Clorox Reports Solid Sales and Margin Growth in First Quarter; Confirms Fiscal Year 2013 Outlook
OAKLAND, Calif., Oct. 31, 2012 - The Clorox Company (NYSE: CLX) today reported 3 percent sales growth and a 110 basis-point increase in gross margin for the quarter, which ended Sept. 30.
"We're off to a good start in the fiscal year," said Chairman and CEO Don Knauss. "We delivered sales growth in both our U.S. and International businesses. We also saw strong margin improvement in the quarter, which is a particular focus for the company, even as we continue to invest in systems and facilities infrastructure."
Some results in this press release 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 first-quarter results.
Fiscal First-Quarter Results
Following is a summary of key first-quarter results. All comparisons are with the first quarter of fiscal year 2012, unless otherwise stated.
•$1.01 diluted earnings per share (3 percent growth)
•1% volume decrease
•3% sales growth
Clorox reported first-quarter earnings of $133 million, or $1.01 diluted earnings per share (EPS). This compares with $130 million, or 98 cents diluted EPS, in the year-ago quarter. Current-quarter results reflect higher sales and gross margin expansion, partially offset by higher selling and administration expenses, including continued investments in the company's information technology (IT) systems.
Volume for the first quarter of fiscal year 2013 decreased 1 percent, as price increases impacted shipments. Sales growth outpaced volume primarily due to the benefit of price increases, partially offset by unfavorable foreign exchange.
Gross margin increased 110 basis points to 42.9 percent from 41.8 percent in the year-ago quarter. The increase in gross margin was driven primarily by strong cost savings and the benefit of price increases, partially offset by inflation impacting manufacturing and logistics costs, as well as other supply chain costs.
"We are very pleased that we delivered margin improvement in the quarter," said Senior Vice President and Chief Financial Officer Steve Robb. "We've taken the right steps to rebuild our margin, including well-executed price increases across our portfolio and a strong focus on cost savings, a company hallmark."
The effective tax rate of 31.6 percent for the current quarter was higher versus the year-ago quarter, but lower than anticipated, reflecting the benefit of a recent international tax settlement. Clorox anticipates the tax rate for the full year to be between 33 percent and 34 percent.
Net cash provided by operations increased to $208 million from $131 million in the year-ago quarter. The year-over-year increase was due primarily to favorable changes in working capital. For the full fiscal year, Clorox anticipates free cash flow of about 9 percent to 10 percent of sales. The company defines free cash flow as cash provided by operations less capital expenditures. In September, the company issued $600 million of 10-year senior notes, temporarily increasing its cash balance prior to the mid-October repayment of other maturing long-term debt of $350 million. The company's cash balance is expected to return to a more normalized level by Dec. 31.
Key Segment Results
Following is a summary of key first-quarter results by reportable segment. All comparisons are with the first quarter of fiscal 2012, unless otherwise stated.
Cleaning
(Laundry, Home Care, Professional Products)
•4% volume increase
•8% sales increase
•11% pretax earnings increase
Volume growth in the segment was driven primarily by high double-digit growth in the Professional Products business, due to the benefit of acquisitions made in fiscal 2012 and a double-digit increase in the base business. Shipments in the Home Care business were about equal to the year ago quarter, with all-time record shipments of Clorox® disinfecting wipes, offset by declines on Pine-Sol® products due to a price increase in the fourth quarter of fiscal 2012. Home Care sales increased due to the benefit of price increases. Laundry volume decreased due to lower shipments of Clorox 2® stain fighter and color booster, partially offset by the highest volume growth of bleach in more than two years. Segment sales outpaced volume largely due to the benefit of price increases. Pretax earnings growth was driven primarily by higher sales and the benefit of strong cost savings, partially offset by unfavorable product mix.
Household
(Bags and Wraps, Charcoal, Cat Litter)
•7% volume decrease
•3% sales decrease
•19% pretax earnings increase
The segment's volume and sales decreases were driven primarily by declines in the Charcoal business, reflecting the impact of price increases earlier in the calendar year and the comparison to very strong merchandising and volume growth in the year-ago quarter. Cat Litter volume declined due to price increases implemented in the fourth quarter of fiscal 2012 and increased competitive activity. Glad® volume was up, with continued strong gains in premium trash bag products such as Glad® OdorShield® trash bags with Febreze®. The variance between the changes in segment volume and sales was primarily due to the benefit of price increases. Pretax earnings growth was driven largely by strong cost savings, partially offset by lower sales.
Lifestyle
(Dressings and Sauces, Water Filtration, Natural Personal Care)
•1% volume decrease
•1% sales increase
•2% pretax earnings increase
Volume was up in the Food business driven primarily by higher shipments of Hidden Valley® products, offset by lower shipments of KC Masterpiece® products due to strong competitive activity. Volume declined in the Water Filtration business due to lower shipments of faucet mount products, as well as lower Brita Bottle® shipments, compared to strong volume behind the new product launch in the prior-year quarter. Burt's Bees shipments declined slightly, following strong growth in the year-ago period, behind a robust pipeline of new products. Burt's Bees delivered double-digit retail sales growth. Segment sales grew primarily due to the benefit of price increases. Pretax earnings growth reflected the benefit of cost savings.
International
(All countries outside of the U.S.)
•2% volume decrease
•3% sales increase
•30% pretax earnings decrease
Volume declined in the segment largely due to the exit of nonstrategic export businesses. Base business in Latin America grew both volume and sales, while Canada volume and sales declined slightly. Segment sales increased primarily due to price increases, partially offset by unfavorable foreign exchange. The pretax earnings decline of $12 million was due to the inflationary impact on manufacturing and logistics costs, unfavorable foreign exchange and expenses associated with IT systems implementation in Latin America.
Clorox Confirms Fiscal 2013 Financial Outlook
Clorox confirmed its previous financial outlook for fiscal 2013:
•2-4 percent sales growth
•EBIT margin up 25-50 basis points
•Diluted EPS in the range of $4.20-$4.35
Clorox continues to anticipate sales growth for fiscal 2013 in the range of 2 percent to 4 percent. This reflects continued category growth and product innovation across many of the company's brands. Uncertainty in some international markets, the negative impact of declining foreign currencies and a more challenging comparison to strong fiscal 2012 sales growth continue to be influencing factors in the company's fiscal 2013 outlook.
The company continues to expect earnings before interest and taxes (EBIT) margin1 to increase by 25-50 basis points for the fiscal year, reflecting strong cost savings, the benefit of price increases and commodity costs estimated to be about flat versus the prior year. This range also anticipates the impact of declining foreign currencies.
Clorox continues to expect spending against its systems and facilities investments, as well as infrastructure-related investments, to be about equal to fiscal 2012, or in the range of $50 million to $55 million.
Net of all these factors, Clorox continues to anticipate fiscal 2013 diluted EPS in the range of $4.20 to $4.35.
https://investors.thecloroxcompany.com/releasedetail.cfm?ReleaseID=717339
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