CLOROX CO /DE/, 10-Q filed on 5/3/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Mar. 31, 2017
Apr. 19, 2017
Document And Entity Information
 
 
Entity Registrant Name
CLOROX CO /DE/ 
 
Entity Central Index Key
0000021076  
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2017 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--06-30 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
128,798,239 
Document Fiscal Period Focus
Q3 
 
Document Fiscal Year Focus
2017 
 
Condensed Consolidated Statements of Earnings and Comprehensive Income (Unaudited) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]
 
 
 
 
Net sales
$ 1,477 
$ 1,426 
$ 4,326 
$ 4,161 
Cost of products sold
827 
780 
2,407 
2,290 
Gross profit
650 
646 
1,919 
1,871 
Selling and administrative expenses
201 
204 
598 
581 
Advertising costs
161 
146 
417 
395 
Research and development costs
35 
35 
98 
99 
Interest expense
22 
22 
66 
67 
Other (income) expense, net
(16)
(2)
Earnings from continuing operations before income taxes
247 
237 
738 
731 
Income taxes on continuing operations
75 
78 
237 
248 
Earnings from continuing operations
172 
159 
501 
483 
Earnings (losses) from discontinued operations, net of tax
(1)
Net earnings
172 
162 
500 
483 
Net earnings (losses) per share, Basic
 
 
 
 
Continuing operations, basic (in dollars per share)
$ 1.34 
$ 1.23 
$ 3.89 
$ 3.73 
Discontinued operations, basic (in dollars per share)
$ 0.00 
$ 0.02 
$ (0.01)
$ 0.00 
Basic net earnings per share (in dollars per share)
$ 1.34 
$ 1.25 
$ 3.88 
$ 3.73 
Net earnings (losses) per share, Diluted
 
 
 
 
Continuing operations, diluted (in dollars per share)
$ 1.31 
$ 1.21 
$ 3.82 
$ 3.67 
Discontinued operations, diluted (in dollars per share)
$ 0.00 
$ 0.02 
$ (0.01)
$ 0.00 
Diluted net earnings per share (in dollars per share)
$ 1.31 
$ 1.23 
$ 3.81 
$ 3.67 
Weighted average shares outstanding (in thousands)
 
 
 
 
Basic (in shares)
128,752 
129,690 
128,899 
129,463 
Diluted (in shares)
131,362 
131,647 
131,399 
131,652 
Dividend declared per share (in dollars per share)
$ 0.80 
$ 0.77 
$ 2.40 
$ 2.31 
Comprehensive income
$ 186 
$ 181 
$ 505 
$ 443 
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2017
Jun. 30, 2016
Current assets
 
 
Cash and cash equivalents
$ 431 
$ 401 
Receivables, net
568 
569 
Inventories, net
510 
443 
Other current assets
94 
72 
Total current assets
1,603 
1,485 
Property, plant and equipment, net of accumulated depreciation and amortization of $1,972 and $1,911, respectively
903 
906 
Goodwill
1,193 
1,197 
Trademarks, net
655 
657 
Other intangible assets, net
70 
78 
Other assets
205 
187 
Total assets
4,629 
4,510 
Current liabilities
 
 
Notes and loans payable
650 
523 
Current maturities of long-term debt
400 
Accounts payable and accrued liabilities
948 
1,035 
Income taxes payable
Total current liabilities
1,998 
1,558 
Long-term debt
1,390 
1,789 
Other liabilities
788 
784 
Deferred income taxes
49 
82 
Total liabilities
4,225 
4,213 
Commitments and contingencies
   
   
Stockholders’ equity
 
 
Preferred stock: $1.00 par value; 5,000,000 shares authorized; none issued or outstanding
Common stock: $1.00 par value; 750,000,000 shares authorized; 158,741,461 shares issued as of March 31, 2017 and June 30, 2016; and 128,780,607 and 129,355,263 shares outstanding as of March 31, 2017 and June 30, 2016, respectively
159 
159 
Additional paid-in capital
912 
868 
Retained earnings
2,351 
2,163 
Treasury shares, at cost: 29,960,854 and 29,386,198 shares as of March 31, 2017 and June 30, 2016, respectively
(2,453)
(2,323)
Accumulated other comprehensive net (losses) income
(565)
(570)
Stockholders’ equity
404 
297 
Total liabilities and stockholders’ equity
$ 4,629 
$ 4,510 
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Mar. 31, 2017
Jun. 30, 2016
Statement of Financial Position [Abstract]
 
 
Property, plant and equipment, accumulated depreciation and amortization
$ 1,972 
$ 1,911 
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)
Preferred stock, shares outstanding (in shares)
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)
128,780,607 
129,355,263 
Treasury stock, shares (in shares)
29,960,854 
29,386,198 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating activities:
 
 
Net earnings
$ 500 
$ 483 
Deduct: Losses from discontinued operations, net of tax
(1)
Earnings from continuing operations
501 
483 
Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations:
 
 
Depreciation and amortization
121 
122 
Share-based compensation
38 
33 
Deferred income taxes
(38)
10 
Other
17 
(4)
Changes in:
 
 
Receivables, net
(24)
Inventories, net
(70)
(86)
Other current assets
(14)
(1)
Accounts payable and accrued liabilities
(75)
(2)
Income taxes payable
(95)
Net cash provided by continuing operations
483 
436 
Net cash (used for) provided by discontinued operations
(1)
11 
Net cash provided by operations
482 
447 
Investing activities:
 
 
Capital expenditures
(161)
(113)
Other
25 
12 
Net cash used for investing activities
(136)
(101)
Financing activities:
 
 
Notes and loans payable, net
123 
337 
Long-term debt repayments
(300)
Treasury stock purchased
(183)
(216)
Cash dividends paid
(309)
(298)
Issuance of common stock for employee stock plans and other
55 
176 
Net cash used for financing activities
(314)
(301)
Effect of exchange rate changes on cash and cash equivalents
(2)
(13)
Net increase in cash and cash equivalents
30 
32 
Cash and cash equivalents:
 
 
Beginning of period
401 
382 
End of period
$ 431 
$ 414 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three and nine months ended March 31, 2017 and 2016, 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.

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

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, 2016, which includes a complete set of footnote disclosures including the Company’s significant accounting policies.

Recently Issued Accounting Standards

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires presenting the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. This standard also requires that other components of the net periodic benefit cost be presented separately from the line item(s) that includes service costs and outside of any subtotal of operating income, if one is presented, on a retrospective basis. Additionally, the new guidance limits the components that are eligible for capitalization in assets to only the service cost component. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with the option to early adopt in the first quarter of fiscal year 2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

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 is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions, including requiring excess tax benefits and tax deficiencies to be recognized as income tax benefits or expenses in the consolidated statement of earnings. Additionally, the standard requires cash flows from excess tax benefits and deficiencies, previously classified as a financing activity, to be classified as an operating activity in the consolidated statement of cash flows. The Company adopted this guidance in the first quarter of fiscal year 2017. Excess tax benefits of $11 and $17 were recognized in the consolidated statement of earnings and classified as an operating activity in the consolidated statement of cash flows during the three and nine months ended March 31, 2017, respectively. The prior period consolidated statement of cash flows has not been adjusted as permitted. The guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The Company did not make this election and will continue to account for forfeitures on an estimated basis.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a right-of-use 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. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Cost,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this standard in the first quarter of fiscal year 2017 and retrospectively applied the standard to the June 30, 2016 consolidated balance sheet, resulting in an $8 reduction in Other assets and Long-term debt. The adoption had no impact on the Company’s consolidated statement of earnings or consolidated statement of cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces most of the existing U.S. GAAP revenue recognition guidance and is intended to improve and converge with international standards on the financial reporting requirements for revenue from contracts with customers. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers, including information about significant judgments and changes in judgments. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with the option to early adopt in the first quarter of fiscal year 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS
On September 22, 2014, Clorox Venezuela announced that it was discontinuing its operations, effective immediately, and seeking to sell its assets. Since fiscal year 2012, Clorox Venezuela has been required to sell more than two thirds of its products at prices frozen by the Venezuelan government. During this same period, Clorox Venezuela experienced successive years of hyperinflation resulting in significant sustained increases in its input costs, including packaging, raw materials, transportation and wages. As a result, Clorox Venezuela had been selling its products at a loss, resulting in ongoing operating losses. Clorox Venezuela repeatedly met with government authorities in an effort to help them understand the rapidly declining state of the business, including the need for immediate, significant and ongoing price increases and other critical remedial actions to address these adverse impacts. Based on the Venezuelan government’s representations, Clorox Venezuela had expected significant price increases would be forthcoming much earlier; however, the price increases subsequently approved were insufficient and would have caused Clorox Venezuela to continue operating at a significant loss into the foreseeable future. As such, Clorox Venezuela was no longer financially viable and was forced to discontinue its operations.
On September 26, 2014, the Company reported that Venezuelan Vice President Jorge Arreaza announced, with endorsement by President Nicolás Maduro, that the Venezuelan government had occupied the Santa Lucía and Guacara production facilities of Clorox Venezuela. On November 6, 2014, the Company reported that the Venezuelan government had published a resolution granting a government-sponsored Special Administrative Board full authority to restart and operate the business of Clorox Venezuela, thereby reaffirming the government's expropriation of Clorox Venezuela’s assets. Further, President Nicolás Maduro announced the government's intention to facilitate the resumed production of bleach and other cleaning products at Clorox Venezuela plants. He also announced his approval of a financial credit to invest in raw materials and production at the plants. These actions by the Venezuelan government were taken without the consent or involvement of Clorox Venezuela, its parent Clorox Spain S.L. (Clorox Spain) or any of their affiliates. Clorox Venezuela, Clorox Spain and their affiliates reserved their rights under all applicable laws and treaties.
With this exit, the financial results of Clorox Venezuela are reflected as discontinued operations in the Company’s condensed consolidated financial statements for all periods presented. The results of Clorox Venezuela had historically been part of the International reportable segment.
Net sales for Clorox Venezuela were $0 for each of the three and nine months ended March 31, 2017 and 2016.

The following table provides a summary of Earnings (losses) from discontinued operations for Clorox Venezuela and Earnings (losses) from discontinued operations other than Clorox Venezuela for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Operating losses from Clorox Venezuela before income taxes
$

 
$

 
$

 
$

Exit costs and other related expenses for Clorox Venezuela
(1
)
 
(1
)
 
(2
)
 
(2
)
Total earnings (losses) from Clorox Venezuela before income taxes
(1
)
 
(1
)
 
(2
)
 
(2
)
Income tax benefit attributable to Clorox Venezuela
1

 
2

 
1

 
2

Total earnings (losses) from Clorox Venezuela, net of tax

 
1

 
(1
)
 

Gains (losses) from discontinued operations
other than Clorox Venezuela, net of tax

 
2

 

 

Earnings (losses) from discontinued operations, net of tax
$

 
$
3

 
$
(1
)
 
$

BUSINESSES ACQUIRED
BUSINESSES ACQUIRED
BUSINESSES ACQUIRED
On May 2, 2016, the Company acquired 100 percent of ReNew Life Holdings Corporation (RenewLife), a leading brand in digestive health. The amount paid was $290 funded through commercial paper. The amount paid of $290 represents the aggregate purchase price less cash acquired. The purchase of the RenewLife business reflects the Company’s strategy to acquire leading brands with attractive margins in growth categories. Results for RenewLife’s U.S. business are reflected in the Household reportable segment and results for RenewLife’s international business are reflected in the International reportable segment.
The assets and liabilities of RenewLife were recorded at their respective estimated fair value as of the date of the acquisition using U.S. GAAP for business combinations. The excess of the purchase price over the fair value of the net identifiable assets acquired was allocated to goodwill. The recorded goodwill primarily reflects the value of expanding the Company’s portfolio further into the health and wellness arena.
The following table summarizes the fair value of RenewLife’s assets acquired and liabilities assumed and related deferred income taxes as of the acquisition date. As of March 31, 2017, the fair value of the assets acquired and liabilities assumed reflects the final insignificant measurement period adjustments related to deferred income taxes and income taxes payable. The weighted-average estimated useful life of intangible assets subject to amortization is 15 years.
 
RenewLife
Goodwill
$
137

Trademarks
134

Customer relationships
36

Property, plant and equipment
3

Working capital, net
40

Deferred income taxes
(60
)
Purchase Price
$
290


Pro forma results reflecting the acquisition were not presented because the acquisition did not meet the threshold requirements for additional disclosure.
INVENTORIES, NET
INVENTORIES, NET
INVENTORIES, NET
Inventories, net, consisted of the following as of:
 
3/31/2017
 
6/30/2016
Finished goods
$
425

 
$
361

Raw materials and packaging
108

 
111

Work in process
3

 
3

LIFO allowances
(26
)
 
(32
)
Total
$
510

 
$
443

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
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, interest rate, foreign currency and counterparty 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 to fix the price of a portion of its forecasted raw material requirements. Contract maturities, which are generally no longer than 2 years, are matched to the length of the raw material purchase contracts. Commodity purchase contracts are measured at fair value using market quotations obtained from commodity futures exchanges or commodity derivative dealers.

As of March 31, 2017, the notional amount of commodity derivatives was $20, of which $10 related to jet fuel swaps used for the charcoal business and $10 related to soybean oil futures used for bottled salad dressings. As of June 30, 2016, the notional amount of commodity derivatives was $30, of which $16 related to jet fuel swaps and $14 related to soybean oil futures.

Interest Rate Risk Management

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

As of both March 31, 2017 and June 30, 2016, the Company had no interest rate derivative instruments.

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 and certain intercompany transactions. 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 $48 as of March 31, 2017, and $84 as of June 30, 2016, respectively. The net notional values of outstanding foreign currency forward contracts used by the Company to economically hedge foreign exchange risk associated with certain intercompany transactions were $23 and $0 as of March 31, 2017 and June 30, 2016, respectively.

Commodity, Interest Rate and Foreign Exchange Derivatives

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

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

 
Gains (losses) recognized in Other comprehensive income
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Commodity purchase derivative contracts
$
(3
)
 
$
3

 
$
(2
)
 
$
(4
)
Interest rate derivative contracts

 

 

 

Foreign exchange derivative contracts
(1
)
 
(9
)
 

 
(4
)
Total
$
(4
)
 
$
(6
)
 
$
(2
)
 
$
(8
)


 
Gains (losses) reclassified from Accumulated other comprehensive loss and recognized in Net earnings
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Commodity purchase derivative contracts
$

 
$
(4
)
 
$
(1
)
 
$
(9
)
Interest rate derivative contracts
(2
)
 
(2
)
 
(5
)
 
(5
)
Foreign exchange derivative contracts

 
1

 
(3
)
 
1

Total
$
(2
)
 
$
(5
)
 
$
(9
)
 
$
(13
)


The gains (losses) reclassified from Accumulated other comprehensive losses and recognized in Net earnings during the three and nine months ended March 31, 2017 and 2016, for commodity purchase and foreign exchange contracts were included in Cost of products sold, and for interest rate contracts were included in Interest expense.

The estimated amount of the existing net gain (loss) in Accumulated other comprehensive losses as of March 31, 2017, that is expected to be reclassified into Net earnings within the next twelve months is $7. Gains and losses on derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in Net earnings. During both the three and nine months ended March 31, 2017 and 2016, hedge ineffectiveness was not significant.

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 held as of March 31, 2017 and June 30, 2016 less than $1 and $4, respectively, contained such terms. As of both March 31, 2017 and June 30, 2016, 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 March 31, 2017 and June 30, 2016, 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 both March 31, 2017 and June 30, 2016, the Company maintained cash margin balances related to exchange-traded futures contracts of $1, which are classified as Other current assets in the condensed consolidated balance sheets.

Trust Assets

The Company has held interests in mutual funds and cash equivalents as part of trust assets related to certain of its nonqualified deferred compensation plans. The participants in the nonqualified deferred compensation plans, who are the Company’s current and former employees, may select among certain mutual funds in which their compensation deferrals are invested in accordance with the terms of the plans and within the confines of the trusts, which hold the marketable securities. These 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 March 31, 2017 and June 30, 2016, the Company’s financial assets and liabilities that were measured at fair value on a recurring basis during the applicable periods included derivative financial instruments, which were classified as either Level 1 or Level 2, and trust assets to fund certain of the Company’s nonqualified deferred compensation plans, which were classified as Level 1.
The following table summarizes the fair value of the Company’s assets and liabilities for which disclosure of fair value is required:
 
 
 
 
 
3/31/2017
 
6/30/2016
 
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
 
$
196

 
$
196

 
$
234

 
$
234

Time deposits
Cash and cash
equivalents
(a)
 
2
 
132

 
132

 
79

 
79

Commodity purchase futures contracts
Other current assets
 
1
 

 

 
1

 
1

Commodity purchase swaps contracts
Other current assets
 
2
 
1

 
1

 

 

Foreign exchange forward contracts
Other current assets
 
2
 

 

 
1

 
1

Commodity purchase swaps contracts
Other assets
 
2
 

 

 
1

 
1

Trust assets for nonqualified deferred compensation plans
Other assets
 
1
 
69

 
69

 
52

 
52

 
 
 
 
 
$
398

 
$
398

 
$
368

 
$
368

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Notes and loans payable
Notes and loans payable (b)
 
2
 
$
650

 
$
650

 
$
523

 
$
523

Commodity purchase futures contracts
Accounts payable and accrued liabilities
 
1
 
1

 
1

 

 

Commodity purchase swaps contracts
Accounts payable and
accrued liabilities
 
2
 

 

 
1

 
1

Foreign exchange forward contracts
Accounts payable and
accrued liabilities
 
2
 
1

 
1

 
4

 
4

Current maturities of long-term debt
and Long-term debt
Current maturities of long-
term debt and Long-term
debt
(c)
 
2
 
1,790

 
1,854

 
1,789

 
1,922

 
 
 
 
 
$
2,442

 
$
2,506

 
$
2,317

 
$
2,450

____________________

(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 debts issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
(c)
Current maturities of long-term debt and Long-term debt are recorded at cost. The fair value of Long-term debt, including current maturities, is determined using secondary market prices quoted by corporate bond dealers, and is classified as Level 2.
DEBT DEBT
DEBT
DEBT

Revolving Credit Agreement

On February 8, 2017, the Company entered into a new $1,100 revolving credit agreement (the Credit Agreement) that matures in February 2022. The Credit Agreement replaced a prior $1,100 revolving credit agreement in place since October 2014. No termination fees or penalties were incurred in connection with the Company's debt modification. There were no borrowings under the Credit Agreement as of March 31, 2017 and the Company believes that borrowings under the Credit Agreement are and will continue to be available for general corporate purposes. The Credit Agreement includes certain restrictive covenants and limitations, with which the Company was in compliance as of March 31, 2017.
INCOME TAXES
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 from continuing operations was 30.2% and 32.1% for the three and nine months ended March 31, 2017, respectively, and 33.0% and 34.0% for the three and nine months ended March 31, 2016, respectively. The decrease in the current three- and nine-month periods was primarily due to the recognition of excess tax benefits from share-based compensation upon the adoption of ASU No. 2016-09 in the first quarter of fiscal year 2017. Refer to Note 1 for further details.
NET EARNINGS PER SHARE (EPS)
NET EARNINGS PER SHARE (EPS)
NET EARNINGS PER SHARE (EPS)
The following is a 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
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Basic
128,752
 
129,690
 
128,899
 
129,463
Dilutive effect of stock options and other
2,610
 
1,957
 
2,500
 
2,189
Diluted
131,362
 
131,647
 
131,399
 
131,652
 
 
 
 
 
 
 
 
Antidilutive stock options and other
5
 
14
 
44
 
40


The Company has two share repurchase programs: an open-market purchase program with an authorized aggregate purchase amount of up to $750, all of which was available for share repurchases as of March 31, 2017, and a program to offset the anticipated impact of share dilution related to share-based awards (the Evergreen Program), which has no authorization limit as to amount or timing of repurchases.
Share repurchases under authorized programs during the three and nine months ended March 31, 2017 and 2016 were as follows:

Three Months Ended

Nine Months Ended

3/31/2017

3/31/2016

3/31/2017

3/31/2016

Amount

Shares (in 000's)

Amount

Shares (in 000's)

Amount

Shares (in 000's)

Amount

Shares (in 000's)
Open-market purchase programs
$




$




$




$



Evergreen Program




74


595


183


1,455


218


1,863

Total
$




$
74


595


$
183


1,455


$
218


1,863

COMPREHENSIVE INCOME
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME
The following table provides a summary of Comprehensive income for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Earnings from continuing operations
$
172

 
$
159

 
$
501

 
$
483

Earnings (losses) from discontinued operations, net of tax

 
3

 
(1
)
 

Net earnings
172

 
162

 
500

 
483

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
13

 
20

 
(5
)
 
(47
)
Net unrealized gains (losses) on derivatives

 
(1
)
 
7

 
4

Pension and postretirement benefit adjustments
1

 

 
3

 
3

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

 
19

 
5

 
(40
)
Comprehensive income
$
186

 
$
181

 
$
505

 
$
443


Changes in Accumulated other comprehensive net (losses) income by component were as follows for the nine months ended March 31:
 
Foreign currency translation adjustments
 
Net unrealized gains (losses) on derivatives
 
Pension and postretirement benefit adjustments
 
Accumulated other comprehensive (losses) income
Balance as of June 30, 2015
$
(300
)
 
$
(53
)
 
$
(149
)
 
$
(502
)
Other comprehensive income (loss) before reclassifications
(40
)
 
(8
)
 

 
(48
)
Amounts reclassified from Accumulated other comprehensive net losses

 
13

 
4

 
17

Income tax benefit (expense)
(7
)
 
(1
)
 
(1
)
 
(9
)
Net current period other comprehensive income (loss)
(47
)
 
4

 
3

 
(40
)
Balance as of March 31, 2016
$
(347
)
 
$
(49
)
 
$
(146
)
 
$
(542
)
Balance as of June 30, 2016
$
(353
)
 
$
(44
)
 
$
(173
)
 
$
(570
)
Other comprehensive income (loss) before reclassifications
(6
)
 
(2
)
 

 
(8
)
Amounts reclassified from Accumulated other comprehensive net losses

 
9

 
6

 
15

Income tax benefit (expense)
1

 

 
(3
)
 
(2
)
Net current period other comprehensive income (loss)
(5
)
 
7

 
3

 
5

Balance as of March 31, 2017
$
(358
)
 
$
(37
)
 
$
(170
)
 
$
(565
)

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 nine months ended March 31, 2017, Other comprehensive income (loss) on these loans totaled $4 and $0, respectively. For the three and nine months ended March 31, 2016, Other comprehensive income (loss) on these loans totaled $0 and $(11), respectively. There were no amounts reclassified from Accumulated other comprehensive net (losses) income for the periods presented.
EMPLOYEE BENEFIT PLANS
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
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Service cost
$
1

 
$
1

 
$
1

 
$
1

Interest cost
5

 
6

 
16

 
19

Expected return on plan assets
(5
)
 
(4
)
 
(15
)
 
(13
)
Amortization of unrecognized items
2

 
2

 
8

 
7

Total
$
3

 
$
5

 
$
10

 
$
14



The net periodic benefit cost for the Company’s retirement health care plans was $0 for both the three and nine months ended March 31, 2017 and a credit of $1 for both the three and nine months ended March 31, 2016.
During the three and nine months ended March 31, 2017, the Company made $0 and $15 in discretionary contributions to the domestic qualified retirement income plan, respectively.
OTHER CONTINGENCIES AND GUARANTEES
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 $22 and $14 as of March 31, 2017 and June 30, 2016, respectively, for its share of aggregate future remediation costs related to these matters.
One 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 $12 and $11 of the recorded liability as of both March 31, 2017 and June 30, 2016, respectively. 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.
Another matter, which accounted for $9 and less than $1 of the recorded liability as of March 31, 2017 and June 30, 2016, respectively, 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, 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 not included in the study. 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 liabilities on the aforementioned guarantees as of March 31, 2017.
As of March 31, 2017, the Company was a party to letters of credit of $10 primarily related to one of its insurance carriers, of which $0 had been drawn upon.
Other Matters
During the second quarter of fiscal year 2017, the Company recognized a $21 non-cash charge related to impairing certain assets of the Company’s Aplicare business within the Cleaning segment. The asset impairment charge was recorded to Other (income) expense, net, and primarily related to writing down Property, plant and equipment to fair value in connection with an updated valuation of the Aplicare business. Such updated valuation took into account proposed actions that the Company planned to take in response to a December 2016 FDA warning letter that focused on the validation of Aplicare's sterilization process as well as quality controls and environmental monitoring for Aplicare's povidone-iodine products. The Aplicare business, which represents slightly less than 1% of the Company’s net sales, is a business primarily focused on providing skin antisepsis products to health care institutions. While the Company continues to believe in the value of the processes that Aplicare has used for the past 30 years, the Company may have additional future charges as it continues to address the warning letter and explores a range of various strategic alternatives for the Aplicare business. As of March 31, 2017, the Aplicare business has remaining total assets of $17, including net Receivables of $5, Inventory of $8 and net Property, plant and equipment of $4.
SEGMENT RESULTS
SEGMENT RESULTS
SEGMENT RESULTS
The Company operates through strategic business units that are aggregated into four reportable segments based on the economics and nature of the products sold: Cleaning, Household, Lifestyle and International. As a result of Clorox Venezuela being reported as discontinued operations, the results of Clorox Venezuela are no longer included in the International reportable segment.
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, other current assets, property and equipment, other investments and deferred taxes.
The table below presents reportable segment information and a reconciliation of the segment information to the Company’s consolidated Net sales and Earnings from continuing operations before income taxes, with amounts that are not allocated to the reportable segments reflected in Corporate.
 
 
Net sales
 
 
Three Months Ended
 
Nine Months Ended
 
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Cleaning
 
$
497

 
$
465

 
$
1,500

 
$
1,419

Household
 
486

 
467

 
1,329

 
1,253

Lifestyle
 
246

 
254

 
742

 
736

International
 
248

 
240

 
755

 
753

Corporate
 

 

 

 

Total
 
$
1,477

 
$
1,426

 
$
4,326

 
$
4,161

 
 
 
 
 
 
 
 
 
 
 
Earnings (losses) from continuing operations before income taxes
 
 
Three Months Ended
 
Nine Months Ended
 
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Cleaning
 
$
132

 
$
122

 
$
400

 
$
394

Household
 
106

 
113

 
246

 
262

Lifestyle
 
51

 
70

 
190

 
201

International
 
20

 
11

 
75

 
65

Corporate
 
(62
)
 
(79
)
 
(173
)
 
(191
)
Total
 
$
247

 
$
237

 
$
738

 
$
731



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 27% and 26% for the three and nine months ended March 31, 2017, respectively, and 27% for each of the three and nine months ended March 31, 2016.
In January 2017, the Company sold an international facility, previously reported in the International reportable segment, which resulted in $23 in cash proceeds from investing activities and a gain of $(10) recorded in Other (income) expense, net, on the condensed consolidated statement of earnings.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three and nine months ended March 31, 2017 and 2016, 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.

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

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, 2016, which includes a complete set of footnote disclosures including the Company’s significant accounting policies.
Recently Issued Accounting Standards

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires presenting the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. This standard also requires that other components of the net periodic benefit cost be presented separately from the line item(s) that includes service costs and outside of any subtotal of operating income, if one is presented, on a retrospective basis. Additionally, the new guidance limits the components that are eligible for capitalization in assets to only the service cost component. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with the option to early adopt in the first quarter of fiscal year 2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

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 is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions, including requiring excess tax benefits and tax deficiencies to be recognized as income tax benefits or expenses in the consolidated statement of earnings. Additionally, the standard requires cash flows from excess tax benefits and deficiencies, previously classified as a financing activity, to be classified as an operating activity in the consolidated statement of cash flows. The Company adopted this guidance in the first quarter of fiscal year 2017. Excess tax benefits of $11 and $17 were recognized in the consolidated statement of earnings and classified as an operating activity in the consolidated statement of cash flows during the three and nine months ended March 31, 2017, respectively. The prior period consolidated statement of cash flows has not been adjusted as permitted. The guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The Company did not make this election and will continue to account for forfeitures on an estimated basis.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a right-of-use 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. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Cost,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this standard in the first quarter of fiscal year 2017 and retrospectively applied the standard to the June 30, 2016 consolidated balance sheet, resulting in an $8 reduction in Other assets and Long-term debt. The adoption had no impact on the Company’s consolidated statement of earnings or consolidated statement of cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which replaces most of the existing U.S. GAAP revenue recognition guidance and is intended to improve and converge with international standards on the financial reporting requirements for revenue from contracts with customers. The core principle of ASU 2014-09 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers, including information about significant judgments and changes in judgments. The new guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with the option to early adopt in the first quarter of fiscal year 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.
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 March 31, 2017 and June 30, 2016, the Company’s financial assets and liabilities that were measured at fair value on a recurring basis during the applicable periods included derivative financial instruments, which were classified as either Level 1 or Level 2, and trust assets to fund certain of the Company’s nonqualified deferred compensation plans, which were classified as Level 1.
The Company operates through strategic business units that are aggregated into four reportable segments based on the economics and nature of the products sold: Cleaning, Household, Lifestyle and International. As a result of Clorox Venezuela being reported as discontinued operations, the results of Clorox Venezuela are no longer included in the International reportable segment.
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, other current assets, property and equipment, other investments and deferred taxes.
DISCONTINUED OPERATIONS (Tables)
Summary of (losses) gains from discontinued operations
The following table provides a summary of Earnings (losses) from discontinued operations for Clorox Venezuela and Earnings (losses) from discontinued operations other than Clorox Venezuela for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Operating losses from Clorox Venezuela before income taxes
$

 
$

 
$

 
$

Exit costs and other related expenses for Clorox Venezuela
(1
)
 
(1
)
 
(2
)
 
(2
)
Total earnings (losses) from Clorox Venezuela before income taxes
(1
)
 
(1
)
 
(2
)
 
(2
)
Income tax benefit attributable to Clorox Venezuela
1

 
2

 
1

 
2

Total earnings (losses) from Clorox Venezuela, net of tax

 
1

 
(1
)
 

Gains (losses) from discontinued operations
other than Clorox Venezuela, net of tax

 
2

 

 

Earnings (losses) from discontinued operations, net of tax
$

 
$
3

 
$
(1
)
 
$

BUSINESSES ACQUIRED (Tables)
Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed as of Acquisition Date
The following table summarizes the fair value of RenewLife’s assets acquired and liabilities assumed and related deferred income taxes as of the acquisition date. As of March 31, 2017, the fair value of the assets acquired and liabilities assumed reflects the final insignificant measurement period adjustments related to deferred income taxes and income taxes payable. The weighted-average estimated useful life of intangible assets subject to amortization is 15 years.
 
RenewLife
Goodwill
$
137

Trademarks
134

Customer relationships
36

Property, plant and equipment
3

Working capital, net
40

Deferred income taxes
(60
)
Purchase Price
$
290

INVENTORIES, NET (Tables)
Schedule of Inventories, Net
Inventories, net, consisted of the following as of:
 
3/31/2017
 
6/30/2016
Finished goods
$
425

 
$
361

Raw materials and packaging
108

 
111

Work in process
3

 
3

LIFO allowances
(26
)
 
(32
)
Total
$
510

 
$
443

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)
The effects of derivative instruments designated as hedging instruments on Comprehensive income and Net earnings were as follows:

 
Gains (losses) recognized in Other comprehensive income
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Commodity purchase derivative contracts
$
(3
)
 
$
3

 
$
(2
)
 
$
(4
)
Interest rate derivative contracts

 

 

 

Foreign exchange derivative contracts
(1
)
 
(9
)
 

 
(4
)
Total
$
(4
)
 
$
(6
)
 
$
(2
)
 
$
(8
)
 
Gains (losses) reclassified from Accumulated other comprehensive loss and recognized in Net earnings
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Commodity purchase derivative contracts
$

 
$
(4
)
 
$
(1
)
 
$
(9
)
Interest rate derivative contracts
(2
)
 
(2
)
 
(5
)
 
(5
)
Foreign exchange derivative contracts

 
1

 
(3
)
 
1

Total
$
(2
)
 
$
(5
)
 
$
(9
)
 
$
(13
)
The following table summarizes the fair value of the Company’s assets and liabilities for which disclosure of fair value is required:
 
 
 
 
 
3/31/2017
 
6/30/2016
 
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
 
$
196

 
$
196

 
$
234

 
$
234

Time deposits
Cash and cash
equivalents
(a)
 
2
 
132

 
132

 
79

 
79

Commodity purchase futures contracts
Other current assets
 
1
 

 

 
1

 
1

Commodity purchase swaps contracts
Other current assets
 
2
 
1

 
1

 

 

Foreign exchange forward contracts
Other current assets
 
2
 

 

 
1

 
1

Commodity purchase swaps contracts
Other assets
 
2
 

 

 
1

 
1

Trust assets for nonqualified deferred compensation plans
Other assets
 
1
 
69

 
69

 
52

 
52

 
 
 
 
 
$
398

 
$
398

 
$
368

 
$
368

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Notes and loans payable
Notes and loans payable (b)
 
2
 
$
650

 
$
650

 
$
523

 
$
523

Commodity purchase futures contracts
Accounts payable and accrued liabilities
 
1
 
1

 
1

 

 

Commodity purchase swaps contracts
Accounts payable and
accrued liabilities
 
2
 

 

 
1

 
1

Foreign exchange forward contracts
Accounts payable and
accrued liabilities
 
2
 
1

 
1

 
4

 
4

Current maturities of long-term debt
and Long-term debt
Current maturities of long-
term debt and Long-term
debt
(c)
 
2
 
1,790

 
1,854

 
1,789

 
1,922

 
 
 
 
 
$
2,442

 
$
2,506

 
$
2,317

 
$
2,450

____________________

(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 debts issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
(c)
Current maturities of long-term debt and Long-term debt are recorded at cost. The fair value of Long-term debt, including current maturities, is determined using secondary market prices quoted by corporate bond dealers, and is classified as Level 2.
NET EARNINGS PER SHARE (EPS) (Tables)
The following is a 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
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Basic
128,752
 
129,690
 
128,899
 
129,463
Dilutive effect of stock options and other
2,610
 
1,957
 
2,500
 
2,189
Diluted
131,362
 
131,647
 
131,399
 
131,652
 
 
 
 
 
 
 
 
Antidilutive stock options and other
5
 
14
 
44
 
40
Share repurchases under authorized programs during the three and nine months ended March 31, 2017 and 2016 were as follows:

Three Months Ended

Nine Months Ended

3/31/2017

3/31/2016

3/31/2017

3/31/2016

Amount

Shares (in 000's)

Amount

Shares (in 000's)

Amount

Shares (in 000's)

Amount

Shares (in 000's)
Open-market purchase programs
$




$




$




$



Evergreen Program




74


595


183


1,455


218


1,863

Total
$




$
74


595


$
183


1,455


$
218


1,863

COMPREHENSIVE INCOME (Tables)
The following table provides a summary of Comprehensive income for the periods indicated:
 
Three Months Ended
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Earnings from continuing operations
$
172

 
$
159

 
$
501

 
$
483

Earnings (losses) from discontinued operations, net of tax

 
3

 
(1
)
 

Net earnings
172

 
162

 
500

 
483

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
13

 
20

 
(5
)
 
(47
)
Net unrealized gains (losses) on derivatives

 
(1
)
 
7

 
4

Pension and postretirement benefit adjustments
1

 

 
3

 
3

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

 
19

 
5

 
(40
)
Comprehensive income
$
186

 
$
181

 
$
505

 
$
443

Changes in Accumulated other comprehensive net (losses) income by component were as follows for the nine months ended March 31:
 
Foreign currency translation adjustments
 
Net unrealized gains (losses) on derivatives
 
Pension and postretirement benefit adjustments
 
Accumulated other comprehensive (losses) income
Balance as of June 30, 2015
$
(300
)
 
$
(53
)
 
$
(149
)
 
$
(502
)
Other comprehensive income (loss) before reclassifications
(40
)
 
(8
)
 

 
(48
)
Amounts reclassified from Accumulated other comprehensive net losses

 
13

 
4

 
17

Income tax benefit (expense)
(7
)
 
(1
)
 
(1
)
 
(9
)
Net current period other comprehensive income (loss)
(47
)
 
4

 
3

 
(40
)
Balance as of March 31, 2016
$
(347
)
 
$
(49
)
 
$
(146
)
 
$
(542
)
Balance as of June 30, 2016
$
(353
)
 
$
(44
)
 
$
(173
)
 
$
(570
)
Other comprehensive income (loss) before reclassifications
(6
)
 
(2
)
 

 
(8
)
Amounts reclassified from Accumulated other comprehensive net losses

 
9

 
6

 
15

Income tax benefit (expense)
1

 

 
(3
)
 
(2
)
Net current period other comprehensive income (loss)
(5
)
 
7

 
3

 
5

Balance as of March 31, 2017
$
(358
)
 
$
(37
)
 
$
(170
)
 
$
(565
)
EMPLOYEE BENEFIT PLANS (Tables)
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
 
Nine Months Ended
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Service cost
$
1

 
$
1

 
$
1

 
$
1

Interest cost
5

 
6

 
16

 
19

Expected return on plan assets
(5
)
 
(4
)
 
(15
)
 
(13
)
Amortization of unrecognized items
2

 
2

 
8

 
7

Total
$
3

 
$
5

 
$
10

 
$
14

SEGMENT RESULTS (Tables)
Selected Financial Information Relating to the Company's Segments
The table below presents reportable segment information and a reconciliation of the segment information to the Company’s consolidated Net sales and Earnings from continuing operations before income taxes, with amounts that are not allocated to the reportable segments reflected in Corporate.
 
 
Net sales
 
 
Three Months Ended
 
Nine Months Ended
 
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Cleaning
 
$
497

 
$
465

 
$
1,500

 
$
1,419

Household
 
486

 
467

 
1,329

 
1,253

Lifestyle
 
246

 
254

 
742

 
736

International
 
248

 
240

 
755

 
753

Corporate
 

 

 

 

Total
 
$
1,477

 
$
1,426

 
$
4,326

 
$
4,161

 
 
 
 
 
 
 
 
 
 
 
Earnings (losses) from continuing operations before income taxes
 
 
Three Months Ended
 
Nine Months Ended
 
 
3/31/2017
 
3/31/2016
 
3/31/2017
 
3/31/2016
Cleaning
 
$
132

 
$
122

 
$
400

 
$
394

Household
 
106

 
113

 
246

 
262

Lifestyle
 
51

 
70

 
190

 
201

International
 
20

 
11

 
75

 
65

Corporate
 
(62
)
 
(79
)
 
(173
)
 
(191
)
Total
 
$
247

 
$
237

 
$
738

 
$
731

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Mar. 31, 2017
Mar. 31, 2017
Jun. 30, 2016
Long-term Debt [Member]
Accounting Standards Update 2015-03 [Member]
Jun. 30, 2016
Other Noncurrent Assets [Member]
Accounting Standards Update 2015-03 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
 
Excess tax benefits
$ 11 
$ 17 
 
 
Reclassification of debt issuance costs
 
 
$ 8 
$ (8)
DISCONTINUED OPERATIONS (Summary of (Losses) Gains from Discontinued Operations) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 39 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Mar. 31, 2017
Mar. 31, 2016
Sep. 30, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
Total gain (losses) from discontinued operations, net of tax
$ 0 
$ 3 
$ (1)
$ 0 
 
Clorox Venezuela [Member]
 
 
 
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
Minimum percentage of products required to be sold at frozen price
 
 
 
 
66.67% 
Net sales
 
Operating losses from Clorox Venezuela before income taxes
 
Exit costs and other related expenses for Clorox Venezuela
(1)
(1)
(2)
(2)
 
Total earnings (losses) from Clorox Venezuela before income taxes
(1)
(1)
(2)
(2)
 
Income tax benefit attributable to Clorox Venezuela
 
Total gain (losses) from discontinued operations, net of tax
(1)
 
Other Discontinued Operations [Member]
 
 
 
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
Total gain (losses) from discontinued operations, net of tax
$ 0 
$ 2 
$ 0 
$ 0 
 
BUSINESSES ACQUIRED (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended
Mar. 31, 2017
Jun. 30, 2016
May 2, 2016
RenewLife [Member]
Mar. 31, 2017
RenewLife [Member]
May 2, 2016
RenewLife [Member]
Mar. 31, 2017
RenewLife [Member]
Customer Relationships [Member]
Mar. 31, 2017
RenewLife [Member]
Trademarks [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Business acquisition date
 
 
May 02, 2016 
 
 
 
 
Percentage of business acquired
 
 
 
 
100.00% 
 
 
Amount paid for acquisition
 
 
$ 290 
 
 
 
 
The weighted-average estimated useful life of intangible assets subject to amortization
 
 
15 years 
 
 
 
 
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
 
 
 
 
 
 
 
Goodwill
1,193 
1,197 
 
137 
 
 
 
Other intangible assets
 
 
 
 
 
36 
134 
Property, plant and equipment
 
 
 
 
 
 
Working capital, net
 
 
 
40 
 
 
 
Deferred income taxes
 
 
 
(60)
 
 
 
Purchase Price
 
 
 
$ 290 
 
 
 
INVENTORIES, NET (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2017
Jun. 30, 2016
Inventory Disclosure [Abstract]
 
 
Finished goods
$ 425 
$ 361 
Raw materials and packaging
108 
111 
Work in process
LIFO allowances
(26)
(32)
Total
$ 510 
$ 443 
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Mar. 31, 2017
instrument
Jun. 30, 2016
instrument
Derivative [Line Items]
 
 
Number of interest rate derivatives held
Maximum duration, foreign exchange contracts
2 years 
 
Estimated amount of the existing net gain (loss) to be reclassified into earnings in the next 12 months
$ 7 
 
Derivative instruments subject to contractually defined counterparty liability position limits
Total Commodity Purchase Derivative Contracts [Member]
 
 
Derivative [Line Items]
 
 
Maximum duration, commodity contracts
2 years