CLOROX CO /DE/ - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

T	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2004

£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-07151

THE CLOROX COMPANY
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		31-0595760 (I.R.S. Employer Identification No.)
1221 Broadway Oakland, California (Address of principal executive offices)		94612-1888 (Zip code)

(510) 271-7000
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

Yes X No

As of December 31, 2004, there were 153,385,982 shares outstanding of the registrant's common stock (par value - $1.00), the registrant's only outstanding class of stock.

THE CLOROX COMPANY



PART I.	Financial Information			Page No.

	Item 1.	Financial Statements (Unaudited)

		Condensed Consolidated Statements of Earnings
			Three Months and Six Months Ended December 31, 2004 and 2003		3

		Condensed Consolidated Balance Sheets
			December 31, 2004 and June 30, 2004		4

		Condensed Consolidated Statements of Cash Flows
			Six Months Ended December 31, 2004 and 2003 and 2002		5

		Notes to Condensed Consolidated Financial Statements			6

	Item 2.	Management's Discussion and Analysis of Results of			19
			Operations and Financial Condition

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk			26

	Item 4.	Controls and Procedures			26

PART II.	Other Information

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			27

	Item 4.	Submission of Matters to a Vote of Security Holders			28

	Item 6.	Exhibits			28

PART I - - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

The Clorox Company

Condensed Consolidated Statements of Earnings

(In millions, except share and per-share amounts)

			Three Months Ended				Six Months Ended

			12/31/2004		12/31/2003		12/31/2004		12/31/2003

Net sales			$1,000		$ 920		$2,048		$1,926
Cost of products sold			569		527		1,160		1,104

Gross profit			431		393		888		822

Selling and administrative expenses			134		127		264		246
Advertising costs			92		87		197		191
Research and development costs			21		20		42		39
Restructuring and asset impairment costs			2		-		32		-
Interest expense			17		7		25		13
Other (income) expense:
Equity earnings and gain on exchange of Henkel Iberica, S.A.			(22	)	(2	)	(25	)	(5	)
Other, net			(7	)	-		(8	)	6

Earnings from continuing operations before income taxes			194		154		361		332
Income taxes on continuing operations			60		53		118		116
Reversal of deferred taxes from equity investment in Henkel Iberica, S.A.			(2	)	-		(2	)	-

Earnings from continuing operations			136		101		245		216

Discontinued operations:
	Gain on exchange		550		-		550		-
	Earnings from exchanged businesses		11		16		33		39
	Reversal of deferred taxes from exchanged businesses		6		-		6		-
	Losses from Brazil operations		-		(3	)	-		(5	)
	Income tax expense on discontinued operations		(4	)	(5	)	(12	)	(12	)

Earnings from discontinued operations			563		8		577		22

Net earnings			$ 699		$ 109		$ 822		$ 238

Earnings per common share:
	Basic
		Continuing operations	$ 0.73		$0.48		$ 1.22		$1.03
		Discontinued operations	3.00		0.04		2.89		0.10

		Basic net earnings per common share	$ 3.73		$0.52		$ 4.11		$1.13

	Diluted
		Continuing operations	$ 0.72		$0.47		$ 1.21		$1.01
		Discontinued operations	2.96		0.04		2.85		0.10

		Diluted net earnings per common share	$ 3.68		$0.51		$ 4.06		$1.11

Weighted average common shares outstanding (in thousands)
	Basic		187,310		210,500		200,107		211,577
	Diluted		189,806		212,959		202,555		213,924

Dividends per common share			$ 0.27		$0.27		$ 0.54		$0.54
See Notes to Condensed Consolidated Financial Statements

PARTI - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Unaudited)

The Clorox Company

Condensed Consolidated Balance Sheets

(In millions, except share amounts)

				12/31/2004		6/30/2004

Assets
Current assets
	Cash and cash equivalents			$ 300		$ 232
	Receivables, net			354		460
	Inventories			342		301
	Income taxes receivable			8		-
	Other current assets			43		50

			Total current assets	1,047		1,043

Property, plant and equipment, net				991		1,052

Goodwill, net				748		742

Trademarks and other intangible assets, net				606		633

Other assets, net				318		364

Total assets				$3,710		$3,834


Liabilities and Stockholders' (Deficit) Equity
Current liabilities
	Notes and loans payable			$ 545		$ 289
	Current maturities of long-term debt			2		2
	Accounts payable			293		310
	Accrued liabilities			629		643
	Income taxes payable			-		24

			Total current liabilities	1,469		1,268

Long-term debt				2,124		475

Other liabilities				390		377

Deferred income taxes				184		174

Stockholders' (deficit) equity
	Common stock			250		250
	Additional paid-in capital			314		301
	Retained earnings			3,542		2,846
	Treasury shares, at cost, 96,440,952 and 36,838,394 shares at
		December 31, 2004 and June 30, 2004, respectively		(4,339	)	(1,570	)
	Accumulated other comprehensive net losses			(207	)	(274	)
	Unearned compensation			(17	)	(13	)

			Stockholders' (deficit) equity	(457	)	1,540

Total liabilities and stockholders' (deficit) equity				$3,710		$3,834

See Notes to Condensed Consolidated Financial Statements

PART I - - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Unaudited)

The Clorox Company

Condensed Consolidated Statements of Cash Flows

(In millions)

					Six Months Ended

					12/31/2004		12/31/2003

Operations:
	Earnings from continuing operations				$245		$216
	Adjustments to reconcile earnings from continuing operations
		to net cash provided by continuing operations:
			Depreciation and amortization		94		95
			Deferred income taxes		(2	)	5
			Restructurings and asset impairment		32		-
			Gain on exchange of Henkel Iberica, S.A.		(20	)	-
			Other		16		22
			Cash effects of changes in:
				Receivables, net	94		99
				Inventories	(39	)	(40	)
				Income taxes receivable	7		-
				Other current assets	8		5
				Accounts payable and accrued liabilities	(65	)	(89	)
				Income taxes payable	-		18
				Pension contribution to qualified plans	-		(37	)

				Net cash provided by continuing operations	370		294
				Net cash provided by discontinued operations	35		34

				Net cash provided by operations	405		328

Investing Activities:
	Capital expenditures				(58	)	(82	)
	Businesses acquired				-		(11	)
	Low income housing contributions				(9	)	(9	)
	Other				1		(2	)

				Net cash used for investing by continuing operations	(66	)	(104	)
				Net cash used for investing by discontinued operations	-		(1	)

				Net cash used for investing activities	(66	)	(105	)

Financing Activities:
	Notes and loans payable, net				254		301
	Long-term debt borrowings				1,635		7
	Long-term debt repayments				-		(214	)
	Cash dividends paid				(115	)	(115	)
	Treasury stock purchased from non-affiliates				-		(155	)
	Treasury stock acquired from related party, Henkel KGaA				(2,110	)	(65	)
	Proceeds from settlement of interest rate swaps				4		22
	Issuance of common stock for employee stock plans				59		32

				Net cash used for financing by continuing operations	(273	)	(187	)
				Net cash used for financing by discontinued operations	-		(8	)

				Net cash used for financing activities	(273	)	(195	)

Effect of exchange rate changes on cash and cash equivalents					2		1
						</