CLOROX CO /DE/, 10-Q filed on 11/2/2012
Quarterly Report
Document and Entity Information
3 Months Ended
Sep. 30, 2012
Oct. 31, 2012
Document and Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2012 
 
Entity Registrant Name
CLOROX CO /DE/ 
 
Entity Central Index Key
0000021076 
 
Current Fiscal Year End Date
--06-30 
 
Document Fiscal Period Focus
Q1 
 
Document Fiscal Year Focus
2013 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
130,469,074 
Condensed Consolidated Statements of Earnings and Comprehensive Income (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Condensed Consolidated Statements of Earnings [Abstract]
 
 
Net sales
$ 1,338 
$ 1,305 
Cost of products sold
764 
759 
Gross profit
574 
546 
Selling and administrative expenses
195 
190 
Advertising costs
122 
118 
Research and development costs
30 
28 
Interest expense
33 
29 
Other income, net
(6)
Earnings before income taxes
194 
187 
Income taxes
61 
57 
Net earnings
133 
130 
Net earnings per share
 
 
Basic
$ 1.02 
$ 0.99 
Diluted
$ 1.01 
$ 0.98 
Weighted average shares outstanding (in thousands)
 
 
Basic
130,268 
131,968 
Diluted
131,702 
133,611 
Dividend declared per share
$ 0.64 
$ 0.60 
Comprehensive income
$ 160 
$ 66 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Jun. 30, 2012
Current assets
 
 
Cash and cash equivalents
$ 667 
$ 267 
Receivables, net
503 
576 
Inventories, net
421 
384 
Other current assets
154 
149 
Total current assets
1,745 
1,376 
Property, plant and equipment, net of accumulated depreciation of $1,834 and $1,804, respectively
1,098 
1,081 
Goodwill
1,123 
1,112 
Trademarks, net
556 
556 
Other intangible assets, net
83 
86 
Other assets
142 
144 
Total assets
4,747 
4,355 
Current liabilities
 
 
Notes and loans payable
300 
Current maturities of long-term debt
850 
850 
Accounts payable
388 
412 
Accrued liabilities
458 
494 
Income taxes payable
27 
Total current liabilities
1,725 
2,061 
Long-term debt
2,169 
1,571 
Other liabilities
738 
739 
Deferred income taxes
135 
119 
Total liabilities
4,767 
4,490 
Contingencies
   
   
Stockholders' deficit
 
 
Preferred stock: $0.001 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 at September 30, 2012 and June 30, 2012; and 130,318,916 and 129,562,082 shares outstanding at September 30, 2012 and June 30, 2012, respectively
159 
159 
Additional paid-in capital
631 
633 
Retained earnings
1,395 
1,350 
Treasury shares, at cost: 28,422,545 and 29,179,379 shares at September 30, 2012 and June 30, 2012, respectively
(1,836)
(1,881)
Accumulated other comprehensive net losses
(369)
(396)
Stockholders' deficit
(20)
(135)
Total liabilities and stockholders' deficit
$ 4,747 
$ 4,355 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2012
Jun. 30, 2012
Condensed Consolidated Balance Sheets [Abstract]
 
 
Property, plant and equipment, accumulated depreciation
$ 1,834 
$ 1,804 
Preferred stock, par value per share
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value per share
$ 1.00 
$ 1.00 
Common stock, shares authorized
750,000,000 
750,000,000 
Common stock, shares issued
158,741,461 
158,741,461 
Common stock, shares outstanding
130,318,916 
129,562,082 
Treasury shares, shares
28,422,545 
29,179,379 
Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Operating activities:
 
 
Net earnings
$ 133 
$ 130 
Adjustments to reconcile earnings from operations:
 
 
Depreciation and amortization
44 
46 
Share-based compensation
Deferred income taxes
15 
Other
17 
Changes in:
 
 
Receivables, net
80 
79 
Inventories, net
(32)
(31)
Other current assets
(2)
Accounts payable and accrued liabilities
(68)
(114)
Income taxes payable
10 
Net cash provided by operations
208 
131 
Investing activities:
 
 
Capital expenditures
(54)
(37)
Net cash used for investing activities
(54)
(37)
Financing activities:
 
 
Notes and loans payable, net
(297)
(22)
Long-term debt borrowings, net of issuance costs
594 
Treasury stock purchased
(9)
Cash dividends paid
(83)
(79)
Issuance of common stock for employee stock plans and other
28 
33 
Net cash provided by (used for) financing activities
242 
(77)
Effect of exchange rate changes on cash and cash equivalents
(6)
Net increase in cash and cash equivalents
400 
11 
Cash and cash equivalents:
 
 
Beginning of period
267 
259 
End of period
$ 667 
$ 267 
INTERIM FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS

Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three months ended September 30, 2012 and 2011, 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. The results for the interim period ended September 30, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013, or for any future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations of the 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, 2012, which includes a complete set of footnote disclosures, including the Company's significant accounting policies.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ materially from estimates and assumptions made.
INVENTORIES, NET
INVENTORIES, NET
NOTE 2. INVENTORIES, NET

Inventories, net, consisted of the following as of:

    9/30/2012   6/30/2012
Finished goods   $ 347     $ 307  
Raw materials and packaging     123       120  
Work in process     4       4  
LIFO allowances     (42 )     (37 )
Allowances for obsolescence     (11 )     (10 )
Total   $ 421     $ 384  
OTHER LIABILITIES
OTHER LIABILITIES
NOTE 3. OTHER LIABILITIES

Other liabilities consisted of the following as of:

    9/30/2012   6/30/2012
Employee benefit obligations   $ 324   $ 312
Venture agreement net terminal obligation     282
  281
Taxes  
68     82
Other     64  
64
Total   $ 738   $ 739
DEBT
DEBT
NOTE 4. DEBT

In September 2012, the Company issued $600 of senior notes with an annual fixed interest rate of 3.05% under its existing shelf registration statement. The notes are payable semi-annually in March and September and have a maturity date of September 15, 2022. Net proceeds were used to repay commercial paper and all of the Company's $350 senior notes with an annual fixed interest rate of 5.45% upon maturity in October 2012. The notes rank equally with all of the Company's existing and future senior indebtedness.
NET EARNINGS PER SHARE
NET EARNINGS PER SHARE
NOTE 5. NET EARNINGS PER SHARE

The following is the reconciliation of the weighted average number of shares outstanding (in thousands) used to calculate basic net earnings per share (EPS) to those used to calculate diluted net EPS:

    Three Months Ended
    9/30/2012   9/30/2011
Basic   130,268
131,968
Dilutive effect of stock options and other
1,434   1,643
Diluted   131,702   133,611

During the three months ended September 30, 2012 and 2011, the Company included all stock options to purchase shares of the Company's common stock in the calculations of diluted net EPS because the average market price of all outstanding grants was greater than the exercise price.

COMPREHENSIVE INCOME
COMPREHENSIVE INCOME

NOTE 6. COMPREHENSIVE INCOME

Comprehensive income is defined as net earnings and other changes in stockholders' deficit from transactions and other events from sources other than stockholders. Comprehensive income was as follows:

    Three Months Ended
    9/30/2012   9/30/2011
Net earnings   $ 133       130  
Other comprehensive income (losses), net of tax:                
Foreign currency translation adjustments     27       (39 )
Net derivative adjustments     (1 )     (23 )
Pension and postretirement benefit adjustments     1       (2 )
Total   $ 160     $ 66  
INCOME TAXES
INCOME TAXES

NOTE 7. 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 before income taxes was 31.6% and 30.5% for the three months ended September 30, 2012 and 2011, respectively. The lower tax rate for the three months ended September 30, 2011 was primarily due to lower tax on foreign earnings. The current and prior year periods also reflect benefits from tax settlements.

The balance of unrecognized tax benefits as of September 30, 2012 and June 30, 2012, included potential benefits of $55 and $56, respectively, which, if recognized, would affect the effective tax rate on earnings.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The total balance of accrued interest and penalties related to uncertain tax positions was $7 as of both September 30, 2012 and June 30, 2012. Interest and penalties included in income tax expense resulted in net benefits of $6 and $1 for the three months ended September 30, 2012 and 2011, respectively.

The Company files income tax returns in U.S. federal and various state, local and foreign jurisdictions. The federal statute of limitations has expired for all tax years through June 30, 2008. Various income tax returns in state and foreign jurisdictions are currently in the process of examination.

Certain issues relating to fiscal years 1996 through 2000 were effectively settled by the Company and the Canadian Revenue Agency during the quarter ended September 30, 2012, resulting in a net benefit of tax and interest of $7. No tax benefits had previously been recognized for these issues in the Company's consolidated financial statements.

RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS
RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS
NOTE 8. RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS

The following table summarizes the components of net periodic benefit cost for the Company's retirement income plan:

    Three Months Ended
    9/30/2012   9/30/2011
Service cost   $ 1     $ 1  
Interest cost

6       7  
Expected return on plan assets     (7 )
  (8 )
Amortization of unrecognized items     2    
2
Total   $ 2     $ 2  

The net periodic benefit cost for the Company's retirement health care plans was $0 and $1 for the three months ended September 30, 2012 and 2011, respectively.
CONTINGENCIES AND GUARANTEES
CONTINGENCIES AND GUARANTEES
NOTE 9. CONTINGENCIES AND GUARANTEES

Contingencies

The Company is involved in certain environmental matters, including response actions at various locations. The Company had a recorded liability of $14 as of both September 30, 2012 and June 30, 2012, for its share of aggregate future remediation costs related to these matters. One matter in Dickinson County, Michigan, for which the Company is jointly and severally liable, accounted for a substantial majority of the recorded liability as of both September 30, 2012 and June 30, 2012. The Company has agreed to be liable for 24.3% of the aggregate remediation and associated costs for this matter pursuant to a cost-sharing arrangement with a third party. With the assistance of environmental consultants, the Company maintains an undiscounted liability representing its current best estimate of its share of the capital expenditures, maintenance and other costs that may be incurred over an estimated 30-year remediation period. Currently, the Company cannot accurately predict the timing of future payments that may be made under this obligation. In addition, the Company's estimated loss exposure is sensitive to a variety of uncertain factors, including the efficacy of remediation efforts, changes in remediation requirements and the future availability of alternative clean-up technologies. Although it is possible that the Company's exposure may exceed the amount recorded, any amount of such additional exposures, or range of exposures, is not estimable at this time.

On October 9, 2012, an appellate court hearing was re-convened from an August 2012 continuance in a lawsuit pending in Brazil against the Company and one of its wholly-owned subsidiaries, The Glad Products Company ("Glad"), which resulted in an unfavorable decision against the Company and Glad. The pending lawsuit was initially filed in a Brazilian lower court in 2002 by two Brazilian companies and one Uruguayan company (collectively "Petroplus") related to joint venture agreements for the distribution of STP auto-care products in Brazil with three companies that became subsidiaries of the Company as a result of the Company's merger with First Brands Corporation in January 1999 (collectively, "Clorox Subsidiaries"). The pending lawsuit seeks indemnification for damages and losses for alleged breaches of the joint venture agreements and abuse of economic power by the Company and Glad. Petroplus had previously unsuccessfully raised the same claims and sought damages from the Company and the Clorox Subsidiaries in an International Chamber of Commerce ("ICC") arbitration proceeding in Miami filed in 2001. The ICC arbitration panel unanimously ruled against Petroplus in numerous rulings in 2001 through 2003, reaching a final decision against Petroplus in November 2003 ("Final ICC Arbitration Award"). The Final ICC Arbitration Award was ratified by the Superior Court of Justice of Brazil in May 2007 ("Foreign Judgment"), and the United States District Court for the Southern District of Florida subsequently confirmed the Final ICC Arbitration Award and recognized and adopted the Foreign Judgment as a judgment of the United States District Court for the Southern District of Florida ("U.S. Judgment"). Despite this, in March 2008 a Brazilian lower court ruled against the Company and Glad in the pending lawsuit and awarded Petroplus R$23 ($13) plus interest. The value of that judgment, including interest and foreign exchange fluctuation as of September 30, 2012, was approximately $34.

Because the Final ICC Arbitration Award, the Foreign Judgment and the U.S. Judgment relate to the same claims as those in the pending lawsuit, the Company believes that Petroplus is precluded from re-litigating these claims. Prior to the recent appellate court hearing, the Company viewed a potential loss in excess of amounts accrued in connection with this matter as remote. Based on the unfavorable appellate court decision, the Company now believes that it is reasonably possible that a loss could be incurred in this matter in excess of amounts accrued, although it is unable to reasonably estimate the amount of any such additional loss. The Company continues to believe that its defenses are meritorious, and plans to appeal the decision to one or both of the highest courts of Brazil, which could take years to resolve. Expenses related to this litigation and any potential additional loss would be reflected in Discontinued Operations, consistent with the Company's classification of expenses related to its discontinued Brazil operations.

Glad and the Clorox Subsidiaries have also filed separate lawsuits against Petroplus alleging misuse of the STP trademark and related matters, which are currently pending before Brazilian courts.

The Company is subject to various other lawsuits and claims relating to issues such as contract disputes, product liability, patents and trademarks, advertising, and employee and other matters. Based on the Company's analysis of these claims and litigation, it is the opinion of management that the ultimate disposition of these matters, to the extent not previously provided for or disclosed, will not have a material adverse effect, individually or in the aggregate, on the Company's consolidated financial statements taken as a whole.

Guarantees

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

As of September 30, 2012, the Company was a party to a letter of credit of $14, primarily related to one of its insurance carriers.

The Company had not recorded any liabilities on the aforementioned guarantees as of September 30, 2012.

SEGMENT RESULTS
SEGMENT RESULTS

NOTE 10. SEGMENT RESULTS

The Company operates through strategic business units that are aggregated into four reportable segments: Cleaning, Household, Lifestyle and International.

  • Cleaning consists of laundry, home care and professional products marketed and sold in the United States. Products within this segment include laundry additives, including bleach products under the Clorox® brand and Clorox 2® stain fighter and color booster; home care products, primarily under the Clorox®, Formula 409®, Liquid-Plumr®, Pine-Sol®, S.O.S® and Tilex® brands; naturally derived home care products under the Green Works® brand; and professional cleaning and disinfecting products under the Clorox®, Dispatch®, Aplicare®, HealthLink® and Clorox HealthcareTM brands.

  • Household consists of charcoal, cat litter and plastic bags, wraps and container products marketed and sold in the United States. Products within this segment include plastic bags, wraps and containers under the Glad® brand; cat litter products under the Fresh Step®, Scoop Away® and Ever Clean® brands; and charcoal products under the Kingsford® and Match Light® brands.

  • Lifestyle consists of food products, water-filtration systems and filters and natural personal care products marketed and sold in the United States. Products within this segment include dressings and sauces, primarily under the Hidden Valley®, K C Masterpiece® and Soy Vay® brands; water-filtration systems and filters under the Brita® brand; and natural personal care products under the Burt's Bees® and güd® brands.

  • International consists of products sold outside the United States. Products within this segment include laundry, homecare, water-filtration, charcoal and cat litter products, dressings and sauces, plastic bags, wraps and containers and natural personal care products, primarily under the Clorox®, Javex®, Glad®, PinoLuz®, Ayudin®, Limpido®, Clorinda®, Poett®, Mistolin®, Lestoil®, Bon Bril®, Nevex®, Brita®, Green Works®, Pine-Sol®, Agua Jane®, Chux®, Kingsford®, Fresh Step®, Scoop Away®, Ever Clean®, K C Masterpiece®, Hidden Valley® and Burt's Bees® brands.

Certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses are reflected in Corporate. Corporate assets include cash and cash equivalents, 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 (losses) before income taxes, with amounts that are not allocated to the operating segments reflected in Corporate.

    Net sales   Earnings (losses)
before income taxes
    Three Months Ended   Three Months Ended
    9/30/2012   9/30/2011   9/30/2012   9/30/2011
Cleaning   $ 472   $ 439   $ 120     $ 108  
Household     355     366
  50
    42  
Lifestyle
  208
  206     56       55  
International     303     294     28  
  40  
Corporate     0  
0  
(60 )  
(58 )
Total Company   $ 1,338   $ 1,305   $ 194     $ 187  

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, was 27% for both the three months ended September 30, 2012 and 2011.
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
NOTE 11. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

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, 2012 and June 30, 2012, the Company's financial assets and liabilities that were measured at fair value on a recurring basis during the year included derivative financial instruments, which were all level 2.

Financial Risk Management and Derivative Instruments

The Company is exposed to certain commodity, interest rate and foreign currency risks relating 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 18 months, 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 derivative dealers.

As of September 30, 2012, the net notional value of commodity derivatives was $45, of which $18 related to jet fuel, $25 related to soybean oil and $2 related to crude oil. As of June 30, 2012, the net notional value of commodity derivatives was $39, of which $22 related to jet fuel, $14 related to soybean oil and $3 related to crude oil.

Interest Rate Risk Management

The Company may enter into over-the-counter interest rate forward contracts to fix a portion of the benchmark interest rate prior to the anticipated issuance of fixed rate debt. These interest rate forward contracts generally have durations of less than twelve months. The interest rate contracts are measured at fair value using information quoted by U.S. government bond dealers. During the three months ended September 30, 2012, the Company paid $4 to settle interest rate forward contracts, which was reflected in operating cash flows.

As of September 30, 2012 and June 30, 2012, the net notional value of interest rate forward contracts was $0 and $250, respectively. The contracts outstanding as of June 30, 2012 were related to the anticipated issuance of long-term debt issued in September 2012.

Foreign Currency Risk Management

The Company may also enter into certain over-the-counter foreign currency-related derivative contracts to manage a portion of the Company's foreign exchange risk associated with the purchase of inventory and certain intercompany transactions between subsidiaries in Canada and the U.S. These foreign currency contracts generally have durations no longer than twelve months. The foreign exchange contracts are measured at fair value using information quoted by foreign exchange dealers.

The net notional values of outstanding foreign currency forward contracts used by the Company's subsidiaries in Canada, Australia and New Zealand to hedge forecasted purchases of inventory were $36, $23 and $3, respectively, as of September 30, 2012, and $28, $0 and $0, respectively, as of June 30, 2012. The net notional value of outstanding foreign currency forward contracts used by the Company to economically hedge foreign exchange risk associated with certain intercompany transactions was $17 as of both September 30, 2012 and June 30, 2012.

Counterparty Risk Management

Certain terms of the agreements governing the Company's over-the-counter derivative instruments require the Company or the counterparty to post collateral when the fair value of the derivative instruments exceeds contractually defined counterparty liability position limits. The $1 and $4 of derivative instruments in accrued liabilities as of September 30, 2012 and June 30, 2012, respectively, contain such terms. As of September 30, 2012, the Company was not required to post any collateral.

Certain terms of the agreements governing the over-the-counter derivative instruments contain provisions that 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 September 30, 2012, the Company and each of its counterparties maintained investment grade ratings with both Standard & Poor's and Moody's.

Fair Value of Derivative Instruments

The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as an accounting hedge, and, if so, on the type of the hedging relationship. For those derivative instruments designated and qualifying as hedging instruments, the Company must designate the hedging instrument as a fair value hedge or a cash flow hedge. The Company designates its commodity forward and future contracts for forecasted purchases of raw materials, interest rate forward contracts for forecasted interest payments, and foreign currency forward contracts for forecasted purchases of inventory as cash flow hedges. The Company does not designate its foreign currency forward contracts for intercompany transactions as accounting hedges. During the three months ended September 30, 2012 and 2011, the Company had no hedging instruments designated as fair value hedges.

The Company's derivative instruments designated as hedging instruments were recorded at fair value in the condensed consolidated balance sheets as follows:

  Balance Sheet classification   9/30/2012   6/30/2012
Assets              
Commodity purchase contracts Other current assets   $ 1   $ 0
Foreign exchange contracts Other current assets     0     1
      $ 1   $ 1

Liabilities              
Foreign exchange contracts Accrued liabilities   $ 1   $ 0
Interest rate contracts Accrued liabilities     0  
3
Commodity purchase contracts Accrued liabilities
  0
  1
 
  $ 1   $ 4

The Company's derivative instruments not designated as accounting hedges were recorded at fair value in the consolidated balance sheets as follows:

  Balance Sheet classification   9/30/2012   6/30/2012
Assets
   
     
Foreign exchange contracts Other current assets   $ 1
$ 0

For derivative instruments designated and qualifying as cash flow hedges, the effective portion of gains or losses is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The estimated amount of the existing net loss in OCI as of September 30, 2012, expected to be reclassified into earnings within the next twelve months is $3. Gains and losses on derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. During the three months ended September 30, 2012 and 2011, hedge ineffectiveness was not material. The Company de-designates cash flow hedge relationships whenever it determines that the hedge relationships are no longer highly effective or that the forecasted transaction is no longer probable. The portion of gains or losses on the derivative instrument previously accumulated in OCI for de-designated hedges remains in accumulated OCI until the forecasted transaction is recognized in earnings, or is recognized in earnings immediately if the forecasted transaction is no longer probable. Changes in the value of derivative instruments not designated as accounting hedges are recorded in other income, net.

The effects of derivative instruments designated as hedging instruments on OCI and the condensed consolidated statements of earnings and comprehensive income were as follows:

    Three Months Ended
    (Loss) gain recognized in OCI   (Loss) gain reclassified from OCI
and recognized in earnings
Cash flow hedges   9/30/2012   9/30/2011   9/30/2012   9/30/2011
Commodity purchase contracts   $ 2     $ (2 )   $ 0     $ (1 )
Interest rate contracts  
(1 )  
(37 )  
(1 )
  0  
Foreign exchange contracts
  (2 )
  3
    0
 
1  
Total   $ (1 )   $ (36 )
$ (1 )   $ 0  

The gains and losses reclassified from OCI and recognized in earnings during the three months ended September 30, 2012 and 2011 for commodity purchase contracts and foreign exchange contracts were included in cost of products sold. The losses reclassified from OCI and recognized in earnings during the three months ended September 30, 2012 for interest rate contracts were included in interest expense.

The gain from derivatives not designated as accounting hedges was $1 and $0 for the three months ended September 30, 2012 and 2011, respectively, and was reflected in other income, net.

Other

The carrying values of cash and cash equivalents, accounts receivable, notes and loans payable and accounts payable approximate their fair values as of September 30, 2012 and June 30, 2012, due to their short maturity and nature. The estimated fair value of long-term debt, including current maturities, was $3,232 and $2,606 as of September 30, 2012 and June 30, 2012, respectively. The fair value of long-term debt was determined using secondary market prices quoted by corporate bond dealers, and was classified as level 2. The Company accounts for its long-term debt at face value, net of any unamortized discounts or premiums.

INTERIM FINANCIAL STATEMENTS (Policy)
Basis of Presentation

The unaudited interim condensed consolidated financial statements for the three months ended September 30, 2012 and 2011, 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. The results for the interim period ended September 30, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013, or for any future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been omitted or condensed pursuant to the rules and regulations of the 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, 2012, which includes a complete set of footnote disclosures, including the Company's significant accounting policies.
Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ materially from estimates and assumptions made.
INVENTORIES, NET (Tables)
Schedule of Inventories
    9/30/2012   6/30/2012
Finished goods   $ 347     $ 307  
Raw materials and packaging     123       120  
Work in process     4       4  
LIFO allowances     (42 )     (37 )
Allowances for obsolescence     (11 )     (10 )
Total   $ 421     $ 384  
OTHER LIABILITIES (Tables)
Schedule of Other Liabilities
    9/30/2012   6/30/2012
Employee benefit obligations   $ 324   $ 312
Venture agreement net terminal obligation     282     281
Taxes     68     82
Other     64     64
Total   $ 738   $ 739
NET EARNINGS PER SHARE (Tables)
Schedule of Weighted Average Number of Shares
    Three Months Ended
    9/30/2012   9/30/2011
Basic   130,268   131,968
Dilutive effect of stock options and other   1,434   1,643
Diluted   131,702   133,611
COMPREHENSIVE INCOME (Tables)
Schedule of Comprehensive Income
    Three Months Ended
    9/30/2012   9/30/2011
Net earnings   $ 133       130  
Other comprehensive income (losses), net of tax:                
Foreign currency translation adjustments     27       (39 )
Net derivative adjustments     (1 )     (23 )
Pension and postretirement benefit adjustments     1       (2 )
Total   $ 160     $ 66  
RETIREMENT INCOME AND HEALTHCARE BENEFIT PLANS (Tables)
Schedule of Components of Net Periodic Benefit Cost
    Three Months Ended
    9/30/2012   9/30/2011
Service cost   $ 1     $ 1  
Interest cost     6       7  
Expected return on plan assets     (7 )     (8 )
Amortization of unrecognized items     2       2  
Total   $ 2     $ 2  
SEGMENT RESULTS (Tables)
Schedule of Reportable Segment Information and a Reconciliation of the Segment Information to the Company's Net Sales and Earnings (Losses) Before Income Taxes
    Net sales   Earnings (losses)
before income taxes
    Three Months Ended   Three Months Ended
    9/30/2012   9/30/2011   9/30/2012   9/30/2011
Cleaning   $ 472   $ 439   $ 120     $ 108  
Household     355     366     50       42  
Lifestyle     208     206     56       55  
International     303     294     28       40  
Corporate     0     0     (60 )     (58 )
Total Company   $ 1,338   $ 1,305   $ 194     $ 187  
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS (Tables)
  Balance Sheet classification   9/30/2012   6/30/2012
Assets              
Commodity purchase contracts Other current assets   $ 1   $ 0
Foreign exchange contracts Other current assets     0     1
      $ 1   $ 1
 
Liabilities              
Foreign exchange contracts Accrued liabilities   $ 1   $ 0
Interest rate contracts Accrued liabilities     0     3
Commodity purchase contracts Accrued liabilities     0     1
      $ 1   $ 4
  Balance Sheet classification   9/30/2012   6/30/2012
Assets              
Foreign exchange contracts Other current assets   $ 1   $ 0
    Three Months Ended
    (Loss) gain recognized in OCI   (Loss) gain reclassified from OCI
and recognized in earnings
Cash flow hedges   9/30/2012   9/30/2011   9/30/2012   9/30/2011
Commodity purchase contracts   $ 2     $ (2 )   $ 0     $ (1 )
Interest rate contracts     (1 )     (37 )     (1 )     0  
Foreign exchange contracts     (2 )     3       0       1  
Total   $ (1 )   $ (36 )   $ (1 )   $ 0  
INVENTORIES, NET (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Jun. 30, 2012
INVENTORIES, NET [Abstract]
 
 
Finished goods
$ 347 
$ 307 
Raw materials and packaging
123 
120 
Work in process
LIFO allowances
(42)
(37)
Allowances for obsolescence
(11)
(10)
Total
$ 421 
$ 384 
OTHER LIABILITIES (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Jun. 30, 2012
OTHER LIABILITIES [Abstract]
 
 
Employee benefit obligations
$ 324 
$ 312 
Venture agreement net terminal obligation
282 
281 
Taxes
68 
82 
Other
64 
64 
Total
$ 738 
$ 739 
DEBT (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
New Senior Notes [Member]
 
Debt Instrument [Line Items]
 
Long-term debt issuance
$ 600 
Fixed interest rate
3.05% 
Repayment date
Sep. 15, 2022 
Outstanding Senior Notes [Member]
 
Debt Instrument [Line Items]
 
Repayment date
October 2012 
Amount outstanding
$ 350 
NET EARNINGS PER SHARE (Details)
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
NET EARNINGS PER SHARE [Abstract]
 
 
Basic
130,268 
131,968 
Dilutive effect of stock options and other
1,434 
1,643 
Diluted
131,702 
133,611 
COMPREHENSIVE INCOME (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
COMPREHENSIVE INCOME [Abstract]
 
 
Net earnings
$ 133 
$ 130 
Foreign currency translation adjustments
27 
(39)
Net derivative adjustments
(1)
(23)
Pension and postretirement benefit adjustments
(2)
Total
$ 160 
$ 66 
INCOME TAXES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Jun. 30, 2012
INCOME TAXES [Abstract]
 
 
 
Effective tax rate on earnings
31.60% 
30.50% 
 
Potential benefits which, if recognized, would affect the effective tax rate on earnings
$ 55 
 
$ 56 
Accrued interest and penalties related to uncertain tax positions
 
Income and penalties included in income tax expense
 
Net benefit of tax and interest from settlement with Canadian Revenue Agency
$ 7 
 
 
RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS [Abstract]
 
 
Defined Benefit Plan Service Cost
$ 1 
$ 1 
Defined Benefit Plan Interest Cost
Expected return on plan assets
(7)
(8)
Amortization of unrecognized items
Total
$ 2 
$ 2 
CONTINGENCIES AND GUARANTEES (Details)
In Millions, unless otherwise specified
1 Months Ended 3 Months Ended
Mar. 31, 2008
USD ($)
Mar. 31, 2008
BRL
Sep. 30, 2012
USD ($)
Jun. 30, 2012
USD ($)
CONTINGENCIES AND GUARANTEES [Abstract]
 
 
 
 
Liability for future remediation costs
 
 
$ 14 
$ 14 
Percentage of liability for aggregate remediation and associated costs, other than legal fees
 
 
24.30% 
 
Remediation period
 
 
30 years 
 
Amount awarded to Petroplus
13 
23 
 
 
Current value of judgment
 
 
34 
 
Letters of credit outstanding
 
 
$ 14 
 
SEGMENT RESULTS (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Segment Reporting Information [Line Items]
 
 
Net sales
$ 1,338 
$ 1,305 
Earnings (losses) before income taxes
194 
187 
Percentage of consolidated net sales to largest customer
27.00% 
27.00% 
Cleaning [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
472 
439 
Earnings (losses) before income taxes
120 
108 
Household [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
355 
366 
Earnings (losses) before income taxes
50 
42 
Lifestyle [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
208 
206 
Earnings (losses) before income taxes
56 
55 
International [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
303 
294 
Earnings (losses) before income taxes
28 
40 
Corporate [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
Earnings (losses) before income taxes
$ (60)
$ (58)
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Jun. 30, 2012
Derivative [Line Items]
 
 
 
Notional value of commodity derivatives
$ 45 
 
$ 39 
Notional value of interest rate forward contracts
 
250 
Notional value of foreign currency derivatives
17 
 
17 
Derivative instruments in accrued liabilities
 
Estimated amount of the existing net loss to be reclassified into earnings, in the next 12 months, maximum
 
 
Gain from derivatives not designated as hedging instruments
 
Estimated fair value of long-term debt
3,232 
 
2,606 
Commodity purchase contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Maximum contract duration
18 months 
 
 
Interest rate contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Maximum contract duration
12 months 
 
 
Foreign exchange contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Maximum contract duration
12 months 
 
 
Jet Fuel [Member] |
Commodity purchase contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Notional value of commodity derivatives
18 
 
22 
Soybean Oil [Member] |
Commodity purchase contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Notional value of commodity derivatives
25 
 
14 
Crude Oil [Member] |
Commodity purchase contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Notional value of commodity derivatives
 
13 
Canada [Member] |
Foreign exchange contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Notional value of foreign currency derivatives
36 
 
28 
Australia [Member] |
Foreign exchange contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Notional value of foreign currency derivatives
23 
 
New Zealand [Member] |
Foreign exchange contracts [Member]
 
 
 
Derivative [Line Items]
 
 
 
Notional value of foreign currency derivatives
$ 3 
 
$ 0 
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS (Schedule of Derivative Instruments Recorded at Fair Value) (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Jun. 30, 2012
Derivatives, Fair Value [Line Items]
 
 
Cash flow hedge derivative instrument assets, at fair value
$ 1 
$ 1 
Cash flow hedge derivative instrument liabilities, at fair value
Foreign exchange contracts [Member] |
Other current assets [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Derivative asset not designated as hedging instrument, fair value
Foreign currency cash flow hedge asset, at fair value
Foreign exchange contracts [Member] |
Accrued liabilities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Foreign currency cash flow hedge liability, at fair value
Interest rate contracts [Member] |
Accrued liabilities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Interest rate cash flow hedge liability, at fair value
Commodity purchase contracts [Member] |
Other current assets [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Price risk cash flow hedge asset, at fair value
Commodity purchase contracts [Member] |
Accrued liabilities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Price risk cash flow hedge liability, at fair value
$ 0 
$ 1 
FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS (Schedule of the Effects of Derivative Instruments Designated as Hedging Instruments) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Gains (losses) recognized in OCI
$ (1)
$ (36)
Gains (losses) reclassified from OCI and recognized in earnings
(1)
Commodity purchase contracts [Member]
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Gains (losses) recognized in OCI
(2)
Gains (losses) reclassified from OCI and recognized in earnings
(1)
Interest rate contracts [Member]
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Gains (losses) recognized in OCI
(1)
(37)
Gains (losses) reclassified from OCI and recognized in earnings
(1)
Foreign exchange contracts [Member]
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
Gains (losses) recognized in OCI
(2)
Gains (losses) reclassified from OCI and recognized in earnings
$ 0 
$ 1