Item 2. 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. The following discussion of the Company’s financial condition and results of operations should be read in conjunction with MD&A and the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, which was filed with the SEC on August 8, 2024, and the unaudited condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q (this Report). Unless otherwise noted, MD&A compares the three and nine month period ended March 31, 2025 (the current period) to the three and nine month period ended March 31, 2024 (the prior period), with percentage and basis point calculations based on rounded numbers, except for per share data and the effective tax rate.

EXECUTIVE OVERVIEW

The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products with approximately 7,400 employees worldwide. The Company has operations in approximately 25 countries or territories and sells its products in more than 100 markets, 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, cleaning and disinfecting products, Pine-Sol® and Tilex® cleaners; Liquid-Plumr® clog removers; Poett® home care products; Glad® bags and wraps; Fresh Step® cat litter; Kingsford® grilling products; Hidden Valley® dressings, dips, seasonings and sauces; Brita® water-filtration products; and Burt’s Bees® natural personal care products. 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 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. About 80% of the Company’s sales are generated from brands that hold the No. 1 or No. 2 market share position in their categories.

The Company operates through strategic business units (SBUs) which are organized into operating segments. Operating segments are then 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 mainly marketed and sold in the United States. Products within this segment include home care cleaning products and laundry additives primarily under the Clorox®, Clorox2®, Pine-Sol, Scentiva®, Tilex, Liquid-Plumr, and Formula 409® brands; professional cleaning and disinfecting products under the CloroxPro and Clorox Healthcare brands; and professional food service products under the Hidden Valley brand.

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

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

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

RECENT EVENTS AFFECTING THE COMPANY

For the fiscal quarter ended March 31, 2025, the Company continues to monitor macroeconomic conditions as a result of volatility in capital markets and developments in international trade policy. These evolving challenges contributed to a highly dynamic operating environment as the Company continued its efforts to drive growth, rebuild margins and drive its transformation.

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. While inflationary headwinds have moderated, consumers continue to feel pressure as continued macroeconomic uncertainty impacts spending.

During the quarter, the United States announced trade policies which included new or increased tariffs on product imports from a wide range of countries. These and any future new or additional tariffs, as well as any associated retaliatory measures taken by other countries, may impact the macroeconomic environment, consumers, suppliers and the Company’s business. While the Company has and will continue to take action to mitigate such impacts, the Company anticipates the operating environment will remain volatile and challenging.

The Company will continue to invest in its brands, capabilities and people to deliver consistent, profitable growth over time. The Company completed implementation of the new streamlined operating model in fiscal year 2024, which continues to generate annual cost savings in fiscal year 2025 and beyond. The recent divestitures of the Company’s Argentina and Better Health VMS businesses reflect its commitment to continue evolving its portfolio to reduce volatility, accelerate sales growth and structurally improve margins.

The Company has recovered from the August 2023 cyberattack which had significant impacts to its operations and results in fiscal year 2024. For further information on the incident, see Notes to Condensed Consolidated Financial Statements.

The impact of continued volatility in macroeconomic conditions and geopolitical instability, including ongoing conflicts in the Middle East and Ukraine, rising tensions between China and Taiwan and actual and potential shifts in U.S. and foreign trade, economic and other policies, have increased global macroeconomic and political uncertainty regarding the duration and resolution of the conflicts, the potential escalation of tensions and potential economic and global trade and supply chain disruptions. 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, refer to Item 1.A, “Risk Factors” of this report and “Risk Factors” included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Net sales			$	1,668					$	1,814					(8)		%				$	5,116					$	5,190					(1)		%

			Three months ended March 31, 2025
			Percentage change versus the year-ago period
			Reported (GAAP) Net Sales Growth / (Decrease)			Reported Volume						Acquisitions & Divestitures (1)			Foreign Exchange Impact			Price/Mix/ Other (2)			Organic Sales Growth / (Decrease) (Non-GAAP) (3)			Organic Volume (4)
Health and Wellness			3		%	7		%				—		%	—		%	(4)		%	3		%	7		%
Household			(11)			(9)						—			—			(2)			(11)			(9)
Lifestyle			(3)			(2)						—			—			(1)			(3)			(2)
International (4)			(15)			(15)						(14)			(3)			3			2			1
Total Company (4)(5)			(8)		%	(7)		%				(5)		%	(1)		%	—		%	(2)		%	—		%
			Nine months ended March 31, 2025
			Percentage change versus the year-ago period
			Reported (GAAP) Net Sales Growth / (Decrease)			Reported Volume						Acquisitions & Divestitures (1)			Foreign Exchange Impact			Price/Mix/Other (2)			Organic Sales Growth / (Decrease) (Non-GAAP) (3)			Organic Volume (4)
Health and Wellness			7		%	9		%				—		%	—		%	(2)		%	7		%	9		%
Household			1			2						—			—			(1)			1			2
Lifestyle			2			3						—			—			(1)			2			3
International (4)			(11)			(11)						(14)			(3)			3			6			6
Total Company (4)(5)			(1)		%	(1)		%				(5)		%	—		%	—		%	4		%	5		%

(1)The divestiture impact is calculated as net sales from the Argentina and Better Health VMS businesses after the respective sale dates in the three and nine month year-ago periods.

(2)This represents the net impact on net sales growth / (decrease) from pricing actions, mix, trade promotion spending, mix from acquisitions and divestitures and other factors. In the three months ended March 31, 2025, the impact from divestiture mix was 2% for both International and Total Company. In the nine months ended March 31, 2025, the impact from divestiture mix was 3% and 1% for International and Total Company, respectively.

(3)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 “Non-GAAP Financial Measures” below for reconciliation of organic sales growth / (decrease) to net sales growth / (decrease), the most directly comparable GAAP financial measure.

(4)Organic volume represents volume excluding the effect of any acquisitions and divestitures. In the three months ended March 31, 2025, the volume impact of divestitures was (16)% and (7)% for International and Total Company, respectively. In the nine months ended March 31, 2025, the volume impact of divestitures was (17)% and (6)% for International and Total Company, respectively.

(5)Total Company includes Corporate and Other. Corporate and Other includes the results of the Better Health VMS business through the date of divestiture.

Net sales and volume in the current three month period decreased by 8% and 7%, respectively, primarily due to the divestitures of the Better Health VMS and Argentina businesses.

Net sales and volume in the current nine month period both decreased by 1%, primarily due to the divestitures of the Better Health VMS and Argentina businesses, partially offset by lapping impacts from the cyberattack and retail inventory restoration.

RESULTS OF OPERATIONS (Continued)

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Gross profit			$	744					$	766					(3)		%				$	2,289					$	2,164					6		%
Gross margin			44.6		%				42.2		%										44.7		%				41.7		%

Gross margin increased by 240 basis points in the current three month period from 42.2% to 44.6%. The increase was primarily driven by cost savings and the benefits from the divestitures of the Better Health VMS and Argentina businesses.

Gross margin increased by 300 basis points in the current nine month period from 41.7% to 44.7%. The increase was primarily driven by cost savings, and the net impacts of higher volume and the divestitures of the Better Health VMS and Argentina businesses, partially offset by unfavorable mix.

Expenses

			Three months ended
																					% of Net Sales
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024
Selling and administrative expenses			$	267					$	301					(11)		%				16.0		%				16.6		%
Advertising costs			207						215						(4)						12.4						11.9
Research and development costs			27						32						(16)						1.6						1.8
			Nine months ended
																					% of Net Sales
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024
Selling and administrative expenses			$	828					$	899					(8)		%				16.2		%				17.3		%
Advertising costs			599						566						6						11.7						10.9
Research and development costs			89						93						(4)						1.7						1.8

Selling and administrative expenses, as a percentage of net sales, decreased by 60 basis points and 110 basis points in the current three and nine month periods, respectively, versus the prior periods. The dollar decrease in selling and administrative expenses in the current three month period was primarily due to the impact from the divestitures and lower incentive compensation expense in the current period. The dollar decrease in selling and administrative expenses in the current nine month period was primarily due to the impact from divestitures in the current period and incremental costs resulting from the cyberattack in the prior period. For further information on the cyberattack, see Notes to Condensed Consolidated Financial Statements.

Advertising costs, as a percentage of net sales, increased by 50 basis and 80 basis points in the current three and nine month periods, respectively, versus the prior periods. The increase in advertising costs reflects the Company’s continued support behind its brands. The Company’s U.S. retail advertising spend as a percentage of net sales increased from 12% to 14% versus the prior three month period.

Research and development costs, as a percentage of net sales, decreased by 20 basis points in the current three month period and were essentially flat in the current nine month period as compared to the prior periods, while dollars decreased in both periods. The Company continues to invest behind product innovation and cost savings.

RESULTS OF OPERATIONS (Continued)

Loss on divestiture, pension settlement charge, interest expense, other (income) expense, net and the effective tax rate on earnings (losses)

			Three months ended												Nine months ended
			3/31/2025						3/31/2024						3/31/2025						3/31/2024
Loss on divestiture			$	—					$	240					$	118					$	240
Pension settlement charge			—						—						—						171
Interest expense			23						22						66						69
Other (income) expense, net			(34)						(2)						(79)						3
Effective tax rate on earnings (losses)			24.8		%				(18.6)		%				26.9		%				41.9		%

Loss on divestiture of $240 in the prior three and nine month periods reflected the loss on the divestiture of the Argentina business. The loss on divestiture of $118 in the current nine month period reflects the divestiture of the Better Health VMS business. See Notes to Condensed Consolidated Financial Statements for further information.

Pension settlement charge of $171 in the prior nine month period reflected the settlement of the domestic qualified pension plan. See Notes to Condensed Consolidated Financial Statements for further information.

Other (income) expense, net was ($34) and ($2) in the current and prior three month periods, respectively, and ($79) and $3 in the current and prior nine month periods, respectively. The variance between the current and prior three month periods was primarily due to the benefit of insurance recoveries related to the cyberattack in the current period. The variance between the current and prior nine month periods was primarily due to the benefit of insurance recoveries related to the cyberattack in the current period and unfavorable foreign exchange rates primarily related to Argentina in the prior period. For further information on the cyberattack, see Notes to Condensed Consolidated Financial Statements.

The effective tax rate on earnings (losses) was 24.8% and 26.9% for the current three and nine month periods, respectively, and (18.6)% and 41.9% for the prior three and nine month periods, respectively. The change in tax rate on earnings in the current three month period as compared to the prior period was primarily driven by the divestiture of the Argentina business and a legal entity reorganization both in the prior period. The change in tax rate on earnings in the current nine month period as compared to the prior period was primarily driven by the divestiture of the Argentina business and a legal entity reorganization both in the prior period, and the nondeductibility of the loss on the divestiture of the Better Health VMS business in the current period.

Diluted net earnings (losses) per share

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Diluted net earnings (losses) per share			$	1.50					$	(0.41)					466		%				$	3.84					$	0.52					638		%

Diluted net earnings (losses) per share (EPS) increased by $1.91, or 466%, in the current three month period, primarily due to the loss relating to the Argentina divestiture in the prior period, higher gross margin and the benefits of cyberattack insurance recoveries in the current period, partially offset by lower net sales in the current period.

Diluted EPS increased by $3.32, or 638%, in the current nine month period, primarily due to losses on the divestiture of the Argentina business and pension settlement charge in the prior period and the net impacts of higher volume and the divestitures of the Better Health VMS and Argentina businesses, the benefits of cyberattack insurance recoveries and cost savings in the current period, partially offset by the loss relating to the divestiture of the Better Health VMS business, unfavorable mix and higher advertising investments all in the current period.

SEGMENT RESULTS

The following presents the results of the Company’s reportable segments and Corporate and Other. See Notes to Condensed Consolidated Financial Statements for further discussion of the principal measure of segment profitability used by management, segment adjusted earnings before interest and income taxes (segment adjusted EBIT):

			Net sales
			Three months ended												Nine months ended
			3/31/2025						3/31/2024						3/31/2025						3/31/2024
Health and Wellness			$	630					$	609					$	1,956					$	1,833
Household			469						526						1,362						1,353
Lifestyle			306						315						964						947
International			263						310						796						891
Reportable segment total			1,668						1,760						5,078						5,024
Corporate and Other			—						54						38						166
Total			$	1,668					$	1,814					$	5,116					$	5,190

			Segment adjusted EBIT (1)
			Three months ended												Nine months ended
			3/31/2025						3/31/2024						3/31/2025						3/31/2024
Health and Wellness			$	169					$	154					$	597					$	517
Household			61						74						169						162
Lifestyle			60						64						196						192
International			31						38						87						104
Reportable segment total			321						330						1,049						975
Corporate and Other			(55)						(70)						(193)						(238)
Total			$	266					$	260					$	856					$	737
Interest income			2						4						7						21
Interest expense			(23)						(22)						(66)						(69)
Loss on divestiture			—						(240)						(118)						(240)
Pension settlement charge			—						—						—						(171)
Cyberattack costs, net of insurance recoveries			35						(8)						70						(57)
Streamlined operating model			—						(10)						—						(13)
Digital capabilities and productivity enhancements investment			(26)						(26)						(81)						(85)
Earnings before income taxes			$	254					$	(42)					$	668					$	123

(1)See “Non-GAAP Financial Measures” below for reconciliation of segment adjusted EBIT to earnings before income taxes, the most directly comparable GAAP financial measure.

SEGMENT RESULTS (Continued)

Health and Wellness

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Net sales			$	630					$	609					3		%				$	1,956					$	1,833					7		%
Segment adjusted EBIT			169						154						10						597						517						15

Volume, net sales and segment adjusted EBIT increased by 7%, 3% and 10%, respectively, during the current three month period. The volume increase was primarily due to strong consumption supported by merchandising activities in Cleaning. The variance between volume and net sales was primarily due to unfavorable price mix. The increase in segment adjusted EBIT was primarily due to lower manufacturing and logistics costs, higher net sales and cost savings, partially offset by higher advertising investments.

Volume, net sales and segment adjusted EBIT increased by 9%, 7% and 15%, respectively, during the current nine month period. The volume increase was primarily due to lapping impacts from the cyberattack and retail inventory restoration. The variance between volume and net sales was primarily due to unfavorable price mix. The increase in segment adjusted EBIT in the current period was primarily due to higher net sales, cost savings and lower manufacturing and logistics costs, partially offset by higher advertising investments.

Household

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Net sales			$	469					$	526					(11)		%				$	1,362					$	1,353					1		%
Segment adjusted EBIT			61						74						(18)						169						162						4

Volume, net sales and segment adjusted EBIT decreased by 9%, 11% and 18%, respectively, during the current three month period. The volume decrease was primarily due to lower consumption and the timing of shipments in Grilling. The variance between volume and net sales was primarily due to unfavorable price mix. The decrease in segment adjusted EBIT was mainly due to lower net sales partially offset by cost savings.

Volume, net sales and segment adjusted EBIT increased by 2%, 1% and 4%, respectively, during the current nine month period. The volume increase was primarily due to lapping impacts from the cyberattack and retail inventory restoration. The increase in segment adjusted EBIT was mainly due to cost savings and higher volume, partially offset by both unfavorable mix and commodity costs.

Lifestyle

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Net sales			$	306					$	315					(3)		%				$	964					$	947					2		%
Segment adjusted EBIT			60						64						(6)						196						192						2

Volume, net sales and segment adjusted EBIT decreased by 2%, 3% and 6%, respectively, during the current three month period. The volume decrease was primarily due to lower consumption. The decrease in segment adjusted EBIT was primarily due to lower net sales.

Volume increased by 3% and both net sales and segment adjusted EBIT increased by 2%, during the current nine month period. The volume increase was primarily due to lapping impacts from the cyberattack and retail inventory restoration. The increase in segment adjusted EBIT was primarily due to favorable commodity costs and higher net sales, partially offset by higher advertising investments.

SEGMENT RESULTS (Continued)

International

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Net sales			$	263					$	310					(15)		%				$	796					$	891					(11)		%
Segment adjusted EBIT			31						38						(18)						87						104						(16)

Both volume and net sales decreased by 15% during the current three month period, primarily due to the Argentina divestiture. Segment adjusted EBIT decreased by 18% during the current three month period, primarily due to the Argentina divestiture partially offset by cost savings.

Both volume and net sales decreased by 11% and segment adjusted EBIT decreased by 16% in the current nine month period. The volume decrease was primarily due to the Argentina divestiture partially offset by lapping impacts from the cyberattack and retail inventory restoration. The decrease in segment adjusted EBIT was primarily due to the Argentina divestiture.

Corporate and Other

Corporate and Other includes certain non-allocated administrative costs, the Better Health VMS business through the date of divestiture and various other non-operating income and expenses.

			Three months ended																		Nine months ended
			3/31/2025						3/31/2024						% Change						3/31/2025						3/31/2024						% Change
Net Sales			$	—					$	54					(100)		%				$	38					$	166					(77)		%
Segment adjusted EBIT			(55)						(70)						21						(193)						(238)						19

Net sales decreased by 100% and 77% in the current three and nine month periods, respectively, due to the divestiture of the Better Health VMS business in the first quarter of fiscal year 2025.

Segment adjusted EBIT increased by 21% and 19% in the current three and nine month periods, respectively. The increase in segment adjusted EBIT in the current three month period was primarily due to lower Better Health VMS operating expenses in the current period due to the divestiture. The increase in segment adjusted EBIT in the current nine month period was primarily due to foreign exchange losses on Corporate and Other assets related to operations in Argentina in the prior period and lower Better Health VMS operating expenses in the current period due to the divestiture.

On September 10, 2024, the Company completed the divestiture of its Better Health VMS business. See Notes to Condensed Consolidated Financial Statements for further information.

FINANCIAL POSITION AND LIQUIDITY

The Company’s financial condition and liquidity remained strong as of March 31, 2025. The following table summarizes cash activities:

			Nine months ended
			3/31/2025						3/31/2024
Net cash provided by operations			$	687					$	355
Net cash used for investing activities			(18)						(94)
Net cash used for financing activities			(645)						(382)

Operating Activities

Net cash provided by operations was $687 in the current nine month period, compared with $355 in the prior nine month period. The increase was primarily driven by higher cash earnings and lower tax payments in the current nine month period. The lower tax payments in the current nine month period are primarily driven by payment 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.

FINANCIAL POSITION AND LIQUIDITY (Continued)

Payment Terms Extension and Supply Chain Financing

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. 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 payment terms with suppliers. 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. 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. Refer to the Notes to Condensed Consolidated Financial Statements for detail on the SCF program.

Investing Activities

Net cash used for investing activities was $18 in the current nine month period, compared with $94 in the prior nine month period. The year-over-year change was mainly due to net proceeds from the sale of the Better Health VMS business in the current nine month period.

Financing Activities

Net cash used for financing activities was $645 in the current nine month period, compared with $382 in the prior nine month period. The year-over-year change was mainly due to higher treasury stock purchases in the current nine month period.

Capital Resources and Liquidity

As of March 31, 2025, current liabilities exceeded current assets by $565, primarily due to the Company's Glad venture agreement terminal obligation coming due for payment in January 2026. This balance was reclassified from Other liabilities to Accounts payable and accrued liabilities as it is reasonably expected to be settled within one year. The venture agreement terminal obligation is expected to be repaid through the Company’s 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.

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 its short- and long-term liquidity and operating needs, including its digital capabilities and productivity enhancements investment and venture agreement terminal obligation based on its 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.

Venture Agreement

The Company has an agreement with The Procter & Gamble Company (P&G) for the Company’s Glad bags and wraps business. As of both March 31, 2025 and June 30, 2024, P&G had a 20% interest in the venture. This agreement is now scheduled to expire in January 2026 as the parties jointly did not opt to further extend the term of the agreement. Upon termination of the agreement, the Company is required to purchase P&G’s 20% interest for cash at fair value as established by predetermined valuation procedures.

The Company performed a valuation of the Glad bags and wraps business in the third quarter of fiscal year 2025 in connection with an update of the Company’s financial projections. As of March 31, 2025 the estimated fair value of P&G’s interest in the venture was $476, of which $515 was recognized and reflected in Accounts payable and accrued liabilities. As of June 30, 2024 the estimated fair value of P&G’s interest in the venture was $531, of which $510 was recognized and reflected in Other liabilities in the Company’s Condensed Consolidated Balance Sheet. The $55 decrease in the estimated fair value of P&G’s interest since June 30, 2024 was attributable to a decrease in the estimated future cash flows since the prior valuation, partially offset by a decrease in the discount rate. Changes in the judgments, assumptions and market factors used could result in significantly different estimates of fair value. The difference between the estimated fair value and the amount recognized, and any future changes in the fair value of P&G’s interest, is charged to Cost of products sold in accordance over the remaining life of the agreement.

See Notes to Condensed Consolidated Financial Statements for further information.

FINANCIAL POSITION AND LIQUIDITY (Continued)

Credit Arrangements

On 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 both March 31, 2025 and June 30, 2024, and the Company believes that borrowings under the 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 noncash 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 March 31, 2025 and anticipates being in compliance with all restrictive covenants for the foreseeable future.

As of March 31, 2025, the Company maintained $34 of foreign and other credit lines, of which $7 was outstanding.

Stock Repurchases and Dividend Payments

As of March 31, 2025, 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 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 three and nine months ended March 31, 2025, the Company repurchased 0 and 1,695 thousand shares of common stock at a cost of $0 and $257, respectively. There were no share repurchases of common stock during both the three and nine months ended March 31, 2024.

Dividends per share declared and total dividends paid to Clorox stockholders were as follows for the periods indicated:

			Three months ended												Nine months ended
			3/31/2025						3/31/2024						3/31/2025						3/31/2024
Dividends per share declared			$	1.22					$	1.20					$	4.88					$	4.80
Total dividends paid			150						148						452						446

CONTINGENCIES

See Notes to Condensed Consolidated Financial Statements for information on the Company’s contingencies.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Notes to Condensed Consolidated Financial Statements for a summary of recently issued accounting standards relevant to the Company.

CRITICAL ACCOUNTING ESTIMATES

The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements. Accordingly, a different financial presentation could result depending on the judgments, estimates or assumptions that are used. The most critical accounting estimates are those that are most important to the portrayal of the Company’s financial condition and results, and require the Company to make the most difficult and subjective judgments, often estimating the outcome of future events that are inherently uncertain. As of March 31, 2025, there have been no significant changes to the Company’s critical accounting estimates since the preparation of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, except as noted below:

Venture Agreement Terminal Obligation

The Company performed a valuation of the Glad bags and wraps business during the third quarter of fiscal year 2025 in connection with an update of the Company’s financial projections. As of March 31, 2025 the estimated fair value of P&G’s interest in the venture was $476, of which $515 was recognized and reflected in Accounts payable and accrued liabilities. As of June 30, 2024 the estimated fair value of P&G’s interest in the venture was $531, of which $510 was recognized and reflected in Other liabilities. See Notes to Condensed Consolidated Financial Statements for additional information on the Venture Agreement.

Fair value determination requires significant judgment, assumptions and market factors which are uncertain and subject to change. Changes in the judgments, assumptions and market factors used could result in significantly different estimates of fair value. For perspective, if the discount rate as of the third quarter of fiscal year 2025, the date of the most recent valuation performed, were to increase or decrease by 100 basis points, the estimated fair value of P&G’s interest would decrease by approximately $53 or increase by approximately $68, respectively. Such changes would affect the amount of future charges to Cost of products sold.

NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures that are included in this MD&A and the reasons management believes they are useful to investors are described below. Certain non-GAAP financial measures may be considered in determining incentive compensation. These measures should be considered supplemental in nature and are not intended to be a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, these measures may not be the same as similarly named measures presented by other companies.

Adjusted earnings (losses) before interest and income taxes (adjusted EBIT) represents earnings (losses) before income taxes excluding interest income, interest expense and other significant items that are nonrecurring or unusual (such as the pension settlement charge, incremental costs and insurance recoveries related to the August 2023 cyberattack, asset impairments, charges related to the streamlined operating model, charges related to the digital capabilities and productivity enhancements investment, significant losses/(gains) related to acquisitions / divestitures and other nonrecurring or unusual items impacting comparability). The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. Management believes that the presentation of adjusted EBIT is useful to investors to assess operating performance on a consistent basis by removing the impact of the items that management believes does not directly reflect the performance of each segment's underlying operations. Adjusted EBIT margin is the ratio of adjusted EBIT to net sales.

NON-GAAP FINANCIAL MEASURES (Continued)

			Reconciliation of earnings (losses) before income taxes to adjusted EBIT
			Three months ended												Nine months ended
			3/31/2025						3/31/2024						3/31/2025						3/31/2024
Earnings before income taxes			$	254					$	(42)					$	668					$	123
Interest income			(2)						(4)						(7)						(21)
Interest expense			23						22						66						69
Loss on divestiture (1)			—						240						118						240
Pension settlement charge (2)			—						—						—						171
Cyberattack costs, net of insurance recoveries (3)			(35)						8						(70)						57
Streamlined operating model (4)			—						10						—						13
Digital capabilities and productivity enhancements investment (5)			26						26						81						85
Adjusted EBIT			$	266					$	260					$	856					$	737

(1)Represents losses related to the divestiture of the Better Health VMS and Argentina businesses. Due to the nature, scope and magnitude of these costs, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.

(2)Represents costs related to the settlement of the domestic qualified pension plan. Due to the nature, scope and magnitude of these costs, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.

(3)Represents incremental costs and insurance recoveries incurred as a result of the August 2023 cyberattack the Company experienced beginning in the first quarter of fiscal year 2024. Due to the nature, scope and magnitude of these costs and recoveries, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.

(4)Represents restructuring and related implementation costs, net for the streamlined operating model. Due to the nonrecurring and unusual nature of these costs, the Company's management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company's operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.

NON-GAAP FINANCIAL MEASURES (Continued)

(5)Represents expenses related to the Company's digital capabilities and productivity enhancements investment. Due to the nature, scope and magnitude of this investment, these costs are considered by management to represent incremental transformational costs above the historical normal level of spending for information technology to support operations. Since these strategic investments, including incremental operating costs, will cease at the end of the investment period, are not expected to recur in the foreseeable future and are not considered representative of the Company's underlying operating performance, the Company's management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company's operations and is useful for period-over-period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management.

Of the total investment, approximately 70% is expected to represent incremental operating costs primarily recorded within selling and administrative expenses to be adjusted from reported earnings before income taxes for purposes of disclosing adjusted EBIT over the course of the next five years. About 70% of these operating costs are expected to be related to the implementation of the ERP, with the remaining costs primarily related to the implementation of complementary technologies.

During the three and nine months ended March 31, 2025, the Company incurred approximately $26 and $81, respectively, and during the three and nine months ended March 31, 2024, the Company incurred approximately $26 and $85, respectively, of operating expenses related to its digital capabilities and productivity enhancements investment. The expenses relate to the following:

			Three months ended												Nine months ended
			3/31/2025						3/31/2024						3/31/2025						3/31/2024
External consulting fees (1)			$	19					$	19					$	56					$	65
IT project personnel costs (2)			1						2						5						6
Other (3)			6						5						20						14
Total			$	26					$	26					$	81					$	85

(1)Comprised of third-party consulting fees incurred to assist in the project management and end-to-end systems integration of this transformative investment. The Company relies on consultants for certain capabilities required for these programs that the Company does not maintain internally. These costs support the implementation of these programs incremental to the Company's normal IT costs and will not be incurred following implementation.

(2)Comprised of labor costs associated with internal IT project management teams that are utilized to oversee the new system implementations. Given the magnitude and transformative nature of the implementations planned, the necessary project management costs are incremental to the historical levels of spend and will no longer be incurred subsequent to implementation. As a result of this long-term strategic investment, the Company considers these costs not reflective of the ongoing costs to operate its business.

(3)Comprised of various other expenses associated with the Company’s new system implementations, including Company personnel dedicated to the project that have been backfilled with either permanent or temporary resources in positions that are considered part of normal operating expenses.

NON-GAAP FINANCIAL MEASURES (Continued)

Organic sales growth / (decrease) is defined as net sales growth / (decrease) excluding the effect of foreign exchange rate changes and any acquisitions and divestitures. Management believes that the presentation of organic sales growth / (decrease) is useful to investors because it excludes sales from any acquisitions and divestitures, which results in a comparison of sales only from the businesses that the Company was operating and expects to continue to operate throughout the relevant periods, and the Company’s estimate of the impact of foreign exchange rate changes, which are difficult to predict and out of the control of the Company and management.

The following table provides a reconciliation of organic sales growth / (decrease) (non-GAAP) to net sales growth / (decrease) (GAAP), the most comparable GAAP measure:

			Three months ended March 31, 2025
			Percentage change versus the year-ago period
			Health and Wellness						Household						Lifestyle						International						Total Company (1)
Net sales growth / (decrease) (GAAP)			3		%				(11)		%				(3)		%				(15)		%				(8)		%
Add: Foreign Exchange			—						—						—						3						1
Add/(Subtract): Divestitures / Acquisitions (2)			—						—						—						14						5
Organic sales growth / (decrease) (non-GAAP)			3		%				(11)		%				(3)		%				2		%				(2)		%
			Nine months ended March 31, 2025
			Percentage change versus the year-ago period
			Health and Wellness						Household						Lifestyle						International						Total Company (1)
Net sales growth / (decrease) (GAAP)			7		%				1		%				2		%				(11)		%				(1)		%
Add: Foreign Exchange			—						—						—						3						—
Add/(Subtract): Divestitures / Acquisitions (2)			—						—						—						14						5
Organic sales growth / (decrease) (non-GAAP)			7		%				1		%				2		%				6		%				4		%

(1)Total Company includes Corporate and Other. Corporate and Other includes the results of the Better Health VMS business through the date of divestiture.

(2)The divestiture impact is calculated as net sales from the Argentina and Better Health VMS businesses after the respective sale dates in the three and nine month year-ago periods.

CAUTIONARY STATEMENT

This Report, including the exhibits hereto and the information incorporated by reference herein, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, statements regarding the expected or potential impact of the Company’s operational disruption stemming from a cyberattack, and any such forward-looking statements involve risks, assumptions and uncertainties. Except for historical information, statements about future volumes, sales, organic sales growth, foreign currencies, costs, cost savings, margins, earnings, earnings per share, diluted earnings per share, foreign currency exchange rates, tax rates, cash flows, plans, objectives, expectations, growth or profitability are forward-looking statements based on management’s estimates, beliefs, assumptions and projections. Words such as “could,” “may,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “predicts,” and variations on such words, and similar expressions that reflect the Company’s current views with respect to future events and operational, economic and financial performance 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. 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 fiscal year ended June 30, 2024, and in this Report, as updated from time to time in the Company’s Securities and Exchange Commission filings. These factors include, but are not limited to:

• unfavorable general economic and geopolitical conditions beyond the Company’s control, including supply chain disruptions, labor shortages, wage pressures, rising inflation, the interest rate environment, fuel and energy costs, foreign currency exchange rate fluctuations, weather events or natural disasters, disease outbreaks or pandemics, such as COVID-19, terrorism, and unstable geopolitical conditions, including ongoing conflicts in the Middle East and Ukraine and rising tensions between China and Taiwan, as well as macroeconomic and geopolitical volatility and uncertainty as a result of a number of these and other factors, including actual and potential shifts in U.S. and foreign trade policies, including as a result of escalating trade tensions and tariffs between the U.S. and its trading partners, especially China;

• the ability of the Company to drive sales growth, increase prices and market share, grow its product categories and manage favorable product and geographic mix;

• the impact of the changing retail environment, including the growth of alternative retail channels and business models, and changing consumer preferences;

• our recovery from the August 2023 cyberattack, and risks related to the Company’s use of and reliance on information technology systems, including potential and actual security breaches, cyberattacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or Company information, business, service or operational disruptions, or that impact the Company’s financial results or financial reporting, or any resulting unfavorable outcomes, increased costs or legal proceedings;

• intense competition in the Company’s markets;

• volatility and increases in the costs of raw materials, energy, transportation, labor and other necessary supplies or services;

• risks related to supply chain issues, product shortages and disruptions to the business, as a result of increased supply chain dependencies due to an expanded supplier network and a reliance on certain single-source suppliers;

• the ability of the Company to implement and generate cost savings and efficiencies, and successfully implement its transformational initiatives or strategies, including achieving anticipated benefits and cost savings from the implementation of the streamlined operating model and digital capabilities and productivity enhancements, and the timing and volume of shipment movement related to our ERP transition;

• the Company’s ability to maintain its business reputation and the reputation of its brands and products;

• dependence on key customers and risks related to customer consolidation and ordering patterns;

• the ability of the Company to innovate and to develop and introduce commercially successful products, or expand into adjacent categories and countries;

• the Company’s ability to attract and retain key personnel, which may continue to be impacted by challenges in the labor market, such as increasing labor costs and sustained labor shortages;

CAUTIONARY STATEMENT (Continued)

• lower revenue, increased costs or reputational harm resulting from government actions and compliance with regulations, or any material costs imposed by changes in regulation;

• changes to the Company’s processes and procedures as a result of its digital capabilities and productivity enhancements that may result in changes to the Company’s internal controls over financial reporting;

• the ability of the Company to successfully manage global political, legal, tax and regulatory risks, including changes in regulatory or administrative activity;

• risks related to international operations and international trade, including changing macroeconomic conditions as a result of inflation, volatile commodity prices and increases in raw and packaging materials prices, labor, energy and logistics; global economic or political instability; foreign currency fluctuations, such as devaluations, and foreign currency exchange rate controls; changes in governmental policies, including trade policy and tariffs, travel or immigration restrictions, new or additional tariffs, and price or other controls; labor claims and civil unrest; potential operational or supply chain disruptions from wars and military conflicts, including ongoing conflicts in the Middle East and Ukraine and rising tensions between China and Taiwan; potential negative impact and liabilities from the use, storage and transportation of chlorine in certain international markets where chlorine is used in the production of bleach; widespread health emergencies, such as COVID-19; and the possibility of nationalization, expropriation of assets or other government action;

• the impact of Environmental, Social, and Governance (ESG) issues, including those related to climate- related transition risks, changing consumer preferences, including the environmental impact of the Company’s products and sustainability on sales, operating costs or reputation;

• the impact of product liability claims, labor claims and other legal, governmental or tax proceedings, including in foreign jurisdictions and in connection with any product recalls;

• risks relating to acquisitions, new ventures and divestitures, and associated costs, including for asset impairment charges related to, among others, intangible assets, including trademarks and goodwill; and the ability to complete announced transactions and, if completed, integration costs and potential contingent liabilities related to those transactions;

• the accuracy of the Company’s estimates and assumptions on which its financial projections, including any sales or earnings guidance or outlook it may provide from time to time, are based;

• risks related to the acquisition of P&G’s interest in the Glad business;

• risks related to the Company's reliance on third-party service providers, including inability to meet cost savings or efficiencies, business or systems disruptions, and other liabilities, including legal or regulatory risk;

• environmental matters, including costs associated with the remediation and monitoring of past contamination, and possible increases in costs resulting from actions by relevant regulators, and the handling and/or transportation of hazardous substances;

• the Company’s ability to effectively utilize, assert and defend its intellectual property rights, and any infringement or claimed infringement by the Company of third-party intellectual property rights;

• the effect of the Company’s indebtedness and credit rating on its business operations and financial results and the Company’s ability to access capital markets and other funding sources, as well as the cost of capital to the Company;

• the Company’s ability to pay and declare dividends or repurchase its stock in the future;

• the impacts of potential stockholder activism; and

• risks related to any litigation associated with the exclusive forum provision in the Company’s bylaws.

The Company’s forward-looking statements in this Report are based on management’s current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this Report. 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.

In this Report, unless the context requires otherwise, the terms “the Company,” “Clorox,” “we,” “us,” and “our” refer to The Clorox Company and its subsidiaries.