CLOROX CO /DE/, 10-K filed on 8/16/2016
Annual Report
DOCUMENT AND ENTITY INFORMATION (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Jun. 30, 2016
Jul. 29, 2016
Dec. 31, 2015
Document and Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Jun. 30, 2016 
 
 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Entity Registrant Name
CLOROX CO /DE/ 
 
 
Entity Central Index Key
0000021076 
 
 
Current Fiscal Year End Date
--06-30 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 16.4 
Entity Common Stock, Shares Outstanding
 
129,469,454 
 
CONSOLIDATED STATEMENT OF EARNINGS (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2014
Income Statement [Abstract]
 
 
 
Net sales
$ 5,761 
$ 5,655 
$ 5,514 
Cost of products sold
3,163 
3,190 
3,158 
Gross profit
2,598 
2,465 
2,356 
Selling and administrative expenses
806 
798 
751 
Advertising costs
587 
523 
503 
Research and development costs
141 
136 
125 
Interest expense
88 
100 
103 
Other (income) expense, net
(7)
(13)
(10)
Earnings from continuing operations before income taxes
983 
921 
884 
Income taxes on continuing operations
335 
315 
305 
Earnings from continuing operations
648 
606 
579 
Losses from discontinued operations, net of tax
(26)
(21)
Net earnings
$ 648 
$ 580 
$ 558 
Net earnings (losses) per share, Basic
 
 
 
Continuing operations
$ 5.01 
$ 4.65 
$ 4.47 
Discontinued operations
$ 0 
$ (0.20)
$ (0.16)
Basic net earnings per share
$ 5.01 
$ 4.45 
$ 4.31 
Net earnings (losses) per share, Diluted
 
 
 
Continuing operations
$ 4.92 
$ 4.57 
$ 4.39 
Discontinued operations
$ 0 
$ (0.20)
$ (0.16)
Diluted net earnings per share
$ 4.92 
$ 4.37 
$ 4.23 
Weighted average shares outstanding (in thousands)
 
 
 
Basic
129,472 
130,310 
129,558 
Diluted
131,717 
132,776 
131,742 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
Earnings from continuing operations
$ 648 
$ 606 
$ 579 
Losses from discontinued operations, net of tax
(26)
(21)
Net earnings
648 
580 
558 
Other comprehensive (losses) income:
 
 
 
Foreign currency adjustments, net of tax
(53)
(54)
(37)
Net unrealized gains (losses) on derivatives, net of tax
(14)
(9)
Pension and postretirement benefit adjustments, net of tax
(24)
(17)
(4)
Total other comprehensive (losses) income, net of tax
(68)
(85)
(50)
Comprehensive income
$ 580 
$ 495 
$ 508 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jun. 30, 2016
Jun. 30, 2015
Current assets
 
 
Cash and cash equivalents
$ 401 
$ 382 
Receivables, net
569 
519 
Inventories, net
443 
385 
Other current assets
72 
143 
Total current assets
1,485 
1,429 
Property, plant and equipment, net
906 
918 
Goodwill
1,197 
1,067 
Trademarks, net
657 
535 
Other intangible assets, net
78 
50 
Other assets
195 
165 
Total assets
4,518 
4,164 
Current liabilities
 
 
Notes and loans payable
523 
95 
Current maturities of long-term debt
300 
Accounts payable and accrued liabilities
1,035 1
979 1
Income taxes payable
31 
Total current liabilities
1,558 
1,405 
Long-term debt
1,797 
1,796 
Other liabilities
784 
750 
Deferred income taxes
82 
95 
Total liabilities
4,221 
4,046 
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; 158,741,461 shares issued as of June 30, 2016 and 2015; and 129,355,263 and 128,614,310 shares outstanding as of June 30, 2016 and 2015, respectively
159 
159 
Additional paid-in capital
868 
775 
Retained earnings
2,163 
1,923 
Treasury shares, at cost: 29,386,198 and 30,127,151 shares as of June 30, 2016 and 2015, respectively
(2,323)
(2,237)
Accumulated other comprehensive net (losses) income
(570)
(502)
Stockholders' equity
297 
118 
Total liabilities and stockholders' equity
$ 4,518 
$ 4,164 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2016
Jun. 30, 2015
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value
$ 1.00 
$ 1.00 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 1.00 
$ 1.00 
Common stock, shares authorized
750,000,000 
750,000,000 
Common stock, shares issued
158,741,461 
158,741,461 
Common stock, shares outstanding
129,355,263 
128,614,310 
Treasury stock, shares
29,386,198 
30,127,151 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Millions, except Share data in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Shares [Member]
Accumulated Other Comprehensive Net (Losses) Income [Member]
Total
Balance, amount at Jun. 30, 2013
$ 159 
$ 661 
$ 1,561 
$ (1,868)
$ (367)
$ 146 
Balance, shares at Jun. 30, 2013
158,741 
 
 
(28,375)
 
 
Net earnings
   
   
558 
   
   
558 
Other comprehensive loss
   
   
   
   
(50)
(50)
Accrued dividends
   
   
(374)
   
   
(374)
Stock-based compensation
   
36 
 
 
 
36 
Other employee stock plan activities, amount
   
12 
(6)
92 
   
98 
Other employee stock plan activities, shares
 
 
 
1,476 
 
 
Treasury stock purchased, amount
   
   
   
(260)
   
(260)
Treasury stock purchased, shares
 
 
 
(3,046)
 
 
Balance, amount at Jun. 30, 2014
159 
709 
1,739 
(2,036)
(417)
154 
Balance, shares at Jun. 30, 2014
158,741 
 
 
(29,945)
 
 
Net earnings
   
   
580 
   
   
580 
Other comprehensive loss
   
   
   
   
(85)
(85)
Accrued dividends
   
   
(391)
   
   
(391)
Stock-based compensation
   
32 
   
   
   
32 
Other employee stock plan activities, amount
   
34 
(5)
233 
   
262 
Other employee stock plan activities, shares
 
 
 
(4,198)
 
 
Treasury stock purchased, amount
   
   
   
(434)
   
(434)
Treasury stock purchased, shares
 
 
 
4,016 
 
 
Balance, amount at Jun. 30, 2015
159 
775 
1,923 
(2,237)
(502)
118 
Balance, shares at Jun. 30, 2015
158,741 
 
 
(30,127)
 
 
Net earnings
   
   
648 
   
   
648 
Other comprehensive loss
   
   
   
   
(68)
(68)
Accrued dividends
   
   
(406)
   
   
(406)
Stock-based compensation
   
45 
   
   
   
45 
Other employee stock plan activities, amount
   
48 
(2)
168 
   
214 
Other employee stock plan activities, shares
 
 
 
2,892 
 
 
Treasury stock purchased, amount
   
   
   
(254)
   
(254)
Treasury stock purchased, shares
 
 
 
(2,151)
 
 
Balance, amount at Jun. 30, 2016
$ 159 
$ 868 
$ 2,163 
$ (2,323)
$ (570)
$ 297 
Balance, shares at Jun. 30, 2016
158,741 
 
 
(29,386)
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2014
Operating activities:
 
 
 
Net earnings
$ 648 
$ 580 
$ 558 
Deduct: Losses from discontinued operations, net of tax
(26)
(21)
Earnings from continuing operations
648 
606 
579 
Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations:
 
 
 
Depreciation and amortization
165 
169 
177 
Stock-based compensation
45 
32 
36 
Deferred income taxes
(16)
(21)
Settlement of interest rate forward contracts
(25)
Other
(17)
Changes in:
 
 
 
Receivables, net
(52)
20 
Inventories, net
(45)
(25)
Other current assets
Accounts payable and accrued liabilities
57 
93 
(12)
Income taxes payable
(62)
29 
(5)
Net cash provided by continuing operations
768 
858 
786 
Net cash provided by (used for) discontinued operations
10 
16 
(19)
Net cash provided by operations
778 
874 
767 
Investing activities:
 
 
 
Capital expenditures
(172)
(125)
(137)
Business acquired, net of cash acquired
(290)
Other
32 
19 
Net cash used for investing activities from continuing operations
(430)
(106)
(137)
Net cash used for investing activities by discontinued operations
(1)
Net cash used for investing activities
(430)
(106)
(138)
Financing activities:
 
 
 
Notes and loans payable, net
426 
(48)
(60)
Long-term debt borrowings, net of issuance costs
495 
Long-term debt repayments
(300)
(575)
Treasury stock purchased
(254)
(434)
(260)
Cash dividends paid
(398)
(385)
(368)
Issuance of common stock for employee stock plans and other
210 
251 
96 
Net cash used for financing activities
(316)
(696)
(592)
Effect of exchange rate changes on cash and cash equivalents
(13)
(19)
(7)
Net increase in cash and cash equivalents
19 
53 
30 
Cash and cash equivalents:
 
 
 
Beginning of year
382 
329 
299 
End of year
401 
382 
329 
Supplemental cash flow information:
 
 
 
Interest paid
79 
104 
76 
Income taxes paid, net of refunds
323 
236 
312 
Noncash financing activities:
 
 
 
Cash dividends declared and accrued, but not paid
$ 104 
$ 99 
$ 95 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Basis of Presentation

The Company is principally engaged in the production, marketing and sales of consumer products through mass retail outlets and grocery, e-commerce channels, wholesale distributors and medical supply distributors. The consolidated financial statements include the statements of the Company and its wholly owned and controlled subsidiaries. All significant intercompany transactions and accounts were eliminated in consolidation. Certain prior year reclassifications were made in the consolidated financial statements and related notes to the consolidated financial statements to conform to the current year presentation.

Effective September 22, 2014, the Company’s Venezuela affiliate, Corporación Clorox de Venezuela S.A. (Clorox Venezuela), discontinued its operations. Consequently, the Company presents the financial results of Clorox Venezuela as a discontinued operation in the consolidated financial statements for all periods presented herein.

Use of Estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) requires management to reach opinions as to estimates and assumptions that affect reported amounts and related disclosures. Specific areas requiring management’s opinion on estimates and judgments include assumptions pertaining to accruals for consumer and trade-promotion programs, stock-based compensation costs, pension and post-employment benefit costs, future cash flows associated with impairment testing of goodwill and other long-lived assets, the credit worthiness of customers, uncertain tax positions, tax valuation allowances and legal, environmental and insurance matters. Actual results could materially differ from estimates and assumptions made.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments, time deposits and money market funds with an initial maturity at purchase of three months or less. The fair value of cash and cash equivalents approximates the carrying amount.

The Company’s cash position includes amounts held by foreign subsidiaries and, as a result, the repatriation of certain cash balances from some of the Company’s foreign subsidiaries could result in additional tax costs in the United States and in certain foreign jurisdictions. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company’s cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries’ books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in Other (income) expense, net. The Company’s cash holdings were as follows as of June 30:

  2016   2015
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent $     249   $      221
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   133     142
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   19     19
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries   -     -
Total $ 401   $ 382

As of June 30, 2016 and 2015, the Company had $4 and $3 of restricted cash, respectively, which is primarily related to fiscal year 2012 acquisitions. Restricted cash was included in Other assets as of June 30, 2016 and in Other current assets as of June 30, 2015.

Inventories

Inventories are stated at the lower of cost or market. When necessary, the Company provides allowances to adjust the carrying value of its inventory to the lower of cost or market, including any costs to sell or dispose. Appropriate consideration is given to obsolescence, excessive inventory levels, product deterioration and other factors in evaluating net realizable value for the purposes of determining the lower of cost or market.

Property, Plant and Equipment and Finite-Lived Intangible Assets

Property, plant and equipment and finite-lived intangible assets are stated at cost. Depreciation and amortization expense are calculated by the straight-line method using the estimated useful lives or lives determined by lease contracts for the related assets. The table below provides estimated useful lives of property, plant and equipment by asset classification.

  Estimated
Useful Lives
Buildings and leasehold improvements 10 - 40 years
Land improvements 10 - 30 years
Machinery and equipment 3 - 15 years
Computer equipment 3 - 5 years
Capitalized software costs 3 - 7 years

Property, plant and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be fully recoverable. The risk of impairment is initially assessed based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist. Impairment occurs when the carrying value of the asset exceeds the estimated future undiscounted cash flows generated by the asset. When impairment is indicated, an impairment charge is recorded for the difference between the carrying value of the asset and its estimated fair market value. Depending on the asset, estimated fair market value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition.

Capitalization of Software Costs

The Company capitalizes certain qualifying costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, consultants, interest and payroll and payroll-related costs for employees during the application development stage. Internal and external costs incurred during the preliminary project stage and post implementation-operation stage, mainly training and maintenance costs, are expensed as incurred. Once the application is substantially complete and ready for its intended use, qualifying costs are amortized on a straight-line basis over the software’s estimated useful life.

Impairment Review of Goodwill and Indefinite-Lived Intangible Assets

The Company tests its goodwill, trademarks with indefinite lives and other indefinite-lived intangible assets annually for impairment in the fiscal fourth quarter unless there are indications during a different interim period that these assets may have become impaired.

With respect to goodwill, the Company has the option to first assess qualitative factors such as maturity and stability of the reporting unit, magnitude of excess fair value over carrying value from the prior year’s impairment testing, other reporting unit specific operating results as well as new events and circumstances impacting the operations at the reporting unit level. If the result of a qualitative test indicates a potential for impairment of a reporting unit, a quantitative test is performed. The quantitative test is a two-step process. In the first step, the Company compares the estimated fair value of the reporting unit to its carrying value. In all instances, the estimated fair value exceeded the carrying value of the reporting unit. Had the estimated fair value of any reporting unit been less than its carrying value, the Company would have performed a second step to determine the implied fair value of the reporting unit’s goodwill. If the carrying amount of a reporting unit’s goodwill had exceeded its implied fair value, an impairment charge would have been recorded for the difference between the carrying amount and the implied fair value of the reporting unit’s goodwill.

To determine the fair value of a reporting unit as part of its quantitative test, the Company uses a discounted cash flow (DCF) approach, as it believes that this approach is the most reliable indicator of the fair value of its businesses and the fair value of their future earnings and cash flows. Under this approach, the Company estimates the future cash flows of each reporting unit and discounts these cash flows at a rate of return that reflects their relative risk. The cash flows used in the DCF are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced, and the broader business strategy for the long term. The other key estimates and factors used in the DCF include, but are not limited to, future sales volumes, revenue and expense growth rates, changes in working capital, foreign exchange rates, currency devaluation, inflation and a perpetuity growth rate. Changes in such estimates or the application of alternative assumptions could produce different results.

For trademarks and other intangible assets with indefinite lives, the Company performs a quantitative analysis to test for impairment. When a quantitative test is performed, the estimated fair value of an asset is compared to its carrying amount. If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value. The Company uses the income approach to estimate the fair value of its trademarks and other intangible assets with indefinite lives. This approach requires significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and foreign exchange rates applied to those cash flows to determine fair value. Changes in such estimates or the use of alternative assumptions could produce different results.

Stock-based Compensation

The Company grants various nonqualified stock-based compensation awards to eligible employees, including stock options and performance units.

For stock options, the Company estimates the fair value of each award on the date of grant using the Black-Scholes valuation model, which requires management to make estimates regarding expected option life, stock price volatility and other assumptions. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company estimates stock option forfeitures based on historical data for each employee grouping. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative catch-up adjustment in the period of change. Compensation expense is recorded by amortizing the grant date fair values on a straight-line basis over the vesting period, adjusted for estimated forfeitures.

The Company’s performance unit grants provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The number of shares issued are dependent upon vesting and the achievement of specified performance targets. The performance period is three years and the payout determination is made at the end of the three-year performance period. Performance unit grants receive dividends earned during the vesting period upon vesting. The fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. The total amount of compensation expense recognized reflects estimated forfeiture rates and the initial assumption that performance goals will be achieved. Compensation expense is adjusted based on management’s assessment of the probability that performance goals will be achieved. If such goals are not met or it is determined that achievement of performance goals is not probable, previously recognized compensation expense is trued up in the current period to reflect the expected payout level. If it is determined that the performance goals will be exceeded, additional compensation expense is recognized, subject to a cap of 150%.

Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for stock-based payment arrangements (excess tax benefits) are primarily classified as financing cash inflows.

Employee Benefits

The Company accounts for its defined benefit retirement income and retirement health care plans using actuarial methods. These methods use an attribution approach that generally spreads “plan events” over the service lives or expected lifetime (for frozen plans) of plan participants. Examples of plan events are plan amendments and changes in actuarial assumptions such as the expected return on plan assets, discount rate, rate of compensation increase and certain employee-related factors, such as retirement age and mortality. The principle underlying the attribution approach is that employees render service over their employment period on a relatively “smooth” basis and, therefore, the statement of earnings effects of retirement income and retirement health care plans are recognized in the same pattern. One of the principal assumptions used in the net periodic benefit cost calculation is the expected return on plan assets. The required use of an expected return on plan assets may result in recognized pension expense or income 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, the expectation is that the pattern of income and expense recognition should closely match the pattern of the services provided by the participants. The Company uses a market-related value method for calculating plan assets for purposes of determining the amortization of actuarial gains and losses. The differences between actual and expected returns are recognized in the net periodic benefit cost calculation over the average remaining service period or expected lifetime (for frozen plans) of the plan participants using the corridor approach. Under this approach, only actuarial gains (losses) that exceed 5% of the greater of the projected benefit obligation or the market-related value of assets are amortized to pension expense by the Company. 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 Company recognizes an actuarial-based obligation at the onset of disability for certain benefits provided to individuals after employment, but before retirement, that include medical, dental, vision, life and other benefits.

Environmental Costs

The Company is involved in certain environmental remediation and ongoing compliance activities. Accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has been incurred and based upon a reasonable estimate of the liability. The Company’s accruals reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information become available. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given the inherent uncertainties in evaluating environmental exposures. The accrual for environmental matters is included in Accounts payable and accrued liabilities and Other liabilities in the Company’s consolidated balance sheets on an undiscounted basis due to uncertainty regarding the timing of future payments.

Revenue Recognition

Sales are recognized as revenue when the risk of loss and title pass to the customer and when all of the following have occurred: a firm sales arrangement exists, pricing is fixed or determinable and collection is reasonably assured. Sales are recorded net of allowances for trade promotions, coupons, returns and other discounts. The Company routinely commits to one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. Programs include shelf price reductions, end-of-aisle or in-store displays of the Company’s products and 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 related to these programs for the estimated expenses incurred, but not paid, at the end of each period. Trade-promotion and coupon redemption costs are recorded as a reduction of sales.

The Company provides an allowance for doubtful accounts based on its historical experience and ongoing assessment of its customers’ credit risk. Receivables were presented net of an allowance for doubtful accounts of $5 and $4 as of June 30, 2016 and 2015, respectively. Receivables, net, included non-customer receivables of $9 and $12 as of June 30, 2016 and 2015, respectively.

Cost of Products Sold

Cost of products sold represents the costs directly related to the manufacture and distribution of the Company’s products and primarily includes raw materials, packaging, contract manufacturing fees, shipping and handling, warehousing, package design, depreciation, amortization, direct and indirect labor and operating costs for the Company’s manufacturing and distribution facilities including salary, benefit costs and incentive compensation, and royalties and other charges related to the Company’s Glad® Venture Agreement (see Note 10).

Costs associated with developing and designing new packaging are expensed as incurred and include design, artwork, films and labeling. Expenses for fiscal years ended June 30, 2016, 2015 and 2014 were $11, $11 and $12, respectively, all of which were reflected in Cost of products sold or discontinued operations, as appropriate, in the consolidated statements of earnings.

Selling and Administrative Expenses

Selling and administrative expenses represent costs incurred by the Company in generating revenues and managing the business and include market research, commissions and certain administrative expenses. Administrative expenses include salary, benefits, incentive compensation, professional fees and services, software and licensing fees and other operating costs associated with the Company’s non-manufacturing, non-research and development staff, facilities and equipment.

Advertising and Research and Development Costs

The Company expenses advertising and research and development costs in the period incurred.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. Management reviews the Company’s deferred tax assets to determine whether their value can be realized based upon available evidence. A valuation allowance is established when management believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet certain recognition thresholds or measurement standards. Amounts for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled.

U.S. income tax expense and foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. Where foreign earnings are indefinitely reinvested, no provision for U.S. income or foreign withholding taxes is made. When circumstances change and the Company determines that some or all of the undistributed earnings will be remitted in the foreseeable future, the Company accrues an expense in the current period for U.S. income taxes and foreign withholding taxes attributable to the anticipated remittance.

Foreign Currency Transactions and Translation

Local currencies are the functional currencies for substantially all of the Company’s foreign operations. When the transactional currency is different than the functional currency, transaction gains and losses are included as a component of Other (income) expense, net. In addition, certain assets and liabilities denominated in currencies different than a foreign subsidiary’s functional currency are reported on the subsidiary’s books in its functional currency, with the impact from exchange rate differences recorded in Other (income) expense, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, while income and expenses are translated at the average monthly exchange rates during the year.

Gains and losses on foreign currency translations are reported as a component of Other comprehensive income (loss). Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested. The income tax effect of currency translation adjustments related to foreign subsidiaries and joint ventures for which earnings are not considered indefinitely reinvested is recorded as a component of deferred taxes with an offset to Other comprehensive income (loss).

Derivative Instruments

The Company’s use of derivative instruments, principally swaps, futures and forward contracts, is limited to non-trading purposes and is designed to partially manage exposure to changes in commodity prices, interest rates and foreign currencies. The Company’s contracts are hedges for transactions with notional amounts and periods consistent with the related exposures and do not constitute investments independent of these exposures.

The changes in the fair value (i.e., gains or losses) of a derivative instrument are recorded as either assets or liabilities in the consolidated balance sheets with an offset to net earnings or Other comprehensive income (loss) depending on whether, for accounting purposes, it has been designated and qualifies as an accounting hedge and, if so, on the type of hedging relationship. The criteria used to determine if hedge accounting treatment is appropriate are: (a) formal designation and documentation of the hedging relationship, the risk management objective and hedging strategy at hedge inception; (b) eligibility of hedged items, transactions and corresponding hedging instrument; and (c) effectiveness of the hedging relationship both at inception of the hedge and on an ongoing basis in achieving the hedging objectives. For those derivative instruments designated and qualifying as hedging instruments, the Company must designate the hedging instrument either as a fair value hedge or as a cash flow hedge. The Company designates its commodity forward and future contracts for forecasted purchases of raw materials, interest rate forward contracts for forecasted interest payments, and foreign currency forward contracts for forecasted purchases of inventory as cash flow hedges. During the fiscal years ended June 30, 2016, 2015 and 2014, the Company had no hedging instruments designated as fair value hedges.

For derivative instruments designated and qualifying as cash flow hedges, the effective portion of gains or losses is reported as a component of Other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. From time to time, the Company may have contracts not designated as hedges for accounting purposes, for which it recognizes changes in the fair value in the consolidated statement of earnings in the current period. Cash flows from hedging activities are classified as operating activities in the consolidated statements of cash flows.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions, including requiring excess tax benefits and deficiencies to be recognized as income tax benefit or expense in the consolidated statement of earnings and excess tax benefits and deficiencies to be classified as an operating activity in the consolidated statement of cash flows. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2018, with early adoption permitted. The Company is planning to adopt the standard in the first quarter of fiscal year 2017. While the actual benefit realized may vary significantly given the inherent uncertainty in predicting future share-based transactions, the Company currently estimates that the adoption will result in approximately a 4 percentage point benefit to the Company’s historical effective tax rate of 34% to 35% for fiscal year 2017.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation will depend on classification as a finance or operating lease. ASU 2016-02 also requires expanded disclosures about leasing arrangements. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which requires all deferred tax liabilities and assets to be classified as noncurrent. The Company adopted the standard in the fourth quarter of fiscal year 2016 on a prospective basis as permitted. Prior period balances have not been retrospectively adjusted.

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Cost,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2017, with early adoption permitted. The Company does not expect the adoption of this guidance will have a significant impact on its consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02,Amendments to the Consolidation Analysis,” which changes the guidance for evaluating whether to consolidate certain legal entities. The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2017, with early adoption permitted. The Company does not expect the adoption of this guidance will have a significant impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces most existing U.S. GAAP revenue recognition guidance and is intended to improve and converge with international standards the financial reporting requirements for revenue from contracts with customers. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers, including information about significant judgments and changes in judgments. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with the option to early adopt in the first quarter of fiscal year 2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS

NOTE 2. DISCONTINUED OPERATIONS

On September 22, 2014, Clorox Venezuela announced that it was discontinuing its operations, effective immediately, and seeking to sell its assets. Since fiscal year 2012, Clorox Venezuela was required to sell more than two thirds of its products at prices frozen by the Venezuelan government. During this same period, Clorox Venezuela experienced successive years of hyperinflation resulting in significant sustained increases in its input costs, including packaging, raw materials, transportation and wages. As a result, Clorox Venezuela had been selling its products at a loss, resulting in ongoing operating losses. Clorox Venezuela repeatedly met with government authorities in an effort to help them understand the rapidly declining state of the business, including the need for immediate, significant and ongoing price increases and other critical remedial actions to address these adverse impacts. Based on the Venezuelan government’s representations, Clorox Venezuela had expected significant price increases would be forthcoming much earlier; however, the price increases subsequently approved were insufficient and would have caused Clorox Venezuela to continue operating at a significant loss into the foreseeable future. As such, Clorox Venezuela was no longer financially viable and was forced to discontinue its operations.

On September 26, 2014, the Company reported that Venezuelan Vice President Jorge Arreaza announced, with endorsement by President Nicolás Maduro, that the Venezuelan government had occupied the Santa Lucía and Guacara production facilities of Clorox Venezuela. On November 6, 2014, the Company reported that the Venezuelan government had published a resolution granting a government-sponsored Special Administrative Board full authority to restart and operate the business of Clorox Venezuela, thereby reaffirming the government's expropriation of Clorox Venezuela’s assets. Further, President Nicolás Maduro announced the government's intention to facilitate the resumed production of bleach and other cleaning products at Clorox Venezuela plants. He also announced his approval of a financial credit to invest in raw materials and production at the plants. These actions by the Venezuelan government were taken without the consent or involvement of Clorox Venezuela, its parent Clorox Spain S.L. (Clorox Spain) or any of their affiliates. Clorox Venezuela, Clorox Spain and their affiliates reserved their rights under all applicable laws and treaties.

With this exit, the financial results of Clorox Venezuela are reflected as discontinued operations in the Company’s consolidated financial statements. The results of Clorox Venezuela have historically been part of the International reportable segment.

Net sales for Clorox Venezuela were $0, $11 and $77 for the fiscal years ended June 30, 2016, 2015 and 2014, respectively.

The following table provides a summary of gains (losses) from discontinued operations for Clorox Venezuela and gains (losses) from discontinued operations other than Clorox Venezuela for the years ended June 30:

    2016   2015   2014
Operating losses from Clorox Venezuela before income taxes   $ -     $ (6 )   $ (23 )
Exit costs and other related expenses for Clorox Venezuela     (2 )     (78 )     -  
Total losses from Clorox Venezuela before income taxes     (2 )     (84 )     (23 )
Income tax benefit attributable to Clorox Venezuela     2       29       6  
Total losses from Clorox Venezuela, net of tax     -       (55 )     (17 )
 
Gains (losses) from discontinued operations other than                        
       Clorox Venezuela, net of tax     -       29       (4 )
Losses from discontinued operations, net of tax   $      -     $      (26 )   $      (21 )

Unrelated to Clorox Venezuela, in the fiscal year ended June 30, 2015, $32 of gross unrecognized tax benefits relating to other discontinued operations for periods prior to fiscal year 2015 were recognized upon the expiration of the applicable statute of limitations. Recognition of these previously disclosed tax benefits had no impact on the Company’s cash flow or earnings from continuing operations for the fiscal years ended June 30, 2015 and 2014. (See Note 18)

Summary of Operating Losses, Asset Charges and Other Costs

The following provides a breakdown of (losses) gains from discontinued operations for Clorox Venezuela and gains from discontinued operations other than Clorox Venezuela for the fiscal years ended June 30:

    2016   2015
Operating losses from Clorox Venezuela before income taxes   $ -     $       (6 )
Net asset charges:              
       Inventories     -     (11 )
       Property, plant and equipment     -     (16 )
       Trademark and other intangible assets     -     (6 )
       Other assets     -     (2 )
Other exit and business termination costs:              
       Severance     -     (3 )
       Recognition of deferred foreign currency translation loss     -     (30 )
       Other     (2 )   (10 )
Total losses from Clorox Venezuela before income taxes     (2 )   (84 )
Income tax benefit attributable to Clorox Venezuela     2     29  
Total losses from Clorox Venezuela, net of tax     -     (55 )
 
Gains from discontinued operations other than              
       Clorox Venezuela, net of tax     -     29  
Losses from discontinued operations, net of tax   $      -     $     (26 )

Prior to Clorox Venezuela being consolidated under the rules governing the preparation of financial statements in a highly inflationary economy, cumulative translation gains (losses) were included as a component of Accumulated other comprehensive net (losses) income. The charge of $30 to discontinued operations in September 2014 represents the recognition of these losses as a result of Clorox Venezuela discontinuing its operations effective September 22, 2014.

Financial Reporting: Hyperinflation and the Selection of Exchange Rates

Due to a sustained inflationary environment, the financial statements of Clorox Venezuela are consolidated under the rules governing the preparation of financial statements in a highly inflationary economy. As such, Clorox Venezuela’s non-U.S. dollar (non-USD) monetary assets and liabilities were remeasured into U.S. dollars (USD) each reporting period with the resulting gains and losses now reflected in discontinued operations.

Subsequent to Clorox Venezuela discontinuing operations in September 2014, the Venezuelan government has continued to evolve its currency exchange mechanisms; however, these changes have not had a material impact on the Company’s financial results because the balance of net bolivar assets and liabilities on the local books of Clorox Venezuela was $0 as of both June 30, 2016 and 2015. As of June 30, 2016 and 2015, the local books of Clorox Venezuela carried a net asset position of $0. In addition, as of June 30, 2016 and 2015, the Company held $0 and $13, respectively, of tax asset balances related to Clorox Venezuela in Corporate in the reconciliation of the results of the Company’s reportable segments to consolidated results.

BUSINESSES ACQUIRED
BUSINESSES ACQUIRED

NOTE 3. BUSINESSES ACQUIRED

On May 2, 2016, the Company acquired 100 percent of ReNew Life Holdings Corporation (Renew Life), a leading brand in digestive health. The amount paid was $290 funded through commercial paper. The amount paid of $290 represents the aggregate purchase price less cash acquired. The purchase of the Renew Life business reflects the Company’s strategy to acquire leading brands with attractive margins in growth categories. Results for Renew Life’s U.S. business are reflected in the Household reportable segment and results for Renew Life’s international business are reflected in the International reportable segment. Included in the Company’s results for fiscal year 2016 was $21 of Renew Life’s global net sales.

The assets and liabilities of Renew Life were recorded at their respective estimated fair values as of the date of the acquisition using generally accepted accounting principles for business combinations. The excess of the purchase price over the fair value of the net identifiable assets acquired has been allocated to goodwill. Goodwill recorded primarily reflects the value of expanding the Company’s portfolio further into the health and wellness arena.

The following table summarizes the estimated fair values of Renew Life’s assets acquired and liabilities assumed and related deferred income taxes as of the acquisition date. Due to the timing of the acquisition, the fair value of the assets acquired and liabilities assumed are based on a preliminary valuation and the Company’s estimates and assumptions are subject to change within the measurement period. The primary areas of the purchase price that are not yet finalized are related to goodwill and income taxes. The weighted-average estimated useful life of intangible assets subject to amortization is 15 years.

  2016
  Renew Life
Goodwill $ 137  
Trademarks   134  
Customer relationships   36  
Property, plant and equipment   3  
Working capital, net   41  
Deferred income taxes   (61 )
Purchase Price $         290  

Pro forma results reflecting the acquisition were not presented because the acquisition did not meet the threshold requirements for additional disclosure.

INVENTORIES
INVENTORIES

NOTE 4. INVENTORIES

Inventories consisted of the following as of June 30:

  2016   2015
Finished goods $ 361     $ 316  
Raw materials and packaging   111       101  
Work in process   3       3  
LIFO allowances   (32 )     (35 )
Total $      443     $      385  

The last-in, first-out (LIFO) method was used to value approximately 38% of inventories as of June 30, 2016 and 2015, respectively. The carrying values for all other inventories are determined on the first-in, first-out (FIFO) method. The effect on earnings of the liquidation of LIFO layers was a benefit of $0, $0 and $2 for the fiscal years ended June 30, 2016, 2015 and 2014, respectively.

OTHER CURRENT ASSETS
OTHER CURRENT ASSETS

NOTE 5. OTHER CURRENT ASSETS

Other current assets consisted of the following as of June 30:

    2016   2015
Deferred tax assets(a)   $ -   $ 99
Prepaid expenses     70     39
Other     2     5
Total   $      72   $      143

(a) The Company prospectively adopted ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," requiring all deferred tax assets and liabilities to be classified as noncurrent. See Note 1 and 18 for further details.

PROPERTY, PLANT AND EQUIPMENT, NET
PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 6. PROPERTY, PLANT AND EQUIPMENT, NET

The components of property, plant and equipment, net, consisted of the following as of June 30:

  2016   2015
Machinery and equipment $ 1,607     $ 1,608  
Buildings   524       515  
Capitalized software costs   368       371  
Land and improvements   118       122  
Construction in progress   112       65  
Computer equipment   88       76  
    2,817       2,757  
Less: Accumulated depreciation and amortization   (1,911 )     (1,839 )
Total $      906     $      918  

Included in Machinery and equipment above are $12 of capital leases as of June 30, 2016 and 2015, respectively. Accumulated depreciation for assets under capital leases was $3 and $2 as of June 30, 2016 and 2015, respectively.

Included in Land and improvements above are $3 and $2 of asset retirement obligations as of June 30, 2016 and 2015, respectively, for two leased properties. The liability of $1 and $2 incurred in fiscal year 2016 and 2015, respectively, was recorded in Other liabilities.

Depreciation and amortization expense related to property, plant and equipment, net, was $157, $157 and $161 in fiscal years 2016, 2015 and 2014, respectively, which includes depreciation of assets under capital leases. This also includes amortization of capitalized software of $16, $19 and $22 in fiscal years 2016, 2015 and 2014, respectively.

Non-cash capital expenditures were $10, $18 and $0 in fiscal years 2016, 2015 and 2014, respectively.

GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS
GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

NOTE 7. GOODWILL, TRADEMARKS AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill by reportable segment for the fiscal years ended June 30, 2016 and 2015 were as follows:

    Goodwill
    Cleaning   Lifestyle   Household   International   Total
Balance June 30, 2014   $ 323   $ 244   $ 85   $ 449     $ 1,101  
Effect of foreign currency translation     -     -     -     (34 )     (34 )
Balance June 30, 2015     323     244     85     415       1,067  
Acquisition     -     -     122     15       137  
Effect of foreign currency translation     -     -     -     (7 )     (7 )
Balance June 30, 2016   $      323   $      244   $      207   $          423     $      1,197  

The changes in the carrying amount of trademarks and other intangible assets for the fiscal years ended June 30 were as follows:

    As of June 30, 2016   As of June 30, 2015
    Gross
carrying
amount
  Accumulated
amortization
  Net carrying
amount
  Gross
carrying
amount
  Accumulated
amortization
  Net carrying
amount
Trademarks not subject to amortization   $ 647   $ -   $ 647   $ 524   $ -   $ 524
Trademarks subject to amortization     32     22     10     33     22     11
Other intangible assets:                                    
       Technology and product formulae     137     134     3     137     133     4
       Other     221     146     75     188     142     46
Total   $ 1,037   $ 302   $ 735   $ 882   $ 297   $ 585

Finite-lived intangible assets are amortized over their estimated useful lives, generally ranging from 2 to 30 years. Amortization expense relating to the Company’s intangible assets was $8, $12 and $15 for the years ended June 30, 2016, 2015 and 2014, respectively. Estimated amortization expense for these intangible assets is $10, $9, $9, $9 and $8 for fiscal years 2017, 2018, 2019, 2020 and 2021, respectively.

During fiscal year 2016, the Company recognized $9 of intangible asset impairment charges, of which $6 related to the Aplicare® trademark within the Cleaning segment. The Aplicare® trademark impairment was recognized based on the anticipated impact on future results from a competitive market entrant.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

NOTE 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following as of June 30:

  2016   2015
Accounts payable $ 490   $ 431
Compensation and employee benefit costs   192     189
Trade and sales promotion   127     115
Dividends   108     103
Other   118     141
Total (a) $      1,035   $      979

(a) Accounts payable and accrued liabilities were combined into one financial statement line as of June 30, 2016. The change has been retrospectively applied to all periods presented.

DEBT
DEBT

NOTE 9. DEBT

Notes and loans payable, which mature in less than one year, included the following as of June 30:

  2016   2015
Commercial paper $ 522   $ 93
Foreign borrowings   1     2
Total $      523   $      95

The weighted average interest rates incurred on average outstanding notes and loans payable during the fiscal years ended June 30, 2016, 2015 and 2014, including fees associated with the Company’s undrawn revolving credit facility, were 1.10%, 2.05% and 0.97%, respectively. The weighted average effective interest rates on commercial paper balances as of June 30, 2016 and 2015 were 0.82% and 0.39%, respectively.

Long-term debt, carried at face value net of unamortized discounts or premiums, included the following as of June 30:

  2016   2015
Senior unsecured notes and debentures:            
       3.55%, $300 due November 2015   -     300  
       5.95%, $400 due October 2017   400     399  
       3.80%, $300 due November 2021   298     298  
       3.05%, $600 due September 2022   599     599  
       3.50%, $500 due December 2024   500     500  
Total   1,797     2,096  
Less: Current maturities of long-term debt   -     (300 )
Long-term debt $      1,797   $      1,796  

The weighted average interest rates incurred on average outstanding long-term debt during the fiscal years ended June 30, 2016, 2015 and 2014, were 4.37%, 4.44% and 4.56%, respectively. The weighted average effective interest rates on long-term debt balances as of June 30, 2016 and 2015, were 4.41% and 4.31%, respectively.

Long-term debt maturities as of June 30, 2016, are $0, $400, $0, $0, $0 and $1,400 in fiscal years 2017, 2018, 2019, 2020, 2021 and thereafter, respectively.

In November 2015, $300 of the Company’s senior notes with an annual fixed interest rate of 3.55% became due and were repaid using commercial paper borrowings and cash on hand.

In December 2014, under a shelf registration statement filed with the SEC that will expire in December 2017, the Company issued $500 of senior notes with an annual fixed interest rate of 3.50%. Interest on the notes is payable semi-annually in June and December and the notes have a maturity date of December 15, 2024. The notes carry an effective interest rate of 4.10%, which includes the impact from the settlement of interest rate forward contracts in December 2014 (see Note 11). The notes rank equally with all of the Company’s existing senior indebtedness. In January 2015, $575 of the Company’s senior notes with an annual fixed interest rate of 5.00% became due and were repaid using the net proceeds from the December 2014 debt issuance and commercial paper borrowings.

The Company’s borrowing capacity under other financing arrangements as of June 30 was as follows:

  2016   2015
Revolving credit facility $ 1,100   $ 1,100
Foreign credit lines   10     11
Other credit lines   18     18
Total $      1,128   $      1,129

As of June 30, 2016, the Company had a $1,100 revolving credit agreement (the Credit Agreement), which expires in October 2019. There were no borrowings under the Credit Agreement as of June 30, 2016 or 2015. The agreement includes certain restrictive covenants and limitations, with which the Company was in compliance as of June 30, 2016.

Of the $28 of foreign and other credit lines as of June 30, 2016, $5 was outstanding and the remainder of $23 was available for borrowing. Of the $29 of foreign and other credit lines as of June 30, 2015, $4 was outstanding and the remainder of $25 was available for borrowing.

OTHER LIABILITIES
OTHER LIABILITIES

NOTE 10. OTHER LIABILITIES

Other liabilities consisted of the following as of June 30:

  2016   2015
Employee benefit obligations $ 335   $ 299
Venture agreement terminal obligation, net   302     294
Taxes   40     38
Other   107     119
Total $      784   $      750

Venture Agreement

The Company has an agreement with The Procter & Gamble Company (P&G) for the Company’s Glad® bags, wraps and containers business. As of June 30, 2016 and 2015, P&G had a 20% interest in the venture. The Company pays a royalty to P&G for its interest in the profits, losses and cash flows, as contractually defined, of the Glad® business, which is included in Cost of products sold. The agreement with P&G will expire in January 2023 unless the parties decide, on or prior to January 2018, to extend the term of the agreement for another 10 years. The agreement can be terminated under certain circumstances, including at P&G’s option upon a change in control of the Company or, at either party’s option, upon the sale of the Glad® business by the Company.

Upon termination of the agreement, the Company is required to purchase P&G’s interest for cash at fair value as established by predetermined valuation procedures. As of June 30, 2016, the estimated fair value of P&G’s interest was $448, of which $302 has been recognized and is reflected in Other liabilities as noted in the table above. The difference between the estimated fair value and the amount recognized, and any future changes in the fair value of P&G’s interest, is charged to Cost of products sold on a straight-line basis over the remaining life of the agreement. Following termination, the Glad® business will retain the exclusive core intellectual property licenses contributed by P&G on a royalty-free basis for the licensed products marketed.

Deferred Gain on Sale-leaseback Transaction

In December 2012, the Company completed a sale-leaseback transaction under which it sold its general office building in Oakland, CA to an unrelated third party for net proceeds of $108 and entered into a 15-year operating lease agreement with renewal options with the buyer for a portion of the building. The Company deferred recognition of the portion of the total gain on the sale that was equivalent to the present value of the lease payments and will continue to amortize such amount to earnings ratably over the lease term. As of June 30, 2016 and 2015, the long-term portion of the deferred gain of $36 and $40, respectively, was included in Other in the table above.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

NOTE 11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets are required to be classified and disclosed in one of the following three categories of the fair value hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.

As of June 30, 2016 and 2015, the Company’s financial assets and liabilities that were measured at fair value on a recurring basis during the period included derivative financial instruments, which were classified as either Level 1 or Level 2, and trust assets to fund certain of the Company’s nonqualified deferred compensation plans, which were classified as Level 1.

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 commodity derivative dealers.

As of June 30, 2016, the notional amount of commodity derivatives was $30, of which $16 related to jet fuel swaps and $14 related to soybean oil futures. As of June 30, 2015, the notional amount of commodity derivatives was $47, of which $27 related to jet fuel swaps and $20 related to soybean oil futures.

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 $84 and $105, respectively, as of June 30, 2016 and 2015.

Interest Rate Risk Management

The Company may enter into over-the-counter interest rate forward contracts to fix a portion of the benchmark interest rate prior to the anticipated issuance of fixed rate debt or to manage the Company’s level of fixed and floating rate debt. The interest rate contracts are measured at fair value using information quoted by U.S. government bond dealers.

During fiscal year 2015, the Company paid $25 to settle interest rate forward contracts related to the December 2014 issuance of $500 in senior notes. The settlement payments are reflected as operating cash flows in the consolidated statements of cash flows for the fiscal year ended June 30, 2015. The loss is reflected in Accumulated other comprehensive net loss on the consolidated balance sheets as of June 30, 2016 and 2015, and is being amortized into Interest expense on the consolidated statements of earnings over the 10-year term of the notes.

The Company had no outstanding interest rate forward contracts as of June 30, 2016 and 2015.

Counterparty Risk Management and Derivative Contract Requirements

The Company utilizes a variety of financial institutions as counterparties for over-the counter derivative instruments. The Company enters into agreements governing the use of over-the-counter derivative instruments and sets internal limits on the aggregate over-the-counter derivative instrument positions held with each counterparty. Certain terms of these agreements require the Company or the counterparty to post collateral when the fair value of the derivative instruments exceeds contractually defined counterparty liability position limits. Of the derivative instruments of $5 and $8 reflected in Accounts payable and accrued liabilities and Other liabilities as of June 30, 2016 and 2015, respectively, $4 and $8, respectively, contained such terms. As of both June 30, 2016 and 2015, neither the Company nor any counterparty was required to post any collateral as no counterparty liability position limits were exceeded.

Certain terms of the agreements governing the Company’s over-the-counter derivative instruments require the credit ratings, as assigned by Standard & Poor’s and Moody’s to the Company and its counterparties, to remain at a level equal to or better than the minimum of an investment grade credit rating. If the Company’s credit ratings were to fall below investment grade, the counterparties to the derivative instruments could request full collateralization on derivative instruments in net liability positions. As of both June 30, 2016 and 2015, the Company and each of its counterparties had been assigned investment grade ratings by both Standard & Poor’s and Moody’s.

Certain of the Company’s exchange-traded futures contracts used for commodity price risk management include requirements for the Company to post collateral in the form of a cash margin account held by the Company’s broker for trades conducted on that exchange. As of June 30, 2016 and 2015, the Company maintained cash margin balances related to exchange-traded futures contracts of $1 and $2, respectively, which are classified as Other current assets on the consolidated balance sheets.

Trust Assets

The Company has held interests in mutual funds and cash equivalents as part of trust assets related to certain of its nonqualified deferred compensation plans. The participants, who are the Company’s current and former employees, in the deferred compensation plans may select among certain mutual funds in which their compensation deferrals are invested in accordance with the terms of the plan and within the confines of the trusts which hold the marketable securities. The trusts represent variable interest entities for which the Company is considered the primary beneficiary, and therefore, trust assets are consolidated and included in Other assets in the consolidated balance sheets. The interests in mutual funds are measured at fair value using quoted market prices. The Company has designated these marketable securities as trading investments.

The value of the trust assets related to certain of the Company’s nonqualified deferred compensation plans increased by $14 as compared to June 30, 2015, primarily due to current year employees’ contributions to these plans.

Fair Value of Financial Instruments

The following table summarizes the fair value of Company’s assets and liabilities for which disclosure of fair value is required as of June 30:

            2016   2015
Assets   Balance sheet classification   Fair value
hierarchy
level
  Carrying
Amount
  Estimated
Fair
Value
  Carrying
Amount
  Estimated
Fair
Value
Investments including money market funds   Cash and cash equivalents (a)   1   $ 234   $ 234   $ 212   $ 212
Time deposits   Cash and cash equivalents (a)   2     79     79     84     84
Commodity purchase derivative contracts   Other current assets   1     1     1     -     -
Foreign exchange derivative contracts   Other current assets   2     1     1     1     1
Commodity purchase derivative contracts   Other assets   2     1     1     -     -
Trust assets for nonqualified deferred
compensation plans
  Other assets   1     52     52     38     38
            $ 368   $ 368   $ 335   $ 335
 
Liabilities                                
Notes and loans payable   Notes and loans payable (b)   2   $ 523   $ 523   $ 95   $ 95
Commodity purchase derivative contracts   Accounts payable and
accrued liabilities
  2     1     1     8     8
Foreign exchange derivative contracts   Accounts payable and
accrued liabilities
  2     4     4     -     -
Current maturities of long-term debt and
Long-term debt
  Current maturities of long-
term debt and Long-term
debt (c)
  2     1,797     1,922     2,096     2,137
            $        2,325   $        2,450   $        2,199   $        2,240
(a)        Cash and cash equivalents are composed of time deposits and other interest bearing investments including money market funds with original maturity dates of 90 days or less. Cash and cash equivalents are recorded at cost, which approximates fair value.
(b) Notes and loan payable is composed of U.S. commercial paper and/or other similar short-term debts issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
(c) Current maturities of long-term debt and Long-term debt are recorded at cost. The fair value of Long-term debt, including current maturities, was determined using secondary market prices quoted by corporate bond dealers, and is classified as Level 2.

Derivatives

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

The effects of derivative instruments designated as hedging instruments on Other comprehensive income (loss) and net earnings were as follows during the fiscal years ended June 30:

  Gains (losses)
recognized in other comprehensive net loss
  2016   2015   2014
Commodity purchase derivative contracts $ (4 )   $ (13 )   $ 2  
Interest rate derivative contracts   -       (12 )     (13 )
Foreign exchange derivative contracts   (3 )     7       (3 )
Total $         (7 )   $         (18 )   $         (14 )
 
  Gains (losses) reclassified from accumulated
other comprehensive net loss and recognized
in net earnings
  2016   2015   2014
Commodity purchase derivative contracts $ (13 )   $ (5 )   $ -  
Interest rate derivative contracts   (6 )     (5 )     (4 )
Foreign exchange derivative contracts   1       3       4  
Total $ (18 )   $ (7 )   $ -  

The gains (losses) reclassified from Accumulated other comprehensive net (losses) income and recognized in earnings during the fiscal years ended June 30, 2016, 2015 and 2014, for commodity purchase and foreign exchange contracts were included in Cost of products sold, and for interest rate contracts were included in Interest expense.

The estimated amount of the existing net gain (loss) in Accumulated other comprehensive net (losses) income as of June 30, 2016, which is expected to be reclassified into earnings within the next twelve months, is $(11). Gains and losses on derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in the consolidated statement of earnings. During each of the fiscal years ended June 30, 2016, 2015 and 2014, hedge ineffectiveness was not significant.

OTHER CONTINGENCIES AND GUARANTEES
OTHER CONTINGENCIES AND GUARANTEES

NOTE 12. OTHER CONTINGENCIES AND GUARANTEES

Contingencies

The Company is involved in certain environmental matters, including response actions at various locations. The Company had a recorded liability of $14 and $12 as of June 30, 2016 and 2015, respectively, for its share of aggregate future remediation costs related to these matters. One matter in Dickinson County, Michigan, for which the Company is jointly and severally liable, accounted for a substantial majority of the recorded liability as of both June 30, 2016 and 2015. The Company has agreed to be liable for 24.3% of the aggregate remediation and associated costs for this matter pursuant to a cost-sharing arrangement with a third party. With the assistance of environmental consultants, the Company maintains an undiscounted liability representing its current best estimate of its share of the capital expenditures, maintenance and other costs that may be incurred over an estimated 30-year remediation period. Currently, the Company cannot accurately predict the timing of future payments that may be made under this obligation. In addition, the Company’s estimated loss exposure is sensitive to a variety of uncertain factors, including the efficacy of remediation efforts, changes in remediation requirements and the future availability of alternative clean-up technologies. Although it is reasonably possible that the Company’s exposure may exceed the amount recorded, any amount of such additional exposures, or range of exposures, is not estimable at this time.

The Company is subject to various legal proceedings, claims and other loss contingencies, including, without limitation, loss contingencies relating to contractual arrangements, product liability, patents and trademarks, advertising, labor and employment, environmental, health and safety and other matters. With respect to these proceedings, claims and other loss contingencies, while considerable uncertainty exists, in the opinion of management at this time, the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, either individually or in the aggregate, on the Company’s consolidated financial statements taken as a whole.

Guarantees

In conjunction with divestitures and other transactions, the Company may provide typical indemnifications (e.g., indemnifications for representations and warranties and retention of previously existing environmental, tax and employee liabilities) that have terms that vary in duration and in the potential amount of the total obligation and, in many circumstances, are not explicitly defined. The Company has not made, nor does it believe that it is probable that it will make, any material payments relating to its indemnifications, and believes that any reasonably possible payments would not have a material adverse effect, either individually or in the aggregate, on the Company’s consolidated financial statements taken as a whole.

The Company had not recorded any liabilities on the aforementioned indemnifications as of June 30, 2016 and 2015.

The Company was a party to letters of credit of $10 and $11 as of June 30, 2016 and 2015, respectively, primarily related to one of its insurance carriers, of which $0 had been drawn upon.

LEASES AND OTHER COMMITMENTS
LEASES AND OTHER COMMITMENTS

NOTE 13. LEASES AND OTHER COMMITMENTS

The Company leases various property, plant, and equipment including office, warehousing, and manufacturing facilities, in addition to certain manufacturing and information technology equipment. The Company expects that, in the normal course of business, existing contracts will be renewed or replaced by other leases. Rental expense for all operating leases was $77, $76 and $71 in fiscal years 2016, 2015 and 2014, respectively.

The future minimum annual lease commitments required under the Company’s existing non-cancelable operating and capital lease agreements as of June 30, 2016, were as follows:

Year   Operating
leases
  Capital
leases
2017   $ 49   $ 3
2018     45     2
2019     38     1
2020     32     -
2021     29     -
Thereafter     135     -
Total   $        328   $          6

The Company is also a party to certain purchase obligations, which are defined as purchase agreements that are enforceable and legally binding and that contain specified or determinable significant terms, including quantity, price and the approximate timing of the transaction. Examples of the Company’s purchase obligations include contracts to purchase raw materials, commitments to contract manufacturers, commitments for information technology and related services, advertising contracts, capital expenditure agreements, software acquisition and license commitments and service contracts. The Company enters into purchase obligations based on expectations of future business needs. For purchase obligations subject to variable price and/or quantity provisions, an estimate of the price and/or quantity has been made. Many of these purchase obligations are short term in nature and are flexible to allow for changes in the Company’s business and related requirements. As of June 30, 2016, the Company’s purchase obligations were as follows:

Year   Purchase
Obligations
2017   $ 150
2018     54
2019     37
2020     12
2021     2
Thereafter     1
Total   $ 256
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY

NOTE 14. STOCKHOLDERS’ EQUITY

The Company has two share repurchase programs: an open-market purchase program with an authorized aggregate purchase amount of up to $750, all of which was available for share repurchases as of both June 30, 2016 and 2015, and a program to offset the anticipated impact of share dilution related to share-based awards (the Evergreen Program), which has no authorization limit as to amount or timing of repurchases.

Share repurchases under authorized programs were as follows during the fiscal years ended June 30:

  2016   2015   2014
  Amount   Shares
(in 000's)
  Amount   Shares
(in 000's)
  Amount   Shares
(in 000's)
Open-market purchase programs $  -   -   $ -   -   $ -   -
Evergreen Program   254   2,151     434   4,016     260   3,046
Total $      254   2,151   $      434   4,016   $      260   3,046

Dividends per share declared and paid, respectively, during the fiscal years ended June 30 were as follows:

  2016   2015   2014
Dividends per share declared $       3.11   $       2.99   $       2.87
Dividends per share paid   3.08     2.96     2.84

Accumulated Other Comprehensive Net (Losses) Income

Changes in Accumulated other comprehensive net (losses) income by component were as follows for the fiscal years ended June 30:

  Foreign currency
adjustments
  Net
unrealized
gains
(losses) on
derivatives
  Pension and
postretirement
benefit
adjustments
  Accumulated
Other
Comprehensive
Income
Balance June 30, 2013 $ (209 )   $ (30 )   $ (128 )   $ (367 )
       Other comprehensive (loss) income before                              
       reclassifications   (26 )     (15 )     (16 )     (57 )
       Amounts reclassified from accumulated other                              
       comprehensive net losses   -       -       8       8  
       Income tax benefit (expense)   (11 )     6       4       (1 )
Net current period other comprehensive income (loss)   (37 )     (9 )     (4 )     (50 )
Balance June 30, 2014   (246 )     (39 )     (132 )     (417 )
       Other comprehensive (loss) income before                              
       reclassifications   (92 )     (18 )     (29 )     (139 )
       Amounts reclassified from accumulated other                              
       comprehensive net losses   -       7       -       7  
       Recognition of deferred foreign currency translation                              
       loss   30       -       -       30  
       Income tax benefit (expense)   8       (3 )     12       17  
Net current period other comprehensive income (loss)   (54 )     (14 )     (17 )     (85 )
Balance June 30, 2015   (300 )     (53 )     (149 )     (502 )
       Other comprehensive (loss) income before                              
       reclassifications   (43 )     (7 )     (38 )     (88 )
       Amounts reclassified from accumulated other                              
       comprehensive net losses   -       18       -       18  
       Income tax benefit (expense)   (10 )     (2 )     14       2  
Net current period other comprehensive income (loss)   (53 )     9       (24 )     (68 )
Balance June 30, 2016 $                  (353 )   $              (44 )   $              (173 )   $              (570 )

Included in foreign currency adjustments are re-measurement losses on long-term intercompany loans where settlement is not planned or anticipated in the foreseeable future. For the fiscal years ended June 30, 2016, 2015 and 2014, Other comprehensive losses on these loans totaled $14, $9 and $12, respectively, and there were no amounts reclassified from Accumulated other comprehensive net (losses) income.

Pension and postretirement benefit reclassification adjustments are reflected in Cost of products sold, Selling and administrative expenses and Research and development costs.

NET EARNINGS PER SHARE (EPS)
NET EARNINGS PER SHARE (EPS)

NOTE 15. NET EARNINGS PER SHARE (EPS)

The following is the reconciliation of the weighted average number of shares outstanding (in thousands) used to calculate basic net EPS to those used to calculate diluted net EPS for the fiscal years ended June 30:

  2016   2015   2014
Basic 129,472   130,310   129,558
Dilutive effect of stock options and other 2,245   2,466   2,184
Diluted 131,717   132,776   131,742
 
Antidilutive stock options and other 42   23   -
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS

NOTE 16. STOCK-BASED COMPENSATION PLANS

In November 2012, the Company’s stockholders voted to approve the amended and restated 2005 Stock Incentive Plan (the Plan). The Plan permits the Company to grant various nonqualified stock-based compensation awards, including stock options, restricted stock, performance units, deferred stock units, stock appreciation rights and other stock-based awards. The primary amendment reflected in the Plan was an increase of approximately 3 million common shares that may be issued for stock-based compensation purposes. As of June 30, 2016, the Company is authorized to grant up to approximately 8 million common shares under the Plan, and, as of June 30, 2016, approximately 8 million common shares were available for grant.

Compensation cost and the related income tax benefit recognized for stock-based compensation plans were classified as indicated below for the fiscal years ended June 30:

  2016   2015   2014
Cost of products sold $ 6   $ 4   $ 4
Selling and administrative expenses   35     25     29
Research and development costs   4     3     3
Total compensation cost $       45   $       32   $       36
 
Related income tax benefit $ 17   $ 12   $ 13

Cash received during fiscal years 2016, 2015 and 2014 from stock options exercised under all stock-based payment arrangements was $180, $230 and $86, respectively. The Company issues shares for stock-based compensation plans from treasury stock. The Company may repurchase shares under its Evergreen Program to offset the estimated impact of share dilution related to stock-based awards (see Note 14).

Details regarding the valuation and accounting for stock options, restricted stock awards, performance units and deferred stock units for non-employee directors follow.

Stock Options

The fair value of each stock option award granted during fiscal years 2016, 2015 and 2014 was estimated on the date of grant using the Black-Scholes valuation model and assumptions noted in the following table:

  2016   2015   2014
Expected life 5.6 years   5.6 to 5.8 years   5.7 years
Weighted-average expected life 5.6 years   5.7 years   5.7 years
Expected volatility 16.43% to 17.3%   16.3% to 18.6%   18.4% to 18.5%
Weighted-average volatility 17.2%   16.6%   18.5%
Risk-free interest rate 1.3% to 1.7%   1.4% to 2.0%   1.8% to 1.9%
Weighted-average risk-free interest rate 1.7%   1.9%   1.8%
Dividend yield 2.5% to 2.8%   2.8% to 3.4%   3.4%
Weighted-average dividend yield 2.8%   3.3%   3.4%

The expected life of the stock options is based on observed historical exercise patterns. The expected volatility is based on implied volatility from publicly traded options on the Company’s stock at the date of grant, historical implied volatility of the Company’s publicly traded options and other factors. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant.

Details of the Company’s stock option activities are summarized below:

  Number of
Shares
(In thousands)
  Weighted-
Average
Exercise
Price
per Share
  Average
Remaining
Contractual
Life
  Aggregate
Intrinsic
Value
Options outstanding as of June 30, 2015 8,357     $ 76   7 years   $ 236
Granted 1,317              112          
Exercised            (2,633 )     69          
Cancelled (214 )     95          
Options outstanding as of June 30, 2016 6,827     $ 85   7 years   $        366
 
Options vested as of June 30, 2016 3,555     $ 74   5 years   $ 228

The weighted-average fair value per share of each option granted during fiscal years 2016, 2015 and 2014, estimated at the grant date using the Black-Scholes option pricing model was $13.21, $9.65 and $9.69, respectively. The total intrinsic value of options exercised in fiscal years 2016, 2015 and 2014 was $142, $140 and $42, respectively.

Stock option awards outstanding as of June 30, 2016, have been granted at prices that are equal to the market value of the stock on the date of grant. Stock option grants generally vest over four years and expire no later than ten years after the grant date. The Company recognizes compensation expense ratably over the vesting period. As of June 30, 2016, there was $16 of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of one year, subject to forfeiture changes.

Restricted Stock Awards

The fair value of restricted stock awards is estimated on the date of grant based on the market price of the stock and is amortized to compensation expense on a straight-line basis over the related vesting periods, which are generally three to four years. The total number of restricted stock awards expected to vest is adjusted by actual and estimated forfeitures. Restricted stock grants receive dividend distributions earned during the vesting period upon vesting.

As of June 30, 2016, there was $1 of total unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a remaining weighted-average vesting period of one year. The total fair value of the shares that vested in each of the fiscal years 2016, 2015 and 2014 was $1, respectively. The weighted-average grant-date fair value of awards granted was $128.91, $95.67 and $89.25 per share for fiscal years 2016, 2015 and 2014, respectively.

A summary of the status of the Company’s restricted stock awards is presented below:

  Number of
Shares
(In thousands)
  Weighted-Average
Grant Date
Fair Value
per Share
Restricted stock awards as of June 30, 2015 18     $ 91
Granted 5       129
Vested (9 )     88
Forfeited                   (1 )     106
Restricted stock awards as of June 30, 2016 13     $      108

Performance Units

As of June 30, 2016, there was $37 in unrecognized compensation cost related to non-vested performance unit grants that is expected to be recognized over a remaining weighted-average performance period of one year. The weighted-average grant-date fair value of awards granted was $92.35, $89.75 and $84.45 per share for fiscal years 2016, 2015 and 2014, respectively.

A summary of the status of the Company’s performance unit awards is presented below:

  Number of
Shares
(In thousands)
  Weighted-Average
Grant Date
Fair Value
per Share
Performance unit awards as of June 30, 2015             1,123     $ 79
Granted 286       92
Distributed (377 )     70
Forfeited (80 )     87
Performance unit awards as of June 30, 2016 952     $ 90
 
Performance units vested and deferred as of June 30, 2016 157     $      58

The non-vested performance units outstanding as of June 30, 2016 and 2015 were 794,000 and 944,000, respectively, and the weighted average grant date fair value was $95.18 and $81.92 per share, respectively. Total shares vested during fiscal year 2016 were 354,000, which had a weighted average grant date fair value per share of $72.11. During fiscal year 2016, $25 of the vested awards was paid by the issuance of shares and $1 of the vested awards was deferred. Deferred shares continue to earn dividends, which are also deferred. The total fair value of shares vested was $26, $24 and $0 during fiscal years 2016, 2015 and 2014, respectively. Upon vesting, the recipients of the grants receive the distribution as shares or, if previously elected by eligible recipients, as deferred stock.

Deferred Stock Units for Nonemployee Directors

Nonemployee directors receive annual grants of deferred stock units under the Company’s director compensation program and can elect to receive all or a portion of their annual retainers and fees in the form of deferred stock units. The deferred stock units receive dividend distributions, which are reinvested as deferred stock units, and are recognized at their fair value on the date of grant. Each deferred stock unit represents the right to receive one share of the Company’s common stock following the completion of a director’s service.

During fiscal year 2016, the Company granted 13,000 deferred stock units, reinvested dividends of 6,000 units and distributed 16,000 shares, which had a weighted-average fair value on grant date of $126.65, $124.03 and $62.70 per share, respectively. As of June 30, 2016, 244,000 units were outstanding, which had a weighted-average fair value on the grant date of $71.13 per share.

OTHER (INCOME) EXPENSE, NET
OTHER (INCOME) EXPENSE, NET

NOTE 17. OTHER (INCOME) EXPENSE, NET

The major components of Other (income) expense, net, for the fiscal years ended June 30 were:

  2016   2015   2014
Income from equity investees $ (15 )   $ (14 )   $ (13 )
Interest income   (5 )     (4 )     (3 )
Low income housing partnership gains, net   -       (13 )     -  
Foreign exchange transaction losses, net   1       9       1  
Amortization of trademarks and other intangible assets   8       8       8  
Intangible asset impairment charges   9       3       3  
Other   (5 )     (2 )     (6 )
Total $      (7 )   $      (13 )   $      (10 )

In April 2016, the Company sold its Los Angeles bleach manufacturing facility, previously reported in the Cleaning segment, which resulted in $20 in cash proceeds from investing activities and a gain of $(11) included in Other in the table above for the year ended June 30, 2016.

During fiscal year 2016, the Company recognized $9 of intangible asset impairment charges, of which $6 related to the Aplicare® trademark within the Cleaning segment. The Aplicare® trademark impairment was recognized based on the anticipated impact on future results from a competitive market entrant.

Investment in Low-Income Housing Partnerships

The Company owns, directly or indirectly, limited partnership interests in low-income housing partnerships, which are accounted for using the equity method of accounting. These partnerships are considered to be variable interest entities; however, the Company does not consolidate them because it does not have the power to direct the partnerships’ activities that significantly impact their economic performance. The purpose of the partnerships is to develop and operate low-income housing rental properties. The general partners, who typically hold 1% of the partnership interests, are third parties unrelated to the Company and its affiliates, and are responsible for controlling and managing the business and financial operations of the partnerships. As a limited partner, the Company is not responsible for any of the liabilities and obligations of the partnerships nor do the partnerships or their creditors have any recourse to the Company other than for the capital requirements. All available tax benefits from low-income housing tax credits provided by the partnerships were claimed as of fiscal year 2012. The risk that previously claimed low-income housing tax credits might be recaptured or otherwise retroactively invalidated is considered remote.

In April 2015, a low-income housing partnership, in which the Company was a limited partner, sold its real estate holdings. The real property sale resulted in $15 in cash proceeds from investing activities and a gain of $(14) recorded to Other (income) expense, net, on the consolidated statement of earnings for the year ended June 30, 2015.

INCOME TAXES
INCOME TAXES

NOTE 18. INCOME TAXES

The provision for income taxes on continuing operations, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:

    2016   2015   2014
Current                        
       Federal   $      254     $      265     $      247  
       State     31       28       34  
       Foreign     45       38       45  
Total current     330       331       326  
                         
Deferred                        
       Federal     11       (13 )     (19 )
       State     1       (1 )     2  
       Foreign     (7 )     (2 )     (4 )
Total deferred     5       (16 )     (21 )
Total   $ 335     $ 315     $ 305  

The components of earnings from continuing operations before income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:

  2016   2015   2014
United States $      900   $      829   $      754
Foreign   83     92     130
Total $ 983   $ 921   $ 884

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate on continuing operations follows for the fiscal years ended June 30:

    2016   2015   2014
Statutory federal tax rate   35.0 %   35.0 %   35.0 %
State taxes (net of federal tax benefits)   2.1     2.1     2.6  
Tax differential on foreign earnings   0.5     (0.3 )   (0.3 )
Domestic manufacturing deduction   (2.4 )   (2.1 )   (2.3 )
Change in valuation allowance   0.5     0.6     0.6  
Other differences   (1.6 )   (1.1 )   (1.0 )
Effective tax rate   34.1 %   34.2 %   34.6 %

Applicable U.S. income taxes and foreign withholding taxes have not been provided on approximately $216 of undistributed earnings of certain foreign subsidiaries as of June 30, 2016, because these earnings are considered indefinitely reinvested. The estimated net federal income tax liability that could arise if these earnings were not indefinitely reinvested is approximately $56. Applicable U.S. income and foreign withholding taxes are provided on these earnings in the periods in which they are no longer considered indefinitely reinvested.

Tax benefits resulting from stock-based payment arrangements that are in excess of the tax benefits recorded in net earnings over the vesting period of those arrangements (excess tax benefits) are recorded as increases to Additional paid-in capital. Excess tax benefits of approximately $51, $42, and $11 were realized and recorded to Additional paid-in capital for fiscal years 2016, 2015 and 2014, respectively.

The components of net deferred tax assets (liabilities) as of June 30 are shown below:

    2016   2015
Deferred tax assets (a)                
       Compensation and benefit programs   $ 193     $ 191  
       Basis difference related to Venture Agreement     30       30  
       Accruals and reserves     34       43  
       Inventory costs     21       19  
       Net operating loss and tax credit carryforwards     48       41  
       Other     54       61  
              Subtotal     380       385  
       Valuation allowance     (37 )     (34 )
       Total deferred tax assets     343       351  
 
Deferred tax liabilities (a)                
       Fixed and intangible assets     (325 )     (277 )
       Low-income housing partnerships     (23 )     (22 )
       Unremitted foreign earnings     (16 )     (7 )
       Other     (25 )     (24 )
       Total deferred tax liabilities           (389 )           (330 )
       Net deferred tax assets (liabilities)   $ (46 )   $ 21  

(a) The Company prospectively adopted ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," requiring all deferred tax assets and liabilities to be classified as noncurrent. See Note 1 for further details.

The Company periodically reviews its deferred tax assets for recoverability. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Valuation allowances have been provided to reduce deferred tax assets to amounts considered recoverable. Details of the valuation allowance were as follows as of June 30:

    2016   2015
Valuation allowance at beginning of year   $ (34 )   $ (51 )
Net decrease/(increase) for other foreign deferred tax assets     3       15  
Net decrease/(increase) for foreign net operating loss carryforwards and tax credits     (6 )     2  
Valuation allowance at end of year   $       (37 )   $       (34 )

As of June 30, 2016, the Company had foreign tax credit carryforwards of $15 for U.S. income tax purposes with expiration dates between fiscal years 2024 and 2025. Tax credit carryforwards in foreign jurisdictions of $19 have expiration dates in fiscal year 2031. Tax credit carryforwards in foreign jurisdictions of $1 can be carried forward indefinitely. Tax benefits from foreign net operating loss carryforwards of $16 have expiration dates between fiscal years 2017 and 2036. Tax benefits from foreign net operating loss carryforwards of $12 can be carried forward indefinitely.

The Company files income tax returns in the U.S. federal and various state, local and foreign jurisdictions. The federal statute of limitations has expired for all tax years through June 30, 2012. Various income tax returns in state and foreign jurisdictions are currently in the process of examination.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. As of June 30, 2016 and 2015, the total balance of accrued interest and penalties related to uncertain tax positions was $3 and $10, respectively. Interest and penalties related to uncertain tax positions included in income tax expense resulted in a net benefit of $1, a net benefit of $1, and a net expense of $3 in fiscal years 2016, 2015 and 2014, respectively.

The following is a reconciliation of the beginning and ending amounts of the Company’s gross unrecognized tax benefits:

    2016   2015   2014
Unrecognized tax benefits at beginning of year   $      38     $      71     $      69  
Gross increases - tax positions in prior periods     3       3       3  
Gross decreases - tax positions in prior periods     (3 )     (8 )     (5 )
Gross increases - current period tax positions     8       6       7  
Gross decreases - current period tax positions     -       -       -  
Lapse of applicable statute of limitations     (4 )     (34 )     (1 )
Settlements     (5 )     -       (2 )
Unrecognized tax benefits at end of year   $ 37     $ 38     $ 71  

Included in the balance of unrecognized tax benefits as of June 30, 2016, 2015 and 2014, are potential benefits of $27, $27 and $58, respectively, which if recognized, would affect net earnings. During the fiscal year ended June 30, 2015, $32 of gross unrecognized tax benefits relating to other discontinued operations for periods prior to fiscal year 2015 were recognized upon the expiration of the applicable statute of limitations. Recognition of these previously disclosed tax benefits had no impact on the Company’s cash flow or earnings from continuing operations for the fiscal years ended June 30, 2016, 2015 and 2014.

EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS

NOTE 19. EMPLOYEE BENEFIT PLANS

Retirement Income Plans

Effective July 1, 2011, and as part of a set of long-term, cost-neutral enhancements to the Company’s overall employee benefit plans, the domestic qualified retirement income pension plan was frozen for service accrual and eligibility purposes for most participants, however, interest credits have continued to accrue on participant balances. As of June 30, 2016 and 2015, the benefits of the domestic pension plan are based on either employee years of service and compensation or a stated dollar amount per year of service. The Company is the sole contributor to the plan in amounts deemed necessary to provide benefits and to the extent deductible for federal income tax purposes. Assets of the plan consist primarily of investments in cash equivalents and common collective trusts.

The Company contributed $15 to its domestic qualified pension plan during fiscal year 2016. No contributions were made in fiscal year 2015 and 2014. The Company’s funding policy for its qualified plans is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit tax laws plus additional amounts as the Company may determine to be appropriate. Subsequent to June 30, 2016, the Company made a $15 discretionary contribution to the pension plan.

Contributions made to the domestic non-qualified pension plans were $16, $13 and $13 in fiscal years 2016, 2015 and 2014, respectively.

Retirement Health Care Plans

The Company provides certain health care benefits for employees who meet age, participation and length of service requirements at retirement. The plans pay stated percentages of covered expenses after annual deductibles have been met or stated reimbursements up to a specified dollar subsidy amount. Benefits paid take into consideration payments by Medicare for the domestic plan. The plans are funded as claims are paid, and the Company has the right to modify or terminate certain plans.

The assumed domestic health care cost trend rate used in measuring the accumulated benefit obligation (ABO) was 6.75% for both medical and prescription drugs for fiscal year 2016. These rates have been assumed to gradually decrease each year until an assumed ultimate trend of 4.5% is reached in 2037. The health care cost trend rate assumption has a minimal effect on the amounts reported due primarily to the existence of benefit cap provisions in the Company’s domestic plan. As such, the effect of a hypothetical 100 basis point increase or decrease in the assumed domestic health care cost trend rate on the total service and interest cost components as well as the postretirement benefit obligation would have been immaterial for each of the fiscal years ended June 30, 2016, 2015 and 2014.

Financial Information Related to Retirement Income and Retirement Health Care

Summarized information for the Company’s retirement income and retirement health care plans as of and for the fiscal years ended June 30 is as follows:

    Retirement
Income
  Retirement
Health Care
    2016   2015   2016   2015
Change in benefit obligations:                                
Projected benefit obligation as of beginning of year   $ 639     $ 641     $ 45     $ 49  
       Service cost     1       2       -       -  
       Interest cost     26       25       2       2  
       Actuarial loss (gain)     51       14       2       -  
       Plan amendments     (1 )     -       -       (1 )
       Translation and other adjustments     (1 )     (5 )     -       (2 )
       Benefits paid     (42 )     (38 )     (2 )     (3 )
       Projected benefit obligation as of end of year     673       639       47       45  
                                 
Change in plan assets:                                
       Fair value of assets as of beginning of year   $ 409     $ 432     $ -     $ -  
       Actual return on plan assets     26       6       -       -  
       Employer contributions     31       13       2       3  
       Benefits paid     (42 )     (38 )     (2 )     (3 )
       Translation and other adjustments     (1 )     (4 )     -       -  
Fair value of plan assets as of end of year     423       409       -       -  
Accrued benefit cost, net funded status   $      (250 )   $      (230 )   $      (47 )   $      (45 )
 
Amount recognized in the balance sheets consists of:                                
       Pension benefit assets   $ 1     $ 2     $ -     $ -  
       Current accrued benefit liability     (14 )     (16 )     (3 )     (3 )
       Non-current accrued benefit liability     (237 )     (216 )     (44 )     (42 )
       Accrued benefit cost, net   $ (250 )   $ (230 )   $ (47 )   $ (45 )

Retirement income plans with ABO in excess of plan assets as of June 30 were as follows:

    Pension Plans   Other
Retirement Plans
    2016   2015   2016   2015
Projected benefit obligation   $     575   $      538   $        76   $        80
Accumulated benefit obligation     574     538     76     80
Fair value of plan assets     399     385     -     -

The ABO for all pension plans was $596, $559 and $563 as of June 30, 2016, 2015 and 2014, respectively.

The net costs of the retirement income and health care plans for the fiscal years ended June 30 included the following components:

  Retirement Income   Retirement Health Care
  2016   2015   2014   2016   2015   2014
Service cost $ 1     $ 2     $ 3     $ -     $ -   $ 1  
Interest cost   26       25       27       2               2     2  
Expected return on plan assets           (17 )             (20 )           (25 )     -       -     -  
Amortization of unrecognized items        10       12       11               (3 )     2             (4 )
Total $ 20     $ 19     $ 16     $ (1 )   $ 4   $ (1 )

Items not yet recognized as a component of postretirement expense as of June 30, 2016, consisted of:

  Retirement
Income
  Retirement
Health Care
Net actuarial loss (gain) $ 296     $           (13 )
Prior service benefit   -       (6 )
Net deferred income tax (assets) liabilities             (111 )     7  
Accumulated other comprehensive loss (income) $ 185     $ (12 )

Net actuarial loss (gain) recorded in Accumulated other comprehensive net (losses) income for the fiscal year ended June 30, 2016, included the following:

    Retirement
Income
  Retirement
Health Care
Net actuarial loss (gain) as of beginning of year   $           264     $           (17 )
Amortization during the year     (10 )     2  
Loss (gain) during the year     42       2  
Net actuarial loss (gain) as of end of year   $ 296     $ (13 )

The Company uses the straight-line amortization method for unrecognized prior service costs and benefits. In fiscal year 2017, the Company expects to recognize, on a pre-tax basis, $11 of the net actuarial loss as a component of net periodic benefit cost for the Pension Plans. In addition, in fiscal year 2017, the Company expects to recognize, on a pre-tax basis, $1 of the net actuarial gain as a component of net periodic benefit cost for the retirement health care plans.

Weighted-average assumptions used to estimate the actuarial present value of benefit obligations as of June 30 were as follows:

    Retirement Income   Retirement Health Care
    2016   2015   2016   2015
Discount rate   3.42 %   4.20 %   3.42 %   4.16 %
Rate of compensation increase   2.92 %   3.37 %   n/a     n/a  

Weighted-average assumptions used to estimate the net periodic pension and other postretirement benefit costs as of June 30 were as follows:

    Retirement Income
    2016   2015   2014
Discount rate   4.20 %   4.05 %   4.39 %
Rate of compensation increase   3.37 %   4.46 %   3.44 %
Expected return on plan assets   4.34 %   5.28 %   6.61 %
 
    Retirement Health Care
    2016   2015   2014
Discount rate   4.16 %   4.00 %   4.33 %

The expected long-term rate of return assumption is based on an analysis of historical experience of the portfolio and the summation of prospective returns for each asset class in proportion to the fund’s current asset allocation.

Expected benefit payments for the Company’s pension and other postretirement plans as of June 30, 2016, were as follows:

  Retirement
Income
  Retirement
Health Care
2017 $ 39   $ 3
2018   52     3
2019   39     3
2020   39     2
2021   39     2
Fiscal years 2022 through 2026   193     12

Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.

The target allocations and weighted average asset allocations by asset category of the investment portfolio for the Company’s domestic retirement income plans as of June 30 were:

  % Target Allocation   % of Plan Assets
  2016   2015   2016   2015
U.S. equity 11 %   11 %   11 %   11 %
International equity 12     12     11     12  
Fixed income 74     74     74     74  
Other 3     3     4     3  
Total 100 %   100 %   100 %   100 %

The target asset allocation is determined based on the optimal balance between risk and return and, at times, may be adjusted to achieve the plan’s overall investment objective to generate sufficient resources to pay current and projected plan obligations over the life of the domestic qualified retirement income plan.

The following table sets forth by level within the fair value hierarchy, the retirement income plans’ assets carried at fair value as of June 30:

    2016
    Level 1   Level 2   Total
Cash equivalents   $ 2   $ -   $ 2
Common collective trusts            
       Bond funds     -     307     307
       International equity funds     -     56     56
       Domestic equity funds     -     44     44
       Real estate fund     -     14     14
Total common collective trusts     -     421     421
Total assets at fair value   $ 2   $ 421   $ 423
 
    2015
    Level 1   Level 2   Total
Cash equivalents   $ 3   $ -   $ 3
Common collective trusts                  
       Bond funds     -     295     295
       International equity funds     -     59     59
       Domestic equity funds     -     41     41
       Real estate fund     -     11     11
Total common collective trusts     -     406     406
Total assets at fair value   $ 3   $      406   $      409

The carrying value of cash equivalents approximates its fair value as of June 30, 2016 and 2015.

Common collective trust funds are not publicly traded and, therefore, are classified as Level 2. They are valued at a net asset value unit price determined by the portfolio’s sponsor based on the fair value of underlying assets held by the common collective trust fund on June 30, 2016 and 2015.

The common collective trusts are invested in various trusts that attempt to achieve their investment objectives by investing primarily in other collective investment funds which have characteristics consistent with each trust’s overall investment objective and strategy.

Defined Contribution Plans

The Company has defined contribution plans for most of its domestic employees. The plans include The Clorox Company 401(k) Plan, The Clorox Company 2011 Nonqualified Defined Contribution Plan and the Executive Retirement Plan. The aggregate cost of the domestic defined contribution plans was $45, $45 and $43 in fiscal years 2016, 2015 and 2014, respectively. Included in the aggregate cost was the cost of The Clorox Company 401(k) Plan of $41, $42 and $38 in fiscal years 2016, 2015 and 2014, respectively. The Company also has defined contribution plans for certain international employees. The aggregate cost of these foreign plans was $3 for the fiscal years ended June 30, 2016, 2015 and 2014.

SEGMENT REPORTING
SEGMENT REPORTING

NOTE 20. SEGMENT REPORTING

The Company operates through strategic business units that are aggregated into the following four reportable segments based on the economics and nature of the products sold:

Cleaning consists of laundry, home care and professional products marketed and sold in the United States. Products within this segment include laundry additives, including bleach products under the Clorox® brand and Clorox 2® stain fighter and color booster; home care products, primarily under the Clorox®, Formula 409®, Liquid-Plumr®, Pine-Sol®, S.O.S® and Tilex® brands; naturally derived products under the Green Works® brand; and professional cleaning and disinfecting products under the Clorox®, Dispatch®, Aplicare®, HealthLink® and Clorox Healthcare® brands.
Household consists of charcoal, cat litter, digestive health products and bags, wraps and container products marketed and sold in the United States. Products within this segment include charcoal products under the Kingsford® and Match Light® brands; cat litter products under the Fresh Step®, Scoop Away® and Ever Clean® brands; digestive health products under the Renew Life® brand; and bags, wraps and containers under the Glad® brand.
Lifestyle consists of food products, water-filtration systems and filters and natural personal care products marketed and sold in the United States. Products within this segment include dressings and sauces, primarily under the Hidden Valley®, KC Masterpiece® and Soy Vay® brands; water-filtration systems and filters under the Brita® brand; and natural personal care products under the Burt’s Bees® brand.
International consists of products sold outside the United States. Products within this segment include laundry, home care, water-filtration, digestive health products, charcoal and cat litter products, dressings and sauces, bags, wraps and containers and natural personal care products, primarily under the Clorox®, Glad®, PinoLuz®, Ayudin®, Limpido®, Clorinda®, Poett®, Mistolin®, Lestoil®, Bon Bril®, Brita®, Green Works®, Pine-Sol®, Agua Jane®, Chux®, Renew Life®, Kingsford®, Fresh Step®, Scoop Away®, Ever Clean®, KC Masterpiece®, Hidden Valley® and Burt’s Bees® brands.

Certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses are reflected in Corporate. Corporate assets include cash and cash equivalents, property and equipment, other investments and deferred taxes.

    Fiscal
Year
  Cleaning   Household   Lifestyle   International   Corporate   Total
Company
Net sales   2016   $     1,912   $     1,862   $     990   $     997   $           $     5,761
    2015     1,824     1,794     950     1,087     -       5,655
    2014     1,776     1,709     936     1,093     -       5,514
 
Earnings (losses) from continuing                                          
       operations before income taxes   2016     511     428     251     66     (273 )     983
    2015     445     375     257     79     (235 )     921
    2014     428     326     258     99     (227 )     884
 
Income from equity investees   2016     -     -     -     15     -       15
    2015     -     -     -     14     -       14
    2014     -     -     -     13     -       13
 
Total assets   2016     883     1,092     880     1,057     606       4,518
    2015     876     725     860     1,057     646       4,164
 
Capital expenditures   2016     44     83     18     24     3       172
    2015     35     50     11     25     4       125
    2014     37     53     11     31     5       137
 
Depreciation and amortization   2016     61     60     19     21     4       165
    2015     52     67     19     24     7       169
    2014     49     67     19     25     17       177
 
Significant noncash charges included                                          
       in earnings (losses) from continuing                                          
       operations before income taxes:                                          
              Share-based compensation   2016     10     8     5     1     21       45
    2015     8     7     4     1     12       32
    2014     11     9     5     1     10       36

All intersegment sales are eliminated and are not included in the Company’s reportable segments’ net sales.

Net sales to the Company’s largest customer, Walmart Stores, Inc. and its affiliates, were 27%, 26% and 27% of consolidated net sales for each of the fiscal years ended June 30, 2016, 2015 and 2014, respectively, and occurred in each of the Company’s reportable segments. No other customers accounted for more than 10% of consolidated net sales in any of these fiscal years. During fiscal years 2016, 2015 and 2014, the Company’s five largest customers accounted for 46%, 45%, and 45% of its consolidated net sales for each of the three fiscal years, respectively.

Three of the Company’s product lines have accounted for 10% or more of consolidated net sales during each of the past three fiscal years. In fiscal years 2016, 2015 and 2014, sales of liquid bleach represented approximately 13%, 14% and 13% of the Company’s consolidated net sales, respectively, approximately 25%, 26%, and 26% of net sales in the Cleaning segment for each such years, respectively, and approximately 27%, 27% and 28% of net sales in the International segment, respectively. Sales of trash bags represented approximately 13%, 14% and 13% of the Company’s consolidated net sales in each of the fiscal years 2016, 2015 and 2014, respectively, and approximately 37%, 38% and 36% of net sales in the Household segment, respectively, for each such years. Sales of charcoal represented approximately 11% of the Company’s consolidated net sales and approximately 34% of net sales in the Household segment in fiscal years 2016, 2015 and 2014.

Net sales and property, plant and equipment, net, by geographic area as of and for the fiscal years ended June 30 were as follows:

  Fiscal
Year
  United
States
  Foreign   Total
Company
Net sales 2016   $      4,805   $      956   $      5,761
  2015     4,609     1,046     5,655
  2014     4,466     1,048     5,514
Property, plant and equipment, net 2016   $ 799   $ 107   $ 906
  2015     801     117     918
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

NOTE 21. RELATED PARTY TRANSACTIONS

The Company holds various equity investments with ownership percentages of up to 50% in a number of consumer products businesses, most of which operate outside the United States. The equity investments, presented in Other assets accounted for under the equity method, were $59 as of the fiscal years ended June 30, 2016 and 2015. The Company has no ongoing capital commitments, loan requirements, guarantees or any other types of arrangements under the terms of its agreements that would require any future cash contributions or disbursements arising out of an equity investment.

Transactions with the Company’s equity investees typically represent payments for contract manufacturing and purchases of raw materials. Payments to related parties, including equity investees, for such transactions during the fiscal years ended June 30, 2016, 2015 and 2014 were $57, $55 and $57, respectively. Receipts from and ending accounts receivable and payable balances related to the Company’s related parties were not significant during or as of the end of each of the fiscal years presented.

UNAUDITED QUARTERLY DATA
UNAUDITED QUARTERLY DATA

NOTE 22. UNAUDITED QUARTERLY DATA

Dollars in millions, except market price and per share data   Quarters Ended
    September 30   December 31   March 31   June 30   Total Year
Fiscal year ended June 30, 2016                                    
Net sales   $           1,390     $          1,345     $      1,426   $      1,600   $      5,761  
Cost of products sold     765       745       780     873     3,163  
Earnings from continuing operations     173       151       159     165     648  
(Losses) earnings from discontinued operations,                                    
       net of tax     (1 )     (2 )     3     -     -  
Net earnings     172       149       162     165     648  
Per common share:                                    
       Basic                                    
              Continuing operations   $ 1.34     $ 1.16     $ 1.23   $ 1.28   $ 5.01  
              Discontinued operations     (0.01 )     (0.01 )     0.02     -     -  
              Basic net earnings per share   $ 1.33     $ 1.15     $ 1.25   $ 1.28   $ 5.01  
       Diluted                                    
              Continuing operations   $ 1.32     $ 1.14     $ 1.21   $ 1.26   $ 4.92  
              Discontinued operations     (0.01 )     (0.01 )     0.02     -     -  
              Diluted net earnings per share   $ 1.31     $ 1.13     $ 1.23   $ 1.26   $ 4.92  
Dividends declared per common share   $ 0.77     $ 0.77     $ 0.77   $ 0.80   $ 3.11  
Market price (NYSE)                                    
       High   $ 119.75     $ 131.78       132.19   $ 138.41   $ 138.41  
       Low     104.26       114.06       122.40     119.23     104.26  
       Year-end                                 138.39  
Fiscal year ended June 30, 2015                                    
Net sales   $ 1,352     $ 1,345     $ 1,401   $ 1,557   $ 5,655  
Cost of products sold     774       773       796     847     3,190  
Earnings from continuing operations     145       128       144     189     606  
Losses from discontinued operations,                                    
       net of tax     (55 )     (3 )     30     2     (26 )
Net earnings     90       125       174     191     580  
Per common share:                                    
       Basic                                    
              Continuing operations   $ 1.12     $ 0.98     $ 1.09   $ 1.46   $ 4.65  
              Discontinued operations     (0.42 )     (0.02 )     0.22     0.02     (0.20 )
              Basic net earnings per share   $ 0.70     $ 0.96     $ 1.31   $ 1.48   $ 4.45  
       Diluted                                    
              Continuing operations   $ 1.10     $ 0.97     $ 1.08   $ 1.44   $ 4.57  
              Discontinued operations     (0.42 )     (0.02 )     0.22     0.02     (0.20 )
              Diluted net earnings per share   $ 0.68     $ 0.95     $ 1.30   $ 1.46   $ 4.37  
Dividends declared per common share   $ 0.74     $ 0.74     $ 0.74   $ 0.77   $ 2.99  
 
Market price (NYSE)                                    
       High   $ 112.70     $ 112.65     $ 106.36   $ 98.31   $ 112.70  
       Low     103.77       102.95       95.19     86.03     86.03  
       Year-end                                 104.02  
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Dollars in millions)

Column A   Column B   Column C   Column D   Column E
            Additions   Deductions        
Description   Balance at
beginning
of period
  Charged to
costs and
expenses
  Credited to
costs and
expenses
  Credited
to other
accounts
  Balance at
end
of period
Allowance for doubtful accounts                                    
       Year ended June 30, 2016   $ (4 )   $ (1 )   $ -   $ -   $ (5 )
       Year ended June 30, 2015     (3 )     (1 )     -     -     (4 )
       Year ended June 30, 2014     (5 )     -       2     -     (3 )
LIFO allowance                                    
       Year ended June 30, 2016   $ (34 )   $ (1 )   $ -   $ 3   $ (32 )
       Year ended June 30, 2015     (36 )     -       -     2     (34 )
       Year ended June 30, 2014     (40 )     -       3     1     (36 )
Valuation allowance on deferred tax assets                                    
       Year ended June 30, 2016   $        (34 )   $        (5 )   $        -   $        2   $        (37 )
       Year ended June 30, 2015     (51 )     (4 )     -     21     (34 )
       Year ended June 30, 2014     (36 )     (25 )     -     10     (51 )
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

Nature of Operations and Basis of Presentation

The Company is principally engaged in the production, marketing and sales of consumer products through mass retail outlets and grocery, e-commerce channels, wholesale distributors and medical supply distributors. The consolidated financial statements include the statements of the Company and its wholly owned and controlled subsidiaries. All significant intercompany transactions and accounts were eliminated in consolidation. Certain prior year reclassifications were made in the consolidated financial statements and related notes to the consolidated financial statements to conform to the current year presentation.

Effective September 22, 2014, the Company’s Venezuela affiliate, Corporación Clorox de Venezuela S.A. (Clorox Venezuela), discontinued its operations. Consequently, the Company presents the financial results of Clorox Venezuela as a discontinued operation in the consolidated financial statements for all periods presented herein.

Use of Estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) requires management to reach opinions as to estimates and assumptions that affect reported amounts and related disclosures. Specific areas requiring management’s opinion on estimates and judgments include assumptions pertaining to accruals for consumer and trade-promotion programs, stock-based compensation costs, pension and post-employment benefit costs, future cash flows associated with impairment testing of goodwill and other long-lived assets, the credit worthiness of customers, uncertain tax positions, tax valuation allowances and legal, environmental and insurance matters. Actual results could materially differ from estimates and assumptions made.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments, time deposits and money market funds with an initial maturity at purchase of three months or less. The fair value of cash and cash equivalents approximates the carrying amount.

The Company’s cash position includes amounts held by foreign subsidiaries and, as a result, the repatriation of certain cash balances from some of the Company’s foreign subsidiaries could result in additional tax costs in the United States and in certain foreign jurisdictions. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company’s cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries’ books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in Other (income) expense, net. The Company’s cash holdings were as follows as of June 30:

  2016   2015
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent $     249   $      221
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   133     142
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   19     19
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries   -     -
Total $ 401   $ 382

As of June 30, 2016 and 2015, the Company had $4 and $3 of restricted cash, respectively, which is primarily related to fiscal year 2012 acquisitions. Restricted cash was included in Other assets as of June 30, 2016 and in Other current assets as of June 30, 2015.

Inventories

Inventories are stated at the lower of cost or market. When necessary, the Company provides allowances to adjust the carrying value of its inventory to the lower of cost or market, including any costs to sell or dispose. Appropriate consideration is given to obsolescence, excessive inventory levels, product deterioration and other factors in evaluating net realizable value for the purposes of determining the lower of cost or market.

Property, Plant and Equipment and Finite-Lived Intangible Assets

Property, plant and equipment and finite-lived intangible assets are stated at cost. Depreciation and amortization expense are calculated by the straight-line method using the estimated useful lives or lives determined by lease contracts for the related assets. The table below provides estimated useful lives of property, plant and equipment by asset classification.

  Estimated
Useful Lives
Buildings and leasehold improvements 10 - 40 years
Land improvements 10 - 30 years
Machinery and equipment 3 - 15 years
Computer equipment 3 - 5 years
Capitalized software costs 3 - 7 years

Property, plant and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be fully recoverable. The risk of impairment is initially assessed based on an estimate of the undiscounted cash flows at the lowest level for which identifiable cash flows exist. Impairment occurs when the carrying value of the asset exceeds the estimated future undiscounted cash flows generated by the asset. When impairment is indicated, an impairment charge is recorded for the difference between the carrying value of the asset and its estimated fair market value. Depending on the asset, estimated fair market value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition.

Capitalization of Software Costs

The Company capitalizes certain qualifying costs incurred in the acquisition and development of software for internal use, including the costs of the software, materials, consultants, interest and payroll and payroll-related costs for employees during the application development stage. Internal and external costs incurred during the preliminary project stage and post implementation-operation stage, mainly training and maintenance costs, are expensed as incurred. Once the application is substantially complete and ready for its intended use, qualifying costs are amortized on a straight-line basis over the software’s estimated useful life.

Impairment Review of Goodwill and Indefinite-Lived Intangible Assets

The Company tests its goodwill, trademarks with indefinite lives and other indefinite-lived intangible assets annually for impairment in the fiscal fourth quarter unless there are indications during a different interim period that these assets may have become impaired.

With respect to goodwill, the Company has the option to first assess qualitative factors such as maturity and stability of the reporting unit, magnitude of excess fair value over carrying value from the prior year’s impairment testing, other reporting unit specific operating results as well as new events and circumstances impacting the operations at the reporting unit level. If the result of a qualitative test indicates a potential for impairment of a reporting unit, a quantitative test is performed. The quantitative test is a two-step process. In the first step, the Company compares the estimated fair value of the reporting unit to its carrying value. In all instances, the estimated fair value exceeded the carrying value of the reporting unit. Had the estimated fair value of any reporting unit been less than its carrying value, the Company would have performed a second step to determine the implied fair value of the reporting unit’s goodwill. If the carrying amount of a reporting unit’s goodwill had exceeded its implied fair value, an impairment charge would have been recorded for the difference between the carrying amount and the implied fair value of the reporting unit’s goodwill.

To determine the fair value of a reporting unit as part of its quantitative test, the Company uses a discounted cash flow (DCF) approach, as it believes that this approach is the most reliable indicator of the fair value of its businesses and the fair value of their future earnings and cash flows. Under this approach, the Company estimates the future cash flows of each reporting unit and discounts these cash flows at a rate of return that reflects their relative risk. The cash flows used in the DCF are consistent with those the Company uses in its internal planning, which gives consideration to actual business trends experienced, and the broader business strategy for the long term. The other key estimates and factors used in the DCF include, but are not limited to, future sales volumes, revenue and expense growth rates, changes in working capital, foreign exchange rates, currency devaluation, inflation and a perpetuity growth rate. Changes in such estimates or the application of alternative assumptions could produce different results.

For trademarks and other intangible assets with indefinite lives, the Company performs a quantitative analysis to test for impairment. When a quantitative test is performed, the estimated fair value of an asset is compared to its carrying amount. If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value. The Company uses the income approach to estimate the fair value of its trademarks and other intangible assets with indefinite lives. This approach requires significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and foreign exchange rates applied to those cash flows to determine fair value. Changes in such estimates or the use of alternative assumptions could produce different results.

Stock-based Compensation

The Company grants various nonqualified stock-based compensation awards to eligible employees, including stock options and performance units.

For stock options, the Company estimates the fair value of each award on the date of grant using the Black-Scholes valuation model, which requires management to make estimates regarding expected option life, stock price volatility and other assumptions. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The Company estimates stock option forfeitures based on historical data for each employee grouping. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative catch-up adjustment in the period of change. Compensation expense is recorded by amortizing the grant date fair values on a straight-line basis over the vesting period, adjusted for estimated forfeitures.

The Company’s performance unit grants provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The number of shares issued are dependent upon vesting and the achievement of specified performance targets. The performance period is three years and the payout determination is made at the end of the three-year performance period. Performance unit grants receive dividends earned during the vesting period upon vesting. The fair value of each grant issued is estimated on the date of grant based on the current market price of the stock. The total amount of compensation expense recognized reflects estimated forfeiture rates and the initial assumption that performance goals will be achieved. Compensation expense is adjusted based on management’s assessment of the probability that performance goals will be achieved. If such goals are not met or it is determined that achievement of performance goals is not probable, previously recognized compensation expense is trued up in the current period to reflect the expected payout level. If it is determined that the performance goals will be exceeded, additional compensation expense is recognized, subject to a cap of 150%.

Cash flows resulting from tax deductions in excess of the cumulative compensation cost recognized for stock-based payment arrangements (excess tax benefits) are primarily classified as financing cash inflows.

Employee Benefits

The Company accounts for its defined benefit retirement income and retirement health care plans using actuarial methods. These methods use an attribution approach that generally spreads “plan events” over the service lives or expected lifetime (for frozen plans) of plan participants. Examples of plan events are plan amendments and changes in actuarial assumptions such as the expected return on plan assets, discount rate, rate of compensation increase and certain employee-related factors, such as retirement age and mortality. The principle underlying the attribution approach is that employees render service over their employment period on a relatively “smooth” basis and, therefore, the statement of earnings effects of retirement income and retirement health care plans are recognized in the same pattern. One of the principal assumptions used in the net periodic benefit cost calculation is the expected return on plan assets. The required use of an expected return on plan assets may result in recognized pension expense or income 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, the expectation is that the pattern of income and expense recognition should closely match the pattern of the services provided by the participants. The Company uses a market-related value method for calculating plan assets for purposes of determining the amortization of actuarial gains and losses. The differences between actual and expected returns are recognized in the net periodic benefit cost calculation over the average remaining service period or expected lifetime (for frozen plans) of the plan participants using the corridor approach. Under this approach, only actuarial gains (losses) that exceed 5% of the greater of the projected benefit obligation or the market-related value of assets are amortized to pension expense by the Company. 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 Company recognizes an actuarial-based obligation at the onset of disability for certain benefits provided to individuals after employment, but before retirement, that include medical, dental, vision, life and other benefits.

Environmental Costs

The Company is involved in certain environmental remediation and ongoing compliance activities. Accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has been incurred and based upon a reasonable estimate of the liability. The Company’s accruals reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information become available. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given the inherent uncertainties in evaluating environmental exposures. The accrual for environmental matters is included in Accounts payable and accrued liabilities and Other liabilities in the Company’s consolidated balance sheets on an undiscounted basis due to uncertainty regarding the timing of future payments.

Revenue Recognition

Sales are recognized as revenue when the risk of loss and title pass to the customer and when all of the following have occurred: a firm sales arrangement exists, pricing is fixed or determinable and collection is reasonably assured. Sales are recorded net of allowances for trade promotions, coupons, returns and other discounts. The Company routinely commits to one-time or ongoing trade-promotion programs with customers and consumer coupon programs that require the Company to estimate and accrue the expected costs of such programs. Programs include shelf price reductions, end-of-aisle or in-store displays of the Company’s products and 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 related to these programs for the estimated expenses incurred, but not paid, at the end of each period. Trade-promotion and coupon redemption costs are recorded as a reduction of sales.

The Company provides an allowance for doubtful accounts based on its historical experience and ongoing assessment of its customers’ credit risk. Receivables were presented net of an allowance for doubtful accounts of $5 and $4 as of June 30, 2016 and 2015, respectively. Receivables, net, included non-customer receivables of $9 and $12 as of June 30, 2016 and 2015, respectively.

Cost of Products Sold

Cost of products sold represents the costs directly related to the manufacture and distribution of the Company’s products and primarily includes raw materials, packaging, contract manufacturing fees, shipping and handling, warehousing, package design, depreciation, amortization, direct and indirect labor and operating costs for the Company’s manufacturing and distribution facilities including salary, benefit costs and incentive compensation, and royalties and other charges related to the Company’s Glad® Venture Agreement (see Note 10).

Costs associated with developing and designing new packaging are expensed as incurred and include design, artwork, films and labeling. Expenses for fiscal years ended June 30, 2016, 2015 and 2014 were $11, $11 and $12, respectively, all of which were reflected in Cost of products sold or discontinued operations, as appropriate, in the consolidated statements of earnings.

Selling and Administrative Expenses

Selling and administrative expenses represent costs incurred by the Company in generating revenues and managing the business and include market research, commissions and certain administrative expenses. Administrative expenses include salary, benefits, incentive compensation, professional fees and services, software and licensing fees and other operating costs associated with the Company’s non-manufacturing, non-research and development staff, facilities and equipment.

Advertising and Research and Development Costs

The Company expenses advertising and research and development costs in the period incurred.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. Management reviews the Company’s deferred tax assets to determine whether their value can be realized based upon available evidence. A valuation allowance is established when management believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet certain recognition thresholds or measurement standards. Amounts for uncertain tax positions are adjusted in quarters when new information becomes available or when positions are effectively settled.

U.S. income tax expense and foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. Where foreign earnings are indefinitely reinvested, no provision for U.S. income or foreign withholding taxes is made. When circumstances change and the Company determines that some or all of the undistributed earnings will be remitted in the foreseeable future, the Company accrues an expense in the current period for U.S. income taxes and foreign withholding taxes attributable to the anticipated remittance.

Foreign Currency Transactions and Translation

Local currencies are the functional currencies for substantially all of the Company’s foreign operations. When the transactional currency is different than the functional currency, transaction gains and losses are included as a component of Other (income) expense, net. In addition, certain assets and liabilities denominated in currencies different than a foreign subsidiary’s functional currency are reported on the subsidiary’s books in its functional currency, with the impact from exchange rate differences recorded in Other (income) expense, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, while income and expenses are translated at the average monthly exchange rates during the year.

Gains and losses on foreign currency translations are reported as a component of Other comprehensive income (loss). Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested. The income tax effect of currency translation adjustments related to foreign subsidiaries and joint ventures for which earnings are not considered indefinitely reinvested is recorded as a component of deferred taxes with an offset to Other comprehensive income (loss).

Derivative Instruments

The Company’s use of derivative instruments, principally swaps, futures and forward contracts, is limited to non-trading purposes and is designed to partially manage exposure to changes in commodity prices, interest rates and foreign currencies. The Company’s contracts are hedges for transactions with notional amounts and periods consistent with the related exposures and do not constitute investments independent of these exposures.

The changes in the fair value (i.e., gains or losses) of a derivative instrument are recorded as either assets or liabilities in the consolidated balance sheets with an offset to net earnings or Other comprehensive income (loss) depending on whether, for accounting purposes, it has been designated and qualifies as an accounting hedge and, if so, on the type of hedging relationship. The criteria used to determine if hedge accounting treatment is appropriate are: (a) formal designation and documentation of the hedging relationship, the risk management objective and hedging strategy at hedge inception; (b) eligibility of hedged items, transactions and corresponding hedging instrument; and (c) effectiveness of the hedging relationship both at inception of the hedge and on an ongoing basis in achieving the hedging objectives. For those derivative instruments designated and qualifying as hedging instruments, the Company must designate the hedging instrument either as a fair value hedge or as a cash flow hedge. The Company designates its commodity forward and future contracts for forecasted purchases of raw materials, interest rate forward contracts for forecasted interest payments, and foreign currency forward contracts for forecasted purchases of inventory as cash flow hedges. During the fiscal years ended June 30, 2016, 2015 and 2014, the Company had no hedging instruments designated as fair value hedges.

For derivative instruments designated and qualifying as cash flow hedges, the effective portion of gains or losses is reported as a component of Other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. From time to time, the Company may have contracts not designated as hedges for accounting purposes, for which it recognizes changes in the fair value in the consolidated statement of earnings in the current period. Cash flows from hedging activities are classified as operating activities in the consolidated statements of cash flows.

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions, including requiring excess tax benefits and deficiencies to be recognized as income tax benefit or expense in the consolidated statement of earnings and excess tax benefits and deficiencies to be classified as an operating activity in the consolidated statement of cash flows. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2018, with early adoption permitted. The Company is planning to adopt the standard in the first quarter of fiscal year 2017. While the actual benefit realized may vary significantly given the inherent uncertainty in predicting future share-based transactions, the Company currently estimates that the adoption will result in approximately a 4 percentage point benefit to the Company’s historical effective tax rate of 34% to 35% for fiscal year 2017.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation will depend on classification as a finance or operating lease. ASU 2016-02 also requires expanded disclosures about leasing arrangements. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which requires all deferred tax liabilities and assets to be classified as noncurrent. The Company adopted the standard in the fourth quarter of fiscal year 2016 on a prospective basis as permitted. Prior period balances have not been retrospectively adjusted.

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Cost,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2017, with early adoption permitted. The Company does not expect the adoption of this guidance will have a significant impact on its consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02,Amendments to the Consolidation Analysis,” which changes the guidance for evaluating whether to consolidate certain legal entities. The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2017, with early adoption permitted. The Company does not expect the adoption of this guidance will have a significant impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces most existing U.S. GAAP revenue recognition guidance and is intended to improve and converge with international standards the financial reporting requirements for revenue from contracts with customers. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers, including information about significant judgments and changes in judgments. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with the option to early adopt in the first quarter of fiscal year 2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

The Company’s cash holdings were as follows as of June 30:

  2016   2015
U.S. dollar balances held by U.S. dollar functional currency subsidiaries and at parent $     249   $      221
Non-U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   133     142
U.S. dollar balances held by non-U.S. dollar functional currency subsidiaries   19     19
Non-U.S. dollar balances held by U.S. dollar functional currency subsidiaries   -     -
Total $ 401   $ 382

The table below provides estimated useful lives of property, plant and equipment by asset classification.

  Estimated
Useful Lives
Buildings and leasehold improvements 10 - 40 years
Land improvements 10 - 30 years
Machinery and equipment 3 - 15 years
Computer equipment 3 - 5 years
Capitalized software costs 3 - 7 years
DISCONTINUED OPERATIONS (Tables)

The following table provides a summary of gains (losses) from discontinued operations for Clorox Venezuela and gains (losses) from discontinued operations other than Clorox Venezuela for the years ended June 30:

    2016   2015   2014
Operating losses from Clorox Venezuela before income taxes   $ -     $ (6 )   $ (23 )
Exit costs and other related expenses for Clorox Venezuela     (2 )     (78 )     -  
Total losses from Clorox Venezuela before income taxes     (2 )     (84 )     (23 )
Income tax benefit attributable to Clorox Venezuela     2       29       6  
Total losses from Clorox Venezuela, net of tax