þ | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware | 31-0595760 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification Number) |
(Address of principal executive offices) (ZIP code)
(Registrant’s telephone number, including area code)Title of each class Name of each exchange on which registered Common Stock–$1.00 par value New York Stock Exchange
net sales in the Household segment and approximately 10%, 10% and 11% of net sales in the International segment. Sales of charcoal represented approximately 11% in fiscal year 2010 and approximately 10% in fiscal years 2009 and 2008, respectively, of the Company’s total consolidated net sales and approximately 36%, 32% and 30% of net sales in the Household segment, respectively. recessionary periods. equity securities, the incurrence of debt, the assumption of contingent liabilities, the increase in expenses related to certain intangible assets and increased operating expenses, which could adversely affect the Company’s results of operations and financial condition. Future acquisitions of foreign companies would increase the Company’s exposure to foreign exchange risks. In addition, to the extent that the economic benefits associated with any of the Company’s acquisitions diminish in the future, the Company may be required to record additional write-downs of goodwill, intangible assets or other assets associated with such acquisitions, which could adversely affect its operating results. Additionally, this may reduce the ability of the Company to bring new innovative products to consumers. other restructuring plans. hereto. The Company has outsourced a significant portion of its information technology activities to Hewlett-Packard, including its data centers, which are primarily located in Alpharetta, Ga. This information appears under “Quantitative and Qualitative Disclosure about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” on pages
None
(Title of class)oþ. No o.þo.Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company oLarge accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o 20082009 (the last day of the most recently completed second quarter) was approximately $7.7$8.5 billion.2009,2010, there were 139,346,876138,931,910 shares of the registrant’s common stock outstanding.20092010 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days after June 30, 2009,2010, are incorporated by reference into Part III, Items 10 through 14 of this Annual Report on Form 10-K.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 20092010
TABLE OF CONTENTSPage Part I Item 1. Business4 Item 1.A. 1.Risk Factors 8 Business5 Item 1.A. Risk Factors 9 Item 1.B. Unresolved Staff Comments 17 20Item 2. Properties17 Properties20 Item 3. Legal Proceedings 17 21Item 4. Submission of Matters to a Vote of Security Holders 17 (Removed and Reserved)21 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 19 23 Item 6. Selected Financial Data 20 24Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 24Item 7.A. Quantitative and Qualitative Disclosures About Market Risk 20 24Item 8. Financial Statements and Supplementary Data 20 25Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 20 25Item 9.A. Controls and Procedures 21 25Item 9.B. Other Information 21 25Part III Item 10. Directors, Executive Officers and Corporate Governance 21 26Item 11. Executive Compensation 21 26Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters22 Matters 26 Item 13. Certain Relationships and Related Transactions, and Director Independence 22 26Item 14. Principal Accounting Fees and Services 22 26Part IV Item 15. Exhibits and Financial Statement Schedules 22 27Signatures 2outflows,flows, plans, objectives, expectations, growth, or profitability, are forward looking statements based on management’s estimates, assumptions and projections. Words such as “will,” “could,” “may,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations on such words, and similar expressions, are intended to identify such forward looking statements. These forward looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed below. Important factors that could affect performance and cause results to differ materially from management’s expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for the year ended June 30, 2009,2010, as updated from time to time in the Company’s SEC filings.unfavorable general economic and marketplace conditions and events, including consumer confidence and consumer spending levels, the rate of economic growth, the rate of inflation, and the financial condition of our customers, suppliers and service providers;foreign currency exchange rate and interest rate fluctuations;unfavorable political conditions in international markets and risks relating to international operations;impactability of the volatility of the debt markets on the Company’s cost of borrowingCompany to implement and accessgenerate expected savings from its programs to funds,reduce costs, including commercial paperits supply chain restructuring and its credit facility;other restructuring plans;relating to changesinherent in the Company’s capital structure;relationships with suppliers, including sole-source or single-source suppliers;arising from declines in cash flow, whether resulting from tax payments, debt payments, share repurchases, interest cost increases greater than management’s expectations, related to the handling and/or increases in debt or changes in credit ratings, or otherwise;changes in the Company’s tax rate;transportation of hazardous substances, including, but not limited to, chlorine;strategies,strategies;its previously announced Centennial Strategy;the Company’s joint venture regarding the Company’s Glad® plastic bags, wraps and containers business, and the agreements relating to the provision of information technology, procure to pay and other key services by third parties;the ability of the Company to implement and generate expected savings from its programs to reduce costs, including its supply chain restructuring and operating model changes;the need for any unanticipated restructuring or asset-impairment charges;the success of new products and the ability of the Company to develop products that delight the consumer;consumer and customer reaction to price increases;risks related to customer concentration;customer-specific ordering patterns and trends;3competitive actions;supply disruptions or any future supply constraints that may affect key commodities or product inputs;risks inherent in supplier relationships, including sole-supplier relationships;risks related to the handling and/or transportation of hazardous substances, including but not limited to chlorine;risks related to the conversion of the Company’s information systems, including potential disruptions;risks arising out of natural disasters;the impact of disease outbreaks, epidemics or pandemics on the Company’s operations;risks inherent in litigation;providers;abilityneed to manage and realize the benefit of joint venturesrefine controls to adjust for accounting, financial reporting and other cooperative relationships, including the Company’s joint venture regarding the Company’s Glad® plastic bags, wraps and containersorganizational changes or business and the agreements relating to the provision of information technology and related services by third parties;conditions;contingencies;contingencies and risks inherent in litigation, including class action litigation;Works™Works® brand; and auto-care products primarily under the Armor All® and STP® brands.Lifestyle consists of food products and water-filtration systems and filters marketed and sold in the United States and all natural personal care products. Products within this segment include dressings and sauces, primarily under the Hidden Valley® and K C Masterpiece® brands; water-filtration systems and filters under the Brita® brand; and all natural personal care products under the Burt’s Bees® brand. brands brands.States.States, excluding natural personal care products. These products include home-care, laundry, auto-care, water filtration, charcoal and cat litter products, dressings and sauces, plastic bags, wraps and containers, and insecticides, primarily under the Clorox®, Javex®, Glad®, PinoLuz®, Ayudin®, Limpido®, Clorinda®, Poett and, Agua Jane® , Ever Clean®, Chux®, Kingsford®, and Hidden Valley® brands.2008 and 2007,2008, respectively, sales of liquid bleach represented approximately 13%, 14% and 14% of the Company’s total consolidated net sales. In fiscal years 2009, 2008 and 2007, respectively, sales of trash bags represented approximately 12%, 13% and 14% of the Company’s total consolidated net sales.sales, 25% of net sales in the Cleaning segment for each of the three fiscal years and 21%, 25% and 23% of net sales in the International segment. In fiscal years 2010, 2009 and 2008, and 2007respectively, sales of charcoaltrash bags represented approximately 10%11%, 12% and 13% of the Company’s total consolidated net sales.5Tablesales, approximately 31%, 33% and 34% of Contents Historical segment financial information presented herein has been revised to reflect the new reportable segments.
____________________Fiscal Total (Millions) Year Cleaning Lifestyle Household International Corporate(1) Company Net sales 2009 $ 1,836 $ 813 $ 1,726 $ 1,075 $ - $ 5,450 2008 1,817 676 1,698 1,082 - 5,273 2007 1,781 511 1,636 919 - 4,847 Earnings (losses) from
continuing operations before
income taxes2009 410 270 289 140 (298 ) 811 2008 360 205 225 177 (274 ) 693 2007 392 186 225 170 (230 ) 743 Identifiable assets 2009 1,043 1,316 724 895 598 4,576 2008 1,026 1,313 789 958 626 4,712 Fiscal Total (Millions) Year Cleaning Household Lifestyle International Corporate (1) Company Net sales 2010 $ 1,838 $ 1,663 $ 864 $ 1,169 $ - $ 5,534 2009 1,836 1,726 813 1,075 - 5,450 2008 1,817 1,698 676 1,082 - 5,273 Earnings (losses) before income taxes 2010 440 290 303 172 (280 ) 925 2009 410 289 270 140 (298 ) 811 2008 360 225 205 177 (274 ) 693 Identifiable assets 2010 1,211 788 1,378 907 271 4,555 2009 1,043 724 1,316 895 598 4,576 (1) Corporate includes certain nonallocated administrative costs, interest income, interest expense and certain other nonoperating income and expense.expenses. Corporate assets include cash and cash equivalents, the Company’s headquarters and research and development facilities, information systems hardware and software, pension balances, and other investments.2221 –Segment Reportingof the Notes to Consolidated Financial Statements beginning on page 6065 of Exhibit 99.1 hereto.6solesole-source or single-source suppliers. Interruptions in the delivery of these materials or services could adversely impact the Company. Key raw materials used by the Company include resin, jet fuel, chlor-alkali, sodium hypochlorite, corrugate, agricultural commodities and other raw materials. Sufficient raw materials were available during fiscal year 20092010 and costs for materials continue to be volatile. The Company experienced significant commodity cost pressures, particularly inDuring the first half of fiscal year 2009, and2010, the Company experienced somemoderate decline in commodity costs, and during the second half of fiscal year 2010, the fiscal year.Company experienced moderate commodity cost increases. The Company generally utilizes supply and forward-purchase contracts to help ensure availability and help manage the volatility of the pricing of raw materials needed in its operations. However, the Company is nonetheless highly exposed over the short term to changes in the price of commodities used as raw materials in the manufacturing of its products. For further information regarding the impact of changes in commodity prices, see “Quantitative and Qualitative Disclosure about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 16 through 17page 20 of Exhibit 99.1 hereto and “Risk Factors – Price increases in raw materials, energy, transportation and other necessary supplies or services could harm the Company’s profits” in Item 1.A.® natural personal care products, with slightly more than half of the annual net sales occurring during the months of October through March. Operating cash flow is used to build inventories of those products in the off-season.In each of fiscal years 2009, 2008 and 2007 netdomestic and international affiliates, were 27%, for fiscal years 2010 and 2009, and 26% and 26%, respectively,for fiscal year 2008, of the Company’s total consolidated net sales. Order backlog is not a significant factor in the Company’s business.7Oh;Oh.; Willowbrook, Ill.Il.; Midland, Mi.; Durham, NC; and Buenos Aires, Argentina. The Company devotes significant resources and attention to product development, process technology and consumer insight research to develop consumer-preferred products with innovative and distinctive features. The Company incurred expenses of $119 million, $114 million, $111 million and $108$111 million in fiscal years 2010, 2009 2008 and 2007,2008, respectively, on direct research activities relating to the development of new products and/or the maintenance and improvement of existing products. In addition, the Company also obtains technologies for use in its products from third parties. Royalties relating to such technologies are reflected in the Company’s cost of sales. For further information regarding the Company’s research and development costs, see “Research and development costs” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 67 of Exhibit 99.1 hereto.2009,2010, the Company employed approximately 8,300 people. following risks and uncertainties set forth below, as well as other factors described elsewhere in this Report or in other filings by the Company with the SEC, could adversely affect the Company’s business, financial condition and results of operations. Additional risks and uncertainties that are not currently known to the Company or that are not currently believed by the Company to be material may also harm the Company’s business operations and financial results. Risks include:the impact of general economic conditions in the United States and in other countries in which the Company currently does business;the impact of currency fluctuations;the availability and cost of debt financing;changes to cash flow resulting from the Company’s operating results, tax settlement payments, debt repayments and share repurchases;8fluctuations in federal, state, local and foreign taxes;the ability of the Company to successfully execute its strategies, including its Centennial Strategy;expenses for impairment and obsolescence of property, plant and equipment in excess of projections;expenses for impairment of goodwill, trademarks and other intangible assets and equity investments in excess of projections;the introduction of new products and line extensions by the Company or its competitors;the impact of potential emerging technologies on the Company’s existing product lines, including any potential future obsolescence;consumer and customer reaction to price increases;changes in product pricing by the Company or its competitors;the impact of customer inventory reductions or shelf simplification initiatives;the mix of products sold within different channels and countries with varying profitability in a given quarter;the ability of the Company to manage inventory at appropriate levels, including decisions regarding obsolescence;the ability to attract and retain qualified personnel;charges resulting from any restructuring that management may, from time to time, choose to undertake;the impact of changing accounting principles and standards;expenses for impairment of goodwill, trademarks and other intangible assets and equity investments in excess of projections;the effectiveness of the Company’s advertising, marketing and promotional programs;activity;activity or other factors;penetrateensure compliance with applicable laws and grow international markets;with the Company’s policies and procedures;significant increasesthe mix of products sold within different channels and countries with varying profitability in interest rates, insurance costs,a given quarter or fiscal year; pension, healthcare or other employee benefit costs;the face of a consolidating retail environment;personnel;personnel to meet the Company’s business needs;the ability of the Company to successfully manage regulatory, tax and legal matters, including the resolution of pending matters within current estimates;the impact of any litigation or product liability claims;the impact of environmental remediation costs, including those for which the Company is jointly and severally liable;brands;the ability of the Company to maintain key retail customer relationships;the effectiveness of the Company’s advertising, marketing and promotional programs;the ability of the Company to maintain and enhance profits in the face of a consolidating retail environment;the ability of the Company to penetrate and grow international markets; andthe impact of foreign import and export restrictions or other trade regulations.brands.sales volumeCompany growth, whether due to acquisitions or to internal growth, can burden management resources and financial controls that, in turn, can have a negative impact on operating results and net earnings. To some extent, the Company sets its expense levels in anticipation of future revenues. If actual revenue falls short of these expectations, operating results and net earnings are likely to be adversely affected.9the downturn.financial markets have experienced unprecedentedcontinued to experience significant disruptions during fiscal year 20092010 and continuing volatility could harm the Company’s business. Although the Company currently generates significant cash flows from ongoing operations and has access to global credit markets through its financing activities and existing credit facilities, if the current credit conditions were to worsen, the Company might not be able to access credit markets on favorable terms, which could adversely affect the Company’s ability to borrow. Financial market volatility and unfavorable economic conditions may also adversely affect the financial condition of ourthe Company’s customers, suppliers and other business partners. If customers’ financial conditions are severely affected, the Company may not be able to collect account receivables. In addition, the decline in the equity markets and the valuation of other assets precipitated by the credit crisis and financial system disruptions has affected the value of the Company’s pension plan assets. The lower pension plan asset base has negatively affected the return on plan assets and has increased the Company’s pension expense and requiredexpense. As a result, the Company has contributed additional pension funding. If current market conditions worsen or continue for a prolonged period of time, it could have an additional negative impact on future pension expense and cash flow.102009,2010, approximately 80% of the Company’s net sales were generated in U.S. markets. U.S. markets for householdcleaning products are considered mature and are generally characterized by high household penetration. The Company’s ability to achieve sales growth will depend on its ability to drive growth through innovation, investment in its established brands and enhanced merchandising and its ability to capture market share from competitors. In addition, price increases may slow sales growth or create declines in sales in the short term as consumers adjust to price increases. If the Company is unable to increase market share in existing product lines, develop product improvements, undertake sales, marketing and advertising initiatives that grow its product categories, and develop, acquire or successfully launch new products, it may not achieve its sales growth objectives.Operations outside the United States expose the Moreover, any favorable impacts to profit margins or financial results from fluctuations in foreign currency exchange rates are likely to be unsustainable over time.America;America and particularly in Venezuela;
actions.actions generating a negative impact on our business.sellcommercialize its products on a competitive basis in international markets and may have a material adverse effect on its results of operations or financial position. The Company’s small sales volume in some countries, relative to some multinational and local competitors, could exacerbate such risks.jurisdictions, potential difficulties in staffing and managing local operations,jurisdictions. Additionally, there is a risk of potentially higher incidence of fraud or corruption credit riskin certain foreign jurisdictions and greater difficulty in maintaining effective internal controls. From time to time, the Company may conduct internal investigations and compliance reviews to ensure that the Company is in compliance with applicable laws and regulations. Additionally, the Company could be subject to inquiries or investigations by government and other regulatory bodies. Any determination that the Company’s operations or activities are not in compliance with United States laws, including the Foreign Corrupt Practices Act, or various international laws and regulations could expose the Company to significant fines, penalties or other sanctions that may harm the business and reputation of localthe Company.distributors,suppliers of acquired companies; andadverse tax consequences.11Tabledilutive issuances of Contentsextensions.extensions and product improvements. The Company cannot be certain that it will successfully achieve those goals. The development and introduction of new products requiresrequire substantial and effective research, development and marketing expenditures, which the Company may be unable to recoup if the new products do not gain widespread market acceptance. New product development and marketing efforts, including enteringefforts to enter markets or product categories in which the Company has limited or no prior experience, have inherent risks. These risks include product development or launch delays, which could result in the Company not being first to market, the failure of new products and line extensions to achieve anticipated levels of market acceptance and the cost of failed product introductions.TheNet sales to the Company’s largest customer, Wal-Mart Stores, Inc. and its domesticaffiliates, were 27% for fiscal years 2010 and international affiliated companies, accounted2009, and 26% for approximately 27%, 26%fiscal year 2008 of consolidated net sales and 26%occurred in each of the Company’s reportable segments. No other customers exceeded 10% of consolidated net sales during fiscal years 2009, 2008 and 2007.in any of these years. During fiscal years 2010, 2009 2008, and 2007,2008, the Company’s five largest customers accounted for 43%45%, 42%43% and 42%, respectively, of its total consolidated net sales.sales, respectively. The Company expects that a significant portion of its revenues will continue to be derived from a small number of customers. As a result, changes in the strategies of the Company’s largest customers, including shelf simplification or a reduction in the number of brands they carry or a shift of shelf space to “private-label” or competitors’ products, may harm the Company’s sales.whowhich may demand lower pricing or special packaging, or impose other requirements on product suppliers. These business demands may relate to inventory practices, logistics, or other aspects of the customer-supplier relationship. If the Company ceases doing business with a significant customer or if sales of its products to a significant customer materially decrease, the Company’s business, financial condition and results of operations may be harmed. including its Centennial Strategy, or will achieve its intended growth targets. If the Company is unable to implement its strategies in accordance with its expectations, the Company’s financial results could be adversely affected. Moreover, the Company cannot be certain that implementation of its strategies will necessarily advance the Company’s business or financial results.operating model changes.BeginningHistorically, the Company has undertaken restructuring programs and incurred restructuring charges, and expects to continue to restructure its operations as necessary to improve operational efficiency. For example, beginning in fiscal year 2008, the Company began a supply chain restructuring involving closing certain domestic and international manufacturing facilities and redistributing production between the remaining facilities and third-party producers to optimize available capacity and reduce operating costs. Gaining additional efficiencies may become increasingly difficult over time and any failure to successfully execute such changes may result in supply chain interruption, which may negatively impact product volume and margins. In addition, one of the Company’s key strategies is to reduce waste, lower costs and increase productivity. The Company sets aggressive annual cost savings targets in support of this strategy. Failure to reduce costs through productivity gains and operating model efficiencies could adversely affect profitability.12pages 16 through 17page 20 of Exhibit 99.1 hereto, incorporated herein by reference.solesole-source and single-source suppliers for certain of its raw materials, packaging, product components, finished products and other necessary supplies. If the Company is unable to maintain supplier arrangements and relationships, or if it is unable to contract with suppliers at the quantity and quality levels needed for its business, or if any of the Company’s key suppliers becomes insolvent or experiences other financial distress, the Company could experience disruptions in production and its financial results could be adversely affected.Acquisitions and new venture investments may not be successful.In connection with the Company’s Centennial Strategy, the Company may seek to increase growth through acquisitions. Not only is the identification of good acquisition candidates difficult and competitive, but these transactions also involve numerous risks, including the ability to:successfully integrate acquired companies, products or personnel into the Company’s existing business; achieve expected synergies and obtain the desired financial or strategic benefits from acquisitions; retain key relationships with employees, customers, partners and suppliers of acquired companies; and maintain uniform standards, controls, procedures and policies throughout acquired companies.Companies or operations acquired or joint ventures created may not be profitable or may not achieve sales levels and profitability that justify the investments made. Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence of debt, the assumption of contingent liabilities, the increase in amortization expenses related to certain intangible assets and increased operating expenses, which could adversely affect the Company’s results of operations and financial condition. Future acquisitions of foreign companies would increase the Company’s exposure to foreign exchange risks. In addition, to the extent that the economic benefits associated with any of the Company’s acquisitions diminish in the future, the Company may be required to record additional write-downs of goodwill, intangible assets or other assets associated with such acquisitions, which could adversely affect its operating results.In November 2007, the Company acquired Burt’s Bees Inc., a leading manufacturer and marketer of natural personal care products, for an aggregate purchase price of $913 million (excluding $25 million of associated tax benefits). There is no assurance that the Company will be able to achieve the sales and profit growth or increased distribution in the Burt’s Bees business that management has projected.13
Additional government regulations could impose material costs.ourthe Company’s facilities is regulated by the Department of Homeland Security. Most states have agencies that regulate in parallel to these federal agencies. In addition, the Company’s international operations are subject to regulation in each of the foreign jurisdictions in which it manufactures or distributes its products. If the Company is found to be out of compliance with applicable laws and regulations in these or other areas, it could be subject to civil remedies, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on its business. Loss of or failure to obtain necessary permits and registrations could delay or prevent the Company from meeting current product demand, introducing new products, building new facilities or acquiring new businesses and could adversely affect operating results, particularly with respect to its charcoal business. It is possible that the federal government will increase regulation of the transportation, storage or use of certain chemicals to enhance homeland security or protect the environment and that such regulation could negatively impact the Company’s ability to obtain raw materialmaterials or could increase costs. In addition, pending legislative initiatives and newly adopted legislation, such as the Patient Protection and Affordable Care Act, the Health Care and Education Reconciliation Act of 2010 and the Dodd-Frank Wall Street Reform and Consumer ProtectionAct in the areas of healthcare reform and other initiatives and legislation in the area of taxation of foreign profits, executive compensation and corporate governance and executive compensation, could also increase the Company's costs.2009,2010, the Company had a recorded liability of $19$16 million for its future remediation costs. One matter in Dickinson County, Michigan, for which the Company is jointly and severally liable, accounts for a substantial majority of the recorded liability. The Company is subject to a cost-sharing arrangement with Ford Motor Co. (Ford) for this matter, under which the Company has agreed to be liable for 24.3% of the aggregate remediation and associated costs, other than legal fees, as it and Ford are each responsible for their own such fees. If Ford is unable to pay its share of the response and remediation obligations, the Company would likely be responsible for such obligations. In October 2004, the Company and Ford agreed to a consent judgment with the Michigan Department of Environmental Quality, which sets forth certain remediation goals and monitoring activities. Based on the current status of this matter, and with the assistance of environmental consultants, the Company maintains an undiscounted liability representing its best estimate of its share of costs associated with the capital expenditures, maintenance and other costs to be incurred over an estimated 30-year remediation period. The most significant components of the liability relate to the estimated costs associated with the remediation of groundwater contamination and excess levels of subterranean methane deposits. The Company made payments of less than $1 million in fiscal years 2010 and 2009, respectively, towards remediation efforts. Currently, the Company cannot accurately predict the timing of the payments that will likely be made under this estimated obligation. In addition, the estimated loss exposure is sensitive to a variety of uncertain factors, including the efficacy of remediation efforts, changes in remediation requirements and the timing, varying costs and alternative clean-up technologies that may become available in the future. Although it is possible that the Company’s exposure may exceed the amount recorded, any amount of such additional exposures, or range of exposures, is not estimable at this time.14ourthe Company’s facilities, due to accident or an intentional act, could result in substantial liability. The Company has incurred, and will continue to incur, significant capital and operating expenditures and other costs in complying with environmental laws and regulations and in providing physical security for its worldwide operations, and such expenditures reduce the cash flow available to the Company for other purposes.2009,2010, the Company had $3.1$2.8 billion of debt. The Company’s substantial indebtedness could have important consequences. For example, it could:
expansion efforts and other general corporate purposes;
itoperates;it operates;15
2009,2010, the Company could add approximately $600 million$1.3 billion in incremental debt and remain in compliance with restrictive debt covenants. If new debt is added to the current debt levels, the related risks that the Company now faces could intensify. In addition, the cost of incurring additional debt could increase due to possible additional downgrades in the Company’s credit rating. , fire, earthquakes, flooding or other natural disasters. In addition, the Company’s corporate headquarters and Technical Center are located near major earthquake fault lines in California. If a major disruption were to occur, it could result in harm to people or the natural environment, temporary loss of access to critical data, delays in shipments of products to customers or suspension of operations.16FASB Interpretation No. (FIN) 48, Accounting for Uncertainty in Income Taxes – an Interpretation of Financial Accounting Standards Board Statement No. 109. The Companyaccounting standard that provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by FIN 48.the applicable accounting standards. Changes to uncertain tax positions, including related interest and penalties, impact the Company’s effective tax rate. When particular tax matters arise, a number of years may elapse before such matters are audited and finally resolved. Favorable resolution of such matters could be recognized as a reduction to the Company’s effective tax rate in the year of resolution. Unfavorable resolution of any tax matter could increase the effective tax rate. Any resolution of a tax issue may require the use of cash in the year of resolution. For additional information, refer to the information set forth in Note 2019 -Income Taxesof the Notes to Consolidated Financial Statements beginning on page 5356 of Exhibit 99.1 hereto, incorporated herein by reference.hereto.1718 manufacturing facilities outside North America. The Company also leases sevensix regional distribution centers in North America and several other warehouse facilities. Management believes the Company’s production and distribution facilities, together with additional facilities owned or leased and operated by various unaffiliated finished product suppliers and distribution center service providers that serve the Company, are adequate to support the business efficiently and that the Company’s properties and equipment have generally been well maintained. The Company has announcedis performing a supply chain restructuring that it expects to complete by the end of fiscal year 2012, which involves closing certain domestic and international manufacturing facilities.facilities and redistributing production between its remaining facilities and contract manufacturers to optimize availability, capacity and reduce operating costs. For additional information, see “Restructuring and asset impairment costs” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 68 through 89 of Exhibit 99.1 hereto, incorporated herein by reference.leases certainconducts research and development centersactivities and engineering research in leased facilities in Willowbrook, Ill.,Il.; Cincinnati, Oh.; Midland, Mi.; Durham, NC.; and Kennesaw, Ga. Leased sales and other facilities are located at a number of other locations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS(REMOVED AND RESERVED)None.17 an executive officer and current titles of each of the executive officers of the Company as of July 31, 2009,2010, are set forth below:Year First Elected Executive Name Age Officer Title Donald R. Knauss 58 2006 Chairman of the Board and Chief Executive Officer Lawrence S. Peiros 54 1999 Executive Vice President and Chief Operating Officer – North America Daniel J. Heinrich 53 2003 Executive Vice President – Chief Financial Officer Frank A. Tataseo 54 2004 Executive Vice President – Strategy & Growth, Bags & Wraps and Away from Home M. Beth Springer 45 2005 Executive Vice President – International & Natural Personal Care Jacqueline P. Kane 57 2004 Senior Vice President – Human Resources & Corporate Affairs Laura Stein 47 2005 Senior Vice President – General Counsel Thomas P. Britanik 51 2009 Senior Vice President – Chief Marketing Officer Wayne L. Delker 55 2009 Senior Vice President – Chief Innovation Officer Benno Dorer 45 2009 Senior Vice President – General Manager, Cleaning Division James Foster 47 2009 Senior Vice President – Chief Product Supply Officer Grant J. LaMontagne 53 2009 Senior Vice President – Chief Customer Officer George Roeth 48 2009 Senior Vice President – General Manager, Specialty Division Year First Elected Executive Name Age Officer Title Donald R. Knauss 59 2006 Chairman of the Board and Chief Executive Officer Lawrence S. Peiros 55 1999 Executive Vice President and Chief Operating Officer – North America Daniel J. Heinrich 54 2003 Executive Vice President – Chief Financial Officer Frank A. Tataseo 55 2004 Executive Vice President – Strategy & Growth, Bags & Wraps and Away from Home M. Beth Springer 46 2005 Executive Vice President – International & Natural Personal Care Jacqueline P. Kane 58 2004 Senior Vice President – Human Resources & Corporate Affairs Laura Stein 48 2005 Senior Vice President – General Counsel Thomas P. Britanik 52 2009 Senior Vice President – Chief Marketing Officer Wayne L. Delker 56 2009 Senior Vice President – Chief Innovation Officer Benno Dorer 46 2009 Senior Vice President – General Manager, Cleaning Division James Foster 48 2009 Senior Vice President – Chief Product Supply Officer Grant J. LaMontagne 54 2009 Senior Vice President – Chief Customer Officer George Roeth 49 2009 Senior Vice President – General Manager, Specialty Division
M. Beth Springer was elected executive vice president - international and natural personal care effective January 2009. She served as executive vice president – strategy & growth from January 2007 until January 2009. From January 2005 through January 2007, she served as group vice president – specialty. She served as vice president, general manager of Glad Products from October 2002 through December 2004.18ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES 24–23 – Unaudited Quarterly Dataof the Notes to Consolidated Financial Statements, which appears on page 6368 of Exhibit 99.1 hereto, incorporated herein by reference.2009,2010, was 12,62712,664 based on information provided by the Company’s transfer agent.24 –23– Unaudited Quarterly Dataof the Notes to Consolidated Financial Statements, which appears on page 6368 of Exhibit 99.1 hereto, incorporated herein by reference.192009.2010.[d] [c] Maximum Number (or Total Number of Approximate Dollar [a] Shares (or Units) Value) of Shares (or Total Number of [b] Purchased as Part of Units that May Yet Be Shares (or Units) Average Price Paid Publicly Announced Purchased Under the Period Purchased(1) per Share (or Unit) Plans or Programs Plans or Programs(2) April 1 to 30, 2009 436 $ 55.18 — $ 750,000,000 May 1 to 31, 2009 1,788 $ 51.40 — $ 750,000,000 June 1 to 30, 2009 3,790 $ 56.39 — $ 750,000,000 [d] [c] Maximum Number (or Total Number of Approximate Dollar [a] Shares (or Units) Value) of Shares (or Total Number of [b] Purchased as Part of Units that May Yet Be Shares (or Units) Average Price Paid Publicly Announced Purchased Under the Period Purchased(1) per Share (or Unit) Plans or Programs Plans or Programs(2) April 1 to 30, 2010 2,049 $ 64.29 - $ 750,000,000 May 1 to 31, 2010 2,076,628 $ 63.23 - $ 750,000,000 June 1 to 30, 2010 299,310 $ 62.95 - $ 750,000,000 (1) The shares purchased in April May and June 20092010 relate entirely to the surrender to the Company of shares of common stock to satisfy tax withholding obligations in connection with the distribution of performance shares. Of the shares purchased in May 2010, 2,074,427 shares were acquired pursuant to the Company’s share repurchase program to offset the potential impact of share dilution related to share-based awards. The remaining 2,201 shares relate to the surrender to the Company of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock andstock. The total shares purchased in June 2010 were acquired pursuant to the exerciseCompany’s share repurchase program to offset the potential impact of stock options.share dilution related to share-based awards.(2) On May 13, 2008, the board of directors approved a new $750,000,000 share repurchase program, all of which remains available for repurchase as of June 30, 2009.2010. On September 1, 1999, the Company announced a share repurchase program to reduce or eliminate dilution upon the issuance of shares pursuant to the Company’s stock compensation plans. The program initiated in 1999 has no specified cap and therefore is not included in column [d] above. On November 15, 2005, the Board of Directors authorized the extension of the 1999 program to reduce or eliminate dilution in connection with issuances of common stock pursuant to the Company’s 2005 Stock Incentive Plan. None of these programs has a specified termination date.ITEM 7.A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK1620 through 1721 of Exhibit 99.1 hereto, incorporated herein by reference.2427 through 6368 of Exhibit 99.1 hereto, incorporated herein by reference.ThereCompany’sCompany's internal control over financial reporting that occurred during the Company’sCompany's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.6469 of Exhibit 99.1 hereto, and is incorporated herein by reference. The Company’s independent registered public accounting firm, Ernst & Young, LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of June 30, 2009,2010, and has expressed an unqualified opinion in their report, which appears on page 6570 of Exhibit 99.1 hereto.21ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS accountantaccounting fees and services set forth in the Proxy Statement is incorporated herein by reference.