Business Context and Reporting Period
This Form 8-K filing by The Clorox Company (CLOROX CO) reports a material definitive agreement entered into on December 7, 2004. The filing was signed on December 9, 2004, by Peter D. Bewley, Senior Vice President and General Counsel.
Key Financial Metrics and Agreement Details
- Credit Facility: Established a $1,300,000,000 five-year revolving credit agreement.
- Purpose: Funds are designated for general corporate purposes and to support the issuance of commercial paper.
- Maturity Date: December 7, 2009.
- Debt Covenants:
- Maximum Debt-to-EBITDA ratio of 3.25:1 from the effective date through June 30, 2006.
- Maximum Debt-to-EBITDA ratio of 3.00:1 from July 1, 2006 through the termination date.
- Interest Calculation: Borrowings may be based on a Base Rate (Citicorp quoted base rate or 0.5% + Federal Funds Rate) or Euro-Dollar Rate (LIBOR + applicable margin).
- Current Utilization: The Company does not expect to borrow under this Agreement immediately.
Material Changes Versus Prior Period
The filing does not provide comparative financial data or a discussion of material changes in revenue, profit, or cash flow versus prior periods. The primary material change is the establishment of the new $1.3 billion credit facility, which is in addition to existing commercial paper and other borrowings used for working capital and the share exchange with Henkel KGaA.
Guidance, Outlook, and Risks
Management Commentary: The Company explicitly states it does not expect to borrow under the new Agreement. The facility is intended to provide liquidity support for commercial paper issuance and general corporate needs.
Risks and Contingencies: The agreement imposes financial covenants limiting the consolidated debt-to-EBITDA ratio. Failure to maintain these ratios could constitute a default. The filing notes extensive pre-existing relationships with the lending banks, including participation in prior credit facilities, bond offerings, and derivative transactions.
Investor Verification Checklist
- Verify the current consolidated debt and EBITDA figures to ensure compliance with the 3.25:1 covenant threshold.
- Confirm the status of the share exchange with Henkel KGaA and its impact on working capital needs.
- Review the full text of Exhibit 10.1 for specific definitions of "consolidated debt" and "consolidated EBITDA" used in the covenants.
- Monitor the Company's commercial paper issuance levels to understand the utilization of this backstop facility.