CLOROX CO /DE/, 10-Q filed on 2/5/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Dec. 31, 2014
Jan. 31, 2015
Document and Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Dec. 31, 2014 
 
Entity Registrant Name
CLOROX CO /DE/ 
 
Entity Central Index Key
0000021076 
 
Current Fiscal Year End Date
--06-30 
 
Document Fiscal Period Focus
Q2 
 
Document Fiscal Year Focus
2015 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
131,177,785 
Condensed Consolidated Statements of Earnings and Comprehensive Income (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Condensed Consolidated Statements of Earnings and Comprehensive Income [Abstract]
 
 
 
 
Net sales
$ 1,345 
$ 1,308 
$ 2,697 
$ 2,651 
Cost of products sold
773 
753 
1,547 
1,512 
Gross profit
572 
555 
1,150 
1,139 
Selling and administrative expenses
191 
196 
371 
390 
Advertising costs
127 
122 
248 
242 
Research and development costs
33 
31 
63 
62 
Interest expense
26 
26 
52 
52 
Other (income) expense, net
(2)
(4)
(2)
Earnings from continuing operations before income taxes
197 
184 
415 
395 
Income taxes on continuing operations
69 
66 
142 
138 
Earnings from continuing operations
128 
118 
273 
257 
Losses from discontinued operations, net of tax
(3)
(3)
(58)
(6)
Net earnings
125 
115 
215 
251 
Basic net earnings (losses) per share
 
 
 
 
Continuing operations
$ 0.98 
$ 0.91 
$ 2.10 
$ 1.99 
Discontinued operations
$ (0.02)
$ (0.02)
$ (0.44)
$ (0.06)
Basic net earnings per share
$ 0.96 
$ 0.89 
$ 1.66 
$ 1.93 
Diluted net earnings (losses) per share
 
 
 
 
Continuing operations
$ 0.97 
$ 0.90 
$ 2.07 
$ 1.95 
Discontinued operations
$ (0.02)
$ (0.03)
$ (0.44)
$ (0.05)
Diluted net earnings per share
$ 0.95 
$ 0.87 
$ 1.63 
$ 1.90 
Weighted average shares outstanding (in thousands)
 
 
 
 
Basic
130,555 
129,836 
129,933 
129,955 
Diluted
132,819 
132,278 
132,203 
132,276 
Dividends declared per share
$ 0.74 
$ 0.71 
$ 1.48 
$ 1.42 
Comprehensive income
$ 88 
$ 96 
$ 179 
$ 231 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Jun. 30, 2014
Current assets
 
 
Cash and cash equivalents
$ 819 
$ 329 
Receivables, net
473 
546 
Inventories
446 
386 
Other current assets
167 
134 
Total current assets
1,905 
1,395 
Property, plant and equipment, net of accumulated depreciation and amortization of $1,809 and $1,776, respectively
933 
977 
Goodwill
1,080 
1,101 
Trademarks, net
537 
547 
Other intangible assets, net
55 
64 
Other assets
164 
174 
Total assets
4,674 
4,258 
Current liabilities
 
 
Notes and loans payable
143 
Current maturities of long-term debt
875 
575 
Accounts payable
375 
440 
Accrued liabilities
492 
472 
Income taxes payable
Total current liabilities
1,744 
1,638 
Long-term debt
1,795 
1,595 
Other liabilities
773 
768 
Deferred income taxes
81 
103 
Total liabilities
4,393 
4,104 
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 at both December 31, 2014 and June 30, 2014; and 130,968,651 and 128,796,228 shares outstanding at December 31, 2014 and June 30, 2014, respectively
159 
159 
Additional paid-in capital
726 
709 
Retained earnings
1,757 
1,739 
Treasury shares, at cost: 27,772,810 and 29,945,233 shares at December 31, 2014 and June 30, 2014, respectively
(1,908)
(2,036)
Accumulated other comprehensive net loss
(453)
(417)
Total Stockholders' equity
281 
154 
Total liabilities and stockholders' equity
$ 4,674 
$ 4,258 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2014
Jun. 30, 2014
Condensed Consolidated Balance Sheets [Abstract]
 
 
Property, plant and equipment, accumulated depreciation
$ 1,809 
$ 1,776 
Preferred stock, par value per share
$ 1.00 
$ 1.00 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value 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
130,968,651 
128,796,228 
Treasury shares, shares
27,772,810 
29,945,233 
Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
6 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Operating activities:
 
 
Net earnings
$ 215 
$ 251 
Deduct: Losses from discontinued operations, net of tax
(58)
(6)
Earnings from continuing operations
273 
257 
Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations:
 
 
Depreciation and amortization
85 
88 
Share-based compensation
23 
Deferred income taxes
(16)
(6)
Settlement of interest rate forward contracts
(25)
Other
Changes in:
 
 
Receivables, net
60 
77 
Inventories
(78)
(72)
Other current assets
(4)
(8)
Accounts payable and accrued liabilities
(19)
(77)
Income taxes payable
(23)
(65)
Net cash provided by continuing operations
267 
222 
Net cash provided by (used for) discontinued operations
10 
(12)
Net cash provided by operations
277 
210 
Investing activities:
 
 
Capital expenditures
(60)
(63)
Other
Net cash used for investing activities
(57)
(62)
Financing activities:
 
 
Notes and loans payable, net
(141)
140 
Long-term debt borrowings, net of issuance costs
496 
Treasury stock purchased
(8)
(130)
Cash dividends paid
(191)
(184)
Issuance of common stock for employee stock plans and other
125 
71 
Net cash provided by (used for) financing activities
281 
(103)
Effect of exchange rate changes on cash and cash equivalents
(11)
(3)
Net increase in cash and cash equivalents
490 
42 
Cash and cash equivalents:
 
 
Beginning of period
329 
299 
End of period
$ 819 
$ 341 
INTERIM FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS

NOTE 1. INTERIM FINANCIAL STATEMENTS

 

Basis of Presentation

 

The unaudited interim condensed consolidated financial statements for the three and six months ended December 31, 2014 and 2013, 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 December 31, 2014, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2015, 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, for the three and six months ended December 31, 2014 and 2013, Clorox Venezuela is reflected as a discontinued operation in the Company's financial statements.

 

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 audited financial statements for the fiscal year ended June 30, 2014, which includes a complete set of footnote disclosures, including the Company's significant accounting policies, filed with the SEC in Exhibit 99.2 of the Company's Current Report on Form 8-K on December 4, 2014.

 

Recently Issued Accounting Pronouncements

 

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

 

In April 2014, the FASB issued ASU No 2014-08 “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (Topic 205)”, which will change the criteria for reporting discontinued operations. The amendments will also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments are effective for the Company for new disposals (or classifications as held for sale) of components of the Company, should they occur, beginning in the first quarter of fiscal year 2016. Early adoption is permitted for disposals (or classifications as held for sale) that have not been previously reported. The Company will adopt this ASU beginning in the first quarter of fiscal year 2016, as required. Adoption of the new standard will not impact the Company's reporting or disclosures for discontinued operations of Clorox Venezuela.

DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS

NOTE 2. DISCONTINUED OPERATIONS

 

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

 

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

 

With this exit, the financial results of Clorox Venezuela are reflected as discontinued operations in the Company's consolidated financial statements. The results of Clorox Venezuela have historically been part of the International reportable segment. The following table provides summary net sales for Clorox Venezuela and a breakdown of losses from discontinued operations for the periods indicated:

 

      Three Months Ended     Six Months Ended
      12/31/2014   12/31/2013   12/31/2014   12/31/2013
Net sales for Clorox Venezuela     $ -   $ 22     $ 11   $ 43
                             
Operating losses from Clorox Venezuela       -     (3)       (6)     (6)
Exit costs and other related expenses for Clorox Venezuela       (4)     -       (77)     -
Total losses from Clorox Venezuela before income taxes       (4)     (3)       (83)     (6)
Income tax benefit attributable to Clorox Venezuela       1     1       25     2
Total losses from Clorox Venezuela, net of tax       (3)     (2)       (58)     (4)
Losses from other discontinued operations, net of tax       -     (1)       -     (2)
Losses from discontinued operations, net of tax     $ (3)   $ (3)     $ (58)   $ (6)

 

Summary of Operating Losses, Asset Charges and Other Costs

 

The following provides a breakdown of amounts included in losses from discontinued operations for the periods indicated:

 

      Three Months Ended   Six Months Ended
      12/31/2014   12/31/2014
Operating losses from Clorox Venezuela     $ -   $ (6)
               
Asset charges:              
Inventories       -     (11)
Property, plant and equipment, net       -     (16)
Trademark and other intangible assets       -     (6)
Other assets       -     (4)
Other exit and business termination costs:              
Severance       -     (3)
Recognition of deferred foreign currency translation loss       -     (30)
Other       (4)     (7)
Total losses from Clorox Venezuela before income taxes     $ (4)   $ (83)
Income tax benefit attributable to Clorox Venezuela       1     25
Total losses from Clorox Venezuela, net of tax     $ (3)   $ (58)
Losses from other discontinued operations, net of tax       -     -
Losses from discontinued operations, net of tax       (3)     (58)

 

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

 

Goodwill related to Clorox Venezuela was previously aggregated and assessed for impairment at the Latin America reporting unit level, which is a component of the Company's International segment. Based on the results of the annual impairment test performed in the fourth quarter of fiscal year 2014, the fair value of the Latin America reporting unit exceeded its recorded value by more than 40%. In the first quarter of fiscal year 2015, after Clorox Venezuela discontinued its operations, the Company reviewed the relative fair value of its components of the Latin America reporting unit and concluded no goodwill should be allocated to the Clorox Venezuela component and that there were no indicators of impairment within the remaining Latin American reporting unit.

 

Major Classes of Remaining Assets and Liabilities 

 

The following is a summary of the remaining assets and liabilities for the local books of Clorox Venezuela as of:
 

      12/31/2014   6/30/2014
Cash and cash equivalents     $   -   $   5  
Receivables, net         -       4  
Inventories         -       11  
Other current assets         -       2  
Property, plant and equipment, net         -       16  
Trademarks and other intangible assets, net         -       6  
Other assets         -       9  
Accounts payable and accrued liabilities         (2 )     (11 )
Net (liability) asset position     $   (2 $   42  

 

In addition to the above, as of December 31, 2014 and June 30, 2014, the Company held $20 and $17, respectively, of tax asset balances related to Clorox Venezuela in the Corporate segment.
 



 

Financial Reporting: Hyperinflation and the Selection of Exchange Rates 

 

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

 

For all periods presented prior to March 1, 2014, the Company recorded the results of its business operations and remeasured the non-USD denominated monetary assets and liabilities of Clorox Venezuela using the CENCOEX (previously referred to as CADIVI) rate of 6.3 bolivares fuertes (VEF) per USD. Beginning March 1, 2014, the Company utilized the SICAD I rate for financial reporting. In connection with Clorox Venezuela's announced exit from the country in September 2014, Clorox Venezuela's parent, Clorox Spain, infused cash through SICAD II to settle obligations, including those resulting from the decision to exit. As a result, the Company believes the SICAD II rate is the most appropriate rate for financial reporting purposes and as such, began utilizing this rate in September 2014. At December 31, 2014, the SICAD II rate was 50 VEF per USD.

INVENTORIES
INVENTORIES

NOTE 3. INVENTORIES

 

Inventories consisted of the following as of:

 

      12/31/2014   6/30/2014
Finished goods     $ 369     $ 312  
Raw materials and packaging       109       108  
Work in process       3       2  
LIFO allowances       (35)       (36 )
Total     $ 446     $ 386  
OTHER ASSETS
OTHER ASSETS

NOTE 4. OTHER ASSETS

 

Investments in Low-Income Housing Partnerships

 

The Company owns, directly or indirectly, limited partnership interests in low-income housing partnerships, which are accounted for using the equity method of accounting. The Company's investment balance as of December 31, 2014 and June 30, 2014 was $1 and $4, respectively. These partnerships are considered to be variable interest entities; however, the Company does not consolidate them because it does not have the power to direct the partnerships' activities that significantly impact their economic performance. The purpose of the partnerships is to develop and operate low-income housing rental properties. The general partners, who typically hold 1% of the partnership interests, are third parties unrelated to the Company and its affiliates, and are responsible for controlling and managing the business and financial operations of the partnerships. As a limited partner, the Company is not responsible for any of the liabilities and obligations of the partnerships nor do the partnerships or their creditors have any recourse to the Company other than for the capital requirements. All available tax benefits from low-income housing tax credits provided by the partnerships were claimed as of fiscal year 2012. The risk that previously claimed low-income housing tax credits might be recaptured or otherwise retroactively invalidated is considered remote.

OTHER LIABILITIES
OTHER LIABILITIES

NOTE 5. OTHER LIABILITIES

 

Other liabilities consisted of the following as of:

 

    12/31/2014   6/30/2014
Venture agreement net terminal obligation   $ 292   $ 290
Employee benefit obligations     286     289
Taxes     79     76
Other     116     113
Total   $ 773   $ 768

DEBT
DEBT

NOTE 6. DEBT

 

In December 2014, under a new shelf registration statement filed with the SEC that will expire in December 2017, the Company issued $500 of senior notes with an annual fixed interest rate of 3.50%. Interest on the notes is payable semi-annually in June and December and the notes have a maturity date of December 15, 2024. The notes carry an effective interest rate of 4.10%, which includes the impact from the settlement of interest rate forward contracts in December 2014 (Note 13 – Financial Instruments and Fair Value Measurements). The majority of the proceeds from the issuance was included in the cash balance of the Company's Corporate segment at December 31, 2014, and in January 2015, these net proceeds were used to repay a portion of the Company's $575 in senior notes with an annual fixed interest rate of 5.00%. The notes rank equally with all of the Company's existing senior indebtedness.

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

NOTE 7. NET EARNINGS PER SHARE (EPS)

 

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

 

  Three Months Ended   Six Months Ended
  12/31/2014   12/31/2013   12/31/2014   12/31/2013
Basic 130,555   129,836    129,933   129,955
Dilutive effect of stock options and other 2,264   2,442   2,270   2,321
Diluted 132,819   132,278   132,203   132,276

During the three and six months ended December 31, 2014, the number of stock options and restricted stock units that were considered antidilutive and excluded from the diluted net EPS calculation were 0.2 and 0.3 million shares, respectively. During the three and six months ended December 31, 2013, the Company included all stock options and restricted stock units in the calculations of diluted net EPS.

 

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 December 31, 2014, and a program to offset the impact of share dilution related to share-based awards (the Evergreen Program), which has no authorization limit as to amount or timing of repurchases.

 

During the three and six months ended December 31, 2014, the Company repurchased zero shares and approximately 0.1 million shares, respectively, under its Evergreen Program, for an aggregate amount of $0 and $8, respectively. During the three and six months ended December 31, 2013, the Company repurchased zero shares and approximately 1.6 million shares, respectively, under its Evergreen Program, for an aggregate amount of $0 and $130, respectively. 

 

The Company did not repurchase any shares under the open-market purchase program during the three and six months ended December 31, 2014 and 2013.

COMPREHENSIVE INCOME
COMPREHENSIVE INCOME

NOTE 8: COMPREHENSIVE INCOME

 

Comprehensive income was as follows for the periods indicated:

 

      Three Months Ended   Six Months Ended
      12/31/2014   12/31/2013   12/31/2014   12/31/2013
Earnings from continuing operations     $ 128     $ 118     $ 273     $ 257  
Losses from discontinued operations, net of tax       (3)       (3 )     (58)       (6 )
Net earnings       125       115       215       251  
Other comprehensive (loss) income, net of tax:                  
Foreign currency translation adjustments       (19)       (23 )     (19)       (19 )
Net unrealized losses on derivatives       (19)       3       (20)       2  
Pension and postretirement benefit adjustments       1       1       3       (3 )
Total other comprehensive loss, net of tax       (37)       (19 )     (36)       (20 )
Comprehensive income     $ 88     $ 96     $ 179     $ 231  

Foreign currency translation adjustments are presented in the table above net of decreases in deferred tax liabilities of $3 and $6 for the three and six months ended December 31, 2014, respectively,and net of increases in deferred tax liabilities of $2 and $4 for the three and six months ended December 31, 2013, respectively.

 

Net unrealized losses on derivatives are presented in the table above net of decreases in deferred tax assets of $3 and $1 for the three and six months ended December 31, 2014 , respectively, and of $1 and $0 for the three and six months ended December 31, 2013, respectively.

 

Pension and postretirement benefit adjustments are presented in the table above net of increases in deferred tax liabilities of $0 for both the three and six months ended December 31, 2014,and net of increases in deferred tax liabilities of $1 and decreases in deferred tax liabilities of $2 for the three and six months ended December 31, 2013, respectively.

 

Changes in accumulated other comprehensive net losses by component were as follows:

 

   
      Pension and    
    Foreign   Net unrealized   postretirement    
    currency   losses on   benefit    
    adjustments   derivatives   adjustments   Total
Balance as of June 30, 2014, net of tax   $ (246 )   $ (39 )   $ (132 )   $ (417 )

Other comprehensive (loss) income

       before reclassifications

    (49 )     (23 )     (1 )     (73 )

Amounts reclassified from accumulated other

       comprehensive net losses:

                               

Recognition of deferred foreign currency

       translation loss

    30       -       -       30  
Other     -       3       4       7  
Net other comprehensive (loss) income     (19)       (20 )     3       (36 )
Balance as of December 31, 2014, net of tax   $ (265 )   $ (59 )   $ (129 )   $ (453 )

Included in foreign currency adjustments as of June 30, 2014 were $16 of accumulated net of tax re-measurement losses on long term intercompany loans where settlement is not planned or anticipated in the foreseeable future. For the six months ended December 31, 2014, other comprehensive losses on these loans totaled $4 and there were no amounts reclassified from accumulated other comprehensive net losses.

INCOME TAXES
INCOME TAXES

NOTE 9. 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 34.9% and 34.2% for the three and six months ended December 31, 2014, respectively, and 35.6% and 34.8% for the three and six months ended December 31,2013, respectively. The lower tax rates in the current periods were primarily due to higher benefits from favorable tax settlements. The higher tax rates for the prior periods were primarily due to higher state tax accruals.

 

Included in the balance of unrecognized tax benefits as of December 31, 2014 and June 30, 2014, are potential benefits of $61 and $58, respectively, which if recognized, would affect net earnings. 

In the twelve months succeeding December 31, 2014, it is reasonably possible that up to $30 of the $61 unrecognized tax benefits may be recognized, primarily within fiscal year 2015.

 

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 $11 as of both December 31, 2014 and June 30, 2014. Interest and penalties included in income tax expense resulted in net expense of $0 for both the three and six months ended December 30, 2014, respectively, and net expense of $0 and $1 for the three and six months ended December 31, 2013, 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, 2010. Various income tax returns in state and foreign jurisdictions are currently in the process of examination.

RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS
RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS

NOTE 10. RETIREMENT INCOME AND HEALTH CARE BENEFIT PLANS

 

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

 

    Three Months Ended   Six Months Ended
    12/31/2014   12/31/2013   12/31/2014   12/31/2013
Service cost   $   1     $   -     $   1     $   1  
Interest cost       6         7         12         13  
Expected return on plan assets       (5 )       (7 )       (10 )       (13 )
Amortization of unrecognized items       3         3         6         6  
Total   $   5     $   3     $   9     $   7  

The net periodic benefit cost for the Company's retirement health care plans was a credit of $1 for both the three and six months ended December 31, 2014 and $0 for both the three and six months ended December 31, 2013.

OTHER CONTINGENCIES AND GUARANTEES
OTHER CONTINGENCIES AND GUARANTEES

NOTE 11. OTHER CONTINGENCIES AND GUARANTEES

 

Contingencies

 

The Company is involved in certain environmental matters, including response actions at various locations. The Company had a recorded liability of $13 and $14 as of December 31, 2014 and June 30, 2014, respectively, for its share of aggregate future remediation costs related to these matters. One matter in Dickinson County, Michigan, for which the Company is jointly and severally liable, accounted for a substantial majority of the recorded liability as of both December 31, 2014 and June 30, 2014. The Company has agreed to be liable for 24.3% of the aggregate remediation and associated costs for this matter pursuant to a cost-sharing arrangement with a third party. With the assistance of environmental consultants, the Company maintains an undiscounted liability representing its current best estimate of its share of the capital expenditures, maintenance and other costs that may be incurred over an estimated 30-year remediation period. Currently, the Company cannot accurately predict the timing of future payments that may be made under this obligation. In addition, the Company's estimated loss exposure is sensitive to a variety of uncertain factors, including the efficacy of remediation efforts, changes in remediation requirements and the future availability of alternative clean-up technologies. Although it is reasonably possible that the Company's exposure may exceed the amount recorded, any amount of such additional exposures, or range of exposures, is not estimable at this time.

 

In October 2012, a Brazilian appellate court issued an adverse decision in a lawsuit pending in Brazil against the Company and one of its wholly owned subsidiaries, The Glad Products Company (Glad). The lawsuit, which was initially filed in a Brazilian lower court in 2002 by two Brazilian companies and one Uruguayan company (collectively, Petroplus), relates 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, Florida, filed in 2001. The ICC arbitration panel unanimously ruled against Petroplus in a final decision 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. The value of the judgment against the Company, including interest and foreign exchange fluctuations as of December 31, 2014, was approximately $34.

 

Among other defenses, 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. Based on the unfavorable appellate court decision, however, the Company believes that it is reasonably possible that a loss could be incurred in this matter in excess of amounts accrued, and that the estimated range of such loss in this matter is from $0 to $28
 

The Company continues to believe that its defenses are meritorious, and has appealed the decision to the highest courts of Brazil. In December 2013, in the first stage of the appellate process, the appellate court declined to admit the Company's appeals to the highest courts. The Company then appealed directly to the highest courts. While in May 2014 the Superior Court of Justice originally agreed to consider the Company's appeal, in December 2014 the same court declined to admit the appeal based on procedural grounds. The Company is appealing that decision. It is possible that a final decision in this case could be issued as early as the third quarter of fiscal year 2015. Expenses related to this litigation have been, 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.

 

In a separate action filed in 2004 by Petroplus, in January 2013, a lower Brazilian court nullified the Final ICC Arbitration Award. The Company believes this judgment is inconsistent with the Foreign Judgment and the U.S. Judgment and that it is without merit. The Company appealed this decision, and the lower court decision was overturned by the appellate court in April 2014. Petroplus has appealed this decision to Brazil's highest court.

 

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, and have taken other legal actions against Petroplus, which are pending. Additionally, in November 2013, the Clorox Subsidiaries initiated a new ICC arbitration seeking damages against Petroplus.

 

The Company is subject to various other lawsuits, claims and loss contingencies relating to issues such as contract disputes, product liability, patents and trademarks, advertising, and employee and other matters. Based on management's analysis, it is the opinion of management that the ultimate disposition of these matters, to the extent not previously provided for, 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 material 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.

 

The Company had not recorded any liabilities on the aforementioned guarantees as of December 31, 2014.

 

As of December 31, 2014, the Company was a party to letters of credit of $11, primarily related to one of its insurance carriers, of which $0 had been drawn upon.

SEGMENT RESULTS
SEGMENT RESULTS

NOTE 12. SEGMENT RESULTS

 

The Company operates through strategic business units that are aggregated into four reportable segments: 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 earnings from continuing operations of the International reportable segment (Note 2 – Discontinued Operations).

 

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

 

  • Household consists of charcoal, cat litter 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®, KC Masterpiece® and Soy Vay® brands; water-filtration systems and filters under the Brita® brand; and natural personal care products under the Burt's Bees® brand.

 

  • International consists of products sold outside the United States. Products within this segment include laundry, home care, water-filtration, 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®, Brita®, Green Works®, Pine-Sol®, Agua Jane®, Chux®, Kingsford®, Fresh Step®, Scoop Away®, Ever Clean®, KC Masterpiece®, Hidden Valley® and Burt's Bees® brands.

 

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

 

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   Six Months Ended      
    12/31/2014   12/31/2013   12/31/2014   12/31/2013      
Cleaning   $ 447     $ 432     $ 917     $ 911    
Household     371       352       763       724    
Lifestyle     246       237       462       455    
International     281       287       555       561    
Total   $ 1,345     $ 1,308     $ 2,697     $ 2,651    
                                   
    Earnings (losses) from continuing operations before income taxes  
    Three Months Ended   Six Months Ended  
    12/31/2014   12/31/2013   12/31/2014   12/31/2013  
Cleaning   $ 107     $ 101     $ 231     $ 232    
Household     51       41       103       93    
Lifestyle     73       69       129       122    
International     24       33       50       64    
Corporate     (58 )     (60 )     (98 )     (116 )  
Total   $ 197     $ 184     $ 415     $ 395    

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 26% for each of the three and six months ended December 31, 2014 and 2013.

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

NOTE 13. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

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

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs reflecting the reporting entity's own assumptions. 

 

As of December 31, 2014 and June 30, 2014, the Company's financial assets and liabilities that were measured at fair value on a recurring basis during the period included derivative financial instruments, which were all Level 2, and trust assets to fund certain of the Company's nonqualified deferred compensation plans, which were classified as Level 1.

 

Financial Risk Management and Derivative Instruments

 

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

 

As of December 31, 2014, the notional amount of commodity derivatives was $67, of which $35 related to jet fuel and $32 related to soybean oil. As of June 30, 2014, the notional amount of commodity derivatives was $36, of which $19 related to jet fuel and $17 related to soybean 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 12 months. The interest rate contracts are measured at fair value using information quoted by U.S. government bond dealers.

 

As of December 31, 2014 and June 30, 2014, the notional amounts of interest rate forward contracts were $0 and $288, respectively. During the three months ended December 31, 2014, the Company paid $25 to settle interest rate forward contracts related to the December 2014 issuance of $500 in senior notes. The settlement payments were reflected as operating cash flows in the Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2014. The $25 loss is reflected in accumulated other comprehensive net loss on the Condensed Consolidated Balance Sheet as of December 31, 2014, and will be amortized into interest expense on the Condensed Consolidated Statement of Earnings and Comprehensive Income over the 10-year term of the notes.

 

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. These foreign currency contracts generally have durations of no longer than 20 months. 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 in Canada, Australia and New Zealand to hedge forecasted purchases of inventory were $28, $14 and $3, respectively, as of December 31, 2014, and $54, $28 and $5, respectively, as of June 30, 2014.

 

Counterparty Risk Management and Broker Margin Requirements

 

The Company utilizes a variety of financial institutions as counterparties for over-the counter derivative instruments. The Company enters into agreements governing the use of over-the-counter derivative instruments and sets internal limits on the aggregate over-the-counter derivative instrument positions held with each counterparty. Certain terms of these agreements require the Company or the counterparty to post collateral when the fair value of the derivative instruments exceeds contractually defined counterparty liability position limits. Of the $15 and $17 of derivative instruments reflected in a liability position as of December 31, 2014 and June 30, 2014, respectively, $9 and $11, respectively, contained such terms. As of both December 31, 2014 and June 30, 2014, neither the Company nor any counterparty was required to post any collateral.

 

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 December 31, 2014 and June 30, 2014, the Company and each of its counterparties had been assigned investment grade ratings by both Standard & Poor's and Moody's.


Certain of the Company's exchange-traded futures contracts used for commodity price risk management include requirements for the Company to post collateral in the form of a cash margin account held by the Company's broker for trades conducted on that exchange. As of December 31, 2014 and June 30, 2014, the Company maintained cash margin balances related to exchange-traded futures contracts of $4 and $1, respectively, which are classified as other current assets on the Condensed Consolidated Balance Sheets.


Fair Value of Derivative Instruments

 

Derivatives

 

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 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. During the three and six months ended December 31, 2014 and 2013, the Company had no hedging instruments designated as fair value hedges.

 

Trust Assets

 

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

 

The Company's derivative instruments designated as hedging instruments and trust assets related to certain of the Company's nonqualified deferred compensation plans were recorded at fair value in the consolidated balance sheets as follows:

 

  Balance sheet     12/31/2014   6/30/2014
  classification     Level 1   Level 2   Level 1   Level 2
Assets      
Foreign exchange derivative contracts   Other current assets     $ -     $ 3     $ -     $ -  
Commodity purchase derivative contracts   Other current assets       -       -       -       1  
Trust assets for nonqualified deferred                                      
compensation plans   Other assets       35       -       31       -  
          $ 35     $ 3     $ 31     $ 1  
Liabilities                                      
Commodity purchase derivative contracts   Accrued liabilities     $ -     $ 10     $ -     $ 1  
Interest rate derivative contracts   Accrued liabilities       -       -       -       13  
Foreign exchange derivative contracts   Accrued liabilities       -       -       -       3  
Commodity purchase derivative contracts   Other liabilities       -       5       -       -  
          $ -     $ 15     $ -     $ 17  

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 (loss) 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 accumulated other comprehensive net loss as of December 31, 2014, expected to be reclassified into earnings within the next 12 months is $13. 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 and six months ended December 31, 2014 and 2013, respectively, hedge ineffectiveness was not significant. 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 other comprehensive net loss 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) expense, net.

 

Changes in the value of the trust assets related to certain of the Company's nonqualified deferred compensation plans were $4 for the six months ended December 31, 2014, primarily due to current quarter employees' contributions to these plans.

 

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

 

      Gain (loss) recognized in OCI
      Three Months Ended   Six Months Ended
      12/31/2014   12/31/2013   12/31/2014   12/31/2013
Commodity purchase derivative contracts     $ (10 )     $ 3       $ (16 )     $ 1    
Interest rate derivative contracts       (9 )       -         (12 )       -    
Foreign exchange derivative contracts       1         1         5         1    
Total     $ (18 )     $ 4       $ (23 )     $ 2    
                                           
      Gain (loss) reclassified from accumulated other comprehensive net loss and recognized in earnings
      Three Months Ended   Six Months Ended
      12/31/2014   12/31/2013   12/31/2014   12/31/2013
Interest rate derivative contracts       (1 )     $ (1   )     (3 )     $ (2 )  
Foreign exchange derivative contracts       1         1         -         2    
Total     $ -       $ -       $ (3 )     $ -    

The gains and losses reclassified from accumulated other comprehensive net loss and recognized in earnings during the three and six months ended December 31, 2014 and 2013 for foreign exchange contracts were included in cost of products sold. The losses reclassified from accumulated other comprehensive net loss and recognized in earnings during the three and six months ended December 31, 2014 and 2013 for interest rate contracts were included in interest expense.

 

Other Financial Instruments

 

The carrying values of cash and cash equivalents, accounts receivable, notes and loans payable and accounts payable approximated their estimated fair values as of December 31, 2014 and June 30, 2014, due to their generally short maturities. The estimated fair value of long-term debt, including current maturities, was $2,755 and $2,265 as of December 31, 2014 and June 30, 2014, respectively. The estimated fair value of long-term debt was determined using secondary market prices quoted by corporate bond dealers, and was classified as Level 2.

 

Revolving Credit Agreement

 

On October 1, 2014, the Company entered into a $1,100 revolving credit agreement (the Credit Agreement), which expires in October 2019. This agreement replaced a prior $1,100 revolving credit agreement in place since May 2012.There were no borrowings under the Credit Agreement as of December 31, 2014, and the Company believes that borrowings under the Credit Agreement are and will continue to be available for general corporate purposes.

INTERIM FINANCIAL STATEMENTS (Policy)

Basis of Presentation

 

The unaudited interim condensed consolidated financial statements for the three and six months ended December 31, 2014 and 2013, 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 December 31, 2014, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2015, 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, for the three and six months ended December 31, 2014 and 2013, Clorox Venezuela is reflected as a discontinued operation in the Company's financial statements.

 

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 audited financial statements for the fiscal year ended June 30, 2014, which includes a complete set of footnote disclosures, including the Company's significant accounting policies, filed with the SEC in Exhibit 99.2 of the Company's Current Report on Form 8-K on December 4, 2014.

Recently Issued Accounting Pronouncements

 

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

 

In April 2014, the FASB issued ASU No 2014-08 “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (Topic 205)”, which will change the criteria for reporting discontinued operations. The amendments will also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments are effective for the Company for new disposals (or classifications as held for sale) of components of the Company, should they occur, beginning in the first quarter of fiscal year 2016. Early adoption is permitted for disposals (or classifications as held for sale) that have not been previously reported. The Company will adopt this ASU beginning in the first quarter of fiscal year 2016, as required. Adoption of the new standard will not impact the Company's reporting or disclosures for discontinued operations of Clorox Venezuela.

DISCONTINUED OPERATIONS (Tables)
      Three Months Ended     Six Months Ended
      12/31/2014   12/31/2013   12/31/2014   12/31/2013
Net sales for Clorox Venezuela     $ -   $ 22     $ 11   $ 43
                             
Operating losses from Clorox Venezuela       -     (3)       (6)     (6)
Exit costs and other related expenses for Clorox Venezuela       (4)     -       (77)     -
Total losses from Clorox Venezuela before income taxes       (4)     (3)       (83)     (6)
Income tax benefit attributable to Clorox Venezuela       1     1       25     2
Total losses from Clorox Venezuela, net of tax       (3)     (2)       (58)     (4)
Losses from other discontinued operations, net of tax       -     (1)       -     (2)
Losses from discontinued operations, net of tax     $ (3)   $ (3)     $ (58)   $ (6)
      Three Months Ended   Six Months Ended
      12/31/2014   12/31/2014
Operating losses from Clorox Venezuela     $ -   $ (6)
               
Asset charges:              
Inventories       -     (11)
Property, plant and equipment, net       -     (16)
Trademark and other intangible assets       -     (6)
Other assets       -     (4)
Other exit and business termination costs:              
Severance       -     (3)
Recognition of deferred foreign currency translation loss       -     (30)
Other       (4)     (7)
Total losses from Clorox Venezuela before income taxes     $ (4)   $ (83)
Income tax benefit attributable to Clorox Venezuela       1     25
Total losses from Clorox Venezuela, net of tax     $ (3)   $ (58)
Losses from other discontinued operations, net of tax       -     -
Losses from discontinued operations, net of tax       (3)     (58)
      12/31/2014   6/30/2014
Cash and cash equivalents     $   -   $   5  
Receivables, net         -       4  
Inventories         -       11  
Other current assets         -       2  
Property, plant and equipment, net         -       16  
Trademarks and other intangible assets, net         -       6  
Other assets         -       9  
Accounts payable and accrued liabilities         (2 )     (11 )
Net (liability) asset position     $   (2 $   42  

 

In addition to the above, as of December 31, 2014 and June 30, 2014, the Company held $20 and $17, respectively, of tax asset balances related to Clorox Venezuela in the Corporate segment.
 



INVENTORIES (Tables)
Schedule of Inventories
      12/31/2014   6/30/2014
Finished goods     $ 369     $ 312  
Raw materials and packaging       109       108  
Work in process       3       2  
LIFO allowances       (35)       (36 )
Total     $ 446     $ 386  
OTHER LIABILITIES (Tables)
Schedule of Other Liabilities
    12/31/2014   6/30/2014
Venture agreement net terminal obligation   $ 292   $ 290
Employee benefit obligations     286     289
Taxes     79     76
Other     116     113
Total   $ 773   $ 768
NET EARNINGS PER SHARE (EPS) (Tables)
Schedule of Weighted Average Number of Shares
  Three Months Ended   Six Months Ended
  12/31/2014   12/31/2013   12/31/2014   12/31/2013
Basic 130,555   129,836    129,933   129,955
Dilutive effect of stock options and other 2,264   2,442   2,270   2,321
Diluted 132,819   132,278   132,203   132,276
COMPREHENSIVE INCOME (Tables)