SEC Company Response from CLOROX (CLX) — Dec 21, 2004
CLOROX CO /DE/ (CLX) (CIK 0000021076)
Date: Dec. 21, 2004 · CIK: 0000021076 · Accession: 0000021076-04-000118
AI Filing Summary & Sentiment
Referenced dates: December 10, 2004
Letter
United States Securities and Exchange Commission Division of Corporate Finance Washington, D.C. RE: SEC Comment Letter dated December 10, 2004 The Clorox Company, Form 10-Q for the Quarter Ended September 30, 2004 File Number 1-7151
Dear Mr. Decker:
In connection with your review of the The Clorox Company’s (the “Company”) Form 10-Q for the quarter ended September 30, 2004, we respectfully submit the following response to the comments included in your letter of December 10, 2004.
We understand that you will be reviewing our responses and may have additional comments. We welcome any questions you may have concerning our responses and thank you for your attention devoted to our filing. Please feel free to call us at the telephone numbers listed at the end of this letter.
QUESTIONS REGARDING SHARE EXCHANGE AGREEMENT
Question: How did you determine the value of the businesses and joint venture being transferred to be $745 million?
Response: The value of the transaction was determined based upon arms length negotiations between the parties. The bargained value of the shares was $46.25 per share and the bargained value of the businesses and joint venture was $745 million. The value of the businesses was determined by the parties supported by traditional valuation methodologies, including discounted cash flow calculations, sales multiples and EBITDA multiples.The resulting sales and EBITDA multiples of the transferred businesses (excluding the joint venture) were 3.9 and 7.3 respectively. The parties negotiated a value for the Company’s share in the joint venture consistent with the Company’s expected share of the cash flow from the venture.
Question: How did you arrive at an estimated gain on the transfer?
Response: The estimated gain was determined by subtracting the historical cost of the exchanged businesses and joint venture, and related transaction costs, from the fair value of the exchanged businesses and joint venture. The transaction is not subject to income tax and therefore a tax provision was not recognized in connection with the gain.
Question: What specific accounting literature did you use to account for this transaction?
Response: We referred to the following guidance to account for this transaction:
APB #29 and EITF 01-02, - This guidance states that a transfer of non-monetary assets to a shareholder should be recorded at the fair value of the assets transferred and that a non-pro rata split-off of a business should be accounted for at fair value.
AICPA Technical Practice Aid (TIS 4110.09), Costs Incurred to Acquire Treasury Stock –In accordance with this guidance, we included transaction costs directly related to the acquisition of treasury shares as part of the cost of the share acquisition.
* * * * * * *
In addition, the Company acknowledges that:
It is responsible for the adequacy and accuracy of the disclosures in its filings;
It is the Commission’s position that comments from the SEC staff or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
It is the Commission’s position that the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
*******
Contact Information
If you have any questions or need any additional information, please contact Tom Johnson at (510) 271 2873, John Kresich at (510) 271 3127 or me at (510) 271 7377.
Sincerely,
/s/ DANIEL J. HEINRICH
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CORRESP
1
filename1.htm
April 7, 2003
December 21, 2004
Mr. Rufus Decker
Accounting Branch Chief
United States Securities and
Exchange Commission
Division of Corporate
Finance
450 Fifth Street, N.W., Stop
4-5
Washington, D.C.
20549
RE:
SEC Comment Letter dated
December 10, 2004
The Clorox Company, Form 10-Q
for the Quarter Ended September 30, 2004
File Number 1-7151
Dear Mr. Decker:
In connection with your review of
the The Clorox Company’s (the “Company”) Form
10-Q for the quarter ended September 30, 2004, we respectfully
submit the following response to the comments included in your
letter of December 10, 2004.
We understand that you will be
reviewing our responses and may have additional comments. We
welcome any questions you may have concerning our responses and
thank you for your attention devoted to our filing. Please
feel free to call us at the telephone numbers listed at the end of
this letter.
QUESTIONS REGARDING SHARE
EXCHANGE AGREEMENT
Question: How did you determine the value of the
businesses and joint venture being transferred to be $745
million?
Response: The value of the transaction was
determined based upon arms length negotiations between the parties.
The bargained value of the shares was $46.25 per share and the
bargained value of the businesses and joint venture was $745
million. The value of the businesses was determined by the parties
supported by traditional valuation methodologies, including
discounted cash flow calculations, sales multiples and EBITDA
multiples.The resulting sales and EBITDA multiples of the transferred
businesses (excluding the joint venture) were 3.9 and 7.3
respectively. The parties negotiated a value for the
Company’s share in the joint venture consistent with the
Company’s expected share of the cash flow from the
venture.
Question: How did you
arrive at an estimated gain on the transfer?
Response: The estimated gain
was determined by subtracting the historical cost of the exchanged
businesses and joint venture, and related transaction costs, from
the fair value of the exchanged businesses and joint venture.
The transaction is not subject to income tax and therefore a tax
provision was not recognized in connection with the
gain.
Question: What specific
accounting literature did you use to account for this
transaction?
Response: We referred to the
following guidance to account for this transaction:
APB #29 and EITF 01-02, - This
guidance states that a transfer of non-monetary assets to a
shareholder should be recorded at the fair value of the assets
transferred and that a non-pro rata split-off of a business should
be accounted for at fair value.
AICPA Technical Practice Aid (TIS
4110.09), Costs Incurred to Acquire Treasury Stock
–In
accordance with this guidance, we included transaction costs
directly related to the acquisition of treasury shares as part of
the cost of the share acquisition.
* * * * * *
*
In addition, the Company
acknowledges that:
It is responsible for the adequacy
and accuracy of the disclosures in its filings;
It is the Commission’s
position that comments from the SEC staff or changes to disclosure
in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and
It is the Commission’s
position that the Company may not assert staff comments as a
defense in any proceeding initiated by the Commission or any person
under the federal securities laws of the United States.
*******
Contact Information
If you have any questions or need
any additional information, please contact Tom Johnson at (510) 271
2873, John Kresich at (510) 271 3127 or me at (510) 271
7377.
Sincerely,
/s/ DANIEL J. HEINRICH
Daniel J. Heinrich
cc:
Peter Bewley
Senior Vice President--General Counsel
Thomas
Johnson
Vice President--Controller
John Kresich
Vice President--Assistant Controller
Pamela
Fletcher
Vice President--Secretary
Nudrat Salik
Securities and Exchange Commission
Ernst & Young