CLOROX CO /DE/, 10-Q filed on 11/2/2020
Quarterly Report
v3.20.2
Cover Page - shares
3 Months Ended
Sep. 30, 2020
Oct. 19, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
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 - $1.00 par value  
Trading Symbol CLX  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   126,049,929
Entity Central Index Key 0000021076  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2021  
v3.20.2
Condensed Consolidated Statements of Earnings and Comprehensive Income (Unaudited) - USD ($)
shares in Thousands, $ in Millions
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]    
Net sales $ 1,916 $ 1,506
Cost of products sold 996 843
Gross profit 920 663
Selling and administrative expenses 238 211
Advertising costs 179 137
Research and development costs 32 30
Interest expense 25 25
Other (income) expense, net (80) 2
Earnings before income taxes 526 258
Income taxes 109 55
Net earnings 417 203
Less: Net earnings attributable to noncontrolling interests 2 0
Net earnings attributable to Clorox $ 415 $ 203
Net earnings per share attributable to Clorox    
Basic net earnings per share (in dollars per share) $ 3.28 $ 1.61
Diluted net earnings per share (in dollars per share) $ 3.22 $ 1.59
Weighted average shares outstanding (in thousands)    
Basic (in shares) 126,346 125,823
Diluted (in shares) 128,729 127,465
Comprehensive income $ 434 $ 190
Less: Total comprehensive income attributable to noncontrolling interests 2 0
Total comprehensive income attributable to Clorox $ 432 $ 190
v3.20.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Sep. 30, 2020
Jun. 30, 2020
Current assets    
Cash and cash equivalents $ 860 $ 871
Receivables, net 685 648
Inventories, net 534 454
Prepaid expenses and other current assets 65 47
Total current assets 2,144 2,020
Property, plant and equipment, net of accumulated depreciation and amortization of $2,270 and $2,224, respectively 1,176 1,103
Operating lease right-of-use assets 281 291
Goodwill 1,793 1,577
Trademarks, net 786 785
Other intangible assets, net 265 109
Other assets 332 328
Total assets 6,777 6,213
Current liabilities    
Current operating lease liabilities 64 64
Accounts payable and accrued liabilities 1,395 1,329
Income taxes payable 57 25
Total current liabilities 1,516 1,418
Long-term debt 2,781 2,780
Long-term operating lease liabilities 268 278
Other liabilities 797 767
Deferred income taxes 104 62
Total liabilities 5,466 5,305
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 September 30, 2020 and June 30, 2020; and 126,037,019 and 126,198,606 shares outstanding as of September 30, 2020 and June 30, 2020, respectively 159 159
Additional paid-in capital 1,146 1,137
Retained earnings 3,840 3,567
Treasury shares, at cost: 32,704,442 and 32,542,855 shares as of September 30, 2020 and June 30, 2020, respectively (3,407) (3,315)
Accumulated other comprehensive net (loss) income (623) (640)
Total Clorox stockholders’ equity 1,115 908
Noncontrolling interests 196 0
Total stockholders’ equity 1,311 908
Total liabilities and stockholders’ equity $ 6,777 $ 6,213
v3.20.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2020
Jun. 30, 2020
Statement of Financial Position [Abstract]    
Property, plant and equipment, accumulated depreciation and amortization $ 2,270 $ 2,224
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) 126,037,019 126,198,606
Treasury stock, shares (in shares) 32,704,442 32,542,855
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Operating activities:    
Net earnings $ 417 $ 203
Adjustments to reconcile net earnings to net cash provided by operations:    
Depreciation and amortization 51 44
Stock-based compensation 13 6
Deferred income taxes 20 7
Other (71) 19
Changes in:    
Receivables, net (8) 73
Inventories, net (70) 6
Prepaid expenses and other current assets (18) (10)
Accounts payable and accrued liabilities 20 (82)
Operating lease right-of-use assets and liabilities, net (1) 1
Income taxes payable / prepaid 30 4
Net cash provided by operations 383 271
Investing activities:    
Capital expenditures (69) (54)
Businesses acquired, net of cash acquired (85) 0
Other 3 12
Net cash used for investing activities (151) (42)
Financing activities:    
Notes and loans payable, net 0 51
Treasury stock purchased (100) (110)
Cash dividends paid (140) (133)
Issuance of common stock for employee stock plans and other (7) 9
Net cash used for financing activities (247) (183)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 3 (2)
Net increase (decrease) in cash, cash equivalents, and restricted cash (12) 44
Cash, cash equivalents, and restricted cash:    
Beginning of period 879 113
End of period $ 867 $ 157
v3.20.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Sep. 30, 2020
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 months ended September 30, 2020 and 2019, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated results of operations, financial position and cash flows of The Clorox Company and its controlled subsidiaries (the Company) for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 30, 2020, which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

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 (ASC 740): Simplifying the Accounting for Income Taxes,” which improves consistency in the application of accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and by clarifying and amending existing guidance. The standard will be effective for the Company beginning in the first quarter of fiscal year 2022, with early adoption permitted. The amendments that are related to changes in ownership of foreign equity method investments or foreign subsidiaries are to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments that are related to franchise taxes that are partially based on income are to be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments under this ASU are to be applied on a prospective basis. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

Recently Adopted Accounting Standards
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 Company adopted this guidance as of July 1, 2020 on a prospective basis, and the adoption did not have a material impact on the Company’s consolidated financial statements, as the Company had no goodwill impairments during the first quarter of fiscal year 2021. The future impact of this new standard will depend on the specific facts and circumstances of future impairments that may occur, if any.
v3.20.2
BUSINESS ACQUIRED
3 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
BUSINESS ACQUIRED BUSINESS ACQUIRED
Saudi Joint Venture Acquisition

On July 9, 2020, the Company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). The joint venture offers customers in the Gulf region a range of cleaning and disinfecting products. The Company had previously accounted for its 30 percent investment of $27 as of June 30, 2020, under the equity method of accounting. Subsequent to the closing of this transaction, the Company’s total ownership interest in each of the entities increased to 51 percent. The Company has consolidated this joint venture into the Company's consolidated financial statements from the date of acquisition and reflects operations within the International reportable segment. The equity and income attributable to the other joint venture owners is recorded and presented as noncontrolling interests.

The total purchase consideration of $111 consisted of $100 cash paid, which was sourced from operations, and $11 on the net effective settlement of preexisting arrangements between the Company and the joint venture. The assets and liabilities of the joint venture were recorded at their respective estimated fair value as of the acquisition date 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 in the International reportable segment in the amount of $212. The goodwill is primarily attributable to the synergies expected to arise after the acquisition and reflects the value of further growth anticipated in the Gulf region. None of the goodwill is deductible for tax purposes.

As a result of this transaction, the carrying value of the Company’s previously held equity investment was remeasured to fair value, and resulted in an $85 non-recurring, non-cash gain recorded in Other (income) expense, net in the consolidated statement of earnings and adjusted in Other operating activities in the consolidated statement of cash flows for the first quarter of fiscal year 2021. The fair values of the noncontrolling interests and previously held equity interest were determined using a discounted cash flow (DCF) method under the income approach. Under this approach, the Company estimates future cash flows and discounts these cash flows at a rate of return that reflects the entities’ relative risk.
 
The following table summarizes the estimated fair value of the joint ventures’ assets acquired and liabilities assumed and the related deferred income taxes as of the acquisition date. Due to the timing of the acquisition, the fair values of the assets acquired and liabilities assumed were 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 definite-lived intangibles acquired primarily represent the Company reacquiring previously licensed trademarks and customer relationships. The weighted-average estimated useful life of intangible assets subject to amortization is 9 years.

Joint Venture
Goodwill$212 
Reacquired rights (included in Other intangible assets, net)138 
Property, plant and equipment46 
Customer relationships (included in Other intangible assets, net)10 
Working capital, net (includes cash acquired of $26)
31 
Noncurrent liabilities, net(5)
Deferred income taxes(20)
Total fair value of net assets412 
Less: Fair value of noncontrolling interests(198)
Less: Fair value of previously held equity interest(103)
Total purchase consideration$111 

Included in the Company’s results for the first quarter of fiscal year 2021 was $23 of net sales from the joint venture. Pro forma results reflecting this transaction were not presented because it is not significant to the Company's consolidated financial results.
v3.20.2
INVENTORIES, NET
3 Months Ended
Sep. 30, 2020
Inventory Disclosure [Abstract]  
INVENTORIES, NET INVENTORIES, NET
Inventories, net, consisted of the following as of:
9/30/20206/30/2020
Finished goods$396 $340 
Raw materials and packaging161 140 
Work in process
LIFO allowances(32)(33)
Total$534 $454 
v3.20.2
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
3 Months Ended
Sep. 30, 2020
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 September 30, 2020, the notional amount of commodity derivatives was $22, of which $11 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, 2020, the notional amount of commodity derivatives was $27, of which $14 related to soybean oil futures and $13 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 $58 and $70, respectively, as of September 30, 2020 and June 30, 2020.

Interest Rate Risk Management

The Company may enter into over-the-counter interest rate forward or swap 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 or swap contracts historically have had durations of less than 3 years. The interest rate contracts are measured at fair value using information quoted by U.S. government bond and interest rate derivative dealers.

The notional amounts of outstanding interest rate contracts used by the Company were $300 and $225, respectively, as of September 30, 2020 and June 30, 2020. These contracts represent forward starting interest rate swap contracts with a maturity date of September 2022 to manage the exposure to interest rate volatility associated with future interest payments on a forecasted debt issuance.
Commodity, Foreign Exchange and Interest Rate Derivatives

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

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

Gains (losses) recognized in Other comprehensive (loss) income
Three Months Ended
9/30/20209/30/2019
Commodity purchase derivative contracts$$— 
Foreign exchange derivative contracts(1)
Interest rate derivative contracts— 
Total$$

Location of Gains (losses) reclassified from Accumulated other comprehensive net (loss) income into Net earningsGains (losses) reclassified from Accumulated other comprehensive net (loss) income and recognized in Net earnings
Three Months Ended
9/30/20209/30/2019
Commodity purchase derivative contractsCost of products sold$(1)$— 
Foreign exchange derivative contractsCost of products sold— — 
Interest rate derivative contractsInterest expense(2)(2)
Total$(3)$(2)

The estimated amount of the existing net gain (loss) in Accumulated other comprehensive net (loss) income as of September 30, 2020, that is expected to be reclassified into Net earnings within the next twelve months is $(10).
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 over-the-counter derivative instruments in liability positions held as of September 30, 2020 and June 30, 2020, $2 and $3, respectively, contained such terms. As of September 30, 2020 and June 30, 2020, 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 September 30, 2020 and June 30, 2020, 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 September 30, 2020 and June 30, 2020, the Company maintained cash margin balances related to exchange-traded futures contracts of $1 and $2, respectively, which are classified as Prepaid expenses and other current assets on the condensed consolidated balance sheets.

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 September 30, 2020 and June 30, 2020, 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:
 9/30/20206/30/2020
Balance Sheet
Classification
Fair Value
Hierarchy
Level
Carrying
Amount
Estimated
Fair
Value
Carrying
Amount
Estimated
Fair
Value
Assets
Commodity purchase futures contractsOther current assets1$$$— $— 
Interest rate forward contractsOther assets2
 $$$$
Liabilities
Commodity purchase futures contractsAccounts payable and accrued liabilities1$— $— $$
Commodity purchase swaps contractsAccounts payable and accrued liabilities2
Foreign exchange forward contractAccounts payable and accrued liabilities2
$$$$

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:
 9/30/20206/30/2020
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$379 $379 $584 $584 
Time deposits
Cash and cash
equivalents (a)
2318 318 165 165 
Trust assets for nonqualified deferred compensation plansOther assets1114 114 100 100 
 $811 $811 $849 $849 
Liabilities
Current maturities of long-term debt and Long-term debt
Current maturities of long-
term debt and Long-term
debt (b)
22,781 3,049 2,780 3,051 
$2,781 $3,049 $2,780 $3,051 

____________________

(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)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.
v3.20.2
INCOME TAXES
3 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXESIn 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 20.7% and 21.5% for the three months ended September 30, 2020 and 2019, respectively. The decrease in the effective tax rate on earnings for the current three-month period was primarily due to the non-taxability of a portion of the remeasurement gain recognized on the Company’s previously held investment in the Saudi joint venture, partially offset by a lower rate benefit from excess tax benefits.
v3.20.2
NET EARNINGS PER SHARE (EPS)
3 Months Ended
Sep. 30, 2020
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
9/30/20209/30/2019
Basic126,346125,823
Dilutive effect of stock options and other2,3831,642
Diluted128,729127,465
Antidilutive stock options and other441 — 

Basic net earnings per share and Diluted net earnings per share are calculated on Net earnings attributable to Clorox.
v3.20.2
COMPREHENSIVE INCOME
3 Months Ended
Sep. 30, 2020
Stockholders' Equity Note [Abstract]  
COMPREHENSIVE INCOME COMPREHENSIVE INCOME
The following table provides a summary of Comprehensive income for the periods indicated:
Three Months Ended
9/30/20209/30/2019
Net earnings$417 $203 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments10 (16)
Net unrealized gains (losses) on derivatives
Pension and postretirement benefit adjustments
Total other comprehensive (loss) income, net of tax17 (13)
Comprehensive income434 190 
Less: Total comprehensive income attributable to noncontrolling interests— 
Total comprehensive income attributable to Clorox$432 $190 
v3.20.2
STOCKHOLDERS' EQUITY
3 Months Ended
Sep. 30, 2020
Equity [Abstract]  
STOCKHOLDERS' EQUITY STOCKHOLDERS EQUITY
Changes in the components of Stockholders’ equity were as follows for the periods indicated:
Three Months Ended September 30
(Dollars in millions except per share data; shares in thousands)
Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated
Other
Comprehensive
Net (Loss) Income
Non-controlling interests
Total Stockholders Equity
AmountSharesAmountShares
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 (1)
22 22 
Net earnings203 203 
Other comprehensive (loss) income(13)(13)
Dividends to Clorox stockholders ($1.06 per share declared)
(134)(134)
Stock-based compensation
Other employee stock plan activities(9)— 20 472 11 
Treasury stock purchased(104)(663)(104)
Balance as of September 30, 2019$159 158,741 $1,043 $3,241 $(3,278)(33,246)$(615)$— $550 
Balance as of June 30, 2020$159 158,741 $1,137 $3,567 $(3,315)(32,543)$(640)$— $908 
Net earnings415 417 
Other comprehensive (loss) income17 17 
Dividends to Clorox stockholders ($1.11 per share declared)
(141)(141)
Dividends to noncontrolling interests(4)(4)
Business combinations including purchase accounting adjustments198 198 
Stock-based compensation13 13 
Other employee stock plan activities(4)(1)283 
Treasury stock purchased(100)(444)(100)
Balance as of September 30, 2020$159 158,741 $1,146 $3,840 $(3,407)(32,704)$(623)$196 $1,311 

(1) 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.

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
9/30/20209/30/2019
AmountShares
(in thousands)
AmountShares
(in thousands)
Open-market purchase program$— — $— — 
Evergreen Program100 444 104 663 
Total stock repurchases$100 444 $104 663 
Changes in Accumulated other comprehensive net (loss) income attributable to Clorox by component were as follows for the periods indicated:
Three Months Ended September 30
Foreign currency translation adjustmentsNet unrealized gains (losses) on derivativesPension and postretirement benefit adjustmentsAccumulated other comprehensive net (loss) income
Balance as of June 30, 2019$(414)$(23)$(165)$(602)
Other comprehensive (loss) income before reclassifications(15)— (14)
Amounts reclassified from Accumulated other comprehensive net (loss) income— 
Income tax benefit (expense)(1)(1)(1)(3)
Net current period other comprehensive (loss) income(16)(13)
Balance as of September 30, 2019$(430)$(21)$(164)$(615)
Balance as of June 30, 2020$(450)$(18)$(172)$(640)
Other comprehensive (loss) income before reclassifications— 12 
Amounts reclassified from Accumulated other comprehensive net (loss) income— 
Income tax benefit (expense), and other(1)— — 
Net current period other comprehensive (loss) income10 17 
Balance as of September 30, 2020$(440)$(13)$(170)$(623)

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. There were no amounts associated with these loans reclassified from Accumulated other comprehensive net (loss) income for the periods presented.
v3.20.2
EMPLOYEE BENEFIT PLANS
3 Months Ended
Sep. 30, 2020
Retirement Benefits [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
9/30/20209/30/2019
Service cost$— $— 
Interest cost
Expected return on plan assets (1)
(4)(4)
Amortization of unrecognized items
Total$$
(1) The weighted average long-term expected rate of return on plan assets used in computing the fiscal year 2021 net periodic benefit cost is 3.1%.
The net periodic benefit cost for the Company’s retirement health care plans was $0 for both the three months ended September 30, 2020 and 2019.
During the three months ended September 30, 2020 and 2019, the Company made $2 in contributions to its domestic retirement income plans.
Net periodic benefit costs are reflected in Other (income) expense, net.
v3.20.2
OTHER CONTINGENCIES AND GUARANTEES
3 Months Ended
Sep. 30, 2020
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 $28 as of September 30, 2020 and June 30, 2020, for its share of aggregate future remediation costs related to these matters.
One matter, which accounted for $14 of the recorded liability as of September 30, 2020 and June 30, 2020, 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 $10 of the recorded liability, as of September 30, 2020 and June 30, 2020. 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. If the third party is unable to pay its share of the response and remediation obligations, the Company may be responsible for such obligations. 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 September 30, 2020 and June 30, 2020.
As of September 30, 2020, the Company was party to a letter of credit of $11, related to one of its insurance carriers, of which $0 had been drawn upon.
v3.20.2
SEGMENT RESULTS
3 Months Ended
Sep. 30, 2020
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: Health and Wellness, Household, Lifestyle and International. Prior periods presented have been recast to reflect the reportable segment changes effective in the fourth quarter of fiscal year 2020.
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, operating lease right-of-use assets, other long-term assets 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
9/30/20209/30/2019
Health and Wellness$813 $633 
Household500 361 
Lifestyle318 271 
International285 241 
Corporate— — 
Total$1,916 $1,506 
Earnings (losses) before income taxes
Three Months Ended
9/30/20209/30/2019
Health and Wellness$251 $170 
Household109 32 
Lifestyle102 71 
International124 39 
Corporate(60)(54)
Total$526 $258 

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, Wal-Mart Stores, Inc. and its affiliates, as a percentage of consolidated net sales, were 25% and 26% for the three months ended September 30, 2020 and 2019, respectively.
The following table provides Net sales as a percentage of the Company’s consolidated net sales for the Company’s SBUs and for the periods indicated:
Net sales
Three Months Ended
9/30/20209/30/2019
Cleaning29 %32 %
Professional Products%%
Vitamins, Minerals and Supplements%%
Health and Wellness42 %42 %
Bags and Wraps11 %12 %
Cat Litter%%
Grilling%%
Household26 %24 %
Food Products%%
Natural Personal Care%%
Water Filtration%%
Lifestyle17 %18 %
International15 %16 %
Total100 %100 %
v3.20.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three months ended September 30, 2020 and 2019, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated results of operations, financial position and cash flows of The Clorox Company and its controlled subsidiaries (the Company) for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 30, 2020, which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.
Recently Issued Accounting Standards
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 (ASC 740): Simplifying the Accounting for Income Taxes,” which improves consistency in the application of accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and by clarifying and amending existing guidance. The standard will be effective for the Company beginning in the first quarter of fiscal year 2022, with early adoption permitted. The amendments that are related to changes in ownership of foreign equity method investments or foreign subsidiaries are to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments that are related to franchise taxes that are partially based on income are to be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments under this ASU are to be applied on a prospective basis. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

Recently Adopted Accounting Standards
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 Company adopted this guidance as of July 1, 2020 on a prospective basis, and the adoption did not have a material impact on the Company’s consolidated financial statements, as the Company had no goodwill impairments during the first quarter of fiscal year 2021. The future impact of this new standard will depend on the specific facts and circumstances of future impairments that may occur, if any.
Fair Value Measurement
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 September 30, 2020 and June 30, 2020, 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.
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: Health and Wellness, Household, Lifestyle and International. Prior periods presented have been recast to reflect the reportable segment changes effective in the fourth quarter of fiscal year 2020.
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, operating lease right-of-use assets, other long-term assets and deferred taxes.
v3.20.2
BUSINESS ACQUIRED (Tables)
3 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed
The following table summarizes the estimated fair value of the joint ventures’ assets acquired and liabilities assumed and the related deferred income taxes as of the acquisition date. Due to the timing of the acquisition, the fair values of the assets acquired and liabilities assumed were 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 definite-lived intangibles acquired primarily represent the Company reacquiring previously licensed trademarks and customer relationships. The weighted-average estimated useful life of intangible assets subject to amortization is 9 years.

Joint Venture
Goodwill$212 
Reacquired rights (included in Other intangible assets, net)138 
Property, plant and equipment46 
Customer relationships (included in Other intangible assets, net)10 
Working capital, net (includes cash acquired of $26)
31 
Noncurrent liabilities, net(5)
Deferred income taxes(20)
Total fair value of net assets412 
Less: Fair value of noncontrolling interests(198)
Less: Fair value of previously held equity interest(103)
Total purchase consideration$111 
v3.20.2
INVENTORIES, NET (Tables)
3 Months Ended
Sep. 30, 2020
Inventory Disclosure [Abstract]  
Schedule of Inventories, Net
Inventories, net, consisted of the following as of:
9/30/20206/30/2020
Finished goods$396 $340 
Raw materials and packaging161 140 
Work in process
LIFO allowances(32)(33)
Total$534 $454 
v3.20.2
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Sep. 30, 2020
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS [Abstract]  
Effects of Derivative Instruments Designated as Hedging Instruments on OCI
The effects of derivative instruments designated as hedging instruments on Other comprehensive (loss) income and Net earnings were as follows:

Gains (losses) recognized in Other comprehensive (loss) income
Three Months Ended
9/30/20209/30/2019
Commodity purchase derivative contracts$$— 
Foreign exchange derivative contracts(1)
Interest rate derivative contracts— 
Total$$
Effects of Derivative Instruments Designated as Hedging Instruments on Net Earnings
Location of Gains (losses) reclassified from Accumulated other comprehensive net (loss) income into Net earningsGains (losses) reclassified from Accumulated other comprehensive net (loss) income and recognized in Net earnings
Three Months Ended
9/30/20209/30/2019
Commodity purchase derivative contractsCost of products sold$(1)$— 
Foreign exchange derivative contractsCost of products sold— — 
Interest rate derivative contractsInterest expense(2)(2)
Total$(3)$(2)
Schedule of Assets and Liabilities for Fair Value Disclosure The following table provides information about the balance sheet classification and the fair values of the Company’s derivative instruments:
 9/30/20206/30/2020
Balance Sheet
Classification
Fair Value
Hierarchy
Level
Carrying
Amount
Estimated
Fair
Value
Carrying
Amount
Estimated
Fair
Value
Assets
Commodity purchase futures contractsOther current assets1$$$— $— 
Interest rate forward contractsOther assets2
 $$$$
Liabilities
Commodity purchase futures contractsAccounts payable and accrued liabilities1$— $— $$
Commodity purchase swaps contractsAccounts payable and accrued liabilities2
Foreign exchange forward contractAccounts payable and accrued liabilities2
$$$$

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:
 9/30/20206/30/2020
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$379 $379 $584 $584 
Time deposits
Cash and cash
equivalents (a)
2318 318 165 165 
Trust assets for nonqualified deferred compensation plansOther assets1114 114 100 100 
 $811 $811 $849 $849 
Liabilities
Current maturities of long-term debt and Long-term debt
Current maturities of long-
term debt and Long-term
debt (b)
22,781 3,049 2,780 3,051 
$2,781 $3,049 $2,780 $3,051 

____________________

(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)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.
v3.20.2
NET EARNINGS PER SHARE (EPS) (Tables)
3 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Schedule of Weighted Average Number of Shares Outstanding and Antidilutive Shares
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
9/30/20209/30/2019
Basic126,346125,823
Dilutive effect of stock options and other2,3831,642
Diluted128,729127,465
Antidilutive stock options and other441 — 
v3.20.2
COMPREHENSIVE INCOME (Tables)
3 Months Ended
Sep. 30, 2020
Stockholders' Equity Note [Abstract]  
Schedule of Comprehensive Income
The following table provides a summary of Comprehensive income for the periods indicated:
Three Months Ended
9/30/20209/30/2019
Net earnings$417 $203 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments10 (16)
Net unrealized gains (losses) on derivatives
Pension and postretirement benefit adjustments
Total other comprehensive (loss) income, net of tax17 (13)
Comprehensive income434 190 
Less: Total comprehensive income attributable to noncontrolling interests— 
Total comprehensive income attributable to Clorox$432 $190 
v3.20.2
STOCKHOLDERS' EQUITY (Tables)
3 Months Ended
Sep. 30, 2020
Equity [Abstract]  
Schedule of Stockholders Equity
Changes in the components of Stockholders’ equity were as follows for the periods indicated:
Three Months Ended September 30
(Dollars in millions except per share data; shares in thousands)
Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated
Other
Comprehensive
Net (Loss) Income
Non-controlling interests
Total Stockholders Equity
AmountSharesAmountShares
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 (1)
22 22 
Net earnings203 203 
Other comprehensive (loss) income(13)(13)
Dividends to Clorox stockholders ($1.06 per share declared)
(134)(134)
Stock-based compensation
Other employee stock plan activities(9)— 20 472 11 
Treasury stock purchased(104)(663)(104)
Balance as of September 30, 2019$159 158,741 $1,043 $3,241 $(3,278)(33,246)$(615)$— $550 
Balance as of June 30, 2020$159 158,741 $1,137 $3,567 $(3,315)(32,543)$(640)$— $908 
Net earnings415 417 
Other comprehensive (loss) income17 17 
Dividends to Clorox stockholders ($1.11 per share declared)
(141)(141)
Dividends to noncontrolling interests(4)(4)
Business combinations including purchase accounting adjustments198 198 
Stock-based compensation13 13 
Other employee stock plan activities(4)(1)283 
Treasury stock purchased(100)(444)(100)
Balance as of September 30, 2020$159 158,741 $1,146 $3,840 $(3,407)(32,704)$(623)$196 $1,311 
(1) As a result of adopting ASU No. 2016-02, “Leases (Topic 842),” on July 1, 2019, the Company recorded a cumulative effect of initially applying the new guidance as an adjustment to the fiscal year 2020 opening balance of Retained earnings.
Schedule of Share Repurchases Under Authorized Programs
Stock repurchases under the two stock repurchase programs were as follows for the periods indicated:
Three Months Ended
9/30/20209/30/2019
AmountShares
(in thousands)
AmountShares
(in thousands)
Open-market purchase program$— — $— — 
Evergreen Program100 444 104 663 
Total stock repurchases$100 444 $104 663 
Schedule of Changes in Accumulated Other Comprehensive Net (Losses) Income
Changes in Accumulated other comprehensive net (loss) income attributable to Clorox by component were as follows for the periods indicated:
Three Months Ended September 30
Foreign currency translation adjustmentsNet unrealized gains (losses) on derivativesPension and postretirement benefit adjustmentsAccumulated other comprehensive net (loss) income
Balance as of June 30, 2019$(414)$(23)$(165)$(602)
Other comprehensive (loss) income before reclassifications(15)— (14)
Amounts reclassified from Accumulated other comprehensive net (loss) income— 
Income tax benefit (expense)(1)(1)(1)(3)
Net current period other comprehensive (loss) income(16)(13)
Balance as of September 30, 2019$(430)$(21)$(164)$(615)
Balance as of June 30, 2020$(450)$(18)$(172)$(640)
Other comprehensive (loss) income before reclassifications— 12 
Amounts reclassified from Accumulated other comprehensive net (loss) income— 
Income tax benefit (expense), and other(1)— — 
Net current period other comprehensive (loss) income10 17 
Balance as of September 30, 2020$(440)$(13)$(170)$(623)
v3.20.2
EMPLOYEE BENEFIT PLANS (Tables)
3 Months Ended
Sep. 30, 2020
Retirement Benefits [Abstract]  
Schedule of Components of Net Periodic Benefit Cost
The following table summarizes the components of net periodic benefit cost for the Company’s retirement income plans:
Three Months Ended
9/30/20209/30/2019
Service cost$— $— 
Interest cost
Expected return on plan assets (1)
(4)(4)
Amortization of unrecognized items
Total$$
(1) The weighted average long-term expected rate of return on plan assets used in computing the fiscal year 2021 net periodic benefit cost is 3.1%.
v3.20.2
SEGMENT RESULTS (Tables)
3 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Selected Financial Information Relating to the Company's Segments
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
9/30/20209/30/2019
Health and Wellness$813 $633 
Household500 361 
Lifestyle318 271 
International285 241 
Corporate— — 
Total$1,916 $1,506 
Earnings (losses) before income taxes
Three Months Ended
9/30/20209/30/2019
Health and Wellness$251 $170 
Household109 32 
Lifestyle102 71 
International124 39 
Corporate(60)(54)
Total$526 $258 
The following table provides Net sales as a percentage of the Company’s consolidated net sales for the Company’s SBUs and for the periods indicated: