CLOROX CO /DE/, 10-Q filed on 2/4/2020
Quarterly Report
v3.19.3.a.u2
Cover Page - shares
6 Months Ended
Dec. 31, 2019
Jan. 21, 2020
Cover page.    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Dec. 31, 2019  
Document Transition Report false  
Entity File Number 1-07151  
Entity Registrant Name THE CLOROX COMPANY  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 31-0595760  
Entity Address, Address Line One 1221 Broadway  
Entity Address, City or Town Oakland  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94612-1888  
City Area Code 510  
Local Phone Number 271-7000  
Title of 12(b) Security Common Stock-$1.00 par value  
Trading Symbol CLX  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   125,099,598
Entity Central Index Key 0000021076  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
v3.19.3.a.u2
Condensed Consolidated Statements of Earnings and Comprehensive Income (Unaudited) - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 6 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]        
Net sales $ 1,449 $ 1,473 $ 2,955 $ 3,036
Cost of products sold 810 830 1,653 1,715
Gross profit 639 643 1,302 1,321
Selling and administrative expenses 210 211 421 423
Advertising costs 140 145 277 284
Research and development costs 34 32 64 64
Interest expense 25 24 50 48
Other (income) expense, net (5) 7 (3) 10
Earnings before income taxes 235 224 493 492
Income taxes 50 42 105 100
Net earnings $ 185 $ 182 $ 388 $ 392
Net earnings per share        
Basic net earnings per share (in dollars per share) $ 1.48 $ 1.42 $ 3.09 $ 3.07
Diluted net earnings per share (in dollars per share) $ 1.46 $ 1.40 $ 3.05 $ 3.02
Weighted average shares outstanding (in thousands)        
Basic (in shares) 125,440 128,068 125,632 127,955
Diluted (in shares) 126,879 130,094 127,198 130,107
Comprehensive income $ 199 $ 152 $ 389 $ 362
v3.19.3.a.u2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Dec. 31, 2019
Jun. 30, 2019
Current assets    
Cash and cash equivalents $ 168 $ 111
Receivables, net 544 631
Inventories, net 514 512
Prepaid expenses and other current assets 77 51
Total current assets 1,303 1,305
Property, plant and equipment, net of accumulated depreciation and amortization of $2,185 and $2,150, respectively 1,052 1,034
Operating lease right-of-use assets 303  
Goodwill 1,588 1,591
Trademarks, net 790 791
Other intangible assets, net 115 121
Other assets 308 274
Total assets 5,459 5,116
Current liabilities    
Notes and loans payable 507 396
Current operating lease liabilities 61  
Accounts payable and accrued liabilities 945 1,035
Income taxes payable 0 9
Total current liabilities 1,513 1,440
Long-term debt 2,288 2,287
Long-term operating lease liabilities 282  
Other liabilities 745 780
Deferred income taxes 76 50
Total liabilities 4,904 4,557
Commitments and contingencies
Stockholders’ equity    
Preferred stock: $1.00 par value; 5,000,000 shares authorized; none issued or outstanding 0 0
Common stock: $1.00 par value; 750,000,000 shares authorized; 158,741,461 shares issued as of December 31, 2019 and June 30, 2019; and 125,024,628 and 125,686,325 shares outstanding as of December 31, 2019 and June 30, 2019, respectively 159 159
Additional paid-in capital 1,062 1,046
Retained earnings 3,292 3,150
Treasury shares, at cost: 33,716,833 and 33,055,136 shares as of December 31, 2019 and June 30, 2019, respectively (3,357) (3,194)
Accumulated other comprehensive net (loss) income (601) (602)
Stockholders’ equity 555 559
Total liabilities and stockholders’ equity $ 5,459 $ 5,116
v3.19.3.a.u2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2019
Jun. 30, 2019
Statement of Financial Position [Abstract]    
Property, plant and equipment, accumulated depreciation and amortization $ 2,185 $ 2,150
Preferred stock, par value (in dollars per share) $ 1.00 $ 1.00
Preferred stock, shares authorized (in shares) 5,000,000 5,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 1.00 $ 1.00
Common stock, shares authorized (in shares) 750,000,000 750,000,000
Common stock, shares issued (in shares) 158,741,461 158,741,461
Common stock, shares outstanding (in shares) 125,024,628 125,686,325
Treasury stock, shares (in shares) 33,716,833 33,055,136
v3.19.3.a.u2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
6 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Operating activities:    
Net earnings $ 388 $ 392
Adjustments to reconcile net earnings to net cash provided by operations:    
Depreciation and amortization 88 88
Stock-based compensation 19 18
Deferred income taxes 12 2
Other 21 25
Changes in:    
Receivables, net 86 68
Inventories, net (3) (74)
Prepaid expenses and other current assets (9) (15)
Accounts payable and accrued liabilities (80) (43)
Operating lease right-of-use assets and liabilities, net 7  
Income taxes payable (31) (12)
Net cash provided by operations 498 449
Investing activities:    
Capital expenditures (111) (86)
Other 13 9
Net cash used for investing activities (98) (77)
Financing activities:    
Notes and loans payable, net 106 33
Treasury stock purchased (195) (243)
Cash dividends paid (266) (245)
Issuance of common stock for employee stock plans and other 17 117
Net cash used for financing activities (338) (338)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (1) (3)
Net increase (decrease) in cash, cash equivalents, and restricted cash 61 31
Cash, cash equivalents, and restricted cash:    
Beginning of period 113 134
End of period $ 174 $ 165
v3.19.3.a.u2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three and six months ended December 31, 2019 and 2018, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated results of operations, financial position and cash flows of The Clorox Company and its subsidiaries (the Company) for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 30, 2019, which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

Leases

Effective July 1, 2019, the Company adopted Accounting Standards Codification 842, Leases (ASC 842). Under this guidance, the Company determines whether an arrangement contains a lease at inception by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration and other facts and circumstances. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are calculated based on the lease liability adjusted for any lease payments paid to the lessor at or before the commencement date and initial direct costs incurred by the Company and excludes any lease incentives received from the lessor. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option as of the commencement date of the lease, and is reviewed in subsequent periods if a triggering event occurs. As the Company’s leases typically do not contain a readily determinable implicit rate, the Company determines the present value of the lease liability using its incremental borrowing rate at the lease commencement date based on the lease term and the currency of the lease on a collateralized basis. Variable lease payments are the portion of lease payments that are not fixed over the lease term. Variable lease payments are expensed as incurred, and include certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease, as applicable. The Company elected to combine lease and non-lease components as a single lease component and to exclude short-term leases, defined as leases with initial terms of 12 months or less, from its condensed consolidated balance sheet.


Recently Issued Accounting Standards

Recently Issued Accounting Standards Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.  The standard will be effective for the Company beginning in the first quarter of fiscal year 2022, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2021, with early adoption permitted. The Company intends to adopt the standard no later than July 1, 2020. The impact of the new standard will be dependent on the specific facts and circumstances of future individual impairments, if any.

Recently Adopted Accounting Standards

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amends the hedge accounting recognition and presentation requirements to better align an entity’s risk management activities with its financial reporting. This standard also simplifies the application of hedge accounting in certain situations. The Company adopted this new guidance in the first quarter of fiscal year 2020 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a ROU asset and a lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation will depend on the classification of a lease as either a finance or an operating lease. ASU 2016-02 also requires expanded disclosures about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842), Targeted Improvements,” which provides an optional transition method in applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented, or, as permitted by ASU 2018-11, at the beginning of the period in which it is adopted. The Company adopted the new standard in the first quarter of fiscal year 2020, on a modified retrospective basis using the optional transition method, and, accordingly, has not restated comparative periods; fiscal year 2019 balances and related disclosures supporting those comparative period balances continue to be presented under ASC 840, “Leases.” As allowed under the new standard, the Company elected to apply the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. Upon adoption, the Company recorded a cumulative effect adjustment to the opening balance of Retained earnings of $22 related primarily to the remaining deferred gain from the sale-leaseback of the Company’s general office building in Oakland, California. This new standard did not have a material impact on the Company’s condensed consolidated statement of earnings or the condensed consolidated statement of cash flows. Refer to Note 3 for more information.
v3.19.3.a.u2
INVENTORIES, NET
6 Months Ended
Dec. 31, 2019
Inventory Disclosure [Abstract]  
INVENTORIES, NET INVENTORIES, NET
Inventories, net, consisted of the following as of:
 
12/31/2019
 
6/30/2019
Finished goods
$
415

 
$
411

Raw materials and packaging
127

 
125

Work in process
7

 
6

LIFO allowances
(35
)
 
(30
)
Total
$
514

 
$
512


v3.19.3.a.u2
LEASES AND OTHER COMMITMENTS LEASES AND OTHER COMMITMENTS
6 Months Ended
Dec. 31, 2019
Leases [Abstract]  
LEASES AND OTHER COMMITMENTS LEASES AND OTHER COMMITMENTS

The Company leases various property, plant and equipment, including office, warehousing, manufacturing and research and development facilities and equipment. These leases have remaining lease terms of up to 11 years, inclusive of renewal or termination options that the Company is reasonably certain to exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to the Company’s leases was as follows:
 
Balance sheet classification
12/31/2019
Operating leases
 
 
Right-of-use assets
Operating lease right-of-use assets
$
303

Current lease liabilities
Current operating lease liabilities
61

Non-current lease liabilities
Long-term operating lease liabilities
282

Total operating lease liabilities
 
$
343

 
 
 
Finance leases
 
 
Right-of-use assets
Other assets
$
14

Current lease liabilities
Accounts payable and accrued liabilities
2

Non-current lease liabilities
Other liabilities
12

Total finance lease liabilities
 
$
14



Components of lease cost were as follows:
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2019
Operating lease cost
$
19

 
37

Finance lease cost:
 
 
 
Amortization of right-of-use assets
1

 
2

Interest on lease liabilities

 

Total finance lease cost
$
1

 
2

Variable lease cost
$
10

 
20

Short term lease cost
1

 
1


Supplemental cash flow information and non-cash activity related to the Company’s leases were as follows:
 
Six Months Ended
 
12/31/2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases, net
$
29

Operating cash flows from finance leases

Financing cash flows from finance leases
1

Right-of-use assets obtained in exchange for lease obligations:
 
Operating leases
$
16

Finance leases
7



Weighted-average remaining lease term and discount rate for the Company’s leases were as follows:
 
12/31/2019
Weighted-average remaining lease term:
 
Operating leases
8 years

Finance leases
8 years

Weighted-average discount rate:
 
Operating leases
2.6
%
Finance leases
3.3
%


Maturities of lease liabilities by fiscal year for the Company’s leases as of December 31, 2019 were as follows:
Year
Operating leases
 
Finance leases
2020
$
22

 
$
1

2021
67

 
2

2022
52

 
2

2023
45

 
2

2024
40

 
2

Thereafter
156

 
7

Total lease payments
$
382

 
$
16

Less: Imputed interest
(39
)
 
(2
)
Total lease liabilities
$
343

 
$
14



The future minimum annual lease payments required under the Company’s existing non-cancelable operating and capital lease agreements as of June 30, 2019 prior to the adoption of ASC 842 were as follows:
Year
Operating leases
 
Capital leases
2020
$
71

 
$
2

2021
65

 
2

2022
50

 
1

2023
42

 
1

2024
37

 
1

Thereafter
124

 
2

Total lease payments
$
389

 
$
9


LEASES AND OTHER COMMITMENTS LEASES AND OTHER COMMITMENTS

The Company leases various property, plant and equipment, including office, warehousing, manufacturing and research and development facilities and equipment. These leases have remaining lease terms of up to 11 years, inclusive of renewal or termination options that the Company is reasonably certain to exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to the Company’s leases was as follows:
 
Balance sheet classification
12/31/2019
Operating leases
 
 
Right-of-use assets
Operating lease right-of-use assets
$
303

Current lease liabilities
Current operating lease liabilities
61

Non-current lease liabilities
Long-term operating lease liabilities
282

Total operating lease liabilities
 
$
343

 
 
 
Finance leases
 
 
Right-of-use assets
Other assets
$
14

Current lease liabilities
Accounts payable and accrued liabilities
2

Non-current lease liabilities
Other liabilities
12

Total finance lease liabilities
 
$
14



Components of lease cost were as follows:
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2019
Operating lease cost
$
19

 
37

Finance lease cost:
 
 
 
Amortization of right-of-use assets
1

 
2

Interest on lease liabilities

 

Total finance lease cost
$
1

 
2

Variable lease cost
$
10

 
20

Short term lease cost
1

 
1


Supplemental cash flow information and non-cash activity related to the Company’s leases were as follows:
 
Six Months Ended
 
12/31/2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases, net
$
29

Operating cash flows from finance leases

Financing cash flows from finance leases
1

Right-of-use assets obtained in exchange for lease obligations:
 
Operating leases
$
16

Finance leases
7



Weighted-average remaining lease term and discount rate for the Company’s leases were as follows:
 
12/31/2019
Weighted-average remaining lease term:
 
Operating leases
8 years

Finance leases
8 years

Weighted-average discount rate:
 
Operating leases
2.6
%
Finance leases
3.3
%


Maturities of lease liabilities by fiscal year for the Company’s leases as of December 31, 2019 were as follows:
Year
Operating leases
 
Finance leases
2020
$
22

 
$
1

2021
67

 
2

2022
52

 
2

2023
45

 
2

2024
40

 
2

Thereafter
156

 
7

Total lease payments
$
382

 
$
16

Less: Imputed interest
(39
)
 
(2
)
Total lease liabilities
$
343

 
$
14



The future minimum annual lease payments required under the Company’s existing non-cancelable operating and capital lease agreements as of June 30, 2019 prior to the adoption of ASC 842 were as follows:
Year
Operating leases
 
Capital leases
2020
$
71

 
$
2

2021
65

 
2

2022
50

 
1

2023
42

 
1

2024
37

 
1

Thereafter
124

 
2

Total lease payments
$
389

 
$
9


v3.19.3.a.u2
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
6 Months Ended
Dec. 31, 2019
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS [Abstract]  
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial Risk Management and Derivative Instruments

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

Commodity Price Risk Management

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

As of December 31, 2019, the notional amount of commodity derivatives was $24, of which $13 related to soybean oil futures used for the Food products business and $11 related to jet fuel swaps used for the Grilling business. As of June 30, 2019, the notional amount of commodity derivatives was $24, of which $13 related to soybean oil futures and $11 related to jet fuel swaps.

Foreign Currency Risk Management

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

The notional amounts of outstanding foreign currency forward contracts used by the Company’s subsidiaries to hedge forecasted purchases of inventory were $49 and $61, respectively, as of December 31, 2019 and June 30, 2019.

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. These interest rate forward contracts generally have durations of less than 12 months. The interest rate contracts are measured at fair value using information quoted by U.S. government bond dealers.

As of December 31, 2019 and June 30, 2019, the Company had no outstanding interest rate forward contracts.
Commodity, Foreign Exchange and Interest Rate Derivatives

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

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

 
Gains (losses) recognized in Other comprehensive income
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
Commodity purchase derivative contracts
$
3

 
$
(10
)
 
$
3

 
$
(6
)
Foreign exchange derivative contracts
(1
)
 
1

 

 
1

Interest rate derivative contracts

 

 

 

Total
$
2

 
$
(9
)
 
$
3

 
$
(5
)


 
Location of Gains (losses) reclassified from Accumulated other comprehensive net (loss) income into Net earnings
Gains (losses) reclassified from Accumulated other comprehensive net (loss) income and recognized in Net earnings
 
 
Three Months Ended
 
Six Months Ended
 
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
Commodity purchase derivative contracts
Cost of products sold
$
(1
)
 
$
(4
)
 
$
(1
)
 
$

Foreign exchange derivative contracts
Cost of products sold

 

 

 
1

Interest rate derivative contracts
Interest expense
(1
)
 
(1
)
 
(3
)
 
(3
)
Total
 
$
(2
)
 
$
(5
)
 
$
(4
)
 
$
(2
)


The estimated amount of the existing net gain (loss) in Accumulated other comprehensive net (loss) income as of December 31, 2019, that is expected to be reclassified into Net earnings within the next twelve months is $(4).

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 instrument exceeds contractually defined counterparty liability position limits. Of the over-the-counter derivative instruments in liability positions held as of both December 31, 2019 and June 30, 2019, $0 and $1 respectively, contained such terms. As of December 31, 2019 and June 30, 2019, 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 of the Company and its counterparties, as assigned by Standard & Poor’s and Moody’s, 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 December 31, 2019 and June 30, 2019, the Company and each of its counterparties had been assigned investment grade credit 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 December 31, 2019, the Company maintained a negative cash margin balance related to exchange-traded futures contracts of $1, which is classified as Accounts payable and accrued liabilities in the condensed consolidated balance sheet. As of June 30, 2019, the Company maintained a cash margin balance related to exchange-traded futures contracts of $1, which is classified as Prepaid expenses and other current assets in the consolidated balance sheet.

Trust Assets

The Company has held interests in mutual funds and cash equivalents as part of the trust assets related to its nonqualified deferred compensation plans. The participants in the nonqualified deferred compensation plans, who are the Company’s current and former employees, may select among certain mutual funds in which to invest their compensation deferrals in accordance with the terms of the plans 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 condensed 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.

Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis in the condensed 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 December 31, 2019 and June 30, 2019, the Company’s financial assets and liabilities that were measured at fair value on a recurring basis included derivative financial instruments, which were classified as either Level 1 or Level 2, and trust assets to fund the Company’s nonqualified deferred compensation plans, which were classified as Level 1.
All of the Company’s derivative instruments qualify for hedge accounting. The following table provides information about the balance sheet classification and the fair values of the Company’s derivative instruments:
 
 
 
 
 
12/31/2019
 
6/30/2019
 
Balance sheet
classification
 
Fair value
hierarchy
level
 
Carrying
Amount
 
Estimated
Fair
Value
 
Carrying
Amount
 
Estimated
Fair
Value
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity purchase futures contracts
Prepaid expenses and other current assets
 
1
 
$
2

 
$
2

 
$

 
$

 
 
 
 
 
$
2

 
$
2

 
$

 
$

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Commodity purchase futures contracts
Accounts payable and accrued liabilities
 
1
 
$

 
$

 
$
1

 
$
1

Commodity purchase swaps contracts
Accounts payable and accrued liabilities
 
2
 
1

 
1

 
1

 
1

 
 
 
 
 
$
1

 
$
1

 
$
2

 
$
2


The following table provides information about the balance sheet classification and the fair values of the Company’s other assets and liabilities for which disclosure of fair value is required:
 
 
 
 
 
12/31/2019
 
6/30/2019
 
Balance sheet
classification
 
Fair value
hierarchy
level
 
Carrying
Amount
 
Estimated
Fair
Value
 
Carrying
Amount
 
Estimated
Fair
Value
Assets
 
 
 
 
 
 
 
 
 
 
 
Investments, including money market funds
Cash and cash
equivalents (a)
 
1
 
$
49

 
$
49

 
$
26

 
$
26

Time deposits
Cash and cash
equivalents (a)
 
2
 
9

 
9

 
7

 
7

Trust assets for nonqualified deferred compensation plans
Other assets
 
1
 
106

 
106

 
96

 
96

 
 
 
 
 
$
164

 
$
164

 
$
129

 
$
129

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Notes and loans payable
Notes and loans payable (b)
 
2
 
$
507

 
$
507

 
$
396

 
$
396

Current maturities of long-term debt and Long-term debt
Current maturities of long-
term debt and Long-term
debt (c)
 
2
 
2,288

 
2,425

 
2,287

 
2,402

 
 
 
 
 
$
2,795

 
$
2,932

 
$
2,683

 
$
2,798


____________________

(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 loans payable is composed of U.S. commercial paper and/or other similar short-term debt 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.
v3.19.3.a.u2
DEBT
6 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
DEBT DEBT

On November 15, 2019, the Company entered into a new $1,200 revolving credit agreement (the Credit Agreement) that matures in November 2024. The Credit Agreement replaced a prior $1,100 revolving credit agreement in place since February 2017. No termination fees or penalties were incurred in connection with entering the new agreement, which was considered a debt modification. There were no borrowings under either the new Credit Agreement or the existing credit agreement as of December 31, 2019 and June 30, 2019, respectively, and the Company believes that borrowings under the new Credit Agreement will continue to be available for general corporate purposes. The new Credit Agreement includes certain restrictive covenants and limitations consistent with the previous agreement, with which the Company was in compliance as of December 31, 2019.
v3.19.3.a.u2
INCOME TAXES
6 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
In determining its quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter. The effective tax rate on earnings was 21.0% and 21.3% for both the three and six months ended December 31, 2019, respectively, and 18.8% and 20.2% for the three and six months ended December 31, 2018, respectively. In comparison to prior period, the Company had a reduced benefit from excess tax deductions offset by a greater benefit from releases of uncertain tax positions.
v3.19.3.a.u2
NET EARNINGS PER SHARE (EPS)
6 Months Ended
Dec. 31, 2019
Earnings Per Share [Abstract]  
NET EARNINGS PER SHARE (EPS) 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:
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
Basic
125,440
 
128,068

 
125,632

 
127,955

Dilutive effect of stock options and other
1,439
 
2,026

 
1,566

 
2,152

Diluted
126,879
 
130,094

 
127,198

 
130,107

 
 
 
 
 
 
 
 
Antidilutive stock options and other
1,792
 
1

 
1,035

 
831


v3.19.3.a.u2
COMPREHENSIVE INCOME
6 Months Ended
Dec. 31, 2019
Stockholders' Equity Note [Abstract]  
COMPREHENSIVE INCOME COMPREHENSIVE INCOME
The following table provides a summary of Comprehensive income for the periods indicated:
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
Net earnings
$
185

 
$
182

 
$
388

 
$
392

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
9

 
(29
)
 
(7
)
 
(31
)
Net unrealized gains (losses) on derivatives
4

 
(2
)
 
6

 
(1
)
Pension and postretirement benefit adjustments
1

 
1

 
2

 
2

Total other comprehensive income (loss), net of tax
14

 
(30
)
 
1

 
(30
)
Comprehensive income
$
199

 
$
152

 
$
389

 
$
362


v3.19.3.a.u2
STOCKHOLDERS' EQUITY
6 Months Ended
Dec. 31, 2019
Equity [Abstract]  
STOCKHOLDERS' EQUITY STOCKHOLDERS EQUITY

Changes in the components of Stockholders’ equity were as follows for the periods indicated:
 
Three Months Ended December 31
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Net (Loss) Income
 
Total Stockholders Equity
 
Amount
 
Shares
(in thousands)
 
 
 
Amount
 
Shares
(in thousands)
 
 
Balance as of September 30, 2018
$
159

 
158,741

 
$
984

 
$
2,883

 
$
(2,802
)
 
(31,136
)
 
$
(547
)
 
$
677

Net earnings


 


 


 
182

 


 


 


 
182

Other comprehensive income (loss)


 


 


 


 


 


 
(30
)
 
(30
)
Dividends ($0.96 per share declared)


 


 


 
(123
)
 


 


 


 
(123
)
Stock-based compensation


 


 
10

 


 


 


 


 
10

Other employee stock plan activities


 


 
20

 
(2
)
 
46

 
738

 


 
64

Treasury stock purchased


 


 


 


 
(38
)
 
(253
)
 


 
(38
)
Balance as of December 31, 2018
$
159

 
158,741

 
$
1,014

 
$
2,940

 
$
(2,794
)
 
(30,651
)
 
$
(577
)
 
$
742

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Balance as of September 30, 2019
$
159

 
158,741

 
$
1,043

 
$
3,241

 
$
(3,278
)
 
(33,246
)
 
$
(615
)
 
$
550

Net earnings


 


 


 
185

 


 


 


 
185

Other comprehensive income (loss)


 


 


 


 


 


 
14

 
14

Dividends ($1.06 per share declared)


 


 


 
(133
)
 


 


 


 
(133
)
Stock-based compensation


 


 
13

 


 


 


 


 
13

Other employee stock plan activities


 


 
6

 
(1
)
 
6

 
106

 


 
11

Treasury stock purchased


 


 


 


 
(85
)
 
(577
)
 


 
(85
)
Balance as of December 31, 2019
$
159

 
158,741

 
$
1,062

 
$
3,292

 
$
(3,357
)
 
(33,717
)
 
$
(601
)
 
$
555

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended December 31
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Net (Loss) Income
 
Total Stockholders Equity
 
Amount
 
Shares
(in thousands)
 
 
 
Amount
 
Shares
(in thousands)
 
 
Balance as of June 30, 2018
$
159

 
158,741

 
$
975

 
$
2,797

 
$
(2,658
)
 
(30,759
)
 
$
(547
)
 
$
726

Cumulative effect of accounting changes, net of tax (1)
 
 
 
 
 
 
(3
)
 
 
 
 
 
 
 
(3
)
Net earnings


 


 


 
392

 


 


 


 
392

Other comprehensive income (loss)


 


 


 


 


 


 
(30
)
 
(30
)
Dividends ($1.92 per share declared)


 


 


 
(246
)
 


 


 


 
(246
)
Stock-based compensation


 


 
18

 


 


 


 


 
18

Other employee stock plan activities


 


 
21

 

 
100

 
1,784

 


 
121

Treasury stock purchased


 


 


 


 
(236
)
 
(1,676
)
 


 
(236
)
Balance as of December 31, 2018
$
159

 
158,741

 
$
1,014

 
$
2,940

 
$
(2,794
)
 
(30,651
)
 
$
(577
)
 
$
742

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2019
$
159

 
158,741

 
$
1,046

 
$
3,150

 
$
(3,194
)
 
(33,055
)
 
$
(602
)
 
$
559

Cumulative effect of accounting changes, net of tax (2)


 


 


 
22

 


 


 


 
22

Net earnings


 


 


 
388

 


 


 


 
388

Other comprehensive income (loss)


 


 


 


 


 


 
1

 
1

Dividends ($2.12 per share declared)


 


 


 
(267
)
 


 


 


 
(267
)
Stock-based compensation


 


 
19

 


 


 


 


 
19

Other employee stock plan activities


 


 
(3
)
 
(1
)
 
26

 
578

 


 
22

Treasury stock purchased


 


 


 


 
(189
)
 
(1,240
)
 


 
(189
)
Balance as of December 31, 2019
$
159

 
158,741

 
$
1,062

 
$
3,292

 
$
(3,357
)
 
(33,717
)
 
$
(601
)
 
$
555


(1) As a result of adopting ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” on July 1, 2018, the Company recorded a cumulative effect of initially applying the new guidance as an adjustment to the fiscal year 2019 opening balance of Retained earnings.
(2) As a result of adopting ASU No. 2016-02, “Leases (Topic 842),” on July 1, 2019, the Company recorded a cumulative effect of initially applying the new guidance as an adjustment to the fiscal year 2020 opening balance of Retained earnings. See Note 1 for more information.

The Company has two stock repurchase programs: an open-market purchase program with an authorized aggregate purchase amount of up to $2,000, which has no expiration date, and a program to offset the anticipated impact of dilution related to stock-based awards (the Evergreen Program), which has no authorization limit on the dollar amount and no expiration date.

Stock repurchases under the two stock repurchase programs were as follows for the periods indicated:
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
 
Amount
 
Shares
(in thousands)
 
Amount
 
Shares
(in thousands)
 
Amount
 
Shares
(in thousands)
 
Amount
 
Shares
(in thousands)
Open-market purchase program
$
85

 
577

 
$

 

 
$
85

 
577

 
$
78

 
591

Evergreen Program

 

 
38

 
253

 
104

 
663

 
158

 
1,085

Total stock repurchases
$
85

 
577

 
$
38

 
253

 
$
189

 
1,240

 
$
236

 
1,676


Changes in Accumulated other comprehensive net (loss) income by component were as follows for the periods indicated:
 
Three Months Ended December 31
 
Foreign currency translation adjustments
 
Net unrealized gains (losses) on derivatives
 
Pension and postretirement benefit adjustments
 
Accumulated other comprehensive net (loss) income
Balance as of September 30, 2018
$
(386
)
 
$
(24
)
 
$
(137
)
 
$
(547
)
Other comprehensive income (loss) before reclassifications
(28
)
 
(9
)
 

 
(37
)
Amounts reclassified from Accumulated other comprehensive net (loss) income

 
5

 
1

 
6

Income tax benefit (expense)
(1
)
 
2

 

 
1

Net current period other comprehensive income (loss)
(29
)
 
(2
)
 
1

 
(30
)
Balance as of December 31, 2018
$
(415
)
 
$
(26
)
 
$
(136
)
 
$
(577
)
 
 
 
 
 
 
 
 
Balance as of September 30, 2019
$
(430
)
 
$
(21
)
 
$
(164
)
 
$
(615
)
Other comprehensive income (loss) before reclassifications
9

 
2

 

 
11

Amounts reclassified from Accumulated other comprehensive net (loss) income

 
2

 
1

 
3

Income tax benefit (expense), and other

 

 

 

Net current period other comprehensive income (loss)
9

 
4

 
1

 
14

Balance as of December 31, 2019
$
(421
)
 
$
(17
)
 
$
(163
)
 
$
(601
)
 
 
 
 
 
 
 
 
 
Six Months Ended December 31
 
Foreign currency translation adjustments
 
Net unrealized gains (losses) on derivatives
 
Pension and postretirement benefit adjustments
 
Accumulated other comprehensive net (loss) income
Balance as of June 30, 2018
$
(384
)
 
$
(25
)
 
$
(138
)
 
$
(547
)
Other comprehensive income (loss) before reclassifications
(30
)
 
(5
)
 

 
(35
)
Amounts reclassified from Accumulated other comprehensive net (loss) income

 
2

 
3

 
5

Income tax benefit (expense)
(1
)
 
2

 
(1
)
 

Net current period other comprehensive income (loss)
(31
)
 
(1
)
 
2

 
(30
)
Balance as of December 31, 2018
$
(415
)
 
$
(26
)
 
$
(136
)
 
$
(577
)
 
 
 
 
 
 
 
 
Balance as of June 30, 2019
$
(414
)
 
$
(23
)
 
$
(165
)
 
$
(602
)
Other comprehensive income (loss) before reclassifications
(6
)
 
3

 

 
(3
)
Amounts reclassified from Accumulated other comprehensive net (loss) income

 
4

 
3

 
7

Income tax benefit (expense), and other
(1
)
 
(1
)
 
(1
)
 
(3
)
Net current period other comprehensive income (loss)
(7
)
 
6

 
2

 
1

Balance as of December 31, 2019
$
(421
)
 
$
(17
)
 
$
(163
)
 
$
(601
)


Included in foreign currency translation adjustments are re-measurement losses on long-term intercompany loans where settlement is not planned or anticipated in the foreseeable future. For the three and six months ended December 31, 2019, Other comprehensive income (loss) on these loans totaled $0 and $(1), respectively. For the three and six months ended December 31, 2018, Other comprehensive income (loss) on these loans totaled $(2) and $(4), respectively. There were no amounts associated with these loans reclassified from Accumulated other comprehensive net (loss) income for the periods presented.
v3.19.3.a.u2
EMPLOYEE BENEFIT PLANS
6 Months Ended
Dec. 31, 2019
Defined Benefit Plan [Abstract]  
EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS
The following table summarizes the components of net periodic benefit cost for the Company’s retirement income plans:
 
Three Months Ended
 
Six Months Ended
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
Service cost
$

 
$

 
$

 
$

Interest cost
5

 
6

 
10

 
12

Expected return on plan assets (1)
(5
)
 
(5
)
 
(9
)
 
(9
)
Amortization of unrecognized items
2

 
3

 
4

 
5

Total
$
2

 
$
4

 
$
5

 
$
8

(1) The weighted average long-term expected rate of return on plan assets used in computing the fiscal year 2020 net periodic benefit cost is 3.9%.
The net periodic benefit for the Company’s retirement health care plans was ($1) for both the three and six months ended December 31, 2019 and 2018.
During each of the three months ended December 31, 2019 and 2018, the Company made $2 in contributions to its domestic retirement income plans. During each of the six months ended December 31, 2019 and 2018, the Company made $4 in contributions to its domestic retirement income plans.
Net periodic benefit costs are reflected in Other (income) expense, net.
v3.19.3.a.u2
OTHER CONTINGENCIES AND GUARANTEES
6 Months Ended
Dec. 31, 2019
OTHER CONTINGENCIES AND GUARANTEES [Abstract]  
OTHER CONTINGENCIES AND GUARANTEES OTHER CONTINGENCIES AND GUARANTEES
Contingencies
The Company is involved in certain environmental matters, including response actions at various locations. The Company had recorded liabilities totaling $27 as of December 31, 2019 and June 30, 2019, for its share of aggregate future remediation costs related to these matters.
One matter, which accounted for $14 of the recorded liability as of December 31, 2019 and June 30, 2019, relates to environmental costs associated with one of the Company’s former operations at a site located in Alameda County, California. In November 2016, at the request of regulators and with the assistance of environmental consultants, the Company submitted a Feasibility Study that evaluated various options for managing the site and included estimates of the related costs. As a result, the Company recorded in Other (income) expense, net an undiscounted liability for costs estimated to be incurred over a 30-year period, based on the option recommended in the Feasibility Study. However, as a result of ongoing discussions with regulators, in June 2017, the Company increased its recorded liability to $14, which reflects anticipated costs to implement additional remediation measures at this site. While the Company believes its latest estimate is reasonable, regulators could require the Company to implement one of the other options evaluated in the Feasibility Study, with estimated undiscounted costs of up to $28 over an estimated 30-year period, or require the Company to take other actions and incur costs not included in the study.
Another matter in Dickinson County, Michigan, at the site of one of the Company’s former operations for which the Company is jointly and severally liable, accounted for $11 of the recorded liability, as of December 31, 2019 and June 30, 2019. This amount reflects the Company’s agreement 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. Although it is reasonably possible that the Company’s exposure may exceed the amount recorded for the Dickinson County matter, any amount of such additional exposures, or range of exposures, is not estimable at this time. The Company’s estimated losses related to these matters are sensitive to a variety of uncertain factors, including the efficacy of any remediation efforts, changes in any remediation requirements, and the future availability of alternative clean-up technologies.
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 condensed 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 condensed consolidated financial statements taken as a whole.
The Company had not recorded any material liabilities on the aforementioned guarantees as of December 31, 2019 and June 30, 2019.
As of December 31, 2019, the Company was party to a letter of credit of $10, related to one of its insurance carriers, of which $0 had been drawn upon.
v3.19.3.a.u2
SEGMENT RESULTS
6 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
SEGMENT RESULTS SEGMENT RESULTS
The Company operates through strategic business units (SBUs) that are aggregated into four reportable segments based on the economics and nature of the products sold: Cleaning, Household, Lifestyle and International.
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, prepaid expenses and other current assets, property and equipment, other investments and deferred taxes.
The tables below present reportable segment information and a reconciliation of the segment information to the Company’s consolidated Net sales and Earnings before income taxes, with amounts that are not allocated to the reportable segments reflected in Corporate.
 
 
Net sales
 
 
Three Months Ended
 
Six Months Ended
 
 
12/31/2019
 
12/31/2018
 
12/31/2019
 
12/31/2018
Cleaning
 
$