SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant x | |
Filed by a Party other than the Registrant o | |
Check the appropriate box: | |
o | Preliminary Proxy Statement |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to § 240.14a-12 |
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
(1) | Title of each class of securities to which transaction applies: | |
(2) | Aggregate number of securities to which transaction applies: | |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
(4) | Proposed maximum aggregate value of transaction: | |
(5) | Total fee paid: | |
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o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
(1) | Amount Previously Paid: | |
(2) | Form, Schedule or Registration Statement No.: | |
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(4) | Date Filed: | |
Proxy Statement
and
Annual Financial Statements
Stockholders
TO BE HELD ON NOVEMBER 16, 2005
1. | To elect a board of ten directors to hold office until the next annual election of directors; |
2. | To approve the 2005 Stock Incentive Plan; |
3. | To approve the Executive Incentive Compensation Plan; |
4. | To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2006; and |
5. | To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. |
Laura Stein,
Senior Vice President —
General Counsel & Secretary
1221 Broadway
Oakland, California 94612-1888
• | FOR the election of the ten nominees for director (Proposal 1); |
• | FOR the approval of the 2005 Stock Incentive Plan (Proposal 2); |
• | FOR the approval of the Executive Incentive Compensation Plan (Proposal 3); and |
• | FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2006 (Proposal 4). |
• | submitting written notice of revocation to the Secretary of the Company; |
• | submitting another proxy with a later date; or |
• | voting in person at the Annual Meeting. |
even if you do not provide voting instructions to your broker. However, the broker is not entitled to vote your shares on Proposals 2 and 3 without your instructions.
• | FOR the election of the ten nominees for director (Proposal 1); |
• | FOR the approval of the 2005 Stock Incentive Plan (Proposal 2); |
• | FOR the approval of the Executive Incentive Compensation Plan (Proposal 3); and |
• | FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2006 (Proposal 4). |
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
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Name, Principal Occupation And Other Information | | Director Since | ||||
DANIEL BOGGAN, JR. Retired Senior Vice President, the National Collegiate Athletic Association. | 1990 | |||||
Mr. Boggan has served as a consultant to Siebert Brandford Shank & Co., LLC (a municipal finance firm) since September 2003. He served as senior vice president of the National Collegiate Athletic Association from 1996 through his retirement in August 2003, after having been group executive director for education services for the National Collegiate Athletic Association since November 1994. Previously, he was vice chancellor for business and administrative services at the University of California at Berkeley since 1986. Prior to that, he served several cities and two counties as a senior manager. Mr. Boggan is a director of Payless Shoesource, Inc. and Viad Corp., is a trustee of The California Endowment and serves on various local boards. Age: 59. | ||||||
TULLY M. FRIEDMAN Chairman and Chief Executive Officer, Friedman Fleischer & Lowe LLC. | 1997 | |||||
Mr. Friedman is the chairman and chief executive officer of Friedman Fleischer & Lowe LLC (a private investment firm). Prior to forming Friedman Fleischer & Lowe in 1997, Mr. Friedman was a founding partner of Hellman & Friedman (a private investment firm) and a managing director of Salomon Brothers, Inc. He is a director of CapitalSource, LLC, Mattel, Inc. and Tempurpedic International, Inc. He is also a member of the executive committee, a trustee and the treasurer of the American Enterprise Institute. Age: 63. | ||||||
GERALD E. JOHNSTON Chairman of the Board and Chief Executive Officer of the Company. | 2003 | |||||
Mr. Johnston was elected chairman of the board of the Company in January 2005, and has served as chief executive officer since July 2003. He joined the Company in July 1981. He was vice president – corporate development from June 1992 through November 1993, vice president – Kingsford Products from November 1993 through June 1996, group vice president from July 1996 through January 1999 and president and chief operating officer from January 1999 through June 2003. Mr. Johnston is a director of Del Monte Foods Company. Age: 58. | ||||||
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Name, Principal Occupation And Other Information | | Director Since | ||||
ROBERT W. MATSCHULLAT Presiding Director of the Company. | 1999 | |||||
Mr. Matschullat was elected presiding director of the board of directors of the Company in January 2005. He served as chairman of the board of the Company from January 2004 to January 2005. He was the vice chairman and chief financial officer of The Seagram Company Ltd. (a global company engaging in two business segments: entertainment and spirits and wine) from 1995 until his relinquishment of his position as chief financial officer in December 1999 and retirement from his position as vice chairman in June 2000. Prior to joining The Seagram Company Ltd., Mr. Matschullat served as head of worldwide investment banking for Morgan Stanley & Co. Incorporated, and was one of six management members of the Morgan Stanley Group board of directors. He is a director of The Walt Disney Company and McKesson Corporation. Age: 57. | ||||||
GARY G. MICHAEL Retired Chairman of the Board and Chief Executive Officer of Albertson’s, Inc. | 2001 | |||||
Mr. Michael was the chairman of the board and chief executive officer of Albertson’s, Inc. (a leading grocery retailer) from 1991 until his retirement in April 2001. He is a director of Questar Corporation, OfficeMax Incorporated, Harrah’s Entertainment, Inc. and Idacorp. Age: 64. | ||||||
JAN L. MURLEY Chief Executive Officer of The Boyds Collection, Ltd. | 2001 | |||||
Ms. Murley became chief executive officer of The Boyds Collection, Ltd. (a leading designer and manufacturer of gifts and collectibles), in October 2003. Prior to that, she was group vice president – marketing of Hallmark Cards, Inc. (a publisher of greeting cards and related gifts) from 1999 to 2002. Previously, Ms. Murley was employed by Procter & Gamble for over 20 years, most recently as vice president for skin care and personal cleansing products. Ms. Murley is a director of The Boyds Collection, Ltd. Age: 54. | ||||||
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Name, Principal Occupation And Other Information | | Director Since | ||||
LARY R. SCOTT Retired Executive Vice President, Arkansas Best Corporation. | 1989 | |||||
Mr. Scott was executive vice president of Arkansas Best Corporation (a holding company with a multi-industry composition) from January 1996 until his retirement in February 2002. Previously, he had been chairman and chief executive officer of WorldWay Corporation from May 1993 until January 1996. Prior to that, Mr. Scott was president and chief executive officer of Consolidated Freightways, Inc. (a worldwide transportation company). Age: 69. | ||||||
MICHAEL E. SHANNON President MEShannon & Associates, Inc. | 2001 | |||||
Mr. Shannon is president of MEShannon & Associates, Inc. (a private firm specializing in corporate finance and investment). Previously, he was the chairman of the board and chief financial and administrative officer of Ecolab, Inc. (a Fortune 500 specialty chemical company) from 1996 until his retirement in January 2000. Prior to that, Mr. Shannon held senior management positions with Ecolab, Inc., Republic Steel and Gulf Oil Corp. Mr. Shannon serves as a director of CenterPoint Energy, Inc., Apogee Enterprises and NACCO Industries, Inc. Age: 68. | ||||||
PAMELA THOMAS-GRAHAM Group President – Liz Claiborne, Inc. | 2005 | |||||
Ms. Thomas-Graham has served as Group President of Liz Claiborne, Inc. since September 2005. From February 2005 through September 2005, she served as chairman of CNBC and served as president and chief executive officer of CNBC from July 2001 to February 2005. From February 2001 to July 2001, she served as president and chief operating officer of CNBC and from September 1999 to February 2001, she served as an executive vice president of NBC and president and chief executive officer of CNBC.com. Prior to joining NBC, Ms. Thomas-Graham was a consultant at McKinsey & Company from September 1989 to September 1999, the last four years as a partner. Ms. Thomas-Graham serves as a director of Idenix Pharmaceuticals, Inc. Age: 42. | ||||||
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Name, Principal Occupation And Other Information | | Director Since | ||||
CAROLYN M. TICKNOR Retired President of Hewlett Packard Company, Imaging & Printing Systems. | 2005 | |||||
Ms. Ticknor joined the board of directors in January 2005. She was president of Hewlett Packard Company’s Imaging and Printing Systems from 1999 until her retirement in 2001. She served as president and general manager of Hewlett Packard Company’s LaserJet Solutions from 1994 to 1999. Ms. Ticknor serves as a director of OfficeMax Incorporated and Lucille Packard Children’s Hospital, a private non-profit organization at the Stanford University Medical Center. Age: 58. | ||||||
Annual director retainer | $75,000 | |||||
Presiding director retainer | 25,000 | |||||
Committee chair retainers: | ||||||
Nominating and Governance Committee* | 0 | |||||
Finance Committee | 5,000 | |||||
Audit Committee | 15,000 | |||||
Management Development and Compensation Committee | 15,000 |
* | The presiding director is currently chair of the Nominating and Governance Committee and does not receive a committee chair retainer in addition to the Presiding Director retainer. |
Name of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class (3) | ||||||||
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Barclays Global Investors, N.A. (4) 45 Fremont St., 17th Flr San Francisco, CA 94105 | 14,516,986 | 9.6 | % | |||||||
Daniel Boggan, Jr. | 17,946 | * | ||||||||
Tully M. Friedman | 34,000 | * | ||||||||
Daniel J. Heinrich | 110,208 | * | ||||||||
William R. Johnson (5) | 16,603 | * | ||||||||
Gerald E. Johnston | 890,205 | * | ||||||||
Robert W. Matschullat | 21,148 | * | ||||||||
Gary G. Michael | 8,748 | * | ||||||||
Jan L. Murley | 18,398 | * | ||||||||
Lawrence S. Peiros | 373,069 | * | ||||||||
Lary R. Scott | 25,580 | * | ||||||||
Michael E. Shannon | 17,500 | * | ||||||||
Mary Beth Springer | 68,617 | * | ||||||||
Frank A. Tataseo | 324,511 | * | ||||||||
Pamela Thomas-Graham (6) | — | * | ||||||||
Carolyn M. Ticknor | — | * | ||||||||
All directors and executive officers as a group (18 persons) (7) | 2,063,773 | 1.3 | % |
* | Does not exceed 1% of the outstanding shares. |
(1) | Correspondence to all executive officers and directors of the Company may be mailed to The Clorox Company, c/o Secretary, 1221 Broadway, Oakland, CA 94612-1888. |
(2) | Each beneficial owner listed has sole voting and dispositive power (or shares such power with his or her spouse) concerning the shares indicated. These totals include the following number of shares of Common Stock which such persons have the right to acquire through stock options exercisable within 60 days of July 31, 2005: |
Mr. Boggan — 16,500; Mr. Friedman — 22,500; Mr. Heinrich — 90,470; Mr. Johnson — 14,500; Mr. Johnston — 754,822; Mr. Matschullat — 18,500; Mr. Michael — 4,500; Ms. Murley — 14,500; Mr. Peiros — 336,661; Mr. Scott — 18,500; Mr. Shannon — 14,500; Ms. Springer — 59,611; Mr. Tataseo — 266,686; and all directors and executive officers as a group — 1,727,644. The numbers in the table above do not include the following numbers of shares of Common Stock which the executive officers have the right to acquire upon the termination of their service as employees pursuant to deferred stock units granted in December 1995 in exchange for the cancellation of certain restricted stock, and deferred stock unit dividends thereon: Mr. Johnston — 18,110; Mr. Peiros — 12,353; Mr. Tataseo — 13,270; and all executive officers as a group — 43,733. The numbers in the table above do not include the following numbers of shares of Common Stock which the non-management directors have the right to acquire upon the termination of their service as directors pursuant to deferred stock units granted under the Independent Directors’ Stock-Based Compensation Plan: Mr. Boggan — 11,564; Mr. Friedman — 12,310; Mr. Johnson — 6,562; Mr. Matschullat — 13,973; Mr. Michael — 1,097; Ms. Murley — 1,097; Mr. Scott — 17,052; Mr. Shannon — 2,925 and Ms. Ticknor — 579. |
(3) | On July 31, 2005, there were 151,694,567 shares of Common Stock outstanding. |
(4) | Barclays Global Investors, N.A. and various related entities have indicated that they have sole voting power over 12,527,288 shares and sole dispositive power over 14,516,986 shares as reported on Schedule 13G/A dated March 10, 2005 and filed with the SEC. |
(5) | Mr. Johnson will not be standing for re-election to the board of directors at the Annual Meeting. |
(6) | Ms. Thomas-Graham was elected to the board of directors on September 20, 2005. |
(7) | Pursuant to Rule 3b-7 under the Securities Exchange Act of 1934, executive officers include the Company’s chief executive officer, all group vice presidents, all senior vice presidents and the vice president – general manager, international. |
[a] | [b] | [c] | ||||||||||||
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Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (in thousands) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining for future issuance under non- qualified stock-based compensation programs (excluding securities reflected in column (a)) (in thousands) | |||||||||||
Equity compensation plans approved by security holders | 12,776 | $ | 38 | 6,756 | ||||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||||
Total | 12,776 | $ | 38 | 6,756 |
consistent with Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and discussed with the auditors any relationship that may impact their objectivity and independence. The Audit Committee meets periodically with the independent registered public accounting firm, with and without management present, to discuss the results of the independent registered public accounting firm’s examinations and evaluations of the Company’s internal control and the overall quality of the Company’s financial reporting.
Gary Michael, Chair | Michael E. Shannon | ||
Robert W. Matschullat | Lary R. Scott |
2005 | 2004 | |||||||||
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Audit Fees (1) | $ | 3,985,000 | $ | 2,359,000 | ||||||
Audit-Related Fees (2) | 552,400 | 281,000 | ||||||||
Tax Fees (3) | 176,600 | 68,000 | ||||||||
All Other Fees (4) | 0 | 0 | ||||||||
Total | $ | 4,714,000 | $ | 2,708,000 |
(1) | Consists of aggregate fees billed or expected to be billed by Ernst & Young LLP for professional services rendered for the audit of the Company’s annual financial statements for each of the fiscal years ended June 30, |
2005 and June 30, 2004 and for review of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for each of those fiscal years. For fiscal year 2005, the amount also includes $1,385,000 of fees billed for the internal control audit required by Section 404 of the Sarbanes-Oxley Act of 2002. |
(2) | Consists of aggregate fees billed or expected to be billed by Ernst & Young LLP for assurance and related services reasonably related to the performance of the audit or review of the Company’s financial statements for each of the fiscal years ended June 30, 2005 and June 30, 2004, and not included in the Audit Fees listed above. These services included audits of the Company’s employee benefit plans. |
(3) | Consists of aggregate fees billed or expected to be billed by Ernst & Young LLP for tax compliance, tax advice, and tax planning for each of the fiscal years ended June 30, 2005 and June 30, 2004. These services included tax return preparation and review services for foreign subsidiaries and affiliates and consultation on tax matters. |
(4) | Consists of aggregate fees billed or expected to be billed by Ernst & Young LLP for all other services not included in the three categories set forth above for each of the fiscal years ended June 30, 2005 and June 30, 2004. There were no such services in either of these fiscal years. |
• | Attract and retain qualified candidates for executive positions; |
• | Motivate each executive toward the achievement of the Company’s short- and long-term goals, as reflected in its strategic business plans; |
• | Provide competitive opportunities based on performance and results; |
• | Ensure that a significant proportion of each executive’s total compensation be at-risk incentive compensation in order to emphasize the relationship between pay and performance, both Company performance and the individual’s contributions to the Company’s results; and |
• | Align the interests of executives with those of stockholders through the use of equity-based incentive awards. |
independent compensation data relating to executive compensation at other companies. The Committee’s policy with respect to Section 162(m) of the Internal Revenue Code of 1986, as amended, seeks to balance the interests of the Company in maintaining flexible incentive plans and how the Company benefits from the compensation package paid to any executive officer against the possible loss of a tax deduction when taxable compensation for any of the five highest paid executive officers exceeds $1 million per year. The Company’s EIC Plan and stock-based incentive plan are designed to comply with the Section 162(m) requirements.
William R. Johnson, Chair | Michael E. Shannon | ||
Tully M. Friedman | Lary R. Scott |
Long-Term Compensation Awards | ||||||||||||||||||||||||||||||||||
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Annual Compensation | Payouts | |||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Other Annual Compensation ($)(2) | Restricted Stock Award(s) ($)(3)(4) | Securities Underlying Options (#)(1)(4) | LTIP Payouts ($)(4)(5) | All Other Compensation ($)(6) | ||||||||||||||||||||||||||
Gerald E. Johnston | 2005 | $ | 954,167 | $ | 1,526,300 | $ | 189,789 | 0 | 211,200 | $ | 141,206 | $ | 195,975 | |||||||||||||||||||||
Chairman and Chief | 2004 | 900,000 | 1,059,500 | 153,880 | 3,318,750 | 185,000 | 89,316 | 174,482 | ||||||||||||||||||||||||||
Executive Officer | 2003 | 687,500 | 785,400 | 15,081 | 0 | 88,000 | 1,139,520 | 207,898 | ||||||||||||||||||||||||||
Lawrence S. Peiros | 2005 | 468,750 | 411,500 | 13,427 | 0 | 45,000 | 58,350 | 73,964 | ||||||||||||||||||||||||||
Group Vice President | 2004 | 443,750 | 322,200 | 12,903 | 905,000 | 46,000 | 43,416 | 84,511 | ||||||||||||||||||||||||||
2003 | 416,250 | 392,700 | 10,287 | 0 | 40,000 | 496,530 | 110,465 | |||||||||||||||||||||||||||
Frank A. Tataseo | 2005 | 400,000 | 321,800 | 14,424 | 0 | 35,200 | 37,990 | 58,274 | ||||||||||||||||||||||||||
Group Vice President | 2004 | 320,000 | 233,800 | 13,861 | 678,750 | 23,000 | 26,528 | 57,264 | ||||||||||||||||||||||||||
2003 | 301,250 | 261,690 | 11,050 | 0 | 22,000 | 241,988 | 71,844 | |||||||||||||||||||||||||||
Daniel J. Heinrich | 2005 | 388,750 | 419,900 | 0 | 557,200 | 35,200 | 20,940 | 58,190 | ||||||||||||||||||||||||||
Senior Vice President – | 2004 | 328,750 | 244,300 | 0 | 0 | 32,000 | 12,015 | 50,529 | ||||||||||||||||||||||||||
Chief Financial Officer | 2003 | 258,750 | 189,475 | 0 | 0 | 13,000 | 48,120 | 57,692 | ||||||||||||||||||||||||||
Mary Beth Springer | 2005 | 289,824 | 301,200 | 0 | 0 | 29,600 | 15,551 | 41,123 | ||||||||||||||||||||||||||
Group Vice President | 2004 | 252,760 | 176,300 | 0 | 0 | 14,000 | 10,254 | 32,570 | ||||||||||||||||||||||||||
2003 | 180,000 | 153,945 | 0 | 0 | 13,000 | 6,343 | 27,982 |
(1) | Amounts include awards earned for the years indicated. |
(2) | Perquisites and other personal benefits did not exceed the lesser of either $50,000 or 10% of the total of annual salary and bonus reported for any Named Officer. The amount for Mr. Johnston reflects dividends earned on deferred stock units received in December 1995, reinvested at his election, and dividends earned on restricted stock units received in July 2003, reinvested by the terms of the restricted stock unit award agreement. The |
amounts for Messrs. Peiros and Tataseo reflect dividends earned on deferred stock units received in December 1995, reinvested at the election of the Named Officers. |
(3) | As of June 30, 2005, all Named Officers held restricted stock awards. Mr. Johnston was awarded 75,000 shares of restricted stock units in fiscal year 2004, all of which will vest on July 15, 2007. Settlement of the shares will be deferred until January 15 of the calendar year following termination of his continuous service. The value of this award was $4,179,000 based on the fair market value of $55.72 on June 30, 2005. Dividends will be accrued and converted to stock units on the restricted stock unit award on dividend payment dates commencing from the date of grant until the latest to occur of the following: (i) the vesting of the units, (ii) the settlement of the units, or (iii) the forfeiture of unvested units prior to July 15, 2007. Mr. Johnston holds no other restricted stock in the Company. Mr. Peiros and Mr. Tataseo were awarded 20,000 and 15,000 shares of restricted stock, respectively, in fiscal year 2004, of which 50% vest on September 17, 2005 and the remaining 50% vest on September 17, 2007. The values of these awards were $1,114,400 and $835,800 respectively based on the fair market value of $55.72 on June 30, 2005. Dividends are paid on the restricted stock award commencing from the date of grant. Mr. Peiros and Mr. Tataseo hold no other restricted stock in the Company. Mr. Heinrich was awarded 10,000 shares of restricted stock in fiscal year 2005, of which 50% vest May 13, 2007 and the remaining 50% vest on May 13, 2009. The value of the award was $557,200 based on the fair market value of $55.72 on June 30, 2005. Dividends are paid on the restricted stock award commencing from the date of grant. Mr. Heinrich holds no other restricted stock in the Company. Ms. Springer was awarded 1,542 shares of restricted stock in fiscal year 2001, all of which vest on September 20, 2005. The value of this award was $85,920 based on the fair market value of $55.72 on June 30, 2005. Ms. Springer was also awarded 1,581 shares of restricted stock in fiscal year 2002, all of which vest on September 24, 2006. The value of this award was $88,093 based on the fair market value of $55.72 on June 30, 2005. |
(4) | See “Employment Agreements and Other Arrangements” on page 22 for a description of the accelerated vesting provisions applicable to the restricted stock and performance units. A feature of the Company’s 1996 Stock Incentive Plan is the stock withholding election, pursuant to which a recipient may elect to have the Company withhold shares of Common Stock to pay any withholding tax liability that arises when the restrictions on the restricted stock are released or when non-qualified stock options are exercised, respectively. In both cases, the value of shares which may be withheld is based on the per share price of the Common Stock on the Composite Transactions Report for the New York Stock Exchange on the last business day before the withholding is made. |
(5) | The amounts reflect dividends received from performance units granted in September 2002 and September 2003 and any outstanding restricted stock. In addition, the amounts for fiscal year 2003 include the value of performance units granted between May 1999 and March 2001, which vested at 50% on June 30, 2003. Based on their value on the earliest settlement date on July 31, 2003, the number and value of such vested performance units shown in the amounts for fiscal year 2003 were as follows: 24,800 units ($1,076,072) for Mr. Johnston; 10,800 units ($468,612) for Mr. Peiros; 5,250 units ($227,798) for Mr. Tataseo; and 1,000 units ($43,390) for Mr. Heinrich. |
(6) | Except for amounts received under the Nonqualified Deferred Compensation Plan, the amounts shown in the column are pursuant to programs provided to salaried employees generally. The amounts shown in the column represent actual Company contributions under the Company’s 401(k) Plan, the Nonqualified Deferred Compensation Plan, and term life insurance premiums paid by the Company for the benefit of each Named Officer, respectively, in the following amounts: for fiscal year 2005, $15,207, $179,601, and $1,168, for Mr. Johnston; $15,207, $58,185, and $572 for Mr. Peiros; $15,207, $42,580, and $487 for Mr. Tataseo; |
$15,207, $42,505, and $478 for Mr. Heinrich; and $15,207, $25,501, and $415 for Ms. Springer; for fiscal year 2004, $15,000, $158,272, and $1,210 for Mr. Johnston; $15,000, $68,915, and $596 for Mr. Peiros; $15,000, $41,834, and $430 for Mr. Tataseo; $16,260, $33,827, and $442 for Mr. Heinrich; and $14,665, $17,594, and $312 for Ms. Springer; for fiscal year 2003, $15,000, $191,977, and $921 for Mr. Johnston; $15,000, $94,901, and $564 for Mr. Peiros; $15,000, $56,442, and $402 for Mr. Tataseo; $20,000, $37,344, and $348 for Mr. Heinrich; and $13,600, $14,076, and $306 for Ms. Springer. Contributions under the Company’s 401(k) Plan include value sharing plan payments in excess of 7% for employees not fully vested. |
Options Grants in Last Fiscal Year | |||||||||||||||||||||||||||||||
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Individual Grants | |||||||||||||||||||||||||||||||
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term ($)(3) | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Options Granted (#)(1) | % of Total Options Granted to Employees in Fiscal Year (2) | Exercise or Base Price ($/Share) (1) | Expiration Date (1) | 0% | 5% (4) | 10% (4) | ||||||||||||||||||||||||
Gerald E. Johnston | 211,200 | 8.81 | % | $ | 53.88 | 9/15/14 | 0 | $ | 7,156,479 | $ | 18,135,922 | ||||||||||||||||||||
Lawrence S. Peiros | 45,000 | 1.88 | 53.88 | 9/15/14 | 0 | 1,524,818 | 3,864,188 | ||||||||||||||||||||||||
Frank A. Tataseo | 35,200 | 1.47 | 53.88 | 9/15/14 | 0 | 1,192,746 | 3,022,654 | ||||||||||||||||||||||||
Daniel J. Heinrich | 35,200 | 1.47 | 53.88 | 9/15/14 | 0 | 1,192,746 | 3,022,654 | ||||||||||||||||||||||||
Mary Beth Springer | 17,600 | 0.73 | 53.88 | 9/15/14 | 0 | 596,373 | 1,511,327 | ||||||||||||||||||||||||
12,000 | 0.50 | 58.55 | 1/18/15 | 0 | 441,861 | 1,119,763 |
(1) | The stock options awarded to the Named Officers in fiscal year 2005 had ten-year lives and an exercise price equal to the fair market value on the date of grant. One-fourth of the number of option shares will vest on the first four anniversaries of the date of grant. See “Employment Agreements and Other Arrangements” on page 22 for a description of the accelerated vesting provisions applicable to the stock options. |
(2) | The total number of options granted to employees of the Company in fiscal year 2005 represented 2,360,267 shares of Common Stock. This does not include options representing 38,000 shares of Common Stock granted to non-employee directors during fiscal year 2005. |
(3) | The 5% and 10% assumed rates of appreciation are shown in response to requirements of the rules of the SEC. There can be no assurance that the market value of the Common Stock will appreciate in the assumed manner. The column reflecting no appreciation in market value is intended for illustrative purposes only. The September 15, 2004 stock option grant price was $53.88 per share based on the closing sale price on September 14, 2004. The January 18, 2005 grant price of Ms. Springer’s stock options was $58.55 based on the closing sale price on January 17, 2005. |
(4) | Based on the fair market value of $55.72 of the outstanding shares of Common Stock on June 30, 2005, and not including dividends, the potential realizable value at assumed annual rates of Common Stock appreciation of 5% and 10% for a ten-year period for all stockholders would be $5,315,287,994 and $13,469,983,370, respectively. The potential realizable value at assumed annual rates of appreciation of 5% and 10% on the options of the Named Officers from the date of grant to the end of the ten-year option terms would be $12,105,024 and $30,676,508, respectively. Thus, the Named Officers’ potential realizable value as a percentage of all stockholders’ gain would be .23% in the event of a 5% assumed annual rate of appreciation and .23% in the event of a 10% assumed annual rate of appreciation. Further, the potential realizable value of all employee options as a percentage of all stockholders’ gain would be 1.45% in the event of a 5% assumed annual rate of appreciation and 1.45% in the event of a 10% assumed annual rate of appreciation over the ten-year option terms. |
and FY-End Option Values
Name | Shares Acquired on Exercise (#) | Value Realized ($) | Number of Securities Underlying Unexercised Options at FY-End (#) Exercisable/ Unexercisable (1) | Value of Unexercised In-the-Money Options at FY-End ($) Exercisable/ Unexercisable (1)(2) | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gerald E. Johnston | 0 | $ | 0 | 655,772/379,284 | $ | 14,568,737/$2,489,319 | ||||||||||||
Lawrence S. Peiros | 0 | 0 | 325,411/92,834 | 8,011,108/653,218 | ||||||||||||||
Frank A. Tataseo | 0 | 0 | 257,886/59,784 | 6,919,651/362,884 | ||||||||||||||
Daniel J. Heinrich | 0 | 0 | 81,670/63,534 | 1,555,880/393,387 | ||||||||||||||
Mary Beth Springer | 0 | 0 | 55,211/57,434 | 1,086,357/210,950 |
(1) | The number of shares covered and the value of the unexercisable options listed relate to stock options granted under the 1996 Stock Incentive Plan. See “Employment Agreements and Other Arrangements” on page 22 for a description of the accelerated vesting provisions applicable to the stock options. |
(2) | The value of the unexercised options was determined by multiplying the number of shares subject to unexercised options at the fiscal year end by $55.72, the fair market value of the Common Stock on June 30, 2005, minus the exercise price of each unexercised option. |
(a) | (b) | (c) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares, Units or Other Rights (#)(1) | Performance or Other Period Until Maturation or Payment (2) | ||||||||
Gerald E. Johnston | 48,200 | 9/30/07 or Forfeited | ||||||||
Lawrence S. Peiros | 10,000 | 9/30/07 or Forfeited | ||||||||
Frank A. Tataseo | 8,000 | 9/30/07 or Forfeited | ||||||||
Daniel J. Heinrich | 8,000 | 9/30/07 or Forfeited | ||||||||
Mary Beth Springer | 6,700 | 9/30/07 or Forfeited |
(1) | To continue its objective of focusing the executive officers on creation of stockholder value, the Management Development and Compensation Committee approved a new three-year grant of performance units to all executive officers in September 2004. The September 2004 grants could vest on September 30, 2007 based on the relative total stockholder return (stock price appreciation plus dividends paid) (“TSR”), comparing the month of September 2004 with the month of September 2007, of the Common Stock measured against the TSR of an index of the common stocks of a financial comparator group consisting of a peer group of companies used by the Company for financial analysis purposes. If, on September 30, 2007, the Company’s three-year cumulative TSR is at or above the 75th percentile relative to that of the comparator group, the performance units will vest at 125% of target; if the Company’s three-year TSR is at or above the 50th percentile, the performance units will vest at 100% of target; if the Company’s three-year TSR is at or above the 45th percentile, the performance units will vest at 75% of target; if the Company’s three-year TSR is at or above the 40th percentile, the performance units will vest at 50% of target; if the Company’s three-year TSR is below the 40th percentile, the performance units will be forfeited. If the performance units vest, they are payable in Common Stock. See the first paragraph of the section of the Management Development and Compensation Committee report entitled “Long Term Compensation” on page 15 for further information. |
(2) | See “Employment Agreements and Other Arrangements” on page 22 for a description of the accelerated vesting provisions applicable to the performance units. |
formula. Except for Mr. Johnston, who has met the age and years of service levels and will receive the greater of the benefits under the current and prior formula, each of the Named Officers will receive benefits calculated under the cash balance formula. A participant is fully vested in his or her benefit after five years of service.
Compensation (1) | 15 or more Years of Service | |||||
---|---|---|---|---|---|---|
$ 400,000 | $ | 220,000 | ||||
$ 600,000 | $ | 330,000 | ||||
$ 800,000 | $ | 440,000 | ||||
$1,000,000 | $ | 550,000 | ||||
$1,200,000 | $ | 660,000 | ||||
$1,400,000 | $ | 770,000 | ||||
$1,600,000 | $ | 880,000 | ||||
$1,800,000 | $ | 990,000 | ||||
$2,000,000 | $ | 1,100,000 | ||||
$2,200,000 | $ | 1,210,000 | ||||
$2,400,000 | $ | 1,320,000 | ||||
$2,600,000 | $ | 1,430,000 | ||||
$2,800,000 | $ | 1,540,000 | ||||
$3,000,000 | $ | 1,650,000 | ||||
$3,200,000 | $ | 1,760,000 |
(1) | The number of years of credited service for each of the Named Officers are: Mr. Johnston, 24; Mr. Peiros, 25; Mr. Tataseo, 11; Mr. Heinrich, 4, and Ms. Springer, 15. |
to his or her then current base salary plus 75% of his or her average annual EIC and AIP Plan awards for the preceding three years, divided by 12 and then multiplied by the number of months in the remaining term of his or her employment agreement. The employee agreements provide that the officer is entitled to continue to participate in the Company’s medical and dental insurance programs for the same period. In addition, the officer would receive pro-rated EIC and AIP Plan awards for the year in which termination occurs.
PROPOSAL NO. 2:
APPROVAL OF THE 2005 STOCK INCENTIVE PLAN
• | Exercise Price. The Committee sets the Exercise Price of the Shares subject to each Option, provided that the Exercise Price cannot be less than 100% of the Fair Market Value of the Company’s Common Stock on the Option grant date. In addition, the Exercise Price of an Incentive Stock Option must be at least 110% of Fair Market Value if, on the grant date, the Participant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its subsidiaries (a “10% Stockholder”). |
• | Form of Consideration. The means of payment for Shares issued upon exercise of an option is specified in each option agreement. Payment generally may be made by cash, other Shares of Common Stock owned by the optionee, any other method permitted by the Committee, or by a combination of the foregoing. |
• | Exercise of the Option. Each Award Agreement will specify the term of the Option and the date when the Option is to become exercisable, provided that except as specified in an Award Agreement upon a termination of employment or a Change in Control or Subsidiary Disposition, no Option may be exercisable prior to one (1) year from the date of grant. The 2005 Plan provides that in no event shall an Option granted under the 2005 Plan be exercised more than ten (10) years after the date of grant. Moreover, in the case of an Incentive Stock Option granted to a 10% Stockholder, the term of the Option shall be for no more than five (5) years from the date of grant. |
• | Termination of Employment. If an optionee’s employment terminates for any reason (including death or permanent disability), all Options held by such optionee under the 2005 Plan expire upon the earlier of (i) such period of time as is set forth in his or her Award Agreement or (ii) the expiration date of the Option. The optionee may exercise all or part of his or her Option at any time before such expiration to the extent that such Option was exercisable at the time of termination of employment. |
RESOLVED, that the stockholders of the Company hereby approve and adopt the 2005 Stock Incentive Plan attached as Appendix A to the proxy statement for this meeting. |
PROPOSAL NO. 3:
APPROVAL OF THE EXECUTIVE INCENTIVE COMPENSATION PLAN
“performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). If the Incentive Plan is approved by the stockholders, it will be effective as of July 1, 2005 and will remain in effect until such time as it is terminated by the board of directors.
RESOLVED, that the stockholders of the Company hereby approve and adopt the Company’s Executive Incentive Compensation Plan attached as Appendix B to the proxy statement for this meeting. |
PROPOSAL NO. 4:
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
RESOLVED, that the stockholders of The Clorox Company hereby ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2006. |
Laura Stein,
Senior Vice President —
General Counsel & Secretary
2005 STOCK INCENTIVE PLAN
1. | Establishment, Objectives and Duration |
2. | Administration of the Plan |
amendment that would adversely affect the Participant’s rights under an outstanding Award shall not be made without the Participant’s written consent;
3. | Shares Subject to the Plan; Effect of Grants; Individual Limits |
4. | Eligibility and Participation |
5. | Types of Awards |
6. | Options |
Market Value at the time of exercise equal to the Exercise Price, (iii) in any other manner then permitted by the Committee, or (iv) by a combination of any of the permitted methods of payment. The Committee may limit any method of payment, other than that specified under (i), for administrative convenience, to comply with Applicable Laws or otherwise.
7. | Stock Appreciation Rights |
8. | Restricted Stock |
provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Awards of Restricted Stock, and may reflect distinctions based on the reasons for termination of employment or service.
9. | Restricted Stock Units |
10. | Performance Shares |
11. | Performance Units |
12. | Other Stock-Based Awards |
granted pursuant to this Section 12 shall have a minimum Period of Restriction of three (3) years, which period may, at the discretion of the Committee, lapse on a pro-rated, graded, or cliff basis (as specified in an Award Agreement); provided, however, that in the Committee’s sole discretion, up to five percent (5%) of the Shares available for issuance as Full-Value Awards under the Plan may have a shorter Period of Restriction, but in no case less than one (1) year. Notwithstanding the above, an Award of payment Shares in lieu of cash under other Company incentive or bonus programs shall not be subject to the minimum Period of Restriction limitations described above.
14. | Performance-Based Exception |
17. | Conditions Upon Issuance of Shares |
19. | Change in Control, Cash-Out and Termination of Underwater Options/SARs, and Subsidiary Disposition |
twenty-four (24) months following consummation of a Change in Control, the Period of Restriction on any replacement awards shall lapse; and
20. | Amendment, Suspension or Termination of the Plan |
the participant holding such Award, unless such termination, modification or amendment is required by Applicable Laws and except as otherwise provided herein.
21. | Reservation of Shares |
22. | Rights of Participants |
24. | Legal Construction |
(a) | The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act ) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, including any acquisition which, by reducing the number of shares outstanding, is the sole cause for increasing the percentage of shares beneficially owned by any such Person to more than the applicable percentage set forth above, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or |
(b) | Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason within any period of 24 months to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of |
an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or |
(c) | Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a “Business Combination”), in each case, unless, following such Business Combination, (i) more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) is represented by Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Outstanding Company Common Stock and Outstanding Company Voting Securities were converted pursuant to such Business Combination) and such ownership of common stock and voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or |
(d) | Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. |
(a) | Where there exists a public market for the Share, the Fair Market Value shall be (A) the closing sales price for a Share for the last market trading day prior to the time of the determination (or, if no sales were reported |
on that date, on the last trading date on which sales were reported) on the New York Stock Exchange, the NASDAQ National Market or the principal securities exchange on which the Share is listed for trading, whichever is applicable, or (B) if the Share is not traded on any such exchange or national market system, the average of the closing bid and asked prices of a Share on the NASDAQ Small Cap Market, in each case, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or |
(b) | In the absence of an established market of the type described above, for the Share, the Fair Market Value thereof shall be determined by the Committee in good faith, and such determination shall be conclusive and binding on all persons. |
EXECUTIVE INCENTIVE COMPENSATION PLAN
1. | Establishment, Objectives, Duration |
2. | Definitions |
3. | Administration of the Plan |
4. | Eligibility |
5. | Form of Payment of Awards |
6. | Shares Subject to the Plan |
7. | Awards |
Period, including, without limitation, the extent to which the Participant shall have the right to receive an Award following termination of the Participant’s employment. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Awards, and may reflect distinctions based on the reasons for termination of employment.
8. | Committee Certification and Payment of Awards |
9. | Termination of Employment |
10. | Taxes |
11. | Amendment or Termination of the Plan |
12. | No Rights to Employment |
13. | No Assignment |
14. | Legal Construction |
Financial Statements, Management’s Report on Internal Control over Financial Reporting
and Report of Independent Registered Accounting Firm
MANAGEMENT’S DISCUSSION & ANALYSIS
The Clorox Company
(Dollars in millions, except per-share amounts)
• | Net sales increased 5% during fiscal year 2005 reflecting results of brand-building efforts from our consumer insights process. Innovative new products developed from our consumer insights process provided meaningful growth, including the fiscal year 2004 fourth quarter launch of Clorox ToiletWand™ disposable toilet-cleaning system, and the fiscal year 2005 launches of Glad ForceFlex™ trash bags, and Clorox BathWand™ cleaning system. The Company expects annual net sales growth of 3% to 5% through 2008 supported by growth from established brands and new products. In fiscal year 2006, this includes, among other items, the expansion of the Glad ForceFlex technology into the OdorShield® line of trash bags, and the launch of improved Kingsford charcoal, which offers improved cooking performance for consumers. |
The Clorox Company
(Dollars in millions, except per-share amounts)
• | Diluted net earnings per common share from continuing operations increased 26% despite a challenging commodities cost environment and increased investment in advertising and other brand-building activities. Gross margin decreased 1% driven in large part by rapidly rising commodities costs. The Company responded to these margin pressures through price increases and cost savings initiatives. In fiscal year 2005, the Company delivered approximately $104 in cost savings through trade spending efficiencies, reductions in unsaleables, logistics and manufacturing efficiencies and procurement savings. The Henkel share exchange (described below) also contributed to earnings per share accretion in fiscal year 2005. |
• | In fiscal year 2005, the Company deliveredfree cash flow of 14% of net sales, ahead of its longer term target range of 10% to 12%. Strong performance in free cash flow, defined as cash flow from operations less capital expenditures, was delivered through strong earnings and continued discipline in fixed and working capital management (see page A-4 for a reconciliation of free cash flow). |
• | The Company’sreturn on invested capital (“ROIC”) (see page A-4 for a discussion of ROIC and exhibit 99-3 for a reconciliation of ROIC) was 13.9% in fiscal year 2005 reflecting a modest improvement for the fiscal year. Strong capital management helped to mitigate the impact of commodity cost increases on the return on invested capital in fiscal year 2005. The Company is targeting 150 to 250 basis point improvement in its return on invested capital by 2008 through continued focus on top-line growth, margin enhancement and capital management. |
The Clorox Company
(Dollars in millions, except per-share amounts)
• | In January 2005, The Procter & Gamble Company (“P&G”) paid the Company $133 to exercise its option to increase its interest in the Venture Agreement from 10% to 20% (Page A-11). The Company expects that the scale created by this business partnership, which has already yielded consumer product innovations such as Glad Press ’n Seal and Glad ForceFlex, will continue to drive product innovation in future periods. |
• | In April 2005, the Company settled a tax contingency with the Internal Revenue Service (“IRS”), which resulted in tax payments of $94 (excluding $6 of tax benefits) in fiscal year 2005 and $150 in the first quarter of fiscal year 2006 (Page A-13). |
• | The Company expects to repatriate approximately $200 of earnings from its foreign subsidiaries in fiscal year 2006 in order to receive a one-time dividends-received deduction allowed under the terms of the American Jobs Creation Act of 2004 (the “Act”). The Company expects that the cash made available to the parent company by the Company’s foreign locations will be used for reinvestment in qualifying activities (Page A-15). |
• | Beginning in fiscal year 2006, the Company will begin to record compensation cost for its stock option grants and implement other new rules related to share-based payments, which the Company expects to reduce annual diluted net earning per common share by $0.14 to $0.16 in fiscal year 2006 (Page A-15). |
% Change | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | |||||||||||||||||||
Net sales | $ | 4,388 | $ | 4,162 | $ | 3,986 | 5 | % | 4 | % | |||||||||||||
Gross profit | 1,895 | 1,831 | 1,815 | 3 | 1 | ||||||||||||||||||
Diluted net earnings per common share from continuing operations | 2.88 | 2.28 | 2.08 | 26 | 10 | ||||||||||||||||||
Free cash flow as a % of net sales | 14.0 | % | 17.5 | % | 15.1 | % | |||||||||||||||||
Return on invested capital | 13.9 | % | 13.5 | % | 13.9 | % |
The Clorox Company
(Dollars in millions, except per-share amounts)
bags, the Clorox BathWand cleaning system, Clorox dual action toilet bowl cleaner, Clorox disinfecting bathroom cleaner, Glad Press ’n Seal Freezer™ wrap, and three new flavors of K C Masterpiece food items.
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash provided by operations | $ | 765 | $ | 899 | $ | 803 | ||||||||
Less: capital expenditures | (151 | ) | (170 | ) | (203 | ) | ||||||||
Free cash flow | $ | 614 | $ | 729 | $ | 600 |
The Clorox Company
(Dollars in millions, except per-share amounts)
% Change | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% of Net Sales | |||||||||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | 2005 | 2004 | 2003 | ||||||||||||||||||||||||||||
Gross profit | $ | 1,895 | $ | 1,831 | $ | 1,815 | 3 | % | 1 | % | 43.2 | % | 44.0 | % | 45.5 | % | |||||||||||||||||||
Selling and administrative expenses | 551 | 543 | 523 | 2 | 4 | 12.6 | 13.0 | 13.1 | |||||||||||||||||||||||||||
Advertising costs | 435 | 420 | 446 | 3 | (6 | ) | 9.9 | 10.1 | 11.2 | ||||||||||||||||||||||||||
Research and development costs | 88 | 84 | 75 | 6 | 10 | 2.0 | 2.0 | 1.9 | |||||||||||||||||||||||||||
Operating profit | $ | 821 | $ | 784 | $ | 771 | 5 | % | 2 | % | 18.7 | % | 18.9 | % | 19.3 | % |
% Change | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | |||||||||||||||||||
Restructuring and asset impairment costs | $ | 36 | $ | 11 | $ | 33 | 221 | % | (65 | )% | |||||||||||||
Interest expense | 79 | 30 | 28 | 168 | 7 | ||||||||||||||||||
Other (income), net | (23 | ) | (9 | ) | (8 | ) | 168 | 2 | |||||||||||||||
Income taxes on continuing operations | 212 | 262 | 257 | (19 | ) | 2 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gain on exchange | $ | 550 | $ | — | $ | — | ||||||||
Earnings from exchanged businesses | 37 | 87 | 84 | |||||||||||
Reversal of deferred taxes from exchanged businesses | 6 | — | — | |||||||||||
Losses from Brazil operations | — | (4 | ) | (26 | ) | |||||||||
Income tax expense on discontinued operations | (14 | ) | (24 | ) | (26 | ) | ||||||||
Total earnings from discontinued operations | $ | 579 | $ | 59 | $ | 32 | ||||||||
Diluted earnings per share from discontinued operations | $ | 3.23 | $ | 0.28 | $ | 0.15 |
The Clorox Company
(Dollars in millions, except per-share amounts)
% Change | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | |||||||||||||||||||
Net sales | $ | 2,038 | $ | 1,986 | $ | 1,995 | 3 | % | — | ||||||||||||||
Earnings from continuing operations before income taxes | 633 | 634 | 613 | — | 3 | % |
% Change | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | |||||||||||||||||||
Net sales | $ | 1,788 | $ | 1,677 | $ | 1,549 | 7 | % | 8 | % | |||||||||||||
Earnings from continuing operations before income taxes | 435 | 417 | 442 | 4 | (5 | ) |
The Clorox Company
(Dollars in millions, except per-share amounts)
% Change | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | |||||||||||||||||||
Net sales | $ | 562 | $ | 499 | $ | 442 | 13 | % | 13 | % | |||||||||||||
Earnings from continuing operations before income taxes | 119 | 115 | 55 | 3 | 111 |
The Clorox Company
(Dollars in millions, except per-share amounts)
% Change | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 to 2004 | 2004 to 2003 | |||||||||||||||||||
Losses from continuing operations before income taxes | $ | (458 | ) | $ | (414 | ) | $ | (392 | ) | 11 | % | 6 | % |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash provided by continuing operations | $ | 728 | $ | 844 | $ | 760 | ||||||||
Cash used for investing by continuing operations | (154 | ) | (234 | ) | (201 | ) | ||||||||
Cash used for financing by continuing operations | (552 | ) | (596 | ) | (627 | ) |
The Clorox Company
(Dollars in millions, except per-share amounts)
Short-Term | Long-Term | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Standard and Poor’s | A-2 | A– | ||||||||
Moody’s | P-2 | A3 | ||||||||
Fitch | F2 | A– |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Domestic credit facilities: | ||||||||||
Credit line, scheduled to expire in December 2009 | $ | 1,300 | $ | — | ||||||
Credit line, scheduled to expire in June 2005 | — | 600 | ||||||||
Credit line, scheduled to expire in March 2007 | — | 350 | ||||||||
Foreign and other credit lines | 16 | 12 | ||||||||
Total | $ | 1,316 | $ | 962 |
The Clorox Company
(Dollars in millions, except per-share amounts)
At June 30, 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating leases | $ | 23 | $ | 23 | $ | 21 | $ | 16 | $ | 12 | $ | 55 | $ | 150 | ||||||||||||||||
Purchase obligations | 187 | 38 | 32 | 11 | 4 | 4 | 276 | |||||||||||||||||||||||
Capital requirements for low-income housing partnerships | 5 | 2 | 2 | 1 | — | — | 10 | |||||||||||||||||||||||
Long-term debt maturities including interest payments (1) | 102 | 249 | 580 | 71 | 635 | 1,016 | 2,653 | |||||||||||||||||||||||
Net terminal obligation pursuant to Venture Agreement | — | — | — | — | — | 258 | 258 | |||||||||||||||||||||||
Total contractual obligations | $ | 317 | $ | 312 | $ | 635 | $ | 99 | $ | 651 | $ | 1,333 | $ | 3,347 |
(1) | The interest rate in effect as of June 30, 2005 was used to estimate the future interest payments on the floating rate debt. |
The Clorox Company
(Dollars in millions, except per-share amounts)
expiration of the statute of limitations period for assessing taxes on the share exchange transaction. Based on the nature of the representations and warranties as well as other factors, the Company has not accrued any liability under this indemnity.
The Clorox Company
(Dollars in millions, except per-share amounts)
forward purchase, options and futures contracts. Derivative contracts are entered into for non-trading purposes with major credit-worthy institutions, thereby decreasing the risk of credit loss.
The Clorox Company
(Dollars in millions, except per-share amounts)
No. 25, and generally requires that such transactions be accounted for using prescribed fair-value-based methods. SFAS No. 123-R permits public companies to adopt its requirements using one of two methods: (a) a “modified prospective” method in which compensation costs are recognized beginning with the effective date based on the requirements of SFAS No. 123-R for all share-based payments granted or modified after the effective date, and based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123-R that remain unvested on the effective date or (b) a “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits companies to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures either for all periods presented or prior interim periods of the year of adoption.
The Clorox Company
(Dollars in millions, except per-share amounts)
be repatriated in fiscal year 2006. The Company anticipates repatriation of approximately $200 in fiscal year 2006, with a resulting tax provision increase of $4 in fiscal year 2006.
The Clorox Company
(Dollars in millions, except per-share amounts)
devaluation, inflation and the selection of an appropriate discount rate. Impairment occurs when the carrying value of a reporting unit exceeds the fair value of that reporting unit. An impairment charge is recorded for the difference between the carrying value and the fair value of the reporting unit, which is determined based on the net present value of estimated future cash flows. The Company tests its intangible assets annually in the third fiscal quarter unless there are indications during an interim period that assets may have become impaired. The Company uses its judgment in assessing whether assets may have become impaired between annual valuations. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities, loss of key personnel and acts by governments and courts may signal that an asset has become impaired.
The Clorox Company
(Dollars in millions, except per-share amounts)
in September 2005 and began accruing a liability for the estimated expense. The Company continues to monitor the status of the grants vesting in September 2006 and 2007; the Company has not yet recorded a liability related to these grants because the vesting dates extend too far into the future to reasonably estimate whether the hurdle rates will be achieved. Based on the June 30, 2005 market price of the Company’s stock, the expense for the remaining unvested performance unit grants would be $13.
The Clorox Company
(Dollars in millions, except per-share amounts)
appropriate by management. The fiscal year 2005 results were favorably affected by a reduction in tax contingency accruals primarily related to the settlement of a significant tax issue with the IRS.
CONSOLIDATED STATEMENTS OF EARNINGS
The Clorox Company
Years ended June 30 | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dollars in millions, except per-share amounts | ||||||||||||||
Net sales | $ | 4,388 | $ | 4,162 | $ | 3,986 | ||||||||
Cost of products sold | 2,493 | 2,331 | 2,171 | |||||||||||
Gross profit | 1,895 | 1,831 | 1,815 | |||||||||||
Selling and administrative expenses | 551 | 543 | 523 | |||||||||||
Advertising costs | 435 | 420 | 446 | |||||||||||
Research and development costs | 88 | 84 | 75 | |||||||||||
Restructuring and asset impairment costs | 36 | 11 | 33 | |||||||||||
Interest expense | 79 | 30 | 28 | |||||||||||
Other (income) expense: | ||||||||||||||
Equity earnings and gain on exchange of Henkel Iberica, S.A. | (25 | ) | (11 | ) | (2 | ) | ||||||||
Other, net | 2 | 2 | (6 | ) | ||||||||||
Earnings from continuing operations before income taxes | 729 | 752 | 718 | |||||||||||
Income taxes on continuing operations | 214 | 262 | 257 | |||||||||||
Reversal of deferred taxes from equity investment in Henkel Iberica, S.A. | (2 | ) | — | — | ||||||||||
Earnings from continuing operations | 517 | 490 | 461 | |||||||||||
Discontinued operations: | ||||||||||||||
Gain on exchange | 550 | — | — | |||||||||||
Earnings from exchanged businesses | 37 | 87 | 84 | |||||||||||
Reversal of deferred taxes from exchanged businesses | 6 | — | — | |||||||||||
Losses from Brazil operations | — | (4 | ) | (26 | ) | |||||||||
Income tax expense on discontinued operations | (14 | ) | (24 | ) | (26 | ) | ||||||||
Earnings from discontinued operations | 579 | 59 | 32 | |||||||||||
Net earnings | $ | 1,096 | $ | 549 | $ | 493 | ||||||||
Earnings per common share | ||||||||||||||
Basic | ||||||||||||||
Continuing operations | $ | 2.92 | $ | 2.31 | $ | 2.11 | ||||||||
Discontinued operations | 3.28 | 0.28 | 0.15 | |||||||||||
Basic net earnings per common share | $ | 6.20 | $ | 2.59 | $ | 2.26 | ||||||||
Diluted | ||||||||||||||
Continuing operations | $ | 2.88 | $ | 2.28 | $ | 2.08 | ||||||||
Discontinued operations | 3.23 | 0.28 | 0.15 | |||||||||||
Diluted net earnings per common share | $ | 6.11 | $ | 2.56 | $ | 2.23 | ||||||||
Weighted average common shares outstanding (in thousands) | ||||||||||||||
Basic | 176,586 | 211,683 | 218,174 | |||||||||||
Diluted | 179,176 | 214,371 | 220,692 |
CONSOLIDATED BALANCE SHEETS
The Clorox Company
As of June 30 | | 2005 | | 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Dollars in millions, except per-share amounts | ||||||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 293 | $ | 232 | ||||||
Receivables, net | 411 | 460 | ||||||||
Inventories | 323 | 301 | ||||||||
Other current assets | 63 | 50 | ||||||||
Total current assets | 1,090 | 1,043 | ||||||||
Property, plant and equipment, net | 999 | 1,052 | ||||||||
Goodwill, net | 743 | 742 | ||||||||
Trademarks and other intangible assets, net | 599 | 633 | ||||||||
Other assets | 186 | 364 | ||||||||
Total assets | $ | 3,617 | $ | 3,834 | ||||||
Liabilities and Stockholders’ (Deficit) Equity | ||||||||||
Current liabilities | ||||||||||
Notes and loans payable | $ | 359 | $ | 289 | ||||||
Current maturities of long-term debt | 2 | 2 | ||||||||
Accounts payable | 347 | 310 | ||||||||
Accrued liabilities | 614 | 643 | ||||||||
Income taxes payable | 26 | 24 | ||||||||
Total current liabilities | 1,348 | 1,268 | ||||||||
Long-term debt | 2,122 | 475 | ||||||||
Other liabilities | 618 | 377 | ||||||||
Deferred income taxes | 82 | 174 | ||||||||
Stockholders’ (deficit) equity | ||||||||||
Common stock: $1.00 par value; 750,000,000 shares authorized; 249,826,934 shares issued; and 151,683,314 and 212,988,540 shares outstanding at June 30, 2005 and 2004, respectively | 250 | 250 | ||||||||
Additional paid-in capital | 328 | 301 | ||||||||
Retained earnings | 3,684 | 2,846 | ||||||||
Treasury shares, at cost: 98,143,620 and 36,838,394 shares at June 30, 2005 and 2004, respectively | (4,463 | ) | (1,570 | ) | ||||||
Accumulated other comprehensive net losses | (336 | ) | (274 | ) | ||||||
Unearned compensation | (16 | ) | (13 | ) | ||||||
Stockholders’ (deficit) equity | (553 | ) | 1,540 | |||||||
Total liabilities and stockholders’ (deficit) equity | $ | 3,617 | $ | 3,834 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
The Clorox Company
Common Stock | Treasury Shares | |||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares (000) | | Amount | | Additional Paid-in Capital | | Retained Earnings | | Shares (000) | | Amount | | Accumulated Other Comprehensive Net Losses | | Unearned Compensation | | Total | | Total Comprehensive Income | |||||||||||||||||||||||
Dollars in millions, except per-share amounts | ||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2002 | 249,827 | $ | 250 | $ | 222 | $ | 2,270 | (26,817 | ) | $ | (1,070 | ) | $ | (296 | ) | $ | (10 | ) | $ | 1,366 | ||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||||||||
Net earnings | 493 | 493 | $ | 493 | ||||||||||||||||||||||||||||||||||||||
Translation adjustments | 48 | 48 | 48 | |||||||||||||||||||||||||||||||||||||||
Tax effect on translation adjustments | (94 | ) | (94 | ) | (94 | ) | ||||||||||||||||||||||||||||||||||||
Translation related to impairment charges | 13 | 13 | 13 | |||||||||||||||||||||||||||||||||||||||
Change in valuation of derivatives, net of tax of $(4) | (5 | ) | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||||||||
Minimum pension liability adjustments, net of tax | (5 | ) | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||||||||
Total comprehensive income | $ | 450 | ||||||||||||||||||||||||||||||||||||||||
Dividends paid ($0.88 per share) | (193 | ) | (193 | ) | ||||||||||||||||||||||||||||||||||||||
Employee stock plans | 33 | (5 | ) | 2,333 | 49 | 1 | 78 | |||||||||||||||||||||||||||||||||||
Treasury stock purchased | (11,666 | ) | (486 | ) | (486 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2003 | 249,827 | 250 | 255 | 2,565 | (36,150 | ) | (1,507 | ) | (339 | ) | (9 | ) | 1,215 | |||||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||||||||
Net earnings | 549 | 549 | $ | 549 | ||||||||||||||||||||||||||||||||||||||
Translation adjustments, net of tax of $1 | 3 | 3 | 3 | |||||||||||||||||||||||||||||||||||||||
Change in valuation of derivatives, net of tax of $2 | (4 | ) | (4 | ) | (4 | ) | ||||||||||||||||||||||||||||||||||||
Minimum pension liability adjustments, net of tax | 66 | 66 | 66 | |||||||||||||||||||||||||||||||||||||||
Total comprehensive income | $ | 614 | ||||||||||||||||||||||||||||||||||||||||
Dividends paid ($1.08 per share) | (229 | ) | (229 | ) | ||||||||||||||||||||||||||||||||||||||
Employee stock plans | 46 | (39 | ) | 4,275 | 157 | (4 | ) | 160 | ||||||||||||||||||||||||||||||||||
Treasury stock purchased | (4,963 | ) | (220 | ) | (220 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2004 | 249,827 | 250 | 301 | 2,846 | (36,838 | ) | (1,570 | ) | (274 | ) | (13 | ) | 1,540 | |||||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||||||||
Net earnings | 1,096 | 1,096 | $ | 1,096 | ||||||||||||||||||||||||||||||||||||||
Share Exchange with Henkel KGaA | (61,387 | ) | (2,843 | ) | (2,843 | ) | ||||||||||||||||||||||||||||||||||||
Translation adjustments resulting from the Henkel KGaA exchange, net of tax of $(10) | 21 | 21 | 21 | |||||||||||||||||||||||||||||||||||||||
Other translation adjustments, net of tax of $(2) | 29 | 29 | 29 | |||||||||||||||||||||||||||||||||||||||
Change in valuation of derivatives, net of tax of $(3) | 6 | 6 | 6 | |||||||||||||||||||||||||||||||||||||||
Minimum pension liability adjustments, net of tax | (118 | ) | (118 | ) | (118 | ) | ||||||||||||||||||||||||||||||||||||
Total comprehensive income | $ | 1,034 | ||||||||||||||||||||||||||||||||||||||||
Dividends paid ($1.10 per share) | (201 | ) | (201 | ) | ||||||||||||||||||||||||||||||||||||||
Dividends accrued ($0.28 per share) | (42 | ) | (42 | ) | ||||||||||||||||||||||||||||||||||||||
Employee stock plans | 27 | (15 | ) | 2,831 | 110 | (3 | ) | 119 | ||||||||||||||||||||||||||||||||||
Treasury stock purchased | (2,750 | ) | (160 | ) | (160 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2005 | 249,827 | $ | 250 | $ | 328 | $ | 3,684 | (98,144 | ) | $ | (4,463 | ) | $ | (336 | ) | $ | (16 | ) | $ | (553 | ) |
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Clorox Company
Years ended June 30 | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dollars in millions | ||||||||||||||
Operations: | ||||||||||||||
Earnings from continuing operations | $ | 517 | $ | 490 | $ | 461 | ||||||||
Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations: | ||||||||||||||
Depreciation and amortization | 190 | 195 | 189 | |||||||||||
Deferred income taxes | (45 | ) | 26 | 98 | ||||||||||
Restructuring and asset impairment activities | 38 | 11 | 30 | |||||||||||
Gain on exchange of Henkel Iberica, S.A. | (20 | ) | — | — | ||||||||||
Net loss on disposition of assets | 6 | 5 | (4 | ) | ||||||||||
Other | 34 | 29 | 36 | |||||||||||
Changes in: | ||||||||||||||
Receivables, net | 33 | 8 | 19 | |||||||||||
Inventories | (17 | ) | (37 | ) | (10 | ) | ||||||||
Other current assets | 5 | — | (1 | ) | ||||||||||
Accounts payable and accrued liabilities | 59 | 72 | (44 | ) | ||||||||||
Income taxes payable | 22 | 86 | 41 | |||||||||||
Settlement of income tax contingency (Note 16) | (94 | ) | — | — | ||||||||||
Pension contributions to qualified plans | — | (41 | ) | (55 | ) | |||||||||
Net cash provided by continuing operations | 728 | 844 | 760 | |||||||||||
Net cash provided by discontinued operations | 37 | 55 | 43 | |||||||||||
Net cash provided by operations | 765 | 899 | 803 | |||||||||||
Investing Activities: | ||||||||||||||
Capital expenditures | (151 | ) | (170 | ) | (203 | ) | ||||||||
Businesses acquired | — | (13 | ) | — | ||||||||||
Proceeds from the sale of businesses | — | — | 15 | |||||||||||
Low-income housing contributions | (9 | ) | (17 | ) | (15 | ) | ||||||||
Other | 6 | (34 | ) | 2 | ||||||||||
Net cash used for investing by continuing operations | (154 | ) | (234 | ) | (201 | ) | ||||||||
Net cash (used for) provided by investing by discontinued operations | — | (2 | ) | 8 | ||||||||||
Net cash used for investing activities | (154 | ) | (236 | ) | (193 | ) | ||||||||
Financing Activities: | ||||||||||||||
Notes and loans payable, net | 68 | (75 | ) | 30 | ||||||||||
Long-term debt borrowings | 1,635 | 8 | 8 | |||||||||||
Long-term debt repayments | — | (215 | ) | (27 | ) | |||||||||
Proceeds from option exercise pursuant to Venture Agreement (Note 11) | 133 | — | — | |||||||||||
Treasury stock acquired from related party, Henkel KGaA (Note 2) | (2,119 | ) | (65 | ) | — | |||||||||
Treasury stock purchased from non-affiliates | (160 | ) | (155 | ) | (486 | ) | ||||||||
Cash dividends paid | (201 | ) | (229 | ) | (193 | ) | ||||||||
Issuance of common stock for employee stock plans | 93 | 111 | 41 | |||||||||||
Other | (1 | ) | 24 | — | ||||||||||
Net cash used for financing by continuing operations | (552 | ) | (596 | ) | (627 | ) | ||||||||
Net cash (used for) provided by financing by discontinued operations | — | (9 | ) | 10 | ||||||||||
Net cash used for financing activities | (552 | ) | (605 | ) | (617 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 2 | 2 | 2 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 61 | 60 | (5 | ) | ||||||||||
Cash and cash equivalents: | ||||||||||||||
Beginning of year | 232 | 172 | 177 | |||||||||||
End of year | $ | 293 | $ | 232 | $ | 172 | ||||||||
Supplemental cash flow information: | ||||||||||||||
Cash paid for: | ||||||||||||||
Interest, net of amounts capitalized | $ | 81 | $ | 31 | $ | 30 | ||||||||
Income taxes, net of refunds | 335 | 81 | 126 | |||||||||||
Non-cash investing and financing activities: | ||||||||||||||
Venture Agreement | ||||||||||||||
Equipment and technologies obtained | $ | — | $ | — | $ | 125 | ||||||||
Terminal obligation recorded | �� | — | — | 125 | ||||||||||
Share Exchange Agreement | ||||||||||||||
As part of the Share Exchange Agreement, the Company obtained 61,386,509 shares of its common stock in exchange for businesses valued at $745 and cash (Note 2). | ||||||||||||||
Dividends declared but not paid | $ | 42 | — | — |
The Clorox Company
(Dollars in millions, except per-share amounts)
The Clorox Company
(Dollars in millions, except per-share amounts)
to $0.16 per diluted share in fiscal year 2006, which includes the incremental accounting impact from the issuance of stock options and performance units. The Company plans to continue to use the Black-Scholes option pricing model to determine the fair value of awards.
The Clorox Company
(Dollars in millions, except per-share amounts)
Classification | | Expected Useful Lives | |||
---|---|---|---|---|---|
Land improvements | 10 to 30 years | ||||
Buildings | 10 to 40 years | ||||
Machinery and equipment | 3 to 15 years | ||||
Computer equipment | 3 years | ||||
Capitalized software costs | 3 to 7 years | ||||
Furniture and fixtures | 5 to 10 years | ||||
Transportation equipment | 5 to 10 years |
The Clorox Company
(Dollars in millions, except per-share amounts)
that differs from the actual returns of those plan assets in any given year. Over time, however, the goal is for the expected long-term returns to approximate the actual returns, and therefore are expected to result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the participants. The differences between actual and expected returns are recognized in the net periodic benefit cost calculation over the average remaining service period of the plan participants. In developing its expected return on plan assets, the Company considers the long-term actual returns relative to the mix of investments that comprise its plan assets and also develops estimates of future investment returns by considering external sources.
The Clorox Company
(Dollars in millions, except per-share amounts)
consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. Programs include introductory marketing funds, cooperative marketing programs, shelf price reductions, advantageous end-of-aisle or in-store displays of the Company’s products, graphics, and other trade-promotion activities conducted by the customer. Coupons are recognized as a liability when distributed based upon expected consumer redemptions. The Company maintains liabilities at the end of each period for the estimated expenses incurred, but unpaid for these programs. Trade-promotion and coupon costs are recorded as a reduction of sales.
The Clorox Company
(Dollars in millions, except per-share amounts)
its tax contingency accruals are adequate to address known tax contingencies. Favorable resolution of such contingencies could be recognized as a reduction to the Company’s effective tax rate in the period of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate and may require the use of cash in the year of resolution.
The Clorox Company
(Dollars in millions, except per-share amounts)
comprehensive income. The Company also has contracts not designated as hedges for accounting purposes and recognizes changes in the fair value of these contracts in other (income) expense.
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net earnings: | ||||||||||||||
As reported | $ | 1,096 | $ | 549 | $ | 493 | ||||||||
Fair value-based expense, net of tax | (18 | ) | (19 | ) | (21 | ) | ||||||||
Pro forma | $ | 1,078 | $ | 530 | $ | 472 | ||||||||
Net earnings per common share: | ||||||||||||||
Basic | ||||||||||||||
As reported | $ | 6.20 | $ | 2.59 | $ | 2.26 | ||||||||
Pro forma | 6.10 | 2.50 | 2.16 | |||||||||||
Diluted | ||||||||||||||
As reported | $ | 6.11 | $ | 2.56 | $ | 2.23 | ||||||||
Pro forma | 6.02 | 2.47 | 2.14 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | $ | 87 | $ | 162 | $ | 158 | ||||||||
Income from discontinued operations before income taxes | $ | 37 | $ | 87 | $ | 84 | ||||||||
Income tax expense | (8 | ) | (31 | ) | (31 | ) | ||||||||
Earnings from discontinued operations | $ | 29 | $ | 56 | $ | 53 |
11/22/2004 | 6/30/2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Current assets, net of current liabilities of $5 and $21 | $ | 8 | $ | 31 | ||||||
Property, plant and equipment, net | 9 | 9 | ||||||||
Goodwill, net | 15 | 15 | ||||||||
Trademarks and other intangible assets, net | 31 | 31 | ||||||||
Equity investment in Henkel Iberica | 69 | 62 | ||||||||
Other assets | 3 | 3 | ||||||||
Deferred income tax assets (liabilities) | 1 | (6 | ) | |||||||
Net assets exchanged | $ | 136 | $ | 145 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2004 | 2003 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Net sales | — | $ | 27 | |||||||
Losses from discontinued operations before income taxes | $ | (4 | ) | $ | (3 | ) | ||||
Asset impairment charges | — | (23 | ) | |||||||
Income tax benefits | 7 | 5 | ||||||||
Earnings (losses) from discontinued operations | $ | 3 | $ | (21 | ) |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Restructuring: | ||||||||||||||
Severance | $ | 6 | $ | 1 | $ | — | ||||||||
Plant closure and other | 1 | — | — | |||||||||||
Total restructuring | 7 | 1 | — | |||||||||||
Asset impairment: | ||||||||||||||
Machinery and equipment | 29 | 10 | — | |||||||||||
Goodwill and other intangibles (including deferred translation and deferred charges) | — | — | 33 | |||||||||||
Total asset impairment | 29 | 10 | 33 | |||||||||||
Total restructuring and asset impairment expense | $ | 36 | $ | 11 | $ | 33 | ||||||||
Accrued restructuring at beginning of year | $ | 3 | $ | 6 | $ | 14 | ||||||||
Restructuring expense | 7 | 1 | — | |||||||||||
Payments | (8 | ) | (4 | ) | (8 | ) | ||||||||
Accrued restructuring at end of year | $ | 2 | $ | 3 | $ | 6 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Finished goods | $ | 256 | $ | 243 | ||||||
Raw materials and packaging | 76 | 68 | ||||||||
Work in process | 6 | 3 | ||||||||
LIFO allowances | (9 | ) | (9 | ) | ||||||
Allowances for obsolescence | (6 | ) | (4 | ) | ||||||
Total | $ | 323 | $ | 301 |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning of year | $ | (4 | ) | $ | (3 | ) | $ | (12 | ) | |||||
Inventory obsolescence | (16 | ) | (14 | ) | (8 | ) | ||||||||
Deductions for inventory write-offs | 14 | 13 | 17 | |||||||||||
End of year | $ | (6 | ) | $ | (4 | ) | $ | (3 | ) |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Land and improvements | $ | 96 | $ | 93 | ||||||
Buildings | 487 | 480 | ||||||||
Machinery and equipment | 1,245 | 1,255 | ||||||||
Computer hardware | 120 | 113 | ||||||||
Capitalized software costs | 235 | 219 | ||||||||
Construction in progress | 69 | 50 | ||||||||
2,252 | 2,210 | |||||||||
Less: accumulated depreciation and amortization | (1,253 | ) | (1,158 | ) | ||||||
Net balance | $ | 999 | $ | 1,052 |
The Clorox Company
(Dollars in millions, except per-share amounts)
Household Group | Specialty Group | International | Corporate | Total | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at June 30, 2003 (as reported) | $ | 125 | $ | 381 | $ | 155 | $ | 69 | $ | 730 | ||||||||||||
Segment realignment (Note 18) | 298 | (298 | ) | — | — | — | ||||||||||||||||
Balance at June 30, 2003 (as realigned) | 423 | 83 | 155 | 69 | 730 | |||||||||||||||||
Acquisitions and sales | — | — | 6 | — | 6 | |||||||||||||||||
Translation adjustments and other | (2 | ) | — | 8 | — | 6 | ||||||||||||||||
Balance at June 30, 2004 | 421 | 83 | 169 | 69 | 742 | |||||||||||||||||
Henkel exchange | — | (15 | ) | — | — | (15 | ) | |||||||||||||||
Translation adjustments and other | 5 | — | 11 | — | 16 | |||||||||||||||||
Balance at June 30, 2005 | $ | 426 | $ | 68 | $ | 180 | $ | 69 | $ | 743 |
Trademarks and other intangible assets subject to amortization | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Technology | Other | Sub-Total | Trademarks not subject to amortization | Total | ||||||||||||||||||
Net balance at June 30, 2003 | $ | 105 | $ | 31 | $ | 136 | $ | 515 | $ | 651 | ||||||||||||
Acquisitions | 1 | — | 1 | 2 | 3 | |||||||||||||||||
Translation adjustments and other | — | (4 | ) | (4 | ) | (2 | ) | (6 | ) | |||||||||||||
Amortization | (9 | ) | (6 | ) | (15 | ) | — | (15 | ) | |||||||||||||
Net balance at June 30, 2004 | 97 | 21 | 118 | 515 | 633 | |||||||||||||||||
Henkel exchange | — | — | — | (32 | ) | (32 | ) | |||||||||||||||
Translation adjustments and other | — | 1 | 1 | 9 | 10 | |||||||||||||||||
Amortization | (10 | ) | (2 | ) | (12 | ) | — | (12 | ) | |||||||||||||
Net balance at June 30, 2005 | $ | 87 | $ | 20 | $ | 107 | $ | 492 | $ | 599 | ||||||||||||
Weighted average life (in years) | 13 | 19 | 14 | 14 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Pension benefit assets | $ | 2 | $ | 119 | ||||||
Equity investments in: | ||||||||||
Henkel Iberica | — | 62 | ||||||||
Other entities | 47 | 45 | ||||||||
Investment in low-income housing partnerships | 33 | 51 | ||||||||
Investment in insurance contracts | 49 | 47 | ||||||||
Non-qualified retirement plan assets | 18 | 21 | ||||||||
Other | 37 | 19 | ||||||||
Total | $ | 186 | $ | 364 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Taxes | $ | 281 | $ | 377 | ||||||
Trade and sales promotion | 107 | 122 | ||||||||
Compensation and employee benefit costs | 85 | 88 | ||||||||
Interest and other | 141 | 56 | ||||||||
Total | $ | 614 | $ | 643 |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Commercial paper | $ | 357 | $ | 286 | ||||||
Notes payable | — | 3 | ||||||||
Foreign borrowings | 2 | — | ||||||||
Total | $ | 359 | $ | 289 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Senior unsecured notes and debentures: | ||||||||||
Floating rate, $500 due December 2007 | $ | 500 | $ | — | ||||||
4.20%, $575 due January 2010, including premiums | 577 | — | ||||||||
5.00%, $575 due January 2015 | 575 | — | ||||||||
6.125%, $300 due February 2011, including premiums | 317 | 321 | ||||||||
7.25%, $150 due March 2007 | 150 | 150 | ||||||||
Foreign bank loans | — | 6 | ||||||||
Other | 5 | — | ||||||||
Total | 2,124 | 477 | ||||||||
Less: current maturities | (2 | ) | (2 | ) | ||||||
Long-term debt | $ | 2,122 | $ | 475 |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Domestic credit facilities: | ||||||||||
Credit line, scheduled to expire in December 2009 | $ | 1,300 | $ | — | ||||||
Credit line, scheduled to expire in June 2005 | — | 600 | ||||||||
Credit line, scheduled to expire in March 2007 | — | 350 | ||||||||
Foreign and other credit lines | 16 | 12 | ||||||||
Total | $ | 1,316 | $ | 962 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Current assets: | ||||||||||
Commodity purchase contracts | $ | 7 | — | |||||||
Foreign exchange contracts | — | $ | 1 | |||||||
Other assets: | ||||||||||
Commodity purchase contracts | 5 | 3 |
2005 | 2004 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Notional | Fair Value | Notional | Fair Value | ||||||||||||||||
Derivative Instruments | |||||||||||||||||||
Foreign exchange contracts | $ | 32 | — | $ | 36 | $ | 1 | ||||||||||||
Commodity purchase contracts | 73 | $ | 12 | 43 | 3 | ||||||||||||||
Commodity option contracts | — | — | 2 | — |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Venture agreement net terminal obligation | $ | 258 | $ | 125 | ||||||
Retirement healthcare benefits | 88 | 82 | ||||||||
Qualified and nonqualified pension plans | 119 | 42 | ||||||||
Deferred compensation plans | 61 | 50 | ||||||||
Environmental remediation | 33 | 29 | ||||||||
Long term disability post employment obligation | 21 | 19 | ||||||||
Other | 38 | 30 | ||||||||
Total | $ | 618 | $ | 377 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Currency translation | $ | (217 | ) | $ | (267 | ) | $ | (270 | ) | |||||
Derivatives | 5 | (1 | ) | 3 | ||||||||||
Minimum pension liabilities | (124 | ) | (6 | ) | (72 | ) | ||||||||
Total | $ | (336 | ) | $ | (274 | ) | $ | (339 | ) |
Number of shares to be issued upon exercise (in thousands) | 12,776 | |||||
Weighted-average exercise price | $38 | |||||
Number of shares remaining for future issuance (in thousands) | 6,756 |
The Clorox Company
(Dollars in millions, except per-share amounts)
Number of Shares | Weighted-Average Exercise Price | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in thousands) | ||||||||||
Outstanding at June 30, 2002 | 15,212 | $ | 33 | |||||||
Granted | 2,009 | 41 | ||||||||
Exercised | (2,202 | ) | 25 | |||||||
Cancelled | (424 | ) | 41 | |||||||
Outstanding at June 30, 2003 | 14,595 | 35 | ||||||||
Granted | 2,337 | 45 | ||||||||
Exercised | (3,982 | ) | 29 | |||||||
Cancelled | (395 | ) | 43 | |||||||
Outstanding at June 30, 2004 | 12,555 | 38 | ||||||||
Granted | 2,398 | 53 | ||||||||
Exercised | (2,686 | ) | 35 | |||||||
Cancelled | (576 | ) | 49 | |||||||
Outstanding at June 30, 2005 | 11,691 | 42 | ||||||||
Options exercisable at: | ||||||||||
June 30, 2003 | 9,208 | $ | 32 | |||||||
June 30, 2004 | 8,173 | 35 | ||||||||
June 30, 2005 | 7,229 | 36 |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dividend yield | 2.06% | 2.45% | 2.11% | |||||||||||
Expected volatility | 29.2% | 33.1% | 35.0% | |||||||||||
Risk-free interest rate | 3.1% to 5.4% | 2.5% to 4.0% | 2.1% to 4.1% | |||||||||||
Expected life | 4 to 6 years | 4 to 6 years | 5 years |
The Clorox Company
(Dollars in millions, except per-share amounts)
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of Exercise Price | Weighted-Average Remaining Contractual Life in Years | Outstanding | Weighted-Average Exercise Price | Exercisable | Weighted-Average Exercise Price | ||||||||||||||||||
$13–$20 | 0.2 | 59 | $ | 18 | 59 | $ | 18 | ||||||||||||||||
20– 27 | 0.9 | 838 | 22 | 838 | 22 | ||||||||||||||||||
27– 34 | 3.2 | 41 | 33 | 41 | 33 | ||||||||||||||||||
34– 40 | 5.3 | 5,506 | 37 | 5,123 | 37 | ||||||||||||||||||
40– 47 | 7.8 | 2,278 | 45 | 773 | 44 | ||||||||||||||||||
47– 54 | 9.0 | 2,228 | 53 | 65 | 50 | ||||||||||||||||||
54– 61 | 7.2 | 378 | 55 | 285 | 54 | ||||||||||||||||||
61– 67 | 1.7 | 363 | 67 | 45 | 67 | ||||||||||||||||||
$13–$67 | 6.1 | 11,691 | $ | 42 | 7,229 | $ | 36 |
Fiscal Year | Future Minimum Rental Payments | |||||
---|---|---|---|---|---|---|
2006 | $ | 23 | ||||
2007 | 23 | |||||
2008 | 21 | |||||
2009 | 16 | |||||
2010 | 12 | |||||
Thereafter | 55 | |||||
Total | $ | 150 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Henkel Iberica: | ||||||||||||||
Gain on exchange | $ | (20 | ) | $ | — | $ | — | |||||||
Equity in earnings | (5 | ) | (11 | ) | (2 | ) | ||||||||
(25 | ) | (11 | ) | (2 | ) | |||||||||
Interest income | (10 | ) | (4 | ) | (3 | ) | ||||||||
Foreign exchange (gains) losses, net | (8 | ) | — | 2 | ||||||||||
Equity in earnings of other unconsolidated affiliates | (5 | ) | (6 | ) | (7 | ) | ||||||||
Low-income housing partnerships losses (Note 7) | 16 | — | — | |||||||||||
Amortization of trademarks and other intangible assets | 4 | 7 | 11 | |||||||||||
Other, net | 5 | 5 | (9 | ) | ||||||||||
2 | 2 | (6 | ) | |||||||||||
Total other (income) expense | $ | (23 | ) | $ | (9 | ) | $ | (8 | ) |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current | ||||||||||||||
Federal | $ | 209 | $ | 186 | $ | 122 | ||||||||
State | 24 | 19 | 12 | |||||||||||
Foreign | 26 | 32 | 23 | |||||||||||
Total current | 259 | 237 | 157 | |||||||||||
Deferred | ||||||||||||||
Federal | (62 | ) | 29 | 95 | ||||||||||
Federal — American Jobs Creation Act | 12 | — | — | |||||||||||
State | (5 | ) | (4 | ) | 7 | |||||||||
Foreign | 8 | — | (2 | ) | ||||||||||
Total deferred | (47 | ) | 25 | 100 | ||||||||||
Total | $ | 212 | $ | 262 | $ | 257 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
United States | $ | 587 | $ | 639 | $ | 642 | ||||||||
Foreign | 142 | 113 | 76 | |||||||||||
Total | $ | 729 | $ | 752 | $ | 718 |
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Statutory federal tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State taxes (net of federal tax benefits) | 1.7 | 1.9 | 1.7 | |||||||||||
Tax differential on foreign earnings | (0.6 | ) | (1.2 | ) | (1.0 | ) | ||||||||
Net adjustment of prior year federal and state tax accruals | (2.9 | ) | 0.5 | 0.1 | ||||||||||
Change in valuation allowance | (1.4 | ) | (0.4 | ) | 0.8 | |||||||||
Low-income housing tax credits | (0.9 | ) | (1.1 | ) | (1.9 | ) | ||||||||
Other differences | (1.8 | ) | 0.2 | 1.1 | ||||||||||
Effective tax rate | 29.1 | % | 34.9 | % | 35.8 | % |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax assets | ||||||||||
Minimum pension funding obligation | $ | 75 | $ | 3 | ||||||
Compensation and benefit programs | 55 | 38 | ||||||||
Basis difference related to Venture Agreement (Note 11) | 34 | — | ||||||||
Net operating loss and tax credit carryforwards | 26 | 38 | ||||||||
Tax effect of deferred translation | — | 12 | ||||||||
Other | 33 | 27 | ||||||||
Subtotal | 223 | 118 | ||||||||
Valuation allowance | (33 | ) | (39 | ) | ||||||
Total deferred tax assets | 190 | 79 | ||||||||
Deferred tax liabilities | ||||||||||
Fixed and intangible assets | (173 | ) | (191 | ) | ||||||
Low-income housing partnerships | (24 | ) | (26 | ) | ||||||
Tax effect of deferred translation | (2 | ) | — | |||||||
Other | (50 | ) | (29 | ) | ||||||
Total deferred tax liabilities | (249 | ) | (246 | ) | ||||||
Net deferred tax liabilities | $ | (59 | ) | $ | (167 | ) |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Current deferred tax assets | $ | 16 | $ | 7 | ||||||
Noncurrent deferred tax assets | 8 | — | ||||||||
Current deferred tax liabilities | (1 | ) | �� | — | ||||||
Noncurrent deferred tax liabilities | (82 | ) | (174 | ) | ||||||
Net deferred tax liabilities | $ | (59 | ) | $ | (167 | ) |
2005 | 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Valuation allowance at beginning of year | $ | (39 | ) | $ | (97 | ) | ||||
Impairment | — | 49 | ||||||||
Other | 6 | 9 | ||||||||
Valuation allowance at end of year | $ | (33 | ) | $ | (39 | ) |
The Clorox Company
(Dollars in millions, except per-share amounts)
The Clorox Company
(Dollars in millions, except per-share amounts)
Retirement Income | Retirement Health Care | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Change in benefit obligations | |||||||||||||||||||
Benefit obligation at beginning of year | $ | 404 | $ | 387 | $ | 77 | $ | 76 | |||||||||||
Service cost | 13 | 12 | 2 | 2 | |||||||||||||||
Interest cost | 26 | 24 | 5 | 5 | |||||||||||||||
Employee contributions to deferred compensation plans | 7 | 8 | — | — | |||||||||||||||
Actuarial loss (gain) | 112 | 3 | 6 | (3 | ) | ||||||||||||||
Benefits paid | (32 | ) | (30 | ) | (6 | ) | (3 | ) | |||||||||||
Benefit obligation at end of year | 530 | 404 | 84 | 77 | |||||||||||||||
Change in plan assets | �� | ||||||||||||||||||
Fair value of assets at beginning of year | 334 | 272 | — | — | |||||||||||||||
Actual return on plan assets | 29 | 45 | — | — | |||||||||||||||
Employer contributions to qualified and nonqualified plans | 8 | 47 | 6 | 3 | |||||||||||||||
Benefits paid | (32 | ) | (30 | ) | (6 | ) | (3 | ) | |||||||||||
Fair value of plan assets at end of year | 339 | 334 | — | — | |||||||||||||||
Unfunded status | (191 | ) | (70 | ) | (84 | ) | (77 | ) | |||||||||||
Unrecognized prior service cost | (3 | ) | (4 | ) | (10 | ) | (12 | ) | |||||||||||
Unrecognized loss | 220 | 118 | 12 | 7 | |||||||||||||||
Prepaid (accrued) benefit cost | $ | 26 | $ | 44 | $ | (82 | ) | $ | (82 | ) | |||||||||
Amount recognized in the balance sheets consists of: | |||||||||||||||||||
Pension benefit assets | $ | 2 | $ | 119 | $ | — | $ | — | |||||||||||
Accrued benefit liability | (175 | ) | (84 | ) | (82 | ) | (82 | ) | |||||||||||
Accumulated other comprehensive net losses, before deferred tax benefits | 199 | 9 | — | — | |||||||||||||||
Net amount recognized | $ | 26 | $ | 44 | $ | (82 | ) | $ | (82 | ) |
The Clorox Company
(Dollars in millions, except per-share amounts)
Retirement Income | Retirement Health Care | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | 2005 | 2004 | 2003 | ||||||||||||||||||||||
Components of net periodic benefit cost | |||||||||||||||||||||||||||
Service cost | $ | 13 | $ | 12 | $ | 11 | $ | 2 | $ | 2 | $ | 2 | |||||||||||||||
Interest cost | 26 | 24 | 24 | 5 | 5 | 5 | |||||||||||||||||||||
Expected return on plan assets | (28 | ) | (29 | ) | (30 | ) | — | — | — | ||||||||||||||||||
Plan adjustments | — | — | 11 | — | — | (4 | ) | ||||||||||||||||||||
Amortization of unrecognized items | 8 | 6 | (2 | ) | (2 | ) | (1 | ) | (1 | ) | |||||||||||||||||
Total net periodic benefit cost | $ | 19 | $ | 13 | $ | 14 | $ | 5 | $ | 6 | $ | 2 |
% of Plan Assets at June 30 | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% Target Allocation | 2005 | 2004 | |||||||||||||
Asset Category | |||||||||||||||
U.S. equity | 57 | 58 | 60 | ||||||||||||
International equity | 18 | 18 | 16 | ||||||||||||
Fixed income | 25 | 24 | 24 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % |
Retirement Income | Retirement Health Care | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Benefit Obligation | |||||||||||||||||||
Discount rate | |||||||||||||||||||
Range | 5.00% to 5.25% | 5.50% to 6.50% | 5.00% to 5.25% | 6.25% to 6.50% | |||||||||||||||
Weighted average | 5.01% | 6.48% | 5.01% | 6.49% | |||||||||||||||
Rate of compensation increase | |||||||||||||||||||
Range | 3.50% to 5.50% | 3.50% to 5.50% | n/a | n/a | |||||||||||||||
Weighted average | 4.17% | 4.17% | n/a | n/a | |||||||||||||||
Expected return on plan assets | |||||||||||||||||||
Range | 6.50% to 8.25% | 6.50% to 8.25% | n/a | n/a | |||||||||||||||
Weighted average | 8.18% | 8.19% | n/a | n/a |
The Clorox Company
(Dollars in millions, except per-share amounts)
Retirement Income | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | |||||||||||||
Net periodic expense (income) | |||||||||||||||
Discount rate | |||||||||||||||
Range | 5.50% to 6.50% | 4.75% to 6.25% | 5.75% to 7.25% | ||||||||||||
Weighted average | 6.49% | 6.24% | 7.23% | ||||||||||||
Rate of compensation increase | |||||||||||||||
Range | 3.50% to 5.50% | 3.50% to 5.50% | 3.50% to 5.50% | ||||||||||||
Weighted average | 4.17% | 4.17% | 4.16% | ||||||||||||
Expected return on plan assets | |||||||||||||||
Range | 6.50% to 8.25% | 6.50% to 8.25% | 6.50% to 9.50% | ||||||||||||
Weighted average | 8.18% | 8.19% | 9.41% |
Retirement Health Care | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2003 | |||||||||||||
Net periodic expense (income) | |||||||||||||||
Discount rate | |||||||||||||||
Range | 6.25% to 6.50% | 6.25% to 6.50% | 6.25% to 6.75% | ||||||||||||
Weighted average | 6.49% | 6.49% | 6.27% |
Retirement Income | Retirement Health Care | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
2006 | $ | 30 | $ | 7 | ||||||
2007 | 31 | 7 | ||||||||
2008 | 32 | 7 | ||||||||
2009 | 32 | 6 | ||||||||
2010 | 34 | 6 | ||||||||
Fiscal years 2011–2015 | 168 | 31 |
The Clorox Company
(Dollars in millions, except per-share amounts)
• | Household Group — North America, formerly known as Household Products — North America: Includes U.S. bleach, cleaning, water-filtration and professional products; the automotive-care business; and all products marketed in Canada. The automotive-care business and professional products were previously included in the Specialty Products segment. The Soft Scrub business, previously part of the Household Products — North America segment, is included in discontinued operations. |
• | Specialty Group, formerly known as Specialty Products: Includes the plastic bags, wraps and containers businesses marketed in the United States, charcoal, cat litter and food products. The plastic bags, wraps and containers businesses were previously included in the Household Products — North America segment. The domestic insecticide business, previously part of the Specialty Products segment, is included in discontinued operations. |
• | International, formerly known as Household Products — Latin America/Other: Includes operations outside the United States and Canada, excluding the European automotive-care business. The international insecticide business and Henkel Iberica, both previously part of the Household Products — Latin America/Other segment, are included in discontinued operations. |
The Clorox Company
(Dollars in millions, except per-share amounts)
Fiscal Year | Household Group | Specialty Group | International | Corporate | Total Company | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 2005 | $ | 2,038 | $ | 1,788 | $ | 562 | $ | — | $ | 4,388 | |||||||||||||||
2004 | 1,986 | 1,677 | 499 | — | 4,162 | |||||||||||||||||||||
2003 | 1,995 | 1,549 | 442 | — | 3,986 | |||||||||||||||||||||
Earnings (losses) from continuing operations before income taxes | 2005 | 633 | 435 | 119 | (458 | ) | 729 | |||||||||||||||||||
2004 | 634 | 417 | 115 | (414 | ) | 752 | ||||||||||||||||||||
2003 | 613 | 442 | 55 | (392 | ) | 718 | ||||||||||||||||||||
Equity in earnings of affiliates | 2005 | — | — | 13 | (1 | ) | 12 | |||||||||||||||||||
2004 | — | — | 17 | — | 17 | |||||||||||||||||||||
2003 | — | — | 9 | — | 9 | |||||||||||||||||||||
Identifiable assets | 2005 | 1,360 | 862 | 549 | 846 | 3,617 | ||||||||||||||||||||
2004 | 1,355 | 908 | 660 | 911 | 3,834 | |||||||||||||||||||||
Capital expenditures | 2005 | 39 | 61 | 9 | 42 | 151 | ||||||||||||||||||||
2004 | 30 | 61 | 6 | 73 | 170 | |||||||||||||||||||||
2003 | 29 | 55 | 7 | 112 | 203 | |||||||||||||||||||||
Depreciation and amortization | 2005 | 42 | 64 | 9 | 75 | 190 | ||||||||||||||||||||
2004 | 40 | 63 | 11 | 81 | 195 | |||||||||||||||||||||
2003 | 43 | 54 | 10 | 82 | 189 | |||||||||||||||||||||
Significant non-cash charges included in earnings from continuing operations before income taxes: | ||||||||||||||||||||||||||
Asset impairment costs | 2005 | — | 26 | 3 | — | 29 | ||||||||||||||||||||
2004 | — | 10 | — | — | 10 | |||||||||||||||||||||
2003 | — | — | 33 | — | 33 |
The Clorox Company
(Dollars in millions, except per-share amounts)
Fiscal Year | United States | Foreign | Total Company | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales | 2005 | $ | 3,692 | $ | 696 | $ | 4,388 | |||||||||||
2004 | 3,547 | 615 | 4,162 | |||||||||||||||
2003 | 3,433 | 553 | 3,986 | |||||||||||||||
Long-lived assets | 2005 | 883 | 116 | 999 | ||||||||||||||
2004 | 937 | 115 | 1,052 |
The Clorox Company
(Dollars in millions, except per-share amounts)
2005 | 2004 | 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Basic | 176,586 | 211,683 | 218,174 | |||||||||||
Stock options and other | 2,590 | 2,688 | 2,518 | |||||||||||
Diluted | 179,176 | 214,371 | 220,692 |
The Clorox Company
(Dollars in millions, except per-share amounts)
Quarters Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30 | December 31 | March 31 | June 30 | Total Year | ||||||||||||||||||
Fiscal year ended June 30, 2005 | ||||||||||||||||||||||
Net sales | $ | 1,048 | $ | 1,000 | $ | 1,086 | $ | 1,254 | $ | 4,388 | ||||||||||||
Cost of products sold | 591 | 569 | 632 | 701 | 2,493 | |||||||||||||||||
Earnings from continuing operations (1)(2)(3)(4) | $ | 109 | $ | 136 | $ | 116 | $ | 156 | $ | 517 | ||||||||||||
Earnings from discontinued operations, net of tax | 14 | 563 | 2 | — | 579 | |||||||||||||||||
Net earnings (5) | $ | 123 | $ | 699 | $ | 118 | $ | 156 | $ | 1,096 | ||||||||||||
Per common share (6): | ||||||||||||||||||||||
Net earnings | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
Continuing operations | $ | 0.51 | $ | 0.73 | $ | 0.76 | $ | 1.02 | $ | 2.92 | ||||||||||||
Discontinued operations | 0.07 | 3.00 | 0.01 | — | 3.28 | |||||||||||||||||
Net earnings | $ | 0.58 | $ | 3.73 | $ | 0.77 | $ | 1.02 | $ | 6.20 | ||||||||||||
Diluted | ||||||||||||||||||||||
Continuing operations | $ | 0.50 | $ | 0.72 | $ | 0.75 | $ | 1.00 | $ | 2.88 | ||||||||||||
Discontinued operations | 0.07 | 2.96 | 0.01 | — | 3.23 | |||||||||||||||||
Net earnings | $ | 0.57 | $ | 3.68 | $ | 0.76 | $ | 1.00 | $ | 6.11 | ||||||||||||
Dividends paid | $ | 0.27 | $ | 0.27 | $ | 0.28 | $ | 0.28 | $ | 1.10 | ||||||||||||
Dividends accrued (7) | — | — | — | $ | 0.28 | $ | 0.28 | |||||||||||||||
Market price (NYSE) | ||||||||||||||||||||||
High | $ | 54.93 | $ | 59.45 | $ | 63.48 | $ | 66.04 | $ | 66.04 | ||||||||||||
Low | 48.90 | 53.20 | 56.80 | �� | 55.15 | 48.90 | ||||||||||||||||
Year-end | 55.72 |
(1) | In the first quarter of fiscal year 2005, the Company recorded pretax asset impairment charges of $27 related to the supply chain restructuring initiative for the Glad business, part of the Specialty Group operating segment. |
(2) | The Company released approximately $23 in tax accruals in the third quarter as a result of reaching settlement on an income tax contingency, thereby reducing income tax expense on continuing operations. |
(3) | In the third quarter, the Company recorded a $9 after tax charge to recognize certain low-income housing partnership operating losses realized in prior fiscal years. The aggregate charge accumulated over the approximate 14-year period during which the Company invested in the partnerships. |
(4) | The Company recorded an $8 after tax benefit in the fourth quarter of fiscal year 2005 to recognize certain currency transaction gains which accumulated over a four-year period in a foreign subsidiary. |
(5) | Upon closing of the Henkel exchange transaction in the second quarter, the Company recognized a total gain of $570 and reversed a total of $8 of deferred income taxes. Of the total gain recognized, $550 relates to the Operating Businesses and is included in discontinued operations and $20 relates to Henkel Iberica and is included in continuing operations. Of the total deferred tax reversal, $6 relates to the Operating Businesses and is included in discontinued operations and $2 relates to Henkel Iberica and is included in continuing operations. |
(6) | On November 22, 2004, the Company acquired 61.4 million shares of its common stock from Henkel as part of the share exchange. |
(7) | At June 30, 2005, the Company accrued $42 of dividends declared in May 2005 and paid in August 2005. In the first quarter of fiscal year 2005, the Company paid $58 of dividends which should have been accrued at June 30, 2004. The Company does not believe the accrual was material to the period to which it relates. |
The Clorox Company
(Dollars in millions, except per-share amounts)
Quarters Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30 | December 31 | March 31 | June 30 | Total Year | ||||||||||||||||||
Fiscal year ended June 30, 2004 | ||||||||||||||||||||||
Net sales | $ | 1,006 | $ | 920 | $ | 1,051 | $ | 1,185 | $ | 4,162 | ||||||||||||
Cost of products sold | 577 | 527 | 584 | 643 | 2,331 | |||||||||||||||||
Earnings from continuing operations (1) | $ | 115 | $ | 101 | $ | 115 | $ | 159 | $ | 490 | ||||||||||||
Earnings from discontinued operations, net of tax (2) | 14 | 8 | 11 | 26 | 59 | |||||||||||||||||
Net earnings | $ | 129 | $ | 109 | $ | 126 | $ | 185 | $ | 549 | ||||||||||||
Per common share: | ||||||||||||||||||||||
Net earnings | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
Continuing operations | $ | 0.54 | $ | 0.48 | $ | 0.55 | $ | 0.75 | $ | 2.31 | ||||||||||||
Discontinued operations | 0.07 | 0.04 | 0.05 | 0.12 | 0.28 | |||||||||||||||||
Net earnings | $ | 0.61 | $ | 0.52 | $ | 0.60 | $ | 0.87 | $ | 2.59 | ||||||||||||
Diluted | ||||||||||||||||||||||
Continuing operations | $ | 0.54 | $ | 0.47 | $ | 0.54 | $ | 0.74 | $ | 2.28 | ||||||||||||
Discontinued operations | 0.06 | 0.04 | 0.05 | �� | 0.12 | 0.28 | ||||||||||||||||
Net earnings | $ | 0.60 | $ | 0.51 | $ | 0.59 | $ | 0.86 | $ | 2.56 | ||||||||||||
Dividends paid | $ | 0.27 | $ | 0.27 | $ | 0.27 | $ | 0.27 | $ | 1.08 | ||||||||||||
Market price (NYSE) | ||||||||||||||||||||||
High | $ | 46.52 | $ | 49.16 | $ | 50.95 | $ | 54.29 | $ | 54.29 | ||||||||||||
Low | 41.60 | 44.44 | 46.50 | 48.73 | 41.60 | |||||||||||||||||
Year-end | 53.78 |
(1) | Earnings from continuing operations for the fourth quarter include pretax restructuring and asset impairment charges of $11. |
(2) | The Company recognized $5 of income tax benefits in earnings from discontinued operations in the fourth quarter of fiscal year 2004, which includes $3 (or $0.02 per diluted share based upon average shares outstanding during the fourth quarter) of income tax benefits related to losses incurred in the first three quarters of fiscal year 2004. |
August 26, 2005
August 26, 2005
Years ended June 30 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dollars in millions, except per-share data and percentages | ||||||||||||||||||||||
OPERATIONS | ||||||||||||||||||||||
Net sales | $ | 4,388 | $ | 4,162 | $ | 3,986 | $ | 3,859 | $ | 3,697 | ||||||||||||
Cost of products sold | 2,493 | 2,331 | 2,171 | 2,222 | 2,228 | |||||||||||||||||
Gross profit | 1,895 | 1,831 | 1,815 | 1,637 | 1,469 | |||||||||||||||||
Selling and administrative expenses | 551 | 543 | 523 | 516 | 472 | |||||||||||||||||
Advertising costs | 435 | 420 | 446 | 381 | 336 | |||||||||||||||||
Research and development costs | 88 | 84 | 75 | 64 | 67 | |||||||||||||||||
Restructuring and asset impairment costs | 36 | 11 | 33 | 184 | 59 | |||||||||||||||||
Interest expense | 79 | 30 | 28 | 38 | 88 | |||||||||||||||||
Other (income) expense, net | (23 | ) | (9 | ) | (8 | ) | (23 | ) | 46 | |||||||||||||
Earnings from continuing operations before income taxes | 729 | 752 | 718 | 477 | 401 | |||||||||||||||||
Income taxes on continuing operations | 214 | 262 | 257 | 173 | 124 | |||||||||||||||||
Reversal of deferred taxes from equity investment in Henkel Iberica S.A. | (2 | ) | — | — | — | — | ||||||||||||||||
Earnings from continuing operations | 517 | 490 | 461 | 304 | 277 | |||||||||||||||||
Earnings from discontinued operations, net of tax (1) | 579 | 59 | 32 | 18 | 48 | |||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | (2 | ) | ||||||||||||||||
Net earnings | $ | 1,096 | $ | 549 | $ | 493 | $ | 322 | $ | 323 | ||||||||||||
Change in net sales | 5 | % | 4 | % | 3 | % | 4 | % | –2 | % | ||||||||||||
Change in net earnings | 100 | % | 11 | % | 53 | % | — | –18 | % | |||||||||||||
COMMON STOCK | ||||||||||||||||||||||
Weighted average shares outstanding (in thousands) | ||||||||||||||||||||||
Basic | 176,586 | 211,683 | 218,174 | 231,849 | 236,149 | |||||||||||||||||
Diluted | 179,176 | 214,371 | 220,692 | 234,704 | 239,483 | |||||||||||||||||
Earnings (loss) per common share | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
Continuing operations | $ | 2.92 | $ | 2.31 | $ | 2.11 | $ | 1.31 | $ | 1.18 | ||||||||||||
Discontinued operations | 3.28 | 0.28 | 0.15 | 0.08 | 0.20 | |||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | (0.01 | ) | ||||||||||||||||
Basic net earnings per common share | $ | 6.20 | $ | 2.59 | $ | 2.26 | $ | 1.39 | $ | 1.37 | ||||||||||||
Diluted | ||||||||||||||||||||||
Continuing operations | $ | 2.88 | $ | 2.28 | $ | 2.08 | $ | 1.29 | $ | 1.16 | ||||||||||||
Discontinued operations | 3.23 | 0.28 | 0.15 | 0.08 | 0.20 | |||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | (0.01 | ) | ||||||||||||||||
Diluted net earnings per common share | $ | 6.11 | $ | 2.56 | $ | 2.23 | $ | 1.37 | $ | 1.35 | ||||||||||||
Dividends paid | $ | 1.10 | $ | 1.08 | $ | 0.88 | $ | 0.84 | $ | 0.84 | ||||||||||||
Dividends accrued | $ | 0.28 | — | — | — | — | ||||||||||||||||
OTHER DATA | ||||||||||||||||||||||
Property, plant and equipment, net | $ | 999 | $ | 1,052 | $ | 1,072 | $ | 992 | $ | 1,036 | ||||||||||||
Capital expenditures | 151 | 170 | 203 | 174 | 190 | |||||||||||||||||
Long-term debt | 2,122 | 475 | 495 | 678 | 685 | |||||||||||||||||
Total assets | 3,617 | 3,834 | 3,652 | 3,524 | 4,028 | |||||||||||||||||
Stockholders’ (deficit) equity | (553 | ) | 1,540 | 1,215 | 1,366 | 1,933 |
(1) | In fiscal year 2003, the Company announced its intent to sell its business in Brazil. In fiscal year 2005, the Company completed the exchange of its ownership interest in a subsidiary for Henkel KG&A’s interest in Clorox common stock. |
Column A | Column B | Column C | Column D | Column E | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Additions | Deductions | ||||||||||||||||||||||||||
Description | Balance at beginning of period | Charged to costs and expenses | Charged to other accounts | Credited to costs and expenses | Credited to other accounts | Balance at end of period | |||||||||||||||||||||
Allowance for doubtful accounts | |||||||||||||||||||||||||||
Year ended June 30, 2005 | (8 | ) | 2 | 1 | (5 | ) | |||||||||||||||||||||
Year ended June 30, 2004 | (10 | ) | 1 | 1 | (8 | ) | |||||||||||||||||||||
Year ended June 30, 2003 | (15 | ) | (4 | ) | 9 | (10 | ) | ||||||||||||||||||||
Allowance for inventory obsolescence | |||||||||||||||||||||||||||
Year ended June 30, 2005 | (4 | ) | (16 | ) | 14 | (6 | ) | ||||||||||||||||||||
Year ended June 30, 2004 | (3 | ) | (14 | ) | 13 | (4 | ) | ||||||||||||||||||||
Year ended June 30, 2003 | (12 | ) | (8 | ) | 17 | (3 | ) | ||||||||||||||||||||
Valuation allowance on deferred tax assets | |||||||||||||||||||||||||||
Year ended June 30, 2005 | (39 | ) | (4 | ) | 10 | (33 | ) | ||||||||||||||||||||
Year ended June 30, 2004 | (97 | ) | 58 | (39 | ) | ||||||||||||||||||||||
Year ended June 30, 2003 | (66 | ) | (31 | ) | (97 | ) | |||||||||||||||||||||
Accrued environmental remediation | |||||||||||||||||||||||||||
Year ended June 30, 2005 | (29 | ) | (8 | ) | 4 | (33 | ) | ||||||||||||||||||||
Year ended June 30, 2004 | (17 | ) | (14 | ) | 2 | (29 | ) | ||||||||||||||||||||
Year ended June 30, 2003 | (17 | ) | (2 | ) | 2 | (17 | ) | ||||||||||||||||||||
LIFO allowance | |||||||||||||||||||||||||||
Year ended June 30, 2005 | (9 | ) | (9 | ) | |||||||||||||||||||||||
Year ended June 30, 2004 | (8 | ) | (1 | ) | (9 | ) | |||||||||||||||||||||
Year ended June 30, 2003 | (11 | ) | 3 | (8 | ) | ||||||||||||||||||||||
Accrued restructuring | |||||||||||||||||||||||||||
Year ended June 30, 2005 | (3 | ) | (7 | ) | 8 | (2 | ) | ||||||||||||||||||||
Year ended June 30, 2004 | (6 | ) | (1 | ) | 4 | (3 | ) | ||||||||||||||||||||
Year ended June 30, 2003 | (14 | ) | 8 | (6 | ) |
RETURN ON INVESTED CAPITAL
Dollars in millions | FY05 | FY04 | FY03 | FY02 | FY01 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross profit | $ | 1,895 | $ | 1,831 | $ | 1,815 | $ | 1,637 | $ | 1,469 | ||||||||||||
Selling and administrative expenses | 551 | 543 | 523 | 516 | 472 | |||||||||||||||||
Advertising costs | 435 | 420 | 446 | 381 | 336 | |||||||||||||||||
Research and development costs | 88 | 84 | 75 | 64 | 67 | |||||||||||||||||
Operating profit | 821 | 784 | 771 | 676 | 594 | |||||||||||||||||
Restructuring and intangible amortization in operating profit | 15 | 8 | 4 | (4 | ) | 39 | ||||||||||||||||
Adjusted operating profit | 836 | 792 | 775 | 672 | 633 | |||||||||||||||||
After tax adjusted operating profit | 543 | 516 | 508 | 480 | 430 | |||||||||||||||||
Average invested capital (1) | 3,898 | 3,819 | 3,658 | 3,841 | 4,157 | |||||||||||||||||
Return on invested capital | 13.9 | % | 13.5 | % | 13.9 | % | 12.5 | % | 10.3 | % | ||||||||||||
change versus prior year | +40 | bps | –40 | bps | +140 | bps | +220 | bps | n/a |
(1) | Average Invested Capital includes total assets less current liabilities (excluding short-term debt) adjusted to add back goodwill amortization, impairment and restructuring charges. |