Clorox Company — Form 10-K Summary
Period: Fiscal year ended June 30, 2010. Although the request metadata says “2009 Q4,” the supplied filing is an annual report for fiscal 2010, not a quarterly filing. The filing was signed August 25, 2010.
Business context and financial performance
Clorox manufactures and markets consumer and institutional products across Cleaning, Household, Lifestyle and International segments. It reported fiscal 2010 net sales of $5.534 billion and employed approximately 8,300 people.
| Metric | FY2010 | FY2009 | Change |
|---|---|---|---|
| Net sales | $5.534 billion | $5.450 billion | +$84 million, about 1.5% |
| Earnings before income taxes | $925 million | $811 million | +$114 million, about 14.1% |
| Pre-tax earnings as a share of sales | About 16.7% | About 14.9% | Up about 1.8 percentage points |
| Total assets | $4.555 billion | $4.576 billion | Down $21 million |
| Debt | $2.8 billion at June 30, 2010 | Not stated in the supplied text | Not clear from supplied text |
The supplied filing text does not provide clear consolidated net income, operating cash flow, free cash flow, cash and cash equivalents, current liquidity, or interest expense values. The reported pre-tax earnings include corporate items, including interest expense.
Segment sales and pre-tax earnings
| Segment | FY2010 sales | FY2009 sales | FY2010 pre-tax earnings | FY2009 pre-tax earnings |
|---|---|---|---|---|
| Cleaning | $1.838 billion | $1.836 billion | $440 million | $410 million |
| Household | $1.663 billion | $1.726 billion | $290 million | $289 million |
| Lifestyle | $864 million | $813 million | $303 million | $270 million |
| International | $1.169 billion | $1.075 billion | $172 million | $140 million |
| Corporate | — | — | $(280) million | $(298) million |
Material changes and developments
- Sales growth was led by International and Lifestyle; Cleaning sales were nearly flat, while Household sales declined.
- Pre-tax earnings increased in all four operating segments. Corporate losses narrowed by $18 million.
- Liquid bleach represented about 13% of consolidated sales in 2010, down from 14% in 2008. Trash bags were about 11% and charcoal about 11% of 2010 sales.
- Wal-Mart and affiliates accounted for 27% of sales in 2010 and 2009. The five largest customers accounted for 45% of 2010 sales, up from 43% in 2009.
- Clorox was evaluating strategic options for its auto-care business, including a possible sale, but had made no decision.
Outlook, risks and contingencies
- The filing text supplied does not include explicit fiscal 2011 revenue or earnings guidance. Clorox expected its supply-chain restructuring, involving facility closures and production realignment, to be completed by the end of fiscal 2012.
- Management reported moderate commodity-cost declines in the first half of fiscal 2010 and moderate increases in the second half. Key exposures include resin, chlor-alkali, sodium hypochlorite, agricultural commodities, energy and transportation costs.
- Clorox cited intense competition, consumer trade-down and price sensitivity, customer concentration, supplier disruptions, and the challenge of delivering expected restructuring savings as material risks.
- International risks include foreign-exchange movements and political, economic, currency-access and repatriation uncertainties, particularly in Venezuela.
- Debt was $2.8 billion at year-end. The company said it could incur approximately $1.3 billion of additional debt while remaining within restrictive debt covenants; additional borrowing could increase financial risk.
- Environmental remediation liabilities were $16 million at June 30, 2010. A Michigan matter represented most of the recorded amount; Clorox’s agreed share of specified remediation costs is 24.3%. The company said additional exposure could exceed the recorded liability but could not be estimated.
- Management considered pending litigation, to the extent not already provided for, not expected to have a material adverse effect on the consolidated financial statements. Disclosure controls were deemed effective; the independent auditor gave an unqualified opinion on internal control over financial reporting.
Important facts for investors to verify
- Review the incorporated MD&A and financial statements for net income, cash flow, liquidity, debt maturities, interest costs, margins and the causes of earnings growth; these values are not clear in the supplied filing text.
- Assess the sustainability of segment earnings improvement and the effects of pricing, sales volume, product mix and commodity costs.
- Evaluate dependence on Wal-Mart and other large customers, and the potential impact of private-label competition or changes in shelf space.
- Track restructuring execution and costs, the auto-care strategic review, and developments in Venezuela and environmental remediation.
- Confirm the filing period: this is the fiscal year ended June 30, 2010, not “2009 Q4.”