Clorox CLX · USD

SEGMENT REPORTINGThe Company operates through strategic business units (SBUs) that are organized into the Company’s operating segments. Operating segments with shared economic and qualitative characteristics are aggregated into four reportable segments: Health and Wellness, Household, Lifestyle and International. Operating segments not aggregated into a reportable segment are reflected in Corporate and Other. The four reportable segments consist of the following:•Health and Wellness consists of cleaning, disinfecting and professional products marketed and sold in the United States.•Household consists of bags and wraps, cat litter and grilling products marketed and sold in the United States.•Lifestyle consists of food, water-filtration and natural personal care products marketed and sold in the United States. •International consists of products sold outside the United States. Products within this segment include laundry additives and home care products primarily marketed under the Clorox, Poett, Pine-Sol and Clorinda brands; bags and wraps under the Glad brand; cat litter primarily marketed under the Ever Clean and Fresh Step brands and water-filtration products marketed under the Brita brand. Corporate and Other includes certain non-allocated administrative and other costs, various other non-operating income and expenses, as well as the results of the Better Health VMS business, through the date of divestiture. Assets in Corporate and Other include cash and cash equivalents, prepaid expenses and other current assets, property and equipment, operating lease right-of-use assets, other long-term assets and deferred taxes, as well as the assets related to the Better Health VMS business, through the date of divestiture.The principal measure of segment profitability used by the Chief Operating Decision Maker (CODM), identified as the Company's Chair and Chief Executive Officer, is segment adjusted earnings (losses) before interest and income taxes (segment adjusted EBIT).

DEBTShort-term borrowingsNotes and loans payable are borrowings that mature in less than one year, primarily consisting of U.S. commercial paper issued by the Company and borrowings under the Company's revolving credit agreements. Notes and loans payable was $4 as of both June 30, 2025 and 2024, respectively.The weighted average interest rates incurred on average outstanding notes and loans payable during each of the fiscal years ended June 30, 2025, 2024 and 2023, including fees associated with the Company’s revolving credit agreements, were 4.50%, 4.77% and 3.48% respectively.Long-term borrowingsLong-term debt, carried at face value net of unamortized discounts, premiums and debt issuance costs, included the following as of June 30:20252024Senior unsecured notes and debentures:3.10%, $400 due October 2027$399 $399 3.90%, $500 due May 2028499 498 4.40%, $500 due May 2029496 495 1.80%, $500 due May 2030496 495 4.60%, $600 due May 2032594 594 Total2,484 2,481 Less: Current maturities of long-term debt— — Long-term debt$2,484 $2,481 The weighted average interest rates incurred on average outstanding long-term debt during each of the fiscal years ended June 30, 2025, 2024 and 2023, was 3.25%. The weighted average effective interest rates on long-term debt balances as of both June 30, 2025 and 2024 was 3.25%.Long-term debt maturities as of June 30, 2025, were $0 in fiscal years 2026 through 2027, $900 in fiscal year 2028, $500 in fiscal year 2029, $500 in fiscal year 2030 and $600 thereafter.Credit arrangementsOn March 25, 2025, the Company entered into a new $1,200 revolving credit agreement (the Credit Agreement) that matures in March 2030. The Credit Agreement replaced a prior $1,200 revolving credit agreement (the Prior Credit Agreement) in place since March 2022. The Company did not incur any termination fees or penalties in connection with entering the new agreement, which was considered a debt modification. There were no borrowings under either the Credit Agreement or the Prior Credit Agreement as of June 30, 2025 and 2024, respectively, and the Company believes that borrowings under the Credit Agreement will continue to be available for general corporate purposes. The Credit Agreement includes certain restrictive covenants and limitations consistent with the previous agreement, with which the Company was in compliance as of both June 30, 2025 and 2024.

INCOME TAXESThe provision for income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:202520242023CurrentFederal$165 $132 $153 State39 18 33 Foreign68 56 40 Total current$272 $206 $226 DeferredFederal$(17)$(99)$(120)State(2)(5)(28)Foreign1 4 (1)Total deferred(18)(100)(149)Total$254 $106 $77 Income taxes paid, net of refunds, were $264, $347, and $73 for the fiscal year ended June 30, 2025, 2024, and 2023, respectively. The higher tax payments in fiscal year 2024 and lower tax payments in fiscal year 2023 were primarily driven by payments of fiscal year 2023 income taxes in fiscal year 2024 that were previously deferred as a result of the relief provided by the IRS announced in January 2023 due to winter storms in California.The components of Earnings before income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:202520242023United States$886 $311 $154 Foreign192 87 84 Total$1,078 $398 $238 A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate on operations follows for the fiscal years ended June 30:202520242023Statutory federal tax rate21.0 %21.0 %21.0 %State taxes (net of federal tax benefits)2.7 2.5 1.6 Foreign tax rate differential2.6 7.7 8.6 Federal excess tax benefits(0.3)(0.3)(1.8)Net U.S. tax on foreign income(0.5)(5.2)(2.3)Loss on divestiture2.3 10.5 — International legal entity reorganization(1.1)(6.1)— VMS goodwill impairment— — 8.6 Federal research and development credits(0.5)(1.2)(2.7)Other differences(2.6)(2.4)(0.6)Effective tax rate23.6 %26.5 %32.4 %The One Big Beautiful Bill Act, was enacted in the United States on July 4, 2025. This legislation includes provisions that allow accelerated tax deductions for acquisitions of qualified property and for research expenses. It also modifies the U.S. taxation of certain earnings associated with international business. The Company is in the process of evaluating the impact of this legislation on its consolidated financial statements.The Inflation Reduction Act was signed into law on August 16, 2022. This legislation introduced a new 15% corporate minimum tax for certain large corporations, effective at the beginning of the Company’s fiscal 2024 and it enacted a 1% excise tax on the value of share repurchases, net of new share issuances, after December 31, 2022.

STOCK-BASED COMPENSATION PLANSIn November 2021, the Company’s stockholders voted to approve the amended and restated 2005 Stock Incentive Plan (the Plan). The Plan permits the Company to grant various nonqualified stock-based compensation awards, including stock options, restricted stock, performance shares, deferred stock units, stock appreciation rights and other stock-based awards. The Plan as amended and restated provides that the maximum number of shares which may be issued under the Plan will be 5 million common shares that may be issued for stock-based compensation purposes. As of June 30, 2025, the Company was authorized to grant up to approximately 5 million common shares, plus additional shares equal to shares that are potentially deliverable under an award that expires or are canceled, forfeited or settled without the delivery of shares, under the Plan. As of June 30, 2025, approximately 4 million common shares remained available for grant.Compensation cost and the related income tax benefit recognized for stock-based compensation plans were classified as indicated below for the fiscal years ended June 30:202520242023Cost of products sold$7 $7 $7 Selling and administrative expenses70 63 61 Research and development costs4 4 5 Total compensation costs$81 $74 $73 Related income tax benefit$19 $18 $17 Cash received during fiscal years 2025, 2024 and 2023 from stock options exercised under all stock-based payment arrangements was $61, $23 and $52, respectively. The Company issues shares for stock-based compensation plans from treasury stock. The Company may repurchase stock under its Evergreen Program to offset the estimated impact of dilution related to stock-based awards.Details regarding the valuation and accounting for stock options, restricted stock awards, performance shares and deferred stock units for non-employee directors follow.Stock OptionsThere were no stock option awards granted during the fiscal years 2025 and 2024. The fair value of each stock option award granted during fiscal year 2023 was estimated on the date of grant using the Black-Scholes valuation model and assumptions noted in the following table:2023Expected life5.3 yearsWeighted-average expected life5.3 yearsExpected volatility24.2%Weighted-average volatility24.2%Risk-free interest rate3.7%Weighted-average risk-free interest rate3.7%Dividend yield3.4%Weighted-average dividend yield3.4%The expected life of the stock options is based on historical exercise patterns.

The fair value of each stock option award granted during fiscal year 2023 was estimated on the date of grant using the Black-Scholes valuation model and assumptions noted in the following table:2023Expected life5.3 yearsWeighted-average expected life5.3 yearsExpected volatility24.2%Weighted-average volatility24.2%Risk-free interest rate3.7%Weighted-average risk-free interest rate3.7%Dividend yield3.4%Weighted-average dividend yield3.

LEASESThe Company leases various property, plant and equipment, including office, warehousing, manufacturing and research and development facilities and equipment. These leases have remaining lease terms of up to 32 years, inclusive of renewal or termination options that the Company is reasonably certain to exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Supplemental balance sheet information related to the Company’s leases as of June 30 was as follows:Balance sheet classification20252024Operating leasesRight-of-use assetsOperating lease right-of-use assets$333 $360 Current lease liabilitiesCurrent operating lease liabilities$87 $84 Non-current lease liabilitiesLong-term operating lease liabilities305 334 Total operating lease liabilities$392 $418 Finance leasesRight-of-use assetsOther assets$35 $33 Current lease liabilitiesAccounts payable and accrued liabilities$15 $13 Non-current lease liabilitiesOther liabilities21 21 Total finance lease liabilities$36 $34 Components of lease cost were as follows for the fiscal years ended June 30:202520242023Operating lease cost$99 $97 $89 Finance lease cost:Amortization of right-of-use assets$15 $11 $9 Interest on lease liabilities2 1 1 Total finance lease cost$17 $12 $10 Variable lease cost$56 $94 $87 Short term lease cost$5 $3 $4 Supplemental cash flow information and noncash activity related to the Company’s leases were as follows during fiscal years ended June 30:202520242023Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases, net$97 $97 $88 Operating cash flows from finance leases2 1 1 Financing cash flows from finance leases15 11 8 Right-of-use assets obtained in exchange for lease obligations:Operating leases$56 $113 $84 Finance leases17 17 21 Weighted-average remaining lease term and discount rate for the Company’s leases were as follows as of fiscal year ended June 30:20252024Weighted-average remaining lease term:Operating leases5 years5 yearsFinance leases3 years3 yearsWeighted-average discount rate:Operating leases4.1 %3.6 %Finance leases4.9 %5.

Risk Management and Strategy The Company maintains a comprehensive program and processes designed to assess, identify, evaluate and manage vulnerabilities to the Company’s business and operations, and other material risks from cybersecurity threats, as part of its overall Enterprise Risk Management (ERM) and cybersecurity risk management program and processes. The Company’s cybersecurity risk management program includes the following features.•Leverages the National Institute of Standards and Technology (NIST) Cybersecurity and Zero Trust Architecture frameworks for managing cybersecurity risks;•Maintenance of security policies and standards, regular updates to response planning and protocols, and monitoring vulnerabilities, emerging threats and risks through industry information sharing channels and new technology;•A cybersecurity incident response plan designed to facilitate cross-functional coordination across the Company (including escalation based on the severity of the impact of an incident), mitigate brand and reputational damage, and comply with applicable legal obligations, which includes guidance to support the Company’s assessment of whether an incident is considered “material” for purposes of U.S. securities laws;•Executive and IT team tabletop exercises;•A cybersecurity insurance program to reimburse, up to policy limits, covered costs, losses and claims relating to a data or security breach; •Use of consultants, third-party service providers and information security firms to provide technology systems or support aspects of this program, conduct assessments of the Company's cybersecurity practices and penetration testing, and cybersecurity, risk management and legal experts;•A third-party vendor risk management process that utilizes a risk-based approach for vendors engaged through the Company’s procurement process; and•Cybersecurity awareness training for all employees who have access to Company email and connected devices, periodic phishing awareness simulations, and cybersecurity and phishing awareness content on the Company’s intranet site.The Company’s business strategy, results of operations, and financial condition have been materially affected by our previously disclosed August 2023 cyberattack, and the Company is regularly subject to cyber threats, ransomware and other security breaches.

DIVESTITURESDivestiture of Better Health Vitamins, Minerals and Supplements (VMS) BusinessOn September 10, 2024, the Company completed the divestiture of its Better Health VMS business in its entirety to an affiliate of Piping Rock Health Products, LLC. The divested business includes the Natural Vitality, NeoCell, Rainbow Light and RenewLife brands, relevant trademarks and licenses, and associated manufacturing and distribution facilities in Sunrise, Florida. The transaction reflects the Company’s commitment to continue evolving its portfolio to reduce volatility and accelerate sales growth, as well as structurally improve its margin, in service of driving more consistent and profitable growth over time. The transaction was executed pursuant to a purchase agreement. As a result of the transaction, the Company recorded an after tax loss of $118 during fiscal year 2025.The major classes of assets and liabilities of the Better Health VMS business divested as of September 10, 2024 were as follows:DivestitureWorking capital$41 Property, plant and equipment, net59 Trademarks, net37 Other intangible assets, net58 Other assets (1)45 Other liabilities(1)Net assets divested$239 (1) Includes net deferred tax assets of $45The following table presents net sales of the Better Health VMS business, which includes the financial results up to September 10, 2024, the date of sale, for fiscal years ended June 30:202520242023Net sales$38 $221 $240 Divestiture of Argentina BusinessOn March 20, 2024, the Company completed the sale of its Argentina business, which consisted of two production plants in Argentina as well as the rights to the Company’s brands in Argentina, Uruguay and Paraguay, to Apex Capital and an investment group. The transaction is in support of the Company’s IGNITE strategy and the commitment to evolve the Company’s portfolio to increase focus on its core business to drive more consistent, profitable growth.The transaction was executed pursuant to a stock purchase agreement, which covered all the outstanding stock of the Clorox Argentina S.A. and Clorox Uruguay S.A. As a result of the transaction, the Company recorded a pre-tax loss of $240 during the third quarter of fiscal year 2024, primarily due to the one-time noncash impact of the release of the cumulative translation adjustment losses of $223 related to these entities that had previously been recorded in Accumulated other comprehensive net (loss) income.