OAKLAND, Calif., May 8, 2003 – The Clorox Company (NYSE: CLX) (PSE:
CLX) today announced that strong gross margins, working capital
and cash flows contributed solidly to the company's results for
its fiscal third quarter, which ended March 31, 2003.
"We're very pleased with Clorox's third-quarter and year-to-date performance,"
said Clorox Chairman and CEO Craig Sullivan. "Positive trends
across our business have been driven by the organization's focus
on growth, margin expansion, cost savings and working capital
management."
Excluding prior-year divestitures, overall company volume increased 2 percent
compared to the year-ago quarter, driven by a 3 percent increase
in the combined Household Products–North America and Specialty
Products segments, partially offset by declines in the Household
Products–Latin America/Other segment. Also excluding divestitures,
overall company net sales increased 1 percent. Including divestitures,
overall company volume was flat and net sales decreased 1 percent
to $1.019 billion compared to $1.023 billion in the year-ago quarter.
Third-quarter gross margin of 45.5 percent increased by 300 basis points compared
to the prior-year period due to cost-saving activities and favorable
product mix. This was the sixth consecutive quarter of gross margin
improvement for the company.
Clorox reported third-quarter net earnings of $110 million, or 50 cents
per diluted share. This compares with net earnings of $46 million
in the year-ago quarter, or 20 cents per diluted share, for an
increase of 30 cents per diluted share, or 150 percent.
The current period net earnings include a $7 million charge related
to a stock-performance incentive plan set in place in fiscal 1999,
as referenced in Clorox's Form10-Q for the quarter ended Dec.
31, 2002. This expense, which is recorded on the selling and administration
line of the company's earnings statement, had been previously
forecasted for the fourth quarter of fiscal 2003. However, given
recent stock performance, Clorox recognized this expense in the
third quarter based on its expectation that compensation awards
under this plan will almost certainly be earned.
The company's year-ago pre-tax earnings include net charges of $67
million related to a $100 million goodwill impairment charge for
its Argentina business, partially offset by a $33 million gain
on divestitures.
Clorox delivered its ninth consecutive quarter of year-over-year improvements
in working capital. Average working capital was –1.8 percent
of sales for the quarter due to improvements in managing inventories
and receivables.
During the quarter, Clorox acquired approximately 1 million shares
of the company's common stock at a total cost of about $41 million
under the board-authorized $1 billion repurchase program. This
brings the total number of shares repurchased under this program
to approximately 14.8 million at a total cost of about $621 million.
The attached earnings statements and segment information are reported
in accordance with U.S. generally accepted accounting principles
(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/.
Third-Quarter Results by Business Segment
A summary of key third-quarter results by segment follows. All comparisons
are with third quarter fiscal year 2002.
Household Products – North America
- 2% volume decline, 0% change excluding divestitures
- 5% sales decline, 3% decline excluding divestitures
- 4% pretax earnings decline
Volume and sales results in this segment were impacted by unusually high
shipments and sales in the year-ago quarter due to the introduction
of Clorox® ReadyMop™ self-contained mopping systems,
which were partially offset in the current quarter by increased
shipments of Brita® water-filtration systems and Glad®
bags and wraps, including all-time record trash bag volume. The
variance between volume and sales is due to disproportionate sales
of higher-priced Clorox® ReadyMop™ starter kits in the
prior year when the product was launched. Pretax earnings results
were primarily driven by lower sales and increased advertising
to launch eight new products, partially offset by cost savings
and favorable product mix.
Specialty Products
- 5% volume growth, 9% growth excluding divestitures
- 6% sales growth, 9% growth excluding divestitures
- 12% pretax earnings decline
Strong volume growth was driven by increases in charcoal, auto products,
food and cat litter, partially offset by a decline in insecticide
shipments. Kingsford® charcoal delivered its eighth consecutive
quarter of record quarterly volume behind increased distribution.
Armor All® auto appearance products and Scoop Away® cat
litter delivered all-time record shipments. Achieving record third-quarter
volume were Fresh Step® regular and scoopable cat litter,
Hidden Valley® bottled dressings and K C Masterpiece®
barbecue sauce. While pre-tax earnings reflect strong sales growth
and a 12 percent increase in operating profit in the current quarter,
the decline is driven by a $36 million gain on the sale of Maxforce®
insecticides recorded in the year-ago quarter.
Household Products – Latin America & Other
- 4% volume decline, 4% decline excluding divestitures
- 4% sales growth, 4% growth excluding divestitures
- 141% pretax earnings improvement
Continued weak economic conditions in South America drove volume declines
in this segment. Sales growth was driven by strong results in
the company's Asia-Pacific Division due to positive mix and favorable
foreign-exchange rates, and pricing leverage in the Latin America
Division. The pretax earnings improvement reflects cost-saving
initiatives and greater pricing leverage in South America in the
current quarter, compared with prior-year pretax earnings, which
included a $100 million pre-tax asset-impairment charge for the
company's business in Argentina. The company's efforts to aggressively
manage working capital resulted in a nearly 8-point improvement
as a percent of sales in its Latin America Division for the quarter.
Fourth-Quarter and Full-Year Outlook
For the fourth quarter, including a 1 percent negative impact from
divestitures, Clorox continues to expect low- to mid-single-digit
volume and sales growth compared with the year-ago quarter. Clorox
also continues to expect earnings per diluted share in the range
of 67 cents to 70 cents (GAAP). As previously communicated, this
estimate reflects an overall increase in the company's effective
tax rate as a result of the second-quarter Argentina impairment
charge. The fourth-quarter 2003 outlook compares with 63 cents
(GAAP) in the fourth quarter of fiscal year 2002.
For fiscal 2003, the company continues to expect low-single-digit
volume and sales growth. Clorox now expects earnings per diluted
share in the range of $2.22 to $2.25 (GAAP) compared with $1.37
(GAAP) in fiscal 2002. Fiscal 2003 earnings expectations include
an estimated reduction of 20 cents (of which 18 cents is reflected
in the company's results through the third quarter) for noncash
charges associated with the company's Latin America business and
related tax effects. The year-ago earnings per share included
net charges of 55 cents primarily related to asset-impairment
charges for the company's businesses in Latin America, costs associated
with plant closures and costs associated with reducing the size
of the company's workforce, which were partially offset by gains
on divestitures.
Preliminary Fiscal 2004 Expectations
At this time, Clorox expects 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 anticipates 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™, 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.
"As we look ahead to 2004, we expect to achieve our top-line and earnings
targets for the year," said Sullivan. "Although the
first quarter presents a tough comparison, we expect year-over-year
volume increases each quarter in fiscal 2004, and top-line growth
is projected to accelerate through the year behind significant
new-product activity as we remain focused on our priority to drive
growth. Our strategy to cut costs everywhere is expected
to again deliver a high level of cost savings in fiscal 2004."
Today's Webcast
Today, at 1:30 p.m. Eastern time, Clorox will host a live audio webcast
of its discussion with the investment community regarding the
company's results in the fiscal third quarter. The webcast can
be accessed at www.thecloroxcompany.com/investors.
Following the live discussion, 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 2002 revenues of $4.0 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 grants totaling more than $51 million to nonprofit
organizations, schools and colleges; and in fiscal 2002 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.
Q3
Financial Statements (PDF)
Q3
Supplementary Financial Information (PDF)