PART I
This Annual
Report on Form 10-K (this Report), including the exhibits hereto and the
information incorporated by reference herein, contains “forward looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act), and such forward looking statements involve
risks and uncertainties. Except for historical information, matters discussed
below, including statements about future volume, sales, costs, cost savings,
earnings, cash flows, plans, objectives, expectations, growth, or profitability,
are forward looking statements based on management’s estimates, assumptions and
projections. Words such as “will,” “could,” “may,” “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” and variations on such words, and similar expressions, are intended
to identify such forward looking statements. These forward looking statements
are only predictions, subject to risks and uncertainties, and actual results
could differ materially from those discussed below. Important factors that could
affect performance and cause results to differ materially from management’s
expectations are described in the sections entitled “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in this Annual Report on Form 10-K for the year ended June 30, 2010,
as updated from time to time in the Company’s SEC filings.
These factors
include, but are not limited to:
- the Company’s costs,
including volatility and increases in commodity costs such as resin, diesel,
chlor-alkali, sodium hypochlorite, agricultural commodities and other raw
materials;
- increases in energy
costs;
- the ability of the
Company to implement and generate expected savings from its programs to reduce
costs, including its supply chain restructuring and other restructuring
plans;
- supply disruptions or
any future supply constraints that may affect key commodities or product
inputs;
- risks inherent in
relationships with suppliers, including sole-source or single-source
suppliers;
- risks related to the
handling and/or transportation of hazardous substances, including, but not
limited to, chlorine;
- the success of the
Company’s strategies;
- the ability to manage
and realize the benefits of joint ventures and other cooperative
relationships, including the Company’s joint venture regarding the Company’s
Glad® plastic
bags, wraps and containers business, and the agreements relating to the
provision of information technology, procure to pay and other key services by
third parties;
- risks relating to
acquisitions, mergers and divestitures, including the Company’s ability to
achieve the projected strategic and financial benefits from the Burt’s Bees
acquisition;
- risks inherent in
maintaining an effective system of internal controls, including the potential
impact of acquisitions or the use of third-party service providers, and the
need to refine controls to adjust for accounting, financial reporting and
other organizational changes or business conditions;
- the ability of the
Company to successfully manage tax, regulatory, product liability,
intellectual property, environmental and other legal matters, including the
risk resulting from joint and several liability for environmental
contingencies and risks inherent in litigation, including class action
litigation;
- risks related to
maintaining and updating
the Company’s information systems, including potential disruptions,
costs and the ability of the Company to implement adequate information systems
in order to support the current business and to support the Company’s
potential growth;
- the success of new
products and the ability of the Company to develop products that delight the
consumer;
- consumer and customer
reaction to price increases;
- competitive
actions;
- risks related to
customer concentration;
- customer-specific
ordering patterns and trends;
- risks arising out of
natural disasters;
- the impact of disease
outbreaks, epidemics or pandemics on the Company’s, suppliers’ or customers’
operations;
- changes in the Company’s
tax rate;
- continuing unfavorable
world-wide general economic and marketplace conditions and events, including
consumer confidence and consumer spending levels, the rate of economic growth,
the rate of inflation or deflation, and the financial condition of the
Company’s customers, suppliers and service providers;
- foreign currency
exchange rate and interest rate fluctuations;
- unfavorable political
conditions in international markets and risks relating to international
operations;
- the impact of the
volatility of the debt markets on the Company’s cost of borrowing and access
to funds, including commercial paper and its credit facility;
- risks relating to
changes in the Company’s capital structure;
- the need for any
unanticipated restructuring or asset-impairment charges;
- risks arising from
declines in cash flow, whether resulting from declining sales, higher cost
levels, tax payments, debt payments, share repurchases, interest cost
increases greater than management’s expectations, or increases in debt or
changes in credit ratings, or otherwise; and
- the Company’s ability to
maintain its business reputation and the reputation of its brands.
The Company’s
forward looking statements in this Report are based on management’s current
views and assumptions regarding future events and speak only as of their dates.
The Company undertakes no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future events or
otherwise, except as required by the federal securities laws.
In this
Report, unless the context requires otherwise, the terms “the Company” and
“Clorox” refer to The Clorox Company and its subsidiaries.
ITEM 1. BUSINESS
Overview of
Business
The Company is
a leading manufacturer and marketer of consumer and institutional products with
approximately 8,300 employees worldwide and fiscal year 2010 net sales of $5.5
billion. The Company sells its products primarily through mass merchandisers,
grocery stores and other retail outlets. It markets some of consumers’ most
trusted and recognized brand names, including its namesake bleach and cleaning
products, Green Works® natural cleaning and laundry
products, Poett® and Mistolín® cleaning products, Armor All® and STP® auto-care products, Fresh Step® and Scoop Away® cat litter, Kingsford® charcoal, Hidden Valley® and K C Masterpiece® dressings and sauces, Brita® water-filtration systems, Glad® bags, wraps and containers, and
Burt’s Bees® natural personal care products. The
Company’s products are manufactured in more than two dozen countries and sold in
more than 100 countries. The Company was founded in Oakland, Calif., in 1913 and
is incorporated in Delaware.
The Company
has developed a strategy focused on creating value by investing in new and
existing sales channels, countries with profitable growth potential and
categories, particularly those categories aligned with global consumer trends in
the areas of health and wellness, sustainability and affordability, and
appealing to a multicultural marketplace. The Company uses economic profit to
drive enhanced performance, portfolio choices and resource allocation. Economic
profit represents profit generated over and above the cost of capital used by
the business to generate that profit. For information on recent business
developments, refer to the information set forth under the caption “Executive
Overview - Fiscal Year 2010 Summary” in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” on page 3 of
Exhibit 99.1 hereto, incorporated herein by reference.
Financial Information About
Operating Segments and Principal Products
The Company
operates through strategic business units that are aggregated into four
reportable segments: Cleaning, Lifestyle, Household and International. The four
reportable segments consist of the following:
- Cleaning consists of
laundry, home-care, professional products and auto-care products marketed and
sold in the United States. Products within this segment include laundry
additives, including bleaches 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; natural cleaning and
laundry products under the Green Works® brand; and auto-care products
primarily under the Armor All® and STP® 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 marketed and sold in the
United States and all natural personal care products. Products within this
segment include dressings and sauces, primarily under the Hidden Valley® and K C
Masterpiece®
brands; water-filtration systems and filters under the Brita® brand; and all
natural personal care products under the Burt’s Bees®
brand.
- International consists
of products sold outside the United States, excluding natural personal care
products. These products include home-care, laundry, auto-care, water
filtration, charcoal and cat litter products, dressings and sauces, plastic
bags, wraps and containers, and insecticides, primarily under the Clorox®, Javex®, Glad®, PinoLuz®, Ayudin®, Limpido®, Clorinda®, Poett®, Mistolin®, Lestoil®, Bon Bril®, Nevex®, Brita®, Armor All®, STP®, Green Works®, Sabra®, Pine-Sol®, Agua Jane® , Ever Clean®, Chux®, Kingsford® and Hidden Valley® brands.