GRI

Financial Statements

Condensed Consolidated Statements of Earnings

Years ended June 30
Dollars in millions, except share and per share data

  2016     2015     2014  
                   
Net sales $ 5,761   $ 5,655   $ 5,514  
Cost of products sold   3,163     3,190     3,158  
Gross profit   2,598     2,465     2,356  
                   
Selling and administrative expenses   806     798     751  
Advertising costs   587     523     503  
Research and development costs   141     136     125  
Interest expense   88     100     103  
Other (income) expense, net   (7 )   (13 )   (10 )
Earnings from continuing operations before income taxes   983     921     884  
Income taxes on continuing operations   335     315     305  
Earnings from continuing operations   648     606     579  
Losses from discontinued operations, net of tax       (26 )   (21 )
Net earnings $ 648   $ 580   $ 558  
Net earnings (losses) per share                  
Basic                  
Continuing operations $ 5.01   $ 4.65   $ 4.47  
Discontinued operations       (0.20 )   (0.16 )
Basic net earnings per share $ 5.01   $ 4.45   $ 4.31  
Diluted                  
Continuing operations $ 4.92   $ 4.57   $ 4.39  
Discontinued operations       (0.20 )   (0.16 )
Diluted net earnings per share $ 4.92   $ 4.37   $ 4.23  
Weighted average shares outstanding (in thousands)                  
Basic   129,472     130,310     129,558  
Diluted   131,717     132,776     131,742  
Condensed Consolidated statements of Comprehensive Income

Years ended June 30
Dollars in millions

  2016     2015     2014  
                   
Earnings from continuing operations $ 648   $ 606   $ 579  
Losses from discontinued operations, net of tax       (26 )   (21 )
Net earnings   648     580     558  
Other comprehensive (losses) income:                  
Foreign currency adjustments, net of tax   (53 )   (54 )   (37 )
Net unrealized gains (losses) on derivatives, net of tax   9     (14 )   (9 )
Pension and postretirement benefit adjustments, net of tax   (24 )   (17 )   (4 )
Total other comprehensive (losses) income, net of tax   (68 )   (85 )   (50 )
Comprehensive income $ 580   $ 495   $ 508  
Condensed Consolidated Balance Sheets

As of June 30
Dollars in millions, except per share amounts

        2016     2015  
                   
Assets                  
Current assets                  
Cash and cash equivalents       $ 401   $ 382  
Receivables, net         569     519  
Inventories, net         443     385  
Other current assets         72     143  
Total current assets       $ 1,485   $ 1,429  
Property, plant and equipment, net         906     918  
Goodwill         1,197     1,067  
Trademarks, net         657     535  
Other intangible assets, net         78     50  
Other assets         195     165  
Total assets       $ 4,518   $ 4,164  
                   
Liabilities and Stockholders’ Equity                  
Current liabilities                  
Notes and loans payable       $ 523   $ 95  
Current maturities of long-term debt             300  
Accounts payable and accrued liabilities         1,035     979  
Income taxes payable             31  
Total current liabilities         1,558     1,405  
Long-term debt         1,797     1,796  
Other liabilities         784     750  
Deferred income taxes         82     95  
Total liabilities       $ 4,221   $ 4,046  
                   
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 as of June 30, 2016 and 2015; and 129,355,263 and 128,614,310 shares                  
outstanding as of June 30, 2016 and 2015, respectively         159     159  
Additional paid-in capital         868     775  
Retained earnings         2,163     1,923  
Treasury shares, at cost: 29,386,198 and 30,127,151 shares                  
as of June 30, 2016 and 2015, respectively         (2,323 )   (2,237 )
Accumulated other comprehensive net (losses) income         (570 )   (502 )
Stockholders’ equity         297     118  
Total liabilities and stockholders’ equity       $ 4,518   $ 4,164  
CONDENSED Consolidated Statements of Stockholders’ Equity
       
  Common Stock Additional
Paid-In
Capital
Retained
Earnings
Treasury Shares Accumulated
Other
Comprehensive
Net (Losses) Income
Total
Dollars in millions Shares
(000)
Amount Shares
(000)
Amount
Balance as of 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 as of 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 as of June 30, 2015 158,741    159      775      1,923 (30,127)    (2,237)      (502)     118
Net earnings              648         648
Other comprehensive loss                 (68)      (68)
Accrued dividends              (406)         (406)
Stock-based compensation         45            45
Other employee stock plan activities         48            (2)   2,892      168      214
Treasury stock purchased           (2,151)      (254)      (254)
Balance as of June 30, 2016 158,741  $ 159    $ 868    $ 2,163 (29,386) $ (2,323)   $ (570)  $ 297
CONDENSED Consolidated Statements of Cash Flows

Years ended June 30
Dollars in millions

  2016     2015     2014  
Operating activities:                  
Net earnings $ 648   $ 580   $ 558  
Deduct: Losses from discontinued operations, net of tax       (26 )   (21 )
Earnings from continuing operations   648     606     579  

Adjustments to reconcile earnings from continuing operations

                 

to net cash provided by continuing operations:

                 
Depreciation and amortization   165     169     177  
Stock-based compensation   45     32     36  
Deferred income taxes   5     (16 )   (21 )
Settlement of interest rate forward contracts       (25 )    
Other   1     (17 )   6  
Changes in:                  
Receivables, net   (52 )   6     20  
Inventories, net   (45 )   (25 )   1  
Other current assets   6     6     5  
Accounts payable and accrued liabilities   57     93     (12 )
Income taxes payable   (62 )   29     (5 )
Net cash provided by continuing operations   768     858     786  
Net cash provided by (used for) discontinued operations   10     16     (19 )
Net cash provided by operations   778     874     767  
Investing activities:                  
Capital expenditures   (172 )   (125 )   (137 )
Business acquired, net of cash acquired   (290 )        
Other   32     19      
Net cash used for investing activities from continuing operations   (430 )   (106 )   (137 )  
Net cash used for investing activities by discontinued operations           (1 )
Net cash used for investing activities   (430 )   (106 )   (138 )
Financing activities:                  
Notes and loans payable, net   426     (48 )   (60 )
Long-term debt borrowings, net of issuance costs       495      
Long-term debt repayments   (300 )   (575 )    
Treasury stock purchased   (254 )   (434 )   (260 )
Cash dividends paid   (398 )   (385 )   (368 )
Issuance of common stock for employee stock plans and other   210     251     96  
Net cash used for financing activities   (316 )   (696 )   (592 )
Effect of exchange rate changes on cash and cash equivalents   (13 )   (19 )   (7 )
Net increase in cash and cash equivalents   19     53     30  
Cash and cash equivalents:                  
Beginning of year   382     329     299  
End of year $ 401   $ 382   $ 329  
Supplemental cash flow information:                  
Interest paid $ 79   $ 104   $ 76  
Income taxes paid, net of refunds   323     236     312  
Noncash financing activities:                  
Cash dividends declared and accrued, but not paid   104     99     95  
Report on Financial Information

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM on Condensed Financial Statements

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, 2016 and 2015, 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, 2016. Our audits also included the financial statement schedule in Exhibit 99.2. These financial statements and schedule are the responsibility of the Company’s 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, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2016, 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 Company’s internal control over financial reporting as of June 30, 2016, 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 16, 2016 expressed an unqualified opinion thereon.

San Francisco, CA
August 16, 2016

Report On Nonfinancial Information

Report of Independent Accountants on Review of Nonfinancial Information

To the Management of The Clorox Company

We have reviewed selected performance indicators (the “Subject Matter”) included in the accompanying Schedule of Selected Performance Indicators (the “Schedule”) and as identified by the “” symbol presented in The Clorox Company’s (“Clorox” or “the Company”) Annual Report and Executive Summary (the “Reports”) for the year ended June 30, 2016 or as otherwise noted, in accordance with the relevant criteria also presented in the Schedule. We did not review all information included in the Reports. We did not review the narrative sections of the Reports, except where they incorporated the Subject Matter. Clorox’s management is responsible for the Subject Matter included in the Schedule and as also presented in the Reports, based on the relevant criteria included in the Schedule (the “Criteria”). Our responsibility is to express a conclusion on the Subject Matter based on our review.

Our review was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform our review to obtain limited assurance about whether any material modifications should be made to the Subject Matter in order for it to be in accordance with the Criteria. A review consists principally of applying analytical procedures, making inquiries of persons responsible for the subject matter, obtaining an understanding of the data management systems and processes used to generate, aggregate and report the Subject Matter and performing such other procedures as we considered necessary in the circumstances. A review is substantially less in scope than an examination, the objective of which is to obtain reasonable assurance about whether the Subject Matter is in accordance with the Criteria, in all material respects, in order to express an opinion. Accordingly, we do not express such an opinion. We believe that our review provides a reasonable basis for our conclusion.

As described in Note 1, non-financial information is subject to measurement uncertainties resulting from limitations inherent in the nature and the methods used for determining such data. The selection of different but acceptable measurement techniques can result in materially different measurements. The precision of different measurement techniques may also vary.

Based on our review, we are not aware of any material modifications that should be made to the Subject Matter for the year ended June 30, 2016 or otherwise noted, in order for it to be in accordance with the relevant Criteria set forth in the table on the next page.

September 23, 2016

Schedule of Selected Performance Indicators — The Clorox Company

Indicator Name

Scope

Unit

Report Value

Criteria

Scope 1, 2, and 3 Greenhouse Gas (GHG) Emissionsi

Global

Percentage reduction of tCO2e per stat case sold over baseline year (2011)

-17%

The World Resources Institute (“WRI”) / World Business Council for Sustainable Development’s (“WBCSD”) Greenhouse Gas (“GHG”) Protocol Corporate Standard

Energy consumption, Scope 1 & 2i

Global

Percentage reduction of MWh per stat case sold over baseline year (2011)

-14%

Refer to criteria for Scope 1, 2 and 3 GHG emissions above

Water consumptionii

Global

Percentage reduction of gallons of water consumed per stat case sold over baseline year (2011)

-14%

Management’s criteria as follows: Water consumption includes water at all global manufacturing sites, offices and research development centers used in 1) products sold to customers 2) the manufacturing process 3) irrigation and 4) water consumed by employees during office hours for personal needs (i.e. restrooms, break rooms)

Sustainability improvementsiii to product portfolio since January 2012

Global

Percentage of product portfolio

31%

Management’s criteria as follows: There are four types of sustainability improvement criteria that can be met either by fully meeting one or by partially meeting two or more: 1) a 5 percent or more reduction in product or packaging materials on a per-consumer-use basis; 2) an environmentally beneficial change to 10 percent or more of packaging or active ingredients on a per-consumer-use basis; 3) a 10 percent reduction in required usage of water or energy by consumer; or 4) an environmentally beneficial sourcing change to 20 percent or more of active ingredients or packaging on a per-consumer-use basisiv

Workforce demographics/diversity metricsv

See right for metric scope

Percentage minority non-production employees in U.S.

31%

OSHA Regulation 1920.2(d) defines “Employee” as an individual who is employed in a business of his employer which affects commerce. The Equal Employment Opportunity Commission defines “Minority” as any race that is not white (Asian; Black; Latino; Native American; Native Hawaiian; or Two or More).

Management’s criteria as follows: “Manager” is defined as an “employee” at Grade 27 or above for U.S. employees and Grade 26 or above for international employees with regards to Clorox’s Human Resources (HR) compensation structure. “Production Employee” is defined as an employee at Grade 19 or below with regards to Clorox’s HR compensation structure (international and U.S.). “Non-Production Employee” is defined as an employee at Grade 20 or above with regards to Clorox’s HR compensation structure (international and U.S.).

Percentage minority non-production managers in U.S.

25%

Percentage female non-production employees globally

49%

Percentage female non-production managers globally

41%

Percentage female independent Board of Directors

30%

Percentage minority independent Board of Directors

50%

Percentage female Executive Committee members

31%

U.S. product donations

U.S. Only

Fair Market Valuevi of products donated in U.S. dollars

$8,100,000

Management’s criteria as follows: U.S. product donations refer to those donations used to aid in disaster relief or to support schools, food banks, and other non-profit 501c-3 organizations. Fair Market Value is derived from current year average truckload price of the product donated. Truckload prices are based on volume ordered and shipped.

Total recordable
incident rate

Global

Recordable incident rate (RIR)vii

0.61

Occupational Health and Safety Administration (OSHA) Regulation (Standards — 29 CFR) Part 1904 “Recording and Reporting Occupational Injuries and Illness”

Employee engagement score

Global

Percentage of employee engagementviii

87%

Management’s criteria as follows: Engagement is defined as the intensity of employees’ connection to Clorox, marked by committed effort to achieve work goals (‘being engaged’) in environments that support productivity (‘being enabled’) and maintain personal well-being (‘feeling energized’)

Note 1: Non-financial information is subject to measurement uncertainties resulting from limitations inherent in the nature and the methods used for determining such data. The selection of different but acceptable measurement techniques can result in materially different measurements. The precision of different measurement techniques may also vary.

i For the calendar year ended December 31, 2015. Where actual data is not available, Clorox uses an estimation methodology based on historic energy use and stat case figures to determine emissions. Leased Clorox facilities and facilities with less than 15 employees are not included in GHG or energy consumption.

a) Scope 1 emissions include direct energy used by Clorox in its operations, categorized by stationary combustion, mobile combustion, refrigerant use, direct VOC loss and wood pyrolysis (the last two sources relate mainly to Clorox’s Kingsford business unit, and wood pyrolysis is considered to be a carbon neutral process; therefore emissions from wood pyrolysis are not included in total tCO2e).

b) Scope 2 includes indirect emissions resulting from Clorox’s purchased electricity use and is calculated using the Environmental Protection Agency (EPA) 2012 eGRID emission factors for U.S. locations and the Energy Information Administration (EIA) Foreign Electricity Emission Factors published in 2007 for international locations.

c) Scope 3 includes finished goods transportation in the U.S. only and employee business travel (global). Employee business travel includes emissions from commercial air flights and rental car use by Clorox’s employees.

ii For the calendar year ended December 31, 2015. Water sources include city/municipal, well, lake, river and storm water. Facilities with less than 15 employees are not included in water consumption. Leased Clorox facilities are not included in water consumption, unless Clorox maintains full operational control.

iii For the calendar year ended December 31, 2015. All sustainability metrics represent cumulative progress against CY 2011 baseline, with percentage based on net fiscal year customer sales. When projects meet the criteria, they are reported to the Clorox Eco Team by each business unit.

iv In CY 2015, the definition was modified to allow for combinations of product and packaging improvements within a single criterion or across all criteria in cases where there are multiple improvements but no single one meets the minimum thresholds. In those cases, Clorox adds the percentages of each criterion improvement to ensure that together they reach 100 percent. While the adjusted criteria has been retroactively applied back to 2012, no such combinations have been counted toward cumulative progress reported through CY 2015.

v For the fiscal year ended June 30, 2016.

vi For the fiscal year ended June 30, 2016. U.S. product donations include donations made by any U.S. business unit.

vii Recordable incident rate was determined at July 24 for the fiscal year ended June 30, 2016.

viii Clorox adopts Willis Towers Watson’s definition of employee engagement in terms of ‘sustainable’ engagement. Employee engagement is measured by a survey administered March 14, 2016 through April 1, 2016 of 5,969 Clorox employees.