GRI

Dear Fellow Stakeholders:

Evolution is essential to remain relevant and thrive. We’ve come a long way since we started our business more than 100 years ago in Oakland, California, with a single product — Clorox® bleach.

Benno Dorer
Chairman
and Chief Executive Officer

Over the years we’ve evolved our geographical footprint beyond the U.S. and now have leading brands in many countries. We’ve evolved the diversity and capabilities of our people to better serve our consumers around the world. And, we’ve evolved our global portfolio to include a variety of cleaning and healthcare products as well as natural personal care, food, charcoal, water filtration, cat litter, trash bags, food storage and more.

In fiscal year 2016, evolution continued in our quest to deliver good growth: growth that’s profitable, sustainable and achieved responsibly. We’ve strengthened our commitment to corporate responsibility to ensure we continue to achieve our results the right way. We’ve continued to enhance our demand-creation programs, with product innovation across many brands and digital marketing communications to deliver even more targeted messages to consumers. And, with the recent acquisition of the Renew Life® business, our portfolio now includes a leader in digestive health, putting us in an even better position to fulfill our mission to make everyday life better, every day.

We delivered another year of sales and profit growth in fiscal year 2016.

Excellent execution of our 2020 Strategy drove strong results:

  • We grew sales 2 percent; excluding a 3-point impact of unfavorable foreign currency exchange rates, we grew sales 5 percent.1
  • We drove productivity gains, delivering $109 million in cost savings.
  • We expanded our gross margin by 150 basis points to 45.1 percent.
  • We delivered 8 percent diluted earnings per share growth, even while increasing our investments behind demand-creation programs.

We view our business holistically, and I’m equally proud of our results beyond financial performance. We posted a recordable incident rate of 0.612 in the workplace, delivering another year of world-class safety. Once again, we’ve been recognized for our strong diversity and inclusion programs, receiving another 100 percent score from the Human Rights Campaign for our LGBT workplace practices and being named one of the best places to work by Diversity MBA magazine. We also continued to drive our eco strategy, making sustainability improvements to 31 percent of our product portfolio since our baseline calendar year of 2011,3 and we’re on track with our goal to make sustainability improvements to 50 percent of our product portfolio by 2020. We also lowered our greenhouse gas emissions by 17 percent , water usage by 14 percent , energy usage by 14 percent and waste-to-landfill by 25 percent , cumulatively, since 2011. The U.S. Environmental Protection Agency named us a 2016 Safer Choice Partner of the Year, and Corporate Responsibility Magazine again included us among the top 100 companies on its Best Corporate Citizens list.

I’m especially proud of our achievements in the face of continuing macroeconomic challenges in fiscal year 2016, including ongoing foreign currency headwinds that challenged our international business and overall company results. Even so, our strategic choices, including increased investments in our U.S. brands and select growth initiatives in International, drove strong results, with very good top- and bottom-line growth as well as market share increases.

We evolved our corporate responsibility strategy by joining the United Nations Global Compact.

True to our commitment to good growth, we achieved our fiscal year 2016 results the right way — with corporate responsibility serving as the cornerstone of our business. In fiscal year 2016, we became a signatory to the United Nations Global Compact, the world’s largest organization that’s bringing companies, nongovernmental organizations, governments and other stakeholders together to advance the most important global sustainability issues. As a signatory to the UNGC, we affirm our commitment to its Ten Principles by driving our corporate responsibility strategy, a comprehensive set of commitments across our company — from human rights, labor and product safety to transparency, environmental sustainability and contributions to communities where we operate. We believe joining the UNGC is a meaningful next step in our CR journey, giving us an opportunity to continue learning from and sharing ideas with key sustainability influencers and other member companies.

We’ve evolved our portfolio even further into health and wellness.

Over the years we’ve shaped our portfolio with brands that make a meaningful difference in the health and wellness of our consumers. A few noteworthy examples are Clorox® bleach, which kills germs that make people sick in homes, public places and healthcare settings; Brita® water filters, which provide great-tasting water, a healthier beverage option than sugary drinks; and the Burt’s Bees® brand, which offers high-quality natural personal care products to nourish the face and body. Health and wellness is not only our past and present, it’s our future. In fiscal year 2016, we acquired the Renew Life® line of probiotics, cleanses and digestive aids, giving us the ability to make a difference in the digestive health of consumers around the world. Two-thirds of U.S. adults have experienced digestive issues in the past year, and that population is likely to increase. We know consumers are interested in the $10 billion digestive health category, but they’re also confused by the many different brands and products available, all with different claims. That’s where a company of strong marketers, like Clorox, can help consumers make more informed decisions.

We continued to focus on the well-being of our employees and communities around the world.

A priority for the Clorox management team is to focus on high levels of employee engagement since we know there’s a strong correlation between engagement and long-term company performance. Our current engagement score of 87 percent,4 8 points higher than the fast-moving consumer goods industry norm and about 3 points higher than the global high-performance norm, is something that makes me especially proud. Our values-based culture and people programs, including diversity and inclusion, health and wellness, and development and recognition, play a strong part in engaging the heads and hearts of our people.

We also believe that vibrant and healthy communities play an important role in the health of our business. In fiscal year 2016, our total impact to support our communities came to approximately $17 million in cash grants, cause marketing contributions, product donations and employee volunteer hours.

We continued our commitment to return cash to sTockholders.

In fiscal year 2016, we returned $398 million in cash dividends to our stockholders. As we’ve done every year since 1977, we raised our annual cash dividend, announcing in the fourth quarter an increase of 4 percent. As of August 2016, Clorox’s dividend yield was 2.2 percent. Our total stockholder return of 36 percent for fiscal year 2016 ranked Clorox third in our peer group.

Evolution of our business, guided by our 2020 Strategy, will continue in fiscal year 2017.

Evolution in fiscal year 2017 will continue with our focus on making progress against our 2020 Strategy accelerators. We’ll continue to create meaningful value from 3D Innovation across our demand-creation model; through 3D Technology Transformation we’ll continue to tap into the latest technology advancements to deliver the right message to the right consumer at the right time, while generating a strong return on our brand investments; through Portfolio Momentum, we’ll continue to direct more resources to the brands that we expect to deliver the most growth; and we’ll continue to step up our game by living our Growth Culture and defining new opportunities to help us deliver good growth. What won’t change is our commitment to corporate responsibility. It’s the foundation of everything we do in our goal to continue delivering value to all our stakeholders.

Sincerely,

Benno Dorer

Chairman and Chief Executive Officer
Aug. 16, 2016

1 The exclusion of foreign exchange impact (currency neutral) is a non-GAAP financial measure, which management believes provides useful information to investors about trends in the company's operations and enables period-over-period comparisons. See the financial footnotes for reconciliations of these non-GAAP measures to the most directly comparable U.S. GAAP measures.

2 Based on corporate benchmarking by Clorox, we consider a recordable incident rate of 1.0 or less to be world-class. Our fiscal year 2016 RIR of 0.61 means that for every 100 Clorox employees, we averaged less than one reportable incident during the past year. According to the latest available data from the U.S. Bureau of Labor Statistics, the average RIR for goods-producing manufacturing companies is 3.8. The criteria used to determine RIR follow the U.S. Department of Labor’s Occupational Safety and Health Administration guidelines and are applied globally.

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

4 The Willis Towers Watson global high-performance norm is based on responses from more than 145,000 employees at 28 companies. Companies qualify for the norm by meeting two criteria: 1) superior financial performance, defined by a net profit margin and/or return on invested capital that exceeds industry averages; and 2) superior human resources practices, defined by employee opinion scores near the top among the most financially successful companies surveyed by Willis Towers Watson.

Reviewed by Ernst & Young LLP. Please refer to the review report.

The Clorox Company’s
Evolution in Health & Wellness

On May 3, five businessmen invest $100 each to found America's first commercial liquid bleach factory, the Electro-Alkaline Company.

1913

Commercial production of a concentrated industrial-strength bleach with 21 percent sodium hypochlorite begins.

1914

The company develops a less-concentrated version of liquid bleach for home use, touted as a "bleacher, germicide, cleanser and disinfectant."

1916

Bleach earns exalted status during World War II because it could disinfect wounds, neutralize enemy gases and purify water.

1941

Liquid bleach is used to scrub down the Apollo 11 astronauts after their lunar landing to help guard against “moon germs.”

1969

The company introduces Tilex® instant mildew stain remover nationally in the U.S.

1981

The Ayudín® bleach and cleaning brand becomes part of the product portfolio in Argentina.

1986

The company begins marketing Brita® water filtration products in the U.S.

1988

Poett® cleaning products are the latest addition to the portfolio in Argentina.

1996

The company aids in relief efforts after Hurricane Katrina, a South Asian tsunami and a typhoon in Malaysia.

2005-06

The Hidden Valley® brand launches the Love Your Veggies campaign to help educate children about nutrition.

2006

Seizing on the health and wellness consumer megatrend, Clorox acquires Burt’s Bees®, a leader in the natural personal care category.

2007

The company launches the Green Works® line of naturally derived cleaners into the mainstream cleaning aisle.

2008

Clorox is first major consumer packaged goods company to voluntarily disclose cleaning and disinfecting ingredients for U.S. and Canada.

2009

Clorox Commercial Solutions® germicidal bleach becomes first product to get EPA registration for killing C. difficile spores on hard, nonporous surfaces.

2009

Clorox acquires Caltech Industries and its Dispatch® brand, becoming a leading provider of bleach-based disinfectants in healthcare.

2010

The company initiates the Clorox® Safe Water Project to provide people in a rural area of Peru with access to safe drinking water.

2012

The company donates 36,000 bottles of Clorox® regular bleach to help with Ebola prevention and control in Sierra Leone and Liberia.

2014

The company’s professional division begins marketing the Clorox Healthcare® Optimum-UV® system.

2014

Clorox expands into the digestive health category with the acquisition of the Renew Life® brand.

2016