clx-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021.


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-07151

THE CLOROX COMPANY

(Exact name of registrant as specified in its charter)


Delaware			31-0595760
(State or other jurisdiction of			(I.R.S. Employer Identification No.)
incorporation or organization)

1221 Broadway, Oakland, California, 94612-1888

(Address of principal executive offices) (Zip code)

(510) 271-7000

(Registrant’s telephone number, including area code)


(Former name, former address and former fiscal year, if changed since last report)
___________________
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock - $1.00 par value	CLX	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 19, 2021, there were 122,862,766 shares outstanding of the registrant’s common stock ($1.00 par value).

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The Clorox Company

Condensed Consolidated Statements of Earnings and Comprehensive Income (Unaudited)

(Dollars in millions, except per share data)


	Three Months Ended
	9/30/2021		9/30/2020
Net sales	$	1,806	$	1,916
Cost of products sold		1,136		996
Gross profit		670		920
Selling and administrative expenses		236		238
Advertising costs		182		179
Research and development costs		33		32

Interest expense		25		25
Other (income) expense, net		9		(80)
Earnings before income taxes		185		526
Income taxes		42		109
Net earnings		143		417
Less: Net earnings attributable to noncontrolling interests		1		2
Net earnings attributable to Clorox	$	142	$	415
Net earnings per share attributable to Clorox
Basic net earnings per share	$	1.15	$	3.28
Diluted net earnings per share	$	1.14	$	3.22
Weighted average shares outstanding (in thousands)
Basic		122,980		126,346
Diluted		124,042		128,729

Comprehensive income	$	122	$	434
Less: Total comprehensive income attributable to noncontrolling interests		1		2
Total comprehensive income attributable to Clorox	$	121	$	432

See Notes to Condensed Consolidated Financial Statements (Unaudited)

The Clorox Company

Condensed Consolidated Balance Sheets

(Dollars in millions, except per share data)


	9/30/2021		6/30/2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	210	$	319
Receivables, net		654		604
Inventories, net		785		752
Prepaid expenses and other current assets		171		154
Total current assets		1,820		1,829
Property, plant and equipment, net of accumulated depreciation and amortization of $2,422 and $2,382, respectively		1,301		1,302
Operating lease right-of-use assets		310		332
Goodwill		1,566		1,575
Trademarks, net		691		693
Other intangible assets, net		218		225
Other assets		368		378
Total assets	$	6,274	$	6,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Notes and loans payable	$	86	$	—
Current maturities of long-term debt		899		300
Current operating lease liabilities		72		81
Accounts payable and accrued liabilities		1,582		1,675

Total current liabilities		2,639		2,056
Long-term debt		1,885		2,484
Long-term operating lease liabilities		288		301
Other liabilities		846		834
Deferred income taxes		69		67
Total liabilities		5,727		5,742
Commitments and contingencies
Stockholders’ equity
Preferred stock: $1.00 par value; 5,000,000 shares authorized; none issued or outstanding		—		—
Common stock: $1.00 par value; 750,000,000 shares authorized; 130,741,461 shares issued as of September 30, 2021 and June 30, 2021; and 122,856,251 and 122,780,220 shares outstanding as of September 30, 2021 and June 30, 2021, respectively		131		131
Additional paid-in capital		1,166		1,186
Retained earnings		1,027		1,036
Treasury stock, at cost: 7,885,210 and 7,961,241 shares as of September 30, 2021 and June 30, 2021, respectively		(1,389)		(1,396)
Accumulated other comprehensive net (loss) income		(567)		(546)
Total Clorox stockholders’ equity		368		411
Noncontrolling interests		179		181
Total stockholders’ equity		547		592
Total liabilities and stockholders’ equity	$	6,274	$	6,334

See Notes to Condensed Consolidated Financial Statements (Unaudited)

The Clorox Company

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)


	Three Months Ended
	9/30/2021		9/30/2020
Operating activities:
Net earnings	$	143	$	417
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation and amortization		55		51
Stock-based compensation		9		13
Deferred income taxes		2		20

Other		8		(71)
Changes in:
Receivables, net		(53)		(8)
Inventories, net		(37)		(70)
Prepaid expenses and other current assets		(14)		(18)
Accounts payable and accrued liabilities		(96)		20
Operating lease right-of-use assets and liabilities, net		—		(1)
Income taxes payable / prepaid		24		30
Net cash provided by operations		41		383
Investing activities:
Capital expenditures		(52)		(69)
Businesses acquired, net of cash acquired		—		(85)
Other		(4)		3
Net cash used for investing activities		(56)		(151)
Financing activities:
Notes and loans payable, net		86		—
Treasury stock purchased		(25)		(100)
Cash dividends paid to Clorox stockholders		(142)		(140)

Issuance of common stock for employee stock plans and other		(11)		(7)
Net cash used for financing activities		(92)		(247)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(3)		3
Net increase (decrease) in cash, cash equivalents, and restricted cash		(110)		(12)
Cash, cash equivalents, and restricted cash:
Beginning of period		324		879
End of period	$	214	$	867

See Notes to Condensed Consolidated Financial Statements (Unaudited)

The Clorox Company

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share data)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three months ended September 30, 2021 and 2020, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated results of operations, financial position and cash flows of The Clorox Company and its controlled subsidiaries (the Company) for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 30, 2021, which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, “Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes,” which removes certain exceptions to the general principles in ASC 740 and amends existing guidance to improve consistent application. Certain amendments must be applied prospectively, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. The Company adopted this standard as of July 1, 2021. The adoption of this new standard did not have a material impact on the Company’s condensed consolidated financial statements.

NOTE 2. BUSINESS ACQUIRED

Saudi Joint Venture Acquisition

On July 9, 2020, the Company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture) from 30 percent to 51 percent. The joint venture offers customers in the Gulf region a range of cleaning and disinfecting products. With the additional investment, the Company has consolidated this joint venture into its consolidated financial statements from the date of acquisition and reflects operations within the International reportable segment. The equity and income attributable to the other joint venture owners is recorded and presented as noncontrolling interests. As a result of this transaction, the carrying value of the Company’s previously held equity investment was remeasured to fair value, and resulted in an $85 non-recurring, noncash gain recorded in Other (income) expense, net in the condensed consolidated statement of earnings and adjusted in Other operating activities in the condensed consolidated statement of cash flows for the first quarter of fiscal year 2021.

The Saudi joint venture acquisition was accounted for under the acquisition method of accounting for business combinations. The total purchase consideration was $111 consisting of $100 cash paid and $11 from the net effective settlement of preexisting arrangements between the Company and the joint venture. The assets and liabilities of the joint venture were recorded at their respective estimated fair value as of the acquisition date. The fair value of the total net assets and noncontrolling interests recorded as of the date of acquisition was $412 and $198, respectively. The purchase price allocation was finalized during the second quarter of fiscal year 2021.

Refer to the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for the final purchase price allocation, valuation methodology and other information related to the Saudi joint venture acquisition.

NOTE 3. INVENTORIES, NET

Inventories, net, consisted of the following as of:


	9/30/2021		6/30/2021
Finished goods	$	594	$	543
Raw materials and packaging	220		229
Work in process	13		11
LIFO allowances	(42)		(31)
Total	$	785	$	752

NOTE 4. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial Risk Management and Derivative Instruments

The Company is exposed to certain commodity, foreign currency and interest rate risks related to its ongoing business operations and uses derivative instruments to mitigate its exposure to these risks.

Commodity Price Risk Management

The Company may use commodity exchange traded futures and over-the-counter swap contracts, which are generally no longer than 2 years, to fix the price of a portion of its forecasted raw material requirements. Commodity purchase contracts are measured at fair value using market quotations obtained from the Chicago Board of Trade commodity futures exchange and commodity derivative dealers.

As of September 30, 2021, the notional amount of commodity derivatives was $35, of which $24 related to soybean oil futures used for the Food products business and $11 related to jet fuel swaps used for the Grilling business. As of June 30, 2021, the notional amount of commodity derivatives was $32, of which $23 related to soybean oil futures and $9 related to jet fuel swaps.

Foreign Currency Risk Management

The Company may also enter into certain over-the-counter derivative contracts to manage a portion of the Company’s forecasted foreign currency exposure associated with the purchase of inventory. These foreign currency contracts generally have durations of no longer than 2 years. The foreign exchange contracts are measured at fair value using information quoted by foreign exchange dealers.

The notional amounts of outstanding foreign currency forward contracts used by the Company’s subsidiaries to hedge forecasted purchases of inventory were $50 and $70, respectively, as of September 30, 2021 and June 30, 2021.

Interest Rate Risk Management

The Company may enter into over-the-counter interest rate contracts to fix a portion of the benchmark interest rate prior to the anticipated issuance of fixed rate debt. These interest rate contracts generally have durations of less than 3 years. The interest rate contracts are measured at fair value using information quoted by bond dealers.

The notional amounts of outstanding interest rate contracts used by the Company were $300 as of both September 30, 2021 and June 30, 2021. These contracts represent forward starting interest rate swap contracts with a maturity date of September 2022 to manage the exposure to interest rate volatility associated with future interest payments on a forecasted debt issuance.

Commodity, Foreign Exchange and Interest Rate Derivatives

The Company designates its commodity forward and futures contracts for forecasted purchases of raw materials, foreign currency forward contracts for forecasted purchases of inventory and interest rate contracts for forecasted interest payments as cash flow hedges.

NOTE 4. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)

The effects of derivative instruments designated as hedging instruments on Other comprehensive (loss) income and Net earnings were as follows:


	Gains (losses) recognized in Other comprehensive (loss) income
	Three Months Ended
	9/30/2021		9/30/2020
Commodity purchase derivative contracts	$	—	$	1
Foreign exchange derivative contracts	1		(1)
Interest rate derivative contracts	3		3
Total	$	4	$	3


	Location of gains (losses) reclassified from Accumulated other comprehensive net (loss) income into Net earnings	Gains (losses) reclassified from Accumulated other comprehensive net (loss) income and recognized in Net earnings
		Three Months Ended
		9/30/2021		9/30/2020
Commodity purchase derivative contracts	Cost of products sold	$	5	$	(1)
Foreign exchange derivative contracts	Cost of products sold	—		—
Interest rate derivative contracts	Interest expense	(2)		(2)
Total		$	3	$	(3)

The estimated amount of the existing net gain (loss) in Accumulated other comprehensive net (loss) income as of September 30, 2021,