OAKLAND, Calif., Nov. 6, 2003 — The Clorox Company (NYSE: CLX) (PSE:
CLX) today reported results in line with its previously communicated
expectations for the first quarter of fiscal year 2004, which
ended Sept. 30, 2003.
"We knew the first quarter would be the toughest comparison of the
year, and we're pleased to have met our expectations, given our
high level of spending behind a record number of first-quarter
product launches and a significant increase in product costs,"
said President and Chief Executive Officer Jerry Johnston. "As
expected, Clorox people everywhere stayed the course to deliver
volume growth, significant cost savings and strong working capital
results."
Clorox reported first-quarter net earnings of $129 million, or 60 cents
per diluted share, compared with net earnings in the year-ago
first quarter of $145 million, or 65 cents per diluted share,
for a decrease of 5 cents per diluted share, or 8 percent.
First-quarter volume grew 2 percent compared to the year-ago quarter. Excluding
divestitures, volume increased 3 percent, reflecting growth in
every segment of the business. Volume growth was driven by record
shipments of Glad® products, record first-quarter shipments
of charcoal, food and cat litter products, and a double-digit
increase in Latin America shipments. First-quarter sales were
flat at $1.05 billion. Excluding divestitures, sales increased
1 percent. The variance between volume and sales was primarily
the result of increased trade-promotion spending to support new
product activity and a product assortment shift to larger sizes
due to merchandising activities at key retailers.
First-quarter gross margin declined 440 basis points, primarily
due to start-up costs for new products, higher raw-material costs,
a shift in timing of plant maintenance activities, increased contract-manufacturing
costs for Match Light® charcoal, product mix and an unfavorable
comparison to the year-ago quarter, in which gross margin benefited
from an adjustment of coupon redemption rates. These factors were
partially offset by strong cost savings behind the company's continued
focus on its strategy to cut costs everywhere.
Consistent with its strategy to drive growth, Clorox significantly increased
trade-promotion spending to support new products and increased
its investment in research and development (R&D) by 32 percent
versus the prior year. At the same time, Clorox continued its
high level of advertising support at more than 10 percent of net
customer sales. The company's combined investments in trade-promotion
spending, R&D and advertising increased by a double-digit
percent versus the year-ago quarter.
The company achieved its fifth consecutive quarter of negative working
capital, which averaged -2 percent of sales compared with -1 percent
in the year-ago quarter, for an improvement of 100 basis points.
First-quarter cash provided by operations was $140 million compared with $204
million in the year-ago quarter. The current period results reflect
the year-over-year earnings decline and a $37 million contribution
to the company's pension plan.
During the quarter, Clorox used its free cash flow to buy back 3.3 million
shares of the company's common stock on the open market at a cost
of $147 million. Since July 1, 2002, Clorox has bought a total
of 15 million shares of its stock at a cost of $647 million under
the board-authorized stock-repurchase program and the company's
ongoing program to offset potential stock option dilution.
Clorox's earnings and segment information are reported in accordance with
generally accepted accounting principles in the United States
(GAAP). Percentage and basis-point changes noted in this press
release are calculated based on numbers that are not rounded.
The company has posted additional details regarding its results
at www.thecloroxcompany.com/investors/financialinfo/results/.
First-Quarter Results
by Business Segment
A summary of key first-quarter results by segment follows. All comparisons
are with the first quarter of fiscal 2003.
Household Products – North America
- 1% volume growth
- 4% sales decline
- 24% pretax earnings decline
Volume growth in the segment was driven by all-time record shipments
of Glad® products, due to record first-quarter shipments of
Glad® trash bags and GladWare® containers, and the introduction
of Glad® Press 'n Seal™ sealable plastic wrap. Also contributing
to volume growth were new laundry and home care products and increased
shipments of Clorox® bleach. Nearly offsetting these positive
trends were declines in wipes and convenience mopping due to competitive
activity and a high base-period comparison due to the prior-year
launch of new Brita® pitchers with electronic filter change
indicators. The variance between volume and sales was primarily
the result of increased trade-promotion spending and unfavorable
product mix, partially offset by a favorable foreign-exchange
rate in Canada. Pretax earnings reflect cost savings that were
more than offset by the impact of trade-promotion spending, start-up
costs for new products, the Glad® joint venture and higher
raw-material costs.
Specialty Products
- 4% volume growth, 7% growth excluding divestitures
- 4% sales growth, 6% growth excluding divestitures
- 5% pretax earnings decline
The segment's strong volume growth was driven by increases in shipments
of food products, cat litter and charcoal. Delivering record first-quarter
shipments were Hidden Valley® bottled salad dressing, Fresh
Step® scoopable cat litter, and Kingsford® and Match Light®
charcoal. Scoop Away® cat litters and Fresh Step® regular
cat litter achieved all-time record shipments. Pretax earnings
reflect the benefit of volume gains that were more than offset
by costs associated with contract-manufacturing of Match Light®
charcoal, higher raw-material costs and increased manufacturing
costs largely due to a shift in the timing of charcoal plant maintenance
activities.
Household Products – Latin America & Other
- 4% volume growth, 5% growth excluding divestitures
- 13% sales growth, 14% growth excluding divestitures
- 95% pretax earnings growth
Volume growth in the segment was primarily driven by increased shipments
in Mexico and Argentina, partially offset by a decline in Korea
insecticides shipments due to weather conditions. Sales growth
outpaced volume growth due to favorable foreign-exchange rates
and price increases, partially offset by unfavorable product mix.
Pretax earnings primarily reflect a favorable comparison to the
year-ago period, in which pretax earnings declined, and earnings
growth in the current quarter due to revitalization of the Latin
America business.
Outlook
For the second quarter, Clorox now expects earnings per diluted share
in the range of 48 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-promotion spending related
to closing out retailer promotion programs as the company converted
to new systems. The company expects low- to mid-single-digit volume
growth and low-single-digit sales growth compared with the prior-year
quarter.
During the first quarter, Clorox exercised its option under the previously
announced agreement with HC Investments Inc. (Henkel), to increase
its planned repurchases of stock from Henkel by $15 million in
the first half of fiscal year 2004. As a result, in the second
quarter, Clorox now expects to repurchase $65 million of its common
stock from Henkel. In addition, the company has already purchased
$8 million of its common stock on the open market in the second
quarter.
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 expectations are for earnings per diluted
share in the range of $2.47 to $2.57.
Today's Webcast
Today at 10:30 a.m. Pacific time (1:30 p.m. Eastern time), Clorox will
host a live audio webcast of a discussion with the investment
community regarding the company's first-quarter results. The webcast
can be accessed at www.thecloroxcompany.com/investors.
Following a 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 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, Brita® water-filtration
systems, and Glad® bags, wraps and containers. With 8,900
employees worldwide, the company manufactures products in 25 countries
and markets them in more than 100 countries. Clorox is committed
to making a positive difference in the communities where its employees
work and live. Founded in 1980, The Clorox Company Foundation
has awarded cash grants totaling more than $55 million to nonprofit
organizations, schools and colleges; and in fiscal 2003 alone
made product donations valued at $5 million. For more information
about Clorox, visit the company's Web site at www.thecloroxcompany.com.
Forward-Looking Statements
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, 2003,
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.