CLOROX CO /DE/ (CLX) FY 2022 MD&A

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The Clorox Company

(Dollars in millions, except per share data)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of The Clorox Company’s (the Company or Clorox) financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. In certain instances, parenthetical references are made to relevant sections of the Notes to Consolidated Financial Statements to direct the reader to a further detailed discussion. This section should be read in conjunction with the Consolidated Financial Statements and Supplementary Data included in this Annual Report on Form 10-K.

The following sections are included herein:

•Executive Overview

•Results of Operations

•Financial Position and Liquidity

•Contingencies

•Quantitative and Qualitative Disclosures about Market Risk

•Recently Issued Accounting Standards

•Critical Accounting Estimates

•Summary of Non-GAAP Financial Measures

EXECUTIVE OVERVIEW

Clorox is a leading multinational manufacturer and marketer of consumer and professional products with fiscal year 2022 net sales of $7,107 and approximately 9,000 employees worldwide as of June 30, 2022. Clorox sells its products primarily through mass retailers, grocery outlets, warehouse clubs, dollar stores, home hardware centers, drug, pet and military stores, third-party and owned e-commerce channels and distributors. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products; Pine-Sol cleaners; Liquid-Plumr clog removers; Poett home care products; Fresh Step cat litter; Glad bags and wraps; Kingsford grilling products; Hidden Valley dressings, dips, seasonings and sauces; Brita water-filtration products; Burt’s Bees natural personal care products; and RenewLife, Rainbow Light, Natural Vitality and NeoCell vitamins, minerals and supplements. The Company also markets industry-leading products and technologies for professional customers, including those sold under the CloroxPro and Clorox Healthcare brand names. The Company has operations in more than 25 countries or territories and sells its products in more than 100 markets.

The Company primarily markets its leading brands in midsized categories considered to be financially attractive. Most of the Company’s products compete with other nationally advertised brands within each category and with “private label” brands.

The Company operates through strategic business units (SBUs) that are also the Company’s operating segments. These SBUs are then aggregated into four reportable segments: Health and Wellness, Household, Lifestyle and International. These four reportable segments consist of the following:

•Health and Wellness consists of cleaning products, professional products and vitamins, minerals and supplements mainly marketed and sold in the U.S. Products within this segment include cleaning products such as laundry additives and home care products, primarily under the Clorox, Clorox2, Scentiva, Pine-Sol, Liquid-Plumr, Tilex and Formula 409 brands; professional cleaning and disinfecting products under the CloroxPro and Clorox Healthcare brands; professional food service products under the Hidden Valley brand; and vitamins, minerals and supplements under the RenewLife, Natural Vitality, NeoCell and Rainbow Light brands.

•Household consists of bags and wraps, grilling products and cat litter marketed and sold in the U.S. Products within this segment include bags and wraps under the Glad brand; grilling products under the Kingsford brand; and cat litter primarily under the Fresh Step and Scoop Away brands.

•Lifestyle consists of food, natural personal care products and water-filtration products marketed and sold in the U.S. Products within this segment include dressings, dips, seasonings and sauces, primarily under the Hidden Valley brand; natural personal care products under the Burt’s Bees brand; and water-filtration products under the Brita brand.

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•International consists of products sold outside the U.S. Products within this segment include laundry additives; home care products; water-filtration products; digestive health products; grilling products; cat litter; food; bags and wraps; natural personal care products; and professional cleaning and disinfecting products marketed primarily under the Clorox, Ayudin, Clorinda, Poett, Pine-Sol, Glad, Brita, RenewLife, Ever Clean and Burt’s Bees brands.

Non-GAAP Financial Measures

This Executive Overview, the succeeding sections of MD&A and Exhibit 99.2 may include certain financial measures that are not defined by accounting principles generally accepted in the United States of America (U.S. GAAP). These measures, which are referred to as non-GAAP measures, are listed below:

•Free cash flow and free cash flow as a percentage of net sales. Free cash flow is calculated as net cash provided by operations less capital expenditures.

•Earnings before interest and taxes (EBIT) margin (the ratio of EBIT to net sales)

•Economic profit (EP) is defined by the Company as earnings before income taxes, excluding certain U.S. GAAP items (such as asset impairments, charges related to digital capabilities and productivity enhancements investment, significant losses/(gains) related to acquisitions and other non-recurring or unusual items) and interest expense; less income taxes (calculated based on the Company’s effective tax rate excluding the identified U.S. GAAP items), and less after tax profit attributable to noncontrolling interests, and less a capital charge (calculated as average capital employed multiplied by a cost of capital rate).

•Organic sales growth / (decrease) is defined as net sales growth excluding the effect of foreign exchange rate changes and any acquisitions and divestitures.

For a discussion of these measures and the reasons management believes they are useful to investors, refer to “Summary of Non-GAAP Financial Measures” below. To the extent applicable, this MD&A and Exhibit 99.2 include reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

Fiscal Year 2022 Financial Highlights

A detailed discussion of strategic goals, key initiatives and results of operations is included below. Key fiscal year 2022 financial results are summarized as follows:

•The Company’s fiscal year 2022 net sales decreased by 3% to $7,107 from $7,341 in fiscal year 2021, reflecting lower shipments primarily in the Health and Wellness reportable segment. The variance between volume and net sales was primarily due to the impact of favorable price mix, partially offset by unfavorable foreign currency exchange rates.

•Gross margin decreased by 780 basis points to 35.8% in fiscal year 2022 from 43.6% in fiscal year 2021. The decrease was primarily driven by higher manufacturing and logistics costs, increased commodity costs and unfavorable mix, partially offset by the benefit of price increases and cost savings.

•The Company reported earnings before income taxes of $607 in fiscal year 2022, compared to $900 in fiscal year 2021. The Company reported earnings attributable to Clorox of $462 in fiscal year 2022, compared to $710 in fiscal year 2021.

•The Company delivered diluted net earnings per share (EPS) of $3.73 in fiscal year 2022, a decrease of approximately 33%, or $1.85, from fiscal year 2021 diluted net EPS of $5.58. The decrease was primarily due to lower gross margin and the one-time, noncash remeasurement gain recognized on the previously held equity interest in the Saudi joint venture in the prior period, partially offset by the noncash impairment charges on assets held by the Vitamins, Minerals and Supplements (VMS) business in the prior period.

•EP decreased by 58% to $282 in fiscal year 2022, compared to $672 in fiscal year 2021 (refer to the reconciliation of EP to earnings before income taxes in Exhibit 99.2).

•The Company’s net cash provided by operations was $786 in fiscal year 2022, compared to $1,276 in fiscal year 2021. Free cash flow was $535 or 7.5% of net sales in fiscal year 2022, compared to $945 or 12.9% of net sales in fiscal year 2021 (refer to the reconciliation of net cash provided by operations to free cash flow in “Financial Position and Liquidity - Investing - Free Cash Flow”).

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•The Company paid $571 in cash dividends to stockholders in fiscal year 2022, compared to $558 in cash dividends in fiscal year 2021. In July 2022, the Company announced an increase of 2% in its quarterly cash dividend from the prior year.

Strategic Goals and Initiatives

As announced in 2019, the IGNITE strategy is intended to accelerate innovation in key areas of the business to drive growth and deliver value for both the Company's shareholders and society. Specifically, IGNITE focuses on four strategic choices to deliver purpose-driven growth: Fuel Growth, Innovate Experiences, Reimagine Work and Evolve Portfolio. Performance goals within the environmental, social and governance pillars of Healthy Lives, Clean Planet and Thriving Communities, all underpinned by strong governance also are integrated into the strategy. The Company’s long-term financial goals reflected in IGNITE include annual net sales growth of 3% to 5% — increased from 2% to 4% in 2021 — annual EBIT margin expansion of 25 to 50 basis points and annual free cash flow of 11% to 13%.

Additionally, in fiscal year 2021 the Company announced a strategic investment of approximately $500 over a five-year period for digital capabilities and productivity enhancements. This investment, which began in the first quarter of fiscal year 2022, includes replacement of the Company's enterprise resource planning system and transitioning to a cloud-based platform as well as the implementation of a suite of other digital technologies. This investment will generate efficiencies and better position the Company in supply chain, digital commerce, innovation, brand building and more over the long term.

Recent Events Affecting the Company

For the fiscal year ended June 30, 2022, the effects of the on-going novel coronavirus (COVID-19) pandemic continued to cause economic and social disruptions. These disruptions led to ongoing uncertainties, heightened by the conflict in Ukraine that began in the back half of the fiscal year.

Demand for many of the products across the Company's portfolio remained elevated compared to pre-pandemic levels, but moderated versus the previous fiscal year. An inflationary environment marked by higher manufacturing and logistics costs as well as increased commodity costs is expected to continue into fiscal year 2023. While we did not experience significant disruptions in our operations during fiscal year 2022, the risks of future negative impacts due to transportation, logistical or supply constraints and higher commodity costs for certain raw materials remain present, and the Company continues to experience corresponding incremental costs and gross margin pressures.

Throughout fiscal year 2022, our focus has been on addressing supply-chain disruptions and volatility in commodity costs and foreign exchange markets and countering inflationary pressures through pricing actions and cost-cutting measures.

The extent of COVID-19’s effect on the Company’s operational and financial performance in the future will depend on future developments, including the duration, spread, intensity and phase of the pandemic in different countries, the emergence of COVID-19 variants and the effectiveness of vaccines against these variants, the Company’s continued ability to manufacture and distribute its products, any future government actions affecting consumers, our business operations, including any vaccine mandates, or the economy in general, and effectiveness of global vaccines. Additionally, the impact of certain geopolitical events, specifically the conflict in Ukraine, and continued inflationary pressures have increased global economic and political uncertainty due to the uncertainty around the duration and resolution of the conflict and potential economic and global supply chain disruptions. All of these factors are difficult to predict considering the rapidly evolving landscape as the Company continues to expect a variable operating environment going forward.

For further discussion of the possible impacts of the COVID-19 pandemic and other recent events on our business, financial conditions and results of operations, see “Risk Factors” in Part I, Item 1A of this Report.

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RESULTS OF OPERATIONS

Unless otherwise noted, MD&A compares results of operations from fiscal year 2022 to fiscal year 2021, with percentage and basis point calculations based on rounded numbers, except for per share data and the effective tax rate. Discussions of fiscal year 2020 items and year-to-year comparisons between fiscal years 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Exhibit 99.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

CONSOLIDATED RESULTS

(1) This represents the net impact on net sales growth / (decrease) from pricing actions, mix and other factors.

(2) Organic sales growth / (decrease) is defined as net sales growth / (decrease) excluding the effect of any acquisitions and divestitures and foreign exchange rate changes. See “Summary of Non-GAAP Financial Measures” below for reconciliation of organic sales growth / (decrease) to net sales growth / (decrease), the most directly comparable GAAP financial measure.

(3) Organic volume represents volume excluding the effect of any acquisitions and divestitures.

Net sales in fiscal year 2022 decreased by 3%, reflecting lower shipments primarily in the Health and Wellness reportable segment. Volume decreased by 5% versus the prior period. The variance between volume and net sales was primarily due to the impact of favorable price mix, partially offset by unfavorable foreign currency exchange rates.

Gross margin decreased by 780 basis points in fiscal year 2022 from 43.6% to 35.8%. The decrease was primarily driven by higher manufacturing and logistics costs, increased commodity costs and unfavorable mix, partially offset by the benefit of price increases and cost savings.

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Expenses

Selling and administrative expenses, as a percentage of net sales, decreased by 30 basis points in fiscal year 2022. The dollar decrease in selling and administrative expenses was primarily due to lower nonqualified deferred compensation plan expense, lower incentive compensation expense and the benefit from cost savings, partially offset by the Company’s digital capabilities and productivity enhancements investments.

Advertising costs, as a percentage of net sales, decreased by 80 basis points in fiscal year 2022. The dollar decrease was primarily due to higher spend in the prior period and the Company returning to historical levels of spend in the current period. The Company’s U.S. retail advertising spend as a percentage of net sales was 10% for fiscal year 2022 and 12% for fiscal year 2021, respectively.

Research and development costs, as a percentage of net sales, were essentially flat in the current period as compared to the prior period. The Company continues to invest behind product innovation and cost savings.

Goodwill, trademark and other asset impairments, Interest expense, Other expense (income), net, and the effective tax rate on earnings

Goodwill, trademark and other asset impairments of $329 in the prior fiscal year reflect non-cash impairment charges related to goodwill, trademarks, and other assets held by the VMS business (included within the Health and Wellness segment). See Notes to Consolidated Financial Statements for further information regarding the impairments recorded.

Interest expense was $106 and $99 in fiscal year 2022 and fiscal year 2021, respectively. The increase in the current period interest expense was primarily due to a loss on the early extinguishment of debt. See Notes to Consolidated Financial Statements for further information regarding the loss on the early extinguishment of debt recorded.

Other expense (income), net was $37 and ($72) in fiscal year 2022 and fiscal year 2021, respectively. The variance was due to the one-time, non-cash remeasurement gain recognized from the Company’s previously held equity interest in the Saudi joint venture in the first quarter of fiscal year 2021 (see Notes to Consolidated Financial Statements) and the loss in the current period from revaluation of the Company’s trust assets related to its nonqualified deferred compensations plans.

The effective tax rate on earnings (losses) was 22.4% and 20.1% in fiscal year 2022 and 2021, respectively. The lower tax rate in fiscal year 2021 compared to fiscal year 2022 was driven by higher excess tax benefits from stock-based compensation in the prior year.

Diluted net earnings per share

Diluted net earnings per share (EPS) decreased by 1.85, or 33%, in fiscal year 2022, primarily due to lower gross margin and the one-time, noncash remeasurement gain recognized on the previously held equity interest in the Saudi joint venture in the prior period, partially offset by the noncash impairment charges on assets held by the VMS business in the prior period.

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SEGMENT RESULTS

The following presents the results of the Company’s reportable segments and certain unallocated costs reflected in Corporate (see Notes to Consolidated Financial Statements for a reconciliation of segment results to consolidated results):

Health and Wellness

Fiscal year 2022 versus fiscal year 2021: Volume, net sales and earnings before income taxes decreased by 9%, 10% and 2%, respectively, during fiscal year 2022. The volume and net sales decreases were primarily due to lower shipments in the Professional Products portfolio due to higher COVID-19 related demand in the prior period. The decrease in earnings before income taxes in the current period was primarily due to lower net sales, higher manufacturing and logistics costs and unfavorable commodity costs, partially offset by the non-cash impairment charges on assets held by the VMS business in the prior period, and lower advertising spending, selling and administrative expenses and cost savings in the current period.

Household

Fiscal year 2022 versus fiscal year 2021: Volume and earnings before income taxes decreased by 3% and 38%, respectively, and net sales were flat during fiscal year 2022. The volume decrease was primarily driven by lower shipments in Grilling due to higher demand in the prior period and impacts from pricing actions in the current period. The decrease in earnings before income taxes was mainly due to unfavorable commodity costs and higher manufacturing and logistics costs, partially offset by cost saving efforts and the benefits from pricing and lower trade spending.

Lifestyle

Fiscal year 2022 versus fiscal year 2021: Volume and net sales increased by 2% and 3%, respectively, while earnings before income taxes decreased by 13% during fiscal year 2022. The volume and net sales increases were primarily driven by higher shipments of Brita water-filtration products due to expanded distribution and merchandising support and Natural Personal Care products primarily due to innovation and strong consumption. The decrease in earnings before income taxes was primarily due to unfavorable commodity costs and higher manufacturing and logistics costs, partially offset by net sales growth.

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International

Fiscal year 2022 versus fiscal year 2021: Volume and earnings before income taxes decreased by 1% and 52%, respectively, and net sales increased by 2% during fiscal year 2022. The variance between volume and net sales was mainly due to the benefit of price increases, partially offset by the impact of unfavorable foreign exchange rates. The decrease in earnings before income taxes was primarily due to the one-time, noncash remeasurement gain recognized on the previously held equity interest in the Saudi joint venture recognized in the prior period and unfavorable commodity costs and higher manufacturing and logistics costs, partially offset by net sales growth all in the current period.

Argentina

The business environment in Argentina continues to be challenging due to significant volatility in Argentina’s currency, high inflation, economic recession, impacts of COVID-19 and temporary price controls. The Company operates in Argentina through certain wholly owned subsidiaries (collectively, “Clorox Argentina”). Clorox Argentina manufactures products at two plants that it owns and operates across Argentina.

Effective July 1, 2018, under the requirements of U.S. GAAP, Argentina was designated as a highly inflationary economy, and as a result, the U.S. dollar replaced the Argentine peso as the functional currency of the Company’s subsidiaries in Argentina. Consequently, gains and losses from non-U.S. dollar denominated monetary assets and liabilities of Clorox Argentina are recognized in Other (income) expense, net in the consolidated statement of earnings.

As of September 2019, the government of Argentina reinstated foreign exchange controls in response to further declines in the value of the Argentine peso, limiting the Company’s ability to convert Argentine pesos to U.S. dollars and transfer U.S. dollars outside of Argentina. As of June 30, 2022 and 2021, the net asset position, excluding goodwill, of Clorox Argentina was $45 and $48, respectively. Of these net assets, cash balances were approximately $15 and $11 as of June 30, 2022 and 2021, respectively. Net sales from Clorox Argentina represented approximately 2% of the Company’s consolidated net sales for the fiscal years ended June 30, 2022 and 2021.

Volatility in the exchange rate is expected to continue, which, along with competition, changes in the retail, labor and macro-economic environment, and implemented and future additional legal limitations instituted to restrict foreign exchange transactions, as well as government price controls, could have an adverse impact on Clorox Argentina’s liquidity, net sales, net earnings, cash flows and net monetary asset position. The Company is closely monitoring developments in Argentina and continues to take steps intended to mitigate the adverse conditions, but there can be no assurances that these actions will be able to mitigate these conditions as they may occur.

Corporate

Corporate includes certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses. Beginning in fiscal year 2022, losses before income taxes for Corporate include expenses related to the Company's digital capabilities and productivity enhancements investment.

Fiscal year 2022 versus fiscal year 2021: Losses before income taxes were essentially flat due to increased investments in the Company’s digital capabilities and productivity enhancements, offset by lower employee incentive compensation expenses.

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FINANCIAL POSITION AND LIQUIDITY

Management’s discussion and analysis of the Company’s financial position and liquidity describes its consolidated operating, investing and financing activities from operations.

The Company’s cash position includes amounts held by foreign subsidiaries and, as a result, the repatriation of certain cash balances from some of the Company’s foreign subsidiaries could result in additional tax costs. However, these cash balances are generally available without legal restriction to fund local business operations. In addition, a portion of the Company’s cash balance is held in U.S. dollars by foreign subsidiaries, whose functional currency is their local currency. Such U.S. dollar balances are reported on the foreign subsidiaries’ books, in their functional currency, with the impact from foreign currency exchange rate differences recorded in Other (income) expense, net.

The Company’s financial condition and liquidity remained strong as of June 30, 2022. The following table summarizes cash activities for the years ended June 30:

Operating Activities

Net cash provided by operations was $786 in fiscal year 2022, compared with $1,276 in fiscal year 2021. The year-over-year decrease was driven by lower cash earnings and an increase in working capital, partially offset by lower tax payments and cash received from the settlement of interest rate derivative contracts in the current period. The increase in working capital was due to lower Accounts payable and accrued liabilities in the current period driven by lower spend and timing of payments, higher receivables due to the timing of sales in the current period and increased collections in the prior period, partially offset by higher inventory builds in the prior period to improve product availability.

Payment Terms Extension and Supply Chain Financing

The Company initiated the extension of its payment terms with its suppliers in the second half of fiscal year 2020 in order to improve working capital as part of and to fund the IGNITE strategy and in keeping with evolving market practices. The Company’s current payment terms do not exceed 120 days in keeping with industry standards. The Company’s operating cash flows are directly impacted as a result of the extension of the payment terms with the suppliers.

As part of those ongoing efforts, the Company has arranged for a global financial institution to offer a voluntary supply chain finance (SCF) program for the benefit of the Company’s suppliers. Leveraging the Company’s credit rating, the SCF program enables suppliers to directly contract with the financial institution to receive payment from the financial institution prior to the payment terms between the Company and the supplier, by selling the Company’s payables to the financial institution. The participation in the program is at the sole discretion of the supplier and the Company has no economic interest in a supplier's decision to enter into the agreement and has no direct financial relationship with the financial institution, as it relates to the SCF program. Once a supplier elects to participate in the SCF program and reaches an agreement with the financial institution, the supplier elects which individual Company invoices to sell to the financial institution. The terms of the Company’s payment obligations are not impacted by a supplier’s participation in the program and as such, the SCF program has no direct impact on the Company’s balance sheets, cash flows or liquidity. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. There would not be an expected material impact to the Company’s liquidity or capital resources if the financial institution or a supplier terminated the SCF arrangement.

All outstanding amounts related to suppliers participating in SCF are recorded within Accounts payable and accrued liabilities in the Consolidated Balance Sheets and the associated payments are included in operating activities within the Consolidated Statements of Cash Flows. As of June 30, 2022 and 2021, the amount due to suppliers participating in SCF and included in Accounts payable and accrued liabilities was $211 and $152, respectively. While the Company does not have direct access to information on, or influence over, which invoices a participating supplier elects to sell to the financial institution, the Company expects that the majority of these amounts have been sold to the financial institution.

Investing Activities

Net cash used for investing activities was $229 in fiscal year 2022, as compared to $452 in fiscal year 2021. The year-over-year decrease was mainly due to the acquisition of additional interest in the Company's Saudi joint venture in the prior period and lower capital spending in the current period.

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Capital expenditures were $251 and $331 in fiscal years 2022 and 2021, respectively. Capital expenditures as a percentage of net sales was 3.5% and 4.5% for fiscal years 2022 and 2021, respectively. The current year-over-year decrease was due to higher spending in the prior period on capital projects to expand production capacity.

Free cash flow

Financing Activities

Net cash used for financing activities was $689 in fiscal year 2022, compared with $1,391 in fiscal year 2021. The year-over-year decrease was mainly due to lower treasury stock purchases, partially offset by reduced proceeds from employee stock option exercises and net cash outflows from borrowings in the current period.

Current period financing activities include repayment of $300 of the Company’s senior notes with an annual fixed interest rate of 3.80% that became due in November 2021 and were repaid using commercial paper borrowings and repayment of $600 of the Company’s senior notes with an annual fixed interest rate of 3.05% due in September 2022 and $500 of senior notes with an annual fixed interest rate of 3.50% due in December 2024 that were redeemed prior to maturity using the proceeds from the May 2022 debt issuance of $1,100.

Capital Resources and Liquidity

The Company's current liabilities may periodically exceed current assets as a result of the Company's debt management policies, including the Company's use of commercial paper borrowings which fluctuates depending on the amount and timing of operating and investing cash flows and payments for shareholder transactions such as dividends. In addition, the Company’s cash generated from operations has decreased recently primarily due to higher manufacturing and logistics costs and unfavorable commodity costs. The Company continues to take actions to address some of the effects of such cost increases, which include implementing price increases, driving cost savings and optimizing the Company’s supply chain.

Global financial markets have experienced a significant increase in volatility due to heightened uncertainty over the adverse economic impact caused by the COVID-19 outbreak and other geopolitical circumstances. Notwithstanding potential unforeseen adverse market conditions and as part of the Company’s regular assessment of its cash needs, the Company believes it will have the funds necessary to support our short- and long-term liquidity and operating needs based on our anticipated ability to generate positive cash flows from operations in the future, access to capital markets enabled by our strong short-term and long-term credit ratings, and current borrowing availability.

The Company may consider other transactions that require the issuance of additional long- and/or short-term debt or other securities to finance acquisitions, repurchase stock, refinance debt or fund other activities for general business purposes. Such transactions could require funds in excess of the Company’s current cash levels and available credit lines, and the Company’s access to or cost of such additional funds could be adversely affected by any decrease in credit ratings, which were the following as of June 30:

Credit Arrangements

On March 25, 2022, the Company entered into a new $1,200 revolving credit agreement (the Credit Agreement) that matures in March 2027. The Credit Agreement replaced a prior $1,200 revolving credit agreement (the prior Credit Agreement) in place since November 2019. The Credit Agreement also changed the interest rate benchmark used as a reference rate for certain borrowings under the Credit Agreement from the London Interbank Offered Rate (LIBOR) to the secured overnight financing rate (SOFR). The Company did not incur any termination fees or penalties in connection with entering the new Credit

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Agreement, which was considered a debt modification. There were no borrowings under either the new Credit Agreement or the prior Credit Agreement as of June 30, 2022 and 2021, respectively, and the Company believes that borrowings under the new Credit Agreement are and will continue to be available for general corporate purposes. The Credit Agreement includes certain restrictive covenants and limitations. The primary restrictive covenant is a minimum ratio of 4.0, calculated as total earnings before interest, taxes, depreciation and amortization and other similar non-cash charges and certain other items (Consolidated EBITDA) to total interest expense for the trailing four quarters (Interest Coverage ratio), as defined and described in the Credit Agreement.

The Company was in compliance with all restrictive covenants and limitations in the Credit Agreement as of June 30, 2022, and anticipates being in compliance with all restrictive covenants for the foreseeable future.

As of June 30, 2022, the Company maintained $34 of foreign and other credit lines, of which $4 was outstanding and the remainder of $30 was available for borrowing.

As of June 30, 2021, the Company maintained $35 of foreign and other credit lines, of which $5 was outstanding and the remainder of $30 was available for borrowing.

Short-term Borrowings

The Company’s notes and loans payable primarily consist of U.S. commercial paper issued by the parent company and any borrowings under the Credit Agreement. These short-term borrowings have stated maturities of less than one year and provide supplemental funding for supporting operations. The level of U.S. commercial paper borrowings generally fluctuates depending upon the amount and timing of operating cash flows and payments for items such as dividends, income taxes, stock repurchases and pension contributions. The average balance of short-term borrowings outstanding was $233 and $0 for the fiscal years ended June 30, 2022 and 2021, respectively.

Long-term Borrowings

In May 2022, the Company issued $1,100 in senior notes, including $500 of senior notes with an annual fixed interest rate of 4.40% payable semi-annually in May and November, final maturity in May 2029 that carry an effective rate of 3.89% (May 2029 senior notes), which includes the impact from the settlement of interest rate contracts in May 2022, and $600 of senior notes with an annual fixed rate of 4.60%, payable semi-annually in May and November, final maturity in May 2032 that carry an effective rate of 3.25% (May 2032 senior notes), which includes the impact from the settlement of interest rate contracts in May 2022. The notes rank equally with all of the Company's existing senior indebtedness. Proceeds from the senior notes were used to redeem prior to maturity $600 of senior notes with an annual fixed interest rate of 3.05% due in September 2022 and $500 of senior notes with an annual fixed interest rate of 3.50% due in December 2024, which were redeemed in June 2022 and for general corporate purposes. In connection with the redemption prior to maturity of the $500 of senior notes due in December 2024, the Company recorded a loss on the early extinguishment of debt of $13, which is included in Interest expense in the Consolidated Statement of Earnings, representing the difference paid in cash between the redemption price and the carrying amount of the debt extinguished of $5 and the accelerated amortization of losses on settlement of interest rate contracts and issuance costs associated with the debt extinguished of $8.

In November 2021, $300 of the Company’s senior notes with annual fixed interest rate of 3.80% became due and were repaid using commercial paper borrowings.

Stock Repurchases and Dividend Payments

As of June 30, 2022, the Company had two stock repurchase programs: an open-market purchase program with an authorized aggregate purchase amount of up to $2,000, which has no expiration date and was authorized by the Board of Directors in May 2018, and a program to offset the anticipated impact of dilution related to stock-based awards (the Evergreen Program), which has no authorization limit on the dollar amount and no expiration date. During the twelve months ended June 30, 2022 and 2021, the Company purchased 152 thousand and 4,758 thousand shares of common stock at a cost of $25 and $905, respectively.

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Dividends per share and total dividends paid to Clorox stockholders were as follows during the fiscal years ended June 30:

On July 12, 2022, the Company declared a 2% increase in the quarterly dividend, from $1.16 to $1.18 per share, payable on August 12, 2022 to common stockholders of record as of the close of business on July 27, 2022.

On June 2, 2021, the Company declared a 5% increase in the quarterly dividend, from $1.11 to $1.16 per share, payable on August 13, 2021 to common stockholders of record as of the close of business on July 28, 2021.

Material Cash Requirements

The following table summarizes the Company’s current and long-term material cash requirements as of June 30, 2022, which we intend to fund primarily with operating cash flows:

(1)Purchase obligations are defined as purchase agreements that are enforceable and legally binding and that contain specified or determinable significant terms, including quantity, price and the approximate timing of the transaction. For purchase obligations subject to variable price and/or quantity provisions, an estimate of the price and/or quantity has been made. Examples of the Company’s purchase obligations include contracts to purchase raw materials, commitments to contract manufacturers, commitments for information technology and related services, advertising contracts, capital expenditure agreements, software acquisition and license commitments and service contracts. The raw material contracts included above are entered into during the regular course of business based on expectations of future purchases. Many of these raw material contracts are flexible to allow for changes in the Company’s business and related requirements. If such changes were to occur, the Company believes its exposure could differ from the amounts listed above. Any amounts reflected in the consolidated balance sheets as Accounts payable and accrued liabilities are excluded from the table above, as they are short-term in nature and expected to be paid within one year.

(2)These amounts represent expected payments through 2032. Based on the accounting rules for nonqualified retirement income and retirement health care plans, the liabilities reflected in the Company’s consolidated balance sheets differ from these expected future payments (see Notes to Consolidated Financial Statements).

(3)The Company has a venture agreement with The Procter & Gamble Company (P&G) for the Company’s Glad bags and wraps business (the Venture Agreement). As of June 30, 2022, P&G had a 20% interest in the venture. Upon termination of the agreement in January 2026, the Company is required to purchase P&G’s 20% interest for cash at fair value as established by predetermined valuation procedures. Refer to the Notes to Consolidated Financial Statements for further details.

As announced in fiscal year 2021 and with investments beginning in fiscal year 2022, Clorox plans to invest approximately $500 million over a five year period in its digital capabilities and for productivity enhancements. The above table includes contracted spend related to these investments within Purchase obligations, which are expected to be funded through cash generated from operations.

CONTINGENCIES

A summary of contingencies is contained in the Notes to Consolidated Financial Statements and is incorporated herein by reference.

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