Clorox · 10-Q · Item 2 MD&A

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, 2025, which was filed with the SEC on August 8, 2025, 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, 2026 (the current period) to the three and nine month period ended March 31, 2025 (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 7,600 employees worldwide. The Company has operations in approximately 25 countries or territories and sells its products in approximately 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 marketed and sold in the United States. Products within this segment include home care, cleaning and disinfecting 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 and home care products, primarily marketed under the Clorox, Poett, Pine-Sol and Clorinda brands; bags and wraps under the Glad brand; cat litter, primarily marketed under the Ever Clean® and Fresh Step brands and water-filtration products marketed under the Brita brand.

RECENT EVENTS AFFECTING THE COMPANY

For the fiscal quarter ended March 31, 2026, 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.

T1Consumers continue to feel pressure as continued macroeconomic uncertainty impacts spending and prices remain elevated. T2United States trade policies continue to evolve, including new or increased tariffs on product imports from certain 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. Though the Company has and will continue to take action to mitigate such impacts, T3the Company anticipates that the operating environment will remain volatile and challenging.

Global macroeconomic conditions remain volatile and geopolitical instability persists. This includes T4active military hostilities in the Middle East, specifically the ongoing conflict involving Iran, rising tensions in other regions, as well as actual and potential shifts in U.S. and foreign trade, economic and other policies, including the imposition of sanctions. These developments have increased uncertainty regarding the duration and potential escalation of conflicts, as well as the risk of economic disruptions that could impact global trade and supply chains. Given the dynamic nature of these conditions, the Company expects continued variability in the operating environment.

The Company has not experienced significant disruptions to its regional operations and global supply chain or significant cost increases during fiscal year 2026 to date due to the ongoing conflict involving Iran. However, the risks of future negative impacts from regional conflicts due to transportation, logistical or supply constraints and higher commodity costs for certain raw materials remain present, and the Company expects to experience corresponding incremental costs and gross margin pressures in future periods.

The Company's transformation efforts continued into fiscal year 2026. The Company has continued transitioning core U.S. operations to the new enterprise resource planning system (ERP) as part of the phased implementation of its technology transformation. The Company remains in the stabilization phase and completed its implementation in the third quarter of fiscal year 2026. The total incremental transformational investment was approximately $580 million. The digital foundation provided by the Company’s new ERP supports its long-term financial goals through modernized capabilities that accelerate growth and deliver stronger efficiencies.

The Company will continue to invest in its brands, capabilities and people to deliver consistent, profitable growth over time. T5The acquisition of GOJO Industries, Inc. (GOJO), which closed on April 1, 2026, and the completed purchase of The Procter & Gamble Company’s (P&G) interest in the venture agreement for the Company’s Glad bags and wraps business (the Venture Agreement) on March 2, 2026 reflect the Company’s intent to continue evolving its portfolio to deliver long‑term value for shareholders.

For the remainder of fiscal year 2026, the Company anticipates that the operating environment will remain volatile and challenging as consumers may face greater pressure as continued macroeconomic uncertainty impacts spending. The Company will continue to invest in its brands, capabilities and people to deliver consistent, profitable growth over time.

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, 2025.

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

Three months ended

Nine months ended

% Change

% Change

Net sales

$

$

—

%

$

$

(7)

%

Percentage change versus the year-ago period

Reported (GAAP) Net Sales Growth / (Decrease)

Reported Volume

Acquisitions & Divestitures

Foreign Exchange Impact

Price/Mix/ Other (2)

Organic Sales Growth / (Decrease) (Non-GAAP)(3)

Organic Volume (4)

Health and Wellness

—

%

1

%

—

%

—

%

(1)

%

—

%

1

%

Household

3

3

—

—

—

3

3

Lifestyle

(9)

(6)

—

—

(3)

(9)

(6)

International

8

2

—

6

—

2

2

Total Company (5)

—

%

—

%

—

%

1

%

(1)

%

(1)

%

—

%

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

(6)

%

(5)

%

—

%

—

%

(1)

%

(6)

%

(5)

%

Household

(7)

(6)

—

—

(1)

(7)

(6)

Lifestyle

—

—

(2)

International

5

1

—

3

1

2

1

Total Company (4)(5)

(7)

%

(6)

%

(1)

%

—

%

(1)

%

(6)

%

(5)

%

(1)The divestiture impact is calculated as net sales from the Better Health VMS business after the sale date in the nine month year-ago period.

(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 nine months ended March 31, 2026, the impact from divestiture mix was 0% for Total Company.

(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 nine months ended March 31, 2026, the volume impact of divestitures was (1)% for Total Company.

(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 were both essentially flat.

Net sales and volume in the current nine month period decreased by 7% and 6%, respectively, primarily due to T6lower shipments in the current period following the incremental shipments related to the ERP transition in the fourth quarter of fiscal year 2025.

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% Change

% Change

Gross profit

$

$

(3)

%

$

$

%

Gross margin

%

%

%

%

RESULTS OF OPERATIONS (Continued)

T7Gross margin decreased by 140 basis points in the current three month period from 44.6% to 43.2%. The decrease was primarily driven by higher manufacturing and logistics costs and unfavorable mix, T8partially offset by cost savings.

Gross margin decreased by 200 basis points in the current nine month period from 44.7% to 42.7%. The decrease was primarily driven by higher manufacturing and logistics costs and lower volume, partially offset by cost savings.

Expenses

Three months ended

% of Net Sales

% Change

Selling and administrative expenses

$

$

%

%

%

Advertising costs

Research and development costs

—

Nine months ended

% of Net Sales

% Change

Selling and administrative expenses

$

$

(7)

%

%

%

Advertising costs

Research and development costs

(6)

Selling and administrative expenses, as a percentage of net sales, decreased by 230 basis points and 10 basis points in the current three and nine month periods, respectively, versus the prior periods. The dollar decrease in selling and administrative expenses in both the current three and nine month periods was primarily due to lower costs related to the Company’s digital capabilities and productivity enhancements investment and lower incentive compensation.

Advertising costs, as a percentage of net sales, decreased by 180 basis points and 50 basis points in the current three and nine month periods, respectively, versus the prior periods. The Company continues to support its brands. The Company’s U.S. retail advertising investments as a percentage of net sales decreased from 14% to 11% in the current three month period.

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

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

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Nine months ended

Loss on divestiture

$

—

$

—

$

—

$

Interest expense

Other (income) expense, net

6

2

Effective tax rate on earnings

%

%

%

%

Loss on divestiture of $118 in the prior nine month period reflects the loss on the divestiture of the Better Health VMS business. See notes to condensed consolidated financial statements for further information.

Other (income) expense, net was $6 and ($34) in the current and prior three month periods, respectively, and $2 and ($79) in the current and prior nine month periods, respectively. The variance between both the current and prior three and nine month periods was primarily due to lapping the benefit of insurance recoveries mainly related to the cyberattack in fiscal year 2024.

The effective tax rate on earnings was 25.4% and 24.9% for the current three and nine month periods, respectively and 24.8% and 26.9% for the prior three and nine months periods, respectively. The higher tax rate in the prior nine month period as compared to the current period was primarily driven by the nondeductibility of the loss on the divestiture of the Better Health VMS business, partially offset by an international legal entity reorganization and favorable stock-based compensation deductions, all in the prior period.

RESULTS OF OPERATIONS (Continued)

Diluted net earnings per share

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% Change

% Change

Diluted net earnings per share

$

$

3

%

$

$

%

Diluted net earnings per share (EPS) increased by $0.04, or 3%, in the current three month period, primarily due to cost savings and lower selling and administrative expenses, partially offset by higher manufacturing and logistics costs in the current period and lapping insurance recoveries in the prior period.

Diluted EPS decreased by $0.37, or 10%, in the current nine month period, primarily due to lower net sales and higher manufacturing and logistics costs in the current period and lapping insurance recoveries in the prior period, partially offset by lapping losses on the divestiture of the Better Health VMS business in the prior period and higher cost savings 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 (losses) before interest and income taxes (segment adjusted EBIT):

Net sales

Three months ended

Nine months ended

Health and Wellness

$

$

$

$

Household

Lifestyle

International

Reportable segment total

Corporate and Other

(3)

—

(3)

Total

$

$

$

$

Segment adjusted EBIT (1)

Three months ended

Nine months ended

Health and Wellness

$

$

$

$

Household

Lifestyle

International

Reportable segment total

Corporate and Other

Total

$

$

$

$

Interest income

4

2

7

7

Interest expense

Loss on divestiture

—

—

—

Acquisition and integration costs

(7)

—

(7)

—

Cyberattack costs, net of insurance recoveries

—

—

Digital capabilities and productivity enhancements investment

Earnings before income taxes

$

$

$

$

SEGMENT RESULTS (Continued)

(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.

Health and Wellness

Three months ended

Nine months ended

% Change

% Change

Net sales

$

$

—

%

$

$

(6)

%

Segment adjusted EBIT

(7)

Volume increased by 1%, net sales were essentially flat and segment adjusted EBIT decreased by 7% during the current three month period. The decrease in segment adjusted EBIT was primarily due to higher manufacturing and logistics costs, partially offset by cost savings.

Volume, net sales and segment adjusted EBIT decreased by 5%, 6% and 21%, respectively, during the current nine month period. The volume decrease was primarily due to lower shipments in the current period following the incremental shipments related to the ERP transition in the fourth quarter of fiscal year 2025. The decrease in segment adjusted EBIT was primarily due to lower net sales and higher manufacturing and logistics costs, partially offset by cost savings.

Household

Three months ended

Nine months ended

% Change

% Change

Net sales

$

$

3

%

$

$

(7)

%

Segment adjusted EBIT

Both volume and net sales increased by 3% and segment adjusted EBIT increased by 21% during the current three month period. The volume increase was primarily due to shipment ahead of consumption in Cat Litter and Grilling. The increase in segment adjusted EBIT was mainly due to cost savings.

Volume, net sales and segment adjusted EBIT decreased by 6%, 7% and 27%, respectively, during the current nine month period. The volume decrease was primarily due to lower shipments in the current period following the incremental shipments related to the ERP transition in the fourth quarter of fiscal year 2025. The decrease in segment adjusted EBIT was mainly due to lower net sales and higher manufacturing and logistics costs, partially offset by cost savings.

Lifestyle

Three months ended

Nine months ended

% Change

% Change

Net sales

$

$

(9)

%

$

$

%

Segment adjusted EBIT

—

Volume and net sales decreased by 6% and 9%, respectively, and segment adjusted EBIT was essentially flat, during the current three month period. The volume decrease was primarily due to lower consumption. The variance between volume and net sales was mainly due to higher trade promotion spending. Segment adjusted EBIT was essentially flat primarily due to lower net sales offset by lower advertising investments and lower selling and administrative expenses.

Volume decreased by 11% and both net sales and segment adjusted EBIT decreased by 13% during the current nine month period. The volume decrease was primarily due to lower shipments in the current period following the incremental shipments related to the ERP transition in the fourth quarter of fiscal year 2025. The variance between volume and net sales was mainly due to higher trade promotion spending. The decrease in segment adjusted EBIT was primarily due to lower net sales, partially offset by lower advertising investments and cost savings.

SEGMENT RESULTS (Continued)

International

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Nine months ended

% Change

% Change

Net sales

$

$

8

%

$

$

5

%

Segment adjusted EBIT

(1)

Volume, net sales, and segment adjusted EBIT increased by 2%, 8%, and 16%, respectively, during the current three month period. The volume increase was primarily driven by strong shipments in Asia. The variance between volume and net sales was mainly due to favorable foreign exchange rates. The increase in segment adjusted EBIT was primarily due to higher net sales and cost savings, partially offset by higher manufacturing and logistics costs.

Volume and net sales increased by 1% and 5%, respectively, and segment adjusted EBIT decreased by 1% in the current nine month period. The variance between volume and net sales was mainly due to favorable foreign exchange rates and favorable price mix. The decrease in segment adjusted EBIT was primarily due to higher manufacturing and logistics costs, partially offset by higher net sales and cost savings.

Corporate and Other

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

Three months ended

Nine months ended

% Change

% Change

Net Sales

$

(3)

$

—

%

$

(3)

$

%

Segment adjusted EBIT

Net sales decreased by 108% in the current nine month period primarily due to the divestiture of the Better Health VMS business in the first quarter of fiscal year 2025.

Segment adjusted EBIT increased by 42% and 28% in the current three month and nine month periods, respectively. The increase in segment adjusted EBIT in the current three month period was primarily due to decreases in employee-related expenses primarily due to lower employee incentive compensation. The increase in segment adjusted EBIT in the current nine month period was primarily due to decreases in employee-related expenses primarily due to lower employee incentive compensation and lower Better Health VMS operating expenses in the current period due to the divestiture.

In the first quarter of fiscal year 2025, 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, 2026. The following table summarizes cash activities:

Nine months ended

Net cash provided by operations

$

$

Net cash used for investing activities

Net cash provided by (used for) financing activities

Operating Activities

Net cash provided by operations was $282 in the current nine month period, compared with $687 in the prior nine month period. The decrease was primarily driven by the Venture Agreement termination payment of $476 and lower cash earnings offset by lower working capital and lower tax payments in the current nine month period. The lower Accounts receivable balance in current period was primarily due to the incremental shipments related to the ERP transition in the fourth quarter of fiscal year 2025. The higher Accounts payable and accrued liabilities balance was due to the timing of payments.

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 $120 in the current nine month period, compared with $18 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 prior nine month period.

Financing Activities

Net cash provided by financing activities was $857 in the current nine month period, compared with net cash used of $645 in the prior nine month period. The year-over-year change was mainly due to higher cash sourced from short term borrowings in the current nine month period.

Capital Resources and Liquidity

As of March 31, 2026, current liabilities exceeded current assets by $504, primarily due to T9commercial paper borrowings used to finance the Company’s Venture Agreement termination payment.

As of March 31, 2026, the Company has issued approximately $1,591 of Notes and loans payable primarily comprised of U.S. commercial paper borrowings to finance the previously announced GOJO acquisition and fund the Venture Agreement termination payment.

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 ability to invest in its brands, capabilities and people to deliver consistent profitable growth over time 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’s Venture Agreement expired on January 31, 2026. The agreement, at its expiration, required the Company to purchase P&G’s 20% interest for cash at fair value as established by predetermined valuation procedures. As of June 30, 2025, P&G had a 20% interest in the venture, and the estimated fair value of P&G’s interest in the venture was $476, of which $501 was recognized and reflected in Accounts payable and accrued liabilities in the Company’s condensed consolidated balance sheet.

On January 31, 2026, the Company and P&G agreed that the Company would purchase P&G’s 20% interest, which was paid in cash for $476 on March 2, 2026.

The Glad business will continue to retain the exclusive core intellectual property licenses contributed by P&G on a royalty-free basis for the licensed products marketed.

See notes to condensed consolidated financial statements for further information.

Credit Arrangements

As of March 31, 2026, the Company maintained $2,200 in revolving credit agreements comprised of a $1,000 364-day revolving credit agreement that matures in March 2027 (the 364-Day Revolving Credit Agreement) and a $1,200 revolving credit agreement that matures in March 2030 (collectively the Revolving Credit Agreements), and a $1,250 term credit agreement that matures in March 2027 (the Delayed Draw Term Credit Agreement).

On March 6, 2026, in connection with the GOJO acquisition, the Company entered into the 364-Day Revolving Credit Agreement and the Delayed Draw Term Credit Agreement. Amounts available under the 364-Day Revolving Credit Agreement are for general corporate purposes. The Delayed Draw Term Credit Agreement provides the Company with the ability to

FINANCIAL POSITION AND LIQUIDITY (Continued)

borrow up to $1,250 at the closing of the GOJO acquisition, subject to satisfaction of customary closing conditions for similar facilities, for the purpose of financing a portion of the consideration under the membership interest purchase agreement (the Acquisition Agreement), paying related fees and expenses and repaying certain indebtedness of GOJO as contemplated by the Acquisition Agreement, with remaining amounts available to Clorox for general corporate purposes.

There were no borrowings under the Revolving Credit Agreements and the Delayed Draw Term Credit Agreement as of March 31, 2026 and no borrowings under the $1,200 revolving credit agreement that matures in March 2030 as of June 30, 2025, and the Company believes that borrowings under the Revolving Credit Agreements and the Delayed Term Credit Agreement are and will continue to be available for the purposes stated in each agreement. The Revolving Credit Agreements and the Delayed Term Credit Agreement include 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 each agreement.

The Company was in compliance with all restrictive covenants and limitations in the Revolving Credit Agreements and Delayed Draw Term Credit Agreement as of March 31, 2026 and anticipates being in compliance with all restrictive covenants for the foreseeable future.

As of March 31, 2026, the Company maintained $35 of foreign and other credit lines, of which $8 was outstanding.

Subsequent to March 31, 2026, to finance the GOJO acquisition, the Company drew down $1,250 from the Delayed Draw Term Credit Agreement. The Company plans to refinance a portion of GOJO acquisition related borrowings using long-term debt financing.

Stock Repurchases and Dividend Payments

As of March 31, 2026, 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, 2026, the Company repurchased 0 and 2,157 thousand shares of common stock at a cost of $0 and $254, respectively. 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. These costs exclude the impact of excise taxes.

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

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Dividends per share declared

$

$

$

$

Total dividends paid

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.

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 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

NON-GAAP FINANCIAL MEASURES (Continued)

the digital capabilities and productivity enhancements investment, acquisition and integration costs related to acquisitions, significant losses related to divestitures and other nonrecurring or unusual items impacting comparability). 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. See below and notes to condensed consolidated financial statements for additional information on these costs.

The Company uses this measure to assess the operating results and performance of its segments, monitor actual results as compared to plan, 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. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. Adjusted EBIT margin is the ratio of adjusted EBIT to net sales.

Reconciliation of earnings before income taxes to adjusted EBIT

Three months ended

Nine months ended

Earnings before income taxes

$

$

$

$

Interest income

(4)

(2)

(7)

(7)

Interest expense

Loss on divestiture (1)

—

—

—

Acquisition and integration costs (2)

7

—

7

—

Cyberattack costs, net of insurance recoveries (3)

—

—

Digital capabilities and productivity enhancements investment (4)

Adjusted EBIT

$

$

$

$

(1)Represents the loss related to the divestiture of the Better Health VMS business.

(2)Represents expenses related to the Company’s acquisition and integration of GOJO.

As a result of this transaction, various acquisition and integration-related costs related to the acquisition and efforts to integrate the recently acquired business to the Company’s systems and processes were and will be incurred. These costs include direct acquisition transaction costs and legal-entity, operational, manufacturing, and information technology integration costs.

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.

(3)Represents incremental costs and insurance recoveries related to the cyberattack.

(4)Represents expenses related to the Company's digital capabilities and productivity enhancements investment.

As announced in August 2021, the company invested in transformative technologies and processes over a five-year period beginning in fiscal year 2022 and completed during the third quarter of fiscal year 2026. The investment included replacement of the company's ERP system and transitioning to a cloud-based platform as well as the implementation of a suite of other digital technologies. The total incremental transformational investment was approximately $580 million. It is expected that these implementations will generate efficiencies and transform the company's operations in the areas of supply chain, digital commerce, innovation, brand building and more over the long term.

Of the total investment, approximately 75% represented incremental operating costs primarily recorded within selling and administrative expenses to be adjusted from reported EPS for purposes of disclosing adjusted EPS. About 70% of these operating costs were related to the implementation of the ERP, with the remaining costs primarily related to the implementation of complementary technologies.

Due to the nature, scope and magnitude of this investment, these costs were 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, ceased 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.

NON-GAAP FINANCIAL MEASURES (Continued)

During the three and nine months ended March 31, 2026, the Company incurred approximately $10 and $59, respectively, and during the three and nine months ended March 31, 2025 the Company incurred approximately $26 and $81, 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

External consulting fees (a)

$

7

$

$

$

IT project personnel costs (b)

1

1

3

5

Other (c)

2

6

Total

$

$

$

$

(a) 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.

(b) 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.

(c) 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.

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:

Percentage change versus the year-ago period

Health and Wellness

Household

Lifestyle

International

Total Company (1)

Net sales growth / (decrease) (GAAP)

—

%

3

%

(9)

%

8

%

—

%

Add: Foreign Exchange

—

—

—

(6)

(1)

Organic sales growth / (decrease) (non-GAAP)

—

%

3

%

(9)

%

2

%

(1)

%

Percentage change versus the year-ago period

Health and Wellness

Household

Lifestyle

International

Total Company (1)

Net sales growth / (decrease) (GAAP)

(6)

%

(7)

%

%

5

%

(7)

%

Add: Foreign Exchange

—

—

—

(3)

—

Add/(Subtract): Divestitures / Acquisitions (2)

—

—

—

—

1

Organic sales growth / (decrease) (non-GAAP)

(6)

%

(7)

%

%

2

%

(6)

%

(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 Better Health VMS business after the sale date in the nine month year-ago period.

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, regarding the acquisition of GOJO, 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, including as a result of the GOJO acquisition, 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, 2025, 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:

•the risks arising from the integration of the GOJO business; the uncertainty of rating agency actions; the risk that the anticipated benefits and synergies of the acquisition may not be realized when expected or at all; the risk of unexpected costs or expenses resulting from the acquisition, including the costs of financing; the risk of litigation related to the acquisition, including resulting expense; the risks related to disruption to ongoing business operations of the Company and GOJO and diversion of time of management of the Company and GOJO as a result of the acquisition; the risk that the acquisition may have an adverse effect on the ability of the Company and GOJO to retain key personnel, customers and suppliers; the risk that the credit ratings of the Company decline following the acquisition; the risk that the consummation of the acquisition has a negative effect on the market price of the common stock of the Company or on the Company’s or GOJO’s operating results;

•unfavorable general economic and geopolitical conditions beyond the Company’s control, including inflation, supply chain disruptions, labor shortages, wage pressures, fuel and energy costs, interest rate fluctuations, foreign currency exchange rate fluctuations, weather events or natural disasters, disease outbreaks or pandemics, terrorism, and unstable geopolitical conditions, including active armed conflicts and military hostilities in the Middle East, such as the ongoing conflict involving Iran, and rising tensions in various parts of the world, as well as macroeconomic and geopolitical volatility and uncertainty resulting from a number of these and other factors, such as actual and potential shifts in U.S. and foreign trade policies, escalating trade tensions between the U.S. and its trading partners, especially China, the potential expansion of sanctions regimes, and disruptions to global markets or transportation routes, particularly due to the imposition of U.S. and retaliatory tariffs;

•the impact of market and category declines, and the Company’s product and geographic mix on its ability to meet sales growth targets;

•the Company’s ability to successfully execute or realize the anticipated benefits of its strategic or transformational initiatives, including the ERP transition and the related timing and volume of shipment movement related to the ERP transition;

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

•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;

•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;

CAUTIONARY STATEMENT (Continued)

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

•the ability of the Company to successfully manage global political, legal, tax and regulatory risks, including due to regulatory uncertainty and lack of regulatory convergence among different jurisdictions;

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

•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 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;

•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;

•risks related to the Company’s continued operation of the Glad business;

•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 active armed conflicts and military hostilities in the Middle East, such as the ongoing conflict involving Iran, and/or Ukraine and rising tensions in various parts of the world, such as 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; and the possibility of nationalization, expropriation of assets or other government action or inaction, including the impacts of any prolonged U.S. government shutdown;

•the impact of climate change and other sustainability issues on sales, operating costs, reputation or stakeholder relationships;

•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 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 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; and

•the impacts of potential stockholder activism.

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

CAUTIONARY STATEMENT (Continued)

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.