form S-3, and Nos. 33-41131,
33-41277, 2-88106 (Post-Effective Amendment No. 2), 33-24582,
33-56565, 33-56563, 333-29375, 333-16969 and 333-44675 on Form S-8 of
our report dated July 30, 1998 incorporated by reference in this Annual
Report on Form 10-K of The Clorox Company for the year ended
June 30, 1998.
/s/ Deloitte & Touche LLP
September 24, 1998
THE CLOROX COMPANY
RESTATED BYLAWS
(Including September 1998 and November 1998 Amendments)
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
The annual meeting of stockholders shall be scheduled annually
by the Board of Directors and shall be on a date within six months
of the end of the corporation's fiscal year. At the annual meeting
of stockholders, directors shall be elected and any other business
may be transacted which is within the powers of the stockholders.
Section 2. Special Meetings.
Special meetings of the stockholders, for any purpose or
purposes prescribed in the notice of the meeting, may be called
by the Board of Directors and shall be held at such place, on
such date, and at such time as they shall fix.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings
of the stockholders shall be given, not less than ten nor more
than sixty days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting,
except as otherwise provided herein or required by law (meaning,
here and hereinafter, as required from time to time by the
Delaware General Corporation Law or the Certificate of
Incorporation of the corporation).
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the
place, date and time thereof are announced at the meeting at which
the adjournment is taken; provided, however, that if the date of
any adjourned meeting is more than thirty days after the date for
which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of
the shares of stock of the corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum
for all purposes, unless or except to the extent that the presence
of a larger number may be required by law. If a quorum shall fail
to attend any meeting, the chairman of the meeting or the holders
of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
The stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough stockholders
to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 5. Organization.
The Chairman of the Board or, in his absence, the Vice-Chairman
of the Board, if there is a Vice-Chairman, or in his absence,
such person as may be designated by the board of directors or,
in the absence of such designation, as may be chosen by the
holders of a majority of the shares entitled to vote who are
present, in person or by proxy, shall call to order any meeting
of the stockholders and act as chairman of the meeting. In the
absence of the Secretary of the corporation, the secretary of
the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of
discussion as seem to her or him in order.
Section 7. Proxies and Voting.
(a) Except as otherwise provided herein or required by law,
each stockholder shall have one vote for every share of stock
entitled to vote which is registered in her or his name on the
record date for the meeting.
(b) All voting, including on the election of directors but
excepting where otherwise required by law, may be by a voice vote;
provided, however, that upon demand therefore by a stockholder
entitled to vote or her or his proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state
such information as may be required under the procedure established
for the meeting. Every vote taken by ballot shall be counted by
an Inspector or Inspectors appointed pursuant to Section 8 of
this Article I.
(c) All elections shall be determined by a plurality of the
votes cast, and except as otherwise required by law, all other
matters shall be determined by a majority of the votes cast.
(d) Except as otherwise provided by law, only persons in whose
names shares entitled to vote stand on the stock records of the
corporation on the record date for determining the stockholders
entitled to vote at said meeting shall be entitled to vote at such
meeting. Shares standing in the names of two or more persons shall
be voted or represented in accordance with the determination of
the majority of such persons, or, if only one of such persons is
present in person or represented by proxy, such person shall have
the right to vote such shares and such shares shall be deemed to be
represented for the purpose of determining a quorum.
(e) Every person entitled to vote shall have the right to do
so either in person or by an agent or agents authorized by a
proxy validly granted by such person or his or her duly
authorized agent, which proxy shall be filed with the
Secretary of the corporation at or before the meeting at
which it is to be used. Said proxy so appointed need not
be a stockholder. No proxy may be voted after three
years from its date unless the proxy provides for a
longer period.
(f) Without limiting the manner in which a stockholder
may authorize another person or persons to act for the
stockholder as proxy pursuant to subsection (e) of this
section, the following shall constitute a valid means by
which a stockholder may grant such authority:
(i) A stockholder may execute a writing
authorizing another person or persons to act for the
stockholder as proxy Execution may be accomplished by the
stockholder or the stockholder's authorized officer,
director, employee or agent signing such writing or causing
his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile
signature.
(ii) A stockholder may authorize another
person or persons to act for the stockholder as proxy by
transmitting or authorizing the transmission of a telegram,
cablegram or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided
that any such telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by
the stockholder. Such authorization can be established by the
signature of the stockholder on the proxy, either in writing
or by a signature stamp or facsimile signature, or by a number
or symbol from which the identity of the stockholder can be
determined, or by any other procedure deemed appropriate by the
inspectors. If it is determined that such telegrams, cablegrams
or other electronic transmissions are valid, the inspectors
shall specify the information upon which they relied.
(g) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant
to subsection (f) of this section may be substituted or used
in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission
could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Section 8. Voting Procedures and Inspectors of Elections.
(a) The corporation shall, in advance of any meeting of
stockholders, appoint one or more Inspectors to act at the
meeting and make a written report thereof. The corporation
may designate one or more persons as alternate Inspectors to
replace any Inspector who fails to act. If no Inspector or
alternate is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more
Inspectors to act at the meeting. Each Inspector, before
entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of Inspector
with strict impartiality and according to the best of the
Inspector's ability.
(b) The Inspectors shall (i) ascertain the number of
shares outstanding and the voting power of each, (ii) determine
the shares represented at a meeting and the validity of proxies
and ballots, (iii) count all votes and ballots, (iv) determine
and retain for a reasonable period a record of the disposition
of any challenges made to any determination by the Inspectors,
and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and
ballots. The Inspectors may appoint or retain other persons or
entities to assist the Inspectors in the performance of the
duties of the Inspectors.
(c) The date and time of the opening and the closing of
the polls for each matter upon which the stockholders will
vote at a meeting shall be announced at the meeting. No ballot,
proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the Inspectors after the closing
of the polls unless the Court of Chancery upon application by
a stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies
and ballots, the Inspectors shall be limited to an examination
of the proxies, any envelopes submitted with those proxies, any
information provided in accordance with Section 212 (c) (2) of
the Delaware General Corporation Law, ballots and the regular
books and records of the corporation, except that the Inspectors
may consider other reliable information for the limited purpose
of reconciling proxies and ballots submitted by or on behalf of
banks, brokers, their nominees or similar persons which represent
more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds
of record. If the Inspectors consider other reliable information
for the limited purpose permitted herein, the Inspectors at the
time they make their certification pursuant to subsection (b) (v)
of this section shall specify the precise information considered
by them including the person or persons from whom they obtained
the information, when the information was obtained, the means by
which the information was obtained and the basis for the
Inspectors' belief that such information is accurate and reliable.
Section 9. Stock List.
A complete list of stockholders of the corporation entitled
to vote at any meeting of stockholders, arranged in alphabetical
order for each class of stock and showing the address of each
such stockholder and the number of shares registered in her or his
name, shall be open to the examination of any such stockholder, for
any purpose germane to the meeting, during ordinary business hours for
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to the examination
of any stockholder who is present. This list shall presumptively
determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
Section 10. Meetings.
At any annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the
meeting. To be properly brought before a meeting, business must be
specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors, otherwise properly
brought before the meeting by or at the direction of the board of
directors or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary, The Clorox Company, as prescribed in
Section 2 of Article VI of the Bylaws. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting:
(i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such
business at the meeting,
(ii) the name and record address of the stockholder proposing
such business,
(iii) the class and number of shares of the corporation which
are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at a meeting except in accordance
with the procedures set forth in this Section 10, provided,
however, that nothing in this Section 10 shall be deemed to
preclude discussion by any stockholder of any business properly
brought before the meeting in accordance with said procedure.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the
provisions of this Section 10, and if she or he should so determine,
she or he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Section 11. Nominations of Persons for Election to
the Board of Directors.
In addition to any other applicable requirements, only
persons who are nominated in accordance with the following
procedures shall be eligible for election as directors.
Nominations of persons for election to the board of directors
of the corporation may be made at a meeting of stockholders by
or at the direction of the board of directors, by any
nominating committee or person appointed by the board of
directors or by any stockholder of the corporation entitled to
vote for the election of directors at the meeting who complies
with the notice procedures set forth in this Section 11. Such
nominations, other than those made by or at the direction of
the board of directors, shall be made pursuant to timely notice
in writing to the Secretary, The Clorox Company, as prescribed
in Section 2 of Article VI of the Bylaws. Such stockholders'
notice shall set forth:
(a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director,
(i) the name, age, business address and residence
address of the person,
(ii) the principal occupation or employment of the person,
(iii) the class and number of shares of the corporation
which are beneficially owned by the person, and
(iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934; and
(b) as to the stockholder giving the notice,
(i) the name and record address of stockholder, and
(ii) the class and number of shares of the corporation which
are beneficially owned by the stockholder.
The corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the
corporation to determine the eligibility of such proposed nominee
to serve as a director of the corporation.
No person shall be eligible for election as a director of
the corporation unless nominated in accordance with the
procedures set forth herein. These provisions shall not apply
to nomination of any persons entitled to be separately elected
by holders of preferred stock.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if seh or he
should so determine, she or he shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office.
The number of directors who shall constitute the whole
board shall be such number, not less than nine, as shall be
fixed from time to time by resolution of the board of directors.
Each director shall be elected for a term of one year and until
her or his successor is elected and qualified, except as otherwise
provided herein or required by law.
Whenever the authorized number of directors is increased
between annual meetings of the stockholders, a majority of the
directors then in office shall have the power to elect such new
directors for the balance of a term and until their successors
are elected and qualified. Any decrease in the authorized
number of directors shall not become effective until the
expiration of the term of the directors then in office unless,
at the time of such decrease, there shall be vacancies on the
board which are being eliminated by the decrease.
Section 2. Vacancies.
If the office of any director becomes vacant by reason
of death, resignation, disqualification, removal or other
cause, a majority of the directors remaining in office,
although less than a quorum, may elect a successor for the
unexpired term and until her or his successor is elected and
qualified.
Section 3. Regular Meetings.
Regular meetings of the board of directors shall be
held at such place or places, on such date or dates, and at
such time or times as shall have been established by the
board of directors and publicized among all directors. A notice
of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the board of directors may be
called by the Chairman of the Board or the President or any
two directors and shall be held at such place, on such date,
and at such time as she or he or they shall fix. Notice of the place,
date, and time of each such special meeting shall be given
each director (who does not waive notice) by mail, telegraph
or by other form of written notice not less than seventy-two
hours before the meeting or by telephone not less than twenty-four
hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a
special meeting.
Section 5. Quorum
At any meeting of the board of directors, a majority of
the total number of the whole board shall constitute a quorum
for all purposes. If a quorum shall fail to attend any meeting,
a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference
Telephone.
Members of the board of directors, or of any committee
thereof, may participate in a meeting of the board or committee
by means of conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the board of directors, business shall be
transacted in such order and manner as the Chairman of the Board
may from time to time determine, and all matters shall be
determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action
may be taken by the board of directors without a meeting if all
members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board
of directors.
Section 8. Powers.
The business and affairs of the corporation shall be managed
by the board of directors and the board of directors may, except
as otherwise required by law, exercise all such powers and do all
such acts and things as may be exercised or done by the corporation.
Section 9. Fees and Compensation of Directors.
Directors and members of committees of the board may be
allowed a fixed or annual fee to be determined by resolution of
the board of directors for acting as a director or a member of a
committee. Nothing herein contained shall be construed to preclude
any director from serving the corporation in another capacity as
an officer, agent, employee or otherwise, and receiving compensation
therefor.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The board of directors, by a vote of a majority of the whole
board, may from time to time designate committees of the board,
with such powers and duties as it thereby confers, to serve at
the pleasure of the board and shall, for those committees and
any others provided for herein, elect a director or directors
to serve as the member or members, designating, if it desires,
other directors as alternate members who may replace any absent
or disqualified member at any meeting of the committee. Any
committee so designated may exercise the power and authority of
the board of directors to declare a dividend or to authorize the
issuance of stock if the resolution which designates the committee
or a supplemental resolution of the board of directors shall so
provide. In the absence or disqualification of any member of any
committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may
by unanimous vote appoint another member of the board of directors
to act at the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith,
except as otherwise provided herein or required by law. Adequate
provision shall be made for notice to members of all meetings;
one-third of the members shall constitute a quorum unless the
committee shall consist of one or two members, in which event
one member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings
are filed with the minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
Section I. Generally.
The officers of the corporation shall be a Chairman of the Board,
a President, one or more Vice Presidents and a Secretary. The
Board of directors, in its discretion, may designate from among
those officers a Chief Executive Officer, a Chief Operating
Officer, and/or a Chief Financial Officer. The corporation may
also have, at the discretion of the board of directors, one or
more Vice Chairmen of the Board, General Managers, a Treasurer,
a Controller, one or more Assistant Secretaries, one or more
Assistant Treasurers and such other officers as the board of
directors may deem expedient. Any number of offices may be held
by the same person.
Section 2. Appointment.
The Chairman of the Board, the President, the Vice President
or Vice Presidents, the Secretary, the Chief Executive Officer,
the Chief operating Officer and the Chief Financial Officer
shall be appointed by the Board of Directors. Other officers
may be appointed from time to time by the board of directors
or by an officer to whom the board shall have delegated the
power to appoint. Each officer of the corporation shall serve
at the pleasure of the board of directors subject to the rights,
if any, of any officer under any contract of employment.
Section 3. Removal and Resignation.
Any officer may be removed either with or without cause,
by a majority of the directors attending a duly held directors'
meeting at which a quorum is present or, except in the case of
an officer chosen by the board of directors, by any officer upon
whom such power of removal has been conferred by the board of
directors. Any officer may resign at any time by giving written
notice to the board of directors, to the President, or to the
Secretary prejudice to the rights, if any, contract to which
the officer is a party.
Section 4. Vacancies.
A vacancy in any office because of death, resignation,
removal or any other cause may be filled by the board of directors
or by an officer to whom the board of directors shall have
delegated the power to appoint.
Section 5. Chairman of the Board.
The Chairman of the Board shall preside at all meetings of
the board of directors and the stockholders. She or he shall have such
powers and perform such duties as are incident to his office or
as may be properly granted to or required of her or him by the
board of directors.
Section 6. Vice Chairman of the Board.
Each Vice Chairman of the Board shall, under the supervision
of the Chairman of the Board, have such powers and perform such
duties as may be properly granted to or required of her or him
by the board of directors or by the Chairman of the Board. During the
absence or disability of the Chairman of the Board, a Vice Chairman
of the Board, in order of rank as fixed by the board of directors,
shall preside at all meetings of the stockholders and of the board
of directors.
Section 7. President.
The President shall have such powers and perform such duties
as are incident to her or his office or as may be properly granted
to or required of her or him by the board of directors. In the
absence or disability of the Chairman and the Vice Chairman, the
President shall preside at meetings of the board of directors and
stockholders.
Section 8. Vice President.
In the absence or the disability of the President, the Vice
Presidents in the order of rank fixed by the board of directors,
or if not ranked, the Vice President designated by the board of
directors, shall perform the duties of the President and when so
acting shall have the powers of, and be subject to the restrictions
upon the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors.
Section 9. Chief Executive Officer.
The board of directors may designate an officer to serve as
Chief Executive Officer. The Chief Executive Officer shall,
subject to the control of the board of directors, have the ultimate
supervision, direction and control of the policies, business
affairs and officers of the corporation.
Section 10. Chief Operating Officer.
The board of directors may designate an officer to serve as
Chief Operating Officer. The Chief Operating officer shall,
subject to the control of the Chief Executive Officer, if any has
been designated, and if not, subject to the control of an officer
so designated by the board of directors, have general charge,
supervision, and authority over all operations of the corporation.
In the absence or disability of the Chief Executive Officer, the
Chief Operating Officer will assume the powers and responsibilities
of the Chief Executive Officer.
Section 11. Chief Financial Officer.
The Chief Financial Officer, who may, but need not, be the
Treasurer, shall keep and maintain adequate and correct books and
records of accounts of the corporation, and shall see that all
moneys and other valuables of the corporation are deposited in the
name and to the credit of the corporation with such depositories as
may be designated by the board of directors. She or he shall disburse
the funds of the corporation as directed by the board of directors,
shall render to the President and directors, whenever they request
it, an account of all of her or his transactions in her or his
official capacity and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as
may be prescribed by the board of directors.
Section 12. Secretary.
The Secretary shall keep, at the principal office of the
corporation or such other place as the board of directors may order,
a book of minutes of all meetings of directors and stockholders,
with the time and place held, whether regular or special, and if
special, how authorized, the notice thereof given, the names of
those present at directors' meetings, the number of shares present
or represented at stockholders' meetings and the proceedings
thereof. The Secretary shall keep, at the principal office of the
corporation, or at the office of the corporation's transfer agent,
or registrar, a record of its stockholders showing the names of
the stockholders and their addresses, the number and classes of
shares held by each, the number and date of cancellation of every
certificate surrendered for cancellation. The Secretary shall give
notice of all meetings of the stockholders and of the board of
directors required by these Bylaws to be given and shall keep the
seal of the corporation in safe custody, and shall have such other
powers and perform such other duties as may be prescribed by the
board of directors.
Section 13. Treasurer and Assistant Treasurers.
The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to
the credit of the corporation in such depositories as she or he shall
select. She or he shall disburse the funds of the corporation and shall
issue and sign all checks, drafts, bills of exchange, promissory
notes, letters of credit and other evidences of indebtedness; and
shall open safe deposit boxes of the corporation. The Treasurer
shall also designate employees who shall have authority to sign
checks on bank accounts of the corporation.
Checks of the corporation drawn against accounts maintained
at any bank, wherever located, may be signed with applied facsimile
signature of the Treasurer or any other person designated by her or
him. The Secretary is authorized to file with such banks certified
specimens of facsimile signatures authorized by this Bylaw.
If required by the board of directors, she or he shall give the
corporation a bond (which shall be renewed ever six years) in
such sum and with such surety or sureties as shall be satisfactory
to the board of directors for the faithful performance of the
duties of her or his office and for the restoration to the corporation,
in case of her or his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property
of whatever kind in her or his possession or under his control
belonging to the corporation.
The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order
of their election), shall in the absence of the Treasurer or in
the event of her or his inability or refusal to act, perform the
duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the board of directors
or the Treasurer may from time to time prescribe.
Section 14. Controller.
The Controller (in case the board of directors establishes
such office) shall have supervision and charge of the accounts
of the corporation. She or he shall be responsible for the
maintenance of adequate accounting records and shall perform such
other duties as shall be assigned to her or him by the board of
directors or the Chief Financial Officer.
Section 15. Other Officers.
Officers, other than the Chairman of the Board, President,
Vice Presidents, Secretary and Chief Financial Officer shall have
such powers and perform such duties as may be prescribed by the
board of directors.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by,
or in the name of the corporation by, the Chairman of the Board,
the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by her or him. Any of or
all the signatures on the certificate may be facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books
of the corporation kept at an office of the corporation or by
transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in accordance
with Section 4 of Article V of these Bylaws, an outstanding
certificate for the number of shares involved shall be surrendered
for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
(a) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted
by the board of directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the board of directors, the record
date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding
the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the
adjourned meeting.
(b) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the board of directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of
business on the day on which the board of directors adopts the
resolution relating thereto.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any
certificate of stock, another may be issued in its place pursuant
to such regulations as the board of directors may establish
concerning proof of such loss, theft or destruction and concerning
the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates
of stock shall be governed by such other regulations as the board
of directors may establish.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required
by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may
in every instance be effectively given by hand delivery to the
recipient thereof, by depositing such notice in the mails, postage
paid, or by sending such notice by prepaid telegram or mailgram.
Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the
same appears on the books of the corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered
through the mails or by telegram or mailgram, shall be the time of
the giving of the notice.
Section 2. Timeliness of Notices by Stockholders of Proposals
for Consideration at a Meeting of the Stockholders and of Nominations
of Persons for Election to the Board of Directors.
To be timely, a stockholder's notice of nominations of persons
for election to the Board of Directors or other business to be
properly brought before an annual meeting pursuant to Section 10 or
11 of Article I of the Bylaws shall be delivered to or mailed and
received by the Secretary at the principal executive offices of
the corporation not less than 70 days nor more than 170 days prior
to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual
meeting is advanced by more than 20 days, or delayed by more than
70 days, from such anniversary date, notice by the stockholder to
be timely must be so delivered not earlier than the one
hundred-seventieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day prior
to such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made.
To be timely, a stockholder's notice of nominations of persons
for election to the Board of Directors to be properly brought before
a special meeting of stockholders pursuant to Section 11 of Article I
of the Bylaws shall be delivered to or mailed and received by the
Secretary at the principal executive offices of the corporation not
later than the close of business on the tenth day following the day
on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
[NOTE - THE LANGUAGE IN ARTICLE VI, SECTION 2 ABOVE WAS APPROVED BY
THE CORPORATION'S BOARD OF DIRECTORS AT ITS MEETING HELD ON
SEPTEMBER 16, 1998, SUCH AMENDMENT IN THIS SECTION ONLY TO BE MADE
EFFECTIVE AS OF NOVEMBER 18, 1998. PRIOR TO NOVEMBER 18, 1998, THE
LANGUAGE IN ARTICLE VI, SECTION 2 SHALL READ AS FOLLOWS:
"Section 2. Timeliness of Notices by Stockholders of Proposals for
Consideration at a Meeting of the Stockholders and Nominations of
Persons for Election to the Board of Directors. To be timely, a
stockholders' notice given pursuant to Section 9 or 10 of Article I
of the Bylaws shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than 30 days
nor more than 60 days prior to the meeting; provided, however, that
in the event that less than 40 days' notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than
the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure
was made."]
Section 3. Waivers.
A written waiver of any notice, signed by a stockholder,
director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed
equivalent to the notice required to be given to such stockholder,
director, officer, employee or agent. Neither the business nor the
purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these Bylaws, facsimile
signatures of any officer or officers of the corporation may be
used whenever and as authorized by the board of directors or a
committee thereof.
Section 2. Corporate Seal.
The board of directors may provide a suitable seal, containing
the name of the corporation, which seal shall be in the charge
of the Secretary. If and when so directed by the board of directors
or a committee thereof, duplicates of the seal may be kept and
used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the
board of directors, and each officer of the corporation shall, in
the performance of his duties, be fully protected in relying in
good faith upon the records of the corporation and upon such
information, opinions, reports or statements presented to the
corporation by any of the corporation's officers or employees,
or committees of the board of directors, or by any other person
as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the corporation.
Section 4. Contracts, Etc.. How Executed.
Contracts, deeds, mortgages, leases, bonds, powers of attorney,
bills of sale, and all documents and paper requiring the signature
of the corporation shall be executed by the President of the
corporation or one of the Vice Presidents. A Vice President may,
by designation in writing, delegate to employees responsible to her or
him the right to execute any of such contracts, deeds, mortgages,
leases, bonds, powers of attorney, bills of sale, and any other
documents and paper requiring the signature of the corporation.
A copy of such delegation shall be deposited with the Secretary
of the corporation.
Section 5. Voting of Shares of Other Corporations.
The Chairman of the Board, the President, any Vice President,
or any other officer or agent specifically authorized by resolution
of the board of directors, or by the Chairman of the Board, the
President or any Vice President, is authorized to vote, represent
and exercise on behalf of the corporation all rights incident to any
shares of any other corporation held by the corporation.
Section 6. Fiscal Year.
The fiscal year of the corporation shall be as fixed by the
board of directors.
Section 7. Time Periods.
In applying any provision of these Bylaws which require that
an act be done or not done a specified number of days prior to
an event, or that an act be done during a period of a specified
number of days prior to an event, calendar days shall be used;
the day of the doing of the act shall be excluded and the day of
the event shall be included.
ARTICLE VIII - AMENDMENTS
These Bylaws may be amended or repealed by the board of
directors at any meeting or by the stockholders at any meeting.
I hereby certify that the foregoing is a full and correct
copy of the Bylaws of The Clorox Company, a Delaware corporation,
as of this date.
Dated: September 16, 1998
By: /s/ PETER D. BEWLEY
Title: Senior Vice President - General Counsel and Secretary
pdb/twh
09/98
j:\cs\forms\blclx.sam
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL YEAR ENDED JUNE 30, 1998, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-K FOR SUCH PERIOD, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
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<PERIOD-END> JUN-30-1998
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<RECEIVABLES> 430031
<ALLOWANCES> 1521
<INVENTORY> 211913
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<PP&E> 1122667
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<TOTAL-ASSETS> 3029992
<CURRENT-LIABILITIES> 1225076
<BONDS> 316260
0
0
<COMMON> 110844
<OTHER-SE> 974391
<TOTAL-LIABILITY-AND-EQUITY> 3029992
<SALES> 2741270
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<CGS> 1192534
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<OTHER-EXPENSES> (3546)
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<EPS-PRIMARY> 2.88
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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 YEAR ENDED JUNE 30, 1997, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-K FOR SUCH PERIOD, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> JUN-30-1997
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<EPS-PRIMARY> 2.41
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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 YEAR ENDED JUNE 30, 1996, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-K FOR SUCH PERIOD, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> JUN-30-1996
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<PP&E> 961281
<DEPRECIATION> 409844
<TOTAL-ASSETS> 2178894
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<BONDS> 356267
0
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<COMMON> 55422
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<TOTAL-LIABILITY-AND-EQUITY> 2178894
<SALES> 2217843
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<OTHER-EXPENSES> 6365
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</TABLE>
