CLOROX CO /DE/

Regulatory Filings • Jun 28, 2017

11-K 1 clorox3278301-11k.htm ANNUAL REPORT OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549

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FORM 11-K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One):

☑ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ______

Commission file number 1-07151

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

The Clorox Company Employee Retirement Investment Plan for Puerto Rico

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

The Clorox Company 1221 Broadway Oakland, CA 94612-1888

| Financial Statements and Supplemental Information |
| --- |
| The Clorox Company
Employee Retirement Investment Plan for Puerto Rico As
of December 31, 2016 and 2015 and the Plan Year ended December 31,
2016 with Report of Independent Registered Public Accounting Firm |

The Clorox Company Employee Retirement Investment Plan for Puerto Rico

Financial Statements and Supplemental Information

As of December 31, 2016 and 2015 and for the Plan Year ended December 31, 2016

Contents

| Report of
Independent Registered Public Accounting Firm | 1 |
| --- | --- |
| Audited Financial Statements | |
| Statements of Net
Assets Available for Benefits | 2 |
| Statement of Changes in Net Assets
Available for Benefits | 3 |
| Notes to
Financial Statements | 4 |
| Supplemental Information | |
| Schedule H, Line
4i – Schedule of Assets (Held at End of Year) | 12 |
| Exhibit 23.1 – Consent of Independent
Registered Public Accounting Firm | 15 |

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Participants and Plan Administrator of The Clorox Company Employee Retirement Investment Plan for Puerto Rico

We have audited the financial statements of The Clorox Company Employee Retirement Investment Plan for Puerto Rico (the Plan) as of December 31, 2016 and 2015, and for the year ended December 31, 2016, as listed in the accompanying table of contents. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2016 and 2015, and the changes in net assets available for benefits for the year ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

The supplemental information included in Schedule H, line 4(i) – Schedule of Assets (Held at End of Year) has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA. In our opinion, the supplemental information included in Schedule H, line 4(i) – Schedule of Assets (Held at End of Year) is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Moss Adams LLP San Francisco, California June 27, 2017

The Clorox Company Employee Retirement Investment Plan for Puerto Rico Statements of Net Assets Available for Benefits As of December 31, 2016 and 2015

	December 31, — 2016	2015
Assets
Investments, at
fair value	$ 12,406,823	$ 11,037,059
Receivables:
Notes receivable from participants	685,295	878,368
Employer's contributions	414,929	411,223
Participant's contributions	–	6,030
Total
receivables	1,100,224	1,295,621
Net
assets available for benefits	$ 13,507,047	$ 12,332,680

See accompanying notes to the financial statements

2

The Clorox Company Employee Retirement Investment Plan for Puerto Rico Statement of Changes in Net Assets Available for Benefits For the Plan Year ended December 31, 2016

| Additions to (deductions from) net assets
attributed to: | | |
| --- | --- | --- |
| Investment and other income: | | |
| Interest income and dividends | $ 164,832 | |
| Net appreciation in fair value of
investments | 593,078 | |
| Total investment
and other income | 757,910 | |
| Contributions: | | |
| Participants | 539,690 | |
| Employer | 660,117 | |
| Rollovers | 1,558 | |
| Total
contributions | 1,201,365 | |
| Benefit payments to participants | (761,000 | ) |
| Plan expenses | (23,908 | ) |
| Net
increase | 1,174,367 | |
| Net assets available for
benefits: | | |
| Beginning of year | 12,332,680 | |
| End of year | $ 13,507,047 | |

See accompanying notes to the financial statements

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The Clorox Company Employee Retirement Investment Plan for Puerto Rico

Notes to Financial Statements

December 31, 2016

1. Description of the Plan

The following description of The Clorox Company Employee Retirement Investment Plan for Puerto Rico (“the Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

General

The Plan is a defined contribution plan covering most salaried and hourly production employees of Clorox Manufacturing Company of Puerto Rico, Inc. (the “Company”) (previously, The Clorox Company of Puerto Rico) and those affiliates of the Company that adopt the Plan for the benefit of their Puerto Rico resident employees (the “Companies”), except for (i) leased employees and (ii) non-resident aliens with no Puerto Rico source of income, unless such coverage is specified in the written agreement. Participants are eligible to participate on the first day of employment following completion of one hour of service with the Companies. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Employee Benefits Committee (the “Committee”) administers the Plan. Banco Popular de Puerto Rico serves as the Plan’s trustee. Mercer Trust Company (“Mercer”) serves as the Plan’s recordkeeper and custodian.

The Companies maintain a non-leveraged employee stock ownership plan (the “ESOP”). The ESOP is maintained as part of the Plan and is designed to invest primarily in the Company’s common stock. If elected, the participants can choose to (i) reinvest the dividends or (ii) receive the dividends in cash. No participant shall be permitted to direct more than 5% of the contributions to be made to the Plan on his or her behalf in the ESOP fund; and no participant shall be permitted to effect a transfer or exchange from another investment fund into the ESOP fund if the portion of the participant’s account invested in the ESOP fund would exceed 5% of his or her account balance immediately after such transfer or exchange. From January 1, 2007 up to December 31, 2012 the limit was 10%. Prior to January 1, 2007 no limit was implemented; as such, there are certain participants whose investment in the ESOP fund exceeds 10% of their total account balance.

Contributions

Participants may contribute up to 20% of their covered compensation, up to 10% on a pre-tax and after-tax basis, respectively, as defined in the Plan. Generally, covered/eligible compensation consists of regular pay plus most bonuses, overtime and vacation pay.

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Pre-tax contributions are subject to a $15,000 limit specified under the Puerto Rico Internal Revenue Code of 2011, as amended, (the “Code”).

Newly eligible participants who do not make a salary deferral contribution election, or fail to elect to decline a deferral contribution, are automatically enrolled in the Plan at a 6% contribution rate. All participants with a contribution rate of less than 10% have an automatic annual percentage increase of 2% until the contribution rate reaches 10% unless another annual percentage is elected or the automatic election is declined.

Employees can receive a dollar for dollar employer matching contribution up to a maximum of 4% of eligible compensation. Participants need to have completed one year of service to receive the match. Matching contributions are funded each pay period.

Eligible participants can also be eligible for a non-elective employer contribution. Participants must have completed one year of service and be an active employee at the end of the Plan year to be able to receive the non-elective employer contribution. The non-elective employer contribution is equal to 6% of eligible compensation during the plan year. The non-elective employer contribution is funded during the quarter subsequent to the Plan year end. See “Vesting” section for more information.

Participants may also rollover amounts representing distributions from other qualified defined benefit or defined contribution plans.

Investment Options

Participants direct investment of their contributions and the Companies’ contributions into the various investment options offered by the Plan. The Plan offers investments in The Clorox Company’s common stock, mutual funds, common collective trust funds and a money market fund.

Participant Accounts

Each participant’s account is credited with the participant’s contribution and an allocation of: (a) Company contributions and (b) Plan earnings. Allocations are based on participant’s eligible compensation for the employer match and employer non-elective contributions and investment balance for investment earnings. At the discretion of the Committee, forfeited balances of terminated participants’ non-vested accounts may be used to pay Plan expenses, to reduce the Companies’ contributions to the Plan, or to restore forfeited accounts of previously terminated participants who subsequently resumed employment with the Companies. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

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Vesting

Participants are always fully vested in their individual contributions, the Companies’ matching contributions, and actual earnings thereon.

The non-elective employer contributions account will vest in accordance with the following schedule:

| Years of
Service | |
| --- | --- |
| 1 | 0% |
| 2 | 20% |
| 3 | 40% |
| 4 | 66% |
| 5 | 100% |

Participants become immediately vested in the non-elective employer contribution upon reaching age 60 while employed by the Companies, at death, or upon termination of employment due to permanent disability.

Payment of Benefits

The Plan provides for lump-sum distributions of the vested value of a participant’s account upon death, permanent disability, or termination of employment. The Plan also provides for installment distributions in limited instances. Hardship withdrawals are permitted if certain criterion are met.

Notes Receivable from Participants

Participants may obtain up to two loans for a minimum of $1,000 each and a maximum amount equal to the lesser of $50,000 reduced by the highest outstanding loan balance in the previous 12 months, or 50% of the participant’s vested account balance. Loan terms range from 1 to 5 years, or up to 15 years if the proceeds are used for the purchase of a primary residence. The loans are secured by the balance of the participant’s account and bear interest at a fixed rate (prime plus 1%) determined at the time of the loan. Principal and accrued interest is repaid ratably through payroll deductions.

Plan Termination

Although it has not expressed any intent to do so, the Companies have the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of a Plan termination, participants will become 100% vested in their accounts.

Administrative Expenses

The Companies pay substantially all administrative expenses except for loan origination and maintenance fees which are deducted from the participant’s account.

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Forfeitures

Amounts forfeited for each Plan year are used to reduce the Companies’ contributions. The unallocated forfeitures related to non-vested accounts at December 31, 2016 and 2015 are $8,082 and $7,876, respectively. The Companies used $7,000 and $28,646 of forfeitures to reduce the Companies’ non-elective employer contributions for the Plan years ended December 31, 2016 and 2015, respectively. Non-elective employer contributions are made subsequent to the Plan year end.

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements are prepared on the accrual basis of accounting in accordance with Accounting Principles Generally Accepted in the United States of America (U.S. GAAP”).

Investment Valuation and Income Recognition

The Plan’s investments are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 3 for further discussion of fair value measurements.

Purchases and sales of securities are recognized on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. The net appreciation in fair value of investments consists of both the realized gains and losses and unrealized appreciation and depreciation of those investments.

Benefit Payments to Participants

Benefit payments to participants are recorded upon distribution. As of December 31, 2016 and 2015, no significant amounts were due to participants who had requested distributions prior to the Plan’s year ends.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Plan’s management to make estimates that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from those estimates.

Risk and Uncertainties

The Plan provides for various investment options in common stock, mutual funds, common collective trust funds and a money market fund. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risk. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities could occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits, the statement of changes in net assets available for benefits and participant account balances.

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Subsequent Events

In connection with the preparation of the financial statements, the Plan and its management have assessed and reported on subsequent events through the date of issuance of these financial statements. Effective January 1, 2017, the trustees of the Plan approved the change of custodian to Vanguard Fiduciary Trust Company and the recordkeeper to The Vanguard Group, Inc.(“Vanguard”). The conversion from custodian and recordkeeper, Mercer, was completed in January 2017. Upon conversion, the participant investment account balances were transferred from Mercer to Vanguard and invested into fund options offered through Vanguard. No changes were made to the provisions of the Plan.

3. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Fair value is determined based on a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. An asset or liability’s classification is based on the lowest level of input that is significant to the fair value measurement.

Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

| Level 1
– | Quoted market prices
in active markets for identical assets or liabilities. |
| --- | --- |
| Level 2
– | Observable
market-based inputs or unobservable inputs that are corroborated by market
data. |
| Level 3
– | Unobservable inputs
reflecting management’s own assumptions |

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:

Mutual funds and money market fund: Valued at quoted market prices of shares held by the Plan at year-end.

Company’s common stock: Valued at the last reported quoted market sales price at year-end.

Common collective trust funds: Valued using the market approach at a unit price (“NAV” as a practical expedient) determined by the portfolio’s sponsor based on the fair value of underlying investments held by the common collective trust fund on the last business day of the Plan year. These are not classified in the fair value hierarchy table. The fair values are included in the table to allow reconciliation of the fair value hierarchy to the fair value of investments per the statement of net assets available for benefits.

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The common collective trust funds measured at net asset value may impose, in its sole discretion, a prior notice period of up to 12 months for Plan initiated withdrawal of assets. They may also require that within 90 days from withdrawal from the fund, money from the fund cannot be invested directly into a competing fund, such as a money market fund.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2016 and 2015:

| | Assets at Fair Value as of
December 31, 2016 — Level I | Level II | Total |
| --- | --- | --- | --- |
| Mutual
funds | $ 5,693,084 | $ - | $ - |
| Company's common
stock | 1,054,301 | - | 1,054,301 |
| Total assets in
the fair value hierarchy | 6,747,385 | - | 6,747,385 |
| Common
collective trust funds measured at NAV | | | 5,659,438 |
| Investments at
fair value | | | $ 12,406,823 |
| | Assets at Fair Value as of
December 31, 2015 | | |
| | Level I | Level II | Total |
| Mutual
funds | $ 5,168,338 | $ - | $ - |
| Company's common
stock | 1,189,330 | - | 1,189,330 |
| Total assets in
the fair value hierarchy | 6,357,668 | - | 6,357,668 |
| Common
collective trust funds measured at NAV | | | 4,679,391 |
| Investments at
fair value | | | $ 11,037,059 |

4. Party-in-Interest Transactions

The Plan’s investment transactions were managed by Banco Popular de Puerto Rico as of December 31, 2016 and 2015. During the Plan year ended December 31, 2016, the Plan purchased or received approximately $30,138 and sold or distributed approximately $134,174 of the Company’s common stock.

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In addition, a portion of the Plan's assets are participant directed investments in The Clorox Company common stock. As the Companies are subsidiaries of The Clorox Company, the Plan transactions involving The Clorox Company common stock qualify as party-in-interest transactions. All of these party-in-interest transactions are exempt from the prohibited transaction rules of ERISA.

5. Income Tax Status

The Plan has received a determination letter from the Puerto Rico Treasury Department dated May 3, 2013, stating that the Plan meets the requirements of section 1081.01 (d) of the Code and that the trust established thereunder will be entitled to exemption from local income taxes. Subsequent to this determination by the Puerto Rico Treasury Department, the Plan was amended. The Plan administrator believes the Plan is being operated in compliance with applicable requirements of the Code and, therefore, believes that the Plan, as amended and restated, is qualified and the related trust is tax-exempt.

U.S. GAAP requires Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the Puerto Rico Treasury Department. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that, as of December 31, 2016, there are no uncertain positions taken or expected to be taken. The Plan recognized no interest or penalties related to uncertain tax positions. The Plan may be subjected to routine audits by the taxing jurisdictions; however, there are currently no audits in progress for any tax periods.

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Supplemental Information

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The Clorox Company Employee Retirement Investment Plan for Puerto Rico

EIN: 31-0595760 – Plan Number: 007 Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year)

| December 31,
2016 | (b)
Identity of issue, (a) Borrower, Lessor, or Similar
Party | (c) Description of Investment | (e) Current value |
| --- | --- | --- | --- |
| | Mutual funds and
money market fund: | | |
| | Wells Fargo
Stable Value Fund E | Interest-bearing
cash | 1,083,315 |
| | Eaton
Vance-Atlanta Capital SMID-Cap R6 Fund | Mutual fund | 621,615 |
| | Vanguard
Institutional Index Fund | Mutual
fund | 1,157,203 |
| | Vanguard Instl
TTL Bond Market Index Fund | Mutual fund | 771,964 |
| | T. Rowe
Price-Growth Stock Fund | Mutual
fund | 454,107 |
| | MFS Institutional
International Equity Fund | Mutual fund | 818,201 |
| | Vanguard Mid-Cap
Index Fund Institutional | Mutual
fund | 705,006 |
| | Boston Partners
Large Cap Equity Trust B | Mutual fund | 30,087 |
| | Metropolitan West
Total Return Bond Fund | Mutual
fund | 3,474 |
| | Vanguard Small
Cap Fund Institutional | Mutual fund | 48,111 |
| | | | 5,693,084 |
| | Vanguard Target
Retirement Income Trust II | Common collective trust fund | 73,041 |
| | Vanguard Target
Retirement 2015 Trust II | Common collective
trust fund | 13,015 |
| | Vanguard Target
Retirement 2020 Trust II | Common collective trust fund | 84,445 |
| | Vanguard Target
Retirement 2025 Trust II | Common collective
trust fund | 1,014,080 |
| | Vanguard Target
Retirement 2030 Trust II | Common collective trust fund | 291,834 |
| | Vanguard Target
Retirement 2035 Trust II | Common collective
trust fund | 1,851,230 |
| | Vanguard Target
Retirement 2045 Trust II | Common collective trust fund | 1,863,349 |
| | Vanguard Target
Retirement 2050 Trust II | Common collective
trust fund | 104,095 |
| | Vanguard Target
Retirement 2040 Trust II | Common collective trust fund | 310,310 |
| | Vanguard Target
Retirement 2055 Trust II | Common collective
trust fund | 54,040 |
| | | | 5,659,438 |
| * | The Clorox
Company Common Stock | Common
stock | 1,054,301 |
| | | Interest rates ranging from | |
| * | Participant
Loans | 4.25 to 7% | 685,295 |
| | Total
investments | | $ 13,092,118 |

** Represents a party-in-interest to the Plan*

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

| | THE CLOROX
COMPANY |
| --- | --- |
| | EMPLOYEE
RETIREMENT |
| | INVESTMENT
PLAN |
| | FOR PUERTO
RICO |
| Date: June 27,
2017 | /s/ Laura Stein |
| | Laura
Stein |
| | Executive Vice
President - General Counsel |
| | and
Corporate Affairs |

13

Index to Exhibits

Exhibit No.	Description
23.1	Consent of Moss
Adams LLP

14