Clorox Reports First-Quarter Results
OAKLAND, Calif.--Nov. 1, 2001--The Clorox Company today announced earnings before special charges of $108 million, or 45 cents per diluted share, including the positive impact of adopting Statement of Financial Accounting Standards (SFAS) No. 142 (see below), for its fiscal first quarter ended Sept. 30, 2001. This compares with earnings of $100 million, or 42 cents per diluted share, in the prior-year quarter.Overall volume in the first quarter increased 6 percent over the prior-year period, reflecting growth in all business segments. Sales for the quarter increased 3 percent to $991 million, compared to $963 million in the prior-year quarter. Excluding the impact of foreign currencies, sales would have posted a 4 percent gain.
"First-quarter volume and profit were higher than expected, and we're highly encouraged that our focused efforts are continuing to drive positive volume and market-share trends on our businesses. We intend to strengthen our investment in advertising to maintain this momentum," said Chairman and CEO Craig Sullivan. "However, we're still not satisfied with our performance in a number of areas. We had previously identified `cutting costs everywhere' as a key priority for this fiscal year, and we're stepping up our efforts to improve our cost structure and to generate additional funds to invest in growth."
During the quarter, the company took a $40 million charge to write down its business in Brazil and for other projects related to improving margins and asset utilization, including closure of the company's charcoal plant in Saskatchewan. This charge is included in the anticipated $200 million of special charges previously announced.
SFAS No. 142 -- Accounting for Goodwill and Other Intangible Assets
As of July 1, 2001, the company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." In accordance with the standard, Clorox discontinued the amortization of goodwill effective July 1, 2001. The positive first-quarter impact of this change is 4 cents per diluted share; excluding this impact, earnings for the quarter would have declined by 1 cent per diluted share. The positive full-year impact of this change is about 16 cents per diluted share.
First-Quarter Results by Segment
A summary of key results by business segment follows. Unless otherwise noted, comparisons are with the first quarter of fiscal year 2001. Current period and year-ago results are reported in accordance with realigned segments effective July 1, 2001.
Household Products-North America includes bleach, home care, and water-filtration products and the food storage and trash disposal categories in the United States, as well as all products marketed in Canada.
| -- | 3% growth in volume |
| -- | 1% decline in sales |
| -- | 4% decline in pretax earnings before special charges |
Record volume in the overall Glad business drove volume results in this segment. Increased advertising and sales promotion, as well as strong retailer acceptance of the trash-bag price rollback, resulted in record volume for Glad trash and food storage bags and GladWare containers. Total Glad market share was up behind market-share gains on trash bags and GladWare. Segment results also reflect market-share gains and volume growth in Clorox and Clorox 2 bleaches. Volume for home care brands was down slightly versus an unusually strong year-ago period. Segment sales lagged volume primarily as a result of higher trade-promotion and coupon spending. Increased marketing and promotional activity contributed to the decline in this segment's profits.
Household Products-Latin America and Other includes operations outside the United States and Canada, excluding the European automotive-care businesses.
-- 7% growth in volume
-- 0% growth in sales
-- 5% decline in pretax earnings before special charges
Continued strength in fragranced cleaners, the introduction of Poett cleaners in Brazil and Mexico and increased demand for bleach fueled volume growth in Latin America. Excluding the impact of foreign currency weaknesses in several Latin America countries, Australia, New Zealand and Korea, sales in this segment would have posted a 4 percent gain. Foreign-currency weakness, unfavorable mix and trade spending impacted segment profitability.
Specialty Products includes charcoal, U.S. and European automotive-care businesses, cat litter, insecticides, food products and professional products.
-- 13% growth in volume
-- 12% growth in sales
-- 15% growth in pretax earnings before special charges
Strong volume growth in this segment reflects healthy gains across all businesses, especially auto care and cat litter. Significant volume growth in auto care was led by demand for Armor All cleaning and protectant wipes introduced in December 2000; record first-quarter volume in STP fuel-system products also contributed to volume gains. Supported by increased merchandising, advertising and promotional activity, Fresh Step and Scoop Away cat litter brands posted record double-digit volume gains, Fresh Step traditional clay and silica-gel crystals cat litters achieved all-time high market shares and Fresh Step scoopable litter achieved its highest market share in 18 months. The increase in segment profits was driven by volume growth, favorable mix and assortment, and cost-savings initiatives.
The Clorox Company is a $3.9 billion, multinational manufacturer and marketer of household products and products for institutional markets.
Except for historical information, matters discussed above, including statements about future growth, profitability, costs 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 ending June 30, 2001, as updated from time to time in the company's SEC filings. Those factors include, but are not limited to, marketplace conditions and events, the company's costs, risks inherent in litigation or international operations, the success of new products, integration of acquisitions, and environmental, regulatory and intellectual property matters.
Today, Clorox will host a live audio webcast of a discussion with the investment community regarding the company's first-quarter results and its outlook going forward. The webcast, which can be accessed at www.clorox.com/investors, 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 at www.clorox.com/investors.
THE CLOROX COMPANY
Statements of Consolidated Earnings (Unaudited)
(In millions, except earnings per-share amounts)
Three Months Ended
-----------------------
9/30/01 9/30/00
------- -------
Net Sales $991 $963
Cost of products sold 566 549
------- -------
Gross Profit 425 414
Selling and administration 135 123
Advertising 100 88
Research and development 16 14
Special charges -- restructuring and asset
impairment 40 --
Interest expense 12 26
Other (income) expense, net (5) 8
------- -------
Earnings before income taxes and
cumulative effect of change in accounting
principle 127 155
Income taxes (1) 48 55
------- -------
Earnings before cumulative effect of
change in accounting principle 79 100
Cumulative effect of change in accounting
principle (FAS 133) -- (2)
------- -------
Net Earnings $79 $98
======= =======
Earnings per Common Share
Net Earnings
Basic $0.34 $0.42
Diluted 0.33 0.41
Net Earnings before special charges --
restructuring and asset impairment and
cumulative effect of change in accounting
principle (2)
Basic $0.46 $0.43
Diluted 0.45 0.42
Weighted Average Shares Outstanding (in
thousands)
Basic 234,980 235,522
Diluted 238,096 238,568
(1) The effective tax rate before special charges (restructuring and
asset impairment) for the three months ended September 30, 2001 was
35%.
(2) Reflects net earnings before the after tax effect of special
charges (restructuring and asset impairment of $29 million for the
three months ended September 30, 2001.
The Clorox Company Segment Information (1)
Earnings
Earnings Before
Before Special
Chg.vs. Income Chg. vs. Charges Chg. vs.
Net Sales year ago Taxes year ago and year ago
(mill- (mill- (mill- (mill- Income
ions) ions) ions) ions) Taxes
-------- ------- --------- -------- -------- -------
Household
Products:
North America $564 -1% $141 -10% $150 -4%
Latin America/
Other 137 -- (11) -160% 18 -5%
Specialty
Products 290 12% 97 15% 97 15%
Corporate -- -- (100) 5% (98) 7%
-------- ------- --------- -------- -------- -------
Total $991 3% $127 -18% $167 8%
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(1) Starting in 2002, the Glad business unit, previously reported
under the Specialty Products segment, is now reported under the
Household Products-North America segment and the European automotive
care businesses, previously reported under the Household
Products-Latin America/Other segment, is now reported under the
Specialty Products segment. Operating segment information presented
above reflects the Company's current organization structure, including
this change.