Clorox's Q2 net earnings increased to US$105M from US$95M in year-ago period, due in part to cost cutting, raising prices on bleach, other goods; sales for the quarter were up 3.6% to US$1.22B
February 3, 2012
– The Clorox Company today announced strong results for its second quarter, which ended Dec. 31. Clorox reported 4 percent sales growth and 79 cents diluted earnings per share (EPS) from continuing operations. Excluding the Burt's Bees(R) noncash goodwill impairment charge in the year-ago quarter, diluted EPS from continuing operations increased 16 percent.
"We delivered strong second-quarter results," said Chairman and Chief Executive Officer Don Knauss. "We grew sales for the fourth consecutive quarter. Our U.S. categories continue to recover, and our market share remains healthy. While the economic climate remains challenging, our strategies are working and our people are executing well. I feel good about our plans for the remainder of the fiscal year."
All results in this press release are on a continuing operations basis unless otherwise stated, and some results are reported on a non-GAAP basis. See "Non-GAAP Financial Information" below and the tables toward the end of this press release for more information and a reconciliation of key second-quarter results.
Fiscal Second-Quarter Results Following is a summary of key second-quarter results. All comparisons are with the second quarter of fiscal year 2011, and exclude the Burt's Bees(R) noncash goodwill impairment charge in the year-ago quarter.
* 79 cents diluted EPS (16% growth) * Flat volume * 4% sales growth
Clorox reported second-quarter earnings from continuing operations of $105 million, or 79 cents diluted EPS. This compares with $95 million from continuing operations, or 68 cents diluted EPS, in the year-ago quarter. Current quarter results reflected the benefit of price increases and strong cost savings, partially offset by higher costs for raw materials, manufacturing and logistics.
Volume for the second quarter of fiscal year 2012 was flat, with gains in the Lifestyle and Household segments largely offset by lower shipments in international markets and flat volume in the Cleaning segment. Sales grew 4 percent, with increases in three of the company's four reportable segments. Sales growth was primarily driven by the benefit of price increases and product innovation across several businesses, partially offset by unfavorable product and country mix.
Gross margin decreased 20 basis points to 41.5 percent from 41.7 percent in the year-ago quarter. The decrease in the current quarter gross margin was primarily driven by higher commodity costs, higher manufacturing and logistics costs and unfavorable product and country mix. These factors were partially offset by the benefit of price increases and strong cost savings.
Year-to-date cash provided by continuing operations was $168 million, a slight decrease from $170 million in the year-ago period. For the full fiscal year, Clorox continues to anticipate free cash flow of about 10 percent of sales, within its targeted range of 10-12 percent. The company defines free cash flow as cash provided by continuing operations less capital expenditures.
During the second quarter, Clorox repurchased 2.3 million shares of the company's common stock at a cost of approximately $149 million, using the remaining proceeds from the sale of the Auto Care businesses. The company has used all net proceeds from the sale to repurchase a total of 10 million shares for $679 million since February 2011.
Key Segment Results Following is a summary of key second-quarter results by reportable segment. All comparisons are with the second quarter of fiscal year 2011 and exclude the Burt's Bees(R) noncash goodwill impairment charge in the year-ago quarter.
(Laundry, Home Care, Away From Home)
-- Flat volume
-- 5% sales growth
-- 22% pretax earnings growth
The Away From Home business grew volume by double digits, supported by new products and distribution gains in the institutional health care channel. These results were offset by lower shipments in the Laundry and Home Care business units. Laundry volume was lower due to the impact of a recent price increase on Clorox(R) bleach. Home Care volume decreased modestly due to lower shipments of Clorox(R) disinfecting wipes. Price increases on several Home Care brands also reduced volume. The variance between volume and sales was primarily due to the benefit of price increases. Pretax earnings reflected higher sales and strong cost savings, partially offset by higher commodity costs.
Household (Bags and Wraps, Charcoal, Cat Litter)
-- 1% volume growth
-- 4% sales growth
-- 36% pretax earnings growth
Volume growth for the segment was primarily driven by higher shipments in the Cat Litter business unit behind new product innovation. These results were partially offset by lower volume in Bags and Wraps. Increased shipments of premium trash bags were more than offset by lower shipments of food storage products and base trash bags. Sales growth outpaced volume growth primarily due to the benefit of price increases. Pretax earnings reflected higher sales and cost savings. These factors were partially offset by higher commodity costs.
Lifestyle (Dressings and Sauces, Water Filtration, Global Natural Personal Care)
-- 2% volume growth
-- 6% sales growth
-- 6% pretax earnings growth (136% increase including Burt's Bees(R)
noncash goodwill impairment charge)
The segment's volume growth was driven by new product innovation in Water Filtration and Natural Personal Care. The Water Filtration business unit continued to benefit from the launch of the Brita(R) on-the-go bottle in the prior fiscal year. These results were partially offset by the Dressings and Sauces business due to lower shipments of K C Masterpiece(R) barbeque sauce. Sales growth outpaced volume growth due to the benefit of price increases. Pretax earnings reflected higher sales, partially offset by higher commodity costs.
International (All countries outside of the U.S., excluding Natural Personal Care)
-- 1% volume decrease
-- Flat sales
-- 22% pretax earnings decrease
The company's largest international region, Latin America, saw modestly lower volume, reflecting double-digit decreases in Venezuela and reduced shipments in the nonstrategic export business. Segment sales were flat, as the benefit of price increases was offset by unfavorable foreign currency exchange rates and country mix. Pretax earnings reflected higher manufacturing and logistics costs, higher commodity costs, negative country mix and selling and administrative expenses for investments in information systems infrastructure.
Clorox Updates Outlook for Fiscal 2012 Clorox updated its previous financial outlook for fiscal year 2012 continuing operations, including the recently announced Aplicare, Inc. and HealthLink acquisitions, which closed Dec. 31, 2011:
* 2-4 percent sales growth * Gross margin decrease of 50bp - 75bps
* Diluted EPS in the range of $4.00-$4.10 (unchanged)
"Aplicare and HealthLink expand our ability to provide products that help fight the spread of health care-associated infections," Knauss said. "These investments are another step in our efforts to reshape our portfolio through strategic, bolt-on acquisitions with strong potential for growth."
Clorox now anticipates sales growth for fiscal year 2012 in the range of 2 percent to 4 percent, versus the company's previous outlook of 1 percent to 3 percent growth. This reflects strong results in the first half of the fiscal year as well as about one-half percentage point of incremental growth in fiscal year 2012 related to Aplicare and HealthLink. The acquisitions are expected to reduce fiscal 2012 EPS by about 4 cents, which is now included in the company's outlook.
Due to continuing negative product and country mix, the company now anticipates a gross margin decrease of 50 basis points to 75 basis points for fiscal year 2012, versus the previous outlook of about flat. Gross margin is expected to decrease versus prior year in the third quarter, but increase in the fourth quarter due in part to higher commodity costs in the year-ago fourth quarter.
Clorox continues to anticipate $36 million to $40 million in expenses related to its multiyear investments in global information technology systems and research and development facilities, although likely toward the lower end of the range as some spending shifts into the next fiscal year. Spending on these initiatives will be reflected primarily in selling and administrative expenses. In total, the company continues to anticipate that selling and administrative expenses will be about 15 percent of sales. This outlook reflects the updated assumptions for the infrastructure projects, offset by administrative costs for the newly acquired businesses.
In November, the company issued $300 million of 10-year senior notes to retire commercial paper, taking advantage of favorable long-term interest rates currently in the market. With the new debt issuance, interest expense is now anticipated to be about $125 million in fiscal 2012.
Net of all of these factors, the company continues to anticipate diluted EPS in the range of $4.00-$4.10, including the impact of the acquisitions.
For More Detailed Financial Information Visit the Investors: Financial Results section of the company's website at www.TheCloroxCompany.com for the following:
*Supplemental volume and sales growth information * Supplemental gross margin driver information * Reconciliation of certain non-GAAP financial information, including earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA) * Supplemental balance sheet and cash flow information * Supplemental price-change information
Note: Percentage and basis-point changes noted in this news release are calculated based on rounded numbers. Supplemental materials are available in the Investors: Financial Results section of the company's website at www.TheCloroxCompany.com .
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 second-quarter results. The webcast can be accessed at http://investors.thecloroxcompany.com/events.cfm . Following a live discussion, a replay of the webcast will be archived for one week on the company's website.
The Clorox Company The Clorox Company is a leading manufacturer and marketer of consumer products with 8,100 employees and fiscal year 2011 revenues of $5.2 billion. Clorox markets some of consumers' most trusted and recognized brand names, including its namesake bleach and cleaning products, Green Works(R) naturally derived home care products, Pine-Sol(R) cleaners, Poett(R) home care products, Fresh Step(R) cat litter, Kingsford(R) charcoal, Hidden Valley(R) and K C Masterpiece(R) dressings and sauces, Brita(R) water-filtration products, Glad(R) bags, wraps and containers, and Burt's Bees(R) and gud(TM) natural personal care products. Nearly 90 percent of the company's brands hold the No. 1 or No. 2 market share positions in their categories. The company's products are manufactured in more than two dozen countries and marketed 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 $84 million to nonprofit organizations, schools and colleges. In fiscal year 2011 alone, the foundation awarded $4 million in cash grants, and Clorox made product donations valued at $13 million. For more information about Clorox, visit www.TheCloroxCompany.com .