UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-07151
THE CLOROX COMPANY
- --------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-0595760
- --------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification number
1221 Broadway - Oakland, California 94612 - 1888
- --------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, (510) 271-7000
(including area code) --------------------
- --------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
As of March 31, 2000 there were 234,715,228 shares outstanding of the
registrant's common stock (par value - $1.00), the registrant's only
outstanding class of stock.
- --------------------------------------------------------------------
THE CLOROX COMPANY
PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Condensed Statements of Consolidated
Earnings
Three Months and Nine Months
Ended March 31, 2000 and 1999 3
Condensed Consolidated Balance Sheets
March 31, 2000 and June 30, 1999 4
Condensed Statements of Consolidated
Cash Flows
Nine Months Ended March 31, 2000
and 1999 5
Notes to Condensed Consolidated
Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9 - 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Earnings
(In millions, except share and per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- -------------------------
3/31/00 3/31/99 3/31/00 3/31/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 1,034 $ 992 $ 2,930 $ 2,904
----------- ----------- ----------- -----------
Cost and Expenses
Cost of products sold 506 473 1,446 1,390
Selling, delivery and administration 190 195 564 588
Advertising 119 124 345 361
Research and development 15 15 44 44
Merger, integration, restructuring and asset impairment 13 100 21 100
Interest expense 25 23 71 75
Other expense, net 1 10 17 18
----------- ----------- ----------- -----------
Total costs and expenses 869 940 2,508 2,576
----------- ----------- ----------- -----------
Earnings before income taxes 165 52 422 328
Income taxes 59 30 153 132
----------- ----------- ----------- -----------
Net Earnings $ 106 $ 22 $ 269 $ 196
=========== =========== =========== ===========
Earnings per Common Share
Basic $ 0.45 $ 0.09 $ 1.14 $ 0.83
Diluted 0.44 0.09 1.12 0.82
Weighted Average Shares Outstanding (in thousands)
Basic 235,843 235,794 236,446 234,946
Diluted 238,848 240,440 239,894 239,590
Dividends per Share $ 0.20 $ 0.18 $ 0.60 $ 0.53
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
<TABLE>
<CAPTION>
3/31/00 6/30/99
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and short-term investments $ 149 $ 132
Receivables, net 677 610
Inventories 402 319
Prepaid expenses and other 22 29
Deferred income taxes 23 26
----------- -----------
Total current assets 1,273 1,116
Property, Plant and Equipment - Net 1,072 1,054
Brands, Trademarks, Patents and Other Intangibles - Net 1,547 1,497
Investments in Affiliates 114 104
Other Assets 345 361
----------- -----------
Total $ 4,351 $ 4,132
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 239 $ 206
Accrued liabilities 366 350
Accrued merger, integration, and restructuring 9 23
Short-term debt and notes payable 857 734
Income taxes payable 56 48
Current maturities of long-term debt 6 7
----------- -----------
Total current liabilities 1,533 1,368
Long-term Debt 679 702
Other Obligations 190 255
Deferred Income Taxes 224 237
Stockholders' Equity
Common stock 250 250
Additional paid-in capital 131 50
Retained earnings 1,984 1,842
Treasury shares, at cost (462) (392)
Accumulated other comprehensive loss (164) (160)
Other (14) (20)
----------- -----------
Stockholders' equity 1,725 1,570
----------- -----------
Total $ 4,351 $ 4,132
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(In millions)
Nine Months Ended
---------------------------
3/31/00 3/31/99
----------- -----------
<S> <C> <C>
Operations:
Net earnings $ 269 $ 196
Adjustments to reconcile to net cash provided by
operating activities:
Provision for inventory write downs and asset impairment 6 42
Depreciation and amortization 151 147
Deferred income taxes 13 5
Other - (2)
Changes in (excluding effects of businesses acquired):
Accounts receivable (58) 27
Inventories (78) (36)
Prepaid expenses and other 7 5
Accounts payable 29 (53)
Accrued liabilities 1 (97)
Accrued merger, integration, and restructuring (14) 24
Income taxes payable 7 50
----------- -----------
Net cash provided by operations 333 308
----------- -----------
Investing Activities:
Purchases of property, plant and equipment (103) (110)
Proceeds from disposals of property, plant and equipment 5 5
Businesses acquired (101) (116)
Other (57) (27)
----------- -----------
Net cash used for investing (256) (248)
----------- -----------
Financing Activities:
Short-term debt and notes payable borrowings
(repayments), net 125 (127)
Long-term debt and other borrowings 15 201
Long-term debt and other repayments (28) (15)
First Brands receivables financing program, net - (20)
Cash dividends (142) (120)
Treasury stock purchased (125) (33)
Settlement of share repurchase and option contracts 82 -
Issuance of common stock for employee stock plans and other 12 62
----------- -----------
Net cash used for financing (61) (52)
----------- -----------
Effect on cash of exchange rate changes 1 -
Net increase in cash and short-term investments 17 8
Cash and short-term investments:
Beginning of period 132 102
----------- -----------
End of period $ 149 $ 110
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
1) The condensed consolidated financial statements for the three and nine
months ended March 31, 2000 and 1999 have not been audited but, in the
opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the consolidated
results of operations, financial position, and cash flows of The Clorox
Company and its subsidiaries (the "Company"). The Company's results
reflect the January 29, 1999 merger with First Brands Corporation
("First Brands") which was accounted for as a pooling of interests.
All historical financial information has been restated to include First
Brands. The results for the three and nine months ended March 31, 2000
and 1999 should not be considered as necessarily indicative of the annual
results for the respective years.
2) Inventories at March 31, 2000 and at June 30, 1999 consisted of:
3/31/00 6/30/99
--------- ---------
Finished goods and work in process $ 283 $ 220
Raw materials and supplies 119 99
--------- ---------
Total $ 402 $ 319
========= =========
Inventory of certain First Brands' products were written down to their
net realizable value, and cost of products sold includes a corresponding
charge of $4 and $8 for the nine month periods ending March 31, 2000 and
1999, respectively.
3) International acquisitions since June 30, 1999 totaled $101 and were
accounted for as purchases. These acquisitions included a cleaning
utensil business in Colombia, Venezuela and Peru, an increase in ownership
to 100% in Tecnoclor, S.A. in Colombia (previously 72% owned and fully
consolidated), and a rubber glove business purchased in Australia.
The acquisitions were funded using a combination of cash and debt.
4) Basic earnings per share (EPS) is computed by dividing net earnings
by the weighted average number of common shares outstanding each period.
Diluted EPS is computed by dividing net earnings by the diluted weighted
average number of common shares outstanding during each period. Diluted
EPS reflects the potential dilution that could occur from common shares
issuable through stock options, restricted stock, warrants and other
convertible securities. The weighted average number of shares outstanding
(denominator) used to calculate basic EPS is reconciled to those shares
used in calculating diluted EPS as follows (in thousands):
Weighted Average Number of Shares Outstanding
-------------------------------------------------
Three Months Ended Nine Months Ended
------------------------ ------------------------
3/31/00 3/31/99 3/31/00 3/31/99
------------ ---------- ----------- ------------
Basic 235,843 235,794 236,446 234,946
Stock options 2,955 4,610 3,402 4,604
Other 50 36 46 40
------------ ---------- ----------- ------------
Diluted 238,848 240,440 239,894 239,590
============ ========== =========== ============
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
5) Comprehensive income for the Company includes net income and foreign
currency translation adjustments that are excluded from net income but
included as a separate component of total stockholders' equity.
Comprehensive income for the three and nine month periods ended March 31,
2000 and 1999 is as follows:
Three Months Ended Nine Months Ended
-------------------- --------------------
3/31/00 3/31/99 3/31/00 3/31/99
--------- --------- ---------- ---------
Net Earnings $ 106 $ 22 $ 269 $ 196
Foreign currency translation
adjustments (3) (18) (4) (32)
--------- --------- ---------- ---------
Total comprehensive income $ 103 $ 4 $ 265 $ 164
========= ========= ========== =========
6) On January 29, 1999, the Company completed a merger with First Brands.
Related merger, integration, restructuring and asset impairment charges
through March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Merger and Asset
Integration Restructuring Sub-Total Impairment Total
----------- ------------- --------- ---------- -----
<S> <C> <C> <C> <C> <C>
Provision for merger,
integration, restructuring,
and asset impairment:
For the year ended
June 30, 1999 $36 $53 $89 $91 $180
For the nine months ended
March 31, 2000 17 2 19 2 21
----------- ------------- --------- ---------- -----
Total provision for merger,
integration, restructuring and
asset impairment through
March 31, 2000 53 55 108 $93 $201
========== =====
Total paid through
March 31, 2000 (49) (50) (99)
----------- ------------- ---------
Accrued liability as of
March 31, 2000 $4 $5 $9
============ ============= =========
</TABLE>
Substantially all merger, integration, restructuring and asset impairment
costs related to the First Brands merger have been recognized through
March 31, 2000.
PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(In millions, except share and per-share amounts)
7) The Company's operating segments are as follows:
Household Products: Includes cleaning, bleach and other home care products,
and water filtration products marketed in the United States and all products
marketed in Canada.
U. S. Specialty Products: Includes charcoal, automotive care, cat litter,
insecticides, dressings, sauces, professional products and the food storage
and disposal categories.
International: Includes operations outside the United States and Canada.
Corporate, Interest and Other: Includes certain non-allocated
administrative and sales costs, goodwill amortization, interest income,
interest expense, merger, integration and restructuring, and other income
and expense.
Each segment is individually managed with separate operating results that
are reviewed regularly by the chief operating decision maker. The
following table shows operating segment information.
Net Sales
---------------------------------------
Three Months Ended Nine Months Ended
------------------ -----------------
3/31/00 3/31/99 3/31/00 3/31/99
------- ------- ------- -------
Household Products $ 404 $ 373 $ 1,193 1,169
U.S. Specialty Products 469 460 1,273 1,272
International 161 159 464 463
------- ------- ------- -------
Total Company $ 1,034 $ 992 $ 2,930 $ 2,904
======== ======== ======== ========
Earnings Before Income Taxes
Three Months Ended Nine Months Ended
------------------ -----------------
3/31/00 3/31/99 3/31/00 3/31/99
------- ------- ------- -------
Household Products $ 118 $ 128 $ 370 $ 386
U.S. Specialty Products 135 124 325 315
International 24 17 63 43
Corporate, Interest and
Other (112) (217) (336) (416)
------- ------- ------- -------
Total Company $ 165 $ 52 $ 422 $ 328
======== ======== ======== ========
8) In September 1999, in response to declines in the Company's stock
price in the first quarter, the Board of Directors authorized a common
stock repurchase and hedging program intended to reduce or eliminate
dilution when shares are issued in accordance with the Company's various
stock compensation plans. The Company had canceled a prior share
repurchase and hedging program (previously authorized in September 1996
by the Board of Directors to offset the dilutive effects of employee
stock exercises) when it merged with First Brands. From inception of
the new program through March 31, 2000, a total of 3,123,000 shares were
acquired at a cost of $125.
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Diluted earnings per share increased to $0.44 from $0.09 for the quarter
ended March 31, 2000 and increased to $1.12 from $0.82 for the nine months
ended March 31, 2000. Net earnings increased to $106 million from $22
million for the quarter ended March 31, 2000 and increased to $269 million
from $196 million for the nine months ended March 31, 2000. Improved
earnings were principally due to a reduction in merger, restructuring
and asset impairment costs. The Company's results reflect the January 29,
1999 merger with First Brands Corporation ("First Brands"). The merger
was accounted for as a pooling of interests and all historical financial
information has been restated to include First Brands.
Net sales for the third quarter of fiscal 2000 increased 4% to $1,034
million mostly due to the results achieved from the Company's household
products and U.S. specialty products segments. The increase in the
household products segment's net sales was mostly achieved from the
introduction of new products such as Liquid-Plumr Foaming Pipe Snake,
Clorox Disinfecting Spray and Wipes, Ultra Clorox liquid bleach and Clorox
FreshCare fabric refresher and dry clean products. Partially offsetting
this increase were lower shipments of Tilex and Pine-Sol products and
higher promotional spending to support new products. The U.S. specialty
products segment's net sales results were favorably impacted by record
shipments of Hidden Valley dressings and the introduction of K C Masterpiece
marinades.
Net sales for the nine-month period ended March 31, 2000 increased 1% to
$2,930 million primarily due to the Company's household products segment's
increase of 2% in sales over the year ago period. Contributing to this
increase were new product launches and the full year results of the Handi
Wipes business acquired in the prior year. Higher promotional spending to
support new products and lower shipments of Tilex Fresh Shower, due to
higher volumes in the prior year during its launch, partially offset this
increase. The U.S. specialty products and international segments' sales
performance also added $2 million to the Company's increase in net sales.
The increase in U.S. specialty products segment's net sales was due to new
product launches, higher charcoal shipments driven by both continued
category consumption growth and a strong presence in warehouse clubs, and
higher shipments from Hidden Valley bottled dressings. These increases were
partially offset by the negative impact of prior year First Brands
inefficient trade-promotional practices, which the Company is continuing to
eliminate. The increase in the international segment's sales growth was
driven by higher shipments and acquisitions that were partially offset by
currency devaluations and higher promotional spending.
Cost of products sold as a percentage of sales increased to 48.9% from
47.7% for the quarter ended March 31, 2000 and increased to 49.4% from
47.9% for the nine months ended March 31, 2000. These increases were
primarily due to higher resin costs and start-up costs associated with
the introduction of Ultra Clorox liquid bleach and other new products.
Additionally, cost of products sold includes a charge of $4 million and
$8 million at March 31, 2000 and March 31, 1999, respectively, for the
write down of certain First Brands inventories. These increases were
somewhat offset by cost savings initiatives throughout the Company's domestic
and international business units.
Selling, delivery and administrative expenses decreased 3% to $190
million for the quarter ended March 31, 2000 and decreased 4% to $564
million for the nine months ended March 31, 2000. These decreases were
achieved mostly from continued benefits from combining the former First
Brands businesses with Clorox, savings from lower commission expense
primarily due to the consolidation of the Company's broker network, the
consolidation of the Company's logistics network and the integration of
the sales force in Latin America.
Advertising expense decreased to $119 million from $124 million for the
quarter ended March 31, 2000 and decreased to $345 million from $361
million for the nine months ended March 31, 2000. The savings were
primarily due to changing certain First Brands couponing practices and
to the consolidation of advertising agencies. Higher media spending
to support the introduction of new products and former First Brands
businesses partially offset these savings.
Merger, integration, restructuring and asset impairment for the three
and nine months ended March 31, 2000 primarily reflect costs associated
with the closure of First Brands distribution centers and relocation and
retention bonuses paid to former First Brands employees. Additionally,
$2 million of asset impairment losses were recognized in the quarter ended
March 31, 2000 for the write-down of property, plant and equipment related
to the Company's fire logs business.
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations
Interest expense increased to $25 million from $23 million for the
quarter ended March 31, 2000 and decreased to $71 million from $75
million for the nine months ended March 31, 2000. The increase for
the three-month period primarily reflects rising interest rates and
an increase in borrowings in the third quarter to fund acquisitions,
seasonal inventory builds and share repurchases. The decrease for
the nine-month period was due to the refinancing of former First Brands
debt at lower interest rates made possible by Clorox's more favorable
credit rating and the termination of the First Brands trade receivables
financing program, partly offset by rising interest rates and an
increase in borrowings.
Other expense, net decreased to $1 million from $10 million for the
quarter ended March 31, 2000 primarily due to higher interest and royalty
incomes, prior year costs associated with the termination of debt, and
losses on the disposal of assets incurred in the prior year.
Income tax expense as a percent of pretax earnings decreased to 36% from
58% for the quarter ended March 31, 2000 and decreased to 36% from 40%
for the nine months ended March 31, 2000 principally due to non-deductible
merger related costs recorded in the prior year three and nine month
periods.
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Liquidity and Capital Resources
The Company's financial position and liquidity remain strong due to cash
flow provided by operations during the year. Receivables have increased
from June 30, 1999 partly due to the Company's strategic focus on
expanding the business in Latin America as well as domestic sales growth.
The increase in inventories reflects seasonality and inventory builds
resulting from new product launches. Increases in accounts payable and
accrued liabilities result from timing of promotional spending and
inventory purchases.
International acquisitions since June 30, 1999 totaled $101 million and
were funded using a combination of cash and debt. These acquisitions
included a cleaning utensil business in Colombia, Venezuela and Peru,
an increase in ownership to 100% in Tecnoclor, S.A. in Colombia
(previously 72% owned and fully consolidated), and a rubber glove
business purchased in Australia.
In September 1999, in response to declines in the Company's stock price
in the first quarter, the Board of Directors authorized a common stock
repurchase and hedging program intended to reduce or eliminate dilution
when shares are issued in accordance with the Company's various stock
compensation plans. The Company had canceled a prior share repurchase
and hedging program (previously authorized in September 1996 by the
Board of Directors to offset the dilutive effects of employee stock
exercises) when it merged with First Brands. During the nine-month
period ended March 31, 2000, a total of 3,123,000 shares were acquired
at a cost of $125 million.
On September 15, 1999, the Company settled share repurchase agreements
and options contracts realizing cash proceeds of approximately $82
million. On the same day, the Company entered into two new share
repurchase transactions whereby the Company contracted for future
delivery of 2,260,000 shares on September 15, 2002 and 2,260,000 shares
on September 15, 2004, each for a strike price of $43 per share. In
November 1999, the Company entered into an agreement to purchase an
additional 1,000,000 shares on December 1, 2003 at a price of $46.32
per share.
On November 17, 1999, the stockholders approved an amendment of the
Company's Certificate of Incorporation to increase the authorized
capital of the Company to consist of 750,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock, each with a par value
of $1.00 per share.
Management believes the Company has access to sufficient capital
through existing lines of credit and, should the need arise, from
other public and private sources.
<PAGE>
PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Cautionary Statement
Except for historical information, matters discussed above and in
the financial statements and footnotes, including statements about
future growth, profitability, costs, expectations, plans or
objectives, are forward-looking statements based on management's
estimates, assumptions and projections. These forward-looking
statements are subject to risks and uncertainties, and actual results
could differ materially from those discussed above and in the
financial statements and footnotes. Important factors that could
affect performance and cause results to differ materially from
management's expectations are described in "Forward-Looking Statements
and Risk Factors" in the Company's Annual Report on Form 10-K for the
year ending June 30, 1999, and in the Company's subsequent SEC filings.
Those factors include, but are not limited to, marketplace conditions
and events, competitors' actions, the Company's costs, risks inherent
in litigation and international operations, the success of new products,
the integration of acquisitions and mergers, including First Brands, and
environmental, regulatory and intellectual property matters.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts
(viii) The Clorox Company Supplemental Executive
Retirement Plan Restated (July 17, 1991 amended
May 18, 1994, January 17, 1996 and January 29, 2000)
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE CLOROX COMPANY
(Registrant)
DATE May 11, 2000 BY /S/ GREGORY S. FRANK
------------ --------------------
Gregory S. Frank
Vice-President - Controller
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
- -------------- ------------------------------------------------
10(viii) The Clorox Company Supplemental Executive Retirement
Plan Restated (July 17, 1991 amended May 18, 1994,
January 17, 1996 and January 19, 2000)
THE CLOROX COMPANY
SUPPLEMENTAL
EXECUTIVE
RETIREMENT PLAN
RESTATED
JULY 17, 1991
AMENDED
MAY 18, 1994,
JANUARY 17, 1996
and
January 19, 2000
PURPOSE OF THE PLAN
The purpose of The Clorox Company Supplemental Executive Retirement
Plan (the "Plan") is to provide retirement benefits for certain
executives of The Clorox Company (the "Company") in addition to
the retirement benefits provided generally to all Company salaried
employees. These supplemental benefits are intended to provide
greater retirement security for those executives and to aid in
attracting and retaining future executives.
ARTICLE I
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings, unless a different meaning is plainly
required by the context.
1.1 "Accrued Benefit" means the benefit of a Participant
calculated under Article II at the time of the Participant's
termination, or for Participants who have not terminated employment,
at the time of their assumed termination. In the latter case,
the benefit will be based upon the following as of their assumed
termination: (a) Compensation, (b) total years and completed months
of service, (c) any vested accrued benefit from a Company sponsored
Defined Benefits Plan, (d) the monthly benefit which could be
provided based on the actuarially determined annuity value of
the Participant's vested Company contributions account under any
Company sponsored Defined Contribution Plan, and (e) any monthly
primary insurance benefit to which the Participant may be entitled
under the Social Security Act.
1.2 "Board of Directors" means the board of directors of the
Company as from time to time constituted.
1.3 "Committee" means the Employee Benefits and Management
Compensation Committee of the Board of Directors.
1.4 "Company" means The Clorox Company.
1.5 "Compensation" means the total of annual base salary
plus the Management Incentive Compensation awarded to a
Participant and in each case includes amounts the receipt of
which the Participant has elected to defer or to take in the
form of restricted stock or a stock option. For purposes of
the calculation of benefits in Sections 2.3 and 2.5, the total
of the Participant's three highest Management Incentive
Compensation or Executive Incentive Compensation (referred to
collectively as "Incentive Compensation") awards will be
apportioned evenly over the 36 consecutive months of highest base
salary. If a Participant receives a pro-rated Incentive
Compensation award because of termination of employment other
than at the end of the Company's fiscal year, (a) that pro-rated
amount shall be divided by the number of months the Participant
was employed during the fiscal year and (b) the Participant's
third highest Incentive Compensation award shall be divided by 12.
If the result of (a) above is greater than the result of (b)
above, one of the Participant's three highest Incentive
Compensation awards for purposes of this paragraph shall be deemed
to be the Participant's final year pro-rated Incentive
Compensation Award plus the amount determined in (b) above
multiplied by the result of subtracting from 12 the number of
months Participant was employed by the Company during his or
her final year of employment.
1.6 "Defined Benefit Plan" means a plan, fund or program under
which an employer undertakes systematically for the payment of
definitely determinable benefits to its employees over a period
of years after retirement. The benefit an employee will receive
upon retirement can be determined from a formula defined in the
plan instrument.
1.7 "Defined Contribution Plan" means a plan which provides
for an individual account for each participant and for benefits
based solely on the amount contributed to the participant's
account, and any income, expenses, gains and losses and any
forfeitures of accounts of other participants which may be allocated
to such participant's account. Beginning July 1, 1994 "Defined
Contribution Plan" shall include NonQualified Deferred Compensation
Plans which a) restore amounts for a Participant's benefit which
cannot be contributed to a defined benefit or contribution plan
deemed qualified under the Internal Revenue Code, or b) account
for annual distributions, whether deferred or received in cash,
made from a Defined Contribution Plan rather than credited to the
Participant's account in such plan.
1.8 "Effective Date" means July 1, 1981.
1.9 "Married Participant" means a Participant who is lawfully
married on the date Retirement Benefits become payable pursuant
to Article II (Retirement Benefits).
1.10 "Officer" means an officer of the Company with a rank of
Vice President or above.
1.11 "Participant" means any employee who becomes a Participant
pursuant to Section 2.1 (Participation), or a former employee who
has become entitled to a Normal or Early Retirement Benefit
pursuant to the Plan.
1.12 "Retirement Benefit" means the retirement income provided to
Participants and their joint annuitants in accordance with the
applicable provisions of Article II (Retirement Benefits).
Words importing males shall be construed to include females
wherever appropriate.
ARTICLE II
RETIREMENT BENEFITS
2.1 Participation
The employees of the Company named in Exhibit A are the Participants
currently accruing benefits or who have vested deferred benefits
and have not begun to receive such benefits. From time to time,
the Committee may designate additional employees as Plan Participants.
A Participant who is an Officer of the Company and who is removed
from office or is not reelected as an Officer, or who is not an
Officer and who terminates his employment or has his employment
terminated, will thereupon cease to be a Participant and will have
no vested interest in the Plan unless he is entitled to a Normal
or Early Retirement Benefit pursuant to this Article II.
2.2 Normal Retirement Date
A Participant who terminates his employment on or after age sixty-five
with ten or more years of employment with the Company will receive
a Normal Retirement Benefit beginning on the first day of the month
following his termination of employment. Such date will be the
Participant's Normal Retirement Date.
2.3 Normal Retirement Benefits
The Normal Retirement Benefit payable to a Participant will be equal
to 3-2/3% of the monthly average of the Participant's compensation
during the thirty-six (36) consecutive months of employment
producing the highest such average, times the Participant's total
years and completed months of employment with the Company as of his
termination of employment, to a maximum of 15 years, offset by:
(a) the monthly benefit payable under a 50% joint and survivor
annuity form for a Married Participant or an annuity payable for
the life of a single Participant, which would be provided to the
Participant on his Normal Retirement Date (i) by Company contributions
under any Company sponsored Defined Benefit Plan plus (ii) the
monthly benefit which could be provided based on the actuarially
determined annuity value of his vested Company contributions account
under any Company sponsored Defined Contribution Plan, plus
(b) the monthly primary insurance benefit to which the Participant
may be entitled under the Social Security Act as of his Normal
Retirement Date.
For purposes of this Section, Company contributions shall not include
voluntary reductions of compensation under the provisions of a
Company sponsored Defined Contribution Plan. Company matching
contributions under such a plan shall be considered Company contributions.
2.4 Early Retirement Date
A Participant who terminates his employment on or after age
fifty-five with ten or more years of employment with the Company
will receive an Early Retirement Benefit beginning on the first
day of the month following his termination of employment. The
date of the commencement of the Early Retirement Benefit will be
the Participant's Early Retirement Date.
2.5 Early Retirement Benefit
The Early Retirement Benefit payable to a Participant on his
Early Retirement Date will be calculated in the same manner as
the Normal Retirement Benefit in Section 2.3 except that:
(a) Before deducting the offsets provided in Section 2.3, (a)
and (b), the benefit derived by the calculation in the first
paragraph of Section 2.3 shall be reduced to reflect the
Participant's retirement before his Normal Retirement Date.
This reduction will be one quarter of one percent (0.25%) for
each month that the Participant's Early Retirement Date precedes
his Normal Retirement Date.
(b) In calculating the offset described in Section 2.3, (a)
and (b), the reference to "Normal Retirement Date" shall be
changed to "Early Retirement Date." If the Early Retirement Date
is prior to the Participant's attainment of age 62, then the monthly
primary insurance benefit payable at age 62 shall be multiplied
by the appropriate factor from the table below:
Age at Early
Retirement Date Factor
62 1.00
61 .90
60 .81
59 .73
58 .66
57 .60
56 .54
55 .49
If the Participant's Age on the Early Retirement Date is
not an integral age, the factors above shall be interpolated to
reflect the age in years and months. If the Participant is 62
or older on his/her Early Retirement Date, the offset shall be the
actual monthly primary insurance benefit to which the Participant
is entitled under the Social Security Act as of that date.
2.6 Form of Payment
A Participant's Normal or Early Retirement Benefit, will be paid
to him monthly beginning on his Normal or Early Retirement Date
and ending with the payment due for the month in which his
death occurs. If the spouse of a Participant who is receiving
a Retirement Benefit survives the Participant, monthly payments
equal to 50% of the monthly amount payable to the Participant
will continue to such spouse ending with the payment due for
the month in which such spouse's death occurs.
2.7 Termination other than Early or Normal Retirement
A Participant who terminates employment or whose employment
is terminated by the Company and who does not meet the requirements
for an Early or Normal Retirement Benefit will be not be entitled
to a benefit under the Plan.
2.8 Pre-Retirement Death Benefit
The surviving spouse of a Participant with ten or more years of
employment with the Company who dies before he has begun
receiving a Normal or Early Retirement Benefit shall be entitled
to receive a Pre-Retirement Death Benefit. The Pre-Retirement
Death Benefit shall be one-half of a 50% joint and survivor annuity
form of the Early or Normal Retirement Benefit the Participant
would have received had he elected to begin receiving a Retirement
Benefit on the first day of the month following his death. If the
Participant's death occurs before he has attained the age at which
he could elect to receive an Early Retirement Benefit, the
Pre-Retirement Death Benefit will commence on the first day of the
month following the date upon which the Participant would have
attained that age had he survived; provided, however, that if the
surviving spouse dies before that date, there shall be no
Pre-Retirement Death Benefit available to any survivors of the
Participant or his spouse.
2.9 Disability
A Participant who becomes disabled as determined by The Clorox
Company Pension Plan will continue to participate in this Plan
on the same basis as he continues to participate in said
Pension Plan.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 Plan Administration
The Committee shall have the power and the duty to take all action
and to make all decisions necessary and proper to carry out the
Plan. Without limiting the generality of the foregoing, the
Committee hereby designates the Employee Benefits Committee of
the Company to control and manage the operation and administration
of the Plan. The Committee shall have the authority to allocate
among themselves or to the Employee Benefits Committee or to
delegate to any other person, any fiduciary responsibility with
respect to the Plan.
3.2 Amendment and Plan Termination
(a) Except by the written consent of 75% of Plan Participants
actually or potentially affected thereby and the approval of the
Board of Directors, the Plan may not be terminated or amended in
any way which would reduce the benefits payable hereunder or
reduce or eliminate the funding provided for in Article IV until
the first regularly scheduled meeting of the Board of Directors
held after June 30, 2011.
(b) The Board of Directors, without the consent of the Plan
Participants, may amend the Plan to improve or increase the benefits
payable hereunder at any time.
(c) If the Plan is terminated, all Participants, including
beneficiaries receiving benefits, will be entitled to their
Accrued Benefits under the Plan. In such event the Board of
Directors may, at its sole discretion, elect any one or more of
the following alternatives to satisfy the Company's obligations
to such Participants or beneficiaries, provided that the method
so elected shall be applied uniformly to all Participants or
beneficiaries:
(i) Provide benefit payments in accordance with the terms of
the Plan, at the times specified in the Plan.
(ii) Purchase immediate or deferred annuities.
(iii) Make lump sum payments equal to the present value
of accrued benefits for amounts less than $25,000 adjusted
annually beginning July 1, 1995, for changes in the Consumer
Price Index.
3.3 Assignment of Benefits
A Participant may not, either voluntarily or involuntarily,
assign, anticipate, alienate, commute, pledge or encumber any
benefits to which he is or may become entitled to under the
Plan nor may the same be subject to attachment or garnishment
by any creditor of a Participant.
3.4 Not An Employment Agreement
Nothing in the establishment of the Plan is to be construed
as giving any Participant the right to be retained in the
employ of the Company.
3.5 Merger, Consolidation or Transfer
In the event that the Company shall, pursuant to action
by its Board of Directors, at any time propose to merge into,
consolidate with or sell or otherwise transfer all or
substantially all of its assets to another corporation and
provision is not made pursuant to the terms of such transaction
for the continuation of this Plan by the surviving, resulting
or acquiring corporation or for the substitution of a comparable
plan hereto, the provisions of this Plan shall remain in effect.
ARTICLE IV
FUNDING
4.1 Establishment of Irrevocable Trust
The Company shall establish an irrevocable trust of which the
Company is the owner for federal income tax purposes (within
the meaning of Sections 671 through 677 of the Internal Revenue
Code of 1986) (the "Trust") and fund the Trust as hereinafter
provided in order to provide a source from which to satisfy
the Company's obligations to Participants under this Plan.
4.2 Amount of Funding
The Company shall make such contributions to the Trust as the
Board of Directors from time to time determines appropriate.
4.3 Actuarial Assumptions and Method
The Plan's actuary shall use the following assumptions and
methods when advising the Board of Directors with regard to
contributions to the Trust:
(a) Mortality:
1983 Group Annuity Mortality Table for periods after benefits
have commenced, or are assumed to have commenced. No
mortality will be assumed prior to the assumed retirement age
for benefits not yet in payment status.
(b) Return on Investment:
Assets are assumed to earn, the liabilities are discounted at,
eight percent (8%) per year.
(c) Assumed Retirement Age:
For Participants whose benefits are not in payment status as
of July 1 of each year, the Assumed Retirement Age will be
age 60, or their current age if older. For beneficiaries,
the Assumed Retirement Age is the beneficiary's age on the
date their deceased spouse would have reached 60, or their
current age if their spouse would have already been older
than age 60.
(d) Annual Pay Increases:
Eight percent (8%) per year.
(e) Employee Turnover:
None.
(f) Social Security Increases:
Social security benefits are assumed to increase 5% per year.
(g) IRC Limits:
The Internal Revenue Code (IRC) section 415 and section 401(a)(17)
limits are assumed to increase 5% per year.
(h) Defined Contribution Plan Offset:
Annuity equivalent of projected account balance assuming an
annual earnings rate of 8.0%; Profit Sharing Plan contributions
of 8.0% of pay; annual TRIP contributions of $500 (no
inflation); and assuming no further PAYSOP contributions
are made.
(i) Actuarial Cost Method:
The Entry Age Normal Cost Method will be used. The unfunded
actuarial liability as of each July 1 will be amortized
over ten years.
April 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTATINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF THE CLOROX COMPANY FOR THE FISCAL QUARTER ENDED MARCH 31, 1999, AS
PRESENTED IN THE CLOROX COMPANY'S FORM 10-Q FILED FOR SUCH PERIOD, AND IS
INCORPORATED BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-1999
<CASH> 107
<SECURITIES> 42
<RECEIVABLES> 680
<ALLOWANCES> 3
<INVENTORY> 402
<CURRENT-ASSETS> 1273
<PP&E> 1929
<DEPRECIATION> 857
<TOTAL-ASSETS> 4351
<CURRENT-LIABILITIES> 1533
<BONDS> 679
0
0
<COMMON> 250
<OTHER-SE> 1475
<TOTAL-LIABILITY-AND-EQUITY> 4351
<SALES> 2930
<TOTAL-REVENUES> 2930
<CGS> 1446
<TOTAL-COSTS> 2399
<OTHER-EXPENSES> 38
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> 422
<INCOME-TAX> 153
<INCOME-CONTINUING> 269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 269
<EPS-BASIC> 1.14
<EPS-DILUTED> 1.12
</TABLE>
