Nov. 2, 2010 (Marketwire) --
OAKLAND, CA -- (Marketwire) -- 11/02/10 -- The Clorox Company (NYSE: CLX) today reported a 3 percent decline in sales and flat earnings from continuing operations for its fiscal first quarter, which ended Sept. 30.
As announced on Sept. 21, Clorox has reached an agreement for the sale of its global Auto Care businesses. For the current and year-ago quarters, the results from these businesses are now included in discontinued operations on Clorox's statements of earnings, and assets being transferred are classified as held for sale on the company's balance sheets. All results in this press release are on a continuing operations basis, unless otherwise stated. (For more information, see the section below entitled "Impact of Auto Care Businesses Divestiture," and supplemental materials in the Financial Results section of the company's website at www.TheCloroxCompany.com.)
Fiscal First-Quarter Results
"We faced a challenging economic environment, as evidenced by category softness in the U.S. along with the impact of the Venezuela currency devaluation," said Chairman and CEO Don Knauss. "Late first-quarter shipments were particularly soft and that trend has continued into the first weeks of our second quarter. While we're disappointed not to have delivered stronger first-quarter results, we manage our business for the long term. I believe we're taking the right actions to maintain the long-term health of our brands and help strengthen our categories as the economy recovers."
Said Knauss, "Looking at the full fiscal year, I feel good about our plans to drive volume and sales growth. We are aggressively managing competitive price gaps and continuing to invest in strong consumer communications, innovation, support for new products and bringing value to consumers. Importantly, our focus on brand-building activities is paying off with higher market shares."
Following is a summary of key first-quarter results. All comparisons are with the first quarter of fiscal year 2010, unless otherwise stated.
-- 98 cents diluted earnings per share (EPS) (versus 99 cents diluted EPS
in the year-ago quarter)
-- 2% volume decline
-- 3% sales decline
Clorox reported first-quarter net earnings from continuing operations of $140 million, or 98 cents diluted EPS, versus $140 million, or 99 cents diluted EPS, in the year-ago quarter. Including discontinued operations, net earnings were $216 million, or $1.52 diluted earnings per share, compared with $157 million, or $1.11 diluted EPS, in the year-ago quarter. (See "Non-GAAP Financial Information" below and the last two pages of this press release for information and a reconciliation of key first-quarter results.)
Fiscal First-Quarter Earnings Reconciliation
Q1 Fiscal 2011 Q1 Fiscal 2010
----------------- -----------------
Net Diluted Net Diluted
Earnings EPS Earnings EPS
-------- -------- -------- --------
Earnings from continuing operations $ 140 $ 0.98 $ 140 $ 0.99
Earnings from discontinued operations,
net of tax 16 0.11 17 0.12
-------- -------- -------- --------
156 1.09 157 1.11
Deferred tax benefit on businesses to
be sold 60 0.43 -- --
-------- -------- -------- --------
Net earnings $ 216 $ 1.52 $ 157 $ 1.11
======== ======== ======== ========
Volume declined 2 percent, primarily due to lower shipments of Glad® food-storage products and Scoop Away® cat litter, and the comparison with a strong increase in shipments of disinfecting products in the year-ago quarter related to the H1N1 flu pandemic. Volume in the quarter was also negatively impacted by strong retailer merchandising of Kingsford® charcoal and Hidden Valley® bottled salad dressing in the prior quarter.
Sales declined 3 percent to $1.27 billion, primarily due to volume softness, the impact of the Venezuela currency devaluation, and modestly higher trade-promotion spending to support new products and respond to competitive activity in select categories. This was partially offset by the benefit of price increases.
Gross margin decreased 40 basis points to 44.3 percent from 44.7 percent in the year-ago quarter, when gross margin increased about 400 basis points. The decrease in the current quarter gross margin was primarily driven by reinflation of commodity costs, the negative impact of foreign currency exchange rates and higher trade-promotion spending. These factors were partially offset by strong cost savings.
Cash provided by operations, including net cash provided by discontinued operations, increased to $148 million from $94 million in the year-ago quarter. The year-over-year increase was primarily due to changes in working capital and a lower pension contribution.
Key segment results
Following is a summary of key first-quarter results by reportable segment. All comparisons are with the first quarter of fiscal year 2010, unless otherwise stated.
Cleaning
(Laundry, home care, away from home)
-- 1% volume growth
-- 1% sales decline
-- 2% pretax earnings growth
The segment's volume increase was primarily driven by all-time record shipments of Clorox® disinfecting wipes as retailers prepared for the current year's flu season, exceeding a high level of shipments in the year-ago quarter related to the H1N1 flu pandemic. Also contributing to the higher volume were growth in the away-from-home business and increased shipments of Pine-Sol® cleaners. These results were partially offset by lower shipments of Green Works® products, due in part to the launch of Green Works® laundry detergent in the year-ago quarter. The variance between the changes in volume and sales were due to higher trade-promotion spending and unfavorable product mix. Pretax earnings reflected strong cost savings and lower advertising expense, partially offset by lower sales and higher commodity costs.
Household
(Bags and wraps, charcoal, cat litter)
-- 9% volume decline
-- 7% sales decline
-- 4% pretax earnings decline
The segment's volume decline was primarily driven by lower shipments of Glad® food-storage products and Scoop Away® cat litter. Also contributing to the volume decline was lower shipments of Kingsford® charcoal due to strong retailer merchandising in the prior quarter. The variance between changes in volume and sales was primarily due to favorable product mix. Pretax earnings reflected the decline in sales and unfavorable commodity costs, partially offset by strong cost savings.
Lifestyle
(Dressings and sauces, water filtration, global natural personal care)
-- 1% volume growth
-- 1% sales growth
-- 12% pretax earnings decline
The segment's volume growth was driven by higher shipments of Brita® water-filtration products and Burt's Bees® natural personal care products. The Brita results were due to increased merchandising activity. The Burt's Bees results included strong performance of Burt's Bees® acne products and the re-launch of body lotion. Offsetting growth were lower shipments of Hidden Valley® ranch bottled salad dressing due to strong retailer merchandising in the prior quarter. The decline in pretax earnings reflected higher trade-promotion spending, higher manufacturing and logistics costs, and higher selling and administrative expense partially due to supporting the Burt's Bees international expansion. These factors were partially offset by the benefit of strong cost savings.
International
(All countries outside of the U.S., excluding natural personal care)
-- 2% volume decline
-- 2% sales decline
-- 7% pretax earnings decline
Volume decreased due to the comparison with a strong increase in shipments of disinfecting products in the year-ago period related to the H1N1 flu pandemic, lower shipments in Venezuela and lower shipments of Glad® products in Australia. The decline in sales includes the impact of the Venezuela currency devaluation, offset by the benefit of price increases and favorable exchange rates in other countries. Pretax earnings reflected the change in sales, unfavorable commodity costs, increased manufacturing and logistics costs, and higher selling and administrative expenses. These factors were partially offset by the benefit of price increases and strong cost savings.
Impact of Auto Care Businesses Divestiture
As a result of the Auto Care businesses being reported as discontinued operations, Clorox recognized a first-quarter tax benefit of $60 million in earnings from discontinued operations. Accounting rules require that Clorox recognize a deferred tax asset to reflect the tax benefit the company expects to realize on the sale of the businesses because the tax basis in the assets being sold is higher than the book basis in the assets. Clorox expects the transaction to close in the second quarter of fiscal year 2011, which ends June 30, 2011.
Clorox plans to use net proceeds from the sale to repurchase shares of its stock during this fiscal year. Combined with planned share repurchases to offset stock option dilution, Clorox anticipates repurchasing between 12 million and 13 million shares of its common stock during fiscal year 2011, with about two-thirds of the planned repurchases occurring in the second quarter and the balance in the third quarter.
The company now anticipates that the divestiture of the Auto Care businesses will reduce diluted EPS about 20 cents for fiscal year 2011. This includes the loss of earnings resulting from the divestiture, partially offset by the benefit of share repurchases and anticipated fiscal year 2011 revenues from an agreement under which Clorox will provide transition services to the buyer for a period of up to 18 months.
Clorox Updates Fiscal 2011 Financial Outlook
-- 0-2 percent sales growth
-- 25-50 basis points gross margin growth (unchanged)
-- Diluted EPS from continuing operations in the range of $4.05-$4.20
Due primarily to category softness, Clorox now anticipates sales growth in the range of 0-2 percent. This range includes more favorable foreign currencies than previously anticipated.
Reflecting the updated sales outlook, Clorox now anticipates diluted EPS in the range of $4.20 to $4.35 from combined earnings on continuing and discontinued operations, excluding the gain and deferred tax benefit on the sale of the Auto Care businesses. On a continuing operations basis, Clorox anticipates diluted earnings per share in the range of $4.05 to $4.20.