UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-07151
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THE CLOROX COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 31-0595760
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
1221 Broadway - Oakland, California 94612 - 1888
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(Address of principal executive offices)
Registrant's telephone number, (510)-271-7000
(including area code) ---------------
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (
or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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As of September 30, 1996 there were 51,617,112 shares outstanding
of the registrant's common stock (par-value - $1.00), the
registrant's only outstanding class of stock.
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Total pages 9
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THE CLOROX COMPANY
PART 1. Financial Information Page No.
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Item 1. Financial Statements
Condensed Statements of Consolidated
Earnings
Three Months Ended September 30, 1996
and 1995 3
Condensed Consolidated Balance Sheets
September 30, 1996 and June 30, 1996 4
Condensed Statements of Consolidated
Cash Flows
Three Months Ended September 30, 1996
and 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 7-8
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Earnings
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(In thousands, except per-share amounts)
Three Months Ended
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9/30/96 9/30/95
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Net Sales $ 590,773 $ 518,486
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Costs and Expenses
Cost of products sold 257,361 231,333
Selling, delivery and administration 116,594 98,656
Advertising 88,974 72,482
Research and development 10,498 10,202
Interest expense 10,497 7,772
Other income (1,973) (567)
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Total costs and expenses 481,951 419,878
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Earnings before income taxes 108,822 98,608
Income Taxes 43,312 39,829
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Net Earnings $ 65,510 $ 58,779
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Earnings per Common Share $ 1.27 $ 1.12
Dividends per Share $ 0.58 $ 0.53
Weighted Average Shares Outstanding 51,546 52,354
See Notes to Condensed Consolidated Financial Statements.
3
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Consolidated Balance Sheets
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(In thousands)
9/30/96 6/30/96
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ASSETS
Current Assets
Cash and short-term investments $ 116,751 $ 90,828
Accounts receivable, less allowance 275,203 315,106
Inventories 147,421 138,848
Deferred income taxes 11,139 10,987
Prepaid expenses 20,918 18,076
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Total current assets 571,432 573,845
Property, Plant and Equipment - Net 557,454 551,437
Brands, Trademarks, Patents and Other Intangibles 717,770 704,669
Investments in Affiliates 99,668 99,033
Other Assets 278,863 249,910
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Total $ 2,225,187 $ 2,178,894
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 126,764 $ 155,366
Accrued liabilities 278,490 266,192
Income taxes payable 39,507 9,354
Commercial paper and short-term borrowings 184,358 192,683
Current maturities of long-term debt 179 291
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Total current liabilities 629,298 623,886
Long-term Debt 355,575 356,267
Other Obligations 120,116 117,505
Deferred Income Taxes 144,289 148,408
Stockholders' Equity
Common Stock 55,422 55,422
Additional paid-in capital 113,076 111,782
Retained earnings 1,114,802 1,078,789
Treasury shares, at cost (262,770) (268,652)
Cumulative translation adjustments and other (44,621) (44,513)
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Stockholders' Equity 975,909 932,828
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Total $ 2,225,187 $ 2,178,894
See Notes to Condensed Consolidated Financial Statements.
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Condensed Statements of Consolidated Cash Flows
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(In thousands)
Three Months Ended
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9/30/96 9/30/95
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Operations:
Net earnings $ 65,510 $ 58,779
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 26,744 26,478
Deferred income taxes 840 3,300
Other 5,315 4,628
Effects of changes in:
Accounts receivable 42,103 93,933
Inventories (8,273) (3,884)
Prepaid expenses (3,084) 1,372
Accounts payable (28,635) (22,603)
Accrued liabilities (3,770) (18,065)
Income taxes payable 25,042 24,211
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Net cash provided by operations 121,792 168,149
Investing Activities:
Property, plant and equipment (23,033) (12,162)
Disposal of property, plant and equipment 515 2,369
Businesses purchased (22,207) (60,427)
Other (17,043) (15,736)
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Net cash used for investment (61,768) (85,956)
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Financing Activities:
Long-term borrowings 968 -
Long-term debt and other obligations repayments (6,942) (8,789)
Commercial paper, net (5,348) (38,881)
Cash dividends (29,888) (27,804)
Treasury stock purchased - (18,819)
Employee stock plans 7,109 2,616
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Net cash used for financing (34,101) (91,677)
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Net Increase (Decrease) in Cash and Short-Term Investments 25,923 (9,484)
Cash and Short-Term Investments:
Beginning of period 90,828 137,330
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End of period $ 116,751 127,846
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See Notes to Condensed Financial Statements
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PART I - FINANCIAL INFORMATION (Continued)
Item 1. Financial Statements
The Clorox Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(1) The summarized financial information for the three months
ended September 30, 1996 and 1995 has not been audited,
but in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for
a fair presentation of the results of operations, financial
position, and cash flows of The Clorox Company and subsidiaries
(the Company) have been made. The results of the three months
ended September 30, 1996 should not be considered as necessarily
indicative of the results for the entire year.
(2) Inventories at September 30, 1996 and at June 30, 1996 consisted
of (in thousands):
9/30/96 6/30/96
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Finished goods and work
in process $ 91,341 $ 82,261
Raw materials and supplies 56,080 56,587
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Total $147,421 $138,848
(3) Acquisitions during the quarter were funded from cash and
included the Limpido brand of liquid bleach, and an
increase of ownership in Technoclor, S.A, both in Columbia.
These acquisitions were accounted for as purchases.
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PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
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Results of Operations
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Comparison of the Three Months Ended September 30, 1996
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with the Three Months Ended September 30, 1995
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Earnings per share increased 13 percent to $1.27 from $1.12,
and net earnings increased 11 percent to $65,510,000 from
$58,779,000 a year ago principally due to a 14 percent
increase in net sales driven by a 15 percent increase in
volume. Domestic volume growth was approximately 10 percent,
while our international base businesses grew about 13 percent
with the remaining growth coming from acquisitions that
occurred in fiscal 1996. Home cleaning products experienced
strong volume growth and included strong shipments of 409,
Soft Scrub, Pine-Sol, Clorox Toilet Bowl Cleaner, and
S.O.S. Cat litter was up strongly for the quarter principally
due to increased distribution of our larger sizes and the
continued strong growth of the Scoop segment of the category.
Insecticides were also up strongly principally due to last
year's acquisition of Black Flag. Additionally, Brita and
our professional products business experienced strong
volume growth in the quarter, driven principally by new
distribution for Brita. International volume growth occurred
principally in Argentina as well as other markets in Latin
America and Asia.
Costs of products sold as a percent of net sales was 44 and
45 percent in the current and year ago quarters, respectively
and is anticipated to remain in this range for the balance
of the year. This quarter's improvement reflects the results
of certain cost savings measures including our manufacturing
strategy and our initiatives in the food business. Raw
materials costs are relatively stable versus a year ago,
and increases over the balance of the year may tend to
mitigate any margin improvement.
Research and development expense was about even with year
ago period. Selling, delivery, and administration expense
increased 18 percent over the year ago period principally
due to spending this period on major information technology
initiatives that are necessary to maintain technological
competence and prepare for the year 2000 conversion, and
further international infrastructure investments that include
the establishment of our own direct sales forces in Canada
and in some Latin American markets.
Advertising expense increased 23 percent over the year ago
period principally due to increased media spending across
all our businesses. Sales promotional and couponing
spending increased as well due to promotional activity for
S.O.S Scrubber Sponges and other new products. We anticipate
that for the full year, advertising and sales promotion
should increase at about the same rate as the growth of sales,
subject to completion of marketing plans.
Interest expense increased $ 2,725,000 over a year ago due
to increased borrowing levels for both commercial paper and
medium term debt associated with acquisitions that occurred
in fiscal 1996.
7.
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PART I - FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
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Liquidity and Capital Resources
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The Company's financial position remains strong principally due
to cash provided by operations during the quarter. Accounts
receivable and accounts payable both decreased from June 30,
1996 reflecting normal seasonal variations of the charcoal
and insecticides businesses. Inventories are higher due to
international growth and acquisitions as well as for increased
Brita volume. We expect our inventories to increase during
the next two fiscal quarters to support the seasonal charcoal
and insecticides businesses.
The Company has approved the use of interest rate derivative
instruments such as interest rate swaps in order to manage the
impact of interest rate movements on interest expense. These
instruments have the effect of converting fixed rate interest
to floating, or floating to fixed. The conditions under which
derivatives can be used are set forth in a Company Policy
Statement and include a restriction on the amount of such
activity to a designated portion of existing debt, a limit on
the term of any derivative transaction, and a specific prohibition
on the use of any leveraged derivatives.
Management believes the Company has access to additional
capital through existing lines of credit and from public and
private sources should the need arise.
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S I G N A T U R E
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
THE CLOROX COMPANY
(Registrant)
DATE November 13, 1996 BY /S/ HENRY J. SALVO, JR.
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Henry J. Salvo, Jr.
Vice-President -
Controller
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