OAKLAND, Calif., Aug. 12, 2003 — The Clorox Company (NYSE: CLX) (PSE:
CLX) today announced that strong gross margins, working capital
and cash flows contributed to the company's results for its fiscal
fourth quarter and year, which ended June 30, 2003.
In accordance with generally accepted accounting principles in the
United States (GAAP), the company reported fourth-quarter net
earnings of $149 million, or 68 cents per diluted share, compared
with prior-year fourth-quarter net earnings of $145 million, or
63 cents per diluted share, which represents an increase of 5
cents per diluted share, or 8 percent.
For the fiscal year, Clorox reported net earnings of $493 million
(GAAP), or $2.23 per diluted share, compared with year-ago net
earnings of $322 million, or $1.37 per diluted share, which represents
an increase of 86 cents, or 63 percent.
"Clorox people delivered another solid quarter and a very strong year,
demonstrating the effectiveness of our strategies and the organization's
focus on growth, innovation and margin expansion," said President
and CEO Jerry Johnston. "The results of their efforts are
clearly reflected throughout our earnings statement and balance
sheet, and in fiscal 2003, we achieved each of our financial targets."
The earnings and balance sheet statements and segment information
are reported in accordance with GAAP. To clarify the company's
results with respect to prior-year periods, Clorox has posted
additional details regarding previously reported earnings on the
company's Web site at www.thecloroxcompany.com/investors/financialinfo/results/.
Fourth-Quarter Results
Fourth-quarter sales increased 2 percent to $1.2 billion. Excluding divestitures,
sales increased 3 percent compared to the year-ago quarter. Sales
growth was driven by increased volume, notably record fourth-quarter
shipments of Glad® trash bags and Hidden Valley® and K
C Masterpiece® food products.
Cost savings and increased volume drove a gross margin gain of 73 basis
points. This is the company's seventh consecutive quarter of gross
margin improvement.
Improvements in managing inventories and receivables contributed to the company's
ability to achieve its fourth consecutive quarter of negative
working capital and its 10th consecutive quarter of year-over-year
improvements in working capital. Working capital averaged –1.7
percent of net sales, a 170 basis point improvement, compared
with zero percent of net sales in the prior year.
During the quarter, Clorox used its free cash flow to purchase 3.5 million
shares of the company's common stock at a total cost of $152 million.
A portion of the shares purchased was allocated to the board-authorized
$1 billion repurchase program, bringing the total number of shares
repurchased to 18.2 million at a total cost of $773 million under
that program. The remainder of shares purchased during the quarter
was allocated to the company's ongoing program to offset the potential
impact of stock option dilution.
Fourth-Quarter Results by Segment
A summary of key fourth-quarter results by segment follows. All
comparisons are with fourth quarter fiscal 2002.
Household Products – North America
- 2% volume growth
- 2% sales growth
- 9% pretax profit decline
Volume growth in this segment was primarily driven by all-time record
shipments of Glad® trash bags. Pretax profit results reflect
increased volume and cost savings that were more than offset by
unfavorable product mix, higher raw-material costs, increased
trade-promotion spending, and increased R&D expenses to drive
product innovation.
Specialty Products
- 3% volume growth, 5% growth excluding divestitures
- 1% sales growth, 3% growth excluding divestitures
- 6% pretax profit decline
Strong volume growth in this segment was primarily driven by record fourth-quarter
shipments of Fresh Step® and Scoop Away® cat litters,
Hidden Valley® bottled salad dressing and K C Masterpiece®
barbecue sauce. The volume-to-sales variance was primarily driven
by increased trade-promotion spending to launch new products,
partially offset by a Kingsford® charcoal price increase implemented
earlier in the fiscal year. Pretax profit results reflect increased
trade marketing and advertising costs to launch new products.
Household Products – Latin America/Other
- 3% volume growth, 4% growth excluding divestitures
- 6% sales growth, 7% growth excluding divestitures
- 117% pretax profit growth
Volume growth in this segment was primarily driven by increased shipments
in Argentina and insecticides, home care and laundry products
in Asia-Pacific, partially offset by declines in bags and wraps
and auto care volume in Asia-Pacific. Sales growth outpaced volume
growth due to reduced trade-promotion spending, price increases
and favorable foreign exchange rates. Significant gross margin
improvement and cost savings drove the segment's pretax profit
improvement, reflecting the steps Clorox has taken to mitigate
unfavorable economic conditions in Latin America, which include
taking price increases, reducing the size of the organization
to improve the cost structure, cutting back on discretionary spending
and aggressively managing working capital.
Fiscal Year 2003 Results
Fiscal-year sales increased 3 percent to $4.1 billion. Excluding divestitures,
total company sales increased 5 percent and sales in North America
rose 6 percent compared to the prior year.
Focusing on innovation and investing in core brands were key to the company's
top-line results. For the year, Clorox increased advertising spending
by 17 percent and brought several new products to market, including
Clorox® bathroom cleaners with Teflon®, Don't Mop with
Dirty Water Again!™ Pine-Sol® cleaner, Formula 409®
wipes, Brita® pour-through pitchers with electronic filter
change indicators, Hidden Valley® BBQ Ranch dressing, K C
Masterpiece® Dip & Top™ sauces, Armor All® car
wash wipes and Scoop Away® plus crystals cat litter.
For the fiscal year, significant gross margin increases in each segment
drove overall gross margin growth of 296 basis points.
Improvements in managing inventories and receivables contributed to the company's
ability to achieve negative working capital, which averaged –1.6
percent of net sales, a 220 basis point improvement, compared
with .6 percent in the prior year.
The company's return on invested capital (ROIC) increased from 13.5
percent in fiscal 2002 to 14.7 percent in fiscal 2003. The company
defines ROIC as after-tax operating profit (excluding deferred
taxes and restructuring charges included in cost of goods sold)
divided by average total invested capital.
Outlook for Fiscal 2004
Clorox continues to expect that fiscal year 2004 results will be consistent
with the company's previously communicated long-term expectations
for double-digit earnings-per-diluted-share growth and 3 percent
to 5 percent sales and volume growth. Specifically, for fiscal
year 2004, the company's preliminary expectations are for earnings
per diluted share in the range of $2.47 to $2.57 (GAAP).
For the first quarter of fiscal 2004, the company continues to anticipate
volume growth and increased cost savings versus the year-ago period.
At the same time, first-quarter earnings are expected to be impacted
by significant spending to launch new products, including Glad®
Press 'n Seal™ food wrap, as well as higher raw-material
costs and R&D investments as compared to the year-ago quarter.
As a result, Clorox projects first-quarter earnings per diluted
share in the range of 57 cents to 62 cents (GAAP), compared with
65 cents (GAAP) in the prior-year quarter.
For the second quarter, Clorox expects to deliver earnings per diluted
share in the range of 46 cents to 51 cents (GAAP), compared with
40 cents (GAAP) in the prior-year quarter. The company expects
this strong earnings growth to be driven by a strengthening top
line offset by higher commodity costs and trade-promotion spending
to support new products. Second-quarter earnings results will
also benefit from comparison to the year-ago quarter, which included
an asset impairment charge for the company's business in Argentina
that was slightly offset by lower trade spending related to closing
out retailer promotion programs as the company converted to new
systems.
As previously announced, the board of directors authorized the company
to increase its share repurchase program by $700 million. In 2004,
in accordance with its previously announced agreement with HC
Investments Inc. (Henkel), Clorox expects to repurchase $100 million
of its common stock from Henkel and another $250 million on the
open market. Of the $350 million total share repurchases planned
in fiscal 2004, a portion will be purchased under the more than
$900 million available through the board-authorized share repurchase
program, and the balance will be allocated to the company's ongoing
program to offset the potential impact of stock option dilution.
Today's Webcast
Today, Clorox will host a live audio webcast of a discussion with the
investment community regarding the company's fourth-quarter and
full-year results and its outlook. The webcast, which can be accessed
at www.thecloroxcompany.com, will begin at 10:30 a.m. Pacific time (1:30
p.m. Eastern time). A replay of the webcast will be archived for
one week on the company's Web site.
The Clorox Company
The Clorox Company is a leading manufacturer and marketer of consumer
products with fiscal year 2003 revenues of $4.1 billion. Clorox
markets some of consumers' most trusted and recognized brand names,
including its namesake bleach and cleaning products, Armor All®
and STP® auto care products, Fresh Step® and Scoop Away®
cat litters, Kingsford® charcoal briquets, Hidden Valley®
and K C Masterpiece® dressings and sauces, and Glad® bags,
wraps and containers. With 9,500 employees worldwide, the company
manufactures products in 25 countries and markets them in more
than 100 countries. Founded in 1980, The Clorox Company Foundation
has awarded cash grants totaling more than $51 million to nonprofit
organizations, schools and colleges; and in fiscal 2002 alone
made product donations valued at nearly $5 million. For more information
about Clorox, visit the company's Web site at www.thecloroxcompany.com.
Except for historical information, matters discussed above, including
statements about future volume, sales and earnings growth, profitability,
costs, cost savings or expectations, are forward-looking statements
based on management's estimates, assumptions and projections.
Important factors that could cause results to differ materially
from management's expectations are described in "Forward-Looking
Statements and Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operation"
in the company's SEC Form 10-K for the year ended June 30, 2002,
as updated from time to time in the company's SEC filings. Those
factors include, but are not limited to, general economic and
marketplace conditions and events; the company's costs, including
the impact of world events on raw material costs and/or supply
disruption; risks inherent in litigation and international operations;
the success of new products; the company's ability to manage and
obtain the benefits of joint venture activities; the success of
information systems design and implementation; integration of
acquisitions; and environmental, regulatory and intellectual property
matters.
Q4
Earnings Statements (PDF)
Q4
Supplemental Financial Information (PDF)