The Clorox Company (the Company or Clorox) is a leading manufacturer and marketer of consumer products. The Company sells it products primarily through mass merchandisers, grocery stores and other retail outlets. Clorox markets some of consumers' most trusted and recognized brand names, including its namesake bleach and cleaning products, Green Works™ natural cleaners, Poett® and Mistolín® cleaning products, Armor All® and STP® auto-care products, Fresh Step® and Scoop Away® cat litter, Kingsford® charcoal, Hidden Valley® and KC Masterpiece® dressings and sauces, Brita® water-filtration systems, Glad® bags, wraps and containers, and Burt's Bees® natural personal care products. With approximately 8,300 employees worldwide, the Company manufactures products in more than 15 countries and markets them in more than 100 countries.

The Company operates through two operating segments: North America and International. The North America operating segment includes all products marketed in the United States and Canada. The International operating segment includes all products marketed outside the United States and Canada. The Company does not allocate certain administrative and restructuring costs, amortization of trademarks and other intangible assets, interest income, interest expense, foreign exchange gains and losses, and other nonoperating income and expense, to these segments and reflects these unallocated amounts in Corporate.

The Company primarily markets its leading brands in midsized categories with attractive economic and competitive sets. Most of the Company's products compete with other nationally-advertised brands within each category and with "private-label" brands.

The Company reported net earnings of $153 and $367 and diluted net earnings per share of $1.08 and $2.60 for the three and nine months ended March 31, 2009, respectively. This compares to net earnings of $100 and $303 and diluted net earnings per share of $0.71 and $2.12 for the three and nine months ended March 31, 2008, respectively. Restructuring costs and restructuring related cost of products sold charges were $0.09 and $0.13 per diluted share on an after-tax basis for the three and nine months ended March 31, 2009. This compares to restructuring and asset impairment costs and restructuring related cost of products sold charges of $0.08 and $0.22 per diluted share on an after-tax basis for the three and nine months ended March 31, 2008 (See "Restructuring and asset impairment costs" below for more information).

The Company continues to face a volatile cost and economic environment including commodity costs, primarily resin and agricultural commodities, increased energy-related manufacturing and logistics costs and foreign exchange rate volatility. The Company is addressing these challenges through price increases, on-going cost savings programs, focus on product mix and assortment, innovative product improvements and new products, and advertising and trade promotional spending to support and grow its brands.

The following discussion of the Company's financial condition and results of operations should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations and Condensed Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008, which was filed with the Securities and Exchange Commission (SEC) on August 19, 2008, and the unaudited Condensed Consolidated Financial Statements and related notes contained in this quarterly report on Form 10-Q.

                             Results of Operations

Management's Discussion and Analysis of the Results of Operations, unless
otherwise noted, compares the three and nine months ended March 31, 2009 (the
current periods), to the three and nine months ended March 31, 2008 (the prior
periods), using percentages calculated on a rounded basis, except as noted.

                                       Three Months Ended                              % of Net Sales
                                    3/31/2009      3/31/2008       % Change       3/31/2009       3/31/2008
Diluted net earnings per share      $     1.08     $     0.71         52 %
Net sales                           $    1,350     $    1,353          - %           100.0 %         100.0 %
Gross profit                               611            538         14              45.3            39.8
Selling and administrative expenses        174            182         (4 )            12.9            13.5
Advertising costs                          125            123          2               9.3             9.1
Research and development costs              27             27          -               2.0             2.0



                                        Nine Months Ended                             % of Net Sales
                                    3/31/2009      3/31/2008      % Change       3/31/2009       3/31/2008
Diluted net earnings per share      $     2.60     $     2.12         23 %
Net sales                           $    3,950     $    3,778          5 %          100.0 %         100.0 %
Gross profit                             1,659          1,545          7             42.0            40.9
Selling and administrative expenses        530            505          5             13.4            13.4
Advertising costs                          351            350          -              8.9             9.3
Research and development costs              81             78          4              2.1             2.1

Diluted net earnings per share increased by $0.37 and $0.48 in the current periods, respectively, compared to the prior periods primarily due to an increase in net earnings. The increase in net earnings was primarily due to price increases and the benefit of cost savings in both periods and lower interest expense in the current quarter. These increases were partially offset by higher restructuring and asset impairment costs in the current quarter (See "Restructuring and asset impairment costs" section below) and higher manufacturing and logistics costs and a higher effective tax rate for both periods.

Net sales were flat and increased 5% in the current periods, respectively, compared to the prior periods, while volume decreased 3% and was flat, in the current periods, respectively, compared to the prior periods.

Net sales growth outpaced the change in volume in the nine months ended March 31, 2009, primarily due to price increases.

Volume decline in the current quarter was primarily related to the Company's exit from the private-label food bags business and lower shipments of Glad® trash bags due to the impact of pricing. The volume decline was partially offset by higher shipments of Hidden Valley® salad dressing, Brita® water-filtration products, Clorox 2® stain fighter and color booster and Kingsford® charcoal products.

The absence of change in volume during the nine months ended March 31, 2009, was primarily related to the acquisition of Burt's Bees Inc. (BBI), the launch of Green Works™ cleaners, laundry and homecare product sales growth in Latin America and increased shipments of Hidden Valley® bottled salad dressing. These volume increases were offset primarily by the Company's exit from the private-label food bags business and lower shipments of Pine-Sol® cleaner, Clorox® liquid bleach, and Clorox® disinfecting cleaners primarily due to the impact of pricing.

Gross profit increased 550 basis points and 110 basis points as a percentage of net sales for the current periods, respectively, compared to the prior periods. The increases were primarily due to price increases, the benefit of cost savings and moderating commodity costs in the current quarter. These factors were partially offset by higher manufacturing and logistics costs for both periods and unfavorable foreign exchange for the nine months ended March 31, 2009. Additionally, gross margin in the prior periods included a one-time purchase accounting step-up in inventory values related to BBI.

Selling and administrative expenses decreased 4% and increased 5% in the current periods, respectively, compared to the prior periods. The decrease during the three months ended March 31, 2009, was primarily due to lower selling commission costs partially offset by increased selling and administrative spending related to BBI. The increase during the nine months ended March 31, 2009, was primarily due to the acquisition of BBI.

Advertising costs remained relatively consistent in comparison to the prior periods as the Company continues to support its new products and established brands.

Research and development costs remained relatively consistent in comparison to the prior periods as the Company continues to support product innovations.

Restructuring and asset impairment costs in the current and prior periods relate to a restructuring plan for which the Company began recognizing charges in fiscal year 2008. The plan involves simplifying its supply chain and other restructuring activities (Supply Chain and Other restructuring plan). In February 2009, the Company expanded its Supply Chain and Other restructuring plan to include additional costs, primarily severance, associated with the Company's plan to reduce certain staffing levels.

The Supply Chain restructuring involves closing certain domestic and international manufacturing facilities. The Company is redistributing production from these facilities between the remaining facilities and third-party producers to optimize available capacity and reduce operating costs. The Company anticipates the Supply Chain restructuring will be completed in fiscal year 2012. The Other restructuring charges relate primarily to the write-down of certain new venture investments, intangible assets and equipment, the cost of exiting the Company's private-label food bags business in fiscal year 2008 and the February 2009 decision to expand its restructuring plan to reduce certain staffing levels. As a result of the Supply Chain and Other restructuring plan, a number of positions are being eliminated.

The following table summarizes, by operating segment, with unallocated amounts set forth in Corporate, the total restructuring and asset impairment costs associated with the Company's Supply Chain and Other restructuring plan for the three and nine months ended March 31, 2009 and 2008:

                                                                                           Three Months Ended 3/31/09                              Nine Months Ended 3/31/09
                                                                               North                                                   North
                                                                              America      International      Corporate     Total     America      International      Corporate     Total
Cost of products sold                                                         $      4    $             -    $         -    $    4    $     10    $             1    $         -    $   11
Selling & administrative expenses                                                    -                  -              1         1           -                  -              1         1
Restructuring:
    Severance                                                                        1                  2             11        14           3                  2             11        16
Total costs                                                                   $      5    $             2    $        12    $   19    $     13    $             3    $        12    $   28
Non-cash costs                                                                                                              $    1                                                  $    6

                                                                                           Three Months Ended 3/31/08                              Nine Months Ended 3/31/08
                                                                               North                                                   North
                                                                              America      International      Corporate     Total     America      International      Corporate     Total
Cost of products sold                                                         $      9    $             1    $         -    $   10    $     13    $             2    $         -    $   15
Restructuring and asset impairment:
    Severance                                                                        1                  -              -         1           2                  1              1         4
    Asset impairment                                                                 3                  3              -         6          25                  5              -        30
        Total restructuring & asset
           impairment costs                                                          4                  3              -         7          27                  6              1        34
Total costs                                                                   $     13    $             4    $         -    $   17    $     40    $             8    $         1    $   49
Non-cash costs                                                                                                              $   12                                                  $   40

Total restructuring payments for the three and nine months ended March 31, 2009, were $0 and $5, respectively, and the total accrued restructuring liability as of March 31, 2009, was $17.

Total costs associated with the Supply Chain and Other restructuring plan since inception were $60 for the North America segment, $12 for the International segment and $15 for Corporate at March 31, 2009.

Including the February 2009 expansion of the Supply Chain and Other restructuring plan, the Company anticipates incurring approximately $35 to $37 of Supply Chain and Other restructuring-related charges in fiscal year 2009, of which approximately $6 are expected to be non-cash related. The Company anticipates that approximately $18 to $19 of the fiscal year 2009 charges will be in the North America segment, including approximately $16 to $18 which are estimated to be recognized as cost of products sold charges (including accelerated depreciation for manufacturing equipment and other costs associated with the Supply Chain restructuring), and the remainder will be severance charges. The total anticipated charges related to the Supply Chain and Other restructuring plan for the fiscal years 2010 through 2012 are estimated to be approximately $25 to $30.

The Company may, from time to time, decide to pursue additional restructuring-related initiatives that involve charges in future periods.

Interest expense decreased by $7 and $0, respectively, in the current periods. The decrease in the current quarter was primarily due to a decline in average debt balances and a lower weighted average interest rate for total debt.

Other (income) expense, net was $(1) and $6 for the current periods, compared with $2 and $0, respectively, for the prior periods. The change in other (income) expense, net, during the current quarter was primarily due to the favorable impact of foreign exchange rates compared to the prior period, partially offset by decreased interest income. The change in other (income) expense, net, during the nine months ended March 31, 2009, was primarily due to decreased interest income, partially offset by the favorable impact of foreign exchange rates compared to the prior period.

The effective tax rate was 34.3% and 33.3% for the current periods, respectively, as compared to 34.1% and 33.2% for the prior periods, respectively, on an unrounded basis. The higher rate in the current periods was primarily related to the deferred tax impact of a change in California tax law, which partially offset tax benefits related to the domestic manufacturing deduction.

SEGMENT RESULTS

NORTH AMERICA

                                Three Months Ended                           Nine Months Ended
                             3/31/2009      3/31/2008      % Change      3/31/2009      3/31/2008      % Change
Net sales                    $    1,142     $    1,143           - %     $    3,316     $    3,169           5 %
Earnings before income taxes        367            296          24 %            969            839          15 %

North America reported flat sales, 4% volume decline and 24% increase in earnings before income taxes, for the current quarter as compared to the year-ago quarter. The segment also reported 5% net sales growth, 1% volume decline and 15% increase in earnings before income taxes for the nine months ended March 31, 2009, as compared to the year-ago period.

Net sales growth outpaced the change in volume in both periods primarily due to price increases. These were partially offset by an unfavorable Canadian currency exchange rate.

Volume decline in the current quarter was primarily related to the Company's exit from the private-label food bags business and lower shipments of Glad® trash bags due to the impact of pricing. The volume decline was partially offset by higher shipments of Hidden Valley® salad dressing, Brita® water-filtration products, Clorox 2® stain fighter and color booster, and Kingsford® charcoal products.

Volume decline during the nine months ended March 31, 2009, was primarily related to the Company's exit from the private-label food bags business and lower shipments of Pine-Sol® cleaner, Clorox® liquid bleach, Glad® trash bags and Clorox® disinfecting cleaners due to pricing. These volume decreases were partially offset by the acquisition of BBI, the launch of Green Works™, increased shipments of Hidden Valley® bottled salad dressing and Clorox 2® stain fighter & color booster which was relaunched with a concentrated formula, and strong results in Brita®.

The increase in earnings before income taxes in both periods was primarily related to the impact of pricing and cost savings. Also contributing to the increase in earnings before income taxes for the nine months ended March 31, 2009, was lower restructuring and asset impairment charges. These were partially offset by unfavorable commodity, manufacturing and logistic costs in both periods.

INTERNATIONAL

                                 Three Months Ended                            Nine Months Ended
                             3/31/2009        3/31/2008      % Change      3/31/2009       3/31/2008      % Change
Net sales                    $      208      $       210         (1 )%     $      634     $       609          4 %
Earnings before income taxes         41               32         28 %              99             107         (7 )%

International reported 1% net sales decline, 2% volume growth and 28% increase in earnings before income taxes for the current quarter as compared to the year-ago quarter. The segment also reported 4% net sales growth, 3% volume growth and 7% decrease in earnings before income taxes for the nine months ended March 31, 2009, as compared to the year-ago period.

Volume growth for both the current periods was primarily related to laundry and homecare products in Latin America. Volume growth outpaced net sales in the current quarter primarily due to unfavorable foreign exchange rates, partially offset by the impact of pricing. Net sales outpaced volume growth in the nine months ended March 31, 2009, primarily due to the impact of pricing, partially offset by the impact of unfavorable foreign exchange rates.

The increase in earnings before income taxes for the current quarter was primarily related to price increases and cost savings, partially offset by the impact of unfavorable foreign exchange. The decrease in earnings before income taxes for the nine months ended March 31, 2009, was primarily related to increased cost of products sold, including unfavorable foreign exchange, unfavorable commodity, manufacturing and logistic costs, and increased advertising expense, partially offset by sales growth.

CORPORATE

Losses before income taxes attributable to Corporate decreased by 1% and increased by 5% in the current periods, respectively, as compared to prior periods. The decrease for the current quarter was primarily due to decreases in interest expense and foreign exchange losses, partially offset by restructuring costs. The increase for the nine months ended March 31, 2009, was primarily due to increased professional services costs and restructuring costs.

Financial Condition, Liquidity and Capital Resources

Operating Activities

The Company's financial condition and liquidity remain strong as of March 31, 2009. Net cash provided by operations was $423 for the nine months ended March 31, 2009, compared to $476 for the nine months ended March 31, 2008. The decrease was primarily due to higher tax payments and the timing of interest payments, which were partially offset by higher earnings.

The fair value of the Company's pension plan assets declined approximately 36% from $316 at June 30, 2008, to $201 at March 31, 2009. The Company continues to monitor the fair value of its pension plan assets. Based on current pension funding rules, the Company is not required to make any contributions in fiscal year 2009. However, on April 15, 2009, the Company made a $10 discretionary contribution to the pension plan and expects to make a further $20 voluntary contribution during the fourth quarter of fiscal year 2009. The Company is considering making an additional voluntary contribution of approximately $30 to $40 during the first half of fiscal year 2010.

Approximately 20% of the Company's net sales are generated outside of the United States of America. As a result, the Company is exposed to currency exchange rate risks and risks associated with economic or political instability. During the nine months ended March 31, 2009, the Company experienced devaluation of certain foreign currencies versus the U.S. dollar and expects certain foreign currencies to continue to experience devaluation versus the U.S. dollar during the remainder of fiscal year 2009.

Additionally, the Company is exposed to foreign currency risk associated with the possibility that a foreign government may impose currency remittance restrictions. For example, currency restrictions enacted by the Venezuelan government in 2003 have negatively affected margins and cash flow in the Company's subsidiary in Venezuela due to the inability to obtain foreign currency at the official rate of exchange to pay for imported finished goods. Consequently, the Company has had to meet its foreign currency needs from non-government sources at exchange rates substantially higher than the official rate. The Company expects to incur additional foreign currency transaction losses of approximately $12 to $14 during its fourth quarter of fiscal year 2009.

Working Capital

The Company's working capital, defined in this context as total current assets net of total current liabilities, decreased $454 from June 30, 2008 to March 31, 2009, principally due to an increase in current maturities of long-term debt of $575 that will be maturing in January 2010 and decreases in cash and cash equivalents which was used to pay down notes and loans payable, and decreases in accounts receivable and other current assets. These were partially offset by decreases in notes and loans payable and accounts payable. The $48 decrease in accounts receivable was primarily related to the seasonality of sales in the Charcoal business. The $85 decrease in accounts payable was primarily related to $30 related to capital projects payments and $30 related to incentive compensation payments.

Investing Activities

Capital expenditures were $135 during the nine months ended March 31, 2009, compared to $103 in the comparable prior year period. Capital spending as a percentage of net sales was 3.4% during the nine months ended March 31, 2009, compared to 2.7% during the nine months ended March 31, 2008. Higher capital spending during the nine months ended March 31, 2009, was primarily related to the Company's manufacturing network consolidation efforts.

On November 30, 2007, the Company acquired BBI, a leading manufacturer and marketer of natural personal care products, for an aggregate price of $913, excluding $25 that the Company paid for tax benefits associated with the agreement. The Company also incurred $8 of costs in connection with the acquisition of BBI.

Financing Activities

Net cash used for financing activities was $367 for the nine months ended March 31, 2009, compared to net cash provided by financing activities of $630 in the comparable prior year period. Cash provided by financing activities in the prior period was primarily from borrowings to finance the acquisition of BBI and share repurchases, partially offset by the payment of dividends. Cash used for financing activities in the current period was primarily to pay down debt and pay dividends.

At March 31, 2009, the Company had $540 of commercial paper outstanding at a weighted average interest rate of 1.0%. At June 30, 2008, the Company had $748 of commercial paper outstanding at a weighted average interest rate of 2.9%. The credit markets, including the commercial paper markets in the United States of America, experienced significant volatility during the nine months ended March 31, 2009. The Company continues to successfully issue commercial paper. Continuing volatility in the capital markets may increase costs associated with issuing commercial paper or other debt instruments or affect our ability to access those markets. Notwithstanding these adverse market conditions, the Company believes that current cash balances and cash generated by operations, together with access to external sources of funds as described below, will be sufficient to meet the Company's operating and capital needs in the foreseeable future.

Credit Arrangements

At March 31, 2009, the Company had a $1,200 revolving credit agreement, with an expiration date of April 2013. On April 2, 2009, the Company amended its revolving credit agreement to remove the participation of Lehman Brothers Bank, FSB. The remaining amount available under the revolving credit agreement is $1,100 under the same terms and conditions. The Company believes that borrowings under the revolving credit facility are now available and will continue to be available for general corporate purposes and to support commercial paper issuances. The $1,100 revolving credit agreement includes certain restrictive covenants. The primary restrictive covenant is a maximum ratio of total debt to . . .