Current Report



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 8-K

 


CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): October 31, 2007

 


THE CLOROX COMPANY

(Exact name of registrant as specified in its charter)

 


Delaware

(State or other jurisdiction of incorporation or organization)

 

1-07151   31-0595760
(Commission File Number)   (I.R.S. Employer Identification No.)

1221 Broadway, Oakland, California 94612-1888

(Address of principal executive offices) (Zip code)

(510) 271-7000

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.)

 

¨ Written communications pursuant to Rule 425 Under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02 Results of Operations and Financial Condition

On October 31, 2007, The Clorox Company (the “Company”) issued a press release announcing its financial results for its fiscal quarter ended September 30, 2007. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 7.01 Regulation FD

Attached hereto as Exhibit 99.2 and incorporated herein by reference is supplemental financial information regarding the Company’s financial results for its fiscal quarter ended September 30, 2007.

On October 31, 2007, the Company announced that it will acquire Burt’s Bees, a leader in the natural personal care category. The full text of the press release related to the acquisition is attached hereto as Exhibit 99.3 and is incorporated herein by reference. Supplemental information regarding the acquisition is attached hereto as Exhibit 99.4 and is incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits

 

  (c) Exhibits

 

Exhibit  

Description

99.1   Press Release dated October 31, 2007 of The Clorox Company announcing financial results for the quarter ended September 30, 2007
99.2   Supplemental information regarding financial results
99.3   Press Release dated October 31, 2007 of The Clorox Company announcing acquisition agreement
99.4   Supplemental information regarding acquisition


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  THE CLOROX COMPANY
Date: October 31, 2007    
  By:  

/s/ Laura Stein

    Senior Vice President – General Counsel

Exhibit 99.1

 

The Clorox Company News Release

 

  LOGO

Clorox Reports Strong Operating Results in Q1; Updates Fiscal 2008 EPS Outlook

OAKLAND, Calif., Oct. 31, 2007 – The Clorox Company (NYSE: CLX) today announced that top-line growth and cost savings contributed to strong operating results for the company’s fiscal first quarter, which ended Sept. 30, 2007.

“I’m delighted with our first-quarter results,” said Chairman and CEO Don Knauss. “We delivered strong sales and volume growth in our North America and International operating segments. In addition, recent price increases and aggressive cost savings are helping us mitigate the difficult commodity cost environment. And the plans we’ve put in place to address competitive activity are paying off.”

First-quarter highlights

Clorox reported first-quarter net earnings of $111 million, or 76 cents diluted earnings per share (EPS), based on weighted average diluted shares outstanding of 146 million. This compares with $112 million in the year-ago quarter, or 73 cents diluted EPS, based on weighted average diluted shares outstanding of 154 million. Contributing to earnings for the current quarter were strong volume and sales growth in higher margin businesses such as food products and Brita ® water-filtration products. Current quarter earnings also included $27 million in previously announced pretax charges, or 12 cents diluted EPS, including those related to the consolidation of the company’s manufacturing networks and other charges the company decided to take in light of its Centennial Strategy. Of these pretax charges, $25 million were reported in the “restructuring and asset impairment costs” line of the Statements of Earnings and $2 million were reported in “cost of products sold.”

First-quarter sales grew 7 percent to $1.24 billion, compared with $1.16 billion in the year-ago quarter. Sales in the current quarter included 2 percentage points of growth from the recently acquired bleach businesses and 1 percentage point of growth from favorable foreign exchange rates. Volume increased 6 percent compared to the year-ago quarter, including 1 percentage point of growth from the recently acquired bleach businesses. Volume growth was primarily driven by strong shipments of home-care products, including Clorox ® disinfecting wipes and other Clorox ® branded cleaners; Hidden Valley ® bottled salad dressing; Fresh Step ® scoopable cat litter; Brita water-filtration products; bleach in Canada; and laundry and cleaning products in Latin America.

Gross margin in the first quarter decreased 30 basis points to 42.6 percent from 42.9 percent in the year-ago quarter. The decrease was primarily due to the impact of higher expenses for manufacturing and logistics, which includes the cost of diesel fuel, and unfavorable raw-material costs, primarily for resin and agricultural commodities. These factors were substantially offset by the benefit of strong cost savings and price increases.

Net cash provided by operations was $163 million, compared to $133 million in the year-ago quarter. The year-over-year increase was primarily due to higher earnings, excluding $25 million of noncash charges.

During the quarter, Clorox repurchased 2 million shares of the company’s common stock at a cost of about $118 million under its ongoing program to offset stock option dilution. In addition, as previously announced, the company executed an accelerated share repurchase (ASR) agreement on Aug. 10. Under the ASR agreement, Clorox repurchased $750 million of its shares of common stock at an initial repurchase price of $59.59 per share, subject to adjustment. Final settlement of the ASR program is scheduled for no later than Jan. 24, 2008. The final number of shares the company is repurchasing under the terms of the agreement and the timing of the final settlement will depend on prevailing market conditions, the final discounted volume weighted average share price over the term of the ASR program and other customary adjustments.

In the first quarter of fiscal year 2008, Clorox realigned its operating segments due to changes in its management reporting structure. The North America segment includes all products marketed in the United States and Canada. The International segment includes operations outside of the U.S. and Canada. Historical segment financial information in this news release has been revised to reflect these new operating segments. Following is a summary of key first-quarter results by business segment. All comparisons are with the first quarter of fiscal year 2007, unless otherwise stated.


North America

The segment reported 5 percent sales growth, 5 percent volume growth and flat pretax earnings, which includes $23 million in the aforementioned pretax charges. Sales and volume growth were driven by strong shipments of home-care products including Clorox ® disinfecting wipes behind successful promotional activities and a low-streak product improvement, as well as other Clorox ® branded cleaners including Clorox ® disinfecting cleaner, Clorox ® toilet-bowl cleaner and Clorox ® Clean-Up ® spray cleaner. Also contributing to the segment’s volume growth were higher shipments of Hidden Valley ® bottled salad dressing due to increased merchandising; all-time record shipments of Fresh Step ® scoopable cat litter; higher shipments of Brita water-filtration products due to category growth and merchandising activities; and shipments in Canada from the recently acquired bleach business. Pretax earnings reflected the benefit of higher sales, strong cost savings and price increases. These factors were offset primarily by the impact of the aforementioned charges, unfavorable commodity costs, higher trade-promotion spending and increased manufacturing costs.

International

The segment reported 18 percent sales growth, 11 percent volume growth and a 9 percent increase in pretax earnings, which includes $2 million in the aforementioned pretax charges. Sales results included 8 percentage points of growth from the newly acquired bleach businesses and 4 percentage points from favorable foreign exchange rates. Volume growth was driven by increased shipments of laundry and cleaning products in Latin America due to category growth and the recently acquired bleach businesses. Sales growth outpaced volume growth primarily due to the benefit of favorable foreign exchange rates and price increases. Pretax earnings reflected the benefit of higher sales, partially offset by the impact of higher manufacturing costs, trade-promotion spending and commodity costs.

Updated fiscal year 2008 financial outlook

For fiscal year 2008, Clorox continues to anticipate sales growth from existing brands in the range of 3-5 percent. Including the anticipated benefit of the recently acquired bleach businesses, sales growth is now anticipated to be in the range of 4-5 percent.

The company now anticipates that gross margin in fiscal year 2008 will be lower compared with fiscal year 2007. This outlook reflects higher commodity costs, particularly in the second quarter, due to higher-than-anticipated resin costs and continued pressure on agricultural commodities such as corn starch that goes into charcoal and soybean oil, which is used in Hidden Valley ® salad dressing. To partially offset the impact of agricultural commodity cost increases, the company announced plans to increase prices by 6 percent on Kingsford ® charcoal products, effective January 2008. In addition, as previously communicated, the company increased prices on Hidden Valley ® salad dressing by 6 percent, effective October 2007.

As announced previously, the fiscal year 2008 outlook includes anticipated charges related to the consolidation of Clorox’s manufacturing networks and other charges the company decided to take in light of its Centennial Strategy. For the fiscal year, these pretax charges are still anticipated to be in the range of $49 million to $58 million, of which $35 million to $39 million are noncash. This range includes the charges of $27 million reported in the first quarter.

The company’s fiscal year 2008 outlook for diluted EPS is now in the range of $3.33 to $3.50. This change primarily reflects the benefits of the aforementioned ASR agreement. For the fiscal year, the company now anticipates weighted average diluted shares outstanding of about 142 million, subject to adjustment once the ASR is finalized.

Clorox’s fiscal year 2008 outlook excludes the impact of the Burt’s Bees acquisition, which the company also announced today. For more information about the acquisition, see today’s related press release, which is posted at www.TheCloroxCompany.com .

For more information

Visit the Investors: Financial Results section of the company’s Web site at www.TheCloroxCompany.com for the following:

 

 

Definitions of financial terms used in this earnings release and on today’s conference call with the investment community (details below)

 

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Supplemental volume and sales growth information

 

 

Supplemental gross margin driver information

 

 

EBIT reconciliation information

 

 

Supplemental balance sheet and cash flow information

 

 

Supplemental price-increase information

Note: Percentage and basis-point changes noted in this news release are calculated based on rounded numbers.

Today’s webcast

Today at 6:30 a.m. Pacific time (9:30 a.m. Eastern time), Clorox will host a live audio webcast of a discussion with the investment community regarding the company’s first-quarter results. The webcast can be accessed at http://investors.thecloroxcompany.com . Following a live discussion, a replay of the webcast will be archived for one week on the company’s Web site.

The Clorox Company

The Clorox Company is a leading manufacturer and marketer of consumer products with fiscal year 2007 revenues of $4.8 billion. Clorox markets some of consumers’ most trusted and recognized brand names, including its namesake bleach and cleaning products, Armor All ® and STP ® auto-care products, Fresh Step ® and Scoop Away ® cat litter, Kingsford ® charcoal, Hidden Valley ® and K C Masterpiece ® dressings and sauces, Brita ® water-filtration systems, and Glad ® bags, wraps and containers. With 7,800 employees worldwide, the company manufactures products in more than two dozen countries and markets them in more than 100 countries. Clorox is committed to making a positive difference in the communities where its employees work and live. Founded in 1980, The Clorox Company Foundation has awarded cash grants totaling more than $69.7 million to nonprofit organizations, schools and colleges. In fiscal 2007 alone, the foundation awarded $3.4 million in cash grants, and Clorox made product donations valued at $5.9 million. For more information about Clorox, visit www.TheCloroxCompany.com.

Forward-looking statements

This press release contains “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and such forward looking statements involve risks and uncertainties. Except for historical information, matters discussed above, including statements about future volume, sales, costs, cost savings, earnings, cash outflows, plans, objectives, expectations, growth, or profitability, are forward looking statements based on management’s estimates, assumptions and projections. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations on such words, and similar expressions, are intended to identify such forward looking statements. These forward looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed above. Important factors that could affect performance and cause results to differ materially from management’s expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the year ended June 30, 2007, as updated from time to time in the company’s SEC filings. These factors include, but are not limited to, the success of the company’s previously announced Centennial Strategy; the need for any additional restructuring or asset-impairment charges; the final purchase price and number of shares repurchased under the company’s accelerated share repurchase agreement; general economic and marketplace conditions and events; competitors’ actions; the company’s costs, including changes in exposure to commodity costs such as resin, diesel, chlor-alkali and agricultural commodities; increases in energy costs; consumer and customer reaction to price increases; customer-specific ordering patterns and trends; the company’s actual cost performance; changes in the company’s tax rate; any future supply constraints that may affect key commodities; risks inherent in sole-supplier relationships; risks related to customer concentration; risks arising out of natural disasters; risks related to the handling and/or transportation of hazardous substances, including but not limited to chlorine; risks inherent in litigation; risks relating to international operations, including the risk associated with foreign currencies; risks inherent in maintaining an effective system of internal controls, including the potential impact of acquisitions or the use of third-party service providers; the ability to manage and realize the benefit of joint ventures and other cooperative relationships, including the company’s joint venture regarding the company’s Glad ® plastic bags, wraps and containers business, and the agreement relating to the provision of information technology and related services by a third party; the success of new products; risks relating to acquisitions, mergers and divestitures; risks relating to changes in the company’s capital structure; and the ability of the company to successfully manage tax, regulatory, product liability, intellectual property, environmental and

 

Page 3 of 7


other legal matters, including the risk resulting from joint and several liability for environmental contingencies. In addition, the company’s future performance is subject to risks related to its November 2004 share exchange transaction with Henkel KGaA, the tax indemnification obligations and the actual level of debt costs. Declines in cash flow, whether resulting from tax payments, debt payments, share repurchases, interest cost increases greater than management expects, or increases in debt or changes in credit ratings, or otherwise, could adversely affect the company’s earnings.

The company’s forward looking statements in this report are based on management’s current views and assumptions regarding future events and speak only as of their dates. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws.

 

Media relations

  Investor relations   
Dan Staublin 510-271-1622   Li-Mei Johnson 510-271-3396   
Kathryn Caulfield 510-271-7209   Steve Austenfeld 510-271-2270   

 

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Condensed Consolidated Statements of Earnings (Unaudited)

Dollars in millions, except per share amounts

 

     Three Months Ended  
     9/30/2007    9/30/2006  

Net sales

   $ 1,239    $ 1,161  

Cost of products sold

     711      663  
               

Gross profit

     528      498  

Selling and administrative expenses

     155      153  

Advertising costs

     118      117  

Research and development costs

     23      26  

Restructuring and asset impairment costs

     25      —    

Interest expense

     33      29  

Other expense (income), net

     —        (2 )
               

Earnings before income taxes

     174      175  

Income taxes

     63      63  
               

Net earnings

   $ 111    $ 112  
               

Earnings per common share

     

Basic

   $ 0.77    $ 0.74  

Diluted

     0.76      0.73  

Weighted average common shares outstanding (in thousands)

     

Basic

     143,778      151,143  

Diluted

     146,127      153,568  

 

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Segment Information (Unaudited)

Dollars in millions

First Quarter and Year to Date

 

     Net Sales     Earnings/(Losses) Before Income Taxes  
     Three Months Ended   

%

Change  (1)

    Three Months Ended    

%

Change  (1)

 
     9/30/2007    9/30/2006      9/30/2007 (2)     9/30/2006    

North America

   $ 1,049    $ 1,000    5 %   $ 286     $ 287     0 %

International

     190      161    18 %     37       34     9 %

Corporate

     —        —      —         (149 )     (146 )   2 %
                                          

Total Company

   $ 1,239    $ 1,161    7 %   $ 174     $ 175     -1 %
                                          

(1)

Percentages based on rounded numbers.

(2)

Current quarter earnings before income taxes included $25 in pretax restructuring and asset-impairment and incremental cost of products sold charges in the North America segment, and $2 in pretax restructuring and asset-impairment charges in the International segment.

 

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     9/30/2007     6/30/2007     9/30/2006  

Assets

      

Current assets

      

Cash and cash equivalents

   $ 209     $ 182     $ 174  

Receivables, net

     408       460       374  

Inventories, net

     332       309       325  

Other current assets

     115       81       67  
                        

Total current assets

     1,064       1,032       940  

Property, plant and equipment, net

     966       976       990  

Goodwill

     869       855       748  

Trademarks and other intangible assets, net

     585       613       604  

Other assets

     189       190       257  
                        

Total assets

   $ 3,673     $ 3,666     $ 3,539  
                        

Liabilities and Stockholders’ (Deficit) Equity

      

Current liabilities

      

Notes and loans payable

   $ 872     $ 74     $ 68  

Current maturities of long-term debt

     500       500       152  

Accounts payable

     318       329       299  

Accrued liabilities

     347       507       415  

Income taxes payable

     116       17       26  
                        

Total current liabilities

     2,153       1,427       960  

Long-term debt

     1,477       1,462       1,965  

Other liabilities

     592       516       549  

Deferred income taxes

     88       90       120  
                        

Total liabilities

     4,310       3,495       3,594  
                        

Contingencies

      

Stockholders’ (deficit) equity

      

Common stock

     159       159       250  

Additional paid-in capital

     491       481       414  

Retained earnings

     219       185       4,005  

Treasury shares

     (1,309 )     (445 )     (4,514 )

Accumulated other comprehensive net losses

     (197 )     (209 )     (210 )
                        

Stockholders’ (deficit) equity

     (637 )     171       (55 )
                        

Total liabilities and stockholders’ (deficit) equity

   $ 3,673     $ 3,666     $ 3,539  
                        

 

Note: During the second quarter of fiscal year 2007, Clorox retired 91 million of its treasury shares. As a result of the retirement, treasury shares were reduced by $4,137 and common stock and retained earnings were reduced by $91 and $4,046, respectively. There was no impact to the company’s overall equity position as a result of the retirement.

During the first quarter of fiscal year 2008, Clorox entered into an Accelerated Share Repurchase program through which it repurchased $750 of common stock. As a result, the repurchase contributed to the treasury shares increase by $750.

 

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Exhibit 99.2

 

The Clorox Company

 

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Supplemental Information – Volume Growth

 

       % Change vs. Prior Year      
     FY07     FY08      

Business Segment

   Q1     Q2     Q3     Q4     FY     Q1     YTD    

Major Drivers of Change

North America (1)

   -1 %   -3 %   8 %   0 %   1 %   5 %   5 %   Q1 increase primarily driven by strong results in Home Care behind gains on disinfecting wipes and other Clorox branded products, bleach business acquisition in Canada, increased merchandising on Hidden Valley salad dressing, continued growth in cat litter behind activated carbon product improvement, and strong results in the Brita business primarily driven by merchandising and category growth.
                                            

International

   1 %   10 %   13 %   12 %   9 %   11 %   11 %   Q1 increase primarily driven by strong results in Latin America behind the bleach business acquisition and category growth.
                                            

Total Company

   -1 %   -1 %   8 %   2 %   2 %   6 %   6 %  
                                            
Supplemental Information – Sales Growth
       % Change vs. Prior Year      
     FY07     FY08      

Business Segment

   Q1     Q2     Q3     Q4     FY     Q1     YTD    

Major Drivers of Change

North America (1)

   5 %   3 %   6 %   -1 %   3 %   5 %   5 %   Q1 growth primarily driven by increased shipments across the segment and the benefit of pricing partially offset by high levels of trade spending in response to competitive activity.
                                            

International

   4 %   9 %   16 %   21 %   12 %   18 %   18 %   Q1 growth primarily driven by strong shipments, favorable currency and the benefit of price increases.
                                            

Total Company

   5 %   3 %   7 %   2 %   4 %   7 %   7 %  
                                            

(1)

North America includes U.S. and Canadian results.


The Clorox Company

 

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Earnings Before Interest and Taxes (Unaudited) (1)

Reconciliation schedule of earnings before income taxes to earnings before interest and taxes (EBIT)

Dollars in millions and percentages based on rounded numbers

 

     Three months ended  
     9/30/07     9/30/06  

Earnings before income taxes

   $ 174     $ 175  

Interest income

     (3 )     (2 )

Interest expense

     33       29  
                

EBIT (2)

     204       202  
                

EBIT Margin (2)

     16.5 %     17.4 %

Net sales

   $ 1,239     $ 1,161  
                

(1) In accordance with SEC’s Regulation G, this schedule provides the definition of a non-GAAP measure and the reconciliation to the most closely related GAAP measure.

Management believes the presentation of EBIT and EBIT margin provides additional useful information to investors about current trends in the business.

 

(2) EBIT (a non-GAAP measure) represents earnings before income taxes (a GAAP measure), excluding interest income and expense, as reported above. EBIT margin is a measure of EBIT as a percentage of net sales.


The Clorox Company

 

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Supplemental Information – Balance Sheet

(Unaudited)

As of September 30, 2007

Working Capital Update

 

     Q1    

Change
($ millions)

  

Days  (5)

FY 2008

  

Days  (5)

FY 2007

  

Change

     FY 2008
($ millions)
    FY 2007
($ millions)
            

Receivables, net

   $ 408     $ 374     $ 34    32    31    1 day

Inventories

   $ 332     $ 325     $ 7    41    42    -1 day

Accounts payable (1)

   $ 318     $ 299     $ 19    40    41    -1 day

Accrued liabilities

   $ 347     $ 415     $ -68         

Total WC (2)

   $ 74     $ 26     $ 48         

Total WC % net sales (3)

     1.5 %     0.6 %           

Average WC (2)

   $ 36     $ 10     $ 26         

Average WC % net sales (4)

     0.7 %     0.2 %           

 

 

Receivables increased primarily as a result of higher sales and the impact of favorable foreign exchange rates. Increase in days of receivables is primarily due to growth in International receivables which generally have longer collection times.

 

 

Accounts payable increased mainly due to timing of payments.

 

 

Accrued liabilities decreased primarily due to the adoption of FASB Financial Interpretation No. 48 which resulted in income tax liabilities being reclassified from accrued liabilities to income taxes payable and long-term liabilities. These were partially offset by higher accruals related to increased trade and marketing spending levels and an increase in the quarterly dividend rate.

Supplemental Information – Cash Flow

(Unaudited)

As of September 30, 2007

Capital expenditures were $26 million

Depreciation and amortization was $48 million

Cash provided by operations

Net cash provided by operations was $163 million, compared with $133 million provided by operations in the year-ago quarter. The year-over-year increase was mainly due to higher earnings, excluding non-cash restructuring charges.


(1)

Days of accounts payable is calculated as follows: average accounts payable / [(cost of products sold + change in inventory) / 90].

(2)

Working capital (WC) is defined in this context as current assets minus current liabilities excluding cash and short-term debt, based on end of period balances. Average working capital represents a two-point average of working capital .

(3)

Represents working capital at the end of the period divided by annualized net sales (current quarter net sales x 4).

(4)

Represents a two-point average of working capital divided by annualized net sales (current quarter net sales x 4).

(5)

Days calculations based on a two-point average.


The Clorox Company

 

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Supplemental Information – Gross Margin Drivers

The table below provides details on the drivers of gross margin change versus the prior year.

 

     Change vs. Prior Year (basis points)
     FY07    FY08

Driver

   Q1    Q2    Q3    Q4    FY    Q1

Cost savings

   +190 bp    +240 bp    +280 bp    +200 bp    +230 bp    +180 bp

Pricing changes

   +210 bp    +160 bp    +140 bp    +80 bp    +150 bp    +50 bp

Market movement (commodities)

   -280 bp    -190 bp    +40 bp    -40 bp    -110 bp    -120 bp

Manufacturing & logistics (1)

   -90 bp    -110 bp    -120 bp    -70 bp    -100 bp    -140 bp

All other (2)

   +40 bp    0 bp    -160 bp    -120 bp    -80 bp    0 bp
Gross margin change vs prior year    +70 bp    +100 bp    +180 bp    +50 bp    +90 bp    -30 bp

(1) Manufacturing & Logistics includes the change in the cost of diesel fuel.
(2) All other includes all other drivers of gross margin change which are usually of an immaterial nature. Examples of drivers included: volume change, trade and consumer spending, foreign currency, etc. If a driver included in all other is deemed to be material in a given period, it will be disclosed as part of the company’s earnings release.


The Clorox Company

 

Updated: 10-31-07

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U.S. Price Increases From CY2003 - CY2005

 

Brand / Product

  

Average

Increase

    Effective Date

Glad ® trash bags

   6 %   October 2003

Charcoal

   5 %   December 2003

Cat litter

   4 %   May 2004

Glad ® trash bags

   13 %   February 2005

GladWare disposable containers

   12 %   February 2005

Clorox ® liquid bleach

   9 %   July 2005

Clorox 2 ® bleach for colors, Clorox Clean-Up ® cleaner

   5 %   July 2005

Glad ® food bags

   7 %   August 2005

Cat litter

   5 %   October 2005

U.S. Price Increases From CY2006 - CY2008

 

Brand / Product

  

Average

Increase

    Effective Date

Clorox ® liquid bleach, Clorox Clean-Up ® and Tilex ® cleaners

   8 %   January 2006

Match Light ® charcoal

   6 %   January 2006

Kingsford ® lighter fluid

   10 %   January 2006

Armor All ® auto-care products

   9 %   January 2006

STP ® functional fuel products

   9 %   January 2006

Brita ® pour-through filters

   7 %   January 2006

Brita ® pitchers

   5 %   January 2006

GladWare ® food-storage containers

   9 %   January 2006

Glad ® trash bags

   15 %   February 2006

Cat litter

   6 %   June 2006

STP ® functional fuel products

   17 %   October 2006

Charcoal and lighter fluid

   4 -8 %   January 2007

Hidden Valley Ranch ® salad dressing

   6 %   October 2007

Charcoal

   6 %   January 2008

Notes:

 

 

Average % increase reflects brand averages rounded to the whole percent. Individual SKUs vary versus the average.

 

 

This communication reflects pricing actions on primary items.


Exhibit 99.3

 

The Clorox Company News Release

   LOGO

Clorox to Acquire Burt’s Bees; Expands Into Fast-Growing Natural Personal Care

OAKLAND, Calif., Oct. 31, 2007 – The Clorox Company (NYSE: CLX), as part of its strategy to grow in and beyond its core in fast-growing, higher-margin consumer-product categories, today announced it will acquire Burt’s Bees, a leader in the natural personal care category.

The highly fragmented U.S. natural personal care market represents about $6.4 billion in sales and is currently growing at about 9 percent annually. Founded in 1984, the Burt’s Bees ® brand today is regarded among many consumers who purchase natural personal care products as the “most natural” personal care brand and as the leading natural brand in the U.S. The acquisition of Burt’s Bees is strongly aligned with Clorox’s Centennial Strategy to pursue growth in areas aligned with consumer “megatrends” in health and wellness, sustainability, convenience and a more multicultural marketplace.

“This acquisition allows us to enter a growing market that’s consistent with consumer megatrends,” said Clorox Chairman and CEO Donald R. Knauss. “With this transaction, we’re entering into a new strategic phase for our company, enabling us to expand further into the natural/sustainable business platform. The Burt’s Bees ® brand is well-anchored in sustainability and health and wellness, and we believe it will benefit from natural and “green” tailwinds. It’s in an economically attractive category with a margin structure that will be highly accretive to Clorox. Combined with our new Green Works™ line of natural cleaning products, and Brita ® water-filtration products, we can leverage Burt’s Bees’ extensive capabilities and credibility to build a robust, higher-growth platform for Clorox.”

Beth Springer, Clorox’s executive vice president – Strategy & Growth, who will oversee the business, said, “Burt’s Bees is a compelling strategic fit for us, and we believe we can expand on its strong trends over time to build even greater value. Burt’s Bees has a highly effective strategy and plan, strong trade practices and organizational capabilities, and a robust culture and esprit de corps that we want to leverage and protect. We strongly believe Clorox’s deep capabilities to drive demand creation through consumer communication and value-creating customer capabilities, coupled with Burt’s Bees’ strong heritage of innovation to delight consumers, create a right to win. We’re delighted Burt’s Bees president and CEO, John Replogle, will continue to lead the company, which will continue to be based in North Carolina.”

“I’m delighted we’re entering into this partnership with Clorox and that I will be part of this exciting next step for Burt’s Bees,” said John Replogle. “The Clorox Company and Burt’s Bees have complementary values, visions and strengths. Together, I believe Clorox and Burt’s Bees can help this business realize its full potential.”

“Burt’s Bees’ mission ‘ we make people’s lives better every day — naturally’ is a terrific complement to Clorox’s mission ‘ we make everyday life better, every day ,’” Springer said. “Burt’s Bees’ values align strongly with Clorox’s and provide a solid foundation for working together and creating synergies between our management teams.”

Terms of Deal and Financial Impact

Under the terms of the agreement, Clorox will acquire 100 percent of Burt’s Bees from its stockholders in a transaction that is structured as a merger. The company is acquiring Burt’s Bees for $925 million net of an additional $25 million payment for anticipated tax benefits. Clorox will fund the all-cash transaction through a combination of cash and short-term borrowings. The transaction, which is expected to close by the end of this calendar year, is subject to regulatory approval.

Commenting on the transaction, Clorox senior vice president and CFO Dan Heinrich said, “Burt’s Bees is poised to capitalize on expanded distribution within the U.S. and other countries in which the Burt’s Bees ® brand is currently marketed. The business is enjoying strong distribution trends. We believe we can add value and expand these trends over time through our strong customer capabilities, while maintaining Burt’s Bees’ higher margins.


We see potential for expanding the brand into adjacencies, and we believe international expansion may offer significant upside potential beyond our valuation.”

Based on its current growth trajectory and estimated 2007 net customer sales of about $170 million, Burt’s Bees is anticipated to add nearly 2 points of top-line growth to Clorox in fiscal years 2008 and 2009.

Including estimates of purchase-accounting adjustments and one-time transaction and integration costs related to the transaction, the company anticipates that the transaction will dilute its fiscal year 2008 earnings by about 10-15 cents per diluted share and that it will be slightly accretive in fiscal year 2009. Excluding such purchase-accounting adjustments, one-time transaction and integration costs as well as non-cash expenses related to the transaction, the earnings per share impact is anticipated to be neutral in fiscal year 2008 and solidly accretive in fiscal year 2009.

Lehman Brothers acted as sole financial advisor to The Clorox Company. Goldman Sachs was financial advisor to Burt’s Bees.

For More Information

Visit the Investors: News and Events section of the company’s Web site at www.TheCloroxCompany.com.

Today’s Webcast and First-Quarter Earnings Press Release

Today at 6:30 a.m. Pacific time (9:30 a.m. Eastern time), Clorox will host a live audio webcast of a discussion with the investment community regarding the company’s first-quarter results and the acquisition. The webcast can be accessed at http://investors.thecloroxcompany.com . Following the live discussion, a replay of the webcast will be archived for one week on the company’s Web site. Please also see the company’s press release issued today, which discusses its first-quarter results for fiscal year 2008 and its updated fiscal-year outlook.

About Burt’s Bees

Burt’s Bees is a leading manufacturer of earth-friendly natural personal care products. The company manufactures more than 150 products in categories such as lip care, face care, body care, hair care, men’s grooming, baby care and outdoor remedies. Burt’s Bees ® products are carried in nearly 30,000 retail outlets, including major grocery and drug store chains in the U.S., United Kingdom, Ireland, Canada, Hong Kong and Taiwan.

About The Clorox Company

The Clorox Company is a leading manufacturer and marketer of consumer products with fiscal year 2007 revenues of $4.8 billion. Clorox markets some of consumers’ most trusted and recognized brand names, including its namesake bleach and cleaning products, Armor All ® and STP ® auto-care products, Fresh Step ® and Scoop Away ® cat litter, Kingsford ® charcoal, Hidden Valley ® and K C Masterpiece ® dressings and sauces, Brita ® water-filtration systems, and Glad ® bags, wraps and containers. With 7,800 employees worldwide, the company manufactures products in more than two dozen countries and markets them in more than 100 countries. Clorox is committed to making a positive difference in the communities where its employees work and live. Founded in 1980, The Clorox Company Foundation has awarded cash grants totaling more than $69.7 million to nonprofit organizations, schools and colleges. In fiscal 2007 alone, the foundation awarded $3.4 million in cash grants, and Clorox made product donations valued at $5.9 million. For more information about Clorox, visit www.TheCloroxCompany.com.

Forward-looking statements

This press release contains “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and such forward looking statements involve risks and uncertainties. Except for historical information, matters discussed above, including statements about future volume, sales, costs, cost savings, earnings, cash outflows, plans, objectives, expectations, growth, or profitability, are forward looking statements based on management’s estimates, assumptions and projections. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations on such words, and similar expressions, are intended to identify such forward looking statements. These forward looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed above. Important factors that could affect performance and cause results to differ materially from management’s expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the year ended June 30, 2007, as updated from time to time in the company’s SEC filings. These factors include, but are not limited to, the completion of the acquisition of Burt’s Bees; the continuation of Burt’s Bees growth trajectory and other valuation assumptions,

 

Page 2 of 3


including the ability to increase distribution; estimates of the purchase accounting adjustments to account for the acquisition of Burt’s Bees and estimates of other one-time transaction and integration costs as well as non-cash expenses related to the transaction; the company’s success in retaining key employees, suppliers and customers; the company’s ability to achieve the projected strategic and financial benefits from the acquisition, including its ability to achieve synergies in leveraging its supply chain, marketing and other capabilities; the success of the company’s previously announced Centennial Strategy; the need for any additional restructuring or asset-impairment charges; the final purchase price and number of shares repurchased under the company’s accelerated share repurchase agreement; general economic and marketplace conditions and events; competitors’ actions; the company’s costs, including changes in exposure to commodity costs such as resin, diesel, chlor-alkali and agricultural commodities; increases in energy costs; consumer and customer reaction to price increases; customer-specific ordering patterns and trends; the company’s actual cost performance; changes in the company’s tax rate; any future supply constraints that may affect key commodities; risks inherent in sole-supplier relationships; risks related to customer concentration; risks arising out of natural disasters; risks related to the handling and/or transportation of hazardous substances, including but not limited to chlorine; risks inherent in litigation; risks relating to international operations, including the risk associated with foreign currencies; risks inherent in maintaining an effective system of internal controls, including the potential impact of acquisitions or the use of third-party service providers; the ability to manage and realize the benefit of joint ventures and other cooperative relationships, including the company’s joint venture regarding the company’s Glad ® plastic bags, wraps and containers business, and the agreement relating to the provision of information technology and related services by a third party; the success of new products; risks relating to potential divestitures; risks relating to changes in the company’s capital structure; and the ability of the company to successfully manage tax, regulatory, product liability, intellectual property, environmental and other legal matters, including the risk resulting from joint and several liability for environmental contingencies. In addition, the company’s future performance is subject to risks related to its November 2004 share exchange transaction with Henkel KGaA, the tax indemnification obligations and the actual level of debt costs. Declines in cash flow, whether resulting from tax payments, debt payments, share repurchases, interest cost increases greater than management expects, or increases in debt or changes in credit ratings, or otherwise, could adversely affect the company’s earnings.

The company’s forward looking statements in this press release are based on management’s current views and assumptions regarding future events and speak only as of their dates. The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws.

 

Media relations    Investor relations      
Dan Staublin 510-271-1622    Li-Mei Johnson 510-271-3396      
Kathryn Caulfield 510-271-7209    Steve Austenfeld 510-271-2270      

 

Page 3 of 3


Burt’s Bees Acquisition
Investor Overview
Oct. 31, 2007
Exhibit 99.4


Safe Harbor Statement
Except for historical information, matters discussed in the attached document, including
statements about the success of the company’s strategy and acquisitions as well as future
volume, sales and earnings growth, profitability, costs, cost savings, innovation or
expectations, are forward-looking statements based on management’s estimates,
assumptions and projections. Important factors that could cause results to differ materially
from management’s expectations are described in the company’s most recent Form 10-K
filed with the SEC, as updated from time to time in the company’s SEC filings. Those
factors include, but are not limited to, the completion of the acquisition of Burt’s Bees; the
continuation of Burt’s Bees growth trajectory and other valuation assumptions; including the
ability to increase distribution; the company’s success in retaining key Burt’s Bees
employees, suppliers and customers; the company’s ability to achieve the projected
strategic and financial benefits from the acquisition, including
its ability to achieve
synergies;
general
economic
and
marketplace
conditions
and
events;
competitors’
actions;
the company’s actual cost performance; price changes; the effect on cash flow of tax
payments and the success of new products.
The company may also use non-GAAP financial measures, which could differ from
reported results using Generally Accepted Accounting Principles (GAAP). The most directly
comparable GAAP financial measures and reconciliation to non-GAAP financial measures
are set forth in the Form 10-K and its exhibits furnished to the SEC, which is posted at
www.TheCloroxCompany.com
in the Investors/Financial Information/SEC Filings section.


Transaction Summary
Clorox entered into a merger agreement on Oct. 30, 2007, to
acquire Burt’s Bees for $925 million ¹
in cash, funded through
cash and short-term borrowings
The transaction is expected to be EPS accretive to Clorox as
of FY’09
and
neutral
in
FY’08,
excluding
purchase
-
accounting
adjustments, one-time transaction and integration costs as well
as noncash
expenses
At
closing, debt to EBITDA ratio will be 3.5/1x. We intend to
pay down debt and return to long-term target of 3.0/1x by  
mid-FY’09
Close of transaction is targeted for December 2007, subject to
regulatory approval
1
Net of an additional
$25 million payment for anticipated tax benefits


Extending Our Reach
The Burt’s Bees Opportunity
Consistent with consumer
megatrends
Ability to build or buy
a
big-share
brand
Economically attractive
target category
Midsized
category where global
CPG players do not dominate
3D capabilities
create
a right to win
Consumer insights, retail
relationships, R&D/innovation
Our Framework
At the center of
wellness and
sustainability
trends
A leading
Natural Personal Care
brand that consumers love
No. 1 or No. 2
in 5 categories
High-growth $6.4 billion category
9.3% growth (vs. 3.2% for PC)
1
NPC is
highly fragmented
“Natural”
formulation competency
creates challenges to entry
Sustainable growth drivers
Food/Drug/Mass channels,
international, new categories
The Burt’s Bees Opportunity
1
Source: Euromonitor; Datamonitor; Nutrition Business Journal


Enabling Transaction to Begin Portfolio
Reshaping & Drive Centennial Strategy
Advantaged brand
Market leadership and strong brand equity
Advantaged category
Sustainable long-term growth drivers
No global incumbents
At the Core of
Our Strategic
Positioning
Address investor demand for sustainable top-line growth
Consistency with stated objectives of Centennial strategy
Immediate, albeit limited, value creation through synergies
Cost synergies: procurement, channel management
Revenue synergies (long-term): new geographies, category expansion
Shareholder
Value Creation
Transferable core competencies
Core technologies / “know-how”
At the forefront of environmental sustainability / “natural”
push
Managerial talent with extensive expertise in Natural Personal Care (NPC) and
broader Personal Care
Market entry in attractive category and springboard for
Personal Care and wellness/sustainability expansion
Platform for
Expansion


Burt’s Bees Overview
A leading brand in the growing $6.4 billion Natural Personal
Care
(NPC) segment
Products across many Natural Personal Care
categories,
including lip care, facial care and body care
Unique capability in developing and manufacturing products
with natural ingredients
$170 million (est.) in 2007 net sales with roughly 90% in U.S.
and balance concentrated in Canada, UK and Taiwan
Profitability metrics at the high-end of Personal Care
30%+ EBITDA margin
385 employees, 1 manufacturing facility, 1 distribution center
and headquarters in Raleigh-Durham, North Carolina


Lip
Lip Balm
Lip
Shimmers
Lip Gloss
Face
Day
Creams
Night
Creams
Eye
Creams
Serums
Cleaners
Toners
Scrubs
Acne
Body
Body 
Lotions
Hand
Creams
Foot  
Creams
Oils
Moisturizing
Mists
Body Wash
Soaps 
Scrubs
Hair
Shampoos
Conditioners
Hair
Treatment
Baby
Powder
Oil
Lotions
Ointments
Bath
Shampoo
Soap 
Outdoor
& Natural
Remedies
Ointments
Insect Relief
Sun Care
Lip Balm
Gifts
Kits
Burt’s Bees Overview


Competitive Advantage
Instability of natural materials requires steep learning curve to reproduce
natural formulations
Natural material properties
are key to product performance & stability
Processing
is central to scalability of concept formulations
Business
Challenges
Experienced
R&D/product development
team
Professional background in R&D/product development at leading Personal Care
companies
Leverage core knowledge basis
beyond Natural Personal Care
In-depth understanding of consumer demands
Establish core corporate competencies in broader Personal Care
Core
Competencies
Unique knowledge of natural formulations
Understanding of natural material properties
Proprietary and scalable process technologies
Competitive
Advantage


Energizes Centennial Strategy
1.
Natural Personal Care (NPC) is a fast-growing,
high-margin category that is highly fragmented
2.
The convergence of wellness and sustainability
megatrends
should drive long-term growth
3.
Burt’s Bees
®
is an authentic, natural brand with
leading share position in several NPC segments
4.
Clorox brand-building, customer-facing and
supply-chain capabilities will drive value creation


NPC Is Large & Growing Rapidly
U.S.
Personal
Care
Product
Category
Growth
Rates,
2003-2006
Projected growth of Natural Personal Care
is 7.7% for 2006-2010
U.S. Personal Care market was $62 billion in 2006, with historical growth rate of 3.2% (2003-2006)
Natural
Personal
Care
(NPC)
is
large
($6.4
billion)
and
one
of
the
fastest-growing
subcategories
NPC is also global –-
NPC growing at double-digit rates across Europe and Asia
Source: Euromonitor; Datamonitor; Nutrition Business Journal
11.0%
9.3%
5.9%
5.7%
4.3%
3.6%
3.1%
1.7%
1.5%
1.5%
0.9%
-0.1%
-0.5%
-3%
0%
3%
5%
8%
10%
13%


U.S. Natural Personal Care Market Is Highly
Fragmented & Lacks Entrenched Scale Players


Health
& Wellness
Sustainability
Megatrend
Convergence
The convergence of megatrends
wellness
and
sustainability
anticipated to drive growth for years to come


Burt’s Bees Market Share by Category, Natural Food Channel
Only
Source: SPINS
Burt’s Bees Has Leading Presence
Lip Care
Foot Care
Kits/Gifts
Baby Care
Other Skin Care
45.2%
42.7%
39.6%
17.8%
10.2%
0%
10%
20%
30%
40%
50%
Market Position
#1
#1
#1
#2
#2


Burt’s Bees
®
Brand Has Strong
Aided Awareness
Aided
awareness
of
Burt’s
Bees
®
brand
has
grown
to
competitive
levels
while
well
ahead
of
other
natural
players
Significant upside exists
Aided Brand Awareness (Percent Aware)
Source:  Burt’s Bees
®
Brand Tracking Study May 2007
Neutrogena
Aveeno
Nivea
Garnier
Aveda
Burt's Bees
Tom's
of Maine
Avalon
Nature's
Gate
Alba
Jason
Dr. Hauska
99%
96%
87%
81%
67%
54%
32%
31%
19%
16%
6%
3%
0%
20%
40%
60%
80%
100%


Note:
Only
consumers
who
were
aware
of
the
personal
care
product
company
were
asked
this
question
Source: Clorox Commissioned US Consumer Survey  (n=1022)
Burt’s Bees
®
Is Viewed as
the Most Natural Brand by Consumers
Consumers who have purchased natural personal care in the last 12 months:
Q:
Please rate each of the following brands on a scale of 1 to 7, where 1 is not at all
natural and 7 is 100% natural:
77.9%
74.5%
67.5%
63.4%
61.7%
54.5%
54.2%
50.1%
49.6%
48.9%
47.7%
45.8%
45.2%
44.6%
44.0%
39.1%
0%
20%
40%
60%
80%
100%


Burt’s Bees Has Superior Attribute Ratings
vs. Natural and Mass Brands
Source: Clorox Commissioned US Consumer Survey (n=1022)
Consumers who have purchased natural personal care in the last 12 months:
Q:
Please
indicate
the
importance
of
the
following
factors
when
purchasing
natural
personal
care products, on a scale of 1 to 7, where 1 is not at all important and 7 is extremely
important
Q:
On
a
scale
of
1
to
7,
where
1
is
extremely
poor
and
7
is
extremely
strong,
please
rate
the
performance
of
[BRAND]
on
following
factors
Note: Burt’s Bees performance asked of all consumers who indicated they have purchased at least one Burt’s Bees product; for all other competitors, each
consumer was asked about one other random company from which they had purchased personal care items; Core is a weighted average of Tom’s (n=81), Kiss My
Face (n=28), Dr. Bronner’s (n=13) and Jason (n=31); Mass is a weighted average of Aveeno (15), Olay (n=181) and Neutrogena (n=201)
Core
Natural
Competitors
Mass Brand
Competitors
Burt's Bees
Effective
High
Quality
Non-toxic
Made with
Natural
Ingredients
Good
Value for
the Money
Made with
Natural
Process
Looks/
Smells
Good
Brand
I Trust
Made with
Organic
Ingredients
Low Price
Attractive
Packaging
87.0%
79.3%
79.2%
72.8%
72.1%
64.4%
64.2%
63.7%
61.9%
52.1%
20.3%
0%
20%
40%
60%
80%
100%


Utilize Clorox capabilities to
expand depth and breadth of
distribution and in-store presence
New distribution in Mass and
Grocery channels
Additional placements in Baby,
Health & Beauty Care and
Camping departments
Expansion of holiday gift
program
Burt’s Bees distribution exists in
54% ACV of Food, Drug and Mass
Channels
Clorox has 100% ACV
Current Burt’s
Bees ACV
Distribution
Opportunity
to Expand
Distribution
% ACV levels based on Burt’s Bees and Clorox current U.S. distribution as of 10/31/07
Food
Drug
Mass
Distribution Upside Exists


Expanding In-Store Presence
2005
Power Wing
2006
Power Wing
Power Wing + Son
2007-2008
4’
In-Line
Holiday Off-Shelf
Source:  Burt’s Bees internal data


Delight
Desire
Decide
Build a truly
authentic brand
with sustained
marketing support
Enhance product
innovation and
expand into new
segments
Expand
distribution and
in-store presence
How We Will Grow the Business
International
Component:
Continue to grow in existing
markets; look to enter new, high-potential markets


How We Will Manage the Business
Burt’s Bees has a strong management team, strategy, culture
and execution track record, which we intend to retain
We will operate the business from its current North Carolina
headquarters
We will integrate selectively to maximize revenue and cost
synergies and create the best opportunities for all employees
Beth Springer, Clorox EVP –
Strategy
& Growth, will oversee
the business


Conclusion
We believe Burt's Bees provides a new platform
to build a high-growth, high-margin, Natural
Personal Care
business
GREAT BRAND:
Opportunity to acquire leading brand that consumers love
HIGH GROWTH:
The brand participates in high-growth Natural Personal Care
(NPC)
anchored in wellness and sustainability megatrends
MARGIN ACCRETIVE:
The brand’s margin structure is at the upper range of
Personal Care and strongly accretive to Clorox
NEW BUSINESS PLATFORM:
NPC and Burt's Bees benefit from significant wellness
and
natural/green
tailwinds.
Combined
with
Green
Works
and
Brita
businesses and
future “tuck-in”
acquisitions,
we
can
establish
a
robust
new
growth
platform
for
Clorox
LEVERAGE
CLOROX
CAPABILITY:
Clorox’s
strong
brand-building
and customer-
facing capabilities will enable strong growth on a sustained basis