Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than
the Registrant [ ] |
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Check the appropriate
box: |
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Preliminary Proxy
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Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy
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Soliciting Material Pursuant to §240.14a-12 |
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THE CLOROX COMPANY |
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Specified In Its Charter) |
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of Person(s) Filing Proxy Statement, if other than the
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Table of Contents
Notice of 2015 Annual Meeting,
Proxy Statement
and
Annual Financial Statements
ANNUAL MEETING OF STOCKHOLDERS NOVEMBER 18,
2015
Table of
Contents
Notice of Annual
Meeting of Stockholders
To be held on November 18,
2015
The 2015 Annual Meeting of Stockholders
(the Annual Meeting) of The Clorox Company (Clorox or the Company), a
Delaware corporation, will be held at 9:00 a.m. Pacific time on Wednesday,
November 18, 2015, at the offices of the Company, 1221 Broadway, Oakland, CA
94612-1888, for the following purposes:
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1. |
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To elect eleven
directors to serve until the 2016 Annual Meeting; |
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2. |
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To conduct an advisory vote on
the compensation of the Companys named executive officers; |
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3. |
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To ratify the selection of Ernst
& Young LLP as the Companys independent registered public accounting
firm for the fiscal year ending June 30, 2016; |
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4. |
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To approve the material terms of
the performance goals under the Companys Executive Incentive Compensation
Plan; and |
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5. |
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To consider and act upon such
other business as may properly come before the Annual Meeting or any
adjournment thereof. |
The Companys board of directors has
fixed the close of business on September 21, 2015, as the record date for
determining the stockholders entitled to notice of, and to vote at, the Annual
Meeting and any adjournment thereof. A list of such stockholders will be
available at the Annual Meeting and during the ten days prior to the Annual
Meeting at the office of the Secretary of the Company at 1221 Broadway, Oakland,
CA 94612-1888.
Only record holders and people holding
proxies from record holders of Clorox common stock as of the record date may
attend the Annual Meeting. If you plan to
attend the Annual Meeting and your shares are registered in your name, you must
bring a current form of government-issued photo identification to the Annual
Meeting. If your shares are held in the name of a broker, trust, bank, or other
nominee, you must provide proof that you owned Clorox common stock on the record
date as well as a current form of government-issued photo
identification. Please see the Attending
the Annual Meeting section of the proxy statement for more
information.
We are pleased to take advantage of the
U.S. Securities and Exchange Commissions Notice and Access rule that allows
us to provide stockholders with notice of their ability to access proxy
materials via the Internet. This allows us to conserve natural resources and
reduces the costs of printing and distributing the proxy materials, while
providing our stockholders with access to the proxy materials in a fast and
efficient manner via the Internet. Under this process, on or about September 25,
2015, we will begin mailing a Notice of Internet Availability of Proxy Materials
to our stockholders informing them that our Proxy Statement, Integrated Annual
ReportExecutive Summary, and voting instructions are available on the Internet
as of the same date. As more fully described in the Notice of Internet
Availability of Proxy Materials, all stockholders may choose to access our proxy
materials via the Internet or may request printed copies of the proxy materials.
Please see the Information About the Meeting and Voting section of the proxy
statement for more information.
The Notice of Annual Meeting, Proxy
Statement, and 2015 Integrated Annual ReportExecutive Summary are available at
www.edocumentview.com/CLX.
YOUR VOTE IS
VERY IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE HOPE THAT YOU
WILL READ THE PROXY STATEMENT AND VOTE YOUR PROXY BY TELEPHONE, VIA THE
INTERNET, OR BY REQUESTING A PRINTED COPY OF THE PROXY MATERIALS AND COMPLETING,
SIGNING, AND RETURNING THE PROXY CARD ENCLOSED THEREIN.
By Order of the Board of
Directors,
Angela C. Hilt
Vice President Corporate Secretary
& Associate General
Counsel
September 25, 2015
THE CLOROX COMPANY - 2015 Proxy Statement
Table of
Contents
YOUR VOTE IS
IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU
OWN
If you have questions about how to vote
your shares, or need additional assistance, please contact Innisfree M&A
Incorporated, who is assisting us in the solicitation of proxies:
501 Madison Avenue, 20th Floor
New
York, New York 10022
Stockholders may call toll-free at
(877) 750-9499
Banks and brokers may call collect at
(212) 750-5833
Table of
Contents
1221
BROADWAY
OAKLAND, CA
94612-1888
Table of Contents
Table of
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Table of
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1221
BROADWAY
OAKLAND, CA
94612-1888
This proxy statement is furnished in
connection with the solicitation of proxies by the board of directors (the
Board) of The Clorox Company (Clorox or the Company), a Delaware
corporation, for use at the Companys 2015 Annual Meeting of Stockholders (the
Annual Meeting), to be held at 9:00 a.m. Pacific time on Wednesday, November
18, 2015, at the offices of the Company, 1221 Broadway, Oakland, CA
94612-1888. Please
refer to the Attending the Annual Meeting section of this proxy statement for
more information about procedures for attending the Annual
Meeting.
The U.S. Securities and Exchange
Commission, or SEC, has adopted rules that allow us to use a Notice and Access
model to make our proxy statement and other annual meeting materials available
to you. On or about September 25, 2015, we will begin mailing a notice to our
stockholders, called the Notice of Internet Availability
of Proxy Materials (the Notice),
advising that our proxy statement, Integrated Annual ReportExecutive Summary,
and voting instructions can be accessed on the Internet upon the commencement of
such mailing. You may then access these materials and vote your shares via the
Internet or by telephone or you may request that a printed copy of the proxy
materials be sent to you. You will not receive a printed copy of the proxy
materials unless you request one in the manner described in the Notice. Using
the Notice allows us to conserve natural resources and reduces the costs of
printing and distributing the proxy materials while providing our stockholders
with access to the proxy materials in a fast and efficient manner via the
Internet.
The Notice of
Annual Meeting, Proxy Statement, and Integrated Annual ReportExecutive Summary
are available at www.edocumentview.com/CLX.
Information About the Meeting and Voting
Q: What is the
purpose of this proxy statement?
A: The Board is
soliciting your proxy to vote at the Companys 2015 Annual Meeting of
Stockholders to be held on November 18, 2015, and at any adjournments of the
Annual Meeting. This proxy statement summarizes information that is intended to
assist you in making an informed vote on the proposals described in this proxy
statement.
Q: Who is
entitled to vote at the Annual Meeting?
A: Only stockholders of
record at the close of business on September 21, 2015 (the Record Date), are
entitled to vote at the Annual Meeting. On that date, there were 129,126,007 shares of Clorox common stock (Common Stock) outstanding and entitled to vote.
Holders of Common Stock as of the close of business on the Record Date are
entitled to one vote per share on each matter submitted to a vote of
stockholders.
Q: Why did I
receive a notice in the mail regarding the Internet availability of proxy
materials instead of a full set of printed proxy
materials?
A: Pursuant to rules
adopted by the SEC, we are making this proxy statement available to our
stockholders electronically via the Internet. On or about September 25, 2015, we
will mail the Notice to the holders of our Common Stock as of the close of
business on the Record Date, other than those stockholders who previously
requested electronic or paper delivery of communications from us. The Notice
contains instructions on how to access an electronic copy of our proxy
materials, including this proxy statement and our Integrated Annual
ReportExecutive Summary. The Notice also contains instructions on how to
request a paper copy of the proxy statement. We believe that this process will
allow us to provide you with the information you need in a timely manner, while
conserving natural resources and lowering the costs of printing and distributing
our proxy materials.
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THE CLOROX
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Q: Can I vote my
shares by filling out and returning the Notice of Internet Availability of Proxy
Materials?
A: No. The Notice only
identifies the items to be voted on at the Annual Meeting. You cannot vote by
marking the Notice and returning it. The Notice provides instructions on how to
cast your vote.
Q: How can I
vote my shares?
A: You can vote your
shares in one of two ways: either by proxy or in person at the Annual Meeting by
written ballot. If you choose to vote by proxy, you may do so via the Internet
or by telephone, or by requesting a printed copy of the proxy materials and
mailing in the enclosed proxy card. Each of these procedures is explained below.
Even if you plan to attend the Annual Meeting, the Board recommends that you
submit a proxy in advance via the Internet, by telephone, or by mail. In this
way, your shares of Common Stock will be voted as directed by you even if you
should become unable to attend the Annual Meeting. If you are not a record
holder of your shares, you must follow the instructions of your broker or other
nominee.
Q: May I change
my vote?
A: Yes. You may change
your vote or revoke your proxy at any time before it is exercised at the Annual
Meeting by taking any of the following actions:
● | submitting written notice of revocation to the Secretary of the
Company; |
● | voting again electronically by telephone or via the Internet or by
submitting another proxy card with a later date; or |
● | voting in person at the Annual Meeting. |
Q: How many
shares must be present to conduct the Annual Meeting?
A: We must have a
quorum to conduct the Annual Meeting. A quorum is a majority of the
outstanding shares of Common Stock entitled to vote at the meeting, present in
person or by proxy. Abstentions and broker non-votes (described below) will be
counted for the purpose of determining a quorum.
Q: What are
broker non-votes?
A: A broker non-vote
occurs when a bank or brokerage firm does not receive voting instructions from a
beneficial owner of shares and does not have the discretion to direct the voting
of those shares. Broker non-votes are not counted as votes against a proposal or
as abstentions, and will not be counted for purposes of determining the number
of votes present in person or represented by proxy and entitled to vote with
respect to a particular proposal or the number of votes cast on a particular
proposal. Thus, a broker non-vote will not affect the outcome of the vote on a
proposal that requires the approval of a majority of the votes present in person
or represented by proxy and entitled to vote at the Annual Meeting (Proposals 2,
3, and 4) or the approval of a majority of the votes cast (Proposal
1).
Q: Will my
shares be voted if I do not provide instructions to my
broker?
A: If you are the
beneficial owner of shares held by a broker in street name, the broker, as the
record holder of the shares, is required to vote those shares in accordance with
your instructions. Under applicable New York Stock Exchange (NYSE) rules, if
you hold your shares through a bank or brokerage firm and your broker delivers
this proxy statement to you, the broker has the discretion to vote on routine
matters, such as the ratification of the selection of an independent registered
public accounting firm, but does not have discretion to vote on non-routine
matters, such as the election of directors or proposals on executive
compensation matters. Thus, the broker is entitled to vote your shares on
Proposal 3 even if you do not provide voting instructions to your broker. The
broker is not entitled to vote your shares on Proposal 1, 2, or 4 without your
instructions.
Q: How do I vote
if I hold shares in the Clorox 401(k) Plan?
A: If you are a
participant in our 401(k) plan, you will receive a voting instruction card to
direct Mercer Trust Company, as trustee of our 401(k) plan, how to vote the
shares of our Common Stock attributable to your individual account. Mercer Trust
Company will vote shares as instructed by participants prior to 11:59 p.m.
Eastern time on November 17, 2015. If you do not provide voting directions to
Mercer Trust Company by that time, the shares attributable to your account will
not be voted.
2 THE CLOROX COMPANY
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PROXY
STATEMENT
Q: How do I vote
if I cannot attend the Annual Meeting in person?
A: Because many
stockholders cannot attend the Annual Meeting in person, it is necessary that a
large number of stockholders be represented by proxy. By following the
procedures for voting via the Internet or by telephone, or by requesting a
printed copy of the proxy materials and completing, signing, and returning the
proxy card enclosed therein, you will enable Benno Dorer, Stephen M. Robb, or
Laura Stein, each of whom is named on the proxy card as a proxy holder, to
vote your shares at the Annual Meeting in the manner you indicate on your proxy
card. When you vote your proxy, you can specify whether your shares should be
voted for or against each of the nominees for director identified in Proposal 1,
or you can abstain from voting on the director nominees. You can also specify
whether your shares should be voted for or against Proposals 2, 3, and 4, or you
can abstain from voting on such proposals. Each of these proposals is described
in this proxy statement.
Management of the Company is not aware
of any matters other than those described in this proxy statement that may be
presented for action at the Annual Meeting. If any other matters are properly
presented at the Annual Meeting for consideration, the proxy holders will have
discretion to vote for you on those matters.
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Voting via
the Internet. You can vote your
shares via the Internet by following the instructions provided either in
the Notice or on the proxy card. If you requested and received a printed
set of the proxy materials by mail, you should follow the voting
instruction form you received. The Internet voting procedures are designed
to authenticate your identity and to allow you to vote your shares and
confirm that your voting instructions have been properly recorded. If you
vote via the Internet, you do not need to mail a proxy card to
us. |
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Voting by
Telephone. You can vote your
shares by telephone if you requested and received a printed set of the
proxy materials through the mail by following the instructions provided on
the proxy card or voting instruction form enclosed with the proxy
materials you received. If you received the Notice only, you can vote by
telephone by following the instructions at the website address referred to
in the Notice. The telephone voting procedures are designed to
authenticate your identity and to allow you to vote your shares and
confirm that your voting instructions have been properly recorded. If you
vote by telephone, you do not need to mail a proxy card to
us. |
● |
Voting by
Mail. You can vote by mail by
requesting that a printed copy of the proxy materials be sent to your
specified address. Upon receipt of the materials, you may fill out the
proxy card enclosed therein and sign and return it as instructed on the
card. |
Stockholders who hold shares through a
broker or other nominee must follow that nominees direction to vote.
Q: May I vote in
person at the Annual Meeting?
A: Yes, you may vote
your shares at the Annual Meeting if you attend in person and use a written
ballot. However, if your shares are held in the name of a broker, trust, bank,
or other nominee, you must bring a legal proxy or other proof from that broker,
trust, bank, or nominee granting you authority to vote your shares directly at
the Annual Meeting.
If you vote by proxy and also attend
the Annual Meeting, you do not need to vote again at the Annual Meeting unless
you wish to change your vote. Even if you plan to attend the Annual Meeting, we
strongly urge you to vote in advance via the Internet or by telephone, or by
requesting a printed copy of the proxy materials and signing, dating, and
returning the proxy card enclosed therein.
Q: What are the
proposals and what vote is required for each?
A: Proposal 1: Election of
Directors. Proposal 1 is for the election of eleven nominees to serve as
members of the Board until the 2016 Annual Meeting of Stockholders, or until
their respective successors are duly elected and qualified. The Companys Bylaws
provide for majority voting for directors in uncontested elections. Accordingly,
each of the eleven nominees for director will be elected if he or she receives
the majority of the votes cast in person or represented by proxy, with respect
to that director. A majority of the votes cast means that the number of shares
voted FOR a director must exceed the number of shares voted AGAINST that
director. An abstention or a broker non-vote on Proposal 1 will not have any
effect on the election of directors and will not be counted in determining the
number of votes cast. Your broker is not entitled to vote your shares on
Proposal 1 unless you provide voting instructions.
Proposal 2:
Approval (on an advisory basis) of the Compensation of the Companys Named
Executive Officers. Proposal 2 is
being submitted to enable stockholders to approve, on an advisory basis, the
compensation of the Companys named executive officers. Since Proposal 2 is an
advisory vote, the provisions of our Bylaws regarding the vote required to
approve a proposal are not applicable to this matter. In order to be approved
on an advisory basis, Proposal 2 must receive
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THE CLOROX
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a FOR vote from a majority of the votes
present in person or represented by proxy and entitled to vote at the Annual
Meeting. Abstentions will have the same effect as a vote against the proposal.
Broker non-votes will have no effect on this proposal and will not be counted.
Your broker is not entitled to vote your shares on Proposal 2 unless you provide
voting instructions.
Proposal 3:
Ratification of Selection of Independent Registered Public Accounting Firm.
Proposal 3 is for the ratification of
the appointment of Ernst & Young LLP as the Companys independent registered
public accounting firm for the fiscal year ending June 30, 2016. The affirmative
vote of a majority of the votes present in person or represented by proxy and
entitled to vote at the Annual Meeting is required to approve Proposal 3. An
abstention on Proposal 3 will have the same effect as a vote against Proposal 3.
A broker non-vote will not have any effect on Proposal 3 and will not be
counted. Your broker, however, is entitled to vote your shares on Proposal 3
even if you do not provide voting instructions.
Proposal 4:
Approval of the Material Terms of the Performance Goals under the Companys
Executive Incentive Compensation Plan. Proposal 4 is for the approval of the material terms of the performance
goals under the Companys Executive Incentive Compensation Plan. The affirmative
vote of a majority of the votes present in person or represented by proxy and
entitled to vote at the Annual Meeting is required to approve Proposal 4. An
abstention on Proposal 4 will have the same effect as a vote against Proposal 4.
A broker non-vote will not have any effect on Proposal 4 and will not be
counted.
Q: What are the recommendations of the Board of
Directors?
A: The Board recommends
that you vote:
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FOR the election of the eleven nominees for director named
in this proxy statement (Proposal 1); |
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FOR the proposal to approve (on an advisory basis) the
compensation of the Companys named executive officers (Proposal
2); |
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FOR the ratification of the appointment of Ernst & Young
LLP as the Companys independent registered public accounting firm for the
fiscal year ending June 30, 2016 (Proposal
3); and |
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FOR the approval of the material terms of the performance
goals under the Companys Executive Incentive Compensation Plan (Proposal
4). |
Q: What do I do
if I receive more than one proxy card?
A: Stockholders who hold
their shares in more than one account may receive separate proxy cards or voting
instruction forms for each of those accounts. To ensure that ALL of your shares
are represented at the Annual Meeting, we recommend that you vote every proxy
card you receive.
Q: Who will
count the votes?
A: Votes will be counted
by Computershare Trust Company, N.A., our inspector of election appointed for
the Annual Meeting.
Q: What happens
if the Annual Meeting is postponed or adjourned?
A: If we adjourn the
Annual Meeting, we will conduct the same business at a later meeting, and the
Board can decide to set a new record date for determining stockholders entitled
to vote at the adjourned meeting or decide to only allow the stockholders
entitled to vote at the original meeting to vote at the adjourned meeting.
According to our Bylaws, when a meeting is adjourned to another place, date, or
time, notice need not be given of the adjourned meeting if the place, date,
time, and the proxy requirements are announced at the meeting at which the
adjournment is taken; provided, however, that if the date of any adjourned
meeting is more than 30 days after the date for which the meeting was originally
scheduled to take place, notice of the place, date, time, and the proxy
requirements will be given to each stockholder of record entitled to vote at the
meeting. If after the adjournment a new record date for stockholders entitled to
vote is fixed for the adjourned meeting, the Board will fix a new record date
for notice of such adjourned meeting and will give notice of the adjourned
meeting to each stockholder entitled to vote at such adjourned meeting as of the
record date for notice of such adjourned meeting.
4 THE CLOROX COMPANY
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PROXY STATEMENT
Q: What is the
deadline to propose actions for consideration at next years annual meeting of
stockholders?
A: Stockholders may
present proper proposals for inclusion in our proxy statement and for
consideration at next years annual meeting of stockholders by submitting their
proposals in writing to the Company in a timely manner. Proposals should be
addressed to The Clorox Company, c/o Secretary, 1221 Broadway, Oakland, CA
94612-1888. For a stockholder proposal other than a director nomination to be
considered for inclusion in our proxy statement for our 2016 Annual Meeting of
Stockholders, we must receive the written proposal no later than May 28, 2016.
In addition, stockholder proposals must otherwise comply with the requirements
of Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act).
Under certain circumstances,
stockholders may also submit nominations for directors for inclusion in our
proxy materials by complying with the requirements in our Bylaws. To be timely
for inclusion in the Companys proxy materials for the 2016 Annual Meeting of
Stockholders, we must receive notice of such a director nomination between April
28, 2016, and May 28, 2016. For more information regarding proxy access, please
see the question below, How do I nominate a director using the Companys proxy
materials? and the Stockholder Proposals for the 2016 Annual Meeting section
of this proxy statement.
Our Bylaws also establish an advance
notice procedure for stockholders who wish to present a proposal, including the
nomination of directors, before an annual meeting of stockholders, but do not
intend for the proposal to be included in our proxy statement. Pursuant to our
Bylaws, a proposal may be brought before the meeting by a stockholder who was a
stockholder of record at the time notice is given, is entitled to vote at the
annual meeting, and complied with the notice procedures specified in our Bylaws.
To be timely for our 2016 Annual Meeting of Stockholders, and assuming the 2016
Annual Meeting of Stockholders takes place within 30 days before or 60 days
after the anniversary of this years Annual Meeting, we must receive the written
notice at our principal executive
offices between July 21, 2016, and
August 20, 2016. For more information regarding proposals for consideration at
next years annual meeting, please see the Stockholder Proposals for the 2016
Annual Meeting section of this proxy statement. If a stockholder who has
notified us of his or her intention to present a proposal at an annual meeting
does not appear in person or through a qualified representative to present his
or her proposal at such meeting, we are not required to present the proposal for
a vote at such meeting.
Q: How do I
nominate a director using the Companys proxy materials?
A: After engaging with a
number of our stockholders to understand their views on the desirability of
proxy access and the appropriate proxy access structure for the Company, we
amended our Bylaws on August 28, 2015, to permit a stockholder or group of up to
20 stockholders who have owned at least 3% of the Companys Common Stock for at
least three years the ability to submit director nominees (up to 20% of the
Board) for inclusion in the Companys proxy materials if the stockholder(s)
provides timely written notice of such nomination(s) and the stockholder(s) and
nominee(s) satisfy the requirements specified in the Companys Bylaws. The
notice must contain the information required by the Companys Bylaws, and the
stockholder(s) and nominee(s) must comply with the information and other
requirements in our Bylaws relating to the inclusion of stockholder nominees in
the Companys proxy materials.
Q: Whom can I
contact if I have questions?
A: If you have any
questions about the Annual Meeting or how to vote your shares, please call
Innisfree M&A Incorporated at (877) 750-9499, who is assisting us in the
solicitation of proxies.
Q: Where can I
find the voting results?
A: We will report
final results in a filing with the SEC on Form 8-K, which will be filed within
four business days following the Annual Meeting.
THE CLOROX COMPANY - 2015 Proxy Statement
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Proposal 1: Election
of Directors |
At the Annual Meeting, eleven people
will be elected as members of the Board to serve until the 2016 Annual Meeting
of Stockholders, or until their respective successors are duly elected and
qualified. The Board, upon the recommendation of the Nominating and Governance
Committee, has nominated the eleven people listed below for election at the
Annual Meeting.
Each of the nominees for director has
agreed to be named in this proxy statement and to serve as a director if
elected. Each nominee is currently serving as a director of the Company. Spencer
Fleischer and Christopher Williams were each appointed to the Board during
calendar year 2015 and are being nominated for election by the stockholders for
the first time. Each of Messrs. Fleischer and Williams was recommended by
independent directors of the Board.
Board of Directors
Recommendation
The Board
unanimously recommends a vote FOR each of the Boards eleven nominees for
director listed below. The Board
believes that each of the nominees listed below is highly qualified and has the
background, skills, experience, and attributes that qualify them to serve as
directors of the Company (see each nominees biographical information and the
Nominating and Governance Committee section below for more information). The
recommendation of the Board is based on its carefully considered judgment that
the background, skills, experience, and attributes of the nominees make them the
best candidates to serve on our Board.
Certain information with respect to
each nominee appears on the following pages, including age, period served as a
director, position (if any) with the Company, business experience, directorships
of other publicly owned corporations, including any other directorships held
during the past five years (if any), and other relevant experience and
qualifications, including service on certain non-profit or non-public company
boards, that contributed to the conclusion that each director is qualified to
serve as a director of the Company.
Vote Required
Majority Voting
for Directors. The Companys Bylaws
require each director to be elected by a majority of the votes cast with respect
to such director in uncontested elections (the number of shares voted FOR a
director must exceed the number of shares voted AGAINST that director). Under
the Companys Bylaws, any director who fails to be elected by a majority of the
votes cast in an uncontested election must tender his or her resignation to the
Board. The Nominating and Governance Committee would then make a recommendation
to the Board whether to accept or reject the resignation, or whether other
action should be taken. The Board would act on the Nominating and Governance
Committees recommendation and publicly disclose its
decision and the rationale behind it
within 90 days from the date the election results are certified. A director who
tenders his or her resignation would not participate in the Boards
decision.
The people designated in the proxy and
voting instruction card intend to vote your shares represented by proxy FOR the
election of each of these nominees, unless you include instructions to the
contrary. In the event any director nominee is unable to serve, the persons
named as proxies may vote for a substitute nominee recommended by the
Board.
6 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Proposal 1: Election of
Directors
Director Since |
|
Name, Principal Occupation, and Other
Information |
2007 |
|
Richard H. Carmona,
M.D., M.P.H., F.A.C.S. |
|
|
Dr. Carmona has been Vice
Chairman of Canyon Ranch (a life-enhancement company) since October 2006.
He also serves as Chief Executive Officer of the Canyon Ranch Health
Division and President of the non-profit Canyon Ranch Institute. He is
also the first Distinguished Professor of Public Health at the Mel and
Enid Zuckerman College of Public Health at the University of Arizona.
Prior to joining Canyon Ranch, Dr. Carmona served as the 17th Surgeon
General of the United States from August 2002 through July 2006, achieving
the rank of Vice Admiral. Previously, he was Chairman of the State of
Arizona Southern Regional Emergency Medical System, a professor of
surgery, public health, and family and community medicine at the
University of Arizona, and surgeon and deputy sheriff of the Pima County,
Arizona, Sheriffs Department. Dr. Carmona served in the United States
Army and the Armys Special Forces.
Other
Public Company Boards: Dr.
Carmona serves as a director of Taser International (March 2007 to
present) and Herbalife Ltd. (October 2013 to present).
Non-Profit/Other Boards: Dr. Carmona serves on the board of Healthline Networks
(a health information and technology company).
Director
Qualifications: Dr. Carmonas
experience as the Surgeon General of the United States and extensive
background in public health provide him with a valuable perspective on
health and wellness matters, as well as insight into regulatory
organizations and institutions, which are important to the Companys
business strategy. In addition, his executive leadership experience,
including with a global lifestyle enhancement company, provides him with
international experience and enables him to make valuable contributions to
the Companys international growth strategies. Dr. Carmonas experience in
the United States Army and in academia also strengthens the Boards
collective qualifications, skills, and experience. Age:
65. |
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THE CLOROX COMPANY - 2015 Proxy Statement |
7 |
Table of Contents
Director Since |
|
Name, Principal Occupation, and Other
Information |
2014 |
|
Benno
Dorer |
|
|
Mr. Dorer has served as Chief
Executive Officer of the Company since November 2014. Prior to becoming
CEO, Mr. Dorer was Executive Vice President and Chief Operating Officer
Cleaning, International and Corporate Strategy since January 2013, with
responsibility for the Laundry, Home Care, and International businesses as
well as Corporate Strategy and Growth. He previously served as Senior Vice
President Cleaning Division and Canada from March 2011 through December
2012, Senior Vice President Cleaning Division from June 2009 through
March 2011, and Vice President & General Manager Cleaning Division
from October 2007 through June 2009. Mr. Dorer joined Clorox in 2005 as
Vice President & General Manager Glad® Products. Prior to
that role, he worked for The Procter & Gamble Company for 14 years,
leading the marketing organization for the Glad® Products joint
venture since its inception and holding marketing positions across a range
of categories and countries.
Non-Profit/Other Boards: Mr. Dorer serves on the board of GMA (Grocery
Manufacturers Association). He previously served on the executive
committee of the board of directors of the American Cleaning
Institute and the board of directors of the Chabot Space & Science Center
Foundation in Oakland, California.
Director
Qualifications: Mr. Dorers
leadership experience and his in-depth knowledge of the consumer packaged
goods industry, the Companys businesses, and his leadership in developing
the Companys 2020 Strategy and Strategy Accelerators enable him to
provide valuable contributions with respect to strategy, growth, and
long-range plans. Additionally, his extensive international background
provides him with a broad perspective on international customer and
consumer dynamics and business strategy. Age: 51. |
|
|
|
2015 |
|
Spencer C.
Fleischer |
|
|
Mr. Fleischer is co-Chief
Executive Officer and president of Friedman Fleischer & Lowe LLC (FFL)
(a private equity firm). Before co-founding FFL in 1997, Mr. Fleischer
spent 19 years with Morgan Stanley & Company as an investment banker
and manager. At Morgan Stanley & Company, he was a member of the
worldwide Investment Banking Operating Committee and also held roles
including head of investment banking in Asia and head of corporate finance
for Europe.
Non-Profit/Other Boards: Mr. Fleischer is a director of Levi Strauss & Co.,
SKBHC Holdings LLC, and Strategic Investment Management, LLC. He
previously served on the board of WiltonRe Holdings Limited.
Director
Qualifications: Mr. Fleischer
brings to the board more than 35 years of financial and operational
expertise as well as deep international experience. His significant
experience in both private equity and investment banking enables him to
contribute valuable insights into strategic planning, mergers and
acquisitions, and operating expertise to the Company. His leadership role
at FFL also allows him to provide significant experience in compensation
matters. Age: 61. |
8 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Proposal 1: Election of
Directors
Director Since |
|
Name, Principal Occupation, and Other
Information |
2006 |
|
George J.
Harad |
|
|
Mr. Harad was elected the
independent chair of the Company as of July 1, 2015. He was Executive
Chairman of the Board of OfficeMax Incorporated (an office supply and
services company), formerly known as Boise Cascade Corporation (Boise
Cascade), from October 2004 until his retirement in June 2005. He served
as Chairman of the Board and Chief Executive Officer of Boise Cascade from
April 1995 until October 2004. Previously, Mr. Harad held various
positions at Boise Cascade, including Controller, Senior Vice President
and Chief Financial Officer, and President and Chief Operating Officer.
Prior to joining Boise Cascade, Mr. Harad was a consultant for the Boston
Consulting Group and a teaching fellow at Harvard University.
Director
Qualifications: Mr. Harads
prior executive leadership roles enable him to provide valuable
contributions with respect to management, operations, strategy, growth,
and long-range plans. His experience as a chief financial officer has
provided him with expertise in finance and accounting matters.
Additionally, as a former chief executive officer of a Fortune 500
company, Mr. Harad brings extensive knowledge in executive compensation
matters. Mr. Harads long history as a director and deep experience with
the Company enable him to bring important leadership perspectives to our
Board. Age: 71. |
|
|
|
2013 |
|
Esther
Lee |
|
|
Ms. Lee has served as Executive
Vice President Global Chief Marketing Officer at MetLife Inc. (an
insurance and benefits company) since January 2015. Previously, Ms. Lee
served as Senior Vice President Brand Marketing, Advertising and
Sponsorships for AT&T since 2009. From July 2007 to September 2008 she
served as CEO of North America and President of Global Brands for Euro
RSCG Worldwide. Prior to that, she served for five years as Global Chief
Creative Officer for The Coca-Cola Company. Earlier in her career, as
co-founder of DiNoto Lee advertising firm, Ms. Lee worked with several
consumer packaged goods companies, including The Procter & Gamble
Company, Unilever, and Nestle.
Non-Profit/Other Boards: Ms. Lee serves on the board of ANA (Association of
National Advertisers).
Director
Qualifications: Ms. Lee
brings to the Company significant executive and brand-building expertise.
Her current and prior executive leadership roles enable her to provide
valuable contributions with respect to creativity and vision for long-term
growth. In addition, Ms. Lee brings to the Company significant experience
in the areas of marketing and digital media. Her prior experience with
global brand marketing, advertising, media, and sponsorship, as well as
developing operating models in these areas, enable her to provide valuable
contributions to the Companys business strategies. Age:
56. |
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THE CLOROX COMPANY - 2015 Proxy Statement |
9 |
Table of Contents
Director Since |
|
Name, Principal Occupation, and Other
Information |
1999 |
|
Robert W.
Matschullat |
|
|
Mr. Matschullat served as
independent lead director of the Board from November 2012 until July 1,
2015. He was interim Chairman and interim Chief Executive Officer of the
Company from March 2006 through October 2006, served as presiding director
of the Board from January 2005 through March 2006, and served as Chairman
of the Board from January 2004 through January 2005. He was the Vice
Chairman and Chief Financial Officer of The Seagram Company Ltd. (a global
company with entertainment and beverage operations) from October 1995 to
June 2000. Prior to joining The Seagram Company Ltd., Mr. Matschullat
served as head of worldwide investment banking for Morgan Stanley &
Co. Incorporated, and was on the Morgan Stanley Group board of
directors.
Other Public
Company Boards: Mr. Matschullat is a
director of The Walt Disney Company, Inc. (December 2002 to present). He
is the Chairman of the Board of Visa, Inc. (April 2013 to present), having
served as a director of Visa, Inc. since October 2007.
Director
Qualifications: Mr. Matschullat
brings to the Company a wealth of public company leadership experience at
the board and executive levels. Mr. Matschullats executive leadership
experience includes service as the chief financial officer of a major
global company and as the division head of a major financial institution,
providing him with expertise in business and financial matters as well as
broad international experience. In addition, Mr. Matschullat has an
extensive understanding of the Companys business, having served more than
15 years on the Board, including in the leadership roles of
independent lead director, non-executive Chairman, and presiding director
of the Board. Mr. Matschullat also served as the Companys interim Chief
Executive Officer. These experiences have provided him with a long-term
perspective, as well as valuable management, governance, and leadership
experience. Age: 67. |
10 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
Proposal 1: Election of Directors
Director Since |
|
Name, Principal Occupation, and Other
Information |
2013 |
|
Jeffrey Noddle |
|
|
Mr. Noddle was the Executive
Chairman of SuperValu, Inc. (SuperValu) (a food retailer and provider of
distribution and logistical support services) from May 2009 until his
retirement in June 2010. He served as SuperValus Chairman and Chief
Executive Officer from May 2002 to May 2009. During his career with
SuperValu, which commenced in 1976, Mr. Noddle held a number of other
leadership positions, including President and Chief Operating Officer,
Vice President Merchandising, and President of SuperValus Fargo and
former Miami divisions.
Other Public Company
Boards: Mr. Noddle is a director of
Donaldson Company, Inc. (a filtration company) (November 2000 to present)
and Ameriprise Financial, Inc. (September 2005 to present). Mr. Noddle
previously served on the board of SuperValu, Inc. (May 2002 to June
2010).
Non-Profit/Other
Boards: Mr. Noddle serves on the
board of the University of Minnesota Carlson School of Management. He was
previously on the board of The Food Industry Center at the University of
Minnesota and the Greater Twin Cities United Way. Mr. Noddle was also a
member of the executive committee of the Minnesota Business Partnership
and past chairman of the board of The Food Marketing Institute.
Director
Qualifications: Mr. Noddles prior
leadership roles enable him to provide valuable operational and supply
chain insights as well as strategic leadership and human resources
guidance to the Company. His over 30-year career with SuperValu provides
him with valuable perspective on the Companys retail environment, as well
as experience in the areas of mergers and acquisitions, including
integration planning and execution, stockholder relations and
communications, corporate governance issues, executive succession
planning, and director recruitment. Mr. Noddles expertise in leading one
of the largest grocery retail companies in the United States and his
extensive knowledge of the Companys customers and consumers enable him to
make valuable contributions to the Company. Age:
69. |
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
11 |
Table of Contents
Director Since |
|
Name, Principal Occupation, and Other
Information |
2013 |
|
Rogelio
Rebolledo |
|
|
Mr. Rebolledo was the CEO and
Chairman of the Pepsi Bottling Group, Mexico (the Mexican operations of
Pepsi Bottling Group, Inc.) from January 2004 to May 2007. Prior to
January 2004, Mr. Rebolledo worked for the Frito-Lay International
Division of Pepsico for 27 years, becoming President and Chief Executive
Officer of Frito-Lay International in 2001. He began his 31-year career
with Pepsico Inc. in 1976 at Sabritas, the salty food unit of Frito-Lay
International, first in Latin America and then in Asia and Europe. Mr.
Rebolledo began his career at The Procter & Gamble Company, where he
held a variety of marketing roles.
Other Public Company
Boards: Mr. Rebolledo is a director
of the Kellogg Company (October 2008 to present). He previously served on
the boards of Best Buy Company (August 2006 to June 2012), Applebees
International (May 2006 to October 2007), and The Pepsi Bottling Group
(May 2004 to May 2007).
Non-Profit/Other
Boards: Mr. Rebolledo is a director
of Jose Cuervo International and formerly served on the boards of The Alfa
Group and Proeza Group, which are Mexico-based companies.
Director
Qualifications: Mr. Rebolledo brings
to the Board more than 30 years of leadership roles in consumer packaged
goods companies. His extensive background, particularly in developing
business in Latin America and Asia, provides him with a deep understanding
of customer and consumer dynamics. In addition, Mr. Rebolledos strong
financial background and experience on audit and compensation committees
enable him to make valuable contributions to the Company. Age:
71. |
12 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Proposal 1: Election of Directors
Director Since |
|
Name, Principal Occupation, and Other
Information |
2005 |
|
Pamela
Thomas-Graham |
|
|
Ms. Thomas-Graham has served as
Chief Marketing and Talent Officer, Head of Private Banking & Wealth
Management New Markets, and as a member of the Executive Board, of Credit
Suisse Group AG (a global financial services company) since October 2013.
From January 2010 to October 2013, she was Chief Talent, Branding and
Communications Officer of Credit Suisse. From March 2008 to December 2009,
she served as a managing director in the private equity group at Angelo,
Gordon & Co. From October 2005 to December 2007, Ms. Thomas-Graham
held the position of Group President at Liz Claiborne, Inc. Previously,
she served as Chairman of CNBC from February 2005 to October 2005 and as
President and Chief Executive Officer of CNBC from July 2001 to February
2005. From September 1999 to July 2001, Ms. Thomas-Graham served as an
Executive Vice President of NBC and as President and Chief Executive
Officer of CNBC.com. Prior to joining NBC, Ms. Thomas-Graham was a partner
at McKinsey & Company.
Other Public Company
Boards: Ms. Thomas-Graham previously
served as a director of Idenix Pharmaceuticals, Inc. (June 2005 to January
2010).
Non-Profit/Other
Boards: Ms. Thomas-Graham serves on
the board of the New York Philharmonic, the Parsons School of Design, and
the Education Committee of the Museum of Modern Art in New York City. She
is a member of the Business Council of the Metropolitan Museum of Art in
New York City. Additionally, she previously served on the Visiting
Committee of Harvard Business School and on the board of the Harvard
Alumni Association.
Director
Qualifications: Ms. Thomas-Graham
brings to the Company significant executive expertise. Her current and
prior executive leadership roles enable her to provide valuable
contributions with respect to management, operations, growth, and
long-range plans. In addition, Ms. Thomas-Graham brings to the Company
significant experience in the area of branding. Her prior experience as a
management consultant also enables her to provide valuable contributions
to the Companys business strategies and mergers and acquisitions
activities. Additionally, her leadership experience at a private equity
firm provides her with financial and accounting expertise, enabling her to
contribute to the oversight of the Company. Age:
52. |
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
13 |
Table of Contents
Director Since |
|
Name, Principal
Occupation, and Other Information |
2005 |
|
Carolyn M.
Ticknor |
|
|
Ms. Ticknor was President of the
Imaging and Printing Systems group of the Hewlett Packard Company (a
global IT company) from 1999 until her retirement in February 2001. She
served as President and General Manager of the Hewlett Packard Companys
LaserJet Solutions from 1994 to 1999.
Other Public Company
Boards: Ms. Ticknor served as a
director of OfficeMax Incorporated (formerly Boise Cascade Corporation)
(February 2000 to April 2006).
Non-Profit/Other
Boards: Ms. Ticknor is currently a
director of The Center for the Advancement of Science in Space (CASIS).
She previously served as a director of Lucile Packard Childrens Hospital,
a private non-profit organization at the Stanford University Medical
Center.
Director
Qualifications: Ms. Ticknors prior
executive leadership roles enable her to provide valuable contributions
with respect to management, operations, strategy, growth, and long-range
plans. Her prior leadership at a global IT company enables her to provide
valuable contributions with respect to the Companys international
operations, strategies, and growth plans. She also brings to the Company
significant expertise in the areas of innovation and supply chain
management. Ms. Ticknors service as a director of Lucile Packard
Childrens Hospital at Stanford University Medical Center enhances her
understanding of health and wellness issues, as well as the Companys
focus on community involvement. Age: 68. |
|
|
|
2015 |
|
Christopher J.
Williams |
|
|
Mr. Williams has served as the
Chairman and Chief Executive Officer of The Williams Capital Group, L.P.
and Williams Capital Management, LLC (Williams Capital) (an investment
banking and financial services firm) since the companys formation in
1994. From 1992 to 1994, Mr. Williams managed the derivatives and
structured finance division of Jefferies & Company. He previously
worked at Lehman Brothers, where his roles included managing groups in the
corporate debt capital markets and derivatives structuring and
trading.
Other Public Company
Boards: Mr. Williams is a director
of Caesars Entertainment Corporation (April 2008 to present). He
previously served on the board of Wal-Mart Stores Inc. (June 2004 to June
2014).
Non-Profit/Other
Boards: Mr. Williams serves on the
board of Cox Enterprises Inc., Lincoln Center for the Performing Arts, Mt.
Sinai Medical Center, The Partnership for New York City, and the National
Association of Securities Professionals.
Director
Qualifications: Mr. Williams brings a wealth of financial, accounting, and strategic knowledge to the Board
with his years of experience in investment banking and finance, and as the chair of the audit
committee of a Fortune 100 company. He also contributes important executive management
and leadership experience as the chairman and chief executive officer of an investment
management firm. As a current and former director of several public and private companies,
he brings a valuable perspective for the Companys strategy and operations as well as
extensive customer insights. Age: 57. |
14 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
|
Committees, Organization of the Board
of Directors, and Director Independence |
The Board has established three
standing committees: the Audit Committee, the Nominating and Governance
Committee, and the Management Development and Compensation Committee. Each of
these committees consists only of non-management directors whom the Board has
determined are independent under the NYSE listing standards and the Boards
independence standards set forth in the Companys Governance Guidelines
(Governance
Guidelines), which are discussed below. The charters for these committees are
available in the Corporate Governance section of the Companys website at http:// www.thecloroxcompany.com/corporate-responsibility/performance/corporate-governance/company-charters,
or in print by contacting The Clorox Company, c/o Secretary, 1221 Broadway, Oakland, CA 94612-1888.
Standing Committees
Audit Committee. The Audit Committee is composed of directors Noddle,
Rebolledo, Thomas-Graham, Ticknor (chair), and Williams. The Audit Committee is
the principal link between the Board and the Companys independent registered
public accounting firm. The Audit Committee has the functions and duties set
forth in its charter, including representing and assisting the Board in
overseeing (i) the integrity of the Companys financial statements, (ii) the
independent registered public accounting firms qualifications, independence,
and performance, (iii) the performance of the Companys internal audit function,
(iv) the Companys system of disclosure controls and procedures and system of
internal control over financial reporting, (v) the Companys compliance with
legal and regulatory requirements relating to accounting and financial reporting
matters, (vi) the Companys framework and guidelines with respect to risk
assessment and risk management, and (vii) the Companys material financial
policies and actions. The Audit Committees duties also include preparing the
report required by the SEC proxy rules to be included in the Companys annual
proxy statement. The Audit Committee held nine meetings during fiscal year 2015.
The Board has made a determination that each member of the Audit Committee
satisfies the independence and experience requirements of both the NYSE and SEC.
The Board has determined that directors Noddle, Rebolledo, Thomas-Graham,
Ticknor, and Williams are audit committee financial experts, as defined by SEC
rules, and each member of the Audit Committee is financially literate, as
defined by NYSE rules.
Nominating and Governance
Committee. The Nominating and Governance
Committee is composed of directors Carmona, Lee, Matschullat (chair), and
Ticknor. The Nominating and Governance Committee has the functions set forth in
its charter, including (i) identifying and recruiting individuals qualified to
become Board members, (ii) recommending to the Board individuals to be selected
as director nominees for the annual meeting of stockholders, (iii) reviewing and
recommending to the Board changes in the Governance Guidelines and the Code of
Conduct,
(iv) overseeing the Companys ethics
and compliance program and activities, including the Companys compliance with
legal and regulatory requirements relating to matters other than accounting and
financial reporting matters, and (v) performing a leadership role in shaping the
Companys corporate governance and overseeing the evaluation of the Board and
its committees. The Nominating and Governance Committee held five meetings
during fiscal year 2015.
Management Development and
Compensation Committee. The Management Development and
Compensation Committee is composed of directors Carmona, Fleischer, Harad,
Noddle (chair), and Rebolledo. The Management Development and Compensation
Committee has the functions and duties set forth in its charter, including (i)
reviewing and approving the performance goals and objectives for the Chief
Executive Officer (CEO) and other executive officers and the extent to which
such performance goals and objectives have been met, (ii) determining and
approving the CEOs compensation based on a variety of factors, (iii) reviewing
periodically with the CEO the performance of each of the other executive
officers and approving the compensation of each such executive officer, (iv)
determining the amount and other material terms of individual short- and
long-term incentive awards to be made to executive officers, (v) reviewing and
approving recommendations regarding retirement income and other deferred benefit
plans applicable to executive officers, (vi) reviewing and approving
employment-related arrangements, and (vii) evaluating the outcome of the
advisory vote of the stockholders regarding say on pay and making
recommendations or taking appropriate actions in response to such advisory vote.
In addition, the Management Development and Compensation Committee oversees,
with involvement of the full Board, the Companys management development and
succession planning processes. The Management Development and Compensation
Committee held seven meetings during fiscal year 2015.
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THE CLOROX
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|
15 |
Table of Contents
Evaluation of Director Qualifications and Experience
In assessing potential new directors,
the Nominating and Governance Committee will consider individuals from various
disciplines and diverse backgrounds. While the Board has not established any
specific minimum qualifications that a potential nominee must possess, director
candidates, including incumbent directors, are considered based upon various
criteria, including their broad-based business skills and experience, prominence
and reputation in their profession, global business and social perspective,
concern for long-term stockholder interests, and personal integrity and
judgment, all in the context of an assessment of the perceived needs of the
Board at that point in time. The ability of incumbent directors to continue to
contribute to the Board is also considered in connection with the renominating
process.
The following experience and skills,
among others, have been specifically identified by the Nominating and Governance
Committee as being important in creating a diverse and well rounded
Board:
● |
Significant Current or Prior
Leadership Experience (such as service in a significant leadership role,
including as a chief executive officer, or other executive officer or
significant leadership position): Enables important contributions to strengthening the Companys
leadership, management expertise, operations, strategy, growth, and
long-range plans. |
● |
Leadership Experience on Public
Company, Non-Profit, or Other Boards: Prepares directors to take an active leadership role in the
oversight and governance of the Company. |
● |
Knowledge of the Companys Business,
the Consumer Packaged Goods Industry, or Other Complementary Industry:
Enables enhancement of and
contributions to the Companys strategy and position in the Companys
industry. |
● |
Experience in Product Development,
Marketing (including brand building and digital media), Supply Chain
Management, or Other Relevant Areas: Facilitates support of and contributions to the Companys strategy,
development of products, effective marketing to consumers, including brand
building and digital media, and the Companys business operations.
|
● |
Relevant Retail Experience:
Provides insights and contributions to
enhancing relations and results with the Companys customer and consumer
base. |
● |
International Experience:
Provides insights and ability to
contribute to the Companys increasingly global business strategy.
|
● |
Financial and Accounting Expertise:
Enables analysis and oversight of the
Companys financial position, financial statements, and results of
operations. |
● |
Regulatory Experience (including
experience in the health and wellness sector): Enables meaningful contributions on matters relating to
the regulatory environment, including in the area of health and
wellness. |
Diversity
Consistent with the Governance
Guidelines, the Board recognizes the value in diversity and endeavors to
assemble a Board with diverse skills, professional experience, perspectives,
race, ethnicity, gender, and cultural background. The Nominating and Governance
Committee assesses the effectiveness of efforts to assemble a diverse Board by
examining the overall composition of the Board and evaluating how a particular
director candidate can contribute to the overall success of the
Board.
The Nominating and Governance Committee
considers recommendations from many sources, including stockholders, regarding
possible candidates for director. Such recommendations, together with
biographical and business experience information (similar to that required to be
disclosed under applicable SEC rules and regulations) regarding the candidate,
should be submitted to The Clorox Company, c/o Secretary, 1221 Broadway,
Oakland, CA 94612-1888. The Nominating and Governance Committee evaluates all
candidates for the Board in the same manner, including those suggested by
stockholders.
16 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Committees, Organization of the Board of
Directors, and Director Independence
Board of Directors Meeting Attendance
The Board held seven meetings during
fiscal year 2015. All incumbent directors attended at least 75% of the meetings
of the Board and committees of which they were members during fiscal year 2015.
All members of
the Board are expected to attend the
Annual Meeting of Stockholders. Each member of the Board at the time of the
Companys 2014 Annual Meeting of Stockholders held on November 19, 2014,
attended the meeting.
The Clorox Company Governance Guidelines and Director
Independence
The Board has adopted Governance
Guidelines that can be found in the Corporate Governance section on the
Companys website at
http://www.thecloroxcompany.com/corporate-responsibility/performance/corporate-governance/governance-guidelines, and are available in print to any stockholder who requests
them from The Clorox Company, c/o Secretary, 1221 Broadway, Oakland, CA
94612-1888. The Governance Guidelines present a framework for the governance of
the Company. They describe responsibilities, qualifications, and operational
matters applicable to the Board and the Board committees and include provisions
relating to the evaluation of the CEO and ordinary-course and emergency
succession planning. The Governance Guidelines are reviewed annually by the
Nominating and Governance Committee, which recommends changes to the Board as
appropriate.
The Governance Guidelines emphasize and
describe the oversight role of the Board and identify various criteria for Board
members intended to ensure that the Board consists of individuals who can, on
the basis of their knowledge and experience, make valuable contributions to the
overall conduct of the Companys business. The Governance Guidelines currently
provide flexibility for the Board to determine whether to separate or combine
the roles of Chairman and CEO, and whether the Chairman role should be held by
an independent director. In addition, the Board has determined that it is in the
Companys best interest to have an independent director serving as a lead
director while the position of Chairman is held by a management director. The
Governance Guidelines outline various responsibilities for the independent chair
or lead director, as appropriate, which are described more fully below under
Board of Directors Leadership Structure. The Governance Guidelines also
include provisions relating to Board meetings, including the number of, and
materials for, meetings and executive sessions, outside board service, ethics
and conflicts of interest, stock ownership and retention requirements,
orientation and continuing education, compensation, mandatory retirement, and
access to management and other
employees. The Governance Guidelines require that the independent chair and all
other independent directors provide input to the Management Development and
Compensation Committee in connection with that committees annual evaluation of
the CEO.
Finally, the Governance Guidelines
provide that a majority of the Board must consist of independent directors. The
Board determines whether individual Board members are independent, as defined by
the NYSE, using the following standards:
|
1. |
A director will not be deemed to
be independent if the director is, or has been within the preceding three
years, an employee of the Company, or an immediate family member is, or
has been within the preceding three years, an executive officer of the
Company; provided, however, that a directors employment as an interim
executive officer for 12 months or less shall not disqualify a director
from being considered independent following that employment. |
|
|
|
2. |
A director will not be deemed to
be independent if, during any 12-month period within the preceding three
years, the director or an immediate family member received more than
$120,000 in direct compensation from the Company, other than director and
committee fees, pension, or other forms of deferred compensation for prior
service (provided that such compensation is not contingent in any way on
continued service), compensation for former service as an interim chairman
or interim CEO or other interim executive officer, compensation received
by an immediate family member for service as an employee (other than an
executive officer) of the Company, or dividends on Company stock
beneficially owned by the director. |
Continues on next page ► |
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THE CLOROX
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17 |
Table of Contents
|
3. |
A director will not be deemed to
be independent if: (i) the director or an immediate family member is a
current partner of the firm that is the Companys independent registered
public accounting firm, (ii) the director is a current employee of such
firm, (iii) an immediate family member of the director is a current
employee of such firm who personally works on the Companys audit, or (iv)
the director or an immediate family member was within the preceding three
years (but is no longer) a partner or employee of such firm and personally
worked on the Companys audit within that time. |
|
|
|
4. |
A director will not be deemed to
be independent if, within the preceding three years, (i) the director or
an immediate family member is or was employed as an executive officer of
another company where any of the Companys present executive officers at
the same time serves or served on that companys compensation committee or
(ii) the director is a current employee, or an immediate family member is
a current executive officer, of another company that has made payments to
or received payments from the Company for property or services that, in
any of the preceding three fiscal years, exceeded the greater of $1
million or 2% of such other companys consolidated gross
revenues. |
|
5. |
A director may be considered
independent notwithstanding that the director owns, or is a partner,
stockholder, officer, director, or employee of an entity that owns, not
more than 30% of the outstanding stock of the Company, unless the director
or the entity owning the Companys stock has a relationship with the
Company that, under paragraphs 1 through 4 above or otherwise, precludes a
finding of independence. |
|
|
|
6. |
A director will not be deemed
independent if the director or an immediate family member serves as an
executive officer of a tax-exempt organization that received contributions
from the Company or The Clorox Company Foundation, in any single fiscal
year within the preceding three years, more than the greater of $1 million
or 2% of such organizations consolidated gross
revenues. |
For purposes of these criteria,
immediate family member includes a persons spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and
sisters-in-law, and anyone, other than domestic employees, who shares such
persons home.
Director Independence Determination
The Board has determined that each of
the Companys directors is independent under the NYSE listing standards and the
independence standards set forth in the Governance
Guidelines, except Mr. Dorer as a
result of his service as the Companys CEO.
Conflict of Interest and Related Party Transaction Policies and
Procedures
The Company has a long-standing policy
of prohibiting its directors, officers, and employees from entering into
transactions that are an actual or potential conflict of interest. The Companys
Code of Conduct has a detailed provision prohibiting conflicts of interests and
is available on the Companys website at http://www.thecloroxcompany.com/corporate-responsibility/performance/corporate-governance/code-of-conduct.
Additionally, the Company has a written
policy regarding review and approval of related party transactions by the
Nominating and Governance Committee (Related Party Policy). The Related Party
Policy defines an Interested Transaction as any transaction, arrangement, or
relationship or series of similar transactions, arrangements, or relationships
(including any indebtedness or guarantee
of indebtedness) in which (i) the
aggregate amount involved in any fiscal year will or may be expected to exceed
$120,000 (including any periodic payments or installments due on or after the
beginning of the Companys last completed fiscal year and, in the case of
indebtedness, the largest amount expected to be outstanding and the amount of
annual interest thereon), (ii) the Company is a participant, and (iii) any
Related Party (as defined below) has or will have a direct or indirect interest
(other than solely as a result of being a director or a less than 10% beneficial
owner of another entity).
A Related Party is (i) any person who
is or was (since the beginning of the Companys last fiscal year, even if such
person does not presently serve in that role) an executive officer, director, or
nominee for election as a director,
18 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Committees, Organization of the
Board of Directors, and Director Independence
(ii) a beneficial owner of more than 5%
of the Companys Common Stock, or (iii) an immediate family member of any of the
foregoing. For purposes of this definition, immediate family member includes a
persons spouse, parents, stepparents, children, stepchildren, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and
sisters-in-law, and anyone residing in such persons home (other than a tenant
or employee).
Under the Related Party Policy, if a
new Interested Transaction is identified for approval, it is brought to the
Nominating and Governance Committee to determine if the proposed transaction is
reasonable and fair to the Company. The Nominating and Governance Committee will
review the material facts of all Interested Transactions that require its
approval and either approve or disapprove of the entry into the Interested
Transaction.
The Related Party Policy also contains
categories of preapproved transactions that the Board has identified as not
having a significant potential for an actual or potential conflict of interest
or improper benefit.
In determining whether to approve or
ratify an Interested Transaction, the Nominating and Governance Committee will
take into account, among other factors it deems appropriate, whether the
Interested Transaction is on terms no less favorable than terms generally
available to an unaffiliated third party under the same or similar circumstances
and the extent of the Related Partys interest in the transaction.
No director participates in any
discussion or approval of an Interested Transaction for which he or she is a
Related Party, except that the director will provide all material information
concerning the Interested Transaction to the Nominating and Governance
Committee. There were no transactions considered to be an Interested Transaction
during the Companys 2015 fiscal year.
Code of Conduct
The Company has adopted a Code of
Conduct, which can be found in the Governance section under Company Information
on the Companys website, http://
www.thecloroxcompany.com/corporate-responsibility/performance/corporate-governance/code-of-conduct, or obtained in print by contacting The Clorox Company, c/o Secretary,
1221 Broadway, Oakland, CA 94612-1888.
The Code of Conduct applies to all of
the Companys employees, including executives, as well as contractors and
directors. We also have established a separate Business Partner Code of Conduct
outlining our standards and expectations of our suppliers and other business
partners, which can be found at http://www.thecloroxcompany.com/corporate-responsibility/people/suppliers-partners.
Board of Directors Leadership Structure
The Board believes that it is in the
best interests of the Company and its stockholders for the Board to make a
determination on whether to separate or combine the roles of Chairman and CEO
based upon the Companys circumstances at any particular point in time, and
whether the Chairman role should be held by an independent director. The
Nominating and Governance Committee regularly reviews the leadership structure
to determine if it is in the best interests of the Company and its stockholders.
Beginning on July 1, 2015, the position of Chairman has been held by Mr. Harad,
an independent director. The Board of Directors believes this leadership
structure is appropriate at this time as Mr. Harad has a long history of service
on the Board and strong qualifications to serve as chairman, including serving
as executive chairman of the board of another public company.
The independent chair or lead director,
as applicable, is elected annually by and from the independent directors with
clearly delineated and comprehensive duties and responsibilities. To qualify as
independent chair, a director must have served as a member of the Board for a
minimum of three years. The duties of the independent chair, which are also
included in the Governance Guidelines, include serving as a liaison between the
CEO and the Board. In addition, the independent chair (i) assists the Board and
Company officers in promoting compliance with and implementation of the Governance Guidelines, (ii) presides at all meetings of the Board,
(iii) presides at all sessions of independent directors and has the authority to
call additional meetings of independent directors, (iv) approves and advises the
CEO and other members of management on information sent to the Board, (v) works
with the CEO and other members of management to establish
meeting
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
19 |
Table of Contents
agendas, and approves meeting schedules
for the Board to assure that there is sufficient time for discussion of all
agenda items; (vi) is available for consultation and direct communication with
major stockholders if requested; and (vii) evaluates, along with the members of
the Management Development and Compensation Committee and the other independent
directors, the performance of the CEO.
In addition, all of the Companys
directors other than Mr. Dorer are independent as defined by the NYSE rules.
The Board believes that this structure promotes effective governance and, under
the present circumstances, the leadership structure described above is in the
best interests of the Company and its stockholders.
Board of Directors Role in Risk Management
Oversight
The Board has responsibility for the
oversight of the Companys risk management, while the Companys management is
responsible for the day-to-day risk management process. With the oversight of
the Board, the management of the Company has developed an enterprise risk
management process, whereby management identifies the top individual risks that
the Company faces with respect to its business, operations, strategy, and other
factors after interviews with key business and functional leaders in the Company
and a review of external information. In addition to evaluating various key
risks, management identifies ways to mitigate and manage such risks. At least
annually, management reports on and discusses the identified risks and risk
mitigation and management efforts with the Board. The Board allocates
responsibility to a specific committee to examine a particular risk in detail if
the committee is in the best position to review and assess the risk. For
example, the Audit Committee reviews compliance and risk management programs and
practices related to accounting and financial reporting matters and financial
risk management, and the Management Development and Compensation Committee
reviews the risks related to the executive compensation structure. In the event
that a committee is allocated responsibility for examining and analyzing a
specific risk, such committee reports on the relevant risk exposure during its
regular reports to the full Board to facilitate proper risk oversight by the
entire Board.
As part of its responsibilities, the
Management Development and Compensation Committee periodically reviews the
Companys compensation policies and programs to ensure that the compensation
program is able to incent employees, including executive officers, while
mitigating excessive risk-taking. The overall executive compensation program
contains various provisions that
mitigate against excessive risk-taking, including:
● |
An appropriate balance between
annual cash compensation and equity compensation that is earned over a
period of three to four years; |
● |
Caps on the payouts under executive and non-executive
incentive plans, which protect against executives taking short-term
actions to maximize bonuses that are not supportive of long-term
objectives; |
● |
Financial metrics under the executive annual incentive
plan that are equally weighted between net customer sales and economic
profit (as defined in the Compensation Discussion and Analysis section),
which discourage revenue generation at the expense of profitability and
vice versa; |
● |
Clawback provisions applicable to
current and former executives as set forth in the applicable plans that
enable the recapture of previously paid compensation under certain
circumstances, which serve as a deterrent to inappropriate risk-taking
activities; and |
● |
Stock ownership guidelines that require executive
officers to accumulate meaningful levels of equity ownership in the
Company, which align executives short- and long-term interests with those
of the Companys stockholders. |
Based on its review and the analysis
provided by its independent compensation consultant, Frederic W. Cook & Co.,
the Management Development and Compensation Committee has determined that the
risks arising from the Companys compensation policies and practices for its
employees, including executive officers, are not reasonably likely to have a
material adverse effect on the Company.
Executive Sessions
The independent directors generally
meet in executive session at each regularly scheduled Board meeting without the
presence of management directors or employees of the
Company to discuss various matters
related to the oversight of the Company, the management of the Boards affairs,
and the CEOs performance.
20 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
|
Beneficial Ownership
of Voting Securities |
The following table shows, as of July
31, 2015 (except as otherwise indicated), the holdings of Common Stock by (i)
any entity or person known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of Common Stock, (ii) each director and
nominee
for director and each of the seven
individuals named in the Summary Compensation Table (the named executive
officers), and (iii) all current directors and executive officers of the
Company as a group:
Name of Beneficial Owner(1) |
|
Amount and Nature of Beneficial
Ownership(2)(3) |
|
Percent of Class(4) |
BlackRock,
Inc.(5) |
|
|
|
|
55
East 52nd Street |
|
|
|
|
New
York, NY 10022 |
|
10,601,754 |
|
8.24 |
The Vanguard Group,
Inc.(6) |
|
|
|
|
100 Vanguard Blvd. |
|
|
|
|
Malvern, PA 19355 |
|
10,207,287 |
|
7.93 |
State Street
Corporation(7) |
|
|
|
|
One
Lincoln Street |
|
|
|
|
Boston, MA 02111 |
|
8,655,997 |
|
6.73 |
Richard H. Carmona(3) |
|
0 |
|
* |
Benno Dorer |
|
155,646 |
|
* |
Spencer C. Fleischer |
|
0 |
|
* |
George J.
Harad(3) |
|
6,503 |
|
* |
Jacqueline Kane |
|
168,788 |
|
* |
Donald R. Knauss |
|
1,577,680 |
|
1.21 |
Esther Lee(3) |
|
0 |
|
* |
Robert W.
Matschullat(3) |
|
1,324 |
|
* |
Jeffrey Noddle(3) |
|
1,150 |
|
* |
Rogelio
Rebolledo(3) |
|
0 |
|
* |
Stephen M. Robb |
|
195,064 |
|
* |
George Roeth |
|
1,750 |
|
* |
Laura Stein |
|
174,173 |
|
* |
Frank A. Tataseo |
|
107,814 |
|
* |
Pamela Thomas-Graham(3) |
|
1,778 |
|
* |
Carolyn M.
Ticknor(3) |
|
0 |
|
* |
Christopher J. Williams |
|
0 |
|
* |
All current directors and executive officers as a group
(25 persons)(8) |
|
2,735,001 |
|
2.09 |
|
|
* |
Does not exceed 1% of the
outstanding shares. |
(1) |
Correspondence to all executive officers and directors of the
Company may be mailed to The Clorox Company, c/o Secretary, 1221 Broadway,
Oakland, CA 94612-1888. |
(2) |
Unless otherwise indicated, each beneficial owner listed has sole
voting and dispositive power concerning the shares indicated. These totals
include the following numbers of shares of Common Stock that such persons
have the right to acquire through stock options exercisable within 60 days
of July 31, 2015, or with respect to which such persons have shared voting
or dispositive power: Mr. Dorer 153,492 options; Mr. Harad shared
voting and dispositive power with respect to 5,503 shares held jointly
with spouse and 1,000 shares held in limited partnership; Ms. Kane
151,268 options and shared voting and dispositive power with respect to
4,456 shares held in family trust; Mr. Knauss 1,435,638 options, shared
voting and dispositive power with respect to 101,153 shares held in family
trust, and 35,000 shares held in limited liability company; Mr. Robb
182,412 options and shared voting and dispositive power with respect to
9,207 shares held in family trust; Mr. Roeth shared voting and
dispositive power with respect to 1,750 shares held in family trust; Ms.
Stein 157,467 options; Mr. Tataseo 95,420 options; and all current
directors and executive officers as a group 2,456,043 options. The
numbers in the table above do not include the following numbers of shares
of Common Stock that the executive officers have the right to acquire upon
the termination of their service as employees pursuant to deferred stock
units granted in December 1995 in exchange for the cancellation of certain
restricted stock, and deferred dividends on deferred stock units: Mr.
Tataseo 17,793; and all current executive officers as a group 17,793.
The numbers in the table above do not include the following numbers of
shares of Common Stock that the executive officers have the right to
acquire upon the termination of their service as employees pursuant to
vested performance units that were deferred at the executive officers
election: Mr. Dorer 11,098; Ms. Kane 17,432; Mr. Robb 10,239; Ms.
Stein 27,231; Mr. Tataseo 7,500; and all current executive officers as a
group 98,451. |
(3) |
The numbers in the table above do
not include the following numbers of shares of Common Stock that the
non-management directors have the right to acquire upon the termination of
their service as directors pursuant to deferred stock units granted under
the Independent Directors Stock-Based Compensation Plan: Dr. Carmona
14,429; Mr. Harad 32,307; Ms. Lee 1,604; Mr. Matschullat 73,969; Mr.
Noddle 2,304; Mr. Rebolledo 2,304; Ms. Thomas-Graham 18,353; and Ms.
Ticknor 24,799. |
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THE CLOROX
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21 |
Table of
Contents
(4) |
On July 31, 2015, there were 128,643,834 shares of Common Stock
outstanding. |
(5) |
Based on information contained in a report on Schedule 13G/A filed
with the SEC, BlackRock, Inc. reported, as of December 31, 2014, sole
voting power with respect to 9,517,654 shares and sole dispositive power
with respect to all shares reported. |
(6) |
Based on information contained in a report on Schedule 13G/A filed
with the SEC, The Vanguard Group, Inc. reported, as of December 31, 2014,
sole voting power with respect to 222,321 shares, sole dispositive power
with respect to 10,001,225 shares and shared dispositive power with
respect to 206,062 shares. |
(7) |
Based on information contained in a report on Schedule 13G filed
with the SEC, State Street Corporation reported, as of December 31, 2014,
shared voting and dispositive power with respect to these
shares. |
(8) |
Pursuant to Rule 3b-7 of the
Exchange Act, executive officers include the Companys current CEO and all
current executive vice presidents and certain senior vice
presidents. |
22 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
|
Equity
Compensation Plan Information |
The following table sets out the number
of shares of Common Stock to be issued upon exercise of outstanding options,
warrants, and rights, the weighted-average
exercise price of outstanding options,
warrants, and rights, and the number of securities available for future issuance
under equity compensation plans as of June 30, 2015.
|
|
[a] |
|
[b] |
|
[c] |
Plan
category |
|
Number of securities to be issued upon
exercise of outstanding
options, warrants, and
rights (in
thousands) |
|
Weighted-average exercise price
of outstanding
options, warrants, and
rights |
|
Number of securities remaining for
future issuance under
non- qualified
stock-based compensation
programs (excluding
securities reflected in column
[a]) (in
thousands) |
Equity compensation plans
approved by |
|
|
|
|
|
|
security holders |
|
9,739 |
|
$76 |
|
7,100 |
Equity compensation plans not approved
by |
|
|
|
|
|
|
security holders |
|
|
|
|
|
|
Total |
|
9,739 |
|
$76 |
|
7,100 |
Column [a] includes the following
outstanding equity-based awards (in thousands):
● |
8,357 stock options
|
● |
1,123 performance units and
deferred shares |
● |
241 deferred stock units for
non-employee directors |
● |
18 restricted stock
units |
THE CLOROX
COMPANY - 2015 Proxy Statement
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23 |
Table of Contents
|
Compensation
Discussion and Analysis |
Executive Summary
This Compensation Discussion and
Analysis (CD&A) describes our executive compensation philosophy and
program, the compensation decisions made under this program and the specific
factors we considered in making those decisions. This CD&A focuses on the
compensation of our named executive officers for fiscal year 2015, who
were:
● |
Benno Dorer Chief Executive Officer (CEO) (as of November 20,
2014); |
● |
Donald R.
Knauss Executive Chairman (as of
November 20, 2014; retired effective July 1, 2015) and Former Chairman and
Chief Executive Officer (until November 20, 2014); |
● |
Stephen M.
Robb Executive Vice President Chief
Financial Officer (CFO); |
● |
Jacqueline P.
Kane Executive Vice President Human
Resources and Corporate Affairs; |
● |
Frank A.
Tataseo Executive Vice President
New Business Development; |
● |
Laura Stein Executive Vice President General Counsel; and
|
● |
George C.
Roeth Former Executive Vice President
and Chief Operating Officer Lifestyle, Household and Global Operating
Functions (retired January 5, 2015). |
Fiscal year 2015 saw several leadership
transitions that were successfully implemented as part of the Companys formal
succession planning process. On November 20, 2014, Mr. Knauss, the former
Chairman and Chief Executive Officer, transitioned into the role of Executive
Chairman of the Board of Directors (the Board), and Mr. Dorer became the
Companys Chief Executive Officer and was appointed to the Board. Additionally,
on September 22, 2014, Nick Vlahos and Dawn Willoughby assumed co-Chief
Operating Officer (COO) roles, and Mr. Roeth retired from the Company on
January 5, 2015. Subsequently, Mr. Knauss announced his retirement as Executive
Chairman, effective July 1, 2015.
Unless noted otherwise, references to
our CEO will mean Mr. Dorer and references to our Executive Chairman will mean
Mr. Knauss.
Fiscal Year 2015 Performance
Highlights
In fiscal year 2015, the Company
delivered strong results, including 3% sales growth and a 4% increase in diluted
earnings per share, despite a difficult environment, particularly in certain
international markets that included unfavorable foreign exchange rates and
slowing economies. In the face of these challenges, the Company drove cost
savings, operational efficiencies, and, wherever possible, implemented price
increases to mitigate the impact of high inflation in certain non-U.S.
geographies. The Company also continued to invest strongly in its U.S. business,
including continuing to invest in innovation and increasing brand investments to
drive category growth and market share improvements.
The Companys 2020 Strategy aims to
accelerate profitable growth by engaging employees as business owners;
increasing brand investment behind superior value and
more targeted plans for its 3D demand-creation model
of Desire, Decide, and Delight; keeping the core healthy
and growing into new categories and channels; and
funding growth by reducing waste in its work, products,
and supply chain. This year,
the Company introduced its Strategy 2020 Acceleratorsportfolio momentum, 3D
technology transformation, 3D innovation, and growth culturewith the goal of
accelerating profitable growth under its 2020 Strategy.
Successes for the Company in fiscal
year 2015 included:
● |
delivering 3% of incremental
sales from product innovation; |
● |
achieving $116 million in cost
savings, the Companys 12th consecutive year of average cost savings in
excess of $100 million; |
● |
delivering free cash flow* of
$733 million, an increase of more than $80 million from fiscal year
2014; |
● |
introducing new products in many
categories, including Clorox® ScrubSingles; Clorox®
Triple Action Dust Wipes; Burts Bees® facial products; Burts
Bees® lip crayons; new flavors of Burts Bees® lip
balms; Glad® OdorShield® Gain® Original
Scent; new flavors of Hidden Valley® dressings; Fresh
Step® lightweight cat litter; and Kingsford®
lightweight charcoal, among others; |
● |
continuing to receive external
recognition for its leadership in corporate responsibility and
sustainability efforts; and |
● |
returning excess capital to
stockholders through share repurchases and by delivering $385 million in
dividends to stockholders and increasing the quarterly dividend by 4% in
May 2015. |
* |
See Appendix B for definitions of
non-GAAP financial measures and reconciliations to the most directly
comparable GAAP financial measures. |
24 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of
Contents
Compensation Discussion and Analysis
How Pay Was Tied to the Companys
Performance in Fiscal Year 2015
Our fiscal year 2015 results and
compensation decisions continue to illustrate that our pay-for-performance
philosophy works as intended, with pay being driven by performance in the
following ways:
● |
Fiscal Year 2015 Annual
Incentive Payout. In alignment with our
pay-for-performance philosophy, the annual incentive payout for each of
our named executive officers was significantly above target due to the
Companys strong operational results compared to the targets established
at the beginning of the fiscal year. The Companys sales and economic
profit targets both significantly exceeded the targets for the fiscal
year. |
● |
Fiscal Year 2015 Long-Term
Incentive Payout. Our three-year
performance share results were slightly above the financial target for
cumulative economic profit and yielded a 105% payout. These awards were
granted in September 2012, and payment was determined in August 2015 based
on performance over the period commencing July 1, 2012, and ending June 30,
2015. The payout under this plan increased slightly from our long-term
incentive payout in 2014 of 103%, which was based on performance over the
period commencing July 1, 2011, and ending June 30, 2014. While strong
results in fiscal year 2013 helped offset a challenging fiscal year 2014,
fiscal year 2014 results were significantly below target, which negatively
affected the long-term incentive payout in fiscal year 2015 and which we
expect will continue to negatively impact future long-term incentive
payouts that include fiscal year 2014 in the performance period.
|
Compensation Philosophy
The key principle of our compensation
philosophy is to align pay with performance. We do so by delivering the majority
of executive pay through at-risk variable incentive awards that help ensure
that realized pay is tied to attainment of critical operational goals and
sustainable appreciation in stockholder value. In fiscal year 2015,
approximately 85% of the targeted compensation for our CEO and approximately 71%
of the targeted compensation for our other named executive officers was directly
tied to the achievement of short- and long-term operating goals and changes in
total stockholder return. This approach is designed to accomplish the following:
● |
Pay for
Performance. To reward performance that drives the achievement of the
Companys short- and long-term goals and, ultimately, stockholder value.
|
● |
Align Management and
Stockholder Interests. To align the
interests of our executive officers with our stockholders by using long-term, equity-based incentives, maintaining stock ownership and retention
guidelines that encourage a culture of ownership, and rewarding executive
officers for sustained and superior Company performance as measured by
operating results and total stockholder return. |
● |
Attract, Retain, and Motivate
Talented Executives. To compete for and incent
talented individuals by attracting, retaining, and motivating
high-performing executives. |
● |
Address Risk-Management
Considerations. To motivate our executives to pursue objectives that
create long-term stockholder value and discourage behavior that could lead
to unnecessary or excessive risk-taking inconsistent with our strategic
and financial objectives, by providing a certain amount of fixed pay and
balancing our executives at-risk pay between short-term (one-year) and
long-term (three-year) performance horizons, using different financial and
other performance metrics. |
● |
Support Financial
Efficiency. To help ensure that payouts
under our cash-based and equity-based incentive awards are appropriately
supported by performance and to allow the Management Development and
Compensation Committee (the Committee) to design these awards to be
treated as performance-based compensation that is tax-deductible by the
Company under Internal Revenue Code (IRC) Section 162(m) (Section
162(m)), as appropriate. |
What We Have and Dont Have Elements
of Our Executive Compensation Program
The following elements of our executive
compensation program reflect our continued commitment to our compensation
philosophy:
What We Have
✓ |
An executive compensation program
designed to mitigate inappropriate risk; |
✓ |
Different performance horizons
for the goals within our annual and long-term incentive plans;
|
✓ |
Use of economic profit (EP) as
a rigorous incentive metric; |
✓ |
Stringent stock ownership and
retention guidelines for all of our executives; |
✓ |
A prohibition on speculative
transactions involving the Companys stock, including hedging and
pledging; |
✓ |
Stock options that vest over a
four-year period and have an exercise price equal to fair market value of
our Common Stock on the date of
grant; |
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THE CLOROX
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|
25 |
Table of
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✓ |
Clawback provisions in both our
annual and long-term incentive plans; |
✓ |
Double-trigger change in control
provisions for all equity awards; |
✓ |
Modest perquisites supported by
sound business rationale; |
✓ |
Annual review of our executive
compensation program by the Committee, which is composed solely of
independent members of the Board; and |
✓ |
Use of an independent
compensation consultant who does not provide any additional consulting
services to the Company. |
What We Dont Have
∅ |
Employment contracts for any
executives as of July 1, 2015; |
∅ |
Stock option re-pricing without
stockholder approval; |
∅ |
Use of time-based restricted
stock in our annual long-term incentive grants; |
∅ |
Payment of dividends or dividend
equivalents on unvested or unearned performance shares; and
|
∅ |
Tax gross-ups for any employee,
including executive officers. |
Components of Our Executive Compensation
Program
The table below outlines the components
of our executive compensation program, their purpose, and certain
characteristics of these components.
Component |
|
Purpose |
|
Characteristics |
Base Salary |
|
Compensate named executive
officers for their role and level of responsibility, as well as individual
performance. |
|
Fixed component. |
Annual
Incentives(1) |
|
Promote the achievement of the
Companys annual corporate financial and strategic goals, as well as
individual objectives. |
|
Performance-based cash bonus
opportunity. |
Long-Term
Incentives(1) |
|
Promote the achievement of the
Companys long-term corporate financial goals and stock price
appreciation. |
|
Values of performance share
grants and stock option awards vary based on actual Company financial and
stock price performance. |
Retirement Plans |
|
Provide replacement income upon
retirement (a long-term retention incentive). |
|
Fixed component; however, Company
contributions vary based on pay and employee
contributions. |
Post-Termination
Compensation |
|
Provide contingent payments to
attract and retain named executive officers and promote orderly succession for
key roles. |
|
Only payable if a named executive
officers employment is terminated under specific circumstances as
described in the applicable severance plan or, with respect to the
Executive Chairman, the employment agreement. |
Perquisites |
|
Provide other benefits
competitive with the compensation peer group and encourage executives to
proactively manage their health and financial wellness. |
|
Financial planning, Company car
or car allowance, paid parking, limited non-business use of company
aircraft, annual executive physical and health club allowance.
|
|
|
(1) |
Payouts under the annual and
long-term incentive plans are determined based on the achievement of
objectives established by the Committee at the beginning of the
performance period. The performance period is one year for the cash
awarded under the Annual Incentive Plan, which is further described in
What We Pay: Components of Our Compensation Program and three years for
the performance shares awarded under the long-term incentive plan.
Specific financial goals cannot be changed during the performance period,
except in accordance with principles set by the Committee at the time the
goals were established, which, in the case of our long-term incentive
plan, provide for adjustments in limited circumstances, including
acquisitions, restructuring charges, or significant changes to generally
accepted accounting principles, and only if the adjustments exceed a
specified minimum financial impact to the
Company. |
26 THE CLOROX COMPANY
- 2015 Proxy Statement
Table
of Contents
Compensation Discussion and
Analysis
How We
Make Compensation Decisions
Roles and
Responsibilities in Setting Executive Compensation
Management
Development and Compensation Committee. The Committee is made up entirely of independent directors as defined by
our Governance Guidelines and NYSE listing standards. The Committee regularly
reviews the design and implementation of our executive compensation program and
reports on its discussions and actions to the Board. In particular, the
Committee (i) oversees our executive compensation program, (ii) approves the
performance goals and strategic objectives for our named executive officers,
evaluates results against those targets each year, and determines and approves
the compensation of our CEO (after consulting with the other independent members
of the Board) and our other named executive officers, as well as officers at or
above the level of senior vice president and any other officers covered by
Section 16 of the Securities Exchange Act of 1934, as amended, and (iii) makes
recommendations to the Board with respect to the structure of overall incentive
and equity-based plans.
The Committee makes its determinations
regarding executive compensation after consulting with management and the
Committees independent compensation consultant (as further described below),
and its decisions are based on a variety of factors, including the Companys
performance, individual executives performance, peer group data, and input and
recommendations from the independent compensation consultant. Individual
performance is evaluated based on the performance of the business or operations
for which the executive is responsible, the individuals skill set relative to
industry peers, overall experience and time in the position, the critical nature
of the individuals role, difficulty of replacement, expected future
contributions, readiness for promotion to a higher level, role relative to that
of other executive officers, and, in the case of externally recruited named
executive officers, compensation earned with a prior employer.
In determining the compensation package
for each of our named executive officers other than our Executive Chairman and
our CEO, the Committee receives input and recommendations from our CEO and our
Executive Vice President Human Resources and Corporate Affairs. Named
executive officers do not have a role in the determination of their own
compensation, but named
executive officers other than our CEO
do discuss their individual performance objectives with our CEO. The Committee
currently consists of Dr. Carmona and Messrs. Fleischer, Harad, Noddle, and
Rebolledo.
Special
162(m) Subcommittee. Although the
Board has determined that, consistent with our Governance Guidelines and the
NYSE listing standards, all members of the Committee are independent, the
Committee determined that Mr. Matschullat, who previously served on the
Committee, may not qualify as an outside director for purposes of Section
162(m) due to his service as interim CEO from May 2006 until October 2006. As a
result, a subcommittee composed of directors who qualify as outside directors
under Section 162(m) (the Subcommittee) was established to take any actions
required under Section 162(m) for performance-based compensation to be fully
deductible by the Company for income tax purposes. After the end of our 2015
fiscal year, the Board changed certain Board committee assignments, which resulted in Mr. Matschullats service on the Committee ending on
July 29, 2015. As a result, as of that date the Subcommittee is no longer
required for purposes of Section 162(m) since all of the members of the
Committee qualify as outside directors under Section 162(m).
Board of
Directors. The independent members
of the Board undertake a thorough process during which they review our CEOs
annual performance, and each independent director provides candid feedback and
observations that are shared in aggregate with our CEO. The Board considers a
variety of key substantive factors it has identified as being most important for
effective CEO performance, with a focus on strategy, people, operations, and
values. The full Board discusses the evaluations of our CEOs performance
against these key factors and then provides its compensation recommendations to
the Committee. The Committee, after evaluating the Boards recommendations and
receiving input from the independent compensation consultant, then makes a final
determination on our CEOs compensation. Our CEO does not have a role in his own
compensation determination other than participating in a discussion with the
Board regarding his performance relative to specific targets and strategic
objectives set at the beginning of the fiscal year, which the Board considers in
both its compensation determination and when setting performance targets for the
upcoming fiscal year.
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THE CLOROX COMPANY - 2015 Proxy Statement |
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Additionally, for fiscal year 2015, as
a result of the transition in the CEO role, the Committee reviewed and approved
the recommended short-term incentive bonus for Mr. Knauss for his role as
Chairman and CEO for a portion of the year and the remaining portion of the year
as Executive Chairman. Mr. Knauss did not have a role in compensation
determinations other than to discuss his performance relative to specific
targets and strategic objectives set at the beginning of the fiscal year. Mr.
Dorer, who assumed the CEO role on November 20, 2014, did not have a role in his
compensation determinations for fiscal year 2015, other than to discuss his
performance at the end of the year relative to specific goals that he
established when transitioning into the role in November 2014.
Independent
Compensation Consultant. The
Committee retains the services of an independent compensation consulting firm to
assist it in the performance of its duties. During fiscal year 2015, the
Committee used the services of Frederic W. Cook & Co., Inc. (FWC). FWCs
work with the Committee included data analysis and guidance and recommendations
on the following topics: compensation levels relative to our peers, market
trends in incentive plan designs, risk and reward structure of executive
compensation plans, and other policies and practices, including the policies and
views of third-party proxy advisory firms. See the section entitled
Independence of the Compensation Consultant for a discussion of FWCs
independence from management.
Chief
Executive Officer. Our CEO makes
compensation recommendations to the Committee for all executive officers other
than himself and the Executive Chairman. In making these recommendations, our
CEO evaluates the performance of each executive officer and considers his or her
responsibilities as well as the compensation analysis provided by the
independent compensation consultant.
Other Members
of Management. Senior human
resources management provides analyses regarding competitive practices and pay
ranges, compensation and benefit plans, policies and procedures for equity
awards, perquisites, general compensation, and benefits philosophy. Senior human
resources, legal, and, from time to time, finance executives attend
non-executive sessions of Committee meetings to provide additional perspective
and expertise.
Independence of the
Compensation Consultant
Pursuant to its charter, the Committee
is authorized to retain, oversee, and terminate any consultants it deems
necessary, as well as to approve the fees and other retention terms of any such
consultants. Prior to retaining a compensation consultant or any other external
advisor, from time to time as the Committee deems appropriate but at least
annually, the Committee assesses the independence of the advisor from
management. In evaluating FWC, the Committees compensation consultant, the
Committee took into consideration all factors relevant to FWCs independence,
including the following factors specified in the NYSE listing
standards:
● |
other services provided to the
Company by FWC or any of its affiliates; |
● |
the fees paid by the Company
to FWC as a percentage of FWCs total revenue; |
● |
the policies and procedures of
FWC that are designed to prevent a conflict of interest; |
● |
any business or personal
relationship between individuals at FWC performing consulting services for
the Committee and a Committee member; |
● |
any ownership of Company stock
by the individuals at FWC performing consulting services for the
Committee; and |
● |
any business or
personal relationship between individuals at FWC performing consulting
services for the Committee and an executive officer of the
Company. |
FWC has provided the Committee with
appropriate assurances and confirmation of its independent status in accordance
with the Committees charter and other considerations. The Committee believes
that FWC has been independent throughout its service to the Committee and that
there is no conflict of interest between FWC or individuals at FWC and the
Committee, the Companys executive officers, or the Company.
28 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of
Contents
Compensation Discussion and
Analysis
Our Peer
Group
The Committee uses a peer group
composed of 19 consumer products companies (the compensation peer group) to
help determine competitive compensation rates for the Companys executive
officers, including the named executive officers. The compensation peer group
was selected by the Committee based on the factors described below, with input
from FWC. The compensation
peer group is used to evaluate both the
levels of executive compensation and compensation practices within the consumer
products industry.
For fiscal year 2015, the compensation
peer group was composed of the following companies:
Avon Products,
Inc. |
General Mills,
Inc. |
Molson Coors Brewing
Company |
Campbell Soup Company |
The Hershey Company |
Newell Rubbermaid Inc. |
Church & Dwight Co.,
Inc. |
Hormel Foods
Corporation |
Revlon, Inc. |
Colgate-Palmolive Company |
The J.M. Smucker Company |
S.C. Johnson & Son, Inc. |
Dr. Pepper Snapple Group,
Inc. |
Kellogg Company |
Tupperware Brands
Corporation |
Energizer Holdings, Inc. |
McCormick & Company,
Incorporated |
|
The Estee Lauder Companies
Inc. |
Mead Johnson Nutrition
Company |
|
To determine the compensation peer
group for each year, the Committee considers companies that:
● |
hold leadership positions in
branded consumer products; |
● |
are of reasonably similar size
based on market capitalization and revenue; |
● |
compete with the Company for
executive talent; and |
● |
have executive positions
similar in breadth, complexity, and scope of responsibility to those of
the Company. |
The Committee annually reviews and
makes adjustments to the compensation peer group as appropriate to ensure that
the peer group companies continue to meet the relevant criteria. In fiscal year
2015, H.J. Heinz Company was removed due to its acquisition, and the following
companies were added: Dr. Pepper Snapple Group, Inc., The Estee Lauder Companies
Inc., Hormel Foods Corporation, McCormick & Company, Incorporated, and Mead
Johnson Nutrition Company.
Fiscal Year 2015
Compensation of Our Named Executive Officers
For fiscal year 2015, management
engaged Aon Hewitt to obtain and aggregate compensation data for the
compensation peer group. This data was used to advise the Committee on setting
target compensation for our named executive officers. FWC reviewed this
information and performed an independent compensation analysis of the
compensation peer group data to advise the Committee. Although each individual
component of executive compensation is reviewed, particular emphasis is placed
on targeting total compensation within 15% of the median target dollar amounts
of compensation of the compensation peer group. Other factors, such as an
executives level of experience, may result in target total compensation for
individual named executive officers being set above or below this median range.
Specifically, for fiscal year 2015,
target compensation for our CEO, taking
into account his recent promotion, was slightly more than 15% below the peer
group median. Our CFO, EVP General Counsel, and EVP Human Resources and
Corporate Affairs were within 15% of the peer group median. The target
compensation amounts for Mr. Knauss in his role as CEO
and for our former co-COO, Mr. Roeth,
were slightly more than 15% above the peer group median. In addition, it may not
be possible to obtain specific market data for a particular position due to the
unique nature of the positions responsibilities. For fiscal year 2015, Mr.
Tataseos role did not have comparable market data, so it was evaluated based on
positions with comparable responsibility and importance within the
Company.
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THE CLOROX COMPANY - 2015 Proxy Statement |
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Table
of Contents
What We
Pay: Components of Our Compensation Program
A substantial portion of our targeted
executive compensation is at-risk variable compensation, with 85% of
compensation for our CEO and 71% of compensation for all our other named
executive officers (excluding Mr. Knauss, who retired effective July 1, 2015,
and Mr. Roeth, who
retired on January 5, 2015) being
at-risk. Base salary is the only fixed compensation component, as outlined in
the following charts, which reflect target compensation for fiscal year
2015.
Compensation Mix -
CEO(1)
Compensation Mix - Average of All Other
NEOs(1)
(1) |
Compensation mix represents the
actual base salary, target annual incentive award, and actual long-term
incentives granted in fiscal year 2015. Refer to the Summary Compensation
Table below for further details on actual compensation. The CEO mix is
based on Mr. Dorers compensation as CEO. |
Additional elements of the executive
compensation program include retirement plans, post-termination compensation,
and perquisites as appropriate to support our executive compensation philosophy.
Further detail about each element is provided in the discussion
below:
Base
Salary. The Committee generally
seeks to establish base salaries for our named executive officers within 15% of
the median of the compensation peer group. The Committee considered factors such
as the executives specific role, level of experience, and sustained
performance, as well as the compensation peer group market data, in determining
each named executive officers base salary for fiscal year 2015. Changes in base
salary are approved by the Committee in September and become effective in
October of each year. Due to the leadership changes in fiscal year 2015, the
Board also approved various mid-year salary changes. All base salaries that went
into effect in October 2014 for the named executive officers were within this
target pay range. After reviewing Mr. Knauss compensation, with input from the
independent compensation consultant, the Committee did not increase the annual
base salary for Mr. Knauss.
This was the fourth year in a row Mr.
Knauss base salary was not increased, reflecting his compensations current
alignment to market and adherence to our compensation philosophy, as well as Mr.
Knauss then-pending transition to Executive Chairman. After conducting a similar
review for Mr. Dorer and evaluating his individual performance and overall
Company performance for fiscal year 2014, the Committee approved a base salary
increase of 2.3% at the beginning of fiscal year 2015, while Mr. Dorer was in
his co-COO role. Mr. Dorers base salary further increased by 76% on November
20, 2014, upon his promotion to CEO, from $540,000 to $950,000, which is below
the peer group median for CEOs. The annual base salary increases for our named
executive officers other than Mr. Knauss and Mr. Dorer ranged from 0% to 10%,
with an average increase of 3.4%. Our CFOs salary increase was at the high end
of the range to bring his salary closer to market, in recognition of his
continued strong performance and increased experience. The actual base salaries
earned by our named executive officers in fiscal year 2015 are listed in the
Salary column of the Summary Compensation Table.
30 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of
Contents
Compensation Discussion and
Analysis
Annual
Incentives. The Company provides
annual incentive awards to our named executive officers under the Companys
Executive Incentive Compensation Plan (Annual Incentive Plan). Payouts under
the Annual Incentive Plan are based on the level of achievement of Company
performance goals set annually by the Committee, not to exceed the
stockholder-approved maximums. These performance goals are tied to
Board-approved corporate financial and strategic performance goals and
individual objectives, which are described below. The amounts actually paid
under the Annual Incentive Plan are based on four factors: (1) a target award
for each named executive
officer, which is the base salary
multiplied by the annual incentive target (Target Award), (2) the Companys
performance measured against predetermined corporate financial goals (Financial
Performance Multiplier), (3) the Companys level of achievement of various
strategic metrics (Strategic Metrics Multiplier), and (4) the named executive
officers individual performance (Individual Performance Multiplier), which is
based primarily on the performance of the operations or functions under the
individuals responsibility. The final individual Annual Incentive Plan payout
is determined by the following formula:
The Financial Performance Multiplier
can range from 0% to 200% based on an objective assessment of Company
performance versus goals established by the Committee at the beginning of the
year. The Strategic Metrics and Individual Performance Multipliers, which are
also determined by the Committee, typically have a much narrower range, which
makes the impact they have on the total payout significantly smaller than the
Financial Performance Multiplier. Over the past three years, the range for the
Strategic Metrics Multiplier was 90% to 100% and the range for the Individual
Performance Multipliers was 80% to 125%. By comparison, the range for the
Financial Performance Multiplier during this same time period was 28% to
171%.
Below is an illustration of the annual
incentive calculation, using our CEOs Annual Incentive Plan payout as an
example. Because the Financial Performance Multiplier was 171% in fiscal year
2015, based on the Companys strong performance compared to the targets for
annual net sales and economic profit that were established by the Committee at
the beginning of the year, the impact it had on the final incentive payout was
much greater than that of either the Strategic Metrics Multiplier or the
Individual Performance Multiplier.
|
|
(1) |
In connection with Mr. Dorers
promotion to Chief Executive Officer, his base salary and annual incentive
target were increased from $540,000 and 80%, respectively, to $950,000 and
125%, respectively, for the period beginning November 20, 2014 to the end
of the fiscal year. Therefore, in fiscal year 2015, his target bonus of
$893,579 represents the pro-rated amount using a weighted average of base
salary and annual incentive targets based on time in each
position. |
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THE CLOROX COMPANY - 2015 Proxy Statement |
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Table of
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Each of the elements of the annual
incentive formula is further described below.
Base Salary. The named executive officers actual fiscal year 2015 base salary is the
starting point for the annual incentive calculation.
Annual Incentive
Target. Each year, the Committee sets an annual incentive target level
for each named executive officer as a percentage of his or her base salary,
based on an assessment of median bonus targets in the compensation peer group
and other factors such as individual experience, as noted above. The annual
incentive target level is generally set near the median of bonus targets for
comparable positions in the compensation peer group. The table below sets forth
the targets for the fiscal year 2015 annual incentive awards.
Named Executive Officer |
Annual Incentive Target (% of Base
Salary) |
Benno Dorer Chief
Executive Officer(1) |
125% |
Donald R. Knauss Executive
Chairman (Retired effective July 1, 2015) |
145% |
Stephen M. Robb
Executive Vice President Chief Financial Officer(2) |
80% |
Jacqueline P. Kane Executive Vice
President Human Resource and Corporate Affairs |
70% |
Frank A. Tataseo
Executive Vice President New Business Development |
75% |
Laura Stein Executive Vice President
General Counsel |
70% |
George C. Roeth Former
Executive Vice President and Chief Operating Officer Lifestyle,
Household and |
|
Global Operating Functions (Retired January 5,
2015) |
80% |
|
|
(1) |
In connection with Mr. Dorers promotion during fiscal year 2015,
the annual incentive target for Mr. Dorer was increased from 80% (while he
was co-COO) to 125% (when he became CEO) for the period beginning November
20, 2014 to the end of the fiscal year. Therefore in fiscal year 2015, his
bonus was pro-rated based on those two targets and time in each
position. |
(2) |
Mr. Robbs target was increased
from 75% in fiscal year 2014 to 80% for fiscal year
2015. |
Financial
Performance Multiplier. At the beginning of each fiscal year, the
Committee sets financial goals for the Annual Incentive Plan based on targets
approved by the Board. At the end of the year, the Committee reviews the
Companys results against the goals set at the beginning of the year.
For fiscal year 2015, the Committee
established financial goals with a focus on maintaining or increasing net sales
and increasing economic profit when compared to actual operating results for
fiscal year 2014, as described in greater detail below, in order to drive
sustainable profitable growth in short- and long-term total stockholder returns.
The net sales and economic profit metrics that determine the Financial
Performance Multiplier are each weighted
50% as the Committee continues to
believe this mix effectively balances a focus on both top-line and bottom-line
performance. In selecting the metrics and setting the financial goals of the
Annual Incentive Plan, the Committee carefully considered whether the goals
appropriately align with the goals of the long-term incentive program so that
the overall compensation design does not encourage participants to take
unnecessary or excessive risk or actions that are inconsistent with the
Companys short- and long-term strategic and financial objectives.
For fiscal year 2015, the financial
goals for the Annual Incentive Plan, the potential range of payouts for
achieving those goals and the actual results as determined by the Committee were
as follows:
|
Annual
Incentive Financial Goals (in millions) |
Goal |
0% (Minimum) |
|
100% (Target) |
|
200% (Maximum) |
|
Actual |
Net Sales (weighted
50%)(1) |
|
$ |
5,383 |
|
|
$ |
5,549 |
|
|
$ |
5,715 |
|
$ |
5,655 |
EP
(weighted 50%)(2) |
|
$ |
386 |
|
|
$ |
426 |
|
|
$ |
466 |
|
$ |
457 |
|
|
(1) |
Net sales as reported in the
Companys consolidated financial statements. |
(2) |
EP for purposes of the financial
performance multiplier is defined by the Company as earnings from
continuing operations before income taxes, non-cash restructuring, and
interest expense, which is then tax affected and reduced by a capital
charge. |
Strategic Metrics
Multiplier. At the beginning of each fiscal year, the Committee sets
multiple strategic metrics for the Annual Incentive Plan based on what it
believes will best drive the Companys overall strategy of engaging
employees, increasing brand investment behind superior
value, keeping the core healthy and growing into new
categories and channels, and reducing waste. For fiscal
year 2015, the Committee set 11 metrics, each with one or
32 THE CLOROX COMPANY
- 2015 Proxy Statement
Table
of Contents
Compensation Discussion and
Analysis
more associated targets that are objectively
measurable, to be evaluated in determining the Strategic Metrics Multiplier used
in the Annual Incentive Plan payout.
For example, to determine whether the
results of the high-performing employee engagement metric were met, the Company
measured its annual engagement survey results against a benchmark of other
fast-moving consumer goods companies. To measure consumer product preference,
the Company established targets for strategic product growth, new product
launches, advertising, and packaging communications for various products, while
the innovation
and strategic product pipeline metric
was measured against a target based on historical and projected sales resulting
from innovation. Goals related to reshaping the portfolio include mergers and
acquisitions as well as partnerships. The initiative to simplify work was
measured against targets related to our agile enterprise approach, focusing on
reducing administrative waste, and finding faster and more efficient ways of
doing work. Finally, we established goals against our energy, water, and solid
waste use for our global operations and sought more efficient ways to produce
and package our products for the metric relating to reduction of the Companys
environmental footprint.
For fiscal year 2015, the 11 strategic
metrics and the Companys results were as follows:
Strategic
Metric |
|
FY 2015 Result |
|
|
Strategic Metric |
|
FY 2015 Result |
|
High-performing employee engagement |
|
Met or
Exceeded |
|
|
Targeted goals related to reshaping the portfolio |
|
Not Met |
|
Diversity targets, both within the Company and for our
suppliers |
|
Met or
Exceeded |
|
|
Targeted level of cost savings |
|
Met or
Exceeded |
|
Consumer product preference |
|
Met or
Exceeded |
|
|
Gross margin improvement |
|
Met or Exceeded |
|
Dollar share, both domestically and internationally |
|
Not Met |
|
|
Successful execution of initiative to simplify work and eliminate
low value activity |
|
Met or
Exceeded |
|
Future net sales growth projections |
|
Not Met |
|
|
Reduction of the Companys environmental footprint |
|
Met or
Exceeded |
|
Innovation and strategic product pipeline |
|
Met or Exceeded |
|
|
|
|
|
Based on the Companys performance
against these strategic metrics, the Committee determined that the level of
payout for the Strategic Metrics Multiplier was 100%. Over the past three years,
the range for the Strategic Metrics Multiplier has been 90% to 100%.
Individual
Performance Multiplier. Consistent with our pay-for-performance
philosophy, the annual incentive payouts initially are determined by financial
results and performance against strategic metrics, multiplied by an Individual
Performance Multiplier. Based on its evaluation of individual performance, the
Committee reviewed and approved the Individual Performance Multiplier for each
named executive officer to reflect the officers individual contributions in
fiscal year 2015. In determining the multiplier for individual performance, the
Committee carefully evaluates several performance factors against objectives
established at the beginning of the year. For the CEO, the Committee conducts a
detailed evaluation covering the key categories of strategy, people, operations,
values, and overall performance, with specific goals within each category. To
set specific targets for the CEO, the Committee uses a balanced scorecard with
annual strategic priorities of financial goals, people, customer, growth, and
margin, with specific metrics and targets within each strategic priority. These
targets are used to measure the CEOs performance twice a year, with a mid-year
review and a year-end evaluation. This assessment is then used to determine the
appropriate individual multiplier for the fiscal
year performance. The range of
Individual Performance Multipliers in 2015 was 90% to 110% based on the
contributions made in the fiscal year by our named executive officers. The
higher end of this narrow range was awarded to the EVP Human Resources and
Corporate Affairs, EVP General Counsel and CFO primarily for contributions
made with respect to leadership changes within the organization and their
support in connection with the discontinuation of operations in Venezuela. The
lower end of the range was awarded to the EVP New Business Development for his
contributions despite mergers and acquisitions results falling short of
expectations. The Committee reviewed the results for our CEO and our Executive
Chairman and determined their Individual Performance Multipliers were 110% and
100%, respectively. Our CEOs Individual Performance Multiplier was based on his
strong performance since taking the role in November 2014, including the
introduction of the strategy accelerators, delivering overall operational and
financial results for fiscal year 2015 that exceeded expectations, and leading a
highly successful senior management succession plan.
Final Individual
Annual Incentive Plan Payouts. In accordance with the formula described
above, the final annual incentive payouts to our named executive officers in
fiscal year 2015, excluding Messrs. Dorer, Knauss, and Roeth (who retired on
January 5, 2015), ranged from $618,850 to $827,640, and from 154% to 188% of
the
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THE CLOROX COMPANY - 2015 Proxy Statement |
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Table
of Contents
named executive officers Target
Awards. Mr. Dorers annual incentive payout was $1,680,820. Due to his
promotion, Mr. Dorers final annual incentive payout was prorated to reflect the
periods during the fiscal year when he served as co-COO, with an annual
incentive target of 80%, and when he served as CEO, with an annual incentive
target of 125%, which is below the peer group median in light of his recent
promotion. This award was 188% of his Target Award and is composed of a
Financial Performance Multiplier of 171%, a Strategic Metrics Multiplier of
100%, and an Individual Performance Multiplier of 110%. Mr. Knauss annual
incentive payout was $2,851,430, or 171% of his Target Award, which comprises a
Financial Performance Multiplier of 171%, a Strategic Metrics Multiplier of
100%, and an Individual Performance Multiplier of 100%. These payouts are also
reflected in the Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table.
Long-Term
Incentives.
Each year, we provide long-term incentive compensation
to our named executive officers in the form of performance shares and stock
options. We believe these forms of compensation align company performance and
executive officer compensation with the interests of our stockholders. These
incentive awards also support the achievement of our long-term corporate
financial goals.
Unlike many of our industry peers, we
do not use time-based restricted stock as a form of annual long-term incentive
compensation because we believe that doing so reduces the degree to which the
total long-term incentive opportunity is impacted by changes in our multi-year
operating performance. However, we do occasionally use time-based restricted
stock for special purposes, such as in connection with a promotion or as a
replacement for compensation forfeited by an externally recruited executive at a
prior employer.
The Committee annually reviews the
costs of, and potential stockholder dilution attributable to, our long-term
incentive program to ensure that the overall program is financially efficient
and in line with that of our compensation peer group. The Committee also seeks
to calibrate the long-term incentive program design to appropriately drive
performance in line with that of the compensation peer group. In determining the
total value of the long-term incentive opportunity for each named executive
officer, the Committee reviews the compensation peer group data presented by
both management and the independent compensation consultant on a role-by-role
basis and considers recommendations by our CEO for the other named executive
officers.
The Committees goal is to target
long-term incentive awards in amounts that are generally competitive with the
median of the compensation peer group. Actual long-term
incentive award target levels for
individual named executive officers may vary from the median based on a variety
of factors, such as the named executive officers sustained performance,
individual experience, critical nature of his or her role, and expected future
contributions. Like the annual incentive awards, actual payouts under the
long-term incentive awards will vary from the target based on how the Company
performs against pre-established targets. The value of payouts will also vary
based on changes in the market price of our Common Stock.
The Committee determined that our named
executive officers would receive 50% of the value of their total annual
long-term incentive award granted in fiscal year 2015 in performance shares and
50% in stock options. The Committee believes this mix of equity awards supports
several important objectives, including compensating named executive officers
for achievement of long-term goals tied to our business strategy, rewarding
named executive officers for sustained increases in the price of our Common
Stock, enhancing retention by mitigating the impact of price fluctuations of our
Common Stock, and ensuring that the overall cost of the program is aligned with
the compensation realized by the named executive officers and the performance
delivered to stockholders. The Committee does not consider the amount of
outstanding performance shares, stock options, and restricted stock currently
held by a named executive officer when making annual awards of performance
shares and stock options because such amounts represent compensation
attributable to prior years.
Long-Term
Incentive Award. The long-term incentive awards
granted to our named executive officers for fiscal year 2015 were made in
September 2014. The Committee considered factors such as the executives role,
level of experience, and sustained performance, as well as the compensation peer
group market data, in determining each named executive officers long-term
incentive award. For fiscal year 2015, the annual long-term incentives for our
named executive officers, excluding Messrs. Dorer and Knauss, ranged from a
value of $800,000 to $1,100,000. Mr. Dorer received a long-term incentive award
valued at $5,000,000, which consisted of a $975,000 long-term incentive award
approved at the beginning of fiscal year 2015 (while Mr. Dorer was co-COO), a
target long-term incentive award of $3,025,000 in connection with his promotion
to CEO (50% in the form of stock options and 50% in the form of performance
shares that vest after a three-year performance period of October 1, 2014
through September 30, 2017), and a one-time promotional stock option grant of
$1,000,000. In light of his transition to the Executive Chairman role, Mr.
Knauss did not receive a long-term incentive award for fiscal year 2015. The
long-
34
THE CLOROX COMPANY - 2015 Proxy
Statement
Table of Contents
Compensation Discussion and Analysis
term incentives awarded to our named
executive officers in fiscal year 2015 are listed in the Stock Awards and Option
Awards columns of the Summary Compensation Table.
Performance Shares. Performance shares
are grants of restricted stock units that pay out after a three-year performance
period only if the Company meets pre-established financial performance goals,
which are described below. We believe that performance shares align the
interests of our named executive officers with the interests of our stockholders
because the number of shares earned and the shares potential value are tied to
the achievement of performance targets. The performance target is a cumulative
economic profit target which is informed by the budget and our three-year
financial long-range plan developed by management and reviewed and approved by
the Board. In setting the performance targets for the performance shares, the
Committee reviews the budget and long-range plan and seeks to appropriately
align the performance goals with the objectives of the Annual Incentive Plan so
that the overall compensation design does not encourage participants to take
unnecessary or excessive risk or actions that are inconsistent with the
Companys short- and long-term strategic and financial objectives. The Committee
believes its use of cumulative economic profit (cumulative EP) as a metric
provides rigor and an ability to align performance with pay over the three-year
performance period.
The payout of the performance share
awards granted in September 2014 is subject solely to the Companys achievement
of a cumulative EP target during the performance period of July 2014 through
June 2017. The percentage range for payouts is from 0%, in the event the minimum
cumulative EP target is not met, to a maximum of 150% of the target number of
shares, with a payout of 50% of the target number of shares when the minimum
cumulative EP target is attained.
For the grant made in September 2012,
which was based on a performance period of July 2012 through June 2015 and was
paid out in August 2015, the Committee established cumulative EP targets and set
various payout levels tied to cumulative EP for the performance period. For the
September 2012 grant, the cumulative EP target was set so a payout of 100% would
be made if the Company achieved EP growth of approximately 3% per year during
the performance period. The Committee believes this metric directly supports the
Companys corporate strategy and long-term financial goals and correlates to
stock price performance.
In August 2015, the Committee certified
the results of the September 2012 grant for the 2012-2015 performance period.
The adjusted financial target for the grant was a cumulative EP of $1,281
million over the three-year
performance period for a 100% payout.
The cumulative EP targets were adjusted by the Committee for the events in
Venezuela that ultimately led to the Companys discontinuation of operations in
that country, which the Committee determined to be an extraordinary, unusual, or
non-recurring event. The Companys actual cumulative EP was $1,288 million, resulting in the
Committee certifying a payout of 105%. This payout supports the Companys belief
in pay for performance over the long term.
Stock Options. Stock options align the
interests of our named executive officers with those of our stockholders because
the options only have value if the price of the Companys stock increases after
the stock options are granted. Stock options vest in 25% increments over a
four-year period (beginning one year from the date of grant) and expire ten
years from the date of grant. In fiscal year 2015, the Committee awarded stock
options to our named executive officers as part of our annual long-term
incentive plan. The exercise price for the stock options was equal to the
closing price of our Common Stock on the date of grant. Information on all stock
option grants is shown in the Grants of Plan-Based Awards table.
Retirement Plans
Our named executive officers
participate in the same tax-qualified retirement benefit programs available to
all other United States-based salaried and non-union hourly employees. The
Companys retirement plans are designed to provide replacement income upon
retirement and to be competitive with programs offered by our peers.
In addition, because the IRC limits the
amount of benefits that can be contributed to and paid from a tax-qualified
retirement plan, the Company also provides our executive officers, including our
named executive officers, with additional retirement benefits intended to
restore amounts that would otherwise be payable under the Companys
tax-qualified retirement plans if the IRC did not have limits on includable
compensation and maximum benefits. We call these plans restoration plans
because they restore total executive retirement benefits to the same percentage
level provided to our salaried employees who are not limited by IRC
restrictions.
A brief description of each of our
retirement programs is set forth below. Each of our named executive officers
participates in these retirement programs.
The Clorox Company Pension Plan.
The Clorox Company Pension Plan (the
Pension Plan) is a cash balance pension plan that was frozen effective July 1,
2011. This freeze did not affect the benefits previously accrued under the
Pension Plan, which remain fully funded.
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The Clorox Company 401(k) Plan.
After the Pension Plan was frozen in July
2011, the Clorox Company 401(k) Plan (the 401(k) Plan) became the base
retirement plan for the Company. The Company makes an annual fixed contribution
of 6% of eligible pay and a matching contribution of up to 4% of eligible pay to
employees under the 401(k) Plan.
Nonqualified Deferred
Compensation Plan. Under the Nonqualified
Deferred Compensation Plan (the NQDC), eligible employees may voluntarily
defer receipt of up to 50% of base salary and up to 100% of their annual
incentive awards. In fiscal year 2015, deferred amounts could be invested in a
manner that generally mirrored the funds available in the 401(k) Plan. The NQDC
permits the Company to contribute amounts that exceed the IRC compensation
limits in the tax-qualified plans through a 401(k) restoration
provision.
Supplemental Executive Retirement
Plan. The Supplemental Executive
Retirement Plan (the SERP), a defined benefit plan, was closed to new
participants effective April 2007 and, effective June 30, 2011, was frozen with
regard to pay and offsets, while still accruing age and service credits.
Benefits under the SERP have historically been calculated as an annuity based on
a percentage of average compensation adjusted by age and years of service and
offset by the annuity value of Company contributions to the tax-qualified
retirement plans and by Social Security. Effective July 1, 2011, the SERP was
replaced by the Executive Retirement Plan (the ERP) (described below). Moving from the SERP to the ERP created a
defined contribution structure that is more closely aligned with the benefits
provided by the Companys compensation peer group.
Executive Retirement Plan.
Our executive officers (including named
executive officers other than our Executive Chairman) participate in the ERP.
Under the ERP, the Company makes an annual contribution of 5% of an eligible
participants base salary and annual incentive award into the plan.
Replacement Supplemental
Executive Retirement Plan. Pursuant to
Mr. Knauss employment agreement in place at the beginning of fiscal year 2015,
to compensate for the loss of retirement benefits at his prior employer when he
became the Companys CEO in 2006, Mr. Knauss participated in a replacement SERP.
The replacement SERP provided retirement benefits equal to the greater of (i)
the amount payable as calculated under the Company SERP frozen effective June
30, 2011, described above, and (ii) the benefits to which Mr. Knauss would have
been entitled if he had stayed at his previous employer, The Coca-Cola
Company. Mr. Knauss was fully vested in
the replacement SERP and he was the sole participant in the plan. During fiscal
year 2015, Mr. Knauss reached the tenure and age requirements which resulted in
the Company SERP providing for greater retirement benefits. As a result, Mr.
Knauss right to receive any benefits under the replacement SERP was eliminated
when his employment agreement was amended and restated (as described in
Potential Payments upon Termination or Change in Control).
Further details about the provisions of
the Pension Plan, NQDC, SERP, and ERP are provided in the Overview of Pension
Benefits and the Overview of the Nonqualified Deferred Compensation Plans
sections below.
Post-Termination
Compensation
The Company has a severance plan
(the Severance Plan) that provides our named executive officers (other than our
Executive Chairman) with post-termination payments if the named executive
officers employment is terminated by the Company other than for cause. These
payments are intended to provide a measure of financial security following the
loss of employment, which we believe is important to attract and retain
executives. The severance benefits are designed to be competitive with the
compensation peer group and external market practices. The Company also entered
into a revised employment agreement with our Executive Chairman in May 2010,
further amended in November 2014, which provided for severance
benefits under similar conditions, so long as such a termination occurred prior
to March 31, 2015.
The Company also has an Executive
Change in Control Severance Plan (the CIC Plan) to provide for the payment of
severance benefits to certain eligible executives of the Company, including all
of the Companys named executive officers (other than our Executive Chairman) in
the event their employment with the Company is involuntarily terminated in
connection with a change in control of the Company. The Company also had, until
his retirement, a change in control agreement with Mr. Knauss to provide change
in control severance benefits. In addition to helping mitigate the financial
impact associated with termination after a change in control, these benefits
further align the interests of our executive officers with the interests of our
stockholders by providing retention for business continuity purposes. Under the
CIC Plan and Mr. Knauss change in control agreement, a named executive officer
is eligible for change in control severance benefits in the event his or her
employment is terminated in connection with a change in control, either by the
Company without cause or by the named executive officer for good reason. See the
section entitled Potential Payments upon Termination or Change in Control for
additional information.
36 THE CLOROX COMPANY - 2015 Proxy Statement
Table of Contents
Compensation Discussion and
Analysis
Perquisites
We provide our named executive officers
with other limited benefits we believe are competitive with the compensation
peer group and consistent with the Companys overall executive compensation
program.
We believe these benefits allow our
named executive officers to proactively manage their health, work more
efficiently, and, in the case of the financial planning program, help them
optimize the value received from our compensation and benefits programs. These
perquisites are a Company car or car allowance, paid parking at the Companys
headquarters, an annual executive physical exam, reimbursement for health club
membership, financial planning services and, in the case of Messrs. Dorer and
Knauss, limited non-business corporate airplane usage.
Other Executive Compensation Policies and
Practices
Tally Sheets.
To help ensure that our executive
compensation design is aligned with our overall compensation philosophy of pay
for performance and that total compensation levels are appropriate, the
Committee annually reviews compensation tally sheets for each of our named
executive officers. These tally sheets outline current target total compensation
(including the compensation elements described above), the potential wealth
creation of long-term incentive awards granted to our officers under various
assumed stock prices, and the potential value of payouts under various
termination scenarios. As such, these tally sheets help provide the Committee
with a comprehensive understanding of all elements of the Companys compensation
program and enable the Committee to consider changes to the Companys
compensation program, arrangements, and plans in light of best practices and
emerging trends. The Committee may consider the information presented in the
tally sheets in determining future compensation.
Results of 2014 Advisory Vote to
Approve Executive Compensation. At our
2014 Annual Meeting of Stockholders held on November 19, 2014, we asked our
stockholders to approve, on an advisory basis, our fiscal year 2014 compensation
awarded to our named executive officers, commonly referred to as a say-on-pay
vote. Our stockholders overwhelmingly approved the compensation to our named
executive officers, with approximately 92% of votes cast in favor of our
proposal. We value this positive endorsement by our stockholders of our 2014
executive compensation policies and believe that the outcome signals our
stockholders support of our compensation program. As a result, we continued our
general approach to compensation for fiscal year 2015, specifically our pay-for-performance philosophy and our efforts to attract, retain, and motivate our
named executive
officers. We value the opinions of our
stockholders and will continue to consider the results from this years and
future advisory votes on executive compensation, as well as feedback received
throughout the year, when making compensation decisions for our named executive
officers.
Stock Award Granting Practices.
The Company awards annual long-term
incentive grants each September at a regularly scheduled Committee meeting,
which typically occurs during the third week of the month, or about six weeks
after the Company has publicly reported its annual earnings. The meeting date is
the effective grant date for the awards, and the exercise/grant price is equal
to the closing price of our Common Stock on that date.
The Committee may also make occasional
grants of stock options and other equity-based awards at other times to
recognize, retain, or recruit executive officers. Except for Mr. Dorers
promotional stock option grant described under Long-Term Incentive Award
above, the Committee did not approve any additional grants to the named
executive officers in fiscal year 2015.
Executive Stock Ownership
Guidelines. To maintain alignment of the
interests of the Companys executive officers and our stockholders, all
executive officers, including the named executive officers, are expected to
accumulate and maintain a significant level of direct stock ownership. Ownership
levels can be achieved over time in a variety of ways, such as by retaining
stock received upon the exercise of stock options or the vesting of stock
awards or by purchasing stock in the open market. At a minimum, executive
officers are expected to establish and maintain direct ownership of Common Stock
having a value, based on the current market price of the stock, equal to a
multiple of each executive officers annual base salary. The current minimum
ownership guidelines are as follows:
Chief Executive Officer |
6x annual base salary |
Executive Officers (other than
the CEO) |
3x annual base salary |
Other Senior Executives |
2x annual base salary |
Ownership levels are based on shares of
Common Stock owned by the named executive officer or held pursuant to Company
plans, including performance shares that have vested and been deferred for
settlement. Unexercised stock options and shares that have not vested due to
time or performance restrictions are excluded from the
ownership levels.
As of the date of this proxy statement,
all of the named executive officers, with the exception of Mr. Dorer whose
ownership threshold increased from 3 times annual base salary to 6 times annual
base salary upon his promotion to CEO, have met the required ownership
levels.
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THE CLOROX COMPANY - 2015 Proxy Statement | 37 |
Table of Contents
Retention Ratios.
Executive officers, including our named
executive officers, are required to retain a certain percentage of shares
obtained upon either the exercise of stock options or the release of
restrictions on performance shares and restricted stock, after satisfying
applicable taxes. Our CEO is expected to retain 75% of shares acquired (after
taxes) until the minimum ownership level is met. After attaining the minimum
ownership level, our CEO must retain 50% of any additional shares acquired
(after taxes) until retirement or termination. Other executive officers must
retain 75% of shares acquired (after taxes) until the minimum ownership levels
are met and thereafter must retain 25% of shares acquired (after taxes) for one
year after receipt.
Securities Trading Policy;
Prohibition on Hedging and Pledging. To
ensure alignment of the interests of our stockholders and executive officers,
including our named executive officers, the Companys Insider Trading Policy
does not permit executive officers to engage in short-term or speculative
transactions or derivative transactions involving the Companys stock and
includes prohibitions on options trading, hedging, or pledging the Companys
stock as collateral. Trading is permitted only during announced trading periods
or in accordance with a previously established trading plan that meets SEC
requirements. At all times, including during announced trading periods,
executive officers are required to obtain preclearance from the Companys
General Counsel or Corporate Secretary
prior to entering into any transactions
in Company securities, unless those sales occur in accordance with a previously
established trading plan that meets SEC requirements.
Clawback Provisions.
Under our Annual Incentive Plan and
long-term incentive plan, in the event of a restatement of financial results to
correct a material error or other factors as described in the long-term
incentive plan, the Committee is authorized to reduce or recoup an executive
officers award, as applicable, to the extent that the Committee determines such
executive officers fraud or intentional misconduct was a significant
contributing factor to the need for a restatement.
Tax Deductibility Limits on
Executive Compensation. Section 162(m)
limits the tax deductibility of compensation paid to our CEO and the three other
most highly compensated named executive officers employed at the end of the year
(other than our CFO) to $1 million per year, unless such amounts are determined
to be performance-based compensation. Our policy with respect to Section 162(m)
seeks to balance the interests of the Company in maintaining flexible incentive
plans against the possible loss of a tax deduction when taxable compensation for
any of the executive officers subject to Section 162(m) exceeds $1 million per
year. The Annual Incentive Plan and long-term incentive plan are designed to
provide the Committee with the ability to decide whether or not to make
performance-based compensation awards that are intended to meet the requirements
of Section 162(m).
The Management Development and Compensation Committee Report
As detailed in its charter, the
Management Development and Compensation Committee of the Board oversees the
Companys executive compensation program and policies. As part of this function,
the Committee discussed, and reviewed with management, the CD&A. Based on
this review and discussion, we have recommended to the Board that the CD&A
be included in the proxy statement.
THE MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
Jeffrey Noddle, Chair
Richard H.
Carmona
Spencer C. Fleischer
George Harad
Rogelio Rebolledo
38 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Compensation Discussion and Analysis
Compensation Discussion and Analysis Tables
SUMMARY COMPENSATION TABLE
The following table sets forth the
compensation earned, paid or awarded to our named executive officers for the
fiscal years ended June 30, 2015, 2014 and 2013.
Name and
Principal Position |
Year |
|
Salary ($)(1) |
Bonus ($) |
|
Stock Awards ($)(2)(3) |
|
Option Awards ($)(2) |
|
Non-Equity Incentive
Plan Compensation ($)(4) |
|
Change in Pension Value
and Nonqualified Deferred Compensation Earnings ($)(5) |
|
All Other Compensation ($)(6) |
|
Total ($) |
Benno
Dorer Chief Executive
Officer (Effective November
20, 2014) |
2015 |
|
$789,762 |
|
|
$2,000,344 |
|
$2,999,979 |
|
$1,680,820 |
|
$242,911 |
|
$144,371 |
|
$7,858,187 |
2014 |
|
522,669 |
|
|
462,786 |
|
462,526 |
|
106,440 |
|
397,824 |
|
192,377 |
|
2,144,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald R. Knauss Former Executive Chairman and
Former Chairman and
Chief Executive Officer (Retired effective July 1, 2015 and November 20, 2014,
respectively) |
2015 |
|
1,154,423 |
|
|
|
|
|
|
2,851,430 |
|
1,698,979 |
|
201,785 |
|
5,906,617 |
2014 |
|
1,154,424 |
|
|
2,699,867 |
|
2,700,006 |
|
420,210 |
|
1,628,105 |
|
347,274 |
|
8,949,886 |
2013 |
|
1,150,000 |
|
|
2,699,798 |
|
2,699,456 |
|
1,916,790 |
|
1,790,104 |
|
464,916 |
|
10,721,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M.
Robb Executive Vice
President Chief Financial
Officer |
2015 |
|
539,423 |
|
|
549,698 |
|
549,984 |
|
827,640 |
|
33,073 |
|
121,604 |
|
2,621,422 |
2014 |
|
491,731 |
|
|
400,293 |
|
399,965 |
|
94,500 |
|
187,877 |
|
162,675 |
|
1,737,041 |
2013 |
|
462,500 |
|
|
380,020 |
|
379,940 |
|
450,460 |
|
|
|
165,603 |
|
1,838,523 |
Jacqueline P. Kane Executive Vice President Human
Resources and Corporate
Affairs |
2015 |
|
469,269 |
|
|
399,699 |
|
400,032 |
|
618,850 |
|
506,781 |
|
121,939 |
|
2,516,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank A.
Tataseo(7) Executive
Vice President New
Business Development |
2015 |
|
542,830 |
|
|
449,998 |
|
450,048 |
|
624,160 |
|
213,253 |
|
152,914 |
|
2,433,203 |
2014 |
|
534,672 |
|
|
450,119 |
|
450,034 |
|
97,090 |
|
571,551 |
|
206,207 |
|
2,309,673 |
2013 |
|
522,500 |
|
|
449,966 |
|
449,944 |
|
497,880 |
|
|
|
240,164 |
|
2,160,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laura Stein Executive Vice President
General Counsel |
2015 |
|
570,537 |
|
|
399,699 |
|
400,032 |
|
751,180 |
|
86,515 |
|
136,964 |
|
2,344,927 |
2014 |
|
556,792 |
|
|
390,159 |
|
390,010 |
|
118,960 |
|
483,075 |
|
203,834 |
|
2,142,830 |
2013 |
|
545,875 |
|
|
380,020 |
|
379,940 |
|
464,690 |
|
|
|
238,507 |
|
2,009,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
C. Roeth Former Executive
Vice President and Chief Operating Officer Household, Lifestyle and Global
Operating Functions
(Retired January 5, 2015) |
2015 |
|
277,338 |
|
|
487,723 |
|
487,488 |
|
382,520 |
|
1,358,883 |
|
1,438,738 |
|
4,432,690 |
2014 |
|
522,669 |
|
|
462,786 |
|
462,526 |
|
101,120 |
|
357,283 |
|
194,256 |
|
2,100,640 |
2013 |
|
478,742 |
|
|
325,216 |
|
599,968 |
|
437,410 |
|
|
|
196,809 |
|
2,038,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Reflects actual
salary earned for fiscal years 2015, 2014, and 2013. Fiscal years 2015 and
2014 had an extra day of earnings in the pay cycle (versus 2013). Thus,
Mr. Knauss reported salary shows an increase from fiscal year 2013 to
both fiscal years 2014 and 2015; however, his actual annual base salary
was $1,150,000 in all years. |
(2) |
The amounts reflected in these columns are the values
determined under FASB ASC Topic 718 for the awards granted in the fiscal
years ended June 30, 2015, 2014, and 2013, in accordance with the
applicable accounting standard. The assumptions made in valuing stock
awards and option awards reported in these columns are discussed in Note
1, Summary of Significant Accounting Policies under subsection
Stock-Based Compensation, and in Note 15, Stock-Based Compensation
Plans, to the Companys consolidated financial statements for the three
years in the period ended June 30, 2015, included in the Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2015. The option
award granted to Mr. Roeth in fiscal year 2015 was forfeited due to his
retirement. Additional information regarding the stock awards and option
awards granted to our named executive officers during fiscal year 2015 is
set forth in the Grants of Plan-Based Awards
Table. |
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
39 |
Table of Contents
(3) |
The grant date fair value of the performance share awards reflected
in this column is the target payout based on the probable outcome of the
performance-based conditions, determined as of the grant date. The maximum
potential payout of the stock awards would be 150% of the target shares
awarded on the grant date. The maximum value of the performance share
award for 2015 determined as of the date of grant would be as follows for
each respective named executive officer: Mr. Dorer $3,000,516; Mr. Robb
$824,548; Ms. Kane $599,549; Mr. Tataseo $647,997; Ms. Stein
$599,549; and Mr. Roeth $731,584. No performance shares were granted to
Mr. Knauss in fiscal year 2015. The performance share award granted to Mr.
Roeth in fiscal year 2015 was forfeited due to his retirement. See the
Grants of Plan-Based Awards Table for more information about the
performance shares granted under the 2005 Stock Incentive
Plan. |
(4) |
Reflects annual incentive awards earned for fiscal years 2015,
2014, and 2013 and paid out in September 2015, 2014, and 2013,
respectively, under the Annual Incentive Plan. Information about the
Annual Incentive Plan is set forth in the Compensation Discussion and
Analysis under Annual Incentives. |
(5) |
The amounts reflect the aggregate
change in the present value of accumulated benefits during fiscal years
2015, 2014, and 2013 under the SERP, including Mr. Knauss replacement
SERP, the Pension Plan, and the cash balance restoration benefit of the
NQDC (note that the SERP, the Pension Plan, and the cash balance
restoration benefit of the NQDC are all frozen benefits; refer to the
Pension Benefits Table for further information). Each plan amount in
fiscal year 2015 is set forth in the following
table: |
|
|
Benno Dorer |
|
Donald R. Knauss |
|
Stephen M. Robb |
|
Jacqueline P. Kane |
|
Frank A. Tataseo |
|
Laura Stein |
|
George C. Roeth |
The Pension Plan |
|
$ |
1,632 |
|
$ |
1,141 |
|
$ |
4,632 |
|
$ |
1,877 |
|
$ |
5,337 |
|
$ |
4,046 |
|
$ |
4,501 |
SERP |
|
|
238,648 |
|
|
1,686,005 |
|
|
28,440 |
|
|
501,705 |
|
|
189,653 |
|
|
70,616 |
|
|
1,336,455 |
Cash Balance Restoration Benefit |
|
|
2,631 |
|
|
11,833 |
|
|
1 |
|
|
3,199 |
|
|
18,263 |
|
|
11,853 |
|
|
17,927 |
Total |
|
$ |
242,911 |
|
$ |
1,698,979 |
|
$ |
33,073 |
|
$ |
506,781 |
|
$ |
213,253 |
|
$ |
86,515 |
|
$ |
1,358,883 |
(6) |
The amounts shown in the All Other Compensation column
represent (i) actual Company contributions under the Companys 401(k)
Plan, (ii) nonqualified contributions under the NQDC and ERP, (iii)
perquisites available to named executive officers of the Company, (iv)
the separation payment to Mr. Roeth in connection with his retirement, and (v) a cash payment to Mr. Roeth in lieu of 2,210 unvested
restricted stock units awarded to him in March 2011, which were cancelled in connection with his retirement: |
|
|
Benno Dorer |
|
Donald R. Knauss |
|
Stephen M. Robb |
|
Jacqueline P. Kane |
|
Frank A. Tataseo |
|
Laura Stein |
|
George C. Roeth |
The Clorox Company 401(k)
Plan |
|
$ |
25,646 |
|
$ |
24,478 |
|
$ |
25,094 |
|
$ |
26,123 |
|
$ |
24,536 |
|
$ |
25,743 |
|
$ |
24,145 |
Nonqualified Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Plan |
|
|
84,246 |
|
|
131,021 |
|
|
64,909 |
|
|
57,940 |
|
|
81,104 |
|
|
86,017 |
|
|
72,180 |
Company Paid
Perquisites |
|
|
34,479 |
|
|
46,286 |
|
|
31,601 |
|
|
37,876 |
|
|
47,274 |
|
|
25,204 |
|
|
27,413 |
Separation Payment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,080,000 |
Payment for Cancellation of RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235,000 |
Total |
|
$ |
144,371 |
|
$ |
201,785 |
|
$ |
121,604 |
|
$ |
121,939 |
|
$ |
152,914 |
|
$ |
136,964 |
|
$ |
1,438,738 |
|
|
|
The following table sets forth
the perquisites we make available to our named executive officers and the
cost to the Company for providing these perquisites during fiscal year
2015. The amount included under Non-Business Use of Company Aircraft
represents the incremental cost to the Company of Mr. Knauss non-business
use of the Company aircraft of $3,936 in fiscal year 2015. The
incremental cost is determined on a per flight basis and consists of the
variable costs incurred as a result of flight activity. Other Perquisites
consists of paid parking at the Companys headquarters, health club
reimbursement, and an annual executive
physical. |
|
|
Benno Dorer |
|
Donald R. Knauss |
|
Stephen M. Robb |
|
Jacqueline P. Kane |
|
Frank A. Tataseo |
|
Laura Stein |
|
George C. Roeth |
Executive Automobile Program |
|
$ |
13,200 |
|
$ |
13,200 |
|
$ |
13,200 |
|
$ |
13,200 |
|
$ |
13,200 |
|
$ |
13,200 |
|
$ |
7,700 |
Basic Financial
Planning |
|
|
15,177 |
|
|
22,034 |
|
|
14,861 |
|
|
19,010 |
|
|
28,503 |
|
|
6,408 |
|
|
14,833 |
Non-Business Use of Company Aircraft |
|
|
|
|
|
3,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Perquisites |
|
|
6,102 |
|
|
7,116 |
|
|
3,540 |
|
|
5,666 |
|
|
5,571 |
|
|
5,596 |
|
|
4,880 |
Total |
|
$ |
34,479 |
|
$ |
46,286 |
|
$ |
31,601 |
|
$ |
37,876 |
|
$ |
47,274 |
|
$ |
25,204 |
|
$ |
27,413 |
|
|
(7) |
Mr. Tataseo will be retiring on
October 1, 2015. |
40 THE CLOROX COMPANY - 2015 Proxy Statement
Table of Contents
Compensation Discussion and Analysis
GRANTS OF PLAN-BASED AWARDS
This table shows grants of plan-based
awards to the named executive officers during fiscal year 2015.
|
|
Estimated Possible
Payouts Under Non-Equity Incentive Plan Awards |
|
Estimated Possible Payouts
Under Equity Incentive Plan Awards |
All Other Stock Awards: Number
of Shares
or Stock
or Units (#) |
All Other Option Awards: Number
of Securities Underlying Options (#) |
Exercise or Base Price
of Option Awards ($/Sh) |
Grant Date Fair Value of
Stock and Option Awards ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
Grant Date |
Threshold ($) |
Target ($) |
Maximum ($) |
|
Threshold (#) |
Target (#) |
Maximum (#) |
Benno Dorer |
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
$893,579 |
$5,526,000 |
|
|
|
|
|
|
|
|
Performance
Shares(2) |
9/17/2014 |
|
|
|
|
2,715 |
5,430 |
8,145 |
|
|
|
$487,723 |
Stock
Options(3) |
9/17/2014 |
|
|
|
|
|
|
|
|
50,780 |
$89.82 |
487,488 |
Performance
Shares(4) |
11/20/2014 |
|
|
|
|
7,545 |
15,090 |
22,635 |
|
|
|
1,512,622 |
Stock
Options(5) |
11/20/2014 |
|
|
|
|
|
|
|
|
221,170 |
100.24 |
2,512,491 |
Donald R.
Knauss |
|
|
|
|
|
|
|
|
|
|
|
|
(Retired effective |
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2015) |
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
1,667,500 |
9,210,000 |
|
|
|
|
|
|
|
|
Performance Shares(2) |
9/17/2014 |
|
|
|
|
|
|
|
|
|
|
|
Stock Options(3) |
9/17/2014 |
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Robb |
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
440,000 |
5,526,000 |
|
|
|
|
|
|
|
549,698 |
Performance Shares
(2) |
9/17/2014 |
|
|
|
|
3,060 |
6,120 |
9,180 |
|
57,290 |
89.82 |
549,984 |
Stock
Options(3) |
9/17/2014 |
|
|
|
|
|
|
|
|
|
|
|
Jacqueline P. Kane |
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
329,000 |
5,526,000 |
|
|
|
|
|
|
|
|
Performance Shares(2) |
9/17/2014 |
|
|
|
|
2,225 |
4,450 |
6,675 |
|
|
|
399,699 |
Stock Options(3) |
9/17/2014 |
|
|
|
|
|
|
|
|
41,670 |
89.82 |
400,032 |
Frank A. Tataseo |
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
405,563 |
5,526,000 |
|
|
|
|
|
|
|
|
Performance
Shares(2) |
9/17/2014 |
|
|
|
|
2,505 |
5,010 |
7,515 |
|
|
|
449,998 |
Stock
Options(3) |
9/17/2014 |
|
|
|
|
|
|
|
|
46,880 |
89.82 |
450,048 |
Laura
Stein |
|
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
399,350 |
5,526,000 |
|
|
|
|
|
|
|
|
Performance Shares(2) |
9/17/2014 |
|
|
|
|
2,225 |
4,450 |
6,675 |
|
|
|
399,699 |
Stock Options(3) |
9/17/2014 |
|
|
|
|
|
|
|
|
41,670 |
89.82 |
400,032 |
George C. Roeth |
|
|
|
|
|
|
|
|
|
|
|
|
(Retired January 5, 2015) |
|
|
|
|
|
|
|
|
|
|
|
Annual Incentive
Plan(1) |
|
|
223,693 |
5,526,000 |
|
|
|
|
|
|
|
|
Performance
Shares(2)(6) |
9/17/2014 |
|
|
|
|
2,715 |
5,430 |
8,145 |
|
|
|
487,723 |
Stock
Options(3)(6) |
9/17/2014 |
|
|
|
|
|
|
|
|
50,780 |
89.82 |
487,488 |
(1) |
Represents estimated possible payouts of annual incentive awards for fiscal year 2015 under the Annual Incentive Plan for each of our
named executive officers. The Annual Incentive Plan is an annual cash incentive opportunity and, therefore, awards are earned in the year
of grant. The target amounts represent the potential payout if both Company performance, including financial and strategic metrics, and
individual performance are at target levels. Target amounts for Messrs. Dorer and Roeth have been pro-rated for time and compensation
received in their roles during fiscal year 2015. The maximum amount represents the stockholder-approved maximum payout in the Annual
Incentive Plan of 1.0% of Company earnings before income taxes for Mr. Knauss and 0.6% of Company earnings before income taxes
for all other named executive officers (including Mr. Dorer in fiscal year 2015). Because Mr. Dorer transitioned into the CEO role during
the fiscal year, after the performance period and participants were established for the year, the maximum payout for Mr. Dorer is 0.6%
of Company earnings before income taxes. His maximum payout for fiscal year 2016 will be 1.0% of Company earnings before income
taxes. The Annual Incentive Plan is designed to enable the Committee to make awards that meet the requirements of IRC Section 162(m),
as appropriate, and the maximum column reflects maximum awards possible under the Annual Incentive Plan. The Committee historically
has paid annual incentive awards that are substantially lower than the maximum Annual Incentive Plan payouts. See the Summary
Compensation Table for the actual payout amounts in fiscal year 2015 under the Annual Incentive Plan. See Annual Incentives in the
Compensation Discussion and Analysis for additional information about the Annual Incentive Plan. |
Continues on next page ► | |
| |
THE CLOROX COMPANY - 2015 Proxy Statement | 41 |
Table of Contents
(2) |
Represents possible future payouts of Common Stock underlying
performance shares awarded in fiscal year 2015 to each of our named
executive officers as part of their participation in the 2005 Stock
Incentive Plan. These awards will vest upon the achievement of performance
measures based on cumulative economic profit growth over a three-year
period, with the threshold, target, and maximum awards equal to 50%, 100%,
and 150%, respectively, of the number of performance shares granted. If
the minimum financial goals are not met at the end of the three-year
period, no awards will be paid out under the 2005 Stock Incentive Plan.
See Long-Term Incentives in the Compensation Discussion and Analysis for
additional information. No performance shares were granted to Mr. Knauss
in fiscal year 2015. |
(3) |
Represents stock options awarded to each of our named executive
officers under the 2005 Stock Incentive Plan. All stock options vest in
equal installments on the first, second, third, and fourth anniversaries
of the grant date. No stock options were granted to Mr. Knauss in fiscal
year 2015. |
(4) |
Represents possible future payouts of Common Stock underlying performance shares awarded in fiscal year 2015 under the 2005 Stock
Incentive Plan to Mr. Dorer on November 20, 2014, when he was promoted to CEO. These awards will vest upon the achievement of
performance measures based on cumulative economic profit growth over a three-year period (October 1, 2014, through September 30,
2017), with the threshold, target, and maximum awards equal to 50%, 100%, and 150%, respectively, of the number of performance
shares granted. If the minimum financial goals are not met at the end of the three-year period, no awards will be paid out under the 2005
Stock Incentive Plan. See Long-Term Incentives in the Compensation Discussion and Analysis for additional information. |
(5) |
Represents stock options awarded under the 2005 Stock Incentive
Plan to Mr. Dorer when he was promoted to CEO
effective November 20, 2014. All stock options vest in equal installments
on the first, second, third, and fourth anniversaries of the grant
date. |
(6) |
The stock option and performance
share awards granted to Mr. Roeth in fiscal year 2015 were forfeited at
his retirement. |
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
The following equity awards granted to
our named executive officers were outstanding as of the end of fiscal year
2015.
|
|
|
Option Awards |
|
Stock Awards |
|
|
Name |
|
Number of Securities Underlying Unexercised Options- Exercisable (#) |
|
Number of Securities Underlying Unexercised Options- Unexercisable (#) |
|
Equity Incentive Plan
Awards: Number
of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or
Units of Stock That Have Not Vested (#) |
|
Market Value
of Shares or Units of Stock That Have
Not Vested ($) |
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (#) |
|
Equity Incentive Plan
Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have
Not Vested ($)(1) |
|
|
Benno
Dorer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options(2) |
|
12,350 |
|
|
|
|
|
|
$61.16 |
|
9/18/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
14,380 |
|
|
|
|
|
|
63.95 |
|
9/16/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
17,460 |
|
|
|
|
|
|
57.25 |
|
9/15/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
19,826 |
|
|
|
|
|
|
66.48 |
|
9/14/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
14,857 |
|
4,952 |
(3) |
|
|
|
68.15 |
|
9/13/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
15,529 |
|
15,529 |
(4) |
|
|
|
72.11 |
|
9/11/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
13,280 |
|
13,279 |
(5) |
|
|
|
74.09 |
|
1/2/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10,199 |
|
30,598 |
(6) |
|
|
|
84.45 |
|
9/17/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,780 |
(7) |
|
|
|
89.82 |
|
9/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221,170 |
(8) |
|
|
|
100.24 |
|
11/20/2024 |
|
|
|
|
|
|
|
|
|
|
|
Performance
Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,354 |
(9) |
|
$348,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,795 |
(10) |
|
498,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,430 |
(11) |
|
564,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,090 |
(12) |
|
1,569,662 |
|
42 THE CLOROX COMPANY - 2015 Proxy Statement
Table of Contents
Compensation Discussion and
Analysis
|
|
|
Option Awards |
|
Stock Awards |
|
Name |
|
Number
of Securities Underlying Unexercised Options- Exercisable (#) |
|
Number
of Securities Underlying Unexercised Options- Unexercisable (#) |
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units of
Stock That Have Not Vested (#) |
|
Market Value of Shares or Units
of Stock That Have Not Vested ($) |
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (#) |
|
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares, Units or
Other Rights That Have
Not Vested ($)(1) |
|
|
Donald R.
Knauss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Retired effective |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2015) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(2) |
|
185,000 |
|
|
|
|
|
|
$61.16 |
|
9/18/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
227,710 |
|
|
|
|
|
|
63.95 |
|
9/16/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
311,390 |
|
|
|
|
|
|
66.48 |
|
9/14/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
211,703 |
|
70,567 |
(3) |
|
|
|
68.37 |
|
9/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
193,965 |
|
193,965 |
(4) |
|
|
|
72.11 |
|
9/11/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
69,160 |
|
207,480 |
(6) |
|
|
|
84.45 |
|
9/17/2023 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,312 |
(9) |
|
$4,089,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,970 |
(10) |
|
3,325,519 |
|
|
Stephen
M. Robb |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(2) |
|
17,980 |
|
|
|
|
|
|
$63.95 |
|
9/16/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
21,830 |
|
|
|
|
|
|
57.25 |
|
9/15/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
22,240 |
|
|
|
|
|
|
66.48 |
|
9/14/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
15,188 |
|
5,062 |
(3) |
|
|
|
68.15 |
|
9/13/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
24,350 |
|
8,117 |
(13) |
|
|
|
64.96 |
|
11/17/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
27,300 |
|
27,300 |
(4) |
|
|
|
72.11 |
|
9/11/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10,245 |
|
30,735 |
(6) |
|
|
|
84.45 |
|
9/17/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,290 |
(7) |
|
|
|
89.82 |
|
9/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,533 |
(9) |
|
575,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,740 |
(10) |
|
493,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,120 |
(11) |
|
636,602 |
|
|
Jacqueline P. Kane |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(2) |
|
38,881 |
|
|
|
|
|
|
$66.48 |
|
9/14/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
30,780 |
|
10,260 |
(3) |
|
|
|
68.15 |
|
9/13/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
27,300 |
|
27,300 |
(4) |
|
|
|
72.11 |
|
9/11/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
9,990 |
|
29,970 |
(6) |
|
|
|
84.45 |
|
9/17/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,670 |
(7) |
|
|
|
89.82 |
|
9/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,533 |
(9) |
|
575,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,620 |
(10) |
|
480,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,450 |
(11) |
|
462,889 |
|
|
Frank A.
Tataseo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(2) |
|
|
|
12,150 |
(3) |
|
|
|
$68.15 |
|
9/13/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
32,330 |
|
32,330 |
(4) |
|
|
|
72.11 |
|
9/11/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
11,527 |
|
34,583 |
(6) |
|
|
|
84.45 |
|
9/17/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,880 |
(7) |
|
|
|
89.82 |
|
9/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
Performance Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,552 |
(9) |
|
681,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,330 |
(10) |
|
554,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,010 |
(11) |
|
521,140 |
|
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
43 |
Table of Contents
|
|
|
Option Awards |
|
Stock Awards |
|
Name |
|
Number
of Securities Underlying Unexercised Options- Exercisable (#) |
|
Number
of Securities Underlying Unexercised Options- Unexercisable (#)
|
|
Equity Incentive Plan
Awards: Number
of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or
Units of Stock That Have Not Vested (#) |
|
Market Value
of Shares or Units of Stock That Have
Not Vested ($) |
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (#) |
|
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares, Units or
Other Rights That Have
Not Vested ($)(1) |
|
|
Laura
Stein |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options(2) |
|
45,080 |
|
|
|
|
|
|
$66.48 |
|
9/14/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
30,780 |
|
10,260 |
(3) |
|
|
|
68.15 |
|
9/13/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
27,300 |
|
27,300 |
(4) |
|
|
|
72.11 |
|
9/11/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
9,990 |
|
29,970 |
(6) |
|
|
|
84.45 |
|
9/17/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,670 |
(7) |
|
|
|
89.82 |
|
9/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
Performance
Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,533 |
(9) |
|
$575,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,620 |
(10) |
|
480,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,450 |
(11) |
|
462,889 |
|
|
George C.
Roeth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Retired January
5, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015)(14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,077 |
(9) |
|
424,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,620 |
(10) |
|
480,572 |
|
(1) |
Represents unvested target number of performance
shares under the 2005 Stock Incentive Plan multiplied by the closing price
of our Common Stock on June 30, 2015, except as noted below in footnote
(9). The ultimate value will depend on whether performance criteria are
met and the value of our Common Stock on the actual vesting
date. |
(2) |
Grants were made under the 2005 Stock Incentive
Plan. |
(3) |
Represents unvested portion of stock options that vest
in four equal installments beginning one year from the grant date of
September 14, 2011, for Mr. Knauss and September 13, 2011, for all other
named executive officers. |
(4) |
Represents unvested portion of stock options that vest
in four equal installments beginning one year from the grant date of
September 11, 2012. |
(5) |
Represents unvested one-time off-cycle stock option
grant that was granted to Mr. Dorer when he was promoted to Executive Vice
President Chief Operating Officer Cleaning, International and
Corporate Strategy effective January 1, 2013. |
(6) |
Represents unvested portion of stock options that vest
in four equal installments beginning one year from the grant date of
September 17, 2013. |
(7) |
Represents unvested portion of stock options that vest
in four equal installments beginning one year from the grant date of
September 17, 2014. |
(8) |
Represents unvested portion of off-cycle stock options
granted to Mr. Dorer when he was promoted to CEO
effective November 20, 2014. Options vest in four equal installments
beginning one year from the grant date of November 20, 2014. |
(9) |
Represents the actual number of performance shares that
were paid out under our 2005 Stock Incentive Plan. The grants from the
plan have a three-year performance period (fiscal years 2013 through
2015). Performance is based on achievement of cumulative economic profit
growth. After completion of the 2015 fiscal year the Committee determined
whether the performance measures had been achieved and based on the
results, on August 13, 2015, the Committee approved the payout of this
award at 105% of target. |
(10) |
Represents the target number of performance shares
that can be earned under our 2005 Stock Incentive Plan. The grants from
the plan have a three-year performance period (fiscal years 2014 through
2016). Performance is based on achievement of cumulative economic profit
growth. The Committee will determine whether the performance measures have
been achieved after the completion of fiscal year 2016. |
(11) |
Represents the target number of performance shares
that can be earned under our 2005 Stock Incentive Plan. The grants from
the plan have a three-year performance period (fiscal years 2015 through
2017). Performance is based on achievement of cumulative economic profit
growth. The Committee will determine whether the performance measures have
been achieved after the completion of fiscal year 2017. |
(12) |
Represents the
target number of performance shares that can be earned under our 2005
Stock Incentive Plan. The off-cycle grants from the plan, which were
granted to Mr. Dorer when he was promoted to CEO
effective November 20, 2014, have a three-year performance period (October
1, 2014 through September 30, 2017). Performance is based on achievement
of cumulative economic profit growth. The Committee will determine whether
the performance measures have been achieved after the completion of the
performance period. |
44 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
Compensation Discussion and
Analysis
(13) |
Represents unvested one-time off-cycle stock option
grant that was granted to Mr. Robb when he was promoted to Senior Vice
President Chief Financial Officer effective November 17,
2011. |
(14) |
The stock awards
granted to Mr. Roeth for fiscal year 2015 were forfeited at retirement.
The performance share awards granted to Mr. Roeth for fiscal years 2013
and 2014 were pro-rated. The stock options granted to Mr. Roeth that were
unvested at the date of his retirement, excluding those granted in fiscal
year 2015, automatically vested at the date of his termination per the
provisions of the grant agreement. |
OPTION EXERCISES AND STOCK VESTED
This table shows stock options
exercised and stock vested for the named executive officers during fiscal year
2015.
|
|
Option Awards |
|
Stock Awards |
|
|
Name |
Number of Shares Acquired
on Exercise (#) |
|
Value Realized
on Exercise ($)(1) |
|
Number of Shares Acquired on
Vesting (#) |
|
Value Realized on
Vesting ($)(2) |
|
|
Benno Dorer |
|
(3) |
|
$ |
|
4,913 |
(4) |
|
$ 436,913 |
|
|
Donald R.
Knauss (Retired effective July 1,
2015) |
573,330 |
(3) |
|
25,997,363 |
|
39,552 |
(4) |
|
3,517,359 |
|
|
Stephen M. Robb |
26,800 |
(3) |
|
1,291,122 |
|
2,832 |
(4) |
|
251,850 |
|
|
Jacqueline P. Kane |
167,989 |
(3) |
|
4,248,698 |
|
5,747 |
(4) |
|
511,081 |
|
|
Frank A. Tataseo |
262,960 |
(3) |
|
10,418,349 |
|
6,798 |
(4) |
|
604,546 |
|
|
Laura
Stein |
102,590 |
(3) |
|
4,248,698 |
|
5,747 |
(4) |
|
511,081 |
|
|
George C.
Roeth (Retired January 5, 2015) |
311,588 |
(3) |
|
10,526,948 |
|
4,913 |
(4) |
|
511,050 |
|
(1) |
The dollar value realized reflects the difference between the market price of the Common Stock upon exercise and the stock option
exercise price. |
(2) |
The dollar value realized reflects the market value of
the vested shares based on the closing price of the Common Stock on the
vesting date, unless settlement of the shares was deferred, in which case
it was based on the closing price of the Common Stock of $104.02 on June
30, 2015. |
(3) |
The number represents the exercise of nonqualified stock
options granted in previous years under the Companys 2005 Stock Incentive
Plan. |
(4) |
The number of stock
awards listed represent the vesting of performance shares at 103% of
target, granted through participation in the Company's 2005 Stock
Incentive Plan. The grant from the plan had a three-year performance
period (fiscal years 2012 through 2014). Performance is based on the
achievement of cumulative operating profit goal and cumulative economic
profit growth. On August 14, 2014, the Committee approved the payout of
this award at 103% of target and the award was settled on August 18,
2014. |
Overview of Pension
Benefits
Historically, pension benefits have
been paid to the named executive officers under the following plans: (i) the
Pension Plan, (ii) the cash balance restoration provision in the NQDC, and (iii)
the SERP. Effective July 1, 2011, the
Pension Plan and the cash balance
restoration provision under the NQDC were frozen. The SERP was also frozen as of
June 30, 2011, with regard to pay and offsets, while still allowing age and
service credits, as described in the Retirement Plan section of the
CD&A.
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
45 |
Table of Contents
PENSION BENEFITS TABLE
The following table sets forth each
named executive officers pension benefits under the Companys pension plans for
fiscal year 2015.
|
Name |
|
Plan Name |
|
Number of Years of
Credited Service (#)(1) |
|
Present Value
of Accumulated Benefit ($)(2) |
|
Payments During Last Fiscal
Year ($) |
|
|
Benno Dorer |
|
The Pension
Plan(3) |
|
10 |
|
$ |
50,770 |
|
$ |
|
|
|
|
|
SERP(4) |
|
10 |
|
|
1,617,978 |
|
|
|
|
|
|
|
Cash Balance
Restoration(5) |
|
10 |
|
|
131,861 |
|
|
|
|
|
Donald R.
Knauss |
|
The Pension Plan(3) |
|
9 |
|
|
35,457 |
|
|
|
|
|
(Retired effective
July 1, 2015) |
|
SERP(4) |
|
9 |
|
|
11,678,474 |
|
|
|
|
|
|
|
Cash Balance
Restoration(5) |
|
9 |
|
|
483,442 |
|
|
|
|
|
Stephen M. Robb |
|
The Pension
Plan(3) |
|
26 |
|
|
144,049 |
|
|
|
|
|
|
|
SERP(4) |
|
26 |
|
|
1,421,657 |
|
|
|
|
|
|
|
Cash Balance
Restoration(5) |
|
26 |
|
|
67,035 |
|
|
|
|
|
Jacqueline P. Kane |
|
The Pension Plan(3) |
|
11 |
|
|
58,363 |
|
|
|
|
|
|
|
SERP(4) |
|
11 |
|
|
3,470,834 |
|
|
|
|
|
|
|
Cash Balance
Restoration(5) |
|
11 |
|
|
155,463 |
|
|
|
|
|
Frank A. Tataseo |
|
The Pension
Plan(3) |
|
21 |
|
|
165,965 |
|
|
|
|
|
|
|
SERP(4) |
|
21 |
|
|
5,154,241 |
|
|
|
|
|
|
|
Cash Balance
Restoration(5) |
|
21 |
|
|
432,261 |
|
|
|
|
|
Laura
Stein |
|
The Pension Plan(3) |
|
18 |
|
|
125,815 |
|
|
|
|
|
|
|
SERP(4) |
|
18 |
|
|
3,740,636 |
|
|
|
|
|
|
|
Cash Balance
Restoration(5) |
|
18 |
|
|
202,266 |
|
|
|
|
|
George C. Roeth |
|
The Pension
Plan(3) |
|
28 |
|
|
|
|
|
180,838 |
|
|
(Retired January 5, 2015) |
|
SERP(4) |
|
28 |
|
|
3,902,288 |
|
|
|
|
|
|
|
Cash Balance Restoration(5) |
|
28 |
|
|
223,783 |
|
|
|
|
(1) |
Number of years of credited service is rounded to the
nearest whole number. |
(2) |
Present value of the accumulated benefit was calculated
using the following assumptions: mortality table: MILES-CGFD; discount
rate: 4.20%; and age at June 30, 2015. |
(3) |
The Pension Plan was frozen effective July 1, 2011.
Participants keep their accumulated pay credits and receive only quarterly
interest credits after that date. |
(4) |
The SERP was frozen with regards to pay and offsets
effective June 30, 2011. Age and service credits continue to
accrue. |
(5) |
The cash balance restoration provision in the NQDC was
eliminated effective July 1, 2011, when the Pension Plan was frozen.
Participants keep their accumulated pay credits but no contributions were
made under this provision after July 1, 2011. |
(6) |
Mr. Roeth retired on
January 5, 2015; amounts reflected in the payments during the last fiscal
year column are payments he received after his retirement
date. |
Overview of the
Nonqualified Deferred Compensation Plans
Executive
Retirement Plan. Our executive
officers (including each of our named executive officers other than Mr. Knauss)
are eligible for participation in the ERP. The ERP provides that the Company
will make an annual contribution of 5% of an eligible participants base salary
plus annual incentive payment into the plan. For named executive officers who
were age 55 or older as of July 1, 2011, when the ERP was introduced, Company
contributions are fully vested in the ERP. For named executive officers who had
not attained age 55 as of July 1, 2011, Company contributions will vest over a
three-year period and will fully vest upon the participants attainment of age
62 with ten years of
service with the Company (at which time
the individuals are considered retirement-eligible under the ERP). An eligible
participant can elect distribution in a lump sum or up to 15 annual installments
upon a qualifying payment event.
Our named executive officers who were
eligible participants in the SERP at the time it was frozen receive annual
step-down transition contributions into the ERP over a three- or five-year
period that began July 2011, when the ERP became effective. The named executive
officers eligible for the five-year step-down transition contribution are
Messrs. Dorer and Tataseo and Mmes. Stein and Kane, each of whom received a 9% transition
contribution in the first year decreasing to a 5% transition contribution in the
fifth year. Mr. Robb received a three-year step-down
46 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Compensation Discussion and
Analysis
transition contribution from 7% in the first year to 5% in the
third year, as he was at a lower organizational level at the time the SERP was
frozen.
Nonqualified
Deferred Compensation Plan. Under
the NQDC, participants, including each of our named executive officers, may
voluntarily defer the receipt of up to 50% of their base salary and up to 100%
of their annual incentive awards. In addition, the NQDC offers a 401(k)
restoration provision. All Company retirement contributions are made in the form
of (i) a fixed 6% employer annual contribution and (ii) an employer match of up
to 4% of pay into the 401(k) Plan, subject to IRC compensation limits.
Contributions on eligible compensation that exceed the IRC compensation limits
are contributed into a participants NQDC account under the 401(k) restoration
provision.
Participants in the NQDC may elect
to receive benefits from the NQDC either in a lump sum or up to 15 annual
payments upon a qualifying payment event. Participants may choose from an array
of investment crediting rates that generally mirror the investment fund options
available in the 401(k) Plan. The NQDC uses the same benefit formulas, types of
compensation to determine benefits, and vesting requirements as our frozen
tax-qualified retirement plans. The responsibility to pay benefits under the
NQDC is an unfunded and unsecured obligation of the Company for contributions
prior to January 1, 2012. Contributions from January 1, 2012, through the present
are fully funded by the Company.
The following table provides
information regarding the accounts of the named executive officers under the
NQDC and ERP in fiscal year 2015.
NONQUALIFIED DEFERRED COMPENSATION
|
Name |
|
Executive Contributions in Last
FY ($)(1) |
|
Registrant Contributions in Last
FY ($)(2) |
|
Aggregate Earnings in
Last FY ($)(3) |
|
Aggregate Balance at Last
FYE ($)(4)(5) |
|
|
Benno Dorer |
|
$ |
27,549 |
|
$ |
84,246 |
|
$ |
9,675 |
|
$ |
1,451,019 |
|
|
Donald R.
Knauss (Retired effective July 1, 2015) |
|
|
161,000 |
|
|
131,021 |
|
|
150,498 |
|
|
7,040,259 |
|
|
Stephen M. Robb |
|
|
17,253 |
|
|
64,908 |
|
|
19,181 |
|
|
1,136,943 |
|
|
Jacqueline P. Kane |
|
|
48,685 |
|
|
57,940 |
|
|
15,450 |
|
|
4,005,307 |
|
|
Frank A.
Tataseo |
|
|
147,182 |
|
|
81,104 |
|
|
199,389 |
|
|
5,822,568 |
|
|
Laura
Stein |
|
|
18,950 |
|
|
86,017 |
|
|
116,745 |
|
|
2,929,093 |
|
|
George C.
Roeth (Retired January 5, 2015) |
|
|
52,704 |
|
|
72,180 |
|
|
104,247 |
|
|
1,778,846 |
|
(1) |
For Mr. Knauss, the amount represents base salary that the executive deferred, for Ms. Kane, the incentive award that the executive
deferred, and for Messrs. Dorer, Robb, Tataseo, and Roeth and Ms. Stein, the annual base salary deferral and incentive award deferred
during fiscal year 2015. Deferred base salary is also reported in the Summary Compensation Table Salary. Deferred annual incentive
awards are also reported in the Summary Compensation Table Non-Equity Incentive Plan Compensation. |
(2) |
Represents that portion of the Companys 401(k) match and Company contribution of up to 10% of eligible compensation that is in excess
of IRC compensation limits pursuant to the 401(k) restoration provision of the NQDC and the Companys contribution under the ERP.
These contributions are also reported in the Summary Compensation Table All Other Compensation and are included under the caption
Nonqualified Deferred Compensation Plan in footnote (6) to the Summary Compensation Table. |
(3) |
Earnings are based on an array of investment options
that generally mirror the 401(k) Plan. Earnings vary based on participant
investment elections. |
(4) |
Reflects aggregate balances under the restoration
provision of the NQDC and any deferred base salary and annual incentive
awards as of the end of fiscal year 2015. |
(5) |
The executive and
registrant contribution total amounts in the table below are also reported
as compensation in the Summary Compensation Table in the years
indicated: |
|
Fiscal Year |
|
Benno Dorer |
|
Donald R. Knauss |
|
Stephen M. Robb |
|
Jacqueline P. Kane |
|
Frank A. Tataseo |
|
Laura Stein |
|
George C. Roeth |
|
|
2015 |
|
$ |
111,795 |
|
$ |
292,021 |
|
$ |
82,161 |
|
$106,625 |
|
$ |
228,287 |
|
$ |
104,967 |
|
$ |
124,884 |
|
|
2014 |
|
|
254,906 |
|
|
442,179 |
|
|
144,432 |
|
|
|
|
187,635 |
|
|
688,420 |
|
|
381,718 |
|
|
2013 |
|
|
|
|
|
525,022 |
|
|
136,431 |
|
|
|
|
218,413 |
|
|
294,050 |
|
|
173,431 |
|
Potential Payments Upon Termination or Change in
Control
Payments upon
Termination
Severance
Plan for Named Executive Officers Other than Mr. Knauss.
Under the terms of the Severance Plan, our named
executive officers are eligible to receive benefits in the event their
employment is terminated
by the Company without cause (other
than in connection with a change in control). No benefits are payable under the
terms of the Severance Plan if the Company terminates the employment of the
named executive officer for cause or if the named executive officer voluntarily
resigns.
Continues on next page ► |
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
47 |
Table of Contents
Regardless of the manner in which a
named executive officers employment terminates, each named executive officer
would retain the amounts he or she had earned over the course of his or her
employment prior to the termination event, such as balances under the NQDC,
vested and accrued retirement benefits, and previously vested stock options,
except as outlined below under Termination for Cause. For further information
about previously earned amounts, see the Summary Compensation Table, Outstanding
Equity Awards at Fiscal Year-End, Option Exercises and Stock Vested, Pension
Benefits Table, and Nonqualified Deferred Compensation tables.
Under the Severance Plan, each named
executive officer agrees to return and not to use or disclose proprietary
information of the Company and, for two years following any such termination,
the named executive officer is also prohibited from soliciting for employment
any employee of the Company, or diverting or attempting to divert from the
Company any business.
Termination benefits under the
Severance Plan for our named executive officers other than Mr. Knauss are as
follows:
Involuntary
Termination Without Cause. If the Company terminates the employment
of a named executive officer (other than the CEO) without cause, the Severance
Plan entitles the named executive officer to receive a lump-sum severance
payment after termination equal to two times the named executive officers
current base salary. In the case of the CEO, the severance amount is equal to
the sum of (i) two times the CEOs base salary and (ii) two times the CEOs
average annual bonus multiplied by 75%. Under the Severance Plan, a named
executive officer (other than the CEO) is also entitled to an amount equal to
75% of his or her Annual Incentive Plan award for the fiscal year in which he or
she was terminated. The CEO is entitled to an amount equal to 100% of his Annual
Incentive Plan award for the fiscal year in which he was terminated.
The amount of severance paid is
calculated using the actual Company Financial Performance Multiplier and
Strategic Metrics Multiplier, and assumes an Individual Performance Multiplier
of 100%, prorated to the date of termination. If the named executive officer is
retirement-eligible under the terms of the Annual Incentive Plan, the executive
would be eligible for either the treatment under the Severance Plan or
retirement treatment for purposes of the Annual Incentive Plan award payout
(retirement treatment would be 100%, versus 75%, of his or her Annual Incentive
Plan award for the fiscal year in which he or she was terminated, prorated to
the date of termination). It is the Committees decision as to which treatment
to apply.
The Severance Plan provides that the
named executive officer is entitled to continue to participate in the Companys
medical and dental insurance programs for up to two years following termination
on the same terms as active employees. In addition, at the end of this coverage,
a named executive officer will be eligible to participate in the Companys
medical and/or dental plans offered to former employees who retire at age 55 or
older, provided the executive has completed at least ten years of service, on
the same terms as such other former employees. If eligible, this coverage will
continue until the named executive officer turns age 65. Thereafter, the named
executive officer may participate in the Companys general retiree health plan
as it may exist in the future, if otherwise eligible. If the named executive
officer will be age 55 or older and will have completed at least ten years of
service at the end of, and including, the two-year period following termination,
the named executive officer will be deemed to be age 55 and/ or to have ten
years of service under any pre-65 retiree health plan as well as the
SERP.
The above severance-related benefits
are provided only if the named executive officer executes a general release
prepared by the Company.
Termination Due
to Retirement. Under the Companys policy applicable to all
employees, upon retirement the named executive officer is entitled to his or her
salary through the last day of employment and is eligible for a pro-rata portion
of the Annual Incentive Plan award for the fiscal year in which his or her
retirement occurs. Based on the provisions of the respective plans, he or she
will also be eligible to receive SERP, ERP, and other benefits under applicable
Company retirement plans. In addition to the amounts that the named executive
officer has earned or accrued over the course of his or her employment under the
Companys qualified and nonqualified plans, a named executive officer who is at
least age 55 with ten years of service or who has 20 years of service regardless
of age is eligible to receive retirement-related benefits under the long-term
incentive program. Stock options held for longer than one year will vest in full
and remain exercisable for five years following the named executive officers
retirement, or until the expiration date, whichever is sooner, and performance
shares held longer than one year will be paid out on a pro-rata basis at the end
of the relevant performance period based on the actual level of performance
achieved during that period.
Termination Due
to Death or Disability. Under the Companys policy applicable to all
employees, if the named executive officers employment is terminated due to his
or her death, the named executive officers beneficiary or estate is entitled to
(i) the named executive officers salary through the date of his or her death,
(ii) a pro-rata portion of the named
48 THE
CLOROX COMPANY - 2015 Proxy
Statement
Table of Contents
Compensation Discussion and
Analysis
executive officers actual Annual Incentive Plan award for the fiscal year of
his or her death, and (iii) benefits pursuant to the Companys life insurance plan. Stock options will vest in full,
and all vested options remain exercisable for an additional year following the named executive officers death or until
the expiration date, whichever is earlier, and all performance shares will be paid out at the end of the relevant
performance period based on the actual level of performance achieved during that period.
If the named executive officer begins
to receive benefits under the Companys long-term disability plan, the Company
may terminate the named executive officers employment at any time, in which
case the named executive officer will receive his or her salary through the date
of his or her termination and will also be entitled to a pro-rata portion of his
or her actual Annual Incentive Plan award for the fiscal year of his or her
termination. Stock options will vest in full, and all vested options will remain
exercisable for an additional year following the named executive officers
disability or until the expiration date, whichever is earlier, and all
performance shares will be paid out at the end of the relevant performance
period based on the actual level of performance achieved during that
period.
Termination for
Misconduct. The Company may terminate a named executive officers
employment for misconduct at any time without notice. Upon the named executive
officers termination for misconduct, the named executive officer is entitled to
his or her salary through the date of his or her termination, but is not
entitled to any Annual Incentive Plan award for the fiscal year in which his or
her termination for misconduct occurs. Misconduct under the Severance Plan
means: (i) the willful and continued neglect of significant duties or willful
and continued violation of a material Company policy after having been warned in
writing, (ii) a material act of dishonesty, fraud, misrepresentation, or other
act of moral turpitude, (iii) gross negligence in the course of employment, (iv)
the failure to obey a lawful direction of the Board or a corporate officer to
whom the named executive officer reports, directly or indirectly, or (v) an
action that is inconsistent with the Companys best interests and values. All
outstanding stock option grants awarded since September 2005 are forfeited upon
a termination for misconduct. In addition, any retirement-related benefits a
named executive officer would normally receive related to performance shares are
also forfeited upon a termination for misconduct.
Voluntary
Termination. A named executive officer may resign from his or her
employment at any time. Upon the named executive officers voluntary
resignation, the named executive officer is entitled to his or her salary
through the date of termination, but is not entitled to any
Annual
Incentive Plan award for the fiscal
year of termination. All unvested outstanding stock option and performance share
grants are forfeited upon voluntary termination.
The Company also maintains a Change in
Control Severance Plan for the benefit of each of our named executive officers
other than Mr. Knauss. Please see the Potential Payments upon Termination or
Change in Control section for further details on the Change in Control
Severance Plan.
Mr. Knauss
Employment Agreement. In November
2014, Mr. Knauss entered into an amended and restated employment agreement with
the Company in connection with his transition to Executive Chairman. The amended
and restated agreement replaced the May 2010 employment agreement with Mr.
Knauss, with revisions to reflect Mr. Knauss new role as Executive Chairman.
Among other revisions, Mr. Knauss amended and restated employment agreement
removed references to the replacement SERP, which had provided for an additional
retirement benefit to compensate for the loss of retirement benefits at his
prior employer when he became the Companys CEO, as Mr. Knauss had reached the
tenure and age requirements which qualified the Clorox benefit as the richer
plan. The amended and restated employment agreement also eliminated termination
benefits for Mr. Knauss relating to any termination by the Company without cause
or by Mr. Knauss for good reason occurring after March 31, 2015.
Mr. Knauss is retirement-eligible under
all Company welfare benefit (including medical, life, disability, and severance
benefits), equity, and other incentive plans and programs applicable to the
Companys executive officers, participates in the Company SERP, and is eligible
for an early retirement benefit.
For more information regarding the
SERP, see Overview of Pension Benefits.
Under Mr. Knauss employment agreement,
if the Company had terminated his employment without cause subsequent to March
31, 2015, such termination would have been treated as a termination due to retirement.
The terms of Mr. Knauss employment agreement relating to termination by the
Company without cause prior to March 31, 2015, due to retirement, due to death
or disability, and for cause are similar to the terms of the Severance Plan for
our other named executive officers, which are described above.
In addition to the employment
agreement, the Company also entered into an amended and restated change in
control agreement with Mr. Knauss on November 20, 2014, which is described below
in Potential Payments upon Change in Control.
Continues on
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|
|
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
49 |
Table of Contents
Potential Payments upon
Change in Control
Change in
Control Severance Plan for Named Executive Officers Other Than Mr.
Knauss. Under the CIC Plan,
executives are eligible for change in control severance benefits, subject to the
execution of a waiver and release, in the event they are terminated without
cause or resign for good reason (each as defined under the CIC Plan and as
further described below) during (i) the two-year period following a change in
control or (ii) a period of up to one year prior to the change in control in
limited circumstances where the executives termination is directly related to
or in anticipation of a change in control.
The severance benefits under the CIC
Plan include (i) a lump-sum severance payment equal to two times (or, in the
case of the CEO, three times) the sum of (a) the executives base salary and (b)
average Annual Incentive Plan award for the three completed fiscal years prior
to termination, (ii) a lump-sum amount equal to the difference between the
actuarial equivalent of the benefit the named executive officer would have been
entitled to receive if his or her employment had continued until the second
anniversary of the date of termination and the actuarial equivalent of the
aggregate benefits paid or payable as of the date of termination under the
qualified and nonqualified retirement plans, (iii) continuation of healthcare
benefits for a maximum of two (or, in the case of the CEO, three) years
following a severance-qualifying termination, (iv) continued financial planning
services for the year of termination, (v) vesting of all outstanding equity
awards granted prior to the change in control, and (vi) an amount equal to the
average Annual Incentive Plan award for the three completed fiscal years
preceding termination prorated for the number of days employed in the fiscal
year during which termination occurred. In addition, the CIC Plan provides for
an excise tax cutback such that the excise tax under Sections 280G and 4999 of
the IRC would not apply (unless the executive would receive a greater amount of
severance benefits on an after-tax basis without a cutback, in which case the
cutback would not apply). The CIC Plan permits the Committee to make changes to
the CIC Plan that are adverse to covered executives with 12 months advance
notice. If a change in control of the Company occurs during that 12-month
period, then such changes would not become effective. Each participant under the
CIC Plan is subject to certain restrictive covenants including confidentiality
and non-disparagement provisions and a non-solicitation provision during the
term of his or her employment and for two years thereafter.
Cause is generally defined as (i)
willful and continued failure to substantially perform duties upon written
demand or (ii) willfully engaging in illegal conduct or gross misconduct that is
materially and demonstrably injurious to the Company. A termination for cause
requires a vote of
75% of the Board at a meeting after
notice to the executive has been given and the executive has had an opportunity
to be heard.
Good Reason is generally defined as
(i) an assignment of duties inconsistent with the executive officers position
(including offices and reporting requirements), authority, duties, or
responsibilities (other than reassignments with a substantially similar level
and scope of authority, duties, responsibilities, and reporting relationships),
(ii) any failure to substantially comply with any of the material provisions of
compensation plans, programs, agreements, or arrangements as in effect
immediately prior to the change in control, which material provisions consist of
base salary, cash incentive compensation target bonus opportunity, equity
compensation opportunity in the aggregate, savings and retirement benefits in
the aggregate, and welfare benefits (including medical, dental, life,
disability, and severance benefits) in the aggregate, (iii) relocation of
principal place of employment that increases the executive officers commuting
distance by more than 50 miles, (iv) termination of employment by the Company
other than as expressly permitted by the CIC Plan, or (v) failure of a successor
company to assume the CIC Plan.
Change in
Control Agreement with Mr. Knauss. On November 20, 2014, the Company entered into an amended and restated
change in control agreement with Mr. Knauss to reflect his transition from
Chairman and CEO to Executive Chairman. The new agreement replaced the change in
control agreement with Mr. Knauss that became effective on November 15, 2011.
The primary changes from the prior agreement were to align with the changes in
Mr. Knauss employment agreement and reflect the transition into his new
role.
In the event that Mr. Knauss was
terminated without cause or resigned for good reason (each as defined in his
change in control agreement and further described below) within the two-year
period following a change in control, he would have been entitled to the
following change in control severance benefits, subject to the execution of a
general release and waiver:
● |
Cash compensation equal to three
times his base salary and three times his average Annual Incentive Plan
awards for the preceding three years, plus 100% of his average Annual
Incentive Plan awards for the preceding three years, prorated to the date
of termination. This amount would have been paid in a lump sum after
termination. |
● |
Payment of an amount equal to the
difference between the actuarial equivalent of the benefit Mr. Knauss
would have been eligible to receive if his employment had continued until
the third anniversary of the date of termination and the actuarial
equivalent of his |
50 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Compensation Discussion and
Analysis
|
actual aggregate
benefits paid or payable, if any, as of the
date of termination under the qualified and nonqualified retirement plans. This amount would also have been paid in a lump sum after termination.
|
● |
Continued participation in health, welfare,
and insurance benefits until the third
anniversary of the date of termination. In
addition, for purposes of determining Mr.
Knauss eligibility for retiree benefits under other Company plans and programs, he would have been deemed to have continued employment
during such period and to have retired on the last
day of such period. |
● |
Financial planning services
for the calendar year of termination. |
● |
Any outstanding stock awards
granted to Mr. Knauss under the Companys
long-term incentive program prior to the
change in control would have automatically vested upon a qualifying termination following a change in control in accordance with the terms of
the award
agreements. |
Good reason is defined in Mr. Knauss
change in control agreement as (i) a material diminution of position or an
assignment of inconsistent duties, (ii) a decrease in or failure to provide
compensation and benefits, (iii) a material change in work location, (iv) a
termination of Mr. Knauss employment by the Company other than as expressly
permitted by his change in control agreement, (v) any failure by the Company to
obtain a successor corporations agreement to assume Mr. Knauss change in
control agreement, or (vi) a failure of the Board to nominate Mr. Knauss to the
Board at any time. Failure by the stockholders to elect Mr. Knauss to the Board
does not constitute good reason.
Cause is defined in Mr. Knauss
change in control agreement as the (i) willful and continued failure to perform
duties after receiving a written warning, or (ii) willful engagement in illegal
conduct or gross misconduct that is materially and demonstrably injurious to the
Company.
In the event that any payments made in
connection with a change in control would be subject to the golden parachute
(Section 280G) excise tax, the provision in Mr. Knauss change in control
agreement provides for the best after-tax payment to Mr. Knauss, whereby Mr.
Knauss would have received a final payment based on the greater net after-tax
result under the following scenarios: (i) Mr. Knauss receives full value of all
benefit payments and pays excise and all other taxes on such benefit payments, or
(ii) the Company reduces the cash severance payment to the safe harbor limit to
avoid triggering excise tax on such benefit payments. Mr. Knauss and the Company
pay all other income and employment statutory taxes in the same manner as
regular taxable compensation.
In addition to the above benefits,
under Mr. Knauss change in control agreement, if Mr. Knauss had died during the
two-year protection period following a change in control or if Mr. Knauss
employment had been terminated due to disability during such period following a
change in control, all stock options granted to him under his employment
agreement would have become fully vested and remain exercisable for one year
following the date of death or termination due to disability or, if earlier,
until the expiration of the term of the option. Furthermore, upon a change in
control, if the continuing entity had not assumed or replaced the stock options
awarded to Mr. Knauss under his employment agreement, such awards would have
become immediately vested upon the change in control.
Mr. Knauss is subject to the same
restrictive covenants as set forth in the CIC Plan, described in detail
above.
Estimated Potential Payments upon
Termination or Change in Control
The following table reflects the
estimated amount of compensation payable to each of the Companys named
executive officers upon termination of the named executive officers employment
under various scenarios except for Mr. Roeth, who retired in January 2015, and
for whom only the actual termination scenario is shown. The amounts exclude
earned amounts such as vested or accrued benefits, other than benefits vested
under the Companys SERP. If a named executive officer is eligible for his or
her SERP benefit as of the assumed termination date, the respective SERP benefit
amount reported under the Retirement column is also included in the scenarios
for Involuntary Termination without Cause and Termination after Change in
Control on the Retirement Benefits line.
The amounts shown are calculated using
an assumed termination date effective as of the last business day of fiscal year
2015 (June 30, 2015) and the closing trading price of our Common Stock of
$104.02 on such date. Although the calculations are intended to provide
reasonable estimates of the potential compensation payable upon termination,
they are based on assumptions outlined in the footnotes of the table and may not
represent the actual amount the named executive officer would receive if an
eligible termination event were to occur.
The table does not include compensation
or benefits provided under plans or arrangements that are generally available to
all salaried employees.
Amounts reflected for change in control assume that each named executive officer
is involuntarily terminated by the Company without cause or voluntarily
terminates for good reason within two years after a change in control.
Continues on
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
51 |
Table of Contents
TERMINATION TABLES
Name and
Benefits |
|
Involuntary Termination Without Cause |
|
Involuntary Termination After Change In
Control |
|
Retirement |
|
Disability |
|
Death |
|
Benno
Dorer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment |
|
$ |
3,567,385 |
(1) |
|
$ |
4,129,693 |
(2) |
|
$ |
|
(3) |
|
$ |
|
(4) |
|
$ |
|
(4) |
|
Stock Options |
|
|
|
|
|
|
3,226,501 |
(5) |
|
|
|
|
|
|
4,036,682 |
(6) |
|
|
4,036,682 |
(6) |
|
Restricted Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
|
|
|
|
|
1,296,091 |
(7) |
|
|
|
|
|
|
3,049,070 |
(8) |
|
|
3,049,070 |
(8) |
|
Retirement Plan Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & Welfare Benefits |
|
|
29,484 |
(9) |
|
|
44,226 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Planning(11) |
|
|
|
|
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$ |
3,596,869 |
|
|
$ |
8,713,011 |
|
|
$ |
|
|
|
$ |
7,085,752 |
|
|
$ |
7,085,752 |
|
|
Donald R.
Knauss(12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment |
|
$ |
|
|
|
$ |
10,219,627 |
(13) |
|
$ |
|
(3) |
|
$ |
|
(4) |
|
$ |
|
(4) |
|
Stock Options |
|
|
|
|
|
|
11,467,028 |
(5) |
|
|
11,467,028 |
(14) |
|
|
11,467,028 |
(6) |
|
|
11,467,028 |
(6) |
|
Restricted Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
|
|
|
|
|
6,509,043 |
(7) |
|
|
6,509,043 |
(15) |
|
|
7,671,792 |
(8) |
|
|
7,671,792 |
(8) |
|
Retirement Plan Benefits |
|
|
|
|
|
|
4,785,918 |
(16) |
|
|
10,432,609 |
(17) |
|
|
12,186,686 |
(18) |
|
|
6,279,149 |
(19) |
|
Health & Welfare Benefits |
|
|
|
|
|
|
33,000 |
(20) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Planning(11) |
|
|
|
|
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$ |
|
|
|
$ |
33,031,116 |
|
|
$ |
28,408,680 |
|
|
$ |
31,325,506 |
|
|
$ |
25,417,969 |
|
|
Stephen
M. Robb |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment |
|
$ |
1,540,000 |
(21) |
|
$ |
2,170,707 |
(22) |
|
$ |
|
(3) |
|
$ |
|
(4) |
|
$ |
|
(4) |
|
Stock Options |
|
|
1,763,224 |
(14) |
|
|
2,719,795 |
(5) |
|
|
1,763,224 |
(14) |
|
|
2,719,795 |
(6) |
|
|
2,719,795 |
(6) |
|
Restricted Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
|
933,657 |
(15) |
|
|
1,150,387 |
(7) |
|
|
933,657 |
(15) |
|
|
1,756,240 |
(8) |
|
|
1,756,240 |
(8) |
|
Retirement Plan Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,421,657 |
(18) |
|
|
965,770 |
(19) |
|
Health & Welfare Benefits |
|
|
37,636 |
(9) |
|
|
37,636 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Planning(11) |
|
|
|
|
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$ |
4,274,517 |
|
|
$ |
6,095,025 |
|
|
$ |
2,696,881 |
|
|
$ |
5,897,692 |
|
|
$ |
5,441,805 |
|
|
Jacqueline P.
Kane |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment |
|
$ |
1,269,000 |
(21) |
|
$ |
1,906,467 |
(22) |
|
$ |
|
(3) |
|
$ |
|
(4) |
|
$ |
|
(4) |
|
Stock Options |
|
|
1,640,463 |
(14) |
|
|
2,336,226 |
(5) |
|
|
1,640,463 |
(14) |
|
|
2,336,226 |
(6) |
|
|
2,336,226 |
(6) |
|
Restricted Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
|
924,929 |
(15) |
|
|
1,082,518 |
(7) |
|
|
924,929 |
(15) |
|
|
1,565,726 |
(8) |
|
|
1,565,726 |
(8) |
|
Retirement Plan Benefits |
|
|
3,751,881 |
(23) |
|
|
4,778,215 |
(24) |
|
|
3,751,881 |
(25) |
|
|
4,132,496 |
(18) |
|
|
1,633,788 |
(19) |
|
Health & Welfare Benefits |
|
|
37,636 |
(9) |
|
|
37,636 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Planning(11) |
|
|
|
|
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$ |
7,623,909 |
|
|
$ |
10,157,562 |
|
|
$ |
6,317,273 |
|
|
$ |
8,034,448 |
|
|
$ |
5,535,740 |
|
|
Frank A.
Tataseo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment |
|
$ |
1,487,063 |
(21) |
|
$ |
2,283,863 |
(22) |
|
$ |
|
(3) |
|
$ |
|
(4) |
|
$ |
|
(4) |
|
Stock Options |
|
|
1,924,959 |
(14) |
|
|
2,707,714 |
(5) |
|
|
1,924,959 |
(14) |
|
|
2,707,714 |
(6) |
|
|
2,707,714 |
(6) |
|
Restricted Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares |
|
|
1,084,962 |
(15) |
|
|
1,262,383 |
(7) |
|
|
1,084,962 |
(15) |
|
|
1,811,076 |
(8) |
|
|
1,811,076 |
(8) |
|
Retirement Plan Benefits |
|
|
5,922,071 |
(23) |
|
|
6,217,759 |
(24) |
|
|
5,922,071 |
(25) |
|
|
5,154,241 |
(18) |
|
|
3,138,840 |
(19) |
|
Health & Welfare Benefits |
|
|
37,636 |
(9) |
|
|
37,636 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Planning(11) |
|
|
|
|
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$ |
10,456,691 |
|
|
$ |
12,525,855 |
|
|
$ |
8,931,991 |
|
|
$ |
9,673,031 |
|
|
$ |
7,657,630 |
|
|
52 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
Compensation Discussion and
Analysis
Name and Benefits |
|
Involuntary Termination Without Cause |
|
Involuntary Termination After Change In
Control |
|
Retirement |
|
Disability |
|
Death |
|
Laura
Stein |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Payment |
|
$ |
1,440,513 |
(21) |
|
$ |
1,860,261 |
(22) |
|
$ |
|
(3) |
|
$ |
|
(4) |
|
$ |
|
(4) |
|
Stock
Options |
|
|
|
|
|
|
2,417,396 |
(5) |
|
|
|
|
|
|
2,352,398 |
(6) |
|
|
2,352,398 |
(6) |
|
Restricted
Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
Shares |
|
|
|
|
|
|
1,082,518 |
(7) |
|
|
|
|
|
|
1,565,726 |
(8) |
|
|
1,565,726 |
(8) |
|
Retirement Plan
Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health &
Welfare Benefits |
|
|
23,996 |
(9) |
|
|
23,996 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Planning(11) |
|
|
|
|
|
|
16,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$
|
1,464,509 |
|
|
$
|
5,400,671 |
|
|
$
|
|
|
|
$
|
3,918,124 |
|
|
$
|
3,918,124 |
|
|
George C.
Roeth(26) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,462,520 |
(27) |
|
$ |
|
|
|
$ |
|
|
|
Stock Options |
|
|
|
|
|
|
|
|
|
|
2,843,202 |
(28) |
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
|
|
|
|
|
|
|
|
|
235,000 |
(29) |
|
|
|
|
|
|
|
|
|
Performance Shares |
|
|
|
|
|
|
|
|
|
|
901,501 |
(30) |
|
|
|
|
|
|
|
|
|
Retirement Plan
Benefits |
|
|
|
|
|
|
|
|
|
|
4,036,144 |
(25) |
|
|
|
|
|
|
|
|
|
Health & Welfare
Benefits |
|
|
|
|
|
|
|
|
|
|
6,192 |
(31) |
|
|
|
|
|
|
|
|
|
Financial
Planning(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Estimated
Value |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,484,559 |
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
This amount reflects two times Mr.
Dorers current base salary plus two times 75% of his average Annual
Incentive Plan awards from the preceding three years. In addition, the
amount includes 100% of his current year target Annual Incentive Plan
award, pro-rated to the date of termination. |
(2) |
This amount represents three times
Mr. Dorers current base salary, plus three times the average Annual
Incentive Plan awards for the preceding three years, plus the average
Annual Incentive Plan awards for the preceding three years, pro-rated to
the date of termination, subject to the excise tax cut back provision in
the Change in Control Severance Plan. |
(3) |
Messrs. Knauss, Robb, and Tataseo and Ms. Kane are retirement-eligible and thus are eligible for a pro-rata Annual Incentive Plan award
upon retirement. However, all bonus-eligible employees active as of June 30, 2015, are eligible to receive an annual incentive award, so a
pro-rata Annual Incentive Plan award would not be applicable as of this date as the assumed termination date is June 30, 2015. Mr. Dorer
and Ms. Stein are not retirement-eligible and thus not eligible for an Annual Incentive Plan award upon retirement. |
(4) |
Named executive officers whose
termination is the result of disability or death are eligible to receive a
pro-rata Annual Incentive Plan award through the date of termination.
However, all bonus-eligible employees active as of June 30, 2015, are
eligible to receive an annual incentive award, so a pro-rata Annual
Incentive Plan award would not be applicable since the assumed termination
date is June 30, 2015. |
(5) |
For Messrs. Knauss, Robb, and Tataseo and Ms. Kane who are retirement-eligible, this amount represents the expected value of the
accelerated vesting of all outstanding stock options, and assumes a five-year expected life, or the remaining original term, whichever is
sooner. For Mr. Dorer and Ms. Stein, this amount represents the intrinsic value of the accelerated vesting of all outstanding stock options
(based on the provision that non-retirement eligible executives exercise stock options within 90 days of termination), calculated as the
difference between the June 30, 2015, closing Common Stock price of $104.02 and the exercise price for each option. |
(6) |
For Messrs. Knauss, Robb, and Tataseo and Ms. Kane who are retirement-eligible, this amount represents the expected value of the
accelerated vesting of all outstanding stock options upon the named executive officers termination of employment due to disability or
death, and assumes a five-year expected life, or the remaining original term, whichever is sooner. For Mr. Dorer and Ms. Stein, this amount
represents the expected value of the accelerated vesting of all outstanding stock options (based on the provision that non-retirement
eligible executives exercise stock options within one-year of death or disability), calculated as the difference between the June 30, 2015,
closing Common Stock price of $104.02 and the exercise price for each option. |
(7) |
Performance shares will vest based on
performance through the day of the change in control. This amount assumes
a pro-rated targeted payout and is valued at the closing price of our
Common Stock on June 30, 2015, of $104.02. |
(8) |
This amount represents the value of
the accelerated vesting of performance shares upon a death or disability,
assuming a target payout and valued at the closing price of our Common
Stock on June 30, 2015, of $104.02. Upon a death or disability
termination, the entire performance share grant will vest. The actual
payout will not be determined until the end of the performance
period. |
(9) |
This amount represents the estimated
Company cost of providing continuing medical and dental benefits for the
two-year period following termination. |
(10) |
For Messrs. Robb and Tataseo and
Mmes. Kane and Stein, this amount represents the estimated Company cost of
providing welfare benefits, including medical, dental, and vision, for the
two-year period following a qualifying termination after a change in
control. For Mr. Dorer, this amount represents the estimated Company cost
of providing welfare benefits, including medical, dental, and vision, for
the three-year period following a qualifying termination after a change in
control. |
(11) |
This amount represents the cost of
providing financial planning for the year of termination. |
(12) |
Mr. Knauss amended and restated
employment agreement eliminated termination benefits relating to any
termination by the Company without cause or by Mr. Knauss for good reason
occurring after March 31, 2015. |
(13) |
This amount represents three times
Mr. Knauss current base salary, plus three times the average Annual
Incentive Plan awards for the preceding three years, plus the average
Annual Incentive Plan awards for the preceding three years, pro-rated to
the date of termination, subject to the excise tax cut back provision
described in the Change in Control Agreement with Mr.
Knauss. |
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
53 |
Table of Contents
(14) |
Messrs. Knauss, Robb, and Tataseo and Ms. Kane are retirement-eligible and, thus, all unvested stock options held greater than one year
will automatically vest upon termination. This amount represents the expected value of the accelerated vesting of the stock options, and
assumes a five-year expected life, or the remaining original term, whichever is sooner. |
(15) |
Messrs. Knauss, Robb, and Tataseo and Ms. Kane are retirement-eligible and, thus, are entitled to receive a pro-rata portion of all
performance shares held at least one year at the date of termination. This value represents the pro-rata vesting of the eligible shares
from the September 2012 and September 2013 grants, assuming a target payout and valued at the closing price of our Common Stock
on June 30, 2015, of $104.02. The actual payout of the shares will not be determined until the end of the performance period. Named
executive officers who are not retirement-eligible forfeit shares upon termination under these scenarios. |
(16) |
This amount represents the difference
between the actuarial equivalent of the benefit Mr. Knauss would have been
eligible to receive if his employment had continued until the third
anniversary of the date of termination, under the qualified and
nonqualified retirement plans and the actuarial equivalent of Mr. Knauss
actual aggregate benefits paid or payable, if any, as of the date of
termination under the qualified and nonqualified retirement plans. Mr.
Knauss amount also includes the value of the SERP benefit he would
receive upon termination, as he is already vested in this
benefit. |
(17) |
In connection with Mr. Knauss
retirement this is the present value of the amount he will receive under
the SERP. |
(18) |
This amount represents the present
value of the SERP benefit payable to the named executive officer at the
time of termination due to disability. |
(19) |
This amount represents the present
value of the SERP benefit payable to the named executive officers
beneficiary at the time of death. |
(20) |
This amount represents the estimated
Company cost of providing welfare benefits, including medical, dental,
disability, and life insurance, for the three-year period following a
qualifying termination after a change in control. Mr. Knauss currently has
not elected to receive medical and dental coverage under the Companys
plans, so there is no Company cost related to this portion of the
benefit. |
(21) |
This amount reflects two times the named executive officers current base salary. In addition, for Messrs. Robb and Tataseo and
Ms. Kane, who are retirement-eligible, this amount includes 100% of their current year target Annual Incentive Plan award pro-rated to the
date of termination. For Ms. Stein, this amount includes 75% of her current year target Annual Incentive Plan award, pro-rated to the date
of termination. |
(22) |
This amount represents two times the
named executive officers current base salary, plus two times the average
Annual Incentive Plan awards for the preceding three years, subject to the
excise tax cut back provision in the Change in Control Severance Plan. For
Messrs. Robb and Tataseo and Ms. Kane, who are retirement-eliglble, this
amount also includes 100% of their current year target Annual Incentive
Plan award, pro-rated to the date of termination. For Ms. Stein, this
amount includes the average Annual Incentive Plan awards for the preceding
three years, pro-rated to the date of termination. |
(23) |
For Ms. Kane and Mr. Tataseo, this
amount is the present value of the SERP benefit each would receive upon
termination as they are both already vested in this benefit. |
(24) |
This amount represents the difference between the actuarial equivalent of the benefit the named executive officer would have been eligible
to receive if his or her employment had continued until the second anniversary of the date of termination or the first day of the month
following the named executive officers 65th birthday, if earlier, under the qualified and nonqualified retirement plans and the actuarial
equivalent of the named executive officers actual aggregate benefits paid or payable, if any, as of the date of termination under the
qualified and nonqualified retirement plans. Ms. Kane and Mr. Tataseos amount also includes the value of the SERP benefit each would
receive upon termination, as each is already vested in this benefit. |
(25) |
As described above, for Ms. Kane and Mr. Tataseo, this amount represents the value of vested benefits under
the Company SERP per the provisions of the plan and would be payable upon
retirement. For Mr. Roeth this amount represents the value of vested
benefits under the Company SERP per the provisions of the plan that was
paid upon retirement. |
(26) |
Mr. Roeth retired from the Company on
January 5, 2015. |
(27) |
Amount represents cash separation
payment in connection with Mr. Roeths retirement. Amount also includes
pro-rated annual incentive award earned for fiscal year 2015 and paid out
in September 2015 under the Annual Incentive Plan. Per the terms of the
Annual Incentive Plan, Mr. Roeth was considered retirement-eligible and
thus received a pro-rata award for fiscal year 2015. |
(28) |
Mr. Roeth was retirement-eligible
and, thus, all unvested stock options held greater than one year vested
automatically vested at retirement. This amount represents the expected
value of the accelerated vesting of the stock options, and assumes a
five-year expected life, or the remaining original term, whichever is
sooner. |
(29) |
Mr. Roeths stock award amount
includes a cash payment of $235,000 for the cancellation of 2,210 unvested
restricted stock units awarded to him in March 2011. |
(30) |
Mr. Roeth was retirement-eligible
and, thus, entitled to receive a pro-rata portion of all performance
shares held at least one year at the date of termination. This value
represents the pro-rata vesting of the eligible shares from the September
2012 and September 2013 grants, assuming a target payout and valued at the
closing price of our Common Stock on January 5, 2015 of $103.89. The
actual payout of the shares will not be determined until the end of the
performance period. Named executive officers who are not
retirement-eligible forfeit shares upon termination under these
scenarios. |
(31) |
Estimated value of continuation of
health care benefits for two years from date of
separation. |
54 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
Only our non-employee directors
receive compensation for their services as directors. The Companys non-employee
director compensation program is comprised of cash compensation and an annual
grant of deferred stock units.
The following table sets forth
information regarding compensation for each of the Companys non-employee
directors during fiscal year 2015.
Name |
|
Fees
Earned or Paid in Cash ($)(4) |
|
Stock Awards ($)(5) |
|
Total ($) |
Daniel Boggan, Jr.(1) |
|
95,790 |
|
96,250 |
|
192,040 |
Richard H. Carmona |
|
98,750 |
|
128,750 |
|
227,500 |
Spencer C. Fleischer(2) |
|
|
|
|
|
|
Tully M. Friedman(3) |
|
40,897 |
|
31,250 |
|
72,147 |
George J. Harad |
|
118,750 |
|
128,750 |
|
247,500 |
Esther Lee |
|
98,750 |
|
128,750 |
|
227,500 |
Robert W. Matschullat |
|
125,433 |
|
128,750 |
|
254,183 |
Jeffrey Noddle |
|
98,750 |
|
128,750 |
|
227,500 |
Rogelio Rebolledo |
|
98,750 |
|
128,750 |
|
227,500 |
Pamela Thomas-Graham |
|
98,750 |
|
128,750 |
|
227,500 |
Carolyn M. Ticknor |
|
118,750 |
|
128,750 |
|
247,500 |
Christopher J.
Williams(2) |
|
|
|
|
|
|
(1) |
Mr. Boggan retired from the Board
effective May 13, 2015. |
(2) |
Messrs. Fleischer and Williams did
not receive any compensation from the Company during fiscal year 2015 as
they began service as directors in fiscal year 2016. |
(3) |
Mr. Friedman retired from the Board
effective November 19, 2014. |
(4) |
The amounts reported in the Fees
Earned or Paid in Cash column reflect the total annual cash retainer and
other cash compensation earned by each director in fiscal year 2015 and
include amounts deferred into cash or deferred stock units and/or amounts
issued in Common Stock in lieu of cash at the directors election. The
annual cash retainer is paid to each director in quarterly
installments. |
(5) |
The amounts reported reflect the
grant-date fair value for financial statement reporting purposes of the
annual grant of deferred stock units earned during fiscal year 2015.
Awards are granted on an annual basis at the end of each calendar year.
Refer to Note 15 of the Consolidated Financial Statements contained in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2015, for a
discussion of the relevant assumptions used in calculating the grant-date
fair value under applicable accounting guidance. As of June 30, 2015, the
following directors had the indicated aggregate number of deferred stock
units accumulated in their deferred accounts for all years of service as a
director, which includes deferrals of cash compensation, annual awards of
deferred stock units, and additional deferred stock units credited as a
result of dividend equivalents earned with respect to the deferred stock
units: Mr. Boggan 34,526 units; Dr. Carmona 14,429 units; Mr. Friedman
36,330 units; Mr. Harad 32,307 units; Ms. Lee 1,604 units; Mr.
Matschullat 73,969 units; Mr. Noddle 2,304 units; Mr. Rebolledo
2,304 units; Ms. Thomas-Graham 18,353 units; and Ms. Ticknor 24,799
units. |
Fees Earned or Paid in Cash
Cash compensation consists of annual
cash retainer amounts and any special assignment fees. The following table lists
the various retainers paid for board service and service as the lead director or
a committee chair during fiscal year 2015:
Annual director
retainer(1) |
$98,750 |
Lead director retainer |
25,000 |
Committee chair retainers: |
|
Nominating and
Governance Committee(2) |
11,875 |
Audit
Committee |
20,000 |
Management Development
and Compensation Committee |
20,000 |
(1) |
The annual director retainer through
September 30, 2014, was $95,000. The annual director retainer was
increased to $100,000 effective October 1, 2014. The aggregate amount of
the annual retainer for board service in fiscal year 2015 was
$98,750. |
(2) |
The annual Nominating and Governance
Committee chair retainer through September 30, 2014, was $10,000. The
annual Nominating and Governance Committee chair retainer was increased to
$12,500 effective October 1, 2014. The aggregate amount of the annual
retainer for service as chair of the Nominating and Governance Committee
in fiscal year 2015 was $11,875. |
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THE CLOROX
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Table of Contents
Effective July 1, 2015, the
independent chair receives an annual cash retainer of $150,000 in addition to
the annual director retainer paid to all non-employee directors.
Directors who serve as a Board member,
lead director, independent chair, or committee chair for less than the full
fiscal year receive pro-rated retainer amounts based on the number of days they
served in such position during the fiscal year. In addition to the retainer
amounts, each non-employee director is entitled to receive a fee of $2,500 per
day for any special assignment requested by the Board. No special assignment
fees were paid in fiscal year 2015.
Payment Elections
Under the Companys Independent
Directors Deferred Compensation Plan, a director may annually elect to receive
all or a portion of his or her cash compensation in the form of cash, Common
Stock, deferred cash, or deferred stock units.
Payment in
Stock. Directors who elect to receive
cash compensation amounts in the form of Common Stock are issued shares of
Common Stock based on the fair market value of the Common Stock as determined by
the closing price of the Common Stock on the last trading day of the quarter for
which the fees were earned.
Elective Deferral
Program. For directors who elect deferred
cash, the amount deferred is credited to an unfunded cash account that is
credited with interest at an annual interest rate equal to Wells Fargo Bank,
N.A.s prime lending rate in effect on January 1 of each year. Upon termination
of service as a director, the amounts credited to the directors deferred cash
account are paid out in five annual cash installments or in one lump-sum cash
payment, at the directors election. For directors who elect deferred stock
units, the amount deferred is credited to an unfunded account in the form of
units equivalent to the fair market value of the Common Stock on the date on
which the fees are scheduled to be paid. When dividends are declared, additional
deferred stock units are allocated to the directors deferred stock unit account
in amounts equivalent to the dollar amount of Common Stock dividends paid by the
Company divided by the fair market value of the Common Stock on the date the
dividends are paid. Upon termination of service as a director, the amounts
credited to the deferred stock unit account, which include any elective
deferrals and the annual deferred stock unit grants described below, are paid
out in shares of Common Stock in five annual installments or in one lump sum, at
the directors election.
Stock Unit Awards
In addition to the cash compensation
amounts described above, each non-employee director also receives an annual
grant of deferred stock units, the value of which was increased from $125,000 to
$130,000 effective October 1, 2014. The aggregate value of the deferred stock
unit award amount earned by a non-employee director serving for the full fiscal
year 2015 was $128,750. Awards are made as of the last business day in the
calendar year and represent payment for services provided during such calendar
year.
Directors who serve as non-employee
Board members for less than the full calendar year receive pro-rated awards
based on the number of full fiscal quarters they served as a non-employee Board
member during the calendar year. As noted above, deferred stock units accrue
dividend equivalents and the balance of a directors deferred stock unit account
is paid out in Common Stock following the directors termination of
service.
Stock Ownership Guidelines for
Directors
The Board believes that the alignment
of directors interests with those of stockholders is strengthened when Board
members are also stockholders. The Board therefore requires that each
non-employee director, within five years of being first elected, own Common
Stock or deferred stock units having a market value of at least five times his
or her annual cash retainer. This
program is designed to ensure that directors acquire a meaningful and
significant ownership interest in the Company during their tenure on the Board.
As of June 30, 2015, each non-employee director was in compliance with the
guidelines.
56 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
|
Compensation Committee Interlocks
and Insider Participation |
Each of Dr. Carmona and Messrs.
Boggan, Friedman, Harad, Matschullat, Noddle, and Rebolledo served as a member
of the Management Development and Compensation Committee during part or all of
fiscal year 2015. None of the members was an officer or employee of the Company
or any of the subsidiaries during fiscal year 2015 or in any prior fiscal year
other than Mr. Matschullat,
who served as interim Chief Executive
Officer of the Company from March 2006 through October 2006. No executive
officer of the Company served on the board of directors or compensation
committee of any other entity that has or had one or more executive officers who
served as a member of the Board or Management Development and Compensation
Committee during fiscal year 2015.
|
Section 16(a) Beneficial Ownership
Reporting Compliance |
Section 16(a) of the Exchange Act and
SEC regulations require the Companys directors, certain officers, and holders
of more than 10% of the Companys Common Stock to file reports of ownership on
Form 3 and changes in ownership on Form 4 or 5 with the SEC. The reporting
directors, officers, and 10% stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) reports they file. Based
solely on its review of copies of such reports received or written
representations from its
directors and such covered officers,
the Company believes that all Section 16(a) reports were filed timely in fiscal
year 2015, except for one Form 4 for each of Jacqueline P. Kane, George Roeth,
and Nikolaos Vlahos, which were filed late due to technical difficulties in the
electronic transmission of the reports. In addition, a Form 3/A was recently
filed for Stephen M. Robb to correct the inadvertent omission of certain shares
and stock options from his Section 16(a) reports due to an administrative
error.
THE CLOROX COMPANY - 2015 Proxy
Statement 57
Table of Contents
|
Proposal 2: Advisory Vote on
Executive Compensation |
In accordance with the provisions of
Section 14A of the Exchange Act, as enacted as part of the Dodd-Frank Wall
Street Reform and Consumer Protection Act in July 2010, we are providing our
stockholders the opportunity to vote on a non-binding, advisory resolution to
approve the compensation of our named executive officers. This proposal gives
our stockholders the opportunity to express their views on the Companys
executive compensation, and is commonly referred to as a say-on-pay proposal.
This vote is only advisory and will not be binding upon the Company or the
Board. However, the Management Development and Compensation Committee, which is
responsible for designing and administering the Companys executive compensation
program, values the opinions expressed by stockholders and encourages all
stockholders to vote their shares on this matter.
The Companys compensation programs are
designed to enable and reinforce its overall business strategy by aligning pay
with the achievement of short- and long-term financial and strategic objectives
to build stockholder value and by providing a competitive level of compensation
needed to recruit, retain, and motivate talented executives critical to the
Companys long-term success. The key principle underlying
these compensation programs is pay
for performance. Our pay-for-performance principle and the alignment of our
compensation programs with the building of stockholder value are fully discussed
in the Compensation Discussion and Analysis section of this proxy statement,
which begins on page 24. The Board urges you to consider the factors discussed
in the Compensation Discussion and Analysis section of this proxy statement when
deciding how to vote on this Proposal 2.
At our 2014 Annual Meeting of
Stockholders held on November 19, 2014, our stockholders overwhelmingly approved
our executive compensation policies, with approximately 92% of votes cast in
favor of our proposal. We value this positive endorsement by our stockholders
and believe that the outcome signals our stockholders support of our
compensation program. As a result, we continued our general approach to
compensation for fiscal year 2015, specifically our pay-for-performance
philosophy and our efforts to attract, retain, and motivate our named executive
officers. We provide our stockholders the opportunity to vote on the
compensation of our named executive officers every year. The next vote on
executive compensation will be at the 2016 Annual Meeting of
Stockholders.
Board of Directors
Recommendation
The Board recommends a vote FOR
the advisory vote on executive compensation.
The Company is asking its stockholders to support the compensation of the named
executive officers as described in this proxy statement. This vote is not
intended to address any specific item of compensation, but rather the overall
compensation of our named executive officers in fiscal year 2015 and the
philosophy, policies, and practices underlying that compensation, which are
described in this proxy statement. The Board believes that the Companys overall
compensation process effectively implements its compensation philosophy and
achieves its goals.
Accordingly, the Board recommends a
vote FOR the adoption of the following advisory resolution, which will be
presented at the Annual Meeting:
RESOLVED, that the stockholders of The
Clorox Company approve, on an advisory basis, the compensation of the named
executive officers, as disclosed in The Clorox Companys Proxy Statement for the
2015 Annual Meeting of Stockholders pursuant to the compensation disclosure
rules of the Securities and Exchange Commission, including the Compensation
Discussion and Analysis, the Summary Compensation Table, and the other related
tables and disclosure.
58 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
Proposal 2: Advisory Vote on Executive
Compensation
Vote Required
The affirmative vote of a majority of
the votes present in person or represented by proxy and entitled to vote at the
Annual Meeting is required to approve this proposal.
This vote is advisory, and therefore
not binding on the Company, the Board or the Management Development and
Compensation Committee. However, the Board and the Management Development and
Compensation Committee value the opinions of the Companys stockholders and, to
the extent there is any significant vote against the named executive officers
compensation as disclosed in the proxy
statement, we will consider such
stockholders concerns and the Management Development and Compensation Committee
will evaluate whether any actions are necessary to address those
concerns.
The people designated in the proxy and
voting instruction card will vote your shares FOR approval unless you include
instructions to the contrary.
THE CLOROX
COMPANY - 2015 Proxy Statement
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59 |
Table of Contents
|
Proposal
3: Ratification of Independent Registered Public Accounting
Firm |
The Audit Committee has the authority
to appoint (subject to ratification by the Company's stockholders), retain,
compensate and oversee the Companys independent registered public accounting
firm. The Audit Committee of
the Board has selected Ernst &
Young LLP as the Companys independent registered public accounting firm for the
fiscal year ending June 30, 2016. Ernst & Young LLP has been so engaged
since February 15, 2003.
Board of Directors Recommendation
The Board unanimously recommends
that stockholders vote FOR the ratification of the selection of Ernst &
Young LLP. While ratification of the
selection of Ernst & Young LLP by stockholders is not required by law, as a
matter of policy, such selection is being submitted to the stockholders for
ratification at the Annual Meeting (and it is the present intention of the Board
to continue this policy). The Audit Committee and the Board believe that the
continued retention of Ernst & Young LLP as the Companys independent
registered public
accounting firm is in the best
interests of the Company and its stockholders, and recommend the ratification of
the Audit Committees appointment of Ernst & Young LLP as the Companys
independent registered public accounting firm for the fiscal year ending June
30, 2016.
Representatives of Ernst & Young
LLP are expected to be present at the Annual Meeting to respond to appropriate
questions and to make a statement should they desire to do
so.
Vote Required
The affirmative vote of a majority of
the votes present in person or represented by proxy and entitled to vote at the
Annual Meeting is required to ratify the appointment of Ernst & Young LLP.
If stockholders fail to ratify the appointment of this firm, the Audit Committee
will reconsider the appointment.
The people designated in the proxy and
voting instruction card will vote your shares represented by proxy FOR
ratification unless you include instructions to the contrary.
60 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
The Audit Committee assists the Board
in fulfilling its responsibility for oversight of the quality and integrity of
the accounting, auditing, and reporting practices of the Company. The Audit
Committee operates in accordance with a written charter, which was adopted by
the Board. A copy of that charter is available on the Companys website at
http://www.thecloroxcompany.com/corporate-responsibility/performance/corporate-governance/
company-charters, or in print by contacting
The Clorox Company, c/o Secretary, 1221 Broadway, Oakland, CA 94612-1888. Each
member of the Audit Committee is independent, as required by the applicable
listing standards of the NYSE and the rules of the SEC.
The Audit Committee members are not
professional accountants or auditors, and their functions are not intended to
duplicate or to certify the activities of management or the Companys
independent registered public accounting firm. The Audit Committee oversees the
Companys financial reporting process on behalf of the Board. The Companys
management has primary responsibility for the financial statements and reporting
process, including the Companys internal control over financial reporting. The
independent registered public accounting firm is responsible for performing an
integrated audit of the Companys financial statements and internal control over
financial reporting in accordance with the auditing standards of the Public
Company Accounting Oversight Board.
The Audit Committee appointed Ernst
& Young LLP (EY) to audit the Companys financial statements as of and for
the year ended June 30, 2015, and the effectiveness of the Companys internal
control over financial reporting as of June 30, 2015. EY has served as the
Companys independent registered public accounting firm since February 2003. The
Audit Committee considered several factors in selecting EY as the Companys
independent registered public accounting firm, including the firms independence
and internal quality controls, the overall depth of talent, their experience
with the Companys industry, and their familiarity with the Companys business
and internal control over financial reporting. In determining whether to
reappoint EY as the Companys independent registered public accounting firm for
the year ending June 30, 2016, the Audit Committee again took those factors into
consideration along with its evaluation of the past performance of EY. The Audit
Committee is responsible for the audit fee negotiations associated with the
retention of EY. Further, in conjunction with the mandated rotation of the
auditing firms coordinating partner, the Audit Committee and its chairperson
are directly involved in the selection of EYs new coordinating
partner.
EY has also issued reports on its
review of certain corporate responsibility and sustainability metrics and
information provided in the Companys Annual Report.
In fulfilling its oversight
responsibilities, the Audit Committee reviewed and discussed with management the
audited financial statements included in the Annual Report on Form 10-K for the
fiscal year ended June 30, 2015. This review included a discussion of the
quality and the acceptability of the Companys financial reporting and system of
internal controls, including the clarity of disclosures in the financial
statements, reasonableness of significant contingency accruals, reserves and
allowances, critical accounting policies and estimates and risk assessment. The
Audit Committee also reviewed and discussed with the Companys independent
registered public accounting firm the audited financial statements of the
Company for the fiscal year ended June 30, 2015, the independent registered
public accounting firms judgments as to the quality and acceptability of the
Companys financial reporting, critical accounting policies and estimates and
such other matters as are required to be discussed by Auditing Standard No. 16,
as adopted by the Public Company Accounting Oversight Board.
The Audit Committee obtained from the
independent registered public accounting firm the written disclosures and the
letter from the auditors required by the applicable requirements of the Public
Company Accounting Oversight Board regarding communications with the Audit
Committee concerning independence of the auditors and discussed with the
auditors their independence. The Audit Committee meets periodically with the
independent registered public accounting firm, with and without management
present, to discuss the results of the independent registered public accounting
firms examinations and evaluations of the Companys internal controls and the
overall quality of the Companys financial reporting.
Based upon the review and discussions
referred to above, the Audit Committee recommended to the Board that the
Companys audited financial statements be included in the Companys Annual
Report on Form 10-K for the fiscal year ended June 30, 2015, for filing with the
SEC.
THE AUDIT COMMITTEE
Carolyn Ticknor, Chair
Jeffrey
Noddle
Rogelio Rebolledo
Pamela Thomas-Graham
Christopher
Williams
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Fees of the Independent Registered Public Accounting
Firm
The table below includes fees related
to fiscal years 2015 and 2014 of the Companys independent registered public
accounting firm, Ernst & Young LLP:
|
2015 |
2014 |
Audit Fees(1) |
$4,701,000 |
$4,678,000 |
Audit-Related Fees(2) |
123,000 |
279,000 |
Tax
Fees(3) |
277,000 |
528,000 |
All Other Fees(4) |
|
|
Total |
5,101,000 |
$5,485,000 |
|
|
(1) |
Consists of fees for professional services rendered for the audit
of the Companys annual financial statements and internal control over
financial reporting, as required by Section 404 of the Sarbanes-Oxley Act
of 2002, included in the Companys Annual Reports on Form 10-K for each of
the fiscal years ended June 30, 2015 and 2014, and for review of the
financial statements included in the Companys Quarterly Reports on Form
10-Q during those fiscal years. |
(2) |
Consists of fees for assurance and related services (including the
Companys employee benefit plans) not included in the Audit Fees listed
above. |
(3) |
Consists of fees for tax compliance, tax advice and tax planning
for the fiscal years ended June 30, 2015 and 2014. These services included
tax return preparation and review services for foreign subsidiaries and
affiliates and advisory services on tax matters. |
(4) |
Consists of fees for all other
services not included in the three categories set forth above. There were
no such services in fiscal years 2015 and
2014. |
The Audit Committee has established a
policy that requires it to approve all services provided by the Companys
independent registered public accounting firm before services are provided. The
Audit Committee has pre-approved the engagement of the independent registered
public accounting firm for audit
services, and certain specified audit-related services and tax services within
defined limits. The Audit Committee has not pre-approved engagement of the
independent registered public accounting firm for any other non-audit
services.
62 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
|
Proposal 4: Approval
of Material Terms of Performance Goals Under the Companys Executive
Incentive Plan |
The Company currently maintains The
Clorox Company Executive Incentive Compensation Plan (the EIC Plan). The EIC
Plan provides for annual or other short-term incentive awards to the Companys
CEO and other designated executive officers. The EIC Plan first became effective
on July 1, 2005, upon approval by stockholders at the Companys Annual Meeting
in 2005, and the material terms of its performance goals were last re-approved
by the stockholders at the Companys Annual Meeting in 2010. In order to satisfy
more clearly the requirements that should allow bonuses paid under the EIC Plan
to continue to qualify as tax-deductible performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the IRC), the
Board is asking stockholders to re-approve the material terms of the performance
goals under the EIC Plan.
Stockholders are being asked only to
re-approve the material terms of the performance goals under the EIC Plan at the
Annual Meeting. These terms are the same as those that the stockholders
previously approved in 2005, and 2010. Stockholders are not being asked to
approve any amendment to the EIC Plan or to approve the EIC Plan
itself.
If the stockholders do not approve the
material terms of the performance goals for performance-based bonuses, there
will be no impact on the terms of the EIC Plan. The EIC Plan will continue to
remain in existence, and awards may continue to be made in accordance with the
terms of the EIC Plan. The only impact on the Company will be that some or all
of the value of certain awards that are based on the achievement of one or more
performance goals will no longer be deductible under the IRC as a result of the
limitations imposed under Section 162(m) of the IRC.
The Board believes that it is in the
best interests of the Company and its stockholders to enable the Company to pay
bonuses and similar incentive compensation under arrangements that qualify as
fully tax-deductible performance-based compensation in the EIC Plan. The Board
is therefore asking stockholders to re-approve, for Section 162(m) purposes, the
material terms of the performance goals set forth herein.
In general, Section 162(m) places a
limit on the deductibility for federal income tax purposes of the compensation
paid to the Companys CEO or any of the Companys three most highly compensated
executive officers (other than the Companys CEO and CFO). Under Section 162(m),
compensation paid to such persons in excess of $1 million in a taxable year is
not generally deductible. However, compensation that qualifies as
performance-based under Section 162(m) does not count against the $1 million
limitation. One of the requirements of
performance-based compensation for purposes of Section 162(m) is that the
material terms of the performance goals under which compensation may be paid be
disclosed to and approved by the Companys stockholders. In addition, Section
162(m) provides that if the Company retains the authority to change the targets
under a performance goal, then the Company must, no later than the first
stockholders meeting that occurs in the fifth year following the year in which prior stockholder approval was obtained, again disclose the material terms
of the performance goals to stockholders for re-approval.
For purposes of Section 162(m), the
material terms include (a) the employees eligible to receive compensation, (b) a
description of the business criteria on which the performance goal is based, and
(c) the maximum amount of compensation that can be paid to an employee under the
performance goal. Each of these aspects of the EIC Plan is discussed below, and
stockholder approval of this Proposal will be deemed to constitute approval of
each of these aspects of the EIC Plan for purposes of the approval requirements
of Section 162(m) of the IRC.
EIC Plan Summary
The following paragraphs provide a
summary of the principal features of the EIC Plan. This summary does not purport
to be complete and is subject to, and qualified in its entirety by, the
provisions of the EIC Plan, which is attached to this proxy statement as
Appendix A. Capitalized terms used herein and not defined shall have the same
meanings as set forth in the EIC Plan.
Purpose. The purpose of the EIC Plan is to enhance the Companys
ability to attract and retain highly qualified executives and provide such
executives with additional financial incentives (referred to herein as Awards)
to promote the success of the Company and its Subsidiaries. Awards granted under
the EIC Plan are intended to qualify as performance-based compensation within
the meaning of Section 162(m) of the IRC.
Eligibility. Participation in the EIC Plan is limited to the Companys CEO
and each other officer of the Company who the Committee (as defined below)
determines is or may be a covered employee of the Company within the meaning
of Section 162(m) of the IRC and is selected by the Committee to participate in
the EIC Plan (collectively Participants). The number of persons eligible to
participate in the EIC Plan is approximately 14.
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Administration. The EIC Plan
currently is administered by the Management Development and Compensation
Committee (MDCC) of the Companys Board or a subcommittee of the MDCC (the
MDCC or such subcommittee, the Committee), which is a committee of the Board
consisting of two or more members of the Board who are outside directors
within the meaning of Section 162(m) of the IRC, non-employee directors within
the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act
of 1934, as amended, and independent directors under the New York Stock
Exchange Listing Standards. The Committee has the authority to (i) select the
Participants to whom Awards shall be granted, (ii) designate the Performance
Period, and (iii) specify the terms and conditions for the determination and
payment of each Award. Except as otherwise provided by the Board and subject to
applicable laws, the Committee has the full and final authority in its
discretion to establish rules and take all actions determined by the Committee
to be necessary in the administration of the EIC Plan, including, without
limitation, interpreting the terms of the EIC Plan and any related documents,
rules, or regulations and deciding all questions of fact arising in their
application. All decisions, determinations, and interpretations of the Committee
are final, binding, and conclusive on all persons, including the Company, its
subsidiaries, its stockholders, the Participants, and their estates and
beneficiaries.
Performance Goal.
Earnings Before Income Taxes is the
measure of performance provided for the payment of Awards under the EIC Plan.
For purposes of the EIC Plan, Earnings Before Income Taxes consists of earnings
before income taxes of the Company as reported on the Companys income statement
for the applicable Performance Period, and adjusted to exclude the impact of
charges for restructurings, discontinued operations, extraordinary items, and
other unusual or non-recurring items, as well as the cumulative effect of tax
and accounting changes, each as determined in accordance with generally accepted
accounting principles or identified in the Companys financial statements, notes
to the financial statements, managements discussion and analysis, or other
filings with the United States Securities and Exchange Commission.
Performance
Period. The Performance Period under the
EIC Plan is the Companys fiscal year, but may be a shorter or longer period as
determined by the Committee. In no event will the Performance Period be less
than six months or more than five years.
Maximum
Award. The maximum Award that may be paid
to any Participant other than the Companys CEO for any Performance Period is
0.6% of Earnings Before Income Taxes for the Performance Period. The maximum
Award that may be paid to the Companys CEO for any Performance Period is 1.0%
of Earnings Before Income Taxes for the Performance Period.
Awards. Within 90 days after the commencement of each Performance
Period, or the number of days that is equal to 25% of such Performance Period,
if less, the Committee shall select, in writing, the Participants to whom Awards
shall be granted, designate the Performance Period, and specify the terms and
conditions for the determination and payment of such Awards. Although each
Participant is eligible to receive an Award equal to 0.6% of Earnings Before
Income Taxes for the Performance Period, except for the Companys CEO who is
eligible to receive an Award equal to 1.0% of Earnings Before Income Taxes for
the Performance Period, the actual amount of the Award may be conditioned by the
Committee upon the satisfaction of such objective or subjective standards as it
determines to be appropriate, such that the actual Award may be reduced (but not
increased) from the maximum level permitted under the EIC Plan in the
Committees discretion. See the section entitled Annual Incentives under the
Compensation Discussion and Analysis on page 31 for a full discussion of the
determination of Awards by the Committee.
Committee Certification.
As soon as practicable after the end of
each Performance Period, the Committee shall determine the amount of the Awards
to be paid to each Participant for the Performance Period and shall certify its
determination in writing.
Payment of
Awards. All awards will be paid in cash,
Shares or a combination thereof. Award payments made in Shares, in whole or in
part, shall be made from the aggregate number of Shares authorized to be issued
under the 2005 Stock Incentive Plan (or its successor). Awards shall be paid to
Participants following the Committees certification no later than 90 days after
the close of the Performance Period, unless all or a portion of an Award is
deferred pursuant to an election the Participant has timely and validly made
under Section 409A of the IRC. Since the effectiveness of the EIC Plan in 2005,
all awards have been paid in cash.
Recoupment of
Awards. In the event of a restatement of
the Companys financial results to correct a material error resulting from fraud
or intentional misconduct, if a lower payment of performance-based compensation
would have been made to the Participants based upon the restated financial
results, the Board or the Committee will, to the extent permitted by law, seek
to recoup the amount by which the individual Participants Award(s) for the
restated years exceeded the lower payment that would have been made based on the
restated financial results, plus a reasonable rate of interest; provided,
however, neither the Board nor the Committee will seek to recoup Awards paid
more than three years prior to the date on which the Company announces the need
for the applicable financial statements to be restated, and only will seek to
recoup Awards paid to Participants whose fraud or intentional misconduct was a
significant contributing factor to the need for such
restatement.
64 THE CLOROX COMPANY
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Proposal 4: Approval of Material Terms of
Performance Goals
Under the Companys Executive
Incentive Plan
Non-Transferability of Awards. Unless otherwise determined by the Committee, an Award granted under the
EIC Plan may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner by any Participant. During the lifetime of the
Participant, payment of an Award shall only be made to such Participant. The
Committee may, however, establish procedures necessary for a Participant to
designate a beneficiary to whom any amounts would be payable in the event of the
Participants death.
Amendment and
Termination. The Board or Committee may
at any time alter, amend, suspend, or terminate the EIC Plan, in whole or in
part, provided, however, that no amendment that requires stockholder approval in
order to maintain qualification of the Awards as performance-based compensation
under Section 162(m) of the IRC shall be made without such approval. If changes
are made to Section 162(m) of the IRC or the related regulations that permit
greater flexibility with respect to any Award, the Committee may make
adjustments to the EIC Plan and/or Awards as it deems appropriate.
Benefits to Be Received Upon
Approval. Awards under the EIC Plan are
determined based on future performance and, therefore, the value or benefits
that may become payable under the terms of future Awards (including any Awards
that may be granted with respect to the Companys fiscal year ending on June 30,
2016) cannot now be determined.
Federal Income Tax
Consequences
The following is a brief summary of the
material United States federal income tax consequences associated with Awards
granted under the EIC Plan. The summary is based on existing United States laws
and regulations, and there can be no assurance that those laws and regulations
will not change in the future. The summary does not purport to be complete and
does not discuss the tax consequences upon a Participants death, or the
provisions of the income tax laws of any municipality, state, or foreign country
in which the Participant may reside. The tax consequences for any particular
Participant may vary based on individual circumstances.
Participants will recognize ordinary
income equal to the amount of the Award received in the year of receipt
(assuming, in the case of Participants who make an election to defer receipt of
payment of their Award, that such election is timely and validly made under
Section 409A of the IRC). That income will be subject to applicable income and
employment tax withholding by the Company. If and to the extent that the EIC
Plan payments satisfy the requirements of Section 162(m) of the IRC and
otherwise satisfy the requirements of deductibility under federal income tax
law, the Company will receive a deduction for the amount constituting ordinary
income to the Participant. However, the rules and regulations promulgated under
Section 162(m) are complicated and subject to change from time to time,
sometimes with retroactive effect. In addition, a number of additional
requirements must be met in order for particular compensation to so qualify. As
such, there can be no assurance that any compensation awarded or paid under the
EIC will be fully deductible under all circumstances.
Board of Directors Recommendation
The Board unanimously recommends
that stockholders vote FOR the approval of the material terms of the performance
goals under The Clorox Company Executive Incentive Compensation Plan.
If the stockholders do not approve the
material terms of the performance goals under the EIC Plan, the EIC Plan will
continue to remain in existence, and awards may continue to be made in accordance
with the terms of the EIC Plan. The only impact on the Company will be that some
or all of the value of certain awards that are based on the achievement of one
or more performance goals will no longer be deductible under the IRC. The Board
believes that it is in the best interests of the Company and its stockholders to
enable the Company to pay bonuses
and similar incentive compensation
under arrangements that should qualify as tax-deductible performance-based
compensation in the EIC Plan.
Accordingly, the Board recommends a
vote FOR the adoption of the following resolution, which will be presented at
the Annual Meeting:
RESOLVED, that the stockholders of the
Company hereby approve and adopt the material terms of the performance goals
under the Companys Executive Incentive Compensation Plan attached as Appendix A
to the proxy statement for this meeting.
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Vote Required
The affirmative vote of a majority of
the votes present in person or represented by proxy and entitled to vote at the
Annual Meeting is required to approve the material terms of the performance
goals under the EIC Plan.
The people designated in the proxy and
voting instruction card will vote your shares represented by proxy FOR approval
unless you include instructions to the contrary.
66 THE CLOROX COMPANY
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Form 10-K, Financial Statements, and Integrated Annual
ReportExecutive Summary
The following portions of the Companys
Annual Report on Form 10-K for the fiscal year ended June 30, 2015, are attached
as Appendix B to this proxy statement: Managements Discussion and Analysis of
Financial Condition and Results of Operations; Managements Report on Internal
Control over Financial Reporting; Report of Independent Registered Public
Accounting Firm; Consolidated Financial Statements; Valuation and Qualifying
Accounts and Reserves; and Reconciliation of
Economic Profit. The Companys Form
10-K has been filed with the SEC and posted on the Companys website and a copy
may be obtained, without charge, by calling Clorox Stockholder Direct at
888-CLX-NYSE (259-6973) toll-free, 24 hours a day, seven days a week, or by
contacting The Clorox Company, c/o Secretary, 1221 Broadway, Oakland, CA
94612-1888. The 2015 Integrated Annual ReportExecutive Summary is available
with the Proxy Statement at www.edocumentview.com/CLX.
Director Communications
Stockholders and interested parties may
direct communications to individual directors, including the independent chair,
to a Board committee, to the independent directors as a group, or to the Board
as a whole, by addressing the communications to the named individual, to the
committee, to the independent directors as a group, or to the Board as a whole
and sending them
to The Clorox Company, c/o Secretary,
1221 Broadway, Oakland, CA 94612-1888. The Secretary will review all
communications so addressed and will forward to the addressee(s) all
communications determined to bear substantively on the business, management or
governance of the Company.
Solicitation of Proxies
We will pay for the entire cost of
soliciting proxies on behalf of the Company. We will also reimburse brokerage
firms, banks, and other agents for the cost of forwarding the Companys proxy
materials to beneficial owners. In addition, our directors and employees may
solicit proxies in person, by telephone, via the Internet, or by other means of
communication. Directors and employees will not be
paid any additional compensation for
soliciting proxies. We have retained Innisfree M&A Incorporated
(Innisfree) to assist in soliciting proxies for the Annual Meeting at an
estimated cost of $20,000 plus out-of-pocket expenses. In addition, we have
agreed to indemnify Innisfree against certain liabilities arising out of or in
connection with its engagement.
Stockholder Proposals for the 2016 Annual
Meeting
In the event that a stockholder wishes
to have a proposal considered for presentation at the 2016 Annual Meeting of
Stockholders and included in the Companys proxy statement and form of proxy
used in connection with such meeting, the proposal must be forwarded to the
Companys Secretary so that it is received no later than May 28, 2016. Any such
proposal must comply with the requirements of Rule 14a-8 promulgated under the
Exchange Act.
As further described in the Companys
Current Report on Form 8-K filed on August 28, 2015, we recently amended our
Bylaws to permit a stockholder or group of up to 20 stockholders who have owned
at least 3% of the Companys Common Stock for at least three years the ability
to submit director nominees (up to 20% of the Board) for inclusion in the
Companys proxy materials if the stockholder(s) provides timely written notice
of such
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nomination(s) and the stockholder(s)
and the nominee(s) satisfy the requirements specified in the Companys Bylaws.
To be timely for inclusion in the Companys proxy materials for the 2016 Annual
Meeting of Stockholders, notice must be received by the Secretary at the
principal executive offices of the Company no earlier than the close of business on April 28, 2016, and no
later than the close of business on May 28, 2016. The notice must contain the
information required by the Companys Bylaws, and the stockholder(s) and
nominee(s) must comply with the information and other requirements in our Bylaws
relating to the inclusion of stockholder nominees in the Companys proxy
materials.
If a stockholder, rather than including
a proposal or director nomination in the proxy statement as discussed above,
seeks to nominate a director or propose other business for consideration at that
meeting, notice must be
received by the Secretary at the
principal executive offices of the Company not later than the close of business
on the 90th day or earlier than the close of business on the 120th day prior to
the first anniversary of the preceding years annual meeting. To be timely for
the 2016 Annual Meeting of Stockholders, the notice must be received by the
Secretary on any date beginning no earlier than the close of business on July
21, 2016, and ending no later than the close of business on August 20, 2016.
However, in the event that the date of the annual meeting is advanced by more
than 30 days, or delayed by more than 60 days from such anniversary date, notice
by the stockholder to be timely must be so delivered not earlier than the close
of business on the 120th day prior to such annual meeting and not later than the
close of business on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made.
Householding
The SECs householding rules permit
us to deliver only one Notice of Annual Meeting and Proxy Statement or Notice of
Internet Availability of Proxy Materials to stockholders who share an address
unless otherwise requested. This procedure reduces printing and mailing costs.
If you share an address with another stockholder and have received only one set
of proxy materials, you may request a separate copy of these materials at no
cost to you by calling Clorox Stockholder Direct at 888-CLX-NYSE (259-6973)
toll-free, 24 hours a day, seven days a week, or by contacting The Clorox
Company, c/o Secretary, 1221 Broadway, Oakland, CA 94612-1888. Alternatively, if
you are currently receiving multiple copies of the proxy materials at the same
address and wish to receive a single copy in the future, you may contact us by
calling or writing to us at the telephone number or address given
above.
If you are a beneficial owner (i.e.,
your shares are held in the name of a bank, broker, or other holder of record),
the bank, broker, or other holder of record may deliver only one copy of the
proxy materials to stockholders who have the same address unless the bank,
broker, or other holder of record has received contrary instructions from one or
more of the stockholders. If you wish to receive a separate copy of the proxy
materials, now or in the future, you may contact us at the address or telephone
number above and we will promptly deliver a separate copy. Beneficial owners
sharing an address who are currently receiving multiple copies of the proxy
materials and wish to receive a single copy in the future should contact their
bank, broker, or other holder of record to request that only a single copy be
delivered to all stockholders at the shared address in the
future.
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Attending the Annual Meeting |
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The Annual Meeting will be held on
Wednesday, November 18, 2015, at 9:00 a.m. Pacific time, at the offices of the
Company, 1221 Broadway, Oakland, CA 94612-1888. Check-in for the Annual Meeting
begins promptly at 8:30 a.m. To attend the
Annual Meeting, you must be a stockholder of the Company as of the close of
business on the Record Date and provide proof that you owned Clorox Common Stock
on the Record Date or hold a legal proxy from a Record Date stockholder. Please
see the more detailed information below.
Admission will be on a first-come, first-served basis, and seating is limited.
Even if you plan to attend the Annual Meeting, we strongly urge you to vote in
advance by proxy.
If you plan to attend the Annual
Meeting this year, please be aware of the following information:
● |
To be admitted to the Annual
Meeting, you must have a current form of government-issued photo
identification (such as a drivers license or passport). |
● |
Because attendance at the Annual
Meeting is limited to Record Date stockholders, you must provide proof
that you owned Clorox Common Stock on the Record Date. |
● |
If you hold your shares with
Cloroxs transfer agent, Computershare Trust Company, N.A.
(Computershare), your ownership of Clorox Common Stock as of the Record
Date will be verified through reports provided by Computershare prior to
admittance to the meeting. |
By Order of
the Board of Directors,
Angela C. Hilt
Vice President Corporate Secretary
& Associate
General Counsel
September 25, 2015
● |
If you hold your shares with a
broker, trustee, bank, or nominee, you must provide proof of beneficial
ownership as of the Record Date, such as a brokerage account statement
showing that you owned Clorox Common Stock for the statement period
immediately prior to the Record Date, a copy of your Notice of Internet
Availability of Proxy Materials, a copy of your proxy and voting
instruction card, a letter or legal proxy provided by your broker, trust,
bank, or nominee, or other similar evidence of ownership on the Record
Date. |
● |
If you are not a Record Date
stockholder, you will be admitted to the Annual Meeting only if you have a
legal proxy from a Record Date stockholder. |
● |
Cameras, recording equipment, and
other electronic devices will not be allowed in the meeting except for use
by the Company. |
● |
For your protection, briefcases,
purses, packages, etc. may be subject to inspection as you enter the
meeting. We regret any inconvenience this may cause you.
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THE CLOROX
COMPANY
EXECUTIVE INCENTIVE
COMPENSATION PLAN
As Amended and Restated
Effective
as of February 7,
2008
1. ESTABLISHMENT, OBJECTIVES,
DURATION.
The Clorox Company, a Delaware corporation
(hereinafter referred to as the Company) hereby establishes a short-term
incentive compensation plan to be known as the The Clorox Company Executive
Incentive Compensation Plan (hereinafter referred to as the Plan).
The purpose of the Plan is to enhance the
Companys ability to attract and retain highly qualified executives and to
provide such executives with additional financial incentives to promote the
success of the Company and its Subsidiaries. Awards payable under the Plan are
intended to constitute performance-based compensation under Section 162(m) of
the Code and the regulations promulgated thereunder, and the Plan shall be
construed consistently with such intention.
The Plan is effective as of July 1, 2005,
subject to the approval of the Plan by the stockholders of the Company at the
2005 Annual Meeting. The Plan will remain in effect until such time as it shall
be terminated by the Board or the Committee, pursuant to Section 11
herein.
2. DEFINITIONS.
The following terms, when capitalized, shall have the meanings set forth below:
(a) Award means a bonus paid in cash, Shares or any combination thereof.
(b) Board means the Board
of Directors of the Company.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Committee means the Committee, as specified in Section
3(a), appointed by the Board to administer the Plan.
(e) Company means The Clorox Company.
(f) Earnings Before Income Taxes means the earnings before
income taxes of the Company as reported in the Companys income statement for the applicable Performance Period. For purposes
of the foregoing definition, Earnings Before Income Taxes shall be adjusted to exclude the impact of charges for restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring items, as well as the cumulative effect of tax
or accounting changes, each as determined in accordance with generally accepted accounting principles or identified in the Companys
financial statements, notes to the financial statements, managements discussion and analysis or other filings with the U.S.
Securities and Exchange Commission.
(g) Exchange Act means the Securities Exchange Act of 1934,
as amended.
(h) Fair Market Value means, as of any date, the value of a
Share determined as follows:
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(i) |
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Where there exists a
public market for the Share, the Fair Market Value shall be (A) the
closing sales price for a Share on the date of the determination (or, if
no sales were reported on that date, on the last trading date on which
sales were reported) on the New York Stock Exchange, the NASDAQ Global
Market or the principal securities exchange on which the Share is listed
for trading, whichever is applicable, or (B) if the Share is not traded on
any such exchange or national market system, the average of the closing
bid and asked prices of a Share on the NASDAQ Capital Market, in each
case, as reported in The Wall Street Journal or such other source as the
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In the absence of an established
market of the type described above for the Share, the Fair Market Value
thereof shall be determined by the Committee in good faith, and such
determination shall be conclusive and binding on all
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(i) Participant means the Companys Chief Executive
Officer and each other executive officer of the Company that the Committee determines, in its discretion, is or may be a covered
employee of the Company within the meaning of Section 162(m) of the Code and regulations promulgated thereunder who is selected
by the Committee to participate in the Plan.
(j) Performance Period means the fiscal year of the Company,
or such shorter or longer period as determined by the Committee; provided, however, that a Performance Period shall in no event
be less than six (6) months nor more than five (5) years.
(k) Plan means The Clorox Company Executive Incentive Compensation
Plan.
(l) Share means a share of common stock of the Company,
par value $1.00 per share.
(m) Subsidiary means any corporation in which the Company
owns, directly or indirectly, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any
other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns, directly or indirectly,
at least fifty percent (50%) of the combined equity thereof.
3. ADMINISTRATION OF THE
PLAN.
(a) The Committee. The Plan shall be administered by the Management
Development and Compensation Committee of the Board or such other committee (the Committee) as the Board shall select
consisting of two or more members of the Board each of whom is intended to be a non-employee director within the meaning
of Rule 16b-3 (or any successor rule) of the Exchange Act, an outside director under regulations promulgated under
Section 162(m) of the Code, and an independent director under New York Stock Exchange Listing standards. The members
of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board.
(b) Authority of the Committee. Subject to applicable laws and the provisions
of the Plan (including any other powers given to the Committee hereunder), and except as otherwise provided by the Board, the
Committee shall have full and final authority in its discretion to establish rules and take all actions, including, without limitation,
interpreting the terms of the Plan and any related rules or regulations or other documents enacted hereunder and deciding all
questions of fact arising in their application, determined by the Committee to be necessary in the administration of the Plan.
(c) Effect of Committees Decision. All decisions, determinations
and interpretations of the Committee shall be final, binding and conclusive on all persons, including the Company, its Subsidiaries,
its stockholders, the Participants and their estates and beneficiaries.
4. ELIGIBILITY.
Eligibility under this Plan is limited
to Participants designated by the Committee, in its sole and absolute
discretion.
5. FORM OF PAYMENT OF
AWARDS.
Payment of Awards under the Plan shall
be made in cash, Shares or a combination thereof, as the Committee shall
determine, subject to the limitations set forth in Sections 6 and 7
herein.
6. SHARES SUBJECT TO THE
PLAN.
Award payments that are made in the
form of Shares, in whole or in part, shall be made from the aggregate number of
Shares authorized to be issued under and otherwise in accordance with the terms
of The Clorox Company 2005 Stock Incentive Plan (or any successor stock
incentive plan approved by the stockholders of the Company).
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Appendix A
7. AWARDS.
(a) Selection of Participants and
Designation of Performance Period and Terms of Award. Within 90 days after
the beginning of each Performance Period or, if less than 90 days, the number of
days which is equal to twenty-five percent (25%) of the relevant Performance
Period applicable to an Award, the Committee shall, in writing, (i) select the
Participants to whom Awards shall be granted, (ii) designate the applicable
Performance Period, and (iii) specify terms and conditions for the determination
and payment of the Award for each Participant for such Performance Period,
including, without limitation, the extent to which the Participant shall have
the right to receive an Award following termination of the Participants
employment. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Awards, and may reflect distinctions
based on the reasons for termination of employment.
(b) Maximum Award. The maximum
Award that may be paid to any Participant other than the Companys chief
executive officer under the Plan for any Performance Period shall not exceed
0.6% of Earnings Before Income Taxes. The maximum Award that may be paid to the
Companys chief executive officer under the Plan for any Performance Period
shall not exceed 1.0% of Earnings Before Income Taxes.
(c) Actual Award. Subject to the
limitation set forth in paragraph (b) hereof, each Participant under the Plan
shall be eligible to receive an Award equal to 0.6% of Earnings Before Income
Taxes for the designated Performance Period, except for the Companys chief
executive officer who shall be eligible to receive an Award equal to 1.0% of
Earnings Before Income Taxes for the designated Performance Period; provided,
however, that the Committee may condition payment of an Award upon the
satisfaction of such objective or subjective standards as the Committee shall
determine to be appropriate, in its sole and absolute discretion, and shall
retain the discretion to reduce the amount of any Award that would otherwise be
payable to a Participant, including a reduction in such amount to
zero.
(d) Clawback. In the event of a
restatement of the Companys financial results to correct a material error
resulting from fraud or intentional misconduct, as determined by the Board or
the Committee, the Board, or the Committee, will review all compensation that
was made pursuant to this Plan on the basis of having met or exceeded specific
performance targets for performance periods beginning after June 30, 2008 which
occur during the years for which financial statements are restated. If a lower
payment of performance-based compensation would have been made to the
Participants based upon the restated financial results, the Board or the
Committee, as applicable, will, to the extent permitted by governing law and
subject to the following sentence, seek to recoup for the benefit of the Company
the amount by which the individual Participants Award(s) for the restated years
exceeded the lower payment that would have been made based on the restated
financial results, plus a reasonable rate of interest; provided, however, that
neither the Board nor the Committee will seek to recoup Awards paid more than
three years prior to the date on which the Company announces the need for the
applicable financial statements to be restated. The Board, or the Committee,
will only seek to recoup Awards paid to Participants whose fraud or intentional
misconduct was a significant contributing factor to the need for such
restatement, as determined by the Board or the Committee, as
applicable.
8. COMMITTEE CERTIFICATION AND
PAYMENT OF AWARDS.
As soon as reasonably practicable
following the end of each Performance Period, the Committee shall determine the
amount of the Award to be paid to each Participant for such Performance Period
and shall certify such determination in writing. Awards shall be paid to the
Participants following such certification by the Committee no later than ninety
(90) days following the close of the Performance Period with respect to which
the Awards are made, unless all or a portion of a Participants Award is
deferred pursuant to the Participants timely and validly made election made in
accordance with such terms as the Company, the Board or a committee thereof may
determine. A timely election is one that satisfies the requirements of Section
409A (as defined in Section 14(g) below) and typically for performance based
compensation must be made at least six months before the end of the Performance
Period, provided that the Participant performs services continuously from the
later of the beginning of the Performance Period or the date the performance
criteria are established through the date an election is made and provided
further that in no event may a deferral be made after such compensation has
become readily ascertainable as set forth in Code Section 409A (as defined in
Section 14(g) below).
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9. TERMINATION OF
EMPLOYMENT.
Except as may be specifically provided
in an Award pursuant to Section 7(a) or in any written agreement executed
between the Participant and the Company, including employment or change in
control agreements, a Participant shall have no right to an Award under the Plan
for any Performance Period in which the Participant is not actively employed by
the Company or a Subsidiary on the last day of the Performance Period to which
such Award relates. In establishing Awards under Section 7(a), the Committee may
also provide that in the event a Participant is not employed by the Company or a
Subsidiary on the date on which the Award is paid, the Participant may forfeit
his or her right to the Award paid under the Plan.
10. TAXES.
The Company shall have the power and
right to deduct or withhold, or require a Participant to remit to the Company
(or a Subsidiary), an amount (in cash or Shares) sufficient to satisfy any
applicable tax withholding requirements applicable to an Award. Whenever under
the Plan payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any applicable tax withholding requirements.
Subject to such restrictions as the Committee may prescribe, a Participant may
satisfy all or a portion of any tax withholding requirements relating to Awards
payable in Shares by electing to have the Company withhold Shares having a Fair
Market Value equal to the amount to be withheld.
11. AMENDMENT OR TERMINATION OF THE
PLAN.
The Board or the Committee may at any
time and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part; provided, however, that no amendment that requires stockholder
approval in order to maintain the qualification of Awards as performance-based
compensation pursuant to Code Section 162(m) and regulations promulgated
thereunder shall be made without such stockholder approval. If changes are made
to Code Section 162(m) or regulations promulgated thereunder to permit greater
flexibility with respect to any Award or Awards available under the Plan, the
Committee may, subject to this Section 11, make any adjustments to the Plan
and/or Awards it deems appropriate.
12. NO RIGHTS TO
EMPLOYMENT.
The Plan shall not confer upon any
Participant any right with respect to continuation of employment with the
Company, nor shall it interfere in any way with his or her right or the
Companys right to terminate his or her employment at any time, with or without
cause.
13. NO ASSIGNMENT.
Except as otherwise required by
applicable law, any interest, benefit, payment, claim or right of any
Participant under the Plan shall not be sold, transferred, assigned, pledged,
encumbered or hypothecated by any Participant and shall not be subject in any
manner to any claims of any creditor of any Participant or beneficiary, and any
attempt to take any such action shall be null and void. During the lifetime of
any Participant, payment of an Award shall only be made to such Participant.
Notwithstanding the foregoing, the Committee may establish such procedures as it
deems necessary for a Participant to designate a beneficiary to whom any amounts
would be payable in the event of any Participants death.
14. LEGAL
CONSTRUCTION.
(a) Gender, Number and
References. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine, the plural shall include the
singular and the singular shall include the plural. Any reference in the Plan to
a Section of the Plan either in the Plan or to an act or code or to any section
thereof or rule or regulation thereunder shall be deemed to refer to such
Section of the Plan, act, code, section, rule or regulation, as may be amended
from time to time, or to any successor Section of the Plan, act, code, section,
rule or regulation.
A-4 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix A
(b) Severability. If any one or
more of the provisions contained in this Plan, or any application thereof, shall
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and all other
applications thereof shall not in any way be affected or impaired thereby. This
Plan shall be construed and enforced as if such invalid, illegal or
unenforceable provision has never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the invalid, illegal or unenforceable provision or by its severance
herefrom. In lieu of such invalid, illegal or unenforceable provisions there
shall be added automatically as a part hereof a provision as similar in terms
and economic effect to such invalid, illegal or unenforceable provision as may
be possible and be valid, legal and enforceable.
(c) Requirements of Law. The
granting of Awards and the issuance of cash or Shares under the Plan shall be
subject to all applicable laws and to such approvals by any governmental
agencies or national securities exchanges as may be required.
(d) Unfunded Plan. Awards under
the Plan will be paid from the general assets of the Company, and the rights of
Participants under the Plan will be only those of general unsecured creditors of
the Company.
(e) Governing Law. To the extent
not preempted by federal law, the Plan shall be construed in accordance with and
governed by the laws of the State of California, excluding any conflicts or
choice of law rule or principle that might otherwise refer construction or
interpretation of this Plan to the substantive law of another
jurisdiction.
(f) Non-Exclusive Plan. Neither
the adoption of the Plan by the Board nor its submission to the stockholders of
the Company for approval shall be construed as creating any limitations on the
power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable.
(g) Code Section 409A
Compliance. To the extent applicable, it is intended that this Plan and any
Awards granted hereunder comply with the requirements of Section 409A of the
Code and any related regulations or other guidance promulgated with respect to
such Section by the U.S. Department of the Treasury or the Internal Revenue
Service (Section 409A). Any provision that would cause the Plan or any Award
granted hereunder to fail to satisfy Section 409A shall have no force or effect
until amended to comply with Section 409A, which amendment may be retroactive to
the extent permitted by Section 409A.
THE CLOROX
COMPANY - 2015 Proxy Statement
|
A-5 |
Table of Contents
MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS
The Clorox
Company
(Dollars in
millions, except per share amounts)
Managements Discussion and
Analysis of Financial Condition and Results of Operations (MD&A) is designed
to provide a reader of The Clorox Companys (the Company or Clorox) financial
statements with a narrative from the perspective of management on the Companys
financial condition, results of operations, liquidity and certain other factors
that may affect future results. In certain instances, parenthetical references
are made to relevant sections of the Notes to Consolidated Financial Statements
to direct the reader to a further detailed discussion. This section should be
read in conjunction with the Consolidated Financial Statements and Supplementary
Data included in this Annual Report on Form 10-K.
The following sections are
included herein:
● |
Executive
Overview |
● |
Results of Operations
|
● |
Financial Position and
Liquidity |
● |
Contingencies
|
● |
Quantitative and
Qualitative Disclosures about Market Risk |
● |
Recently Issued
Accounting Pronouncements |
● |
Critical Accounting
Policies and Estimates |
● |
Summary of Non-GAAP
Financial Measures |
EXECUTIVE
OVERVIEW
Clorox is a leading
multinational manufacturer and marketer of consumer and professional products
with approximately 7,700 employees worldwide as of June 30, 2015 and fiscal year
2015 net sales of $5,655. Clorox sells its products primarily through mass
retail outlets, e-commerce channels, wholesale distributors and medical supply
distributors. Clorox markets some of the most trusted and recognized consumer
brand names, including its namesake bleach and cleaning products,
Pine-Sol® cleaners, Liquid-Plumr® clog removers,
Poett® home care products, Fresh Step® cat litter,
Glad® bags, wraps and containers, Kingsford® charcoal,
Hidden Valley® dressings and sauces, Brita®
water-filtration products and Burts Bees® natural personal care
products. The Company also markets brands through professional services
channels, including infection control products for the healthcare industry under
Clorox Healthcare®, HealthLink®, Aplicare® and
Dispatch® brands. The Company manufactures products in more than a
dozen countries and markets them in more than 100 countries.
The Company primarily markets
its leading brands in midsized categories considered to be financially
attractive. Most of the Companys products compete with other nationally
advertised brands within each category and with private label brands.
As discussed more fully below
under Venezuela Discontinued Operations, the Companys Venezuela affiliate,
Corporación Clorox de Venezuela S.A. (Clorox Venezuela), discontinued its
operations effective September 22, 2014. The Company has reclassified the
financial results of Clorox Venezuela as a discontinued operation in the
consolidated financial statements for all periods presented herein.
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 products under the Green
Works® brand; and professional cleaning and disinfecting
products under the Clorox®, Dispatch®,
Aplicare®, HealthLink® and Clorox
Healthcare® brands. |
THE CLOROX COMPANY - 2015 Proxy Statement |
B-1 |
Table of Contents
● |
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
Burts 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®, 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 Burts Bees® brands.
|
Non-GAAP Financial Measures
This Executive Overview, the
succeeding sections of MD&A and Exhibit 99.3 include certain financial
measures that are not defined by accounting principles generally accepted in the
United States of America (U.S. GAAP). These measures, which are referred to as
non-GAAP measures, are listed below.
● |
Currency-neutral net
sales growth |
● |
Economic profit
(EP) |
● |
Free cash flow and
free cash flow as a percentage of net sales |
● |
Earnings from
continuing operations before interest and taxes (EBIT) margin (the ratio
of EBIT to net sales) |
● |
Debt to earnings from
continuing operations before interest, taxes, depreciation and
amortization, and noncash intangible asset impairment charges ratio
(Consolidated Leverage ratio) |
For a discussion of these
measures and the reasons management believes they are useful to investors, refer
to Summary of Non-GAAP Financial
Measures below. For a discussion
of the Consolidated Leverage ratio, please refer to Senior Notes and Credit
Arrangements below. This
MD&A and Exhibit 99.3 include reconciliations of these non-GAAP measures to
the most directly comparable financial measures calculated and presented in
accordance with U.S. GAAP.
Fiscal Year 2015 Financial
Highlights
A detailed discussion of
strategic goals, key initiatives and results of operations is included below.
Key fiscal year 2015 financial results are summarized as follows:
● |
The Company delivered
diluted net earnings per share from continuing operations in fiscal year
2015 of $4.57, an increase of approximately 4% from fiscal year 2014
diluted net earnings per share of $4.39. |
● |
The Companys fiscal
year 2015 net sales increased by 3%, from $5,514 in fiscal year 2014 to
$5,655 in fiscal year 2015, reflecting the benefit of price increases and
higher volume, partially offset by unfavorable foreign currency exchange
rates. On a currency-neutral basis, net sales increased
5%. |
● |
Gross margin increased
90 basis points to 43.6% in fiscal year 2015 from 42.7% in fiscal year
2014, reflecting the benefits of cost savings and price increases, partially offset by the impact of higher manufacturing and
logistics costs. |
● |
The Company reported
earnings from continuing operations of $606 in fiscal year 2015, compared
to $579 in fiscal year 2014. |
● |
EP increased to $458 in
fiscal year 2015 compared to $423 in fiscal year 2014 (refer to the
reconciliation of EP to earnings from continuing operations before income
taxes in Exhibit 99.3). |
B-2 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
● |
The Companys net cash
flows provided by continuing operations were $858 in fiscal year 2015,
compared to $786 in fiscal year 2014. Free cash flow was $733 or 13% of
net sales in fiscal year 2015, an increase from $649 or 12% of net sales
in fiscal year 2014. |
● |
The Company returned $385 in
cash dividends to stockholders in fiscal year 2015 compared to $368 in cash
dividends in fiscal year 2014. In May 2015, the Company announced an increase of
4% in the quarterly cash dividend. In fiscal year 2015, the Company repurchased
approximately 4 million shares of its common stock at a cost of approximately
$434. |
Venezuela 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 governments
representations, Clorox Venezuela had expected significant price increases would
be forthcoming much earlier; however, the price increases subsequently approved
were insufficient and would have caused Clorox Venezuela to continue operating
at a significant loss into the foreseeable future. As such, Clorox Venezuela was
no longer financially viable and was forced to discontinue its
operations.
On September 26, 2014, the
Company reported that Venezuelan Vice President Jorge Arreaza announced, with
endorsement by President Nicolás Maduro, that the Venezuelan government had
occupied the Santa Lucía and Guacara production facilities of Clorox Venezuela.
On November 6, 2014, the Company reported that the Venezuelan government had
published a resolution granting a government-sponsored Special Administrative
Board full authority to restart and operate the business of Clorox Venezuela,
thereby reaffirming the government's expropriation of Clorox Venezuelas 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.
Strategic Goals and Initiatives
The Clorox Companys 2020 Strategy serves as its strategic growth plan, directing the Company to the highest value opportunities for long-term, profitable growth and strong stockholder returns.
The long-term financial goals reflected in the Companys 2020 Strategy include annual net sales growth of 3-5%, market share growth, annual EBIT margin growth between 25-50 basis points and annual free cash flow as a
percentage of net sales of about 10-12%. Clorox anticipates using free cash flow to invest in the business, maintain appropriate debt levels and return excess cash to stockholders.
In fiscal year 2016, Clorox anticipates certain continuing challenges to impact its sales and margins, including unfavorable foreign currency exchange rates, particularly in Argentina, and a continuation of slowing
international economies. In addition, the Company is monitoring changes to commodities costs and managing rising logistics costs. The Companys priority in fiscal year 2016 is to continue investing strongly in its U.S. business, particularly in
its 3D demand-creation model of Desire, Decide and Delight, including advertising and consumer promotion, as well as trade promotion in order to drive category and market share growth. The Company is also focused on product innovation
that will continue to delight and deliver superior value to consumers. Importantly, the Company anticipates supporting its margins by reducing exposure to inflation in its products and operations, continuing to slow the growth of selling and
administrative expenses by driving out low-value activity and rebuilding margin in its international businesses.
Continues on next page
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|
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|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-3 |
Table of Contents
As the Company executes its 2020 Strategy, a particular focus on Strategy Accelerators, will help drive investment decisions with the goal to deliver profitable growth:
● |
Accelerating portfolio momentum takes advantage of tailwinds in faster-growing categories and brands in the
portfolio by directing more demand investment to those categories and brands. |
● |
Accelerating 3D technology transformation addresses the shift in how todays consumers research, shop and
buy their products. The Company is investing in digital marketing and social media and focused on driving its e-commerce business. |
● |
Accelerating innovation
across the Companys demand-creation model of
Desire, Decide and Delight will continue to support category growth and market
share improvement. In particular, the Company is focused on delivering superior value to
consumers through the introduction of new products and product
improvements. |
● |
Accelerating the Companys growth
culture encourages Clorox employees to be
even more consumer-centric and focus on driving out low-value activity and
delivering growth for the Company as they conduct their day-to-day
activities. |
Looking forward, the Company will continue
to execute against its 2020 Strategy and seek to achieve its goals to deliver
long-term profitable growth.
RESULTS OF OPERATIONS
Unless otherwise noted, managements
discussion and analysis compares results of continuing operations from fiscal
year 2015 to fiscal year 2014, and fiscal year 2014 to fiscal year 2013, with
percentage and basis point calculations based on rounded numbers, except as
noted.
CONSOLIDATED
RESULTS
Continuing operations
Net sales in fiscal year 2015 increased 3%. Volume increased 2%,
reflecting higher product shipments in the International segment, primarily due
to growth in Latin America, Canada, Europe and Asia; higher shipments of Burts
Bees®
natural personal care products, largely due to innovation in lip and face care
products combined with distribution gains; higher shipments of cleaning and
healthcare products in the professional products business; higher shipments of
Clorox®
toilet bowl cleaner due to increased merchandising activities and distribution
gains; and higher shipments of Kingsford® charcoal products behind increased
merchandising support to launch the start of the grilling season. Volume results
also reflected lower shipments of Clorox® liquid bleach due to the February
2015 price increase, category softness and increased competition; and lower
shipments of Brita® water-filtration products, primarily due to continuing category softness and increased competition. The variance between volume and
net sales was primarily due to the benefit of price increases, partially offset
by unfavorable foreign currency exchange rates. On a currency-neutral basis, net
sales increased about 5%.
Net sales in fiscal year 2014 remained
essentially flat. Volume increased 0.6%, reflecting higher shipments of cleaning
and healthcare products in the professional products business; higher shipments
of charcoal products, primarily behind strong merchandising activities and
improved weather conditions; higher shipments of Clorox® liquid bleach, driven
by product innovation; and higher shipments of Hidden Valley® dry and bottled salad
dressings, primarily due to continued
B-4 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
category growth and increased
merchandising activity. These increases were partially offset by lower shipments
due to heightened competitive activity in the disinfecting wipes category,
including the distribution loss of Clorox® disinfecting wipes at a major club
customer; and lower shipments of Glad® trash bags, primarily due to a
price increase in the second half of the fiscal year. The variance between
volume and net sales was primarily due to unfavorable foreign currency exchange
rates, partially offset by the benefit of price increases. On a currency-neutral
basis, net sales increased about 2%.
Gross
profit increased 5% in fiscal
year 2015, from $2,356 to $2,465, and gross margin, defined as gross profit as a
percentage of net sales, increased 90 basis points from 42.7% to 43.6%. Gross
margin expansion in fiscal year 2015 was driven by the benefits of cost savings
and price increases, partially offset by the impact of higher manufacturing and
logistics costs.
Gross profit decreased 1% in
fiscal year 2014, from $2,391 to $2,356, and gross margin decreased 50 basis
points from 43.2% to 42.7%. Gross margin decline in fiscal year 2014 was driven
by higher manufacturing and logistics costs, including the impact of continued
inflation in Argentina, and higher commodity costs. These factors were partially
offset by the benefits of cost savings and price increases.
Expenses
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
% of Net sales |
|
|
2015 |
|
2014 |
|
2013 |
|
2015 to 2014 |
|
2014 to 2013 |
|
2015 |
|
2014 |
|
2013 |
Selling and administrative expenses |
|
$ |
798 |
|
$ |
751 |
|
$ |
793 |
|
6 |
% |
|
(5 |
)% |
|
14.1 |
% |
|
13.6 |
% |
|
14.3 |
% |
Advertising costs |
|
|
523 |
|
|
503 |
|
|
498 |
|
4 |
|
|
1 |
|
|
9.2 |
|
|
9.1 |
|
|
9.0 |
|
Research and development
costs |
|
|
136 |
|
|
125 |
|
|
130 |
|
9 |
|
|
(4 |
) |
|
2.4 |
|
|
2.3 |
|
|
2.3 |
|
Selling and
administrative expenses
increased 6% in fiscal year 2015, primarily from higher performance-based
incentive costs as a result of fiscal year financial performance exceeding
financial targets. Expenses in the prior year reflected lower performance-based
incentive costs when the Companys results fell below financial targets. In
addition, the Company continued to experience inflationary pressures in
international markets. These increases were partially offset by the benefit of
cost savings, one-time costs in fiscal year 2014 related to the change in
information technology (IT) service providers and a one-time impact related to a
change in the Companys long-term disability plan in fiscal year 2015 to bring
it more in line with the marketplace.
Selling and administrative
expenses decreased 5% in fiscal year 2014, primarily driven by lower
performance-based incentive costs, cost savings and a comparison to one-time
costs associated with an IT systems implementation in Latin America incurred in
fiscal year 2013. These decreases were partially offset by one-time costs
related to the transition to new IT service providers in fiscal year 2014.
Advertising
costs as a percentage of net
sales increased slightly during fiscal year 2015, reflecting continued support
behind the Companys brands, including driving the trial of new products. The
Companys U.S. retail advertising spend was approximately 10% of net sales
during the year.
Advertising costs as a
percentage of net sales increased slightly during fiscal year 2014, reflecting
an increase in spending across our U.S. retail and international markets.
Continues on next page
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THE CLOROX COMPANY - 2015 Proxy Statement |
B-5 |
Table of Contents
Research and development
costs increased slightly as a
percentage of net sales in fiscal year 2015, driven by higher performance-based
incentive costs.
Research and development costs
were flat as a percentage of net sales in fiscal year 2014, and were impacted by
lower performance-based incentive costs.
Interest expense, other
income, net, and the effective tax rate on earnings
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
Interest expense |
|
$100 |
|
|
$103 |
|
|
$122 |
|
Other income, net |
|
(13 |
) |
|
(10 |
) |
|
(4 |
) |
Income taxes on continuing
operations |
|
315 |
|
|
305 |
|
|
279 |
|
Interest expense
decreased $3 in fiscal year
2015, primarily due to a lower weighted-average interest rate on long-term debt
resulting from the issuance of senior notes in December 2014 and the maturities
of senior notes in January 2015, combined with less interest expense on a lower
balance of commercial paper throughout fiscal year 2015.
Interest
expense decreased $19 in fiscal year 2014, primarily due
to a lower weighted-average interest rate on long-term debt resulting from the
issuance of senior notes in September 2012 and the maturities of senior notes in
October 2012 and March 2013.
Other income,
net, of $(13) in fiscal year
2015 included $(14) of income from equity investees, $(13) gain on the sale of
real estate assets by a low-income housing partnership and $(4) of interest
income, partially offset by $9 of foreign currency exchange losses, $8 of
amortization of trademarks and other intangible assets and $3 of noncash
asset impairment charges.
Other income, net, of $(10) in
fiscal year 2014 included $(13) of income from equity investees, $(5) of
insurance and litigation settlements and other smaller items, partially offset
by $8 of amortization of trademarks and other intangible assets and $3 of
noncash asset impairment charges.
Other income, net, of $(4) in
fiscal year 2013 included $(12) of income from equity investees, $(4) from gains
on fixed asset sales, net and $(4) of a gain on the sale of real estate assets
by a low-income housing partnership, partially offset by $9 of amortization of
trademarks and other intangible assets and $8 of foreign currency exchange
losses.
The effective tax rate
on earnings was 34.2%, 34.6%
and 32.7% in fiscal years 2015, 2014 and 2013, respectively. The lower effective
tax rate in fiscal year 2015 compared to fiscal year 2014 was primarily due to
higher uncertain tax position releases, partially offset by higher tax on
foreign earnings, in the current period. The higher effective tax rate in fiscal
year 2014 compared to fiscal year 2013 was primarily due to favorable tax
settlements in fiscal year 2013 and higher tax on foreign earnings in fiscal
year 2014.
Diluted net earnings per
share
|
|
|
|
|
|
|
|
% Change |
|
|
2015 |
|
2014 |
|
2013 |
|
2015 to 2014 |
|
2014 to 2013 |
Diluted net earnings per share
from continuing operations |
|
$4.57 |
|
$4.39 |
|
$4.31 |
|
4% |
|
2% |
Diluted net earnings per share
(EPS) from continuing operations increased $0.18 in fiscal year 2015, driven by
the benefits of higher sales and gross margin expansion, partially offset by
increased selling and administrative expenses, primarily from higher
performance-based incentive costs as a result of fiscal year financial
performance exceeding financial targets. Expenses in the prior year reflected
lower performance-based incentive costs when the Companys results fell below
financial targets. Increased investments in total demand-building programs also
reduced fiscal year diluted EPS.
B-6 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
Diluted net earnings per share
from continuing operations increased $0.08 in fiscal year 2014, driven by the
benefits of cost savings, price increases and lower performance-based incentive
costs, reflecting significantly lower year-over-year payouts, as well as lower
interest expense. These factors were partially offset by higher manufacturing
and logistics costs, higher commodity costs, increased investments in total
demand-building programs, unfavorable foreign currency exchange rates and a
higher effective tax rate.
Discontinued Operations
In addition to the $49
recognized in the fiscal year ended June 30, 2015, the Company believes it is
reasonably possible that it will recognize $11 to $21 in after-tax exit costs
and other related expenses in discontinued operations for Clorox Venezuela
during fiscal years 2016 through 2019, for a total of $60 to $70 over the entire
five-year period. Of this total, the Company believes $0 to $5 will be after-tax
cash expenditures. Further significant changes to the exchange rate used for
financial reporting purposes, among many other external factors, could have a
significant impact on the above estimated costs.
See Notes to Consolidated
Financial Statements for more information regarding discontinued operations of
Clorox Venezuela.
In the fiscal year ended June
30, 2015, the Company recognized $32 of previously unrecognized tax benefits
relating to other discontinued operations upon the expiration of the applicable
statute of limitations. Recognition of these previously disclosed tax benefits
had no impact on the Companys cash flows or earnings from continuing operations
for the fiscal year ended June 30, 2015.
SEGMENT RESULTS FROM
CONTINUING OPERATIONS
The following presents the
results from continuing operations of the Companys reportable segments and
certain unallocated costs reflected in Corporate (see Notes to Consolidated
Financial Statements for a reconciliation of segment results to consolidated
results):
Cleaning
|
|
|
|
|
|
|
% Change |
|
2015 |
|
2014 |
|
2013 |
|
2015 to 2014 |
|
2014 to 2013 |
Net
sales |
$1,824 |
|
$1,776 |
|
$1,783 |
|
3 |
% |
|
|
% |
Earnings from continuing operations
before income taxes |
445 |
|
428 |
|
420 |
|
4 |
|
|
2 |
|
Fiscal year 2015 versus
fiscal year 2014: Volume, net
sales and earnings from continuing operations before income taxes increased by
2%, 3% and 4%, respectively, during fiscal year 2015. Both volume and net sales grew
primarily due to higher shipments of Clorox® toilet bowl cleaner and
Clorox® disinfecting wipes in Home Care, behind increased
merchandising activities. The Professional Products Division also grew volume,
which was driven primarily by distribution gains across a number of brands.
These increases were partially offset by lower shipments of Clorox®
liquid bleach in Laundry, primarily due to the February 2015 price increase. Net
sales growth outpaced volume growth primarily due to the benefit of price
increase. The increase in earnings from continuing operations before income
taxes was driven by the benefit of sales growth and cost savings, partially
offset by an increase in demand-building investments.
Fiscal year 2014 versus
fiscal year 2013: Net sales were
flat and earnings from continuing operations before income taxes increased 2%,
while volume decreased 1% during fiscal year 2014. Volume in the Cleaning
segment decreased driven by lower shipments due to heightened competitive
activity in the disinfecting wipes category, including the distribution loss of
Clorox® disinfecting wipes at a major club customer. These decreases
were partially offset by higher shipments of cleaning and healthcare products in
the professional products business, and higher shipments of Clorox®
liquid bleach driven by product innovation. The variance between net sales
and volume was primarily due to the benefit of price increases and other smaller
items, partially offset by higher trade-promotion spending. The
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THE CLOROX COMPANY - 2015 Proxy Statement |
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Table of Contents
increase in
earnings from continuing operations before income taxes was driven by cost
savings, primarily related to the Companys conversion to concentrated bleach in
fiscal year 2013; lower performance-based incentive costs; and various
manufacturing and other efficiencies. These increases were partially offset by
increased commodity costs, primarily resin; incremental demand-building
investments; and other individually smaller items.
Household
|
|
|
|
|
|
|
% Change |
|
2015 |
|
2014 |
|
2013 |
|
2015 to 2014 |
|
2014 to 2013 |
Net sales |
$1,794 |
|
$1,709 |
|
$1,693 |
|
5 |
% |
|
1 |
% |
Earnings from continuing operations
before income taxes |
375 |
|
326 |
|
336 |
|
15 |
|
|
(3 |
) |
Fiscal year 2015 versus
fiscal year 2014: Volume, net
sales and earnings from continuing operations before income taxes increased by
2%, 5% and 15%, respectively, during fiscal year 2015. Both volume growth and
net sales growth were driven by higher shipments of Kingsford® charcoal
products behind increased merchandising activities. Net sales growth outpaced
volume growth primarily due to the benefits of price increases on
Glad® bags and wraps. The increase in earnings from continuing
operations before income taxes was driven by strong sales growth and the benefit
of cost savings, partially offset by an increase in demand building investments
and manufacturing and logistics costs.
Fiscal year 2014 versus
fiscal year 2013: Net sales and
volume both increased 1%, while earnings from continuing operations before
income taxes decreased 3% during fiscal year 2014. The increase in the volume in
the Household segment was driven by higher shipments of Kingsford®
charcoal products due to strong merchandising activities and improved
weather conditions, partially offset by lower shipments of Glad®
trash bags, primarily due to a price increase in the second half of fiscal
year 2014. The decrease in earnings from continuing operations before income
taxes was driven by higher commodity costs, primarily resin, higher
manufacturing and logistics costs, including one-time supply chain costs in
order to meet strong customer demand for charcoal products, and other
individually smaller items. These decreases were partially offset by cost
savings, higher net sales and lower performance-based incentive costs.
Lifestyle
|
|
|
|
|
|
|
% Change |
|
2015 |
|
2014 |
|
2013 |
|
2015 to 2014 |
|
2014 to 2013 |
Net sales |
$950 |
|
$936 |
|
$929 |
|
1 |
% |
|
1 |
% |
Earnings from continuing operations
before income taxes |
257 |
|
258 |
|
259 |
|
|
|
|
|
|
Fiscal year 2015 versus
fiscal year 2014: Net sales and
volume both increased by 1%, while earnings from continuing operations before
income taxes remained flat during fiscal year 2015. Both net sales growth and volume
growth were driven by higher shipments of Burts Bees® natural
personal care products, largely due to innovation in lip and face care products
combined with distribution gains. The increase was partially offset by lower
shipments of Brita® water-filtration products, primarily due to continuing category softness
and increased competition. Flat earnings from continuing operations before
income taxes reflected lower commodity costs, cost savings and favorable product
mix. These increases were offset by higher manufacturing and logistics costs and
demand building investments.
Fiscal year 2014 versus
fiscal year 2013: Net sales and
volume both increased 1%, while earnings from continuing operations before
income taxes remained flat during fiscal year 2014. Volume in the Lifestyle
segment increased, driven by higher shipments of Hidden Valley®
dry and bottled salad
dressings, primarily due to continued category growth and increased
merchandising activity, and higher shipments of Burts Bees®
natural personal care products,
driven by product innovation in lip and face care products. These increases were
partially offset by lower shipments of Brita® water-filtration products, primarily due to
increased private-label competition and category softness, and decreased
merchandising activities. Flat earnings from continuing operations before income
taxes reflected higher demand-building investments, primarily driven by
increased advertising and sales promotion expenses in support of Burts
Bees® natural personal care products, and other individually smaller
items, offset by cost savings, primarily related to various manufacturing and
other efficiencies and lower performance-based incentive costs.
B-8 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
International
|
|
|
|
|
|
|
% Change |
|
2015 |
|
2014 |
|
2013 |
|
2015 to 2014 |
|
2014 to 2013 |
Net sales |
$1,087 |
|
$1,093 |
|
$1,128 |
|
(1 |
)% |
|
(3 |
)% |
Earnings from continuing operations
before income taxes |
79 |
|
99 |
|
95 |
|
(20 |
) |
|
4 |
|
Fiscal year 2015 versus
fiscal year 2014: Volume
increased 3%, while net sales and earnings from continuing operations before
income taxes decreased 1% and 20%, respectively, during fiscal year 2015. Volume
grew primarily due to higher shipments in Latin America, Canada, Europe and
Asia. Volume growth outpaced net sales growth primarily due to unfavorable
foreign currency exchange rates, partially offset by the benefit of price
increases and favorable product mix. The decrease in earnings from continuing
operations before income taxes was primarily driven by unfavorable foreign
currency exchange rates and inflation across multiple countries, primarily in
Argentina (see Argentina below), which resulted in higher selling and
administrative expenses, higher manufacturing and logistics costs and higher
commodity costs. These decreases in earnings were partially offset by the
benefit of price increases, favorable product mix and cost savings.
Fiscal year 2014 versus
fiscal year 2013: Net sales
decreased 3%, while volume and earnings from continuing operations before income
taxes increased 2% and 4%, respectively, during fiscal year 2014. Volume in the
International segment increased driven by higher shipments in Peru, Asia, the
Middle East, Europe and Argentina, partially offset by lower shipments in
Australia and Colombia. The variance between net sales and volume was primarily
due to unfavorable foreign currency exchange rates, partially offset by the
benefit of price increases and favorable product mix. While International
segment net sales decreased during fiscal year 2014, excluding the negative
foreign currency impact of 10%, segment sales grew about 7%. The increase in
earnings from continuing operations before income taxes was primarily due to the
benefit of price increases; cost savings, primarily related to various
manufacturing and other efficiencies; favorable product mix; one-time costs
incurred in fiscal year 2013 associated with an IT systems implementation in
Latin America and lower performance-based incentive costs. These increases were
partially offset by unfavorable foreign currency exchange rates, primarily in
Argentina; higher manufacturing and logistics and other supply chain costs and
higher selling and administrative costs, both factors mainly driven by continued
inflation in Latin America; higher commodity costs, primarily resin; and
increased advertising and sales promotion costs, primarily in Latin America.
Also impacting fiscal year 2014 results were noncash tax deductible impairment
charges on trademark values.
Argentina
The operating environment in
Argentina presents business challenges, including price controls on some of the
Companys products, a devaluing currency and inflation. Although Argentina is
not currently designated as a highly inflationary economy for accounting
purposes, further volatility and declines in the exchange rate are expected. For
the fiscal years ended June 30, 2015, 2014 and 2013, the official value of the
Argentine peso (ARS) declined 10%, 34% and 16%, respectively, as compared to the
U.S. dollar.
Net sales from the Companys
Argentine subsidiary represented approximately 4%, 3% and 4% of the Companys
consolidated net sales for each of the fiscal years ended June 30, 2015, 2014
and 2013, respectively. As such, and notwithstanding any actions the Company may
undertake in the market in the event of further devaluations, significant future
declines in the Argentine currency as compared to the U.S. dollar in the range of
up to 50% or more, for example, could have a material impact on the Companys
total reported net sales and net earnings.
Further devaluations of the
Argentine peso could also increase the risk for impairment of intangible assets
and goodwill. As of June 30, 2015, using an exchange rate of 9.1 ARS per USD,
the Companys Argentine subsidiary had total assets of $100, including cash and
cash equivalents of $35, net receivables of $18, inventories of $19, net
property, plant and equipment of $19 and intangible assets excluding goodwill of
$4. Goodwill for Argentina is aggregated and assessed for impairment at the
Latin America reporting unit level, which is a component of the Companys
International segment. Based on the results of the annual impairment test
performed in the fourth quarter of fiscal year 2015,
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THE CLOROX COMPANY - 2015 Proxy Statement |
B-9 |
Table of Contents
the fair value of the Latin
America reporting unit exceeded its recorded value by more than 79% and
reflected the Companys expectations of continued challenges from the Argentina
business consistent with the Companys current long-range projections.
The Company is closely
monitoring developments in Argentina and is taking steps intended to mitigate
the adverse conditions, but there can be no assurances that these actions will
mitigate these conditions.
Corporate
|
|
|
|
|
|
|
|
|
|
% Change |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 to 2014 |
|
2014 to 2013 |
Losses from continuing operations before
income taxes |
$(235 |
) |
|
$(227 |
) |
|
$(258 |
) |
|
4 |
% |
|
(12 |
)% |
Corporate includes certain
non-allocated administrative costs, interest income, interest expense and other
non-operating income and expenses. Corporate assets include cash and cash
equivalents, property and equipment, other investments and deferred taxes.
Fiscal year 2015 versus
fiscal year 2014: The increase in
losses from continuing operations before income taxes was primarily due to
higher performance-based incentive costs as a result of fiscal year financial
performance exceeding financial targets, compared to the prior year which
reflected lower performance-based incentive costs when the Companys results
fell below financial targets. This factor was partially offset by cost savings, a gain on the
sale of real estate assets by a low-income housing partnership and benefits from
a change in the Companys long-term disability plan to bring it more in line
with the marketplace.
Fiscal year 2014 versus
fiscal year 2013: The decrease in
losses from continuing operations before income taxes was primarily due to lower
interest expense and lower performance-based incentive costs in fiscal year
2014. These factors were partially offset by one-time costs related to the
transition to new IT service providers in fiscal year 2014, higher wages and
employee benefit costs in fiscal year 2014 and the gain recorded upon the
sale-leaseback of the Companys Oakland, Calif., general office building in
fiscal year 2013.
FINANCIAL POSITION AND
LIQUIDITY
Managements discussion and
analysis of the Companys financial position and liquidity describes its
consolidated operating, investing and financing activities from continuing
operations, contractual obligations and off-balance sheet arrangements.
The following table summarizes
cash activities from continuing operations for the years ended June 30:
|
2015 |
|
|
2014 |
|
|
2013 |
|
Net cash provided by operations |
$ |
858 |
|
|
$ |
786 |
|
|
$ |
780 |
|
Net cash used for investing activities |
|
(106 |
) |
|
|
(137 |
) |
|
|
(51 |
) |
Net cash used for financing
activities |
|
(696 |
) |
|
|
(592 |
) |
|
|
(685 |
) |
The Companys cash position
includes amounts held by foreign subsidiaries and, as a result, the repatriation
of certain cash balances from some of the Companys foreign subsidiaries could
result in additional tax costs in excess of tax benefits. Additionally, as of
June 30, 2015 the Companys Argentine subsidiary held cash and cash equivalents
of $35, with no government-approved mechanism to convert local currency into
U.S. dollars, which restricts the Company's ability to repatriate these funds.
However, these cash balances held by foreign subsidiaries are generally
available without legal restriction to fund local business
operations.
B-10 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
In addition, a portion of the
Companys cash balance is held in U.S. dollars by foreign subsidiaries, whose
functional currency is their local currency. Such U.S. dollar balances are
reported on the foreign subsidiaries books, in their functional currency, with
the impact from foreign currency
exchange rate differences recorded in other income, net. The Companys cash
holdings at June 30 were as follows:
|
|
2015 |
|
2014 |
|
2013 |
|
|
U.S. dollar balances held by U.S. dollar
functional currency subsidiaries and at parent |
$ |
221 |
|
$ |
180 |
|
$ |
130 |
|
|
Non-U.S. dollar balances held by non-U.S. dollar functional
currency subsidiaries |
|
142 |
|
|
132 |
|
|
115 |
|
|
U.S. dollar balances held by non-U.S.
dollar functional currency subsidiaries |
|
19 |
|
|
12 |
|
|
36 |
|
|
Non-U.S. dollar balances held by U.S. dollar functional currency
subsidiaries |
|
|
|
|
5 |
|
|
18 |
|
|
Total |
$ |
382 |
|
$ |
329 |
|
$ |
299 |
|
|
|
|
|
|
|
|
|
|
|
|
The Companys total cash
balance was $382 as of June 30, 2015, as compared to $329 as of June 30, 2014.
The increase of $53 was primarily attributable to $858 of net cash provided by
continuing operations, $495 of net proceeds from the December 2014 long-term
debt issuance and $251 of proceeds from the issuance of common stock for
employee stock plans. These increases were partially offset by $575 of
repayments of long-term debt, $434 of share repurchases, $385 of dividend
payments, $125 of capital expenditures and $48 of repayments of commercial paper
borrowings.
The Companys total cash
balance was $329 as of June 30, 2014, as compared to $299 as of June 30, 2013.
The increase of $30 was primarily attributable to $786 of net cash provided by
continuing operations and $96 of proceeds from the issuance of common stock for
employee stock plans, partially offset by $368 of dividend payments, $260 of
share repurchases, $137 of capital expenditures and $60 of repayments of
commercial paper borrowings.
As of June 30, 2015, total
current assets exceeded total current liabilities by $24, and as of June 30,
2014, total current liabilities exceeded total current assets by $243. The
year-over-year change was primarily attributable to $575 of current maturities
of long-term debt, which matured in January 2015, partially offset by current
maturities of long-term debt of $300 maturing in November 2015. The Company
anticipates that the debt repayment will be made with a combination of debt
refinancing and the use of operating cash flows.
Operating
Activities
Net cash provided by
continuing operations increased to $858 in fiscal year 2015 from $786 in fiscal
year 2014. The increase reflects the companys fiscal year performance,
including solid net sales growth and margin expansion. Other contributing
factors include lower performance-based incentive payments related to the
company's fiscal year 2014 performance and lower tax payments in the current
period, as well as the initial funding of the company's non-qualified deferred
compensation plan in the year-ago period. These benefits were partially offset
by $25 in payments to settle interest-rate hedges related to the company's
issuance of long-term debt in December 2014.
Net cash provided by
continuing operations increased to $786 in fiscal year 2014 from $780 in fiscal
year 2013. The increase was primarily due to favorable changes in working
capital and higher earnings, partially offset by higher tax payments and the
companys funding of liabilities under certain nonqualified deferred
compensation plans in fiscal year 2014.
Investing
Activities
Capital expenditures were
$125, $137 and $190, respectively, in fiscal years 2015, 2014 and 2013. Capital
spending as a percentage of net sales was 2.2%, 2.5% and 3.4% for fiscal years
2015, 2014 and 2013, respectively. The relatively flat fiscal year 2015 capital
spending as a percentage of net sales was due to prudent management of capital
spending against manufacturing, technology and facility projects which meet
growth, efficiency, replacement or compliance requirements. The decrease in
fiscal year 2014 capital spending as a percentage of net sales was driven by
prior-period investments in the Companys Pleasanton, Calif., research and
office facility and IT systems implementation in Latin America.
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THE CLOROX COMPANY - 2015 Proxy Statement |
B-11 |
Table of Contents
In April 2015, a low-income
housing partnership, in which the Company was a limited partner, sold its real
estate holdings. The real property sale resulted in $15 in cash proceeds from
investing activities and a gain of $14 recorded to other income, net, on the
consolidated statement of earnings for the year ended June 30, 2015. The sale is
also expected to result in approximately $8 of cash income tax payments that
will be paid in the first quarter of fiscal year 2016 and reflected as operating
activities in the condensed consolidated statement of cash flows for the three
months ended September 30, 2015.
In fiscal year 2013, the
Company completed sale-leaseback transactions under which it sold its general
office building in Oakland, Calif., and former Technical and Data Center in
Pleasanton, Calif., to unrelated parties for combined net proceeds of $135. The
Company entered into operating lease agreements with the respective buyers for
portions of the buildings for up to 15 years, all of which contain renewal
options.
Free cash
flow
|
2015 |
|
|
2014 |
|
|
2013 |
|
Net cash provided by continuing operations |
$ |
858 |
|
|
$ |
786 |
|
|
$ |
780 |
|
Less:
capital expenditures |
|
(125 |
) |
|
|
(137 |
) |
|
|
(190 |
)
|
Free cash flow |
$ |
733 |
|
|
$ |
649 |
|
|
$ |
590 |
|
Free cash flow as a percentage
of net sales |
|
13.0% |
|
|
|
11.8% |
|
|
|
10.7% |
|
Free cash flow as a
percentage of net sales increased in fiscal year 2015, primarily due to higher net cash provided
by continuing operations and lower capital expenditures.
Free cash flow as a percentage
of net sales increased in fiscal year 2014, primarily due to lower capital
expenditures.
Financing
Activities
Capital Resources and
Liquidity
Net cash used for financing
activities was $696 in fiscal year 2015, as compared to $592 in fiscal year
2014. Net cash used for financing activities was higher in fiscal year 2015 due
to a net reduction in long-term debt and an increase in share repurchases and
dividends paid. These factors were partially offset by an increase in proceeds
from the issuance of common stock for employee stock plans.
Net cash used for financing
activities was $592 in fiscal year 2014, as compared to $685 in fiscal year
2013. Net cash used for financing activities was higher in fiscal year 2013 due
to repayment of company borrowings following the Companys sale-leaseback
transactions under which it sold its general office building in Oakland, Calif.,
and former Technical and Data Center in Pleasanton, Calif. This factor was
partially offset by an increase in share repurchases and higher dividends paid
in fiscal year 2014.
Senior Notes and Credit
Arrangements
In January 2015, $575 of the
Companys senior notes with an annual fixed interest rate of 5.00% became due
and were repaid using the net proceeds from the December 2014 debt issuance and
commercial paper borrowings.
In December 2014, under a
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 (see Notes to Consolidated
Financial Statements). The notes rank equally with all of the Companys existing
senior indebtedness.
In March 2013, $500 in senior
notes with an annual fixed interest rate of 5.00% became due and were repaid.
The repayment was funded in part with commercial paper borrowings and in part
with a portion of the proceeds from the sale-leaseback transaction of the
Companys Oakland, Calif., general office building.
B-12 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
In October 2012, $350 in
senior notes with an annual fixed interest rate of 5.45% became due and were
repaid. The repayment was funded with a portion of the proceeds from the
September 2012 issuance of $600 in senior notes with an annual fixed interest
rate of 3.05%, payable semi-annually in March and September, and a maturity date
of September 15, 2022. The remaining proceeds from the September 2012 issuance
were used to repay commercial paper. The September 2012 notes were issued under
the Companys shelf registration statement filed in November 2011 and rank
equally with all of the Companys existing senior indebtedness.
As of June 30, 2015, the
Company had a $1,100 revolving credit agreement (the Credit Agreement), which
expires in October 2019. The Credit Agreement replaced a prior $1,100 revolving
credit agreement in place since May 2012. There were no borrowings under the
Credit Agreement as of June 30, 2015 or 2014, and the Company believes that
borrowings under the Credit Agreement are and will continue to be available for
general corporate purposes. The agreement includes certain restrictive covenants
and limitations. The primary restrictive covenant is a maximum ratio of total
debt to earnings before interest, taxes, depreciation and amortization and
intangible asset impairment (Consolidated EBITDA) for the trailing four quarters
(Consolidated Leverage ratio), as defined and described in the Credit Agreement,
of 3.50.
The following table sets forth
the calculation of the Consolidated Leverage ratio as of June 30, using
Consolidated EBITDA for the trailing four quarters, as contractually defined:
|
|
2015 |
|
|
Earnings from continuing operations |
$ |
606 |
|
|
Add
back: |
|
|
|
|
Interest expense |
|
100 |
|
|
Income tax expense |
|
315 |
|
|
Depreciation and
amortization |
|
169 |
|
|
Noncash intangible asset
impairment charges |
|
3 |
|
|
Deduct: |
|
|
|
|
Interest income |
|
4 |
|
|
Consolidated EBITDA |
$ |
1,189 |
|
|
Total
debt |
$ |
2,191 |
|
|
Consolidated Leverage ratio |
|
1.84 |
|
|
The Company is in compliance with all
restrictive covenants and limitations in the credit agreement as of June 30,
2015, and anticipates being in compliance with all restrictive covenants for the
foreseeable future. The Company continues to monitor the financial markets and
assess its ability to fully draw on its revolving credit agreement, and
currently expects that any drawing on the agreement will be fully funded.
The Company had $29 of foreign and other
credit lines as of June 30, 2015; $4 was outstanding and the remainder of $25
was available for borrowing.
Based on the Companys working capital
requirements, anticipated ability to generate positive cash flows from
operations in the future, investment-grade credit ratings, demonstrated access
to long- and short-term credit markets and current borrowing availability under
credit agreements, the Company believes it will have the funds necessary to meet
its financing requirements and other fixed obligations as they become due.
Should the Company undertake other transactions requiring funds in excess of its
current cash levels and available credit lines, it would consider the issuance
of additional debt or other securities to finance acquisitions, repurchase
shares, refinance debt or fund other activities for general business purposes.
The Companys access to or cost of such additional funds could be adversely
affected by any decrease in credit ratings, which were the following as of June
30:
|
2015 |
|
2014 |
|
Short-term |
|
Long-term |
|
Short-term |
|
Long-term |
Standard and Poors |
A-2 |
|
BBB+ |
|
A-2 |
|
BBB+ |
Moodys |
P-2 |
|
Baa1 |
|
P-2 |
|
Baa1 |
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THE CLOROX COMPANY - 2015 Proxy Statement |
B-13 |
Table of Contents
Share Repurchases and Dividend
Payments
On May 13, 2013, the Companys board of
directors terminated the share repurchase programs previously authorized on May
13, 2008, and May 18, 2011, and authorized a new share repurchase program for an
aggregate purchase amount of up to $750. This open market share repurchase
program is in addition to the Companys evergreen repurchase program (Evergreen
Program), the purpose of which is to offset the impact of stock dilution related
to stock-based awards. The Evergreen Program has no authorization limit as to
amount or timing of repurchases.
Share repurchases under authorized
programs were as follows during the fiscal years ended June 30:
|
2015 |
|
2014 |
|
2013 |
|
|
Amount |
|
Shares (000) |
|
Amount |
|
Shares (000) |
|
Amount |
|
Shares (000) |
|
Open-market purchase programs |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
Evergreen
Program |
|
|
434 |
|
|
4,016 |
|
|
|
260 |
|
|
3,046 |
|
|
|
128 |
|
|
1,500 |
|
Total |
|
$ |
434 |
|
|
4,016 |
|
|
$ |
260 |
|
|
3,046 |
|
|
$ |
128 |
|
|
1,500 |
|
|
During fiscal years 2015, 2014 and 2013,
the Company declared dividends per share of $2.99, $2.87 and $2.63,
respectively. During fiscal years 2015, 2014 and 2013, the Company paid
dividends per share of $2.96, $2.84 and $2.56, respectively, equivalent to $385,
$368 and $335, respectively.
Contractual
Obligations
The Company had contractual obligations as
of June 30, 2015, payable or maturing in the following fiscal years:
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
|
Thereafter |
|
Total |
|
Long-term debt maturities including interest
payments |
$ |
377 |
|
$ |
72 |
|
$ |
460 |
|
$ |
48 |
|
$ |
47 |
|
|
$ |
1,542 |
|
$ |
2,546 |
|
Notes and loans
payable |
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95 |
|
Purchase obligations(1) |
|
176 |
|
|
57 |
|
|
37 |
|
|
30 |
|
|
7 |
|
|
|
|
|
|
307 |
|
Capital
leases |
|
3 |
|
|
3 |
|
|
2 |
|
|
1 |
|
|
|
|
|
|
|
|
|
9 |
|
Operating leases |
|
50 |
|
|
46 |
|
|
42 |
|
|
34 |
|
|
29 |
|
|
|
100 |
|
|
301 |
|
Payments related to
nonqualified postretirement plans(2) |
20 |
|
|
21 |
|
|
21 |
|
|
17 |
|
|
18 |
|
|
|
75 |
|
|
172 |
|
Venture Agreement net terminal
obligation(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294 |
|
|
294 |
|
Total |
$ |
721 |
|
$ |
199 |
|
$ |
562 |
|
$ |
130 |
|
$ |
101 |
|
|
$ |
2,011 |
|
$ |
3,724 |
|
|
(1) |
Purchase obligations are
defined as purchase agreements that are enforceable and legally binding
and that contain specified or determinable significant terms, including
quantity, price and the approximate timing of the transaction. For
purchase obligations subject to variable price and/or quantity provisions,
an estimate of the price and/or quantity has been made. Examples of the
Companys purchase obligations include contracts to purchase raw
materials, commitments to contract manufacturers, commitments for
information technology and related services, advertising contracts,
capital expenditure agreements, software acquisition and license
commitments and service contracts. The raw material contracts included
above are entered into during the regular course of business based on
expectations of future purchases. Many of these raw material contracts are
flexible to allow for changes in the Companys business and related
requirements. If such changes were to occur, the Company believes its
exposure could differ from the amounts listed above. Any amounts reflected
in the consolidated balance sheets as accounts payable and accrued
liabilities are excluded from the table above. |
(2) |
Represents expected
payments through 2025. Based on the accounting rules for retirement and
postretirement benefit plans, the liabilities reflected in the Companys
consolidated balance sheets differ from these expected future payments
(see Notes to Consolidated Financial Statements). |
(3) |
This amount represents the
net liability related to the Companys venture agreement with The Procter
and Gamble Company (P&G), as further described in the Notes to
Consolidated Financial Statements. Upon termination of the agreement, the
Company will purchase P&Gs interest for cash at fair value. As such,
the amount of the ultimate settlement of the agreement, which could be
impacted by a number of factors including the estimated value of the Glad
business at the time of termination, could differ from the current
carrying value of the obligation. |
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Appendix B
As of June 30, 2015, the
liability recorded for uncertain tax positions, excluding associated interest
and penalties, was approximately $38. During the fiscal year ended June 30,
2015, $32 of gross unrecognized tax benefits relating to other discontinued
operations for periods prior to fiscal year 2015 were recognized upon the
expiration of the applicable statute of limitations. Recognition of these
previously disclosed tax benefits had no impact on the Companys cash flow or
earnings from continuing operations for the fiscal years ended June 30, 2015,
2014 and 2013. Since audit outcomes and the timing of audit settlements are
subject to significant uncertainty, liabilities for uncertain tax positions are
excluded from the contractual obligations table (see Notes to Consolidated
Financial Statements).
Off-Balance Sheet
Arrangements
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 Companys consolidated financial statements taken as a
whole.
The Company had not recorded
any liabilities on the aforementioned indemnifications as of June 30, 2015 and
2014.
As of June 30, 2015, 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.
CONTINGENCIES
The Company is involved in
certain environmental matters, including response actions at various locations.
The Company had a recorded liability of $12 and $14 as of June 30, 2015 and
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 June 30, 2015 and 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 Companys 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 Companys 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 Companys 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 June 30,
2015, was approximately $32.
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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 $26.
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 Companys 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
Companys appeal, in December 2014 the same court declined to admit the appeal
based on procedural grounds. The Company successfully appealed that decision and
the court agreed to admit the appeal in March 2015. The appeal is currently
pending and it is possible that a final decision in this case could be issued as
early as the first quarter of fiscal year 2016. Expenses related to this
litigation have been, and any potential additional loss would be, reflected in
discontinued operations, consistent with the Companys 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
Brazils 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,
commercial, administrative, employee and other matters. Based on managements
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 Companys consolidated
financial statements taken as a whole.
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational company,
the Company is exposed to the impact of foreign currency fluctuations, changes
in commodity prices, interest-rate risk and other types of market risk.
In the normal course of
business, where available at a reasonable cost, the Company manages its exposure
to market risk using contractual agreements and a variety of derivative
instruments. The Companys objective in managing its exposure to market risk is
to limit the impact of fluctuations on earnings and cash flow through the use of
swaps, forward purchases and futures contracts. Derivative contracts are entered
into for non-trading purposes with major credit-worthy institutions, thereby
decreasing the risk of credit loss.
The Company uses different
methodologies, when necessary, to estimate the fair value of its derivative
contracts. The estimated fair values of the majority of the Companys contracts
are based on quoted market prices, traded exchange market prices or broker price
quotations, and represent the estimated amounts that the Company would pay or
receive to terminate the contracts.
Sensitivity Analysis for
Derivative Contracts
For fiscal years 2015 and
2014, the Companys exposure to market risk was estimated using sensitivity
analyses, which illustrate the change in the fair value of a derivative
financial instrument assuming hypothetical changes in foreign exchange rates,
commodity prices or interest rates. The results of the sensitivity analyses for
foreign currency derivative contracts, commodity derivative contracts and
interest rate contracts are summarized below. Actual changes in foreign
B-16 THE CLOROX COMPANY
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Appendix B
exchange
rates, commodity prices or interest rates may differ from the hypothetical
changes, and any changes in the fair value of the contracts, real or
hypothetical, would be partly to fully offset by an inverse change in the value
of the underlying hedged items.
The changes in the fair value
of derivatives are recorded as either assets or liabilities in the consolidated
balance sheets with an offset to net earnings or other comprehensive income,
depending on whether or not, for accounting purposes, the derivative is
designated and qualified as a cash flow hedge. During the fiscal years ended
June 30, 2015, 2014 and 2013, the Company had no hedging instruments designated
as fair value hedges. In the event the Company has contracts not designated as
hedges for accounting purposes, the Company recognizes the changes in the fair
value of these contracts in other income, net.
Foreign Currency
Risk
The Company seeks to minimize
the impact of certain foreign currency fluctuations by hedging transactional
exposures with foreign currency forward contracts. As of June 30, 2015 and 2014,
the Companys foreign currency transactional exposures pertaining to derivative
contracts existed with the Canadian, Australian and New Zealand dollars. Based
on a hypothetical decrease of 10% in the value of the U.S. dollar against the
Canadian, Australian and New Zealand dollars as of June 30, 2015, the estimated
fair value of the Companys then-existing foreign currency derivative contracts
would decrease by $12. Based on a hypothetical increase of 10% in the value of
the U.S. dollar against the Canadian, Australian and New Zealand dollars as of
June 30, 2015, the estimated fair value of the Companys then-existing foreign
currency derivative contracts would increase by $10. Based on a hypothetical
decrease of 10% in the value of the U.S. dollar against the Canadian, Australian
and New Zealand dollars as of June 30, 2014, the estimated fair value of the
Companys then-existing foreign currency derivative contracts would decrease by
$10. Based on a hypothetical increase of 10% in the value of the U.S. dollar
against the Canadian, Australian and New Zealand dollars as of June 30, 2014,
the estimated fair value of the Companys then-existing foreign currency
derivative contracts would increase by $8.
Commodity Price
Risk
The Company is exposed to
changes in the price of commodities used as raw materials in the manufacturing
of its products. The Company uses various strategies to manage cost exposures on
certain raw material purchases with the objective of obtaining more predictable
costs for these commodities, including long-term commodity purchase contracts
and commodity derivative contracts, where available at a reasonable cost. During
fiscal years 2015 and 2014, the Companys raw materials exposures pertaining to
derivative contracts existed with jet fuel, soybean oil and crude oil. Based on
a hypothetical decrease or increase of 10% in these commodity prices as of June
30, 2015, and June 30, 2014, the estimated fair value of the Companys
then-existing commodity derivative contracts would decrease or increase by $4 in
both fiscal years, with the corresponding impact included in accumulated other
comprehensive income.
Interest Rate
Risk
The Company is exposed to
interest rate volatility with regard to existing and anticipated future
issuances of debt. Primary exposures related to existing debt include movements
in U.S. commercial paper rates. Weighted average interest rates for commercial
paper have been less than 1% during fiscal years 2015 and 2014. Assuming average
variable rate debt levels during fiscal years 2015 and 2014, a 100 basis point increase in interest rates
would increase interest expense from commercial paper by approximately $1 and
$3, respectively. Assuming average variable rate debt levels in fiscal years
2015 and 2014, a decrease in interest rates to zero percent would decrease
interest expense from commercial paper by $1 in both fiscal years.
The Company is also exposed to
interest rate volatility with regard to anticipated future issuances of debt.
Primary exposures include movements in U.S. Treasury rates. The Company used
interest rate forward contracts to reduce interest rate volatility on fixed rate
long-term debt during fiscal year 2015 and 2014. The Company had no outstanding
interest rate forward contracts as of June 30, 2015.
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RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
A summary of recently issued
accounting pronouncements is contained in Note 1 of Notes to Consolidated
Financial Statements.
CRITICAL ACCOUNTING
POLICIES AND ESTIMATES
The methods, estimates, and
judgments the Company uses in applying its most critical accounting policies
have a significant impact on the results the Company reports in its consolidated
financial statements. Specific areas requiring the application of managements
estimates and judgment include, among others, assumptions pertaining to accruals
for consumer and trade-promotion programs, stock-based compensation costs,
pension and post-employment benefit costs, future cash flows associated with
impairment testing of goodwill and other long-lived assets, credit worthiness of
customers, uncertain tax positions, tax valuation allowances and legal,
environmental and insurance matters. Accordingly, a different financial
presentation could result depending on the judgments, estimates or assumptions
that are used. The most critical accounting policies are those that are most
important to the portrayal of the Companys financial condition and results, and
require the Company to make the most difficult and subjective judgments, often
estimating the outcome of future events that are inherently uncertain. The
Companys most critical accounting policies are related to: revenue recognition;
valuation of intangible assets and property, plant and equipment; employee
benefits, including estimates related to stock-based compensation; and income
taxes. The Companys critical accounting policies have been reviewed with the
Audit Committee of the Board of Directors. A summary of the Companys
significant accounting policies is contained in Note 1 of Notes to Consolidated
Financial Statements.
Revenue
Recognition
Sales are recognized as
revenue when the risk of loss and title pass to the customer and when all of the
following have occurred: a firm sales arrangement exists, pricing is fixed or
determinable and collection is reasonably assured. Sales are recorded net of
allowances for returns, trade promotions, coupons and other discounts. The
Company routinely commits to one-time or ongoing trade-promotion programs with
customers. Programs include shelf-price reductions, end-of-aisle or in-store
displays of the Companys products and graphics and other trade-promotion
activities conducted by the customer. Costs related to these programs are
recorded as a reduction of sales. The Companys estimated costs of trade
promotions incorporate historical sales and spending trends by customer and
category. The determination of these estimated costs requires judgment and may
change in the future as a result of changes in customer promotion participation,
particularly for new programs and for programs related to the introduction of
new products. Final determination of the total cost of a promotion is dependent
upon customers providing information about proof of performance and other
information related to the promotional event. This process of analyzing and
settling trade-promotion programs with customers could impact the Companys
results of operations and trade spending accruals depending on how actual
results of the programs compare to original estimates. If the Companys trade
spending accrual estimates as of June 30, 2015 were to differ by 10%, the impact
on net sales would be approximately $11.
Valuation of Intangible
Assets and Property, Plant and Equipment
The Company tests its goodwill
and other indefinite-lived intangible assets for impairment annually in the
fiscal fourth quarter unless there are indications during a different interim
period that these assets may have become impaired.
Goodwill
Consistent with fiscal year
2014, the Companys reporting units for goodwill impairment testing purposes are
its domestic Strategic Business Units (SBUs), Canada, Latin America and AMEA
(Asia, Middle East, Europe and Australia), previously referred to as Rest of
World. These reporting units are components of the Companys business that are
either operating segments or one level below an operating segment and for which
discrete financial information is available that is reviewed by the managers of
the respective operating segments. No instances of impairment were identified
during the fiscal year 2015 annual impairment review and all of the Companys
reporting units had fair values that significantly exceeded recorded values.
However, future changes in the judgments, assumptions and estimates that are
used in the impairment testing for goodwill and indefinite-lived intangible
assets as described below could result in significantly different estimates of
the fair values.
B-18 THE CLOROX COMPANY
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Appendix B
In its evaluation of goodwill
impairment, the Company has the option to first assess qualitative factors such
as maturity and stability of the reporting unit, magnitude of excess fair value
over book value from the prior years impairment testing, other reporting unit
operating results as well as new events and circumstances impacting the
operations at the reporting unit level. If the result of a qualitative test
indicates a potential for impairment, a quantitative test is performed. The
quantitative test is a two-step process. In the first step, the Company compares
the estimated fair value of each reporting unit to its carrying value. In all
instances, the estimated fair value exceeded the carrying value of the reporting
unit. Had the estimated fair value of any reporting unit been less than its
carrying value, the Company would have performed a second step to determine the
implied fair value of the reporting units goodwill. If the carrying amount of a
reporting units goodwill had exceeded its implied fair value, an impairment
charge would have been recorded for the difference between the carrying amount
and the implied fair value of the reporting units goodwill.
To determine the fair value of
a reporting unit as part of its quantitative test, the Company uses a discounted
cash flow (DCF) approach, as it believes that this approach is the most reliable
indicator of the fair value of its businesses and the fair value of their future
earnings and cash flows. Under this approach, the Company estimates the future
cash flows of each reporting unit and discounts these cash flows at a rate of
return that reflects their relative risk. The cash flows used in the DCF are
consistent with those the Company uses in its internal planning, which gives
consideration to actual business trends experienced, and the broader business
strategy for the long term. The other key estimates and factors used in the DCF
include, but are not limited to, future sales volumes, revenue and expense
growth rates, changes in working capital, foreign exchange rates, currency
devaluation, inflation and a perpetuity growth rate. Changes in such estimates
or the application of alternative assumptions could produce different results.
Trademarks and Other
Indefinite-Lived Intangible Assets
For trademarks and other
intangible assets with indefinite lives, the Company performs a quantitative
analysis to test for impairment. When a quantitative test is performed, the
estimated fair value of an asset is compared to its carrying amount. If the
carrying amount of such asset exceeds its estimated fair value, an impairment
charge is recorded for the difference between the carrying amount and the
estimated fair value. The Company uses the income approach to estimate the fair
value of its trademarks and other intangible assets with indefinite lives. This
approach requires significant judgments in determining both the assets
estimated cash flows as well as the appropriate discount and foreign exchange
rates applied to those cash flows to determine fair value. Changes in such
estimates or the use of alternative assumptions could produce different
results.
As a result of the effective
devaluation of the Venezuelan currency in the third quarter of fiscal year 2014,
the Company assessed whether recorded values of intangible assets attributable
to Clorox Venezuela and goodwill of the reporting unit, which included
Venezuela, were impaired. As a result of its assessment, the Company identified
indications of impairment and recorded noncash tax deductible impairment charges
on trademark values totaling $4. The Company used the income approach to
estimate the fair value of the trademarks. The $4 impairment charge was
reflected in the International reportable segment, of which $3 relates to
continuing operations and is reflected in other income, net and $1 relates to
trademarks held on the books of Clorox Venezuela and is reflected in earnings
from discontinued operations, net. Based on the results of the annual impairment
test performed in the fourth quarter of fiscal year 2015, there were no
additional indications of impairment of assets in Venezuela. There were no
instances of impairment identified during fiscal years 2013.
Property, Plant
and Equipment and Finite-Lived Intangible Assets
Property, plant and equipment
and finite-lived intangible assets are reviewed for possible impairment whenever
events or changes in circumstances occur that indicate that the carrying amount
of an asset (or asset group) may not be recoverable. The Companys impairment
review requires significant management judgment, including estimating the future
success of product lines, future sales volumes, revenue and expense growth
rates, alternative uses for the assets and estimated proceeds from the disposal
of the assets. The Company conducts quarterly reviews of idle and underutilized
equipment, and reviews business plans for possible impairment indicators.
Impairment occurs when the carrying amount of the asset (or asset group) exceeds
its estimated future undiscounted cash flows and the impairment is viewed as
other than temporary. When impairment is indicated, an impairment charge is
recorded for the difference between the assets book value and its estimated
fair value. Depending on the asset, estimated fair value may be determined
either by use of a DCF model or by reference to estimated selling values of
assets in similar condition. The use of different assumptions would increase or
decrease the estimated fair value of assets and would increase or decrease any
impairment measurement.
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Employee
Benefits
The Companys critical
accounting policies in this area relate to its stock-based compensation and
retirement income programs.
Stock-based
Compensation
The Company grants various
nonqualified stock-based compensation awards to eligible employees, including
stock options, performance units and restricted stock. The stock-based
compensation expense and related income tax benefit recognized in the
consolidated statement of earnings in fiscal year 2015 were $32 and $12,
respectively. As of June 30, 2015, there was $34 of unrecognized compensation
costs related to non-vested stock options, restricted stock and performance unit
awards, which are expected to be recognized over a weighted average remaining
vesting period of one year. The Company estimates the fair value of each stock
option award on the date of grant using the Black-Scholes valuation model, which
requires management to make estimates regarding expected option life, stock
price volatility and other assumptions. Groups of employees that have similar
historical exercise behavior are considered separately for valuation purposes.
The total number of stock options expected to vest is adjusted by actual and
estimated forfeitures. Changes to the actual and estimated forfeitures will
result in a cumulative catch-up adjustment in the period of change.
The use of different
assumptions in the Black-Scholes valuation model could lead to a different
estimate of the fair value of each stock option. The expected volatility is
based on implied volatility from publicly traded options on the Companys stock
at the date of grant, historical implied volatility of the Companys publicly
traded options and other factors. If the Companys assumption for the volatility
rate is increased by one percentage point, the fair value of options granted in
fiscal year 2015 would have increased by $1. The expected life of the stock
options is based on observed historical exercise patterns. If the Companys
assumption for the expected life is increased by one year, the fair value of
options granted in fiscal year 2015 would have increased by less than $1.
The Companys performance unit
grants provide for the issuance of common stock to certain managerial staff and
executive management if the Company achieves specified performance targets. The
performance period is three years and the payout determination is made at the
end of the three-year performance period. The fair value of each grant issued is
estimated on the date of grant based on the current market price of the stock.
The total amount of compensation expense recognized reflects estimated
forfeiture rates and the initial assumption that performance goals will be
achieved. Compensation expense is adjusted based on managements assessment of
the probability that performance goals will be achieved. If such goals are not
met or it is determined that achievement of performance goals is not probable,
previously recognized compensation expense is trued up in the current period to
reflect the expected payout level. If it is determined that the performance
goals will be exceeded, additional compensation expense is recognized, subject
to a cap of 150% of target.
Retirement Income
Plans
The determination of net
periodic pension cost is based on actuarial assumptions including a discount
rate to reflect the time value of money, the long-term rate of return on plan
assets, employee compensation rates and demographic assumptions to determine the
probability and timing of benefit payments. The selection of assumptions is
based on historical trends and known economic and market conditions at the time
of valuation. The expected long-term rate of return assumption is based on an
analysis of historical experience of the portfolio and the summation of
prospective returns for each asset class in proportion to the funds current
asset allocation. The actual net periodic pension cost could differ from the
expected results because actuarial assumptions and estimates are used. In the
calculation of pension expense related to domestic plans for 2015, the Company
used a beginning-of-year discount rate assumption of 4.0% and a long-term rate
of return on plan assets assumption of 5.3%. The use of a different discount
rate or long-term rate of return on domestic plan assets can significantly
impact pension expense. For example, as of June 30, 2015, a decrease of 100
basis points in the discount rate would increase pension liability by
approximately $39, and decrease fiscal year 2015 pension expense by less than
$1. A 100 basis point decrease in the long-term rate of return on plan assets
would increase fiscal year 2015 pension expense by $4. At the end of fiscal year
2015, the long-term
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Appendix B
rate of return is assumed to be 4.3% for the domestic plan
assets. This change is a result of the change in the plans target investment
allocation. The Company also has defined benefit pension plans for eligible
international employees, including Canadian and Australian employees, and
different assumptions are used in the determination of pension expense for those
plans, as appropriate. See Notes to Consolidated Financial Statements for
further discussion of pension and other retirement plan obligations.
Income
Taxes
The Companys effective tax
rate is based on income by tax jurisdiction, statutory tax rates and tax
planning opportunities available to the Company in the various jurisdictions in
which the Company operates. Significant judgment is required in determining the
Companys effective tax rate and in evaluating its tax positions.
The Company maintains
valuation allowances when it is likely that all or a portion of a deferred tax
asset will not be realized. Changes in valuation allowances from period to
period are included in the Companys income tax provision in the period of
change. In determining whether a valuation allowance is warranted, the Company
takes into account such factors as prior earnings history, expected future
earnings, unsettled circumstances that, if unfavorably resolved, would adversely
affect the utilization of a deferred tax asset, statutory carry-back and
carry-forward periods and tax strategies that could potentially enhance the
likelihood of realization of a deferred tax asset. Valuation allowances
maintained by the Company relate mostly to deferred tax assets arising from the
Companys currently anticipated inability to use net operating losses in certain
foreign countries.
In addition to valuation
allowances, the Company provides for uncertain tax positions when such tax
positions do not meet certain recognition thresholds or measurement standards.
Amounts for uncertain tax positions are adjusted in quarters when new
information becomes available or when positions are effectively settled.
United States income taxes and
foreign withholding taxes are not provided when foreign earnings are
indefinitely reinvested. The Company determines whether its foreign subsidiaries
will invest their undistributed earnings indefinitely and reassesses this
determination on a periodic basis. A change to the Companys determination may
be warranted based on the Companys experience as well as plans regarding future
international operations and expected remittances. Changes in the Companys
determination would likely require an adjustment to the income tax provision in
the quarter in which the determination is made.
SUMMARY OF NON-GAAP
FINANCIAL MEASURES
The non-GAAP financial
measures included in this MD&A and Exhibit 99.3 and the reasons management
believes they are useful to investors are described below. These measures should
be considered supplemental in nature and are not intended to be a substitute for
the related financial information prepared in accordance with U.S. GAAP. In
addition, these measures may not be the same as similarly named measures
presented by other companies.
Free cash flow
is calculated as net cash
provided by continuing operations less capital expenditures related to
continuing operations. The Companys management uses this measure and
free cash flow as a percentage of
net sales to help assess the cash
generation ability of the business and funds available for investing activities,
such as acquisitions, investing in the business to drive growth and financing
activities, including debt payments, dividend payments and share repurchases.
Free cash flow does not represent cash available only for discretionary
expenditures, since the Company has mandatory debt service requirements and
other contractual and non-discretionary expenditures. Refer to Free cash flow
and Free cash flow as a percentage of net sales above for a reconciliation of
these non-GAAP measures.
EBIT represents earnings from continuing operations
before income taxes, interest income and interest expense. EBIT margin is the ratio of EBIT to net sales. The company's management believes
these measures provide useful additional information to investors about trends
in the company's operations and are useful for period-over-period comparisons.
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Currency-neutral net sales
growth represents U.S. GAAP net
sales growth excluding the impact of foreign currency exchange rates. The
Companys management believes these measures provide useful additional
information to investors about trends in the Companys core business operations.
The following table presents the currency-neutral net sales growth reconciliation for fiscal year 2015:
|
|
2015 |
|
Net sales growth GAAP |
|
|
3 |
% |
|
Less: foreign exchange impact |
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|
(2 |
) |
|
Currency-neutral net sales growth non-GAAP |
|
|
5 |
% |
|
|
|
|
|
|
|
Economic profit
(EP) is defined by the Company as
earnings from continuing operations before income taxes, excluding noncash U.S.
GAAP restructuring and intangible asset impairment costs, and interest expense;
less an amount of tax based on the effective tax rate and less a charge equal to
average capital employed multiplied by the weighted-average cost of capital. EP
is a key financial metric the Companys management uses to evaluate business
performance and allocate resources, and is a component in determining
managements incentive compensation. The Companys management believes EP
provides additional perspective to investors about financial returns generated
by the business and represents profit generated over and above the cost of
capital used by the business to generate that profit. Refer to Exhibit 99.3 for
a reconciliation of EP to earnings from continuing operations before income
taxes.
CAUTIONARY
STATEMENT
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, and
Section 21E of the Securities Exchange Act of 1934, as amended, and such
forward-looking statements involve risks and uncertainties. Except for
historical information, matters discussed below, including statements about
future volume, sales, foreign currencies, costs, cost savings, margin, earnings,
earnings per share, diluted earnings per share, foreign currency exchange rates,
cash flows, plans, objectives, expectations, growth or profitability, are
forward-looking statements based on managements estimates, assumptions and
projections. Words such as could, may, expects, anticipates, targets,
goals, projects, intends, plans, believes, seeks, estimates and
variations on such words, and similar expressions that reflect our current
views with respect to future events and financial performance, 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
managements expectations are described in the sections entitled Risk Factors
and Managements Discussion and Analysis of Financial Condition and Results of
Operations in this Report, as updated from time to time in the Companys
Securities and Exchange Commission filings. These factors include, but are not
limited to:
● |
intense
competition in the Companys markets; |
● |
worldwide, regional
and local economic conditions and financial market
volatility; |
● |
the ability of the
Company to drive sales growth, increase price and market share, grow its
product categories and achieve favorable product and geographic
mix; |
● |
risks related to international operations, including
political instability; government-imposed price controls or other
regulations; foreign currency exchange rate controls, including periodic
changes in such controls, fluctuations and devaluations; labor claims,
labor unrest and inflationary pressures, particularly in Argentina; and
potential harm and liabilities from the use, storage and transportation of
chlorine in certain international markets where chlorine is used in the
production of bleach; |
● |
risks related to the possibility of nationalization,
expropriation of assets or other government action in foreign
jurisdictions; |
● |
risks related to the Companys discontinuation of operations in
Venezuela; |
● |
volatility and increases in commodity costs such as
resin, sodium hypochlorite and agricultural commodities, and increases in
energy, transportation or other costs; |
● |
supply disruptions and other risks inherent in reliance
on a limited base of suppliers; |
● |
the ability of the Company to develop and introduce
commercially successful products; |
● |
dependence on key customers and risks related to customer
consolidation and ordering patterns; |
● |
costs resulting from government regulations; |
● |
the ability of the Company to successfully manage global
political, legal, tax and regulatory risks, including changes in
regulatory or administrative activity; |
B-22 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of
Contents
Appendix B
● |
risks related to reliance on information
technology systems, including potential security breaches, cyber-attacks
or privacy breaches that result in the unauthorized disclosure of
consumer, customer, employee or Company information, or service
interruptions; |
● |
risks relating to acquisitions, new ventures
and divestitures, and associated costs, including the potential for asset
impairment charges related to, among others, intangible assets and
goodwill; |
● |
the success of the Companys business
strategies; |
● |
the ability of the Company to implement and
generate anticipated cost savings and efficiencies; |
● |
the impact of product liability claims, labor
claims and other legal proceedings, including in foreign jurisdictions and
the Companys litigation related to its discontinued operations in
Brazil; |
● |
the Companys ability
to attract and retain key personnel; |
● |
the Companys ability to maintain its business
reputation and the reputation of its brands; |
● |
environmental matters, including costs
associated with the remediation of past contamination and the handling
and/or transportation of hazardous substances; |
● |
the impact of natural disasters, terrorism and
other events beyond the Companys control; |
● |
the Companys ability to maximize, assert and
defend its intellectual property rights; |
● |
any infringement or claimed infringement by the
Company of third-party intellectual property rights; |
● |
the effect of the Companys indebtedness and
credit rating on its operations and financial results; |
● |
the Companys ability to maintain an effective
system of internal controls; |
● |
uncertainties relating to tax positions, tax
disputes and changes in the Companys tax rate; |
● |
the accuracy of the Companys estimates and
assumptions on which its financial statement projections are based; |
● |
the Companys ability to pay and declare
dividends or repurchase its stock in the future; and |
● |
the impacts of potential stockholder
activism. |
The Companys forward-looking statements
in this Report are based on managements 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.
MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
The Companys management is responsible
for establishing and maintaining adequate internal control over financial
reporting. The Companys internal control over financial reporting is a process
designed under the supervision of its Chief Executive Officer and Chief
Financial Officer to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the Companys financial statements
for external reporting in accordance with accounting principles generally
accepted in the United States of America. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the companys
assets that could have a material effect on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with the policies or
procedures may deteriorate.
Management evaluated the effectiveness of
the Companys internal control over financial reporting using the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated
Framework published in 2013. Management,
under the supervision and with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, assessed the effectiveness of the
Companys internal control over financial reporting at June 30, 2015, and
concluded that it is effective.
The Companys independent registered
public accounting firm, Ernst & Young LLP, has audited the effectiveness of
the Companys internal control over financial reporting as of June 30,
2015.
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-23 |
Table of
Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders of
The Clorox Company
We have audited the accompanying
consolidated balance sheets of The Clorox Company as of June 30, 2015 and 2014,
and the related consolidated statements of earnings, comprehensive income,
stockholders equity and cash flows for each of the three years in the period
ended June 30, 2015. Our audits also included the financial statement schedule
in Exhibit 99.2. These financial statements and schedule are the responsibility
of the Companys management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of The Clorox Company at June 30, 2015 and 2014, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended June 30, 2015, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States),
The Clorox Companys internal control over financial reporting as of June 30,
2015, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated August 21, 2015 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
San Francisco, CA
August 21, 2015
B-24 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders of
The Clorox Company
We have audited The Clorox Companys
internal control over financial reporting as of June 30, 2015, based on criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). The Clorox Companys management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting included in the
accompanying Managements Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A companys internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A companys internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys
assets that could have a material effect on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, The Clorox Company
maintained, in all material respects, effective internal control over financial
reporting as of June 30, 2015, based on the COSO criteria (2013 framework).
We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of The Clorox Company as of June 30, 2015 and 2014, and the
related consolidated statements of earnings, comprehensive income, stockholders
equity, and cash flows for each of the three years in the period ended June 30,
2015 of The Clorox Company and our report dated August 21, 2015 expressed an
unqualified opinion thereon.
/s/ Ernst & Young LLP
San Francisco, CA
August 21, 2015
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-25 |
Table of
Contents
CONSOLIDATED STATEMENTS OF
EARNINGS
The Clorox Company
|
Years ended June
30 Dollars in millions, except per share amounts |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Net sales |
|
$ |
5,655 |
|
|
$ |
5,514 |
|
|
$ |
5,533 |
|
|
|
Cost of products
sold |
|
|
3,190 |
|
|
|
3,158 |
|
|
|
3,142 |
|
|
|
Gross profit |
|
|
2,465 |
|
|
|
2,356 |
|
|
|
2,391 |
|
|
|
|
|
|
Selling and
administrative expenses |
|
|
798 |
|
|
|
751 |
|
|
|
793 |
|
|
|
Advertising costs |
|
|
523 |
|
|
|
503 |
|
|
|
498 |
|
|
|
Research and
development costs |
|
|
136 |
|
|
|
125 |
|
|
|
130 |
|
|
|
Interest expense |
|
|
100 |
|
|
|
103 |
|
|
|
122 |
|
|
|
Other income,
net |
|
|
(13 |
) |
|
|
(10 |
) |
|
|
(4 |
) |
|
|
Earnings from continuing operations before income taxes |
|
|
921 |
|
|
|
884 |
|
|
|
852 |
|
|
|
Income taxes on
continuing operations |
|
|
315 |
|
|
|
305 |
|
|
|
279 |
|
|
|
Earnings from continuing operations |
|
|
606 |
|
|
|
579 |
|
|
|
573 |
|
|
|
Losses from
discontinued operations, net of tax |
|
|
(26 |
) |
|
|
(21 |
) |
|
|
(1 |
) |
|
|
Net earnings |
|
$ |
580 |
|
|
$ |
558 |
|
|
$ |
572 |
|
|
|
|
|
|
Net earnings
(losses) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
4.65 |
|
|
$ |
4.47 |
|
|
$ |
4.37 |
|
|
|
Discontinued
operations |
|
|
(0.20 |
) |
|
|
(0.16 |
) |
|
|
|
|
|
|
Basic net earnings per
share |
|
$ |
4.45 |
|
|
$ |
4.31 |
|
|
$ |
4.37 |
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
4.57 |
|
|
$ |
4.39 |
|
|
$ |
4.31 |
|
|
|
Discontinued
operations |
|
|
(0.20 |
) |
|
|
(0.16 |
) |
|
|
(0.01 |
) |
|
|
Diluted net earnings per
share |
|
$ |
4.37 |
|
|
$ |
4.23 |
|
|
$ |
4.30 |
|
|
|
|
|
|
Weighted average shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
130,310 |
|
|
|
129,558 |
|
|
|
131,075 |
|
|
|
Diluted |
|
|
132,776 |
|
|
|
131,742 |
|
|
|
132,969 |
|
|
See Notes to Consolidated Financial
Statements
B-26 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
The Clorox Company
|
Years ended
June 30 Dollars in millions |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Earnings from continuing operations |
|
$ |
606 |
|
|
$ |
579 |
|
|
$ |
573 |
|
|
|
Losses from
discontinued operations, net of tax |
|
|
(26 |
) |
|
|
(21 |
) |
|
|
(1 |
) |
|
|
Net earnings |
|
|
580 |
|
|
|
558 |
|
|
|
572 |
|
|
|
Other
comprehensive (losses) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency adjustments, net of tax |
|
|
(54 |
) |
|
|
(37 |
) |
|
|
(11 |
) |
|
|
Net unrealized (losses)
gains on derivatives, net of tax |
|
|
(14 |
) |
|
|
(9 |
) |
|
|
3 |
|
|
|
Pension and
postretirement benefit adjustments, net of tax |
|
|
(17 |
) |
|
|
(4 |
) |
|
|
37 |
|
|
|
Total other
comprehensive (losses) income, net of tax |
|
|
(85 |
) |
|
|
(50 |
) |
|
|
29 |
|
|
|
Comprehensive income |
|
$ |
495 |
|
|
$ |
508 |
|
|
$ |
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial
Statements
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-27 |
Table of
Contents
CONSOLIDATED BALANCE
SHEETS
The Clorox Company
|
As of June
30 Dollars in millions, except per share amounts |
2015 |
|
|
2014 |
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
382 |
|
|
$ |
329 |
|
|
|
Receivables,
net |
|
519 |
|
|
|
546 |
|
|
|
Inventories,
net |
|
385 |
|
|
|
386 |
|
|
|
Other current
assets |
|
143 |
|
|
|
134 |
|
|
|
Total
current assets |
|
1,429 |
|
|
|
1,395 |
|
|
|
Property, plant and equipment, net |
|
918 |
|
|
|
977 |
|
|
|
Goodwill |
|
1,067 |
|
|
|
1,101 |
|
|
|
Trademarks, net |
|
535 |
|
|
|
547 |
|
|
|
Other intangible assets,
net |
|
50 |
|
|
|
64 |
|
|
|
Other assets |
|
165 |
|
|
|
174 |
|
|
|
Total assets |
$ |
4,164 |
|
|
$ |
4,258 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Notes and loans
payable |
$ |
95 |
|
|
$ |
143 |
|
|
|
Current maturities of
long-term debt |
|
300 |
|
|
|
575 |
|
|
|
Accounts
payable |
|
431 |
|
|
|
440 |
|
|
|
Accrued liabilities |
|
548 |
|
|
|
472 |
|
|
|
Income taxes
payable |
|
31 |
|
|
|
8 |
|
|
|
Total
current liabilities |
|
1,405 |
|
|
|
1,638 |
|
|
|
Long-term debt |
|
1,796 |
|
|
|
1,595 |
|
|
|
Other liabilities |
|
750 |
|
|
|
768 |
|
|
|
Deferred income taxes |
|
95 |
|
|
|
103 |
|
|
|
Total
liabilities |
|
4,046 |
|
|
|
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 June 30, 2015 and 2014;
and 128,614,310 and 128,796,228 |
|
|
|
|
|
|
|
|
|
shares outstanding at June 30, 2015 and
2014, respectively |
|
159 |
|
|
|
159 |
|
|
|
Additional paid-in capital |
|
775 |
|
|
|
709 |
|
|
|
Retained earnings |
|
1,923 |
|
|
|
1,739 |
|
|
|
Treasury shares, at cost: 30,127,151 and 29,945,233
shares |
|
|
|
|
|
|
|
|
|
at June 30,
2015 and 2014, respectively |
|
(2,237 |
) |
|
|
(2,036 |
) |
|
|
Accumulated other comprehensive net
loss |
|
(502 |
) |
|
|
(417 |
) |
|
|
Stockholders equity |
|
118 |
|
|
|
154 |
|
|
|
Total liabilities and stockholders
equity |
$ |
4,164 |
|
|
$ |
4,258 |
|
|
|
See Notes to Consolidated Financial
Statements
B-28 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY
The Clorox Company
|
|
|
Common
Stock |
|
|
|
|
|
|
|
Treasury Shares |
|
|
|
|
|
|
|
Dollars in
millions |
|
Shares (000) |
|
Amount |
|
Additional Paid-in Capital |
|
|
Retained Earnings |
|
|
Shares (000) |
|
|
Amount |
|
|
Accumulated Other Comprehensive Net
(Losses) Income |
|
|
Total |
|
|
|
Balance at June 30, 2012 |
|
158,741 |
|
|
$ |
159 |
|
|
$ |
633 |
|
|
|
$ |
1,350 |
|
|
(29,179 |
) |
|
|
$ |
(1,881 |
) |
|
|
$ |
(396 |
) |
|
$ |
(135 |
) |
|
|
Net
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572 |
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
29 |
|
|
|
Accrued
dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(348 |
) |
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
Other employee
stock plan activities |
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
|
(13 |
) |
|
2,304 |
|
|
|
|
141 |
|
|
|
|
|
|
|
|
121 |
|
|
|
Treasury stock purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500 |
) |
|
|
|
(128 |
) |
|
|
|
|
|
|
|
(128 |
) |
|
|
Balance at
June 30, 2013 |
|
158,741 |
|
|
|
159 |
|
|
|
661 |
|
|
|
|
1,561 |
|
|
(28,375 |
) |
|
|
|
(1,868 |
) |
|
|
|
(367 |
) |
|
|
146 |
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558 |
|
|
|
Other
comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50 |
) |
|
|
(50 |
) |
|
|
Accrued dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(374 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(374 |
) |
|
|
Stock-based
compensation |
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
Other employee stock plan activities |
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
(6 |
) |
|
1,476 |
|
|
|
|
92 |
|
|
|
|
|
|
|
|
98 |
|
|
|
Treasury stock
purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,046 |
) |
|
|
|
(260 |
) |
|
|
|
|
|
|
|
(260 |
) |
|
|
Balance at June 30, 2014 |
|
158,741 |
|
|
|
159 |
|
|
|
709 |
|
|
|
|
1,739 |
|
|
(29,945 |
) |
|
|
|
(2,036 |
) |
|
|
|
(417 |
) |
|
|
154 |
|
|
|
Net
earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
580 |
|
|
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85 |
) |
|
|
(85 |
) |
|
|
Accrued
dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(391 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(391 |
) |
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
Other employee
stock plan activities |
|
|
|
|
|
|
|
|
|
34 |
|
|
|
|
(5 |
) |
|
(4,198 |
) |
|
|
|
233 |
|
|
|
|
|
|
|
|
262 |
|
|
|
Treasury stock purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016 |
|
|
|
|
(434 |
) |
|
|
|
|
|
|
|
(434 |
) |
|
|
Balance at
June 30, 2015 |
|
158,741 |
|
|
$ |
159 |
|
|
$ |
775 |
|
|
|
$ |
1,923 |
|
|
(30,127 |
) |
|
|
$ |
(2,237 |
) |
|
|
$ |
(502 |
) |
|
$ |
118 |
|
|
|
See Notes to Consolidated Financial Statements
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-29 |
Table of
Contents
CONSOLIDATED STATEMENTS OF CASH
FLOWS
The Clorox Company
|
Years ended
June 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in
millions |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
580 |
|
|
$ |
558 |
|
|
$ |
572 |
|
|
|
Deduct: Losses from
discontinued operations, net of tax |
|
|
(26 |
) |
|
|
(21 |
) |
|
|
(1 |
) |
|
|
Earnings from continuing
operations |
|
|
606 |
|
|
|
579 |
|
|
|
573 |
|
|
|
Adjustments to reconcile
earnings from continuing operations to net cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provided by continuing
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
169 |
|
|
|
177 |
|
|
|
180 |
|
|
|
Stock-based
compensation |
|
|
32 |
|
|
|
36 |
|
|
|
35 |
|
|
|
Deferred
income taxes |
|
|
(16 |
) |
|
|
(21 |
) |
|
|
(8 |
) |
|
|
Settlement
of interest rate forward contracts |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
(17 |
) |
|
|
6 |
|
|
|
20 |
|
|
|
Changes
in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables,
net |
|
|
6 |
|
|
|
20 |
|
|
|
(10 |
) |
|
|
Inventories,
net |
|
|
(25 |
) |
|
|
1 |
|
|
|
(11 |
) |
|
|
Other
current assets |
|
|
6 |
|
|
|
5 |
|
|
|
12 |
|
|
|
Accounts
payable and accrued liabilities |
|
|
93 |
|
|
|
(12 |
) |
|
|
(29 |
) |
|
|
Income
taxes payable |
|
|
29 |
|
|
|
(5 |
) |
|
|
18 |
|
|
|
Net cash provided by continuing operations |
|
|
858 |
|
|
|
786 |
|
|
|
780 |
|
|
|
Net cash
provided by (used for) discontinued operations |
|
|
16 |
|
|
|
(19 |
) |
|
|
(5 |
) |
|
|
Net cash provided by operations |
|
|
874 |
|
|
|
767 |
|
|
|
775 |
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(125 |
) |
|
|
(137 |
) |
|
|
(190 |
) |
|
|
Proceeds from
sale-leasebacks, net of transaction costs |
|
|
|
|
|
|
|
|
|
|
135 |
|
|
|
Other |
|
|
19 |
|
|
|
|
|
|
|
4 |
|
|
|
Net cash used for investing activities from continuing
operations |
|
|
(106 |
) |
|
|
(137 |
) |
|
|
(51 |
) |
|
|
Net cash used for investing activities by discontinued
operations |
|
|
|
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
Net cash used for investing activities |
|
|
(106 |
) |
|
|
(138 |
) |
|
|
(55 |
) |
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and loans payable,
net |
|
|
(48 |
) |
|
|
(60 |
) |
|
|
(98 |
) |
|
|
Long-term debt
borrowings, net of issuance costs |
|
|
495 |
|
|
|
|
|
|
|
593 |
|
|
|
Long-term debt
repayments |
|
|
(575 |
) |
|
|
|
|
|
|
(850 |
) |
|
|
Treasury stock
purchased |
|
|
(434 |
) |
|
|
(260 |
) |
|
|
(128 |
) |
|
|
Cash dividends
paid |
|
|
(385 |
) |
|
|
(368 |
) |
|
|
(335 |
) |
|
|
Issuance of common stock
for employee stock plans and other |
|
|
251 |
|
|
|
96 |
|
|
|
133 |
|
|
|
Net cash used for financing activities |
|
|
(696 |
) |
|
|
(592 |
) |
|
|
(685 |
) |
|
|
Effect of exchange rate changes on cash and cash
equivalents |
|
|
(19 |
) |
|
|
(7 |
) |
|
|
(3 |
) |
|
|
Net increase in cash and cash equivalents |
|
|
53 |
|
|
|
30 |
|
|
|
32 |
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of
year |
|
|
329 |
|
|
|
299 |
|
|
|
267 |
|
|
|
End of year |
|
$ |
382 |
|
|
$ |
329 |
|
|
$ |
299 |
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
104 |
|
|
$ |
76 |
|
|
$ |
129 |
|
|
|
Income taxes paid, net of
refunds |
|
|
236 |
|
|
|
312 |
|
|
|
263 |
|
|
|
Noncash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
and accrued, but not paid |
|
|
99 |
|
|
|
95 |
|
|
|
93 |
|
|
See Notes to Consolidated Financial
Statements
B-30 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
The Clorox
Company
(Dollars in millions, except
per share amounts)
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations and Basis of
Presentation
The Company is principally engaged in the
production, marketing and sales of consumer products through mass retail
outlets, e-commerce channels, distributors and medical supply distributors. The
consolidated financial statements include the statements of the Company and its
wholly owned and controlled subsidiaries. All significant intercompany
transactions and accounts were eliminated in consolidation. Certain prior year
reclassifications were made in the consolidated financial statements and related
notes to the consolidated financial statements to conform to the current year
presentation.
Effective September 22, 2014, the
Companys Venezuela affiliate, Corporación Clorox de Venezuela S.A. (Clorox
Venezuela), discontinued its operations. Consequently, the Company reclassified
the financial results of Clorox Venezuela as a discontinued operation in the
consolidated financial statements for all periods presented herein.
Use of Estimates
The preparation of these consolidated
financial statements in conformity with generally accepted accounting principles
in the United States of America (U.S. GAAP) requires management to reach
opinions as to estimates and assumptions that affect reported amounts and
related disclosures. Specific areas requiring managements opinion on estimates
and judgments include assumptions pertaining to accruals for consumer and
trade-promotion programs, stock-based compensation costs, pension and
post-employment benefit costs, future cash flows associated with impairment
testing of goodwill and other long-lived assets, the credit worthiness of
customers, uncertain tax positions, tax valuation allowances and legal,
environmental and insurance matters. Actual results could materially differ from
estimates and assumptions made.
Cash and Cash
Equivalents
Cash equivalents consist of highly liquid
instruments, time deposits and money market funds with an initial maturity at
purchase of three months or less. The fair value of cash and cash equivalents
approximates the carrying amount.
The Companys cash position includes
amounts held by foreign subsidiaries and, as a result, the repatriation of
certain cash balances from some of the Companys foreign subsidiaries could
result in additional tax costs in the United States and in certain foreign
jurisdictions. However, these cash balances are generally available without
legal restriction to fund local business operations. In addition, a portion of
the Companys cash balance is held in U.S. dollars by foreign subsidiaries,
whose functional currency is their local currency. Such U.S. dollar balances are
reported on the foreign subsidiaries books, in their functional currency, with
the impact from foreign currency exchange rate differences recorded in other
income, net. The Companys cash holdings were as follows as of June 30:
|
2015 |
|
2014 |
|
U.S. dollar balances held by U.S. dollar functional
currency subsidiaries and at parent |
$ |
221 |
|
$ |
180 |
|
Non-U.S. dollar balances held by non-U.S. dollar
functional currency subsidiaries |
|
142 |
|
|
132 |
|
U.S. dollar balances held by non-U.S. dollar functional
currency subsidiaries |
|
19 |
|
|
12 |
|
Non-U.S. dollar balances held by U.S. dollar functional
currency subsidiaries |
|
|
|
|
5 |
|
Total |
$ |
382 |
|
$ |
329 |
|
|
|
Inventories
Inventories are stated at the lower of
cost or market. When necessary, the Company provides allowances to adjust the
carrying value of its inventory to the lower of cost or market, including any
costs to sell or dispose. Appropriate consideration is given to obsolescence,
excessive inventory levels, product deterioration and other factors in
evaluating net realizable value for the purposes of determining the lower of
cost or market.
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-31 |
Table of
Contents
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Property, Plant and Equipment and
Finite-Lived Intangible Assets
Property, plant and equipment and
finite-lived intangible assets are stated at cost. Depreciation and amortization
expense are calculated by the straight-line method using the estimated useful
lives or lives determined by lease contracts for the related assets. The table
below provides estimated useful lives of property, plant and equipment by asset
classification.
|
Estimated Useful
Lives |
Buildings and leasehold
improvements |
10 - 40 years |
Land improvements |
10 - 30
years |
Machinery and equipment |
3 - 15 years |
Computer equipment |
3 - 5
years |
Capitalized software costs |
3 - 7
years |
Property, plant and equipment and
finite-lived intangible assets are reviewed for impairment whenever events or
changes in circumstances occur that indicate that the carrying amount of an
asset (or asset group) may not be fully recoverable. The risk of impairment is
initially assessed based on an estimate of the undiscounted cash flows at the
lowest level for which identifiable cash flows exist. Impairment occurs when the
book value of the asset exceeds the estimated future undiscounted cash flows
generated by the asset. When impairment is indicated, an impairment charge is
recorded for the difference between the book value of the asset and its
estimated fair market value. Depending on the asset, estimated fair market value
may be determined either by use of a discounted cash flow model or by reference
to estimated selling values of assets in similar condition.
Capitalization of Software Costs
The Company capitalizes certain qualifying
costs incurred in the acquisition and development of software for internal use,
including the costs of the software, materials, consultants, interest and
payroll and payroll-related costs for employees during the application
development stage. Internal and external costs incurred during the preliminary
project stage and post implementation-operation stage, mainly training and
maintenance costs, are expensed as incurred. Once the application is
substantially complete and ready for its intended use, qualifying costs are
amortized on a straight-line basis over the softwares useful life.
Impairment Review of Goodwill and
Indefinite-Lived Intangible Assets
The Company tests its goodwill, trademarks
with indefinite lives and other indefinite-lived intangible assets annually for
impairment in the fiscal fourth quarter unless there are indications during a
different interim period that these assets may have become impaired.
With respect to goodwill, the Company has
the option to first assess qualitative factors such as maturity and stability of
the reporting unit, magnitude of excess fair value over book value from the
prior years impairment testing, other reporting unit specific operating results
as well as new events and circumstances impacting the operations at the
reporting unit level. If the result of a qualitative test indicates a potential
for impairment of a reporting unit, a quantitative test is performed. The
quantitative test is a two-step process. In the first step, the Company compares
the estimated fair value of the reporting unit to its carrying value. In all
instances, the estimated fair value exceeded the carrying value of the reporting
unit. Had the estimated fair value of any reporting unit been less than its
carrying value, the Company would have performed a second step to determine the
implied fair value of the reporting units goodwill. If the carrying amount of a
reporting units goodwill had exceeded its implied fair value, an impairment
charge would have been recorded for the difference between the carrying amount
and the implied fair value of the reporting units goodwill.
To determine the fair value of a reporting
unit as part of its quantitative test, the Company uses a discounted cash flow
(DCF) approach, as it believes that this approach is the most reliable indicator
of the fair value of its businesses and the fair value of their future earnings
and cash flows. Under this approach, the Company estimates the future cash flows
of each reporting unit and discounts these cash flows at a rate of return that
reflects their relative risk. The cash flows
B-32 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
used in the DCF are consistent with those
the Company uses in its internal planning, which gives consideration to actual
business trends experienced, and the broader business strategy for the long
term. The other key estimates and factors used in the DCF include, but are not
limited to, future sales volumes, revenue and expense growth rates, changes in
working capital, foreign exchange rates, currency devaluation, inflation and a
perpetuity growth rate. Changes in such estimates or the application of
alternative assumptions could produce different results.
For trademarks and other intangible assets
with indefinite lives, the Company performs a quantitative analysis to test for
impairment and compares the estimated fair value of an asset to its carrying
amount. If the carrying amount of such asset exceeds its estimated fair value,
an impairment charge is recorded for the difference between the carrying amount
and the estimated fair value. The Company uses the income approach to estimate
the fair value of its trademarks and other intangible assets with indefinite
lives. This approach requires significant judgments in determining both the
assets estimated cash flows as well as the appropriate discount and foreign
exchange rates applied to those cash flows to determine fair value. Changes in
such estimates or the use of alternative assumptions could produce different
results.
Stock-based
Compensation
The Company grants various nonqualified
stock-based compensation awards to eligible employees, including stock options
and performance units.
For stock options, the Company estimates
the fair value of each award on the date of grant using the Black-Scholes
valuation model, which requires management to make estimates regarding expected
option life, stock price volatility and other assumptions. Groups of employees
that have similar historical exercise behavior are considered separately for
valuation purposes. The Company estimates stock option forfeitures based on
historical data for each employee grouping. The total number of stock options
expected to vest is adjusted by actual and estimated forfeitures. Changes to the
actual and estimated forfeitures will result in a cumulative catch-up adjustment
in the period of change. Compensation expense is recorded by amortizing the
grant date fair values on a straight-line basis over the vesting period,
adjusted for estimated forfeitures.
The Companys performance unit grants
provide for the issuance of common stock to certain managerial staff and
executive management if the Company achieves specified performance targets. The
performance period is three years and the payout determination is made at the
end of the three-year performance period. The fair value of each grant issued is
estimated on the date of grant based on the current market price of the stock.
The total amount of compensation expense recognized reflects estimated
forfeiture rates and the initial assumption that performance goals will be
achieved. Compensation expense is adjusted based on managements assessment of
the probability that performance goals will be achieved. If such goals are not
met or it is determined that achievement of performance goals is not probable,
previously recognized compensation expense is trued up in the current period to
reflect the expected payout level. If it is determined that the performance
goals will be exceeded, additional compensation expense is recognized, subject
to a cap of 150% of target.
Cash flows resulting from tax deductions
in excess of the cumulative compensation cost recognized for stock-based payment
arrangements (excess tax benefits) are primarily classified as financing cash
inflows.
Employee Benefits
The Company accounts for its defined
benefit retirement income and retirement health care plans using actuarial
methods.
These methods use an attribution approach that generally spreads plan events
over the service lives or expected lifetime (for frozen plans) of plan
participants. Examples of plan events are plan amendments and changes in
actuarial assumptions such as the expected return on plan assets, discount rate,
rate of compensation increase and certain employee-related factors, such as
retirement age and mortality. The principle underlying the attribution approach
is that employees render service over their employment period on a relatively
smooth basis and, therefore, the statement of earnings effects of retirement
income and retirement health care plans are recognized in the same pattern. One
of the principal assumptions used in the net periodic benefit cost calculation
is the expected return on plan assets. The required use of an expected return on
plan assets may result in recognized pension expense or income that differs from
the actual returns of those plan assets in any given year. Over time, however,
the goal is for the expected
Continues on next page ► |
|
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Table of
Contents
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
long-term returns to approximate the
actual returns and, therefore, the expectation is that the pattern of income and
expense recognition should closely match the pattern of the services provided by
the participants. The Company uses a market-related value method for calculating
plan assets for purposes of determining the amortization of actuarial gains and
losses. The differences between actual and expected returns are recognized in
the net periodic benefit cost calculation over the average remaining service
period or expected lifetime (for frozen plans) of the plan participants using
the corridor approach. Under this approach, only actuarial gains (losses) that
exceed 5% of the greater of the projected benefit obligation or the
market-related value of assets are amortized to pension expense by the Company.
In developing its expected return on plan assets, the Company considers the
long-term actual returns relative to the mix of investments that comprise its
plan assets and also develops estimates of future investment returns by
considering external sources.
The Company recognizes an actuarial-based
obligation at the onset of disability for certain benefits provided to
individuals after employment, but before retirement, that include medical,
dental, vision, life and other benefits.
Environmental Costs
The Company is involved in certain
environmental remediation and ongoing compliance activities. Accruals for
environmental matters are recorded on a site-by-site basis when it is probable
that a liability has been incurred and based upon a reasonable estimate of the
liability. The Companys accruals reflect the anticipated participation of other
potentially responsible parties in those instances where it is probable that
such parties are legally responsible and financially capable of paying their
respective shares of the relevant costs. These accruals are adjusted
periodically as assessment and remediation efforts progress or as additional
technical or legal information become available. Actual costs to be incurred at
identified sites in future periods may vary from the estimates, given the
inherent uncertainties in evaluating environmental exposures. The accrual for
environmental matters is included in Other liabilities in the Companys
consolidated balance sheets on an undiscounted basis due to uncertainty
regarding the timing of future payments.
Revenue Recognition
Sales are recognized as revenue when the
risk of loss and title pass to the customer and when all of the following have
occurred: a firm sales arrangement exists, pricing is fixed or determinable and
collection is reasonably assured. Sales are recorded net of allowances for
returns, trade promotions, coupons and other discounts. The Company routinely
commits to one-time or ongoing trade-promotion programs with customers and
consumer coupon programs that require the Company to estimate and accrue the
expected costs of such programs. Programs include shelf price reductions,
end-of-aisle or in-store displays of the Companys products and graphics and
other trade-promotion activities conducted by the customer. Coupons are
recognized as a liability when distributed based upon expected consumer
redemptions. The Company maintains liabilities related to these programs for the
estimated expenses incurred, but not paid, at the end of each period.
Trade-promotion and coupon redemption costs are recorded as a reduction of
sales.
The Company provides an allowance for
doubtful accounts based on its historical experience and ongoing assessment of
its customers credit risk. Receivables were presented net of an allowance for
doubtful accounts of $4 and $3 as of June 30, 2015 and 2014, respectively.
Receivables, net, included non-customer receivables of $12 and $15 as of June
30, 2015 and 2014, respectively.
Cost of Products Sold
Cost of products sold represents the costs
directly related to the manufacture and distribution of the Companys products
and primarily includes raw materials, packaging, contract packer fees, shipping
and handling, warehousing, package design, depreciation, amortization, direct
and indirect labor and operating costs for the Companys manufacturing and
distribution facilities including salary, benefit costs and incentive
compensation, and royalties and amortization related to the Companys Glad
Venture Agreement (see Note 9).
Costs associated with developing and
designing new packaging are expensed as incurred and include design, artwork,
films and labeling. Expenses for fiscal years ended June 30, 2015, 2014 and 2013
were $11, $12 and $10, respectively, all of which were reflected in cost of
products sold or discontinued operations, as appropriate, in the consolidated
statements of earnings.
B-34 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Selling and Administrative
Expenses
Selling and administrative expenses
represent costs incurred by the Company in generating revenues and managing the
business and include market research, commissions and certain administrative
expenses. Administrative expenses include salary, benefits, incentive
compensation, professional fees and services, software and licensing fees and
other operating costs associated with the Companys non-manufacturing,
non-research and development staff, facilities and equipment.
Advertising and Research and
Development Costs
The Company expenses advertising and
research and development costs in the period incurred.
Income Taxes
The Company uses the asset and liability
method to account for income taxes. Deferred tax assets and liabilities are
recognized for the anticipated future tax consequences attributable to
differences between financial statement amounts and their respective tax bases.
Management reviews the Companys deferred tax assets to determine whether their
value can be realized based upon available evidence. A valuation allowance is
established when management believes that it is more likely than not that some
portion of its deferred tax assets will not be realized. Changes in valuation
allowances from period to period are included in the Companys tax provision in
the period of change. In addition to valuation allowances, the Company provides
for uncertain tax positions when such tax positions do not meet certain
recognition thresholds or measurement standards. Amounts for uncertain tax
positions are adjusted in quarters when new information becomes available or
when positions are effectively settled.
U.S. income tax expense and foreign
withholding taxes are provided on unremitted foreign earnings that are not
indefinitely reinvested at the time the earnings are generated. Where foreign
earnings are indefinitely reinvested, no provision for U.S. income or foreign
withholding taxes is made. When circumstances change and the Company determines
that some or all of the undistributed earnings will be remitted in the
foreseeable future, the Company accrues an expense in the current period for
U.S. income taxes and foreign withholding taxes attributable to the anticipated
remittance.
Foreign Currency Transactions and
Translation
Local currencies are the functional
currencies for substantially all of the Companys foreign operations. When the
transactional currency is different than the functional currency, transaction
gains and losses are included as a component of other income, net. In addition,
certain assets and liabilities denominated in currencies different than a
foreign subsidiarys functional currency are reported on the subsidiarys books
in its functional currency, with the impact from exchange rate differences
recorded in other income, net. Assets and liabilities of foreign operations are
translated into U.S. dollars using the exchange rates in effect at the balance
sheet date, while income and expenses are translated at the average monthly
exchange rates during the year.
Gains and losses on foreign currency
translations are reported as a component of other comprehensive income. Deferred
taxes are not provided on cumulative translation adjustments where the Company
expects earnings of a foreign subsidiary to be indefinitely reinvested. The
income tax effect of currency translation adjustments related to foreign
subsidiaries and joint ventures for which earnings are not considered
indefinitely reinvested is recorded as a component of deferred taxes with an
offset to other comprehensive income.
Derivative Instruments
The Companys use of derivative
instruments, principally swaps, futures and forward contracts, is limited to
non-trading purposes and is designed to partially manage exposure to changes in
commodity prices, interest rates and foreign currencies. The Companys contracts
are hedges for transactions with notional amounts and periods consistent with
the related exposures and do not constitute investments independent of these
exposures.
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THE CLOROX
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Table of
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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
The changes in the fair value (i.e., gains
or losses) of a derivative instrument are recorded as either assets or
liabilities in the consolidated balance sheets with an offset to net earnings or
other comprehensive income depending on whether, for accounting purposes, it has
been designated and qualifies as an accounting hedge and, if so, on the type of
hedging relationship. The criteria used to determine if hedge accounting
treatment is appropriate are: (a) formal designation and documentation of the
hedging relationship, the risk management objective and hedging strategy at
hedge inception; (b) eligibility of hedged items, transactions and corresponding
hedging instrument; and (c) effectiveness of the hedging relationship both at
inception of the hedge and on an ongoing basis in achieving the hedging
objectives. For those derivative instruments designated and qualifying as
hedging instruments, the Company must designate the hedging instrument either as
a fair value hedge or as 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 fiscal years ended June 30, 2015, 2014 and 2013, the Company had no
hedging instruments designated as fair value hedges.
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 and reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. From time to time, the Company may have contracts not
designated as hedges for accounting purposes, for which it recognizes changes in
the fair value in other income, net. Cash flows from hedging activities are
classified as operating activities in the consolidated statements of cash flows.
The Company de-designates cash flow hedge
relationships when it determines that the hedge relationships are no longer
highly effective or that the forecasted transaction is no longer probable. Upon
de-designation of a hedge, the portion of gains or losses on the derivative
instrument that was previously accumulated in other comprehensive income remains
in accumulated other comprehensive income until the forecasted transaction is
recognized in net earnings, or is recognized in net earnings immediately if it
is determined that there is any ineffectiveness or the forecasted transaction is
no longer probable.
The Company uses different methodologies,
when necessary, to estimate the fair value of its derivative contracts. The
estimated fair values of the majority of the Companys contracts are based on
quoted market prices, traded exchange market prices, or broker price quotations,
and represent the estimated amounts that the Company would pay or receive to
terminate the contracts.
Recently Issued Accounting
Pronouncements
In April 2015, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03,
Simplifying the Presentation of Debt Issuance Cost, which requires that debt
issuance costs related to a recognized debt liability be presented in the
balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The new guidance is effective for the
Company beginning in the first quarter of fiscal year 2017, with early adoption
permitted. The Company is currently evaluating the impact that adoption of ASU
2015-03 will have on its consolidated financial statements.
In February 2015, the FASB issued ASU No.
2015-02, Amendments to
the Consolidation Analysis, which changes the guidance for evaluating whether
to consolidate certain legal entities. The amendments modify the evaluation of
whether limited partnerships and similar legal entities are variable interest
entities ("VIEs") or voting interest entities. The new guidance is effective for
the Company beginning in the first quarter of fiscal year 2017, with early
adoption permitted. The Company is currently evaluating the impact that adoption
of ASU 2015-02 will have on its consolidated financial statements.
In May 2014, the FASB issued 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
B-36 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
expects to be entitled to receive for
those goods or services. ASU 2014-09 also requires additional disclosures about
the nature, timing and uncertainty of revenue and cash flows arising from
contracts with customers, including information about significant judgments and
changes in judgments. The new guidance is effective for the Company beginning in
the first quarter of fiscal year 2019, with the option to early adopt in the
first quarter of fiscal year 2018. The Company is currently evaluating the
impact that 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 Companys
reporting or disclosures for discontinued operations of Clorox Venezuela or
other previously 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 governments representations, Clorox
Venezuela had expected significant price increases would be forthcoming much
earlier; however, the price increases subsequently approved were insufficient
and would have caused Clorox Venezuela to continue operating at a significant
loss into the foreseeable future. As such, Clorox Venezuela was no longer
financially viable and was forced to discontinue its operations.
On September 26, 2014, the Company
reported that Venezuelan Vice President Jorge Arreaza announced, with
endorsement by President Nicolás Maduro, that the Venezuelan government had
occupied the Santa Lucía and Guacara production facilities of Clorox Venezuela.
On November 6, 2014, the Company reported that the Venezuelan government had
published a resolution granting a government-sponsored Special Administrative
Board full authority to restart and operate the business of Clorox Venezuela,
thereby reaffirming the government's expropriation of Clorox Venezuelas 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 Companys
consolidated financial statements. The results of Clorox Venezuela have
historically been part of the International reportable segment.
Net sales for Clorox Venezuela were $11,
$77 and $90 for the fiscal years ended June 30, 2015, 2014 and 2013,
respectively.
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|
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Table of
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NOTE 2. DISCONTINUED OPERATIONS
(Continued)
The following table provides a summary of
(losses) gains from discontinued operations for Clorox Venezuela and gains
(losses) from discontinued operations other than Clorox Venezuela for the years
ended June 30:
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
Operating (losses) earnings from Clorox Venezuela before income
taxes |
|
|
$ |
(6 |
) |
|
|
$ |
(23 |
) |
|
|
$ |
1 |
|
|
|
Exit costs and
other related expenses for Clorox Venezuela |
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total losses from Clorox Venezuela before income taxes |
|
|
|
(84 |
) |
|
|
|
(23 |
) |
|
|
|
1 |
|
|
|
Income tax
benefit attributable to Clorox Venezuela |
|
|
|
29 |
|
|
|
|
6 |
|
|
|
|
|
|
|
|
Total (losses) gains from Clorox Venezuela, net of tax |
|
|
|
(55 |
) |
|
|
|
(17 |
) |
|
|
|
1 |
|
|
|
Gains (losses)
from discontinued operations other than Clorox Venezuela, net of
tax |
|
|
|
29 |
|
|
|
|
(4 |
) |
|
|
|
(2 |
) |
|
|
Losses from discontinued operations, net of tax |
|
|
$ |
(26 |
) |
|
|
$ |
(21 |
) |
|
|
$ |
(1 |
) |
|
|
Unrelated to Clorox Venezuela, in the
fiscal year ended June 30, 2015, $32 of gross unrecognized tax benefits relating
to other discontinued operations for periods prior to fiscal year 2015 were
recognized upon the expiration of the applicable statute of limitations.
Recognition of these previously disclosed tax benefits had no impact on the
Companys cash flow or earnings from continuing operations for the fiscal years
ended June 30, 2015, 2014 and 2013. (See Note 17.)
Summary of Operating Losses, Asset
Charges and Other Costs
The following provides a breakdown of
(losses) gains from discontinued operations for Clorox Venezuela and gains from
discontinued operations other than Clorox Venezuela for the fiscal year ended
June 30:
|
|
2015 |
|
|
Operating losses from Clorox Venezuela before income
taxes |
|
$ |
(6 |
) |
|
Net
asset charges: |
|
|
|
|
|
Inventories |
|
|
(11 |
) |
|
Property, plant
and equipment |
|
|
(16 |
) |
|
Trademark and
other intangible assets |
|
|
(6 |
) |
|
Other
assets |
|
|
(2 |
) |
|
Other exit and business termination costs: |
|
|
|
|
|
Severance |
|
|
(3 |
) |
|
Recognition of
deferred foreign currency translation loss |
|
|
(30 |
) |
|
Other |
|
|
(10 |
) |
|
Total losses from Clorox Venezuela before income
taxes |
|
|
(84 |
) |
|
Income tax benefit attributable to Clorox
Venezuela |
|
|
29 |
|
|
Total losses from Clorox Venezuela, net of
tax |
|
|
(55 |
) |
|
Gains from discontinued operations other than Clorox
Venezuela, net of tax |
|
|
29 |
|
|
Losses from discontinued operations, net of
tax |
|
$ |
(26 |
) |
|
|
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 (losses) income.
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.
B-38 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTE 2. DISCONTINUED OPERATIONS
(Continued)
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. 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 that no goodwill should be
allocated to the Clorox Venezuela component and that there were no indicators of
impairment within the remaining Latin America reporting unit. Based on the
results of the annual impairment test performed in the fourth quarter of fiscal
year 2015, the fair value of the Latin America reporting unit exceeded its
recorded value by approximately 79%.
Financial Reporting: Hyperinflation
and the Selection of Exchange Rates
Due to a sustained inflationary
environment, the financial statements of Clorox Venezuela are consolidated under
the rules governing the preparation of financial statements in a highly
inflationary economy. As such, Clorox Venezuelas 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 now reflected in
discontinued operations.
Subsequent to Clorox Venezuela
discontinuing operations in September 2014, the Venezuelan government has
continued to evolve its currency exchange mechanisms; however, these changes
have not had a material impact on the Companys financial results because the
balance of net bolivar assets and liabilities on the local books of Clorox
Venezuela was $0 as of June 30, 2015. As of June 30, 2014, the local books of
Clorox Venezuela carried a net asset position of $42. In addition, as of June
30, 2015 and 2014, the Company held $13 and $17, respectively, of tax asset
balances related to Clorox Venezuela in Corporate in the reconciliation of the
results of the Companys reportable segments to consolidated
results.
NOTE 3. INVENTORIES
Inventories consisted of the following as
of June 30:
|
|
2015 |
|
|
2014 |
|
|
Finished goods |
|
$ |
316 |
|
|
$ |
312 |
|
|
Raw
materials and packaging |
|
|
101 |
|
|
|
108 |
|
|
Work in process |
|
|
3 |
|
|
|
2 |
|
|
LIFO
allowances |
|
|
(35 |
) |
|
|
(36 |
) |
|
Total |
|
$ |
385 |
|
|
$ |
386 |
|
|
|
The last-in, first-out (LIFO) method was
used to value approximately 38% and 34% of inventories as of June 30, 2015 and
2014, respectively. The carrying values for all other inventories, including
inventories of all international businesses, are determined on the first-in,
first-out (FIFO) method. The effect on earnings of the liquidation of LIFO
layers was a benefit of $0, $2 and $3 for the fiscal years ended June 30, 2015,
2014 and 2013, respectively.
The Company had inventory consigned to
others of $2 and $4 as of June 30, 2015 and 2014, respectively.
NOTE 4. OTHER CURRENT
ASSETS
Other current assets consisted of the
following as of June 30:
|
|
2015 |
|
2014 |
|
Deferred tax assets |
|
$ |
99 |
|
$ |
81 |
|
Prepaid expenses |
|
|
39 |
|
|
42 |
|
Other |
|
|
5 |
|
|
11 |
|
Total |
|
$ |
143 |
|
$ |
134 |
|
|
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THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-39 |
Table of
Contents
NOTE 4. OTHER CURRENT ASSETS
(Continued)
As of June 30, 2015 and 2014, Other in the
table above included $3 and $9 of restricted cash, respectively. As of June 30,
2015 and 2014, the Company had restricted cash of $3 and $3, respectively, held
in escrow related to fiscal year 2012 acquisitions. Additionally, as of June 30,
2015 and 2014, restricted cash of $0 and $5, respectively, was held by a foreign
subsidiary as a prepayment received for intercompany services.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT,
NET
The components of property, plant and
equipment, net, consisted of the following as of June 30:
|
|
2015 |
|
|
2014 |
|
|
Machinery and equipment |
|
$ |
1,608 |
|
|
$ |
1,593 |
|
|
Buildings |
|
|
515 |
|
|
|
506 |
|
|
Capitalized software costs |
|
|
371 |
|
|
|
374 |
|
|
Land
and improvements |
|
|
122 |
|
|
|
122 |
|
|
Construction in progress |
|
|
65 |
|
|
|
79 |
|
|
Computer equipment |
|
|
76 |
|
|
|
79 |
|
|
|
|
|
2,757 |
|
|
|
2,753 |
|
|
Less: accumulated depreciation and
amortization |
|
|
(1,839 |
) |
|
|
(1,776 |
) |
|
Total |
|
$ |
918 |
|
|
$ |
977 |
|
|
|
Included in Machinery and equipment above
are $12 and $0 of equipment under capital leases as of June 30, 2015 and 2014,
respectively. Accumulated depreciation for assets under capital leases was $2
and $0 as of June 30, 2015 and 2014, respectively.
Included in Land and improvements above
are $2 and $0 of asset retirement obligations as of June 30, 2015 and 2014,
respectively, for two leased properties. The liability of $2 incurred in fiscal
year 2015 was recorded in Other liabilities.
Depreciation and amortization expense
related to property, plant and equipment, net, was $157, $161 and $162 in fiscal
years 2015, 2014 and 2013, respectively, which includes depreciation of assets
under capital leases. This also includes amortization of capitalized software of
$19, $22 and $21 in fiscal years 2015, 2014 and 2013, respectively.
Non-cash capital expenditures were $18, $0
and $0 in fiscal years 2015, 2014 and 2013, respectively.
NOTE 6. GOODWILL, TRADEMARKS AND OTHER
INTANGIBLE ASSETS
The changes in the carrying amount of
goodwill by reportable segment for the fiscal years ended June 30, 2015 and 2014
were as follows:
|
|
Goodwill |
|
|
Cleaning |
|
Lifestyle |
|
Household |
|
International |
|
|
Total |
|
Balance June 30, 2013 |
|
|
$323 |
|
|
$244 |
|
|
$85 |
|
|
$453 |
|
|
$1,105 |
|
Effect of foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
(4 |
) |
Balance June 30, 2014 |
|
|
323 |
|
|
244 |
|
|
85 |
|
|
449 |
|
|
1,101 |
|
Effect of foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
(34 |
) |
|
(34 |
) |
Balance June 30, 2015 |
|
|
$323 |
|
|
$244 |
|
|
$85 |
|
|
$415 |
|
|
$1,067 |
|
|
During the fourth quarter of fiscal years
2015, 2014 and 2013, the Company completed its annual impairment tests of
goodwill and no instances of impairment were identified.
B-40 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTE 6. GOODWILL, TRADEMARKS AND OTHER
INTANGIBLE ASSETS (Continued)
The changes in the carrying amount of
trademarks and other intangible assets for the fiscal years ended June 30, 2015
and 2014 were as follows:
|
|
|
As of June 30, 2015 |
|
As of June 30, 2014 |
|
|
|
|
Gross carrying amount |
|
Accumulated amortization |
|
Net carrying amount |
|
Gross carrying amount |
|
Accumulated amortization |
|
Net carrying amount |
|
|
Trademarks not subject to amortization |
|
|
$ |
524 |
|
|
$ |
|
|
|
$ |
524 |
|
|
$ |
533 |
|
|
$ |
|
|
|
$ |
533 |
|
|
Trademarks
subject to amortization |
|
|
|
33 |
|
|
|
22 |
|
|
|
11 |
|
|
|
36 |
|
|
|
22 |
|
|
|
14 |
|
|
Other intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology and product
formulae |
|
|
|
137 |
|
|
|
133 |
|
|
|
4 |
|
|
|
139 |
|
|
|
129 |
|
|
|
10 |
|
|
Other |
|
|
|
188 |
|
|
|
142 |
|
|
|
46 |
|
|
|
194 |
|
|
|
140 |
|
|
|
54 |
|
|
Total |
|
|
$ |
882 |
|
|
$ |
297 |
|
|
$ |
585 |
|
|
$ |
902 |
|
|
$ |
291 |
|
|
$ |
611 |
|
|
Amortization expense relating to our
intangible assets was $12, $15 and $15 for the years ended June 30, 2015, 2014
and 2013, respectively. Estimated amortization expense for these intangible
assets is $8, $8, $7, $7 and $6 for fiscal years 2016, 2017, 2018, 2019 and
2020, respectively.
In the first quarter of fiscal year 2015,
the Company recorded impairment of trademarks and other intangible assets of $6
related to the discontinuation of operations in Venezuela. This amount is
included as part of losses from discontinued operations, net of tax.
In fiscal year 2014, as a result of the
effective devaluation of the Venezuelan currency in the third quarter, the
Company assessed whether recorded values of intangible assets attributable to
the Venezuela subsidiary and goodwill of the reporting unit that included
Venezuela were impaired. As a result of its assessment, the Company identified
indications of impairment and recorded noncash tax deductible impairment charges
on trademark values totaling $4, which is reflected in the International
reportable segment. Of this amount, $3 is related to continuing operations and
is reflected in Other income, net and $1 is related to trademarks held on the
books of Clorox Venezuela and is reflected in losses from discontinued
operations, net. The Company used the income approach to estimate the fair value
of the trademarks, and as such, the fair value measurement was classified as
Level 3. For a further discussion of Clorox Venezuelas intangible and other
asset balances, see Note 2.
In fiscal year 2014, the Company entered
into an exclusivity agreement with a manufacturer. In connection with the
agreement, the Company recorded an Other intangible asset valued at $4 that will
be amortized over the 7 year term of the agreement. The agreement may be renewed
for an additional 3 years at no cost upon mutual consent.
During the fourth quarter of fiscal years
2015, 2014 and 2013, the Company completed its annual impairment tests of
indefinite-lived intangible assets and no instances of impairment were
identified.
NOTE 7. ACCRUED
LIABILITIES
Accrued liabilities consisted of the
following as of June 30:
|
|
2015 |
|
2014 |
|
Compensation and employee benefit costs |
|
$ |
189 |
|
$ |
102 |
|
Trade and sales promotion |
|
|
115 |
|
|
113 |
|
Dividends |
|
|
103 |
|
|
100 |
|
Royalties |
|
|
16 |
|
|
11 |
|
Insurance |
|
|
15 |
|
|
18 |
|
Interest |
|
|
14 |
|
|
27 |
|
Derivatives |
|
|
8 |
|
|
17 |
|
Other |
|
|
88 |
|
|
84 |
|
Total |
|
$ |
548 |
|
$ |
472 |
|
|
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-41 |
Table of
Contents
NOTE 8. DEBT
Notes and loans payable, which mature in
less than one year, included the following as of June 30:
|
|
2015 |
|
2014 |
|
Commercial paper |
|
|
$ |
93 |
|
$ |
141 |
|
Foreign borrowings |
|
|
|
2 |
|
|
2 |
|
Total |
|
|
$ |
95 |
|
$ |
143 |
|
|
|
The weighted average interest rates
incurred on average outstanding notes and loans payable during the fiscal years
ended June 30, 2015, 2014 and 2013, including fees associated with the Companys
undrawn revolving credit facility, were 2.05%, 0.97% and 1.68%, respectively.
The weighted average effective interest rates on commercial paper balances as of
June 30, 2015 and 2014, were 0.39% and 0.28%, respectively.
Long-term debt, carried at face value net
of unamortized discounts or premiums, included the following as of June 30:
|
|
|
2015 |
|
|
2014 |
|
|
|
Senior unsecured notes and debentures: |
|
|
|
|
|
|
|
|
|
|
5.00%, $575 due January
2015 |
|
$ |
|
|
|
$ |
575 |
|
|
|
3.55%, $300 due November
2015 |
|
|
300 |
|
|
|
300 |
|
|
|
5.95%, $400 due October
2017 |
|
|
399 |
|
|
|
399 |
|
|
|
3.80%, $300 due November
2021 |
|
|
298 |
|
|
|
298 |
|
|
|
3.05%, $600 due September
2022 |
|
|
599 |
|
|
|
598 |
|
|
|
3.50%, $500 due December
2024 |
|
|
500 |
|
|
|
|
|
|
|
Total |
|
|
2,096 |
|
|
|
2,170 |
|
|
|
Less: Current maturities of long-term debt |
|
|
(300 |
) |
|
|
(575 |
) |
|
|
Long-term
debt |
|
$ |
1,796 |
|
|
$ |
1,595 |
|
|
|
The weighted average interest rates
incurred on average outstanding long-term debt during the fiscal years ended
June 30, 2015, 2014 and 2013, were 4.44%, 4.56% and 4.76%, respectively. The
weighted average effective interest rates on long-term debt balances as of June
30, 2015 and 2014, were 4.31% and 4.56%, respectively.
In January 2015, $575 of the Companys
senior notes with an annual fixed interest rate of 5.00% became due and were
repaid using the net proceeds from the December 2014 debt issuance and
commercial paper borrowings.
In December 2014, under a 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 (see Note 10). The notes rank
equally with all of the Companys existing senior indebtedness.
In March 2013, $500 in senior notes with
an annual fixed interest rate of 5.00% became due and were repaid. The repayment
was funded in part with commercial paper borrowings and in part with a portion
of the proceeds from the sale-leaseback transaction of the Companys Oakland,
Calif., general office building (see Note 9).
In October 2012, $350 in senior notes with
an annual fixed interest rate of 5.45% became due and were repaid. The repayment
was funded with a portion of the proceeds from the September 2012 issuance of
$600 in senior notes with an annual fixed interest rate of 3.05%, payable
semi-annually in March and September, and a maturity date of September 15, 2022.
The remaining proceeds from the September 2012 issuance were used to repay
commercial paper. The September 2012 notes were issued under the Companys shelf
registration statement filed in November 2011 and rank equally with all of the
Companys existing senior indebtedness.
B-42 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of
Contents
Appendix B
NOTE 8. DEBT (Continued)
The Companys borrowing capacity under
other financing arrangements as of June 30 was as follows:
|
|
|
2015 |
|
2014 |
|
|
Revolving credit facility |
|
$ |
1,100 |
|
$ |
1,100 |
|
|
Foreign credit
lines |
|
|
11 |
|
|
31 |
|
|
Other credit lines |
|
|
18 |
|
|
13 |
|
|
Total |
|
$ |
1,129 |
|
$ |
1,144 |
|
|
As of June 30, 2015, the Company had a
$1,100 revolving credit agreement (the Credit Agreement), which expires in
October 2019. The Credit Agreement replaced a prior $1,100 revolving credit
agreement in place since May 2012. There were no borrowings under the Credit
Agreement as of June 30, 2015 or 2014, and the Company believes that borrowings
under the Credit Agreement are and will continue to be available for general
corporate purposes. The agreement includes certain restrictive covenants and
limitations, with which the Company was in compliance as of June 30,
2015.
Of the $29 of foreign and other credit
lines as of June 30, 2015, $4 was outstanding and the remainder of $25 was
available for borrowing. Of the $44 of foreign and other credit lines as of June
30, 2014, $5 was outstanding and the remainder of $39 was available for
borrowing. As of June 30, 2014, $7 of the foreign credit lines related to Clorox
Venezuela, of which $1 was outstanding.
Long-term debt maturities as of June 30,
2015, are $300, $0, $400, $0, $0 and $1,400 in fiscal years 2016, 2017, 2018,
2019, 2020 and thereafter, respectively.
NOTE 9. OTHER
LIABILITIES
Other liabilities consisted of the
following as of June 30:
|
|
2015 |
|
2014 |
|
|
Employee benefit obligations |
|
$ |
299 |
|
$ |
289 |
|
|
Venture
agreement net terminal obligation |
|
|
294 |
|
|
290 |
|
|
Taxes |
|
|
38 |
|
|
76 |
|
|
Other |
|
|
119 |
|
|
113 |
|
|
Total |
|
$ |
750 |
|
$ |
768 |
|
|
Venture Agreement
The Company has an agreement with The
Procter & Gamble Company (P&G) for its Glad® plastic bags,
wraps and containers business. The Company maintains a net terminal obligation
liability, which reflects the estimated value of the contractual requirement to
repurchase P&Gs interest at the termination of the agreement. As of June
30, 2015 and 2014, P&G had a 20% interest in the venture. The Company pays a
royalty to P&G for its interest in the profits, losses and cash flows, as
contractually defined, of the Glad® business, which is included in
cost of products sold.
The agreement, entered into in 2003, has a
20-year term, with a 10-year renewal option by mutual agreement and can be
terminated under certain circumstances, including at P&Gs option upon a
change in control of the Company or, at either partys option, upon the sale of
the Glad® business by the Company. Upon termination of the agreement,
the Company will purchase P&Gs interest for cash at fair value as
established by predetermined valuation procedures. Following termination, the
Glad® business will retain the exclusive core intellectual property
licenses contributed by P&G on a royalty-free basis for the licensed
products marketed.
Continues on next page ► |
|
|
|
THE CLOROX
COMPANY - 2015 Proxy Statement
|
B-43 |
Table of
Contents
NOTE 9. OTHER LIABILITIES
(Continued)
Deferred Gain on Sale-leaseback
Transaction
In December 2012, the Company completed a
sale-leaseback transaction under which it sold its general office building in
Oakland, Calif. to an unrelated third party for net proceeds of $108 and entered
into a 15-year operating lease agreement with renewal options with the buyer for
a portion of the building. The Company deferred recognition of the portion of
the total gain on the sale that was equivalent to the present value of the lease
payments and will continue to amortize such amount to earnings ratably over the
lease term. As of June 30, 2015 and 2014, the long-term portion of the deferred
gain of $40 and $43, respectively, was included in Other in the table above.
NOTE 10. 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 three categories
of the fair value hierarchy:
Level 1: Quoted market prices in active
markets for identical assets or liabilities.
Level 2: Observable
market-based inputs or unobservable inputs that are corroborated by market
data.
Level 3:
Unobservable inputs reflecting the reporting entitys own assumptions.
As of June 30, 2015 and 2014, the
Companys financial assets and liabilities that were measured at fair value on a
recurring basis during the period included derivative financial instruments,
which were all classified as Level 2, and trust assets to fund certain of the
Companys 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 June 30, 2015, the notional amount
of commodity derivatives was $47, of which $27 related to jet fuel swaps and $20
related to soybean oil futures. As of June 30, 2014, the notional amount of
commodity derivatives was $36, of which $19 related to jet fuel swaps and $17
related to soybean oil futures.
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 June 30, 2015 and 2014, the notional
amount of interest rate forward contracts was $0 and $288, respectively.
B-44 THE CLOROX
COMPANY - 2015 Proxy
Statement
Table of Contents
Appendix B
NOTE 10. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
During fiscal year 2015, the
Company paid $25 to settle interest rate forward contracts related to the
December 2014 issuance of $500 in senior notes. The settlement payments are
reflected as operating cash flows in the consolidated statements of cash flows
for the fiscal year ended June 30, 2015. The loss is reflected in accumulated
other comprehensive net loss on the consolidated balance sheet as of
June 30, 2015, and will be amortized into interest expense on the consolidated
statements of earnings 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 Companys forecasted foreign currency exposure
associated with the purchase of inventory and certain intercompany transactions.
These foreign currency contracts generally have durations of no longer than 16
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 Companys
subsidiaries in Canada, Australia and New Zealand to hedge forecasted purchases
of inventory were $64, $35 and $6, respectively, as of June 30, 2015, and $54,
$28 and $5, respectively, as of June 30, 2014.
Counterparty Risk
Management
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 $8 and $17 of the derivative instruments reflected in accrued
liabilities as of June 30, 2015 and 2014, respectively, $8 and $11,
respectively, contained such terms. As of both June 30, 2015 and 2014, neither
the Company nor any counterparty was required to post any collateral.
Certain terms of the
agreements governing the Companys over-the-counter derivative instruments
require the credit ratings, as assigned by Standard & Poors and Moodys 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 Companys 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 June 30, 2015 and
2014, the Company and each of its counterparties had been assigned investment
grade ratings by both Standard & Poors and Moodys.
Certain of the Companys
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 Companys broker for trades conducted on that
exchange. As of June 30, 2015 and June 30, 2014, the Company maintained cash
margin balances related to exchange-traded futures contracts of $2 and $1,
respectively, which are classified as Other current assets on the consolidated
balance sheets.
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-45 |
Table of Contents
NOTE 10. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
Fair Value of Financial
Instruments
The following table summarizes
the Companys assets and liabilities that were measured at fair value in the
consolidated balance sheets as of June 30:
|
|
|
|
|
|
2015 |
|
2014 |
|
|
Balance
sheet classification |
|
Fair
value hierarchy level |
|
Carrying Amount |
|
Estimated Fair Value |
|
Carrying Amount |
|
Estimated Fair Value |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments including money market funds(a) |
|
Cash and cash
equivalents |
|
1 |
|
|
$ |
212 |
|
|
$ |
212 |
|
|
$ |
150 |
|
|
$ |
150 |
|
Time deposits(a) |
|
Cash and cash equivalents |
|
2 |
|
|
|
84 |
|
|
|
84 |
|
|
|
75 |
|
|
|
75 |
|
Foreign exchange derivative contracts |
|
Other current
assets |
|
2 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Other current assets |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity purchase derivative contracts |
|
Other current
assets |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Trust assets for nonqualified
deferred compensation plans |
|
Other assets |
|
1 |
|
|
|
38 |
|
|
|
38 |
|
|
|
31 |
|
|
|
31 |
|
|
|
|
|
|
|
|
$ |
335 |
|
|
$ |
335 |
|
|
$ |
257 |
|
|
$ |
257 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity purchase derivative contracts |
|
Accrued
liabilities |
|
2 |
|
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
1 |
|
|
$ |
1 |
|
Interest rate derivative
contracts |
|
Accrued liabilities |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
13 |
|
Foreign exchange derivative contracts |
|
Accrued
liabilities |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
Commodity purchase derivative
contracts |
|
Other liabilities |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and loans payable(b) |
|
Notes and loans
payable |
|
2 |
|
|
|
95 |
|
|
|
95 |
|
|
|
143 |
|
|
|
143 |
|
Long-term debt(c) |
|
Other liabilities |
|
2 |
|
|
|
2,096 |
|
|
|
2,137 |
|
|
|
2,170 |
|
|
|
2,265 |
|
|
|
|
|
|
|
|
$ |
2,199 |
|
|
$ |
2,240 |
|
|
$ |
2,330 |
|
|
$ |
2,425 |
|
|
(a) |
|
Cash equivalents are
composed of time deposits and other interest bearing investments including
money market funds with original maturity dates of 90 days or less. Cash
equivalents are recorded at cost, which approximates fair
value. |
(b) |
|
Short-term debt is
composed of U.S. commercial paper and/or other similar short-term debts
issued by non-U.S. subsidiaries, all of which are recorded at cost, which
approximates fair value. |
(c) |
|
Long-term debt, which
is recorded at cost, includes the current portion of debt instruments,
which approximates fair value. The fair value of long-term debt was
determined using secondary market prices quoted by corporate bond dealers,
and was classified as Level 2. |
Derivatives
The Company designates its
commodity forward and future contracts for forecasted purchases of raw
materials, interest rate forward contracts for forecasted interest payments, and
foreign currency forward contracts for forecasted purchases of inventory as cash
flow hedges.
The effects of derivative
instruments designated as hedging instruments on other comprehensive net
(losses) income and the consolidated statements of earnings and the consolidated
statements of comprehensive income were as follows during the fiscal years ended
June 30:
|
|
Gains (losses) recognized in
other comprehensive net loss |
|
Gains (losses) reclassified from
accumulated other comprehensive net loss and recognized in earnings |
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
Commodity purchase derivative
contracts |
|
|
|
$ |
(13 |
) |
|
|
$ |
2 |
|
|
|
$ |
(1 |
) |
|
|
|
$ |
(5 |
) |
|
|
$ |
|
|
|
|
$ |
|
|
|
Interest rate derivative contracts |
|
|
|
|
(12 |
) |
|
|
|
(13 |
) |
|
|
|
(1 |
) |
|
|
|
|
(5 |
) |
|
|
|
(4 |
) |
|
|
|
(3 |
) |
|
Foreign exchange derivative
contracts |
|
|
|
|
7 |
|
|
|
|
(3 |
) |
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
4 |
|
|
|
|
|
|
|
Total |
|
|
|
$ |
(18 |
) |
|
|
$ |
(14 |
) |
|
|
$ |
1 |
|
|
|
|
$ |
(7 |
) |
|
|
$ |
|
|
|
|
$ |
(3 |
) |
|
|
B-46 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 10. FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Continued)
The gains (losses)
reclassified from accumulated other comprehensive net (losses) income and
recognized in earnings during the fiscal years ended June 30, 2015, 2014 and
2013, for commodity purchase and foreign exchange contracts were included in
cost of products sold. The losses reclassified from accumulated other
comprehensive net (losses) income and recognized in earnings during the fiscal
years ended June 30, 2015, 2014 and 2013, for interest rate contracts were
included in interest expense.
The estimated amount of the
existing net loss in accumulated other comprehensive net (losses) income as of
June 30, 2015, which is expected to be reclassified into earnings within the
next twelve 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 each of
the fiscal years ended June 30, 2015, 2014 and 2013, hedge ineffectiveness was
not significant.
Trust Assets
The Company has held interests
in mutual funds and cash equivalents as part of trust assets related to certain
of its nonqualified deferred compensation plans. The 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
consolidated balance sheets. The interests in mutual funds are measured at fair
value using quoted market prices. The Company has designated these
marketable securities as trading investments. 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 value of the trust assets
related to certain of the Companys nonqualified deferred compensation plans
increased by $7 as compared to June 30, 2014, primarily due to current quarter
employees contributions to these plans and market returns.
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 $12 and $14 as of June 30, 2015 and
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 June 30, 2015 and 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 Companys 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 Companys 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 Companys 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
Continues on next page
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THE CLOROX COMPANY - 2015 Proxy Statement |
B-47 |
Table of Contents
NOTE 11. OTHER
CONTINGENCIES AND GUARANTEES (Continued)
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 June 30,
2015, was approximately $32.
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 $26.
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 Companys 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
Companys appeal, in December 2014 the same court declined to admit the appeal
based on procedural grounds. The Company successfully appealed that decision and
the court agreed to admit the appeal in March 2015. The appeal is currently
pending and it is possible that a final decision in this case could be issued as
early as the first quarter of fiscal year 2016. Expenses related to this
litigation have been, and any potential additional loss would be, reflected in
discontinued operations, consistent with the Companys 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
Brazils 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,
commercial, administrative, employment claims and other matters. Based on
managements 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
Companys 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 Companys consolidated financial
statements taken as a whole.
The Company had not recorded
any liabilities on the aforementioned indemnifications as of June 30, 2015 and
2014.
As of June 30, 2015, 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.
B-48 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 12. LEASES AND OTHER
COMMITMENTS
The Company leases
transportation and manufacturing equipment, certain information technology
equipment and various manufacturing, warehousing, and office facilities. The
majority of the Companys leases are classified as operating leases, and the
Companys existing contracts will expire by 2027. The Company expects that, in
the normal course of business, existing contracts will be renewed or replaced by
other leases. Rental expense for all operating leases was $76, $71 and $71 in
fiscal years 2015, 2014 and 2013, respectively.
The future minimum annual
lease commitments required under the Companys existing non-cancelable operating
and capital lease agreements as of June 30, 2015, were as follows:
Year |
|
Operating leases |
|
Capital leases |
|
2016 |
|
|
$ |
50 |
|
|
$ |
3 |
|
2017 |
|
|
|
46 |
|
|
|
3 |
|
2018 |
|
|
|
42 |
|
|
|
2 |
|
2019 |
|
|
|
34 |
|
|
|
1 |
|
2020 |
|
|
|
29 |
|
|
|
|
|
Thereafter |
|
|
|
100 |
|
|
|
|
|
Total |
|
|
$ |
301 |
|
|
$ |
9 |
|
|
|
Included within the future
minimum lease commitments for operating leases disclosed above are future
minimum rental payments required under the Companys existing non-cancelable
lease agreements for the corporate headquarters and primary research and
development facility as of June 30, 2015, in the amounts of $6, $7, $7, $7, $7
and $22 in fiscal years 2016, 2017, 2018, 2019, 2020 and thereafter,
respectively.
The Company is also a party to
certain purchase obligations, which are defined as purchase agreements that are
enforceable and legally binding and that contain specified or determinable
significant terms, including quantity, price and the approximate timing of the
transaction. Examples of the Companys purchase obligations include contracts to
purchase raw materials, commitments to contract manufacturers, commitments for
information technology and related services, advertising contracts, capital
expenditure agreements, software acquisition and license commitments and service
contracts. The Company enters into purchase obligations during the regular
course of business based on expectations of future needs. Many of these purchase
obligations contracts are short term in nature and are flexible to allow for
changes in the Companys business and related requirements. As of June 30, 2015,
the Companys purchase obligations totaled $176, $57, $37, $30, $7 and $0 for
fiscal years 2016, 2017, 2018, 2019, 2020 and thereafter,
respectively.
NOTE 13. STOCKHOLDERS
EQUITY
On May 13, 2013, the Companys
board of directors terminated the share repurchase programs previously
authorized on May 13, 2008, and May 18, 2011, and authorized a new share
repurchase program for an aggregate purchase amount of up to $750. This open
market share repurchase program is in addition to the Companys evergreen
repurchase program (Evergreen Program), the purpose of which is to offset the
impact of stock dilution related to stock-based awards. The Evergreen Program
has no authorization limit as to amount or timing of repurchases.
Share repurchases under
authorized programs were as follows during the fiscal years ended June 30:
|
|
2015 |
|
2014 |
|
2013 |
|
|
Amount |
|
Shares (in
000's) |
|
Amount |
|
Shares (in
000's) |
|
Amount |
|
Shares (in
000's) |
|
Open-market purchase programs |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
— |
|
Evergreen
Program |
|
|
|
434 |
|
|
4,016 |
|
|
|
260 |
|
|
3,046 |
|
|
|
128 |
|
|
1,500 |
|
Total |
|
|
$ |
434 |
|
|
4,016 |
|
|
$ |
260 |
|
|
3,046 |
|
|
$ |
128 |
|
|
1,500 |
|
|
Continues on next page
► |
|
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|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-49 |
Table of Contents
NOTE 13. STOCKHOLDERS
EQUITY (Continued)
During fiscal years 2015, 2014
and 2013, the Company declared dividends per share of $2.99, $2.87 and $2.63,
respectively, and paid dividends per share of $2.96, $2.84 and $2.56,
respectively.
Changes in accumulated other
comprehensive net (losses) income by component were as follows for the fiscal
years ended June 30:
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
Foreign currency
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications |
|
|
$ |
(92 |
) |
|
|
$ |
(26 |
) |
|
|
$ |
(16 |
) |
|
Amounts reclassified from accumulated other comprehensive net
losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition of deferred foreign currency translation
loss |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) |
|
|
|
8 |
|
|
|
|
(11 |
) |
|
|
|
5 |
|
|
Foreign currency
adjustments, net of tax |
|
|
$ |
(54 |
) |
|
|
$ |
(37 |
) |
|
|
$ |
(11 |
) |
|
|
|
Net unrealized (losses) gains on
derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
|
$ |
(18 |
) |
|
|
$ |
(15 |
) |
|
|
$ |
1 |
|
|
Amounts reclassified from accumulated other comprehensive net
losses |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
3 |
|
|
Income tax (expense) benefit |
|
|
|
(3 |
) |
|
|
|
6 |
|
|
|
|
(1 |
) |
|
Net unrealized
(losses) gains on derivatives, net of tax |
|
|
$ |
(14 |
) |
|
|
$ |
(9 |
) |
|
|
$ |
3 |
|
|
|
|
Pension and postretirement benefit
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications |
|
|
$ |
(29 |
) |
|
|
$ |
(16 |
) |
|
|
$ |
49 |
|
|
Amounts reclassified from accumulated other comprehensive net
losses |
|
|
|
|
|
|
|
|
8 |
|
|
|
|
10 |
|
|
Income tax benefit (expense) |
|
|
|
12 |
|
|
|
|
4 |
|
|
|
|
(22 |
) |
|
Pension and
postretirement benefit adjustments, net of tax |
|
|
$ |
(17 |
) |
|
|
$ |
(4 |
) |
|
|
$ |
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total changes in other comprehensive
(losses) income, net of tax |
|
|
$ |
(85 |
) |
|
|
$ |
(50 |
) |
|
|
$ |
29 |
|
|
|
Included in foreign currency
adjustments are re-measurement losses on long-term intercompany loans where
settlement is not planned or anticipated in the foreseeable future. For the
fiscal years ended June 30, 2015, 2014 and 2013, other comprehensive losses on
these loans totaled $9, $12 and $1, respectively, and there were no amounts
reclassified from accumulated other comprehensive net (losses)
income.
Pension and postretirement
benefit reclassification adjustments are reflected in cost of products sold and
selling and administrative expenses.
NOTE 14. 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:
|
2015 |
|
2014 |
|
2013 |
|
Basic |
130,310 |
|
129,558 |
|
131,075 |
|
Dilutive effect
of stock options and other |
2,466 |
|
2,184 |
|
1,894 |
|
Diluted |
132,776 |
|
131,742 |
|
132,969 |
|
|
During fiscal years 2015, 2014
and 2013, there were approximately zero stock options and restricted stock units
that were considered antidilutive and excluded from the diluted net EPS
calculation.
B-50 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 15. STOCK-BASED
COMPENSATION PLANS
In November 2012, the
Companys stockholders voted to approve the amended and restated 2005 Stock
Incentive Plan (the Plan). The Plan permits the Company to grant various
nonqualified stock-based compensation awards, including stock options,
restricted stock, performance units, deferred stock units, stock appreciation
rights and other stock-based awards. The primary amendment reflected in the Plan
was an increase of approximately 3 million common shares that may be issued for
stock-based compensation purposes. Pursuant to the Plan, the Company is
authorized to issue up to 7 million common shares. As of June 30, 2015,
approximately 7 million common shares were available for grant under the plan.
Compensation cost and the
related income tax benefit recognized for stock-based compensation plans were
classified as indicated below for the fiscal years ended June 30.
|
|
2015 |
|
2014 |
|
2013 |
|
Cost of products sold |
|
|
$ |
4 |
|
|
$ |
4 |
|
|
$ |
4 |
|
Selling and
administrative expenses |
|
|
|
25 |
|
|
|
29 |
|
|
|
28 |
|
Research and development costs |
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Total
compensation cost |
|
|
$ |
32 |
|
|
$ |
36 |
|
|
$ |
35 |
|
Related income tax
benefit |
|
|
$ |
12 |
|
|
$ |
13 |
|
|
$ |
13 |
|
Cash received during fiscal
years 2015, 2014 and 2013 from stock options exercised under all stock-based
payment arrangements was $230, $86 and $121, respectively. The Company issues
shares for stock-based compensation plans from treasury stock. The Company may
repurchase shares under its Evergreen Program to offset the estimated impact of
share dilution related to stock-based awards (see Note 13).
Details regarding the
valuation and accounting for stock options, restricted stock awards, performance
units and deferred stock units for non-employee directors follow.
Stock Options
The fair value of each stock
option award granted during fiscal years 2015, 2014 and 2013 was estimated on
the date of grant using the Black-Scholes valuation model and assumptions noted
in the following table:
|
2015 |
|
2014 |
|
2013 |
|
Expected life |
5.6 to 5.8 years |
|
5.7 years |
|
5.7 years |
|
Weighted-average
expected life |
5.7 years |
|
5.7 years |
|
5.7 years |
|
Expected volatility |
16.3% to 18.6% |
|
18.4% to 18.5% |
|
18.7% to 19.2% |
|
Weighted-average
volatility |
16.6% |
|
18.5% |
|
19.1% |
|
Risk-free interest rate |
1.4% to 2.0% |
|
1.8% to 1.9% |
|
0.6% to 0.8% |
|
Weighted-average
risk-free interest rate |
1.9% |
|
1.8% |
|
0.7% |
|
Dividend yield |
2.8% to 3.4% |
|
3.4% |
|
3.2%-3.6% |
|
Weighted-average dividend
yield |
3.3% |
|
3.4% |
|
3.6% |
|
The expected life of the stock
options is based on observed historical exercise patterns. Groups of employees
having similar historical exercise behavior are considered separately for
valuation purposes. The Company estimates stock option forfeitures based on
historical data for employee groups. The total number of stock options expected
to vest is adjusted by actual and estimated forfeitures.
The expected volatility is
based on implied volatility from publicly traded options on the Companys stock
at the date of grant, historical implied volatility of the Companys publicly
traded options and other factors. The risk-free interest rate is based on the
implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal
to the expected term of the option. The dividend yield is based on the projected
annual dividend payment per share, divided by the stock price at the date of
grant.
Continues on next page
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|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-51 |
Table of Contents
NOTE 15. STOCK-BASED
COMPENSATION PLANS (Continued)
Details of the Companys stock
option activities are summarized below:
|
Number of Shares (In
thousands) |
|
|
Weighted- Average Exercise Price per
Share |
|
Average Remaining Contractual Life |
|
Aggregate Intrinsic Value |
|
Options outstanding as of June 30,
2014 |
|
10,368 |
|
|
$69 |
|
6 years |
|
$232 |
|
Granted |
|
1,895 |
|
|
91 |
|
|
|
|
|
Exercised |
|
(3,605 |
) |
|
64 |
|
|
|
|
|
Cancelled |
|
(301 |
) |
|
82 |
|
|
|
|
|
Options outstanding as of June 30,
2015 |
|
8,357 |
|
|
$76 |
|
7 years |
|
$236 |
|
Options vested as of June 30,
2015 |
|
4,094 |
|
|
$68 |
|
5 years |
|
$148 |
|
The weighted-average fair
value per share of each option granted during fiscal years 2015, 2014 and 2013,
estimated at the grant date using the Black-Scholes option pricing model was
$9.65, $9.69 and $6.96, respectively. The total intrinsic value of options
exercised in fiscal years 2015, 2014 and 2013 was $140, $42 and $45,
respectively.
Stock option awards
outstanding as of June 30, 2015, have been granted at prices that are equal to
the market value of the stock on the date of grant. Stock option grants
generally vest over four years and expire no later than ten years after the
grant date. The Company recognizes compensation expense ratably over the vesting
period. As of June 30, 2015, there was $17 of total unrecognized compensation
cost related to non-vested options, which is expected to be recognized over a
remaining weighted-average vesting period of one year, subject to forfeiture
changes.
Restricted Stock
Awards
The fair value of restricted
stock awards is estimated on the date of grant based on the market price of the
stock and is amortized to compensation expense on a straight-line basis over the
related vesting periods, which are generally three to four years. The total
number of restricted stock awards expected to vest is adjusted by actual and
estimated forfeitures. Restricted stock grants receive dividend distributions
earned during the vesting period upon vesting.
As of June 30, 2015, there was
$1 of total unrecognized compensation cost related to non-vested restricted
stock awards, which is expected to be recognized over a remaining
weighted-average vesting period of one year. The total fair value of the shares
that vested in each of the fiscal years 2015, 2014 and 2013 was $1. The
weighted-average grant-date fair value of awards granted was $95.67, $89.25 and
$72.28 per share for fiscal years 2015, 2014 and 2013, respectively.
A summary of the status of the
Companys restricted stock awards is presented below:
|
Number
of Shares (In thousands) |
|
|
Weighted-Average Grant Date Fair Value per
Share |
|
Restricted stock awards as of June 30,
2014 |
|
21 |
|
|
$81 |
|
Granted |
|
10 |
|
|
96 |
|
Vested |
|
(8 |
) |
|
78 |
|
Forfeited |
|
(5 |
) |
|
81 |
|
Restricted stock awards as of June 30,
2015 |
|
18 |
|
|
$91 |
|
|
B-52 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 15. STOCK-BASED
COMPENSATION PLANS (Continued)
Performance
Units
The Companys performance unit
grants provide for the issuance of common stock to certain managerial staff and
executive management if the Company achieves certain performance targets. The
performance period is three years and the final payout determination is made at
the end of the three-year performance period. Performance unit grants receive
dividends earned during the vesting period upon vesting.
The fair value of each grant
issued is estimated on the date of grant based on the current market price of
the stock. The total amount of compensation expense recognized reflects actual
and estimated forfeitures, and the initial assumption that performance goals
will be achieved. Compensation expense is adjusted, as necessary, on a quarterly
basis based on managements assessment of the probability that performance goals
will be achieved. If such goals are not met or it is determined that achievement
of performance goals is not probable, any previously recognized compensation
expense is adjusted in the current period to reflect the expected payout level.
If it is determined that the performance goals will be exceeded, additional
compensation expense is recognized, subject to a cap of 150% of the grant day
target.
The number of shares issued will be dependent upon
vesting and the achievement of specified performance targets. As of June 30,
2015, there was $16 in unrecognized compensation cost related to non-vested
performance unit grants that is expected to be recognized over a remaining
weighted-average performance period of one year. The weighted-average grant-date
fair value of awards granted was $89.75, $84.45 and $72.11 per share for fiscal
years 2015, 2014 and 2013, respectively.
A summary of the status of the
Companys performance unit awards is presented below:
|
Number of Shares (In
thousands) |
|
|
Weighted-Average Grant
Date Fair Value per Share |
|
Performance unit awards as of June 30,
2014 |
|
1,221 |
|
|
$73 |
|
Granted |
|
332 |
|
|
90 |
|
Distributed |
|
(349 |
) |
|
68 |
|
Forfeited |
|
(81 |
) |
|
80 |
|
Performance unit awards as of June 30,
2015 |
|
1,123 |
|
|
$79 |
|
Performance units vested and deferred as of
June 30, 2015 |
|
179 |
|
|
$58 |
|
The non-vested performance
units outstanding as of June 30, 2015 and 2014 were 944,000 and 1,053,000,
respectively, and the weighted average grant date fair value was $81.92 and
$74.68 per share, respectively. Total shares vested during fiscal year 2015 were
357,000, which had a weighted average grant date fair value per share of $68.15.
During fiscal year 2015, $23 of the vested awards was paid by the issuance of
shares and $1 of the vested awards was deferred. Deferred shares continue to
earn dividends, which are also deferred. The total fair value of shares vested
was $24, $0 and $14 during fiscal years 2015, 2014 and 2013, respectively. Upon
vesting, the recipients of the grants receive the distribution as shares or, if
previously elected by eligible recipients, as deferred stock.
Deferred Stock Units for
Nonemployee Directors
Nonemployee directors receive
annual grants of deferred stock units under the Companys director compensation
program and can elect to receive all or a portion of their annual retainers and
fees in the form of deferred stock units. The deferred stock units receive
dividend distributions, which are reinvested as deferred stock units, and are
recognized at their fair value on the date of grant. Each deferred stock unit
represents the right to receive one share of the Companys common stock
following the completion of a directors service.
During fiscal year 2015, the
Company granted 14,000 deferred stock units, reinvested dividends of 7,000 units
and distributed 14,000 shares, which had a weighted-average fair value on grant
date of $103.99, $100.59 and $62.82 per share, respectively. As of June 30,
2015, 241,000 units were outstanding, which had a weighted-average fair value on
the grant date of $66.26 per share.
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-53 |
Table of Contents
NOTE 16. OTHER INCOME,
NET
The major components of other
income, net, for the fiscal years ended June 30 were:
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
Income from equity investees |
|
$ |
(14 |
) |
|
|
$ |
(13 |
) |
|
|
$ |
(12 |
) |
|
Low income housing partnership gains, net |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
(2 |
) |
|
Interest income |
|
|
(4 |
) |
|
|
|
(3 |
) |
|
|
|
(3 |
) |
|
Income from transition and related services |
|
|
(1 |
) |
|
|
|
(1 |
) |
|
|
|
(3 |
) |
|
Foreign exchange transaction losses,
net |
|
|
9 |
|
|
|
|
1 |
|
|
|
|
8 |
|
|
Amortization of trademarks and other intangible
assets |
|
|
8 |
|
|
|
|
8 |
|
|
|
|
9 |
|
|
Intangible asset impairment
charges |
|
|
3 |
|
|
|
|
3 |
|
|
|
|
|
|
|
Restructuring charges |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
Insurance and other settlements |
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
Other |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
(1 |
) |
|
Total |
|
$ |
(13 |
) |
|
|
$ |
(10 |
) |
|
|
$ |
(4 |
) |
|
|
Investment 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 Companys
investment balance as of June 30, 2015 and 2014, was $0 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.
In April 2015, a low-income
housing partnership, in which the Company was a limited partner, sold its real
estate holdings. The real property sale resulted in $15 in cash proceeds from
investing activities and a gain of $14 recorded to Other income, net, on the
consolidated statement of earnings for the year ended June 30,
2015.
B-54 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 17. INCOME
TAXES
The provision for income taxes
on continuing operations, by tax jurisdiction, consisted of the following as of
June 30:
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
265 |
|
|
|
$ |
247 |
|
|
|
$ |
245 |
|
|
State |
|
|
28 |
|
|
|
|
34 |
|
|
|
|
23 |
|
|
Foreign |
|
|
38 |
|
|
|
|
45 |
|
|
|
|
19 |
|
|
Total current |
|
|
331 |
|
|
|
|
326 |
|
|
|
|
287 |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(13 |
) |
|
|
|
(19 |
) |
|
|
|
(1 |
) |
|
State |
|
|
(1 |
) |
|
|
|
2 |
|
|
|
|
(2 |
) |
|
Foreign |
|
|
(2 |
) |
|
|
|
(4 |
) |
|
|
|
(5 |
) |
|
Total deferred |
|
|
(16 |
) |
|
|
|
(21 |
) |
|
|
|
(8 |
) |
|
Total |
|
$ |
315 |
|
|
|
$ |
305 |
|
|
|
$ |
279 |
|
|
|
The components of earnings
from continuing operations before income taxes, by tax jurisdiction, consisted
of the following as of June 30:
|
2015 |
|
2014 |
|
2013 |
|
United States |
|
$ |
829 |
|
|
$ |
754 |
|
|
$ |
724 |
|
Foreign |
|
|
92 |
|
|
|
130 |
|
|
|
128 |
|
Total |
|
$ |
921 |
|
|
$ |
884 |
|
|
$ |
852 |
|
|
A reconciliation of the
statutory federal income tax rate to the Companys effective tax rate on
continuing operations follows as of June 30:
|
2015 |
|
2014 |
|
2013 |
|
Statutory federal tax rate |
35.0 |
% |
|
35.0 |
% |
|
35.0 |
% |
|
State taxes (net
of federal tax benefits) |
2.1 |
|
|
2.6 |
|
|
1.7 |
|
|
Tax differential on foreign earnings |
(0.3 |
) |
|
(0.3 |
) |
|
(2.9 |
) |
|
Domestic
manufacturing deduction |
(2.1 |
) |
|
(2.3 |
) |
|
(2.3 |
) |
|
Change in valuation allowance |
0.6 |
|
|
0.6 |
|
|
0.7 |
|
|
Other
differences |
(1.1 |
) |
|
(1.0 |
) |
|
0.5 |
|
|
Effective tax rate |
34.2 |
% |
|
34.6 |
% |
|
32.7 |
% |
|
|
The lower effective tax rate
for fiscal year 2015 compared to fiscal year 2014 was primarily due to higher
uncertain tax position releases, partially offset by higher tax on foreign
earnings.
Applicable U.S. income taxes
and foreign withholding taxes have not been provided on approximately $204 of
undistributed earnings of certain foreign subsidiaries as of June 30, 2015,
because these earnings are considered indefinitely reinvested. The estimated net
federal income tax liability that could arise if these earnings were not
indefinitely reinvested is approximately $54. Applicable U.S. income and foreign
withholding taxes are provided on these earnings in the periods in which they
are no longer considered indefinitely reinvested.
Tax benefits resulting from
stock-based payment arrangements that are in excess of the tax benefits recorded
in net earnings over the vesting period of those arrangements (excess tax
benefits) are recorded as increases to additional paid-in capital. Excess tax
benefits of approximately $42, $11, and $11, were realized and recorded to
additional paid-in capital for fiscal years 2015, 2014 and 2013,
respectively.
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-55 |
Table of Contents
NOTE 17. INCOME TAXES
(Continued)
The components of net deferred
tax assets (liabilities) as of June 30 are shown below:
|
2015 |
|
|
2014 |
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
Compensation and
benefit programs |
$ |
191 |
|
|
$ |
171 |
|
|
Basis
difference related to Venture Agreement |
|
30 |
|
|
|
30 |
|
|
Accruals and
reserves |
|
43 |
|
|
|
53 |
|
|
Inventory costs |
|
19 |
|
|
|
20 |
|
|
Net operating loss
and tax credit carryforwards |
|
41 |
|
|
|
37 |
|
|
Other |
|
61 |
|
|
|
63 |
|
|
Subtotal |
|
385 |
|
|
|
374 |
|
|
Valuation allowance |
|
(34 |
) |
|
|
(51 |
) |
|
Total deferred tax
assets |
|
351 |
|
|
|
323 |
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Fixed and
intangible assets |
|
(277 |
) |
|
|
(269 |
) |
|
Low-income housing partnerships |
|
(22 |
) |
|
|
(24 |
) |
|
Unremitted foreign
earnings |
|
(7 |
) |
|
|
(8 |
) |
|
Other |
|
(24 |
) |
|
|
(26 |
) |
|
Total deferred tax
liabilities |
|
(330 |
) |
|
|
(327 |
) |
|
Net
deferred tax assets (liabilities) |
$ |
21 |
|
|
$ |
(4 |
) |
|
|
The Company periodically
reviews its deferred tax assets for recoverability. A valuation allowance is
established when the Company believes that it is more likely than not that some
portion of its deferred tax assets will not be realized. Valuation allowances
have been provided to reduce deferred tax assets to amounts considered
recoverable. Details of the valuation allowance were as follows as of June 30:
|
2015 |
|
|
2014 |
|
|
Valuation allowance at beginning of
year |
|
$ |
(51 |
) |
|
|
$ |
(36 |
) |
|
Net decrease/(increase) for other foreign deferred tax
assets |
|
|
15 |
|
|
|
|
(12 |
) |
|
Net decrease/(increase) for foreign net
operating loss carryforwards and tax credits |
|
|
2 |
|
|
|
|
(3 |
) |
|
Valuation allowance at end of year |
|
$ |
(34 |
) |
|
|
$ |
(51 |
) |
|
|
As of June 30, 2015, the
Company had foreign tax credit carryforwards of $24 for U.S. income tax purposes
with expiration dates between fiscal years 2023 and 2025. Tax credit
carryforwards in foreign jurisdictions of $18 have expiration dates in fiscal
year 2016. Tax benefits from foreign net operating loss carryforwards of $13
have expiration dates between fiscal years 2016 and 2025. Tax benefits from
foreign net operating loss carryforwards of $10 may be carried forward
indefinitely.
The Company files income tax
returns in the U.S. federal and various state, local and foreign jurisdictions.
The federal statute of limitations has expired for all tax years through June
30, 2011. Various income tax returns in state and foreign jurisdictions are
currently in the process of examination.
The Company recognizes
interest and penalties related to uncertain tax positions as a component of
income tax expense. As of June 30, 2015 and 2014, the total balance of accrued
interest and penalties related to uncertain tax positions was $10 and $11,
respectively. Interest and penalties related to uncertain tax positions included
in income tax expense resulted in a net benefit of $1, a net expense of $3, and
a net expense of $1 in fiscal years 2015, 2014 and 2013,
respectively.
B-56 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 17. INCOME TAXES
(Continued)
The following is a
reconciliation of the beginning and ending amounts of the Companys gross
unrecognized tax benefits:
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
Unrecognized tax benefits at beginning of
year |
|
$ |
71 |
|
|
|
$ |
69 |
|
|
|
$ |
80 |
|
|
Gross increases - tax positions in prior
periods |
|
|
3 |
|
|
|
|
3 |
|
|
|
|
3 |
|
|
Gross decreases - tax positions in prior
periods |
|
|
(8 |
) |
|
|
|
(5 |
) |
|
|
|
(19 |
) |
|
Gross increases - current period tax positions |
|
|
6 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
Gross decreases - current period tax
positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lapse of applicable statute of limitations |
|
|
(34 |
) |
|
|
|
(1 |
) |
|
|
|
(2 |
) |
|
Settlements |
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
Unrecognized tax benefits at end of year |
|
$ |
38 |
|
|
|
$ |
71 |
|
|
|
$ |
69 |
|
|
|
Included in the balance of
unrecognized tax benefits as of June 30, 2015, 2014 and 2013, are potential
benefits of $27, $58 and $56, respectively, which if recognized, would affect
net earnings. During the fiscal year ended June 30, 2015, $32 of gross
unrecognized tax benefits relating to other discontinued operations for periods
prior to fiscal year 2015 were recognized upon the expiration of the applicable
statute of limitations. Recognition of these previously disclosed tax benefits
had no impact on the Companys cash flow or earnings from continuing operations
for the fiscal years ended June 30, 2015, 2014 and 2013.
NOTE 18. EMPLOYEE BENEFIT
PLANS
Retirement Income
Plans
Effective July 1, 2011, and as
part of a set of long-term, cost-neutral enhancements to the Companys overall
employee benefit plans, the domestic qualified retirement income pension plan
was frozen for service accrual and eligibility purposes for most participants,
however, interest credits have continued to accrue on participant balances. As
of June 30, 2015 and 2014, the benefits of the domestic qualified plan are based
on either employee years of service and compensation or a stated dollar amount
per year of service. The Company is the sole contributor to the plan in amounts
deemed necessary to provide benefits and to the extent deductible for federal
income tax purposes. Assets of the plan consist primarily of investments in cash
equivalents and common collective trusts.
The Company did not make any
contributions to its domestic qualified retirement income plan during fiscal
years 2015, 2014 and 2013. The Companys funding policy for its qualified plans
is to contribute amounts sufficient to meet minimum funding requirements as set
forth in employee benefit tax laws plus additional amounts as the Company may
determine to be appropriate. Subsequent to June 30, 2015, the Company made a $15
discretionary contribution to the pension plan.
Contributions made to the
domestic nonqualified retirement income plans were $13, $13 and $11 in fiscal
years 2015, 2014 and 2013, respectively. Contributions made to the foreign
retirement income plans were $1, $2 and $1 in fiscal years 2015, 2014 and 2013,
respectively.
Retirement Health Care
Plans
The Company provides certain
health care benefits for employees who meet age, participation and length of
service requirements at retirement. The plans pay stated percentages of covered
expenses after annual deductibles have been met or stated reimbursements up to a
specified dollar subsidy amount. Benefits paid take into consideration payments
by Medicare for the domestic plan. The plans are funded as claims are paid, and
the Company has the right to modify or terminate certain plans.
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-57 |
Table of Contents
NOTE 18. EMPLOYEE BENEFIT
PLANS (Continued)
The assumed domestic health
care cost trend rate used in measuring the accumulated postretirement benefit
obligation was 7.1% for medical and 7.2% for prescription drugs for fiscal year
2015. These rates have been assumed to gradually decrease each year until an
assumed ultimate trend of 4.5% is reached in 2028. The health care cost trend
rate assumption has a minimal effect on the amounts reported due primarily to
the existence of benefit cap provisions in the Companys domestic plan. As such,
the effect of a hypothetical 100 basis point increase or decrease in the assumed
domestic health care cost trend rate on the total service and interest cost
components as well as the postretirement benefit obligation would have been
immaterial for each of the fiscal years ended June 30, 2015, 2014 and 2013.
Financial Information
Related to Retirement Income and Retirement Health Care
Summarized information for the
Companys retirement income and retirement health care plans as of and for the
fiscal years ended June 30 is as follows:
|
|
Retirement Income |
|
Retirement Health
Care |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
Change in benefit obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation as of beginning of
year |
|
$ |
641 |
|
|
$ |
612 |
|
|
|
$ |
49 |
|
|
|
$ |
51 |
|
|
Service cost |
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
1 |
|
|
Interest
cost |
|
|
25 |
|
|
|
27 |
|
|
|
|
2 |
|
|
|
|
2 |
|
|
Actuarial loss
(gain) |
|
|
14 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Plan
amendments |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
(2 |
) |
|
Translation and other
adjustments |
|
|
(5 |
) |
|
|
(6 |
) |
|
|
|
(2 |
) |
|
|
|
|
|
|
Benefits
paid |
|
|
(38 |
) |
|
|
(42 |
) |
|
|
|
(3 |
) |
|
|
|
(1 |
) |
|
Projected benefit
obligation as of end of year |
|
|
639 |
|
|
|
641 |
|
|
|
|
45 |
|
|
|
|
49 |
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets as
of beginning of year |
|
$ |
432 |
|
|
$ |
408 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Actual return
on plan assets |
|
|
6 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions to
nonqualified plans |
|
|
13 |
|
|
|
15 |
|
|
|
|
3 |
|
|
|
|
1 |
|
|
Benefits
paid |
|
|
(38 |
) |
|
|
(42 |
) |
|
|
|
(3 |
) |
|
|
|
(1 |
) |
|
Translation
adjustment |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets as of end of year |
|
|
409 |
|
|
|
432 |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit cost, net funded
status |
|
$ |
(230 |
) |
|
$ |
(209 |
) |
|
|
$ |
(45 |
) |
|
|
$ |
(49 |
) |
|
Amount recognized in the balance sheets consists
of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefit
assets |
|
$ |
2 |
|
|
$ |
2 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Current
accrued benefit liability |
|
|
(16 |
) |
|
|
(14 |
) |
|
|
|
(3 |
) |
|
|
|
(4 |
) |
|
Non-current accrued
benefit liability |
|
|
(216 |
) |
|
|
(197 |
) |
|
|
|
(42 |
) |
|
|
|
(45 |
) |
|
Accrued
benefit cost, net |
|
$ |
(230 |
) |
|
$ |
(209 |
) |
|
|
$ |
(45 |
) |
|
|
$ |
(49 |
) |
|
|
Retirement income plans with
an accumulated benefit obligation (ABO) in excess of plan assets as of June 30
were as follows:
|
|
Pension Plans |
|
Other Retirement
Plans |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Projected benefit obligation |
|
$ |
538 |
|
$ |
538 |
|
$ |
80 |
|
$ |
78 |
|
Accumulated
benefit obligation |
|
|
538 |
|
|
538 |
|
|
80 |
|
|
78 |
|
Fair value of plan
assets |
|
|
385 |
|
|
405 |
|
|
— |
|
|
— |
|
The ABO for all pension plans
was $559, $563 and $530 as of June 30, 2015, 2014 and 2013, respectively.
B-58 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 18. EMPLOYEE BENEFIT
PLANS (Continued)
The net costs of the
retirement income and health care plans for the fiscal years ended June 30
included the following components:
|
|
Retirement Income |
|
Retirement Health Care |
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2015 |
|
2014 |
|
|
2013 |
|
|
Service cost |
|
|
$ |
2 |
|
|
|
$ |
3 |
|
|
|
$ |
4 |
|
|
|
$ |
|
|
|
$ |
1 |
|
|
|
$ |
1 |
|
|
Interest cost |
|
|
|
25 |
|
|
|
|
27 |
|
|
|
|
24 |
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
2 |
|
|
Expected return on plan assets |
|
|
|
(20 |
) |
|
|
|
(25 |
) |
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized items |
|
|
|
12 |
|
|
|
|
11 |
|
|
|
|
12 |
|
|
|
|
2 |
|
|
|
(4 |
) |
|
|
|
(2 |
) |
|
Total |
|
|
$ |
19 |
|
|
|
$ |
16 |
|
|
|
$ |
11 |
|
|
|
$ |
4 |
|
|
$ |
(1 |
) |
|
|
$ |
1 |
|
|
|
Items not yet recognized as a
component of postretirement expense as of June 30, 2015, consisted of:
|
|
Retirement Income |
|
|
Retirement Health Care |
|
|
Net actuarial loss (gain) |
|
|
$ |
264 |
|
|
|
$ |
(17 |
) |
|
Prior service benefit |
|
|
|
|
|
|
|
|
(7 |
) |
|
Net deferred income tax (assets)
liabilities |
|
|
|
(98 |
) |
|
|
|
8 |
|
|
Accumulated other comprehensive loss (income) |
|
|
$ |
166 |
|
|
|
$ |
(16 |
) |
|
|
Net actuarial loss (gain)
recorded in accumulated other comprehensive net (losses) income for the fiscal
year ended June 30, 2015, included the following:
|
|
Retirement Income |
|
|
Retirement Health
Care |
|
|
Net actuarial loss (gain) as of beginning
of year |
|
|
$ |
247 |
|
|
|
$ |
(29 |
) |
|
Amortization during the year |
|
|
|
(12 |
) |
|
|
|
13 |
|
|
Loss (gain) during the year |
|
|
|
29 |
|
|
|
|
(1 |
) |
|
Net actuarial loss (gain) as of end of year |
|
|
$ |
264 |
|
|
|
$ |
(17 |
) |
|
|
The Company uses the straight-line amortization method for unrecognized prior service costs and benefits. In fiscal
year 2016, the Company expects to recognize, on a pre-tax basis, $10 of the net actuarial loss as a component of net periodic benefit
cost for the retirement income plans. In addition, in fiscal year 2016, the Company expects to recognize, on a pre-tax basis, $2 of the
net actuarial gain as a component of net periodic benefit cost for the retirement health care plans.
Weighted-average assumptions
used to estimate the actuarial present value of benefit obligations as of June
30 were as follows:
|
|
Retirement Income |
|
Retirement Health Care |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Discount rate |
|
4.20 |
% |
|
4.05 |
% |
|
4.16 |
% |
|
4.00 |
% |
|
Rate of compensation
increase |
|
3.37 |
% |
|
4.46 |
% |
|
n/a |
|
|
n/a |
|
|
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-59 |
Table of Contents
NOTE 18. EMPLOYEE BENEFIT
PLANS (Continued)
Weighted-average assumptions
used to estimate the net periodic pension and other postretirement benefit costs
as of June 30 were as follows:
|
|
Retirement Income |
|
|
|
2015 |
|
2014 |
|
2013 |
|
Discount rate |
|
4.05 |
% |
|
4.39 |
% |
|
3.87 |
% |
|
Rate of
compensation increase |
|
4.46 |
% |
|
3.44 |
% |
|
3.71 |
% |
|
Expected return on plan
assets |
|
5.28 |
% |
|
6.61 |
% |
|
7.50 |
% |
|
|
|
|
|
Retirement Health Care |
|
|
|
2015 |
|
2014 |
|
2013 |
|
Discount rate |
|
4.00 |
% |
|
4.33 |
% |
|
3.86 |
% |
|
The expected long-term rate of
return assumption is based on an analysis of historical experience of the
portfolio and the summation of prospective returns for each asset class in
proportion to the funds current asset allocation.
Expected benefit payments for
the Companys pension and other postretirement plans as of June 30, 2015, were
as follows:
|
|
Retirement Income |
|
Retirement Health
Care |
|
2016 |
|
$ |
41 |
|
$ |
4 |
|
2017 |
|
|
42 |
|
|
3 |
|
2018 |
|
|
43 |
|
|
3 |
|
2019 |
|
|
40 |
|
|
3 |
|
2020 |
|
|
41 |
|
|
3 |
|
Fiscal years 2021 through 2025 |
|
|
210 |
|
|
12 |
|
Expected benefit payments are
based on the same assumptions used to measure the benefit obligations and
include estimated future employee service.
The target allocations and
weighted average asset allocations by asset category of the investment portfolio
for the Companys domestic retirement income plans as of June 30 were:
|
|
% Target
Allocation |
|
% of Plan
Assets |
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
U.S. equity |
|
|
11 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
International
equity |
|
|
12 |
|
|
|
12 |
|
|
|
12 |
|
|
|
12 |
|
|
Fixed income |
|
|
74 |
|
|
|
74 |
|
|
|
74 |
|
|
|
74 |
|
|
Other |
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
The target asset allocation is
determined based on the optimal balance between risk and return and, at times,
may be adjusted to achieve the plans overall investment objective to generate
sufficient resources to pay current and projected plan obligations over the life
of the domestic qualified retirement income plan.
B-60 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 18. EMPLOYEE BENEFIT
PLANS (Continued)
The following table sets forth
by level within the fair value hierarchy, the retirement income plans assets
carried at fair value as of June 30:
|
|
2015 |
|
|
|
Level 1 |
|
Level 2 |
|
Total |
|
Cash equivalents |
|
|
$ |
3 |
|
|
$ |
|
|
|
$ |
3 |
|
Common
collective trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond funds |
|
|
|
|
|
|
|
295 |
|
|
|
295 |
|
International equity
funds |
|
|
|
|
|
|
|
59 |
|
|
|
59 |
|
Domestic equity
funds |
|
|
|
|
|
|
|
41 |
|
|
|
41 |
|
Real estate
fund |
|
|
|
|
|
|
|
11 |
|
|
|
11 |
|
Total common collective trusts |
|
|
|
|
|
|
|
406 |
|
|
|
406 |
|
Total assets at
fair value |
|
|
$ |
3 |
|
|
$ |
406 |
|
|
$ |
409 |
|
|
|
|
|
|
2014 |
|
|
|
Level 1 |
|
Level 2 |
|
Total |
|
Cash equivalents |
|
|
$ |
3 |
|
|
$ |
|
|
|
$ |
3 |
|
Common
collective trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond funds |
|
|
|
|
|
|
|
309 |
|
|
|
309 |
|
International equity
funds |
|
|
|
|
|
|
|
64 |
|
|
|
64 |
|
Domestic equity
funds |
|
|
|
|
|
|
|
44 |
|
|
|
44 |
|
Real estate
fund |
|
|
|
|
|
|
|
12 |
|
|
|
12 |
|
Total common collective trusts |
|
|
|
|
|
|
|
429 |
|
|
|
429 |
|
Total assets at
fair value |
|
|
$ |
3 |
|
|
$ |
429 |
|
|
$ |
432 |
|
|
The carrying value of cash
equivalents approximates its fair value as of June 30, 2015 and 2014.
Common collective trust funds
are not publicly traded and, therefore, are classified as Level 2. They are
valued at a net asset value unit price determined by the portfolios sponsor
based on the fair value of underlying assets held by the common collective trust
fund on June 30, 2015 and 2014.
The common collective trusts
are invested in various trusts that attempt to achieve their investment
objectives by investing primarily in other collective investment funds which
have characteristics consistent with each trusts overall investment objective
and strategy.
Defined Contribution
Plans
The Company has defined
contribution plans for most of its domestic employees. The plans include The
Clorox Company 401(k) Plan, The Clorox Company 2011 Nonqualified Defined Benefit
Plan and the Executive Retirement Plan. The aggregate cost of the domestic
defined contribution plans was $45, $43 and $45 in fiscal years 2015, 2014 and
2013, respectively. Included in the aggregate cost was the cost of The Clorox
Company 401(k) Plan of $42, $38 and $40 in fiscal years 2015, 2014 and 2013,
respectively. The Company also has defined contribution plans for certain
international employees. The aggregate cost of these foreign plans was $3, $3
and $1 for the fiscal years ended June 30, 2015, 2014 and 2013, respectively.
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-61 |
Table of Contents
NOTE 19. SEGMENT
REPORTING
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 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 Burts 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®,
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
Burts 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.
|
|
Year |
|
Cleaning |
|
Household |
|
Lifestyle |
|
International |
|
Corporate |
|
|
Company |
|
Net
sales |
|
2015 |
|
$ |
1,824 |
|
$ |
1,794 |
|
$ |
950 |
|
$ |
1,087 |
|
$ |
|
|
|
$ |
5,655 |
|
|
|
2014 |
|
|
1,776 |
|
|
1,709 |
|
|
936 |
|
|
1,093 |
|
|
|
|
|
|
5,514 |
|
|
|
2013 |
|
|
1,783 |
|
|
1,693 |
|
|
929 |
|
|
1,128 |
|
|
|
|
|
|
5,533 |
|
Earnings (losses) from
continuing operations before income taxes |
|
2015 |
|
|
445 |
|
|
375 |
|
|
257 |
|
|
79 |
|
|
(235 |
) |
|
|
921 |
|
|
|
2014 |
|
|
428 |
|
|
326 |
|
|
258 |
|
|
99 |
|
|
(227 |
) |
|
|
884 |
|
|
|
2013 |
|
|
420 |
|
|
336 |
|
|
259 |
|
|
95 |
|
|
(258 |
) |
|
|
852 |
|
Income from
equity investees |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
14 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
13 |
|
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
12 |
|
Total assets |
|
2015 |
|
|
876 |
|
|
725 |
|
|
860 |
|
|
1,057 |
|
|
646 |
|
|
|
4,164 |
|
|
|
2014 |
|
|
887 |
|
|
745 |
|
|
869 |
|
|
1,190 |
|
|
567 |
|
|
|
4,258 |
|
Capital expenditures |
|
2015 |
|
|
35 |
|
|
50 |
|
|
11 |
|
|
25 |
|
|
4 |
|
|
|
125 |
|
|
|
2014 |
|
|
37 |
|
|
53 |
|
|
11 |
|
|
31 |
|
|
5 |
|
|
|
137 |
|
|
|
2013 |
|
|
57 |
|
|
72 |
|
|
19 |
|
|
24 |
|
|
18 |
|
|
|
190 |
|
Depreciation and
amortization |
|
2015 |
|
|
52 |
|
|
67 |
|
|
19 |
|
|
24 |
|
|
7 |
|
|
|
169 |
|
|
|
2014 |
|
|
49 |
|
|
67 |
|
|
19 |
|
|
25 |
|
|
17 |
|
|
|
177 |
|
|
|
2013 |
|
|
52 |
|
|
69 |
|
|
19 |
|
|
26 |
|
|
14 |
|
|
|
180 |
|
Significant noncash charges
included |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in earnings from
continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations before income
taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation |
|
2015 |
|
|
8 |
|
|
7 |
|
|
4 |
|
|
1 |
|
|
12 |
|
|
|
32 |
|
|
|
2014 |
|
|
11 |
|
|
9 |
|
|
5 |
|
|
1 |
|
|
10 |
|
|
|
36 |
|
|
|
2013 |
|
|
10 |
|
|
9 |
|
|
5 |
|
|
1 |
|
|
10 |
|
|
|
35 |
|
B-62 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
NOTE 19. SEGMENT REPORTING
(Continued)
All intersegment sales are
eliminated and are not included in the Companys reportable segments net sales.
Net sales to the Companys
largest customer, Walmart Stores, Inc. and its affiliates, were 26%, 27% and 27%
of consolidated net sales for each of the fiscal years ended June 30, 2015, 2014
and 2013, respectively, and occurred in each of the Companys reportable
segments. No other customers accounted for more than 10% of consolidated net
sales in any of these fiscal years. During fiscal years 2015, 2014 and 2013, the
Companys five largest customers accounted for 45% of its consolidated net sales
for each of the three fiscal years.
Three of the Companys product
lines have accounted for 10% or more of consolidated net sales during each of
the past three fiscal years. In fiscal years 2015, 2014 and 2013, sales of
liquid bleach represented approximately 14%, 13% and 14% of the Companys
consolidated net sales, respectively, approximately 26% of net sales in the
Cleaning segment for each such years, and approximately 27%, 28% and 28% of net
sales in the International segment, respectively. Sales of trash bags
represented approximately 14%, 13% and 13% of the Companys consolidated net
sales in each of the fiscal years 2015, 2014 and 2013, respectively,
approximately 38%, 36% and 37% of net sales in the Household segment,
respectively, and approximately 8%, 8% and 10% of net sales in the International
segment, respectively. Sales of charcoal represented approximately 11%, 11% and
10% of the Companys consolidated net sales and approximately 34%, 34% and 32%
of net sales in the Household segment in fiscal years 2015, 2014 and 2013,
respectively.
Net sales and property, plant
and equipment, net, by geographic area as of and for the fiscal years ended June
30 were as follows:
|
|
Fiscal Year |
|
United States |
|
Foreign |
|
Total Company |
|
Net sales |
|
2015 |
|
$ |
4,609 |
|
$ |
1,046 |
|
$ |
5,655 |
|
|
|
2014 |
|
|
4,466 |
|
|
1,048 |
|
|
5,514 |
|
|
|
2013 |
|
|
4,448 |
|
|
1,085 |
|
|
5,533 |
|
Property, plant
and equipment, net |
|
2015 |
|
$ |
801 |
|
$ |
117 |
|
$ |
918 |
|
|
|
2014 |
|
|
825 |
|
|
152 |
|
|
977 |
|
NOTE 20. RELATED PARTY
TRANSACTIONS
The Company holds various
equity investments with ownership percentages of up to 50% in a number of
consumer products businesses, most of which operate outside the United States.
The Company has no ongoing capital commitments, loan requirements, guarantees or
any other types of arrangements under the terms of its agreements that would
require any future cash contributions or disbursements arising out of an equity
investment.
Transactions with the
Companys equity investees typically represent payments for contract
manufacturing and purchases of raw materials. Payments to related parties,
including equity investees, for such transactions during the fiscal years ended
June 30, 2015, 2014 and 2013 were $55, $57 and $50, respectively. Receipts from
and ending accounts receivable and payable balances related to the Companys
related parties were not significant during or as of the end of each of the
fiscal years presented.
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-63 |
Table of Contents
NOTE 21. UNAUDITED
QUARTERLY DATA
|
|
Quarters Ended |
|
|
|
|
September
30 |
|
|
December
31 |
|
|
March
31 |
|
|
June
30 |
|
|
Total
Year |
|
|
Fiscal year ended June 30,
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ |
1,352 |
|
|
|
$ |
1,345 |
|
|
|
$ |
1,401 |
|
|
|
$ |
1,557 |
|
|
|
$ |
5,655 |
|
|
Cost of products sold |
|
|
$ |
774 |
|
|
|
$ |
773 |
|
|
|
$ |
796 |
|
|
|
$ |
847 |
|
|
|
$ |
3,190 |
|
|
Earnings from continuing operations |
|
|
$ |
145 |
|
|
|
$ |
128 |
|
|
|
$ |
144 |
|
|
|
$ |
189 |
|
|
|
$ |
606 |
|
|
(Losses) earnings from discontinued
operations,net of tax |
|
|
$ |
(55 |
) |
|
|
$ |
(3 |
) |
|
|
$ |
30 |
|
|
|
$ |
2 |
|
|
|
$ |
(26 |
) |
|
Net earnings |
|
|
$ |
90 |
|
|
|
$ |
125 |
|
|
|
$ |
174 |
|
|
|
$ |
191 |
|
|
|
$ |
580 |
|
|
Per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
|
$ |
1.12 |
|
|
|
$ |
0.98 |
|
|
|
$ |
1.09 |
|
|
|
$ |
1.46 |
|
|
|
$ |
4.65 |
|
|
Discontinued
operations |
|
|
|
(0.42 |
) |
|
|
|
(0.02 |
) |
|
|
|
0.22 |
|
|
|
|
0.02 |
|
|
|
|
(0.20 |
) |
|
Basic
net earnings per share |
|
|
$ |
0.70 |
|
|
|
$ |
0.96 |
|
|
|
$ |
1.31 |
|
|
|
$ |
1.48 |
|
|
|
$ |
4.45 |
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
|
$ |
1.10 |
|
|
|
$ |
0.97 |
|
|
|
$ |
1.08 |
|
|
|
$ |
1.44 |
|
|
|
$ |
4.57 |
|
|
Discontinued
operations |
|
|
|
(0.42 |
) |
|
|
|
(0.02 |
) |
|
|
|
0.22 |
|
|
|
|
0.02 |
|
|
|
|
(0.20 |
) |
|
Diluted
net earnings per share |
|
|
$ |
0.68 |
|
|
|
$ |
0.95 |
|
|
|
$ |
1.30 |
|
|
|
$ |
1.46 |
|
|
|
$ |
4.37 |
|
|
Dividends declared per common share |
|
|
$ |
0.74 |
|
|
|
$ |
0.74 |
|
|
|
$ |
0.74 |
|
|
|
$ |
0.77 |
|
|
|
$ |
2.99 |
|
|
Market price (NYSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
$ |
112.70 |
|
|
|
$ |
112.65 |
|
|
|
$ |
106.36 |
|
|
|
$ |
98.31 |
|
|
|
$ |
112.70 |
|
|
Low |
|
|
|
103.77 |
|
|
|
|
102.95 |
|
|
|
|
95.19 |
|
|
|
|
86.03 |
|
|
|
|
86.03 |
|
|
Year-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104.02 |
|
|
Fiscal year ended June 30,
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ |
1,343 |
|
|
|
$ |
1,308 |
|
|
|
$ |
1,366 |
|
|
|
$ |
1,497 |
|
|
|
$ |
5,514 |
|
|
Cost of products sold |
|
|
$ |
759 |
|
|
|
$ |
753 |
|
|
|
$ |
791 |
|
|
|
$ |
855 |
|
|
|
$ |
3,158 |
|
|
Earnings from continuing operations |
|
|
$ |
139 |
|
|
|
$ |
118 |
|
|
|
$ |
151 |
|
|
|
$ |
171 |
|
|
|
$ |
579 |
|
|
Losses from discontinued
operations, net of tax |
|
|
$ |
(3 |
) |
|
|
$ |
(3 |
) |
|
|
$ |
(14 |
) |
|
|
$ |
(1 |
) |
|
|
$ |
(21 |
) |
|
Net earnings |
|
|
$ |
136 |
|
|
|
$ |
115 |
|
|
|
$ |
137 |
|
|
|
$ |
170 |
|
|
|
$ |
558 |
|
|
Per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
|
$ |
1.07 |
|
|
|
$ |
0.91 |
|
|
|
$ |
1.16 |
|
|
|
$ |
1.32 |
|
|
|
$ |
4.47 |
|
|
Discontinued
operations |
|
|
|
(0.03 |
) |
|
|
|
(0.02 |
) |
|
|
|
(0.11 |
) |
|
|
|
|
|
|
|
|
(0.16 |
) |
|
Basic
net earnings per share |
|
|
$ |
1.04 |
|
|
|
$ |
0.89 |
|
|
|
$ |
1.05 |
|
|
|
$ |
1.32 |
|
|
|
$ |
4.31 |
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
|
$ |
1.05 |
|
|
|
$ |
0.90 |
|
|
|
$ |
1.14 |
|
|
|
$ |
1.30 |
|
|
|
$ |
4.39 |
|
|
Discontinued
operations |
|
|
|
(0.02 |
) |
|
|
|
(0.03 |
) |
|
|
|
(0.10 |
) |
|
|
|
(0.01 |
) |
|
|
|
(0.16 |
) |
|
Diluted
net earnings per share |
|
|
$ |
1.03 |
|
|
|
$ |
0.87 |
|
|
|
$ |
1.04 |
|
|
|
$ |
1.29 |
|
|
|
$ |
4.23 |
|
|
Dividends declared per common share |
|
|
$ |
0.71 |
|
|
|
$ |
0.71 |
|
|
|
$ |
0.71 |
|
|
|
$ |
0.74 |
|
|
|
$ |
2.87 |
|
|
Market price (NYSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
$ |
87.60 |
|
|
|
$ |
96.76 |
|
|
|
$ |
92.75 |
|
|
|
$ |
93.43 |
|
|
|
$ |
96.76 |
|
|
Low |
|
|
|
81.25 |
|
|
|
|
80.20 |
|
|
|
|
83.70 |
|
|
|
|
86.56 |
|
|
|
|
80.20 |
|
|
Year-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91.40 |
|
|
B-64 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
Appendix B
FIVE-YEAR FINANCIAL SUMMARY
The Clorox
Company
|
|
Years ended June 30 |
|
Dollars in millions, except per share
data |
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
2011(1)(2) |
|
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
5,655 |
|
|
$ |
5,514 |
|
|
$ |
5,533 |
|
|
$ |
5,379 |
|
|
$ |
5,144 |
|
Gross profit |
|
|
2,465 |
|
|
|
2,356 |
|
|
|
2,391 |
|
|
|
2,272 |
|
|
|
2,232 |
|
Earnings from continuing operations |
|
$ |
606 |
|
|
$ |
579 |
|
|
$ |
573 |
|
|
$ |
535 |
|
|
$ |
268 |
|
(Losses) earnings from discontinued
operations, net of tax |
|
|
(26 |
) |
|
|
(21 |
) |
|
|
(1 |
) |
|
|
6 |
|
|
|
289 |
|
Net earnings |
|
$ |
580 |
|
|
$ |
558 |
|
|
$ |
572 |
|
|
$ |
541 |
|
|
$ |
557 |
|
COMMON STOCK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
4.65 |
|
|
$ |
4.47 |
|
|
$ |
4.37 |
|
|
$ |
4.09 |
|
|
$ |
1.96 |
|
Diluted |
|
|
4.57 |
|
|
|
4.39 |
|
|
|
4.31 |
|
|
|
4.05 |
|
|
|
1.94 |
|
Dividends declared per share |
|
$ |
2.99 |
|
|
$ |
2.87 |
|
|
$ |
2.63 |
|
|
$ |
2.44 |
|
|
$ |
2.25 |
|
|
|
|
|
As of June 30 |
|
Dollars in millions |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
|
2011(1)(2) |
|
OTHER DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,164 |
|
|
$ |
4,258 |
|
|
$ |
4,311 |
|
|
$ |
4,355 |
|
|
$ |
4,163 |
|
Long-term debt |
|
|
1,796 |
|
|
|
1,595 |
|
|
|
2,170 |
|
|
|
1,571 |
|
|
|
2,125 |
|
(1) |
In November 2010, the Company completed the
sale of its global auto care businesses pursuant to the terms of a
Purchase and Sale Agreement and received cash consideration of $755.
Included in earnings from discontinued operations for the fiscal year
ended June 30, 2011, is an after-tax gain on the transaction of
$247. |
(2) |
Earnings from continuing operations and net
earnings included the $258 noncash goodwill impairment charge recognized
in fiscal year 2011 related to the Burts Bees® business. Diluted net earnings per share
from continuing operations included the impact of $1.86 from this noncash
goodwill impairment charge. |
VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES (Dollars in millions)
Column A |
|
Column B |
|
Column C |
|
Column D |
|
Column E |
|
|
|
|
|
|
|
Additions |
|
Deductions |
|
|
|
|
|
Description |
|
Balance at beginning of
period |
|
|
Charged to costs
and expenses |
|
|
Credited to costs
and expenses |
|
Credited to
other accounts |
|
Balance at end of
period |
|
|
Allowance for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2015 |
|
$ |
(3 |
) |
|
$ |
(1 |
) |
|
$ |
|
|
$ |
|
|
$ |
(4 |
) |
|
Year ended June 30,
2014 |
|
|
(5 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
(3 |
) |
|
Year ended June 30,
2013 |
|
|
(7 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
(5 |
) |
|
LIFO allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2015 |
|
$ |
(36 |
) |
|
$ |
|
|
|
$ |
|
|
$ |
2 |
|
$ |
(34 |
) |
|
Year ended June 30,
2014 |
|
|
(40 |
) |
|
|
|
|
|
|
3 |
|
|
1 |
|
|
(36 |
) |
|
Year ended June 30,
2013 |
|
|
(37 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
(40 |
) |
|
Valuation allowance on deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2015 |
|
$ |
(51 |
) |
|
$ |
(4 |
) |
|
$ |
|
|
$ |
21 |
|
$ |
(34 |
) |
|
Year ended June 30,
2014 |
|
|
(36 |
) |
|
|
(25 |
) |
|
|
|
|
|
10 |
|
|
(51 |
) |
|
Year ended June 30,
2013 |
|
|
(20 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
(36 |
) |
|
Continues on next page
► |
|
|
|
THE CLOROX COMPANY - 2015 Proxy Statement |
B-65 |
Table of Contents
THE CLOROX COMPANY
RECONCILIATION OF
ECONOMIC PROFIT (UNAUDITED)(1)
Dollars in millions |
|
FY15 |
|
FY14 |
|
FY13 |
|
Earnings from
continuing operations before income taxes |
|
$ |
921 |
|
$ |
884 |
|
$ |
852 |
|
Noncash U.S. GAAP restructuring
and intangible asset impairment costs |
|
|
1 |
|
|
3 |
|
|
|
|
Interest
expense |
|
|
100 |
|
|
103 |
|
|
122 |
|
Earnings from continuing
operations before income taxes, |
|
|
|
|
|
|
|
|
|
|
noncash U.S. GAAP restructuring
and intangible asset |
|
|
|
|
|
|
|
|
|
|
impairment costs, and interest
expense |
|
$ |
1,022 |
|
$ |
990 |
|
$ |
974 |
|
Income taxes on
earnings from continuing operations before |
|
|
|
|
|
|
|
|
|
|
income taxes,
noncash U.S. GAAP restructuring and intangible |
|
|
|
|
|
|
|
|
|
|
asset impairment costs
and interest expense(2) |
|
|
350 |
|
|
342 |
|
|
318 |
|
Adjusted after tax
profit |
|
$ |
672 |
|
$ |
648 |
|
$ |
656 |
|
Average capital
employed(3) |
|
|
2,393 |
|
|
2,494 |
|
|
2,552 |
|
Capital charge(4) |
|
|
214 |
|
|
225 |
|
|
230 |
|
Economic
profit(1) (Adjusted after tax profit less capital
charge) |
|
$ |
458 |
|
$ |
423 |
|
$ |
426 |
|
|
(1) |
Economic profit (EP) is defined
by the Company as earnings from continuing operations before income taxes,
excluding noncash U.S. GAAP restructuring and intangible asset impairment
costs, and interest expense; less an amount of tax based on the effective
tax rate, and less a charge equal to average capital employed multiplied
by the weighted-average cost of capital. EP is a key financial metric that
the Companys management uses to evaluate business performance and
allocate resources, and is a component in determining managements
incentive compensation. The Companys management believes EP provides
additional perspective to investors about financial returns generated by
the business and represents profit generated over and above the cost of
capital used by the business to generate that profit. |
(2) |
The tax rate applied is the
effective tax rate on continuing operations, which was 34.2%, 34.6% and
32.7% in fiscal years 2015, 2014 and 2013, respectively. |
(3) |
Total capital employed represents
total assets less non-interest bearing liabilities. Adjusted capital
employed represents total capital employed adjusted to add back current
year after tax noncash U.S. GAAP restructuring and intangible asset
impairment costs. Average capital employed is the average of adjusted
capital employed for the current year and total capital employed for the
prior year, based on year-end balances. See below for details of the
average capital employed calculation: |
|
|
FY15 |
|
FY14 |
|
FY13 |
|
Total assets |
|
$ |
4,164 |
|
$ |
4,258 |
|
$ |
4,311 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
|
431 |
|
|
440 |
|
|
413 |
|
Accrued
liabilities |
|
|
545 |
|
|
472 |
|
|
490 |
|
Income taxes
payable |
|
|
31 |
|
|
8 |
|
|
29 |
|
Other
liabilities |
|
|
745 |
|
|
768 |
|
|
742 |
|
Deferred income
taxes |
|
|
95 |
|
|
103 |
|
|
119 |
|
Non-interest
bearing liabilities |
|
|
1,847 |
|
|
1,791 |
|
|
1,793 |
|
Total capital employed |
|
|
2,317 |
|
|
2,467 |
|
|
2,518 |
|
After tax
noncash U.S. GAAP restructuring and intangible asset
impairment costs |
|
|
1 |
|
|
2 |
|
|
|
|
Adjusted capital employed |
|
$ |
2,318 |
|
$ |
2,469 |
|
$ |
2,518 |
|
Average
capital employed |
|
$ |
2,393 |
|
$ |
2,494 |
|
$ |
2,552 |
|
|
(4) |
Capital charge represents average
capital employed multiplied by the weighted-average cost of capital. The
weighted-average cost of capital used to calculate capital charge was 9%
for all fiscal years presented. The calculation of capital charge includes
the impact of rounding numbers. |
B-66 THE CLOROX COMPANY
- 2015 Proxy Statement
Table of Contents
IMPORTANT
ANNUAL STOCKHOLDERS MEETING
INFORMATION |
Using a black ink pen, mark your votes with
an X as shown in this example. Please do not write outside the
designated areas. |
X |
Electronic Voting
Instructions
Available 24 hours a day,
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Instead of mailing your
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proxy.
VALIDATION DETAILS ARE LOCATED BELOW
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Proxies submitted by the
Internet or telephone must be received by 11:59 p.m., Eastern Time, on November
17, 2015.
|
|
Vote by
Internet |
|
Go to www.envisionreports.com/CLX |
|
Or scan the QR code with your
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|
Follow the steps outlined on the secure
website |
Vote by telephone |
|
Call toll
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|
Follow the instructions provided by the recorded
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Annual
Meeting Proxy Card |
|
▼ IF YOU HAVE NOT VOTED
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A |
|
The Board
of Directors recommends a vote FOR the election of each of the
following director nominees: |
1.
Election of Directors: |
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
01 - Richard H. Carmona |
|
☐ |
|
☐ |
|
☐ |
|
05 - Esther Lee |
|
☐ |
|
☐ |
|
☐ |
|
09 - Pamela Thomas-Graham |
|
☐ |
|
☐ |
|
☐ |
|
|
|
02 - Benno Dorer |
|
☐ |
|
☐ |
|
☐ |
|
06 - Robert W. Matschullat |
|
☐ |
|
☐ |
|
☐ |
|
10 - Carolyn M. Ticknor |
|
☐ |
|
☐ |
|
☐ |
|
|
|
03 - Spencer C. Fleischer |
|
☐ |
|
☐ |
|
☐ |
|
07 - Jeffrey Noddle |
|
☐ |
|
☐ |
|
☐ |
|
11 - Christopher J. Williams |
|
☐ |
|
☐ |
|
☐ |
|
|
|
04 - George J. Harad |
|
☐ |
|
☐ |
|
☐ |
|
08 - Rogelio Rebolledo |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
B |
|
The Board
of Directors recommends a vote FOR Proposal
2. |
|
|
For |
|
Against |
|
Abstain |
2. Advisory Vote on Executive
Compensation. |
|
☐ |
|
☐ |
|
☐ |
D |
|
The Board
of Directors recommends a vote FOR Proposal
4. |
|
|
For |
|
Against |
|
Abstain |
4. Approval
of the Material Terms of the Performance Goals under the Companys
Executive Incentive Compensation Plan. |
|
☐ |
|
☐ |
|
☐ |
C |
|
The Board
of Directors recommends a vote FOR Proposal
3. |
|
|
For |
|
Against |
|
Abstain |
3.
Ratification of Independent Registered Public Accounting Firm. |
|
☐ |
|
☐ |
|
☐ |
E |
|
Authorized
Signatures This section must be completed for your vote to be counted.
Date and Sign Below |
Please sign exactly as name(s) appears
hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, corporate officer, trustee, guardian, or custodian, please give
full title.
Date (mm/dd/yyyy) Please print
date below. |
|
Signature 1 Please keep
signature within the box. |
|
Signature 2 Please keep
signature within the box. |
/ / |
|
jjj |
|
jjj
|
|
|
|
|
|
Table of Contents
Dear Stockholders:
Attached is the proxy for The Clorox
Companys 2015 Annual Meeting of Stockholders (the Annual Meeting). It is
important that you vote your shares. You may vote via telephone, the Internet or
mail. If you wish to vote via telephone or the Internet, instructions are
printed on this form. If you wish to vote by mail, please mark, sign, date and
return the proxy using the enclosed envelope.
Only stockholders on the record date,
September 21, 2015, or their legal proxy holders, may attend the Annual Meeting.
To be admitted to the Annual Meeting, you must bring a current form of
government-issued photo identification and proof that you owned Clorox common
stock on the record date. Please see the
Attending the Annual Meeting section of the proxy statement for further
information.
Sincerely,
Angela C. Hilt
Vice President Corporate Secretary
& Associate General Counsel
Annual Meeting of Stockholders
|
●
Meeting Date: November 18, 2015 |
|
●
Check-In Time: 8:30 a.m. Pacific Time |
|
●
Meeting Time: 9:00 a.m. Pacific
Time |
|
●
Meeting Location: the offices of the Company, located at 1221 Broadway,
Oakland, CA 94612 |
Please note that cameras, recording
equipment and other electronic devices will not be allowed in the meeting except
for use by the Company. For your protection, briefcases, purses, packages, etc.
may be inspected as you enter the meeting.
The Notice of Annual Meeting, Proxy
Statement and 2015 Integrated Annual Report Executive Summary are available at
www.envisionreports.com/CLX.
▼ IF YOU HAVE NOT VOTED
VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼ |
|
|
Proxy The Clorox
Company |
|
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF THE CLOROX COMPANY ANNUAL MEETING OF STOCKHOLDERS NOVEMBER 18,
2015
The stockholder(s) whose signature(s)
appear(s) on the reverse side hereby appoint(s) Benno Dorer, Stephen M. Robb and
Laura Stein, and each of them individually, as proxies, each with full power of
substitution, to vote as designated on the reverse side of this ballot, all of
the shares of common stock of The Clorox Company that the stockholder(s) whose
signature(s) appear(s) on the reverse side would be entitled to vote, if
personally present, at the Annual Meeting of Stockholders to be held at 9:00
a.m., Pacific time on Wednesday, November 18, 2015, at the offices of the
Company, located at 1221 Broadway, Oakland, CA 94612 and any adjournment or
postponement thereof. A majority of said proxies, including any substitutes, or
if only one of them be present, then that one, may exercise all of the powers of
said proxies hereunder.
THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE
GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE
REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR PROPOSAL 2, FOR PROPOSAL 3 AND FOR
PROPOSAL 4.
If any other matters properly come
before the meeting, the persons named in this proxy will vote in their
discretion.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED REPLY ENVELOPE.
(Items to be voted appear on reverse
side)
Change of
Address
Please print new address below. |
|
Comments
Please print your
comments below. |
xxx |
|
xxx |
|
IF VOTING BY MAIL, YOU
MUST COMPLETE SECTIONS A - F ON BOTH SIDES OF THIS CARD. |
|
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