OAKLAND,
Calif., Feb. 1, 2024 /PRNewswire/ --
The Clorox Company (NYSE: CLX) today reported results for the
second quarter of fiscal year 2024, which ended Dec. 31, 2023.
Second-Quarter Fiscal Year 2024 Summary
Following is a summary of key results for the second quarter,
which reflect operational recovery from the previously announced
cyberattack. All comparisons are with the second quarter of fiscal
year 2023 unless otherwise stated.
- Net sales increased 16% to $1.99
billion compared to a 1% net sales increase in the year-ago
quarter. The increase was driven largely by higher volume as the
company rebuilt customer inventories following the August
cyberattack as well as favorable price mix, partially offset by
unfavorable foreign exchange rates. Organic sales1 were
up 20%.
- Gross margin increased 730 basis points to 43.5% from
36.2% in the year-ago quarter, due to the benefits of pricing and
cost-savings initiatives, more than offsetting unfavorable foreign
exchange rates. Gross margin also reflects the benefit of better
cost absorption from strong shipment growth.
- Diluted net earnings per share (diluted EPS) decreased
6% to 75 cents from 80 cents in the year-ago quarter. This decrease
includes a noncash pension plan settlement charge ($1.04), investments in the company's long-term
strategic digital capabilities and productivity enhancements
(19 cents) and incremental expenses
resulting from the cyberattack (16
cents).
- Adjusted EPS1 increased 120% to
$2.16 from 98
cents in the year-ago quarter, due to higher net sales and
gross margin expansion, partially offset by unfavorable foreign
exchange rates, higher selling and administrative expenses and
advertising investments.
- Year-to-date net cash provided by operations was
$173 million compared to $387 million in the year-ago period, representing
a 55% decrease.
"Our second quarter results reflect strong execution on our
recovery plan from the August cyberattack," said Chair and CEO
Linda Rendle. "We are rebuilding
retailer inventories ahead of schedule, enabling us to return to
merchandising and restore distribution. While there is still more
work to do, we're focused on executing with excellence in what
remains a challenging environment to drive top-line growth and
rebuild margin. We're confident we have the right plans in place to
win with consumers given the strength and superior value of our
brands and our ongoing investments in innovation and brand-building
throughout our advantaged portfolio."
This press release includes certain non-GAAP financial
measures. See "Non-GAAP Financial Information" at the end of this
press release for more details.
Strategic and Operational Highlights
The following are recent highlights of business and
environmental, social and governance achievements:
- Made strong progress recovering from the August
cyberattack-related operational disruptions, including progress
recovering market shares and distribution losses by rebuilding the
vast majority of retailer inventory ahead of expectations.
- Delivered another strong quarter of cost savings as part of the
company's ongoing effort to rebuild margin.
- Delivered double-digit organic sales growth in International,
enabled by the company swiftly and successfully executing
incremental pricing actions to fully offset inflation as well as
impacts from Argentina's currency
devaluation.
- Introduced new product innovations to meet the needs of
consumers, including Kingsford High Heat and Low and Slow charcoal
briquettes, Clorox Toilet Bomb Foaming Toilet Bowl Cleaner and the
Brita Refillable Water Filtration System.
- Received the EPA's 2023 Green Chemistry Awards and named to
Wall Street Journal's 250 Best Managed Companies, 3BL's 100
Best Corporate Citizens, and Newsweek's America's Most
Responsible Companies and America's Greenest Companies lists.
Key Segment Results
The following is a summary of key second-quarter results by
reportable segment. All comparisons are with the second quarter of
fiscal year 2023, unless otherwise stated. Prior periods presented
have been recast to reflect the reportable segment changes
effective in the fourth quarter of fiscal year 2023.
Health and Wellness (Cleaning; Professional Products)
- Net sales increased 25%, driven by 22 points of higher volume
and 3 points of favorable price mix.
- Cleaning sales increased, driven by shipments to rebuild
retailer inventory and lapping the voluntary recall of certain
Pine-Sol scented products.
- Professional Products sales increased, driven by shipments to
rebuild retailer inventory and lapping the voluntary recall of
certain Pine-Sol scented products.
- Segment adjusted EBIT2 increased 109%, primarily
behind increased net sales and lower manufacturing and logistics
costs.
Household (Bags and Wraps; Cat Litter; Grilling)
- Net sales increased 9%, driven by 4 points of higher volume and
5 points of favorable price mix.
- Bags and Wraps sales increased, driven by shipments to rebuild
retailer inventory, partially offset by lower merchandising and
consumption losses due to supply chain constraints.
- Cat Litter sales increased, driven by shipments to rebuild
retailer inventory and continued strong consumer demand, partially
offset by consumption losses due to supply chain constraints.
- Grilling sales increased, driven by shipments to rebuild
retailer inventory.
- Segment adjusted EBIT increased 109%, primarily due to net
sales growth and cost savings.
Lifestyle (Food; Natural Personal Care; Water
Filtration)
- Net sales increased 21%, driven by 24 points of higher volume
partially offset by 3 points of unfavorable price mix.
- Food sales increased, driven by shipments to rebuild retailer
inventory.
- Natural Personal Care sales increased, driven by shipments to
rebuild retailer inventory.
- Water Filtration sales increased, driven by shipments to
rebuild retailer inventory and strong merchandising activities,
partially offset by consumption losses from early quarter
out-of-stocks.
- Segment adjusted EBIT increased 47%, due to net sales growth
partially offset by higher manufacturing and logistics costs.
International (Sales Outside the U.S.)
- Net sales increased 9%, with 25 points of favorable price mix
and 6 points of higher volume more than offsetting 22 points of
unfavorable foreign exchange rates. Organic sales grew 31%.
- Segment adjusted EBIT increased 33%, due to net sales growth
behind pricing partially offset by unfavorable foreign exchange
rates.
Fiscal Year 2024 Outlook
The company is updating the following elements of its
fiscal year 2024 outlook:
- Net sales are now expected to be down low single digits,
updated to reflect the progress the company has made in the second
quarter as well as the raise in expectations for the second half of
the fiscal year, partially offset by 5 points of unfavorable
foreign exchange rates primarily due to the devaluation of the
Argentine Peso. This compares to the previous expectation of net
sales that are down mid- to high single digits.
- Gross margin is now expected to be up about 200 basis points,
reflecting the combined benefit of pricing actions, cost savings
and supply chain optimization, partially offset by supply chain
inflation and the impact from the cyberattack. This compares to the
previous expectation of about flat.
- Selling and administrative expenses are now expected to be
between 16% to 17% of net sales, including about 2.5 points of
impact related to investments to enhance the company's digital
capabilities, implementation of the streamlined operating model and
expenses resulting from the cyberattack. This compares to the
previous expectation of about 16% of net sales.
- The company's effective tax rate is now expected to be between
22% and 23%, compared to the previous expectation of about 23% to
24%.
- Net of these factors, fiscal year diluted EPS is now expected
to be between $3.06 and $3.26, or an increase of 155% to 172%,
respectively. This compares to previous expectations between
$2.10 and $2.60, or an increase of 75% to 117%,
respectively, and includes the lapping of a noncash impairment
charge in our Vitamins, Minerals and Supplements business. Adjusted
EPS is now expected to be between $5.30 and $5.50, or
an increase of 4% to 8%. This compares to previous expectations of
between $4.30 and $4.80, or a decrease of 16% to 6%, respectively.
The adjusted EPS outlook excludes the long-term strategic
investments in digital capabilities and productivity enhancements,
which continue to be estimated at about 70
cents; a charge related to the streamlined operating model,
now estimated to be 20 cents; and
incremental charges resulting from the cyberattack of about
30 cents. It also excludes a noncash
charge of $1.04 related to settlement
of the company's domestic qualified pension plan.
The company is confirming the following elements of its
fiscal year 2024 outlook:
- Advertising and sales promotion spending is expected to be
about 11% of net sales. This continues to reflect the company's
stepped-up efforts to emphasize the superior value of its brands at
a time when consumers are increasingly becoming more value focused
as well as to support efforts to rebuild market share.
|
|
|
|
|
1 Organic
sales growth / (decrease) and adjusted EPS are non-GAAP measures.
See Non-GAAP Financial Information at the end of this press release
for reconciliations to the most comparable GAAP
measures.
|
2
Adjusted EBIT is a non-GAAP measure. See Non-GAAP Financial
Information at the end of this press release for reconciliations to
the most comparable GAAP measures.
|
Clorox Earnings Conference Call Schedule
At approximately 4:15 p.m. ET
today, Clorox will post prepared management remarks regarding its
second-quarter fiscal year 2024 results.
At 5 p.m. ET today, the company
will host a live Q&A audio webcast with Chair and CEO
Linda Rendle and Chief Financial
Officer Kevin Jacobsen to discuss
the results.
Links to the live (and archived) webcast, press release and
prepared remarks can be found at Clorox Quarterly Results.
For More Detailed Financial Information
Visit the company's Quarterly Results for the
following:
- Supplemental unaudited volume and sales growth information
- Supplemental unaudited gross margin drivers information
- Supplemental unaudited cash flow information and free cash flow
reconciliation
- Supplemental unaudited reconciliation of earnings (losses)
before interest and taxes (EBIT) and adjusted EBIT
- Supplemental unaudited reconciliation of adjusted earnings per
share (EPS)
Note: Percentage and basis-point, or point, changes noted in
this press release are calculated based on rounded
numbers, except for per-share data and the effective tax
rate.
About The Clorox Company
The Clorox Company (NYSE: CLX) champions people to be well and
thrive every single day. Its trusted brands, which include Brita®,
Burt's Bees®, Clorox®, Fresh Step®, Glad®, Hidden Valley®,
Kingsford®, Liquid-Plumr®, Pine-Sol® and Natural Vitality®, can be
found in about nine of 10 U.S. homes and internationally with
brands such as Ayudin®, Clorinda®, Chux® and Poett®. Headquartered
in Oakland, California, since
1913, Clorox was one of the first U.S. companies to integrate ESG
into its business reporting. In 2023 the company was
ranked No. 1 on Barron's 100 Most Sustainable Companies list.
Visit thecloroxcompany.com to learn more.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including, among others, statements regarding the expected
or potential impact of the company's operational disruption
stemming from a cyberattack, and any such forward-looking
statements involve risks, assumptions and uncertainties. Except for
historical information, statements about future volumes, sales,
organic sales growth, foreign currencies, costs, cost savings,
margins, earnings, earnings per share, diluted earnings per share,
foreign currency exchange rates, tax rates, cash flows, plans,
objectives, expectations, growth or profitability are
forward-looking statements based on management's estimates,
beliefs, assumptions and projections. Words such as "could," "may,"
"expects," "anticipates," "targets," "goals," "projects,"
"intends," "plans," "believes," "seeks," "estimates," "will,"
"predicts," and variations on such words, and similar expressions
that reflect our current views with respect to future events and
operational, economic and financial performance are intended to
identify such forward-looking statements. These forward-looking
statements are only predictions, subject to risks and
uncertainties, and actual results could differ materially from
those discussed. Important factors that could affect performance
and cause results to differ materially from management's
expectations, are described in the sections entitled "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the company's Annual Report on Form
10-K for the fiscal year ended June 30,
2023, and in the company's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30,
2023, and as updated from time to time in the company's
Securities and Exchange Commission filings. These factors include,
but are not limited to: our recovery from the cyberattack,
unfavorable general economic and geopolitical conditions beyond our
control, including supply chain disruptions, labor shortages, wage
pressures, rising inflation, the interest rate environment, fuel
and energy costs, foreign currency exchange rate fluctuations,
weather events or natural disasters, disease outbreaks or
pandemics, such as COVID-19, terrorism, and unstable geopolitical
conditions, including ongoing conflicts in the Middle East and Ukraine and rising tensions between
China and Taiwan, as well as macroeconomic and
geopolitical volatility and uncertainty as a result of a number of
these and other factors, including actual and potential shifts
between the U.S. and its trading partners, especially China; volatility and increases in the costs
of raw materials, energy, transportation, labor and other necessary
supplies or services; the impact of the changing retail
environment, including the growth of alternative retail channels
and business models, and changing consumer preferences; the ability
of the company to drive sales growth, increase prices and market
share, grow its product categories and manage favorable product and
geographic mix; risks related to supply chain issues, product
shortages and disruptions to the business, as a result of increased
supply chain dependencies due to an expanded supplier network and a
reliance on certain single-source suppliers; intense competition in
the company's markets; risks related to the company's use of and
reliance on information technology systems, including potential and
actual security breaches, cyberattacks, privacy breaches or data
breaches that result in the unauthorized disclosure of consumer,
customer, employee or company information, business, service or
operational disruptions, or that impact the company's financial
results or financial reporting, or any resulting unfavorable
outcomes, increased costs or legal proceedings; the ability
of the company to implement and generate cost savings and
efficiencies, and successfully implement its transformational
initiatives or strategies, including achieving anticipated benefits
and cost savings from the implementation of the streamlined
operating model and digital capabilities and productivity
enhancements; dependence on key customers and risks related to
customer consolidation and ordering patterns; the company's ability
to attract and retain key personnel, which may continue to be
impacted by challenges in the labor market, such as wage inflation
and sustained labor shortages; the company's ability to maintain
its business reputation and the reputation of its brands and
products; lower revenue, increased costs or reputational harm
resulting from government actions and compliance with regulations,
or any material costs imposed by changes in regulation; changes to
our processes and procedures as a result of our digital
capabilities and productivity enhancements investment that may
result in changes to the company's internal controls over financial
reporting; the ability of the company to successfully manage global
political, legal, tax and regulatory risks, including changes in
regulatory or administrative activity; risks related to
international operations and international trade, including
changing macroeconomic conditions as a result of inflation,
volatile commodity prices and increases in raw and packaging
materials prices, labor, energy and logistics; global economic or
political instability; foreign currency fluctuations, such as
devaluations, and foreign currency exchange rate controls; changes
in governmental policies, including trade, travel or immigration
restrictions, new or additional tariffs, and price or other
controls; labor claims and civil unrest; continued high levels of
inflation in Argentina; potential
operational or supply chain disruptions from wars and military
conflicts, including ongoing conflicts in the Middle East and Ukraine and rising tensions between
China and Taiwan; impact of the United Kingdom's exit from the European Union;
potential negative impact and liabilities from the use, storage and
transportation of chlorine in certain international markets where
chlorine is used in the production of bleach; widespread health
emergencies, such as COVID-19; and the possibility of
nationalization, expropriation of assets or other government
action; the impact of Environmental, Social, and Governance (ESG)
issues, including those related to climate change and
sustainability on our sales, operating costs or reputation; the
ability of the company to innovate and to develop and introduce
commercially successful products, or expand into adjacent
categories and countries; the impact of product liability claims,
labor claims and other legal, governmental or tax proceedings,
including in foreign jurisdictions and in connection with any
product recalls; the COVID-19 pandemic and related impacts,
including on the availability of, and efficiency of the supply,
manufacturing and distribution systems for, the company's products,
including any significant disruption to such systems; on the demand
for and sales of the company's products; and on worldwide, regional
and local adverse economic conditions; risks relating to
acquisitions, new ventures and divestitures, and associated costs,
including for asset impairment charges related to, among others,
intangible assets, including trademarks and goodwill, in particular
the impairment charges related to the carrying value of the
company's Vitamins, Minerals and Supplements business; and the
ability to complete announced transactions and, if completed,
integration costs and potential contingent liabilities related to
those transactions; the accuracy of the company's estimates and
assumptions on which its financial projections, including any sales
or earnings guidance or outlook it may provide from time to time,
are based; risks related to increases in the estimated fair value
of The Procter & Gamble Company's interest in the
Glad business; environmental matters, including costs associated
with the remediation and monitoring of past contamination, and
possible increases in costs resulting from actions by relevant
regulators, and the handling and/or transportation of hazardous
substances; the company's ability to effectively utilize,
assert and defend its intellectual property rights, and any
infringement or claimed infringement by the company of third-party
intellectual property rights; the performance of strategic
alliances and other business relationships; the effect of the
company's indebtedness and credit rating on its business operations
and financial results and the company's ability to access capital
markets and other funding sources, as well as the cost of capital
to the company; the company's ability to pay and declare dividends
or repurchase its stock in the future; the impacts of potential
stockholder activism; and risks related to any litigation
associated with the exclusive forum provision in the company's
bylaws.
The company's forward-looking statements in this press release
are based on management's current views, beliefs, assumptions and
expectations regarding future events and speak only as of the date
of this press release. The company undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by the federal securities laws.
Non-GAAP Financial Information
- This press release contains non-GAAP financial information
related to organic sales growth / (decrease), adjusted EPS and
segment adjusted EBIT for the second quarter of fiscal year 2024,
as well as adjusted EPS outlook for fiscal year 2024.
- Clorox defines organic sales growth / (decrease) as GAAP net
sales growth / (decrease) excluding the effect of foreign exchange
rate changes and any acquisitions or divestitures.
- Management believes that the presentation of organic sales
growth / (decrease) is useful to investors because it excludes
sales from any acquisitions and divestitures, which results in a
comparison of sales only from the businesses that the company was
operating and expects to continue to operate throughout the
relevant periods, and the company's estimate of the impact of
foreign exchange rate changes, which are difficult to predict and
out of the control of the company and management. However, organic
sales growth / (decrease) may not be the same as similar measures
provided by other companies due to potential differences in methods
of calculation or differences in which items are incorporated into
these adjustments.
- Adjusted EPS is defined as diluted earnings per share that
excludes or has otherwise been adjusted for significant items that
are nonrecurring or unusual. The income tax effect on non-GAAP
items is calculated based upon the tax laws and statutory income
tax rates applicable in the tax jurisdiction(s) of the underlying
non-GAAP adjustment.
- Adjusted EPS is supplemental information that management uses
to help evaluate the company's historical and prospective financial
performance on a consistent basis over time. Management believes
that by adjusting for certain items affecting comparability of
performance over time, such as the pension settlement charge,
incremental costs related to the cyberattack, asset impairments,
charges related to the streamlined operating model, charges related
to the digital capabilities and productivity enhancements
investment, significant losses/(gains) related to acquisitions, and
other nonrecurring or unusual items, investors and management are
able to gain additional insight into the company's underlying
operating performance on a consistent basis over time. However,
adjusted EPS may not be the same as similar measures provided by
other companies due to potential differences in methods of
calculation or differences in which items are incorporated into
these adjustments.
- Adjusted EBIT represents earnings (losses) before income taxes
excluding interest income, interest expense and other significant
items that are nonrecurring or unusual (such as the pension
settlement charge, incremental costs related to the cyberattack,
asset impairments, charges related to the streamlined operating
model, charges related to the digital capabilities and productivity
enhancements investment, significant losses/(gains) related to
acquisitions and other nonrecurring or unusual items impacting
comparability during the period. The company uses this measure to
assess the operating results and performance of its segments,
perform analytical comparisons, identify strategies to improve
performance, and allocate resources to each segment. Management
believes that the presentation of adjusted EBIT excluding these
items is useful to investors to assess operating performance on a
consistent basis by removing the impact of the items that
management believes do not directly reflect the performance of each
segment's underlying operations. However, adjusted EBIT may not be
the same as similar measures provided by other companies due to
potential differences in methods of calculation or differences in
which items are incorporated into these adjustments.
- The reconciliation tables below refer to the equivalent GAAP
measures adjusted as applicable for the following items:
Pension Settlement Charge
In the second quarter of fiscal year 2024, the Company settled
plan benefits related to its domestic qualified pension plan
through a combination of an annuity contract purchase with a
third-party insurance provider and lump sum payouts. These payments
were made using plan assets. In conjunction with this settlement, a
one-time noncash charge of $171
million ($130 million after
tax) was recorded.
Due to the nature, scope and magnitude of these costs, the
Company's management believes presenting these costs as an
adjustment in the non-GAAP results provides additional information
to investors about trends in the Company's operations and is useful
for period over period comparisons. It also allows investors to
view underlying operating results in the same manner as they are
viewed by Company management.
Cyberattack Costs
As previously disclosed, incremental costs were incurred by the
company as the result of a cyberattack. These costs relate
primarily to third-party consulting services, including IT recovery
and forensic experts and other professional services incurred to
investigate and remediate the attack, as well as incremental
operating costs from the resulting disruption to the company's
business operations.
In the three and six months ended Dec.
31, 2023, the company has not recognized any insurance
proceeds related to the cyberattack. The timing of recognizing
insurance recoveries may differ from the timing of recognizing the
associated expenses. Costs associated with ongoing cybersecurity
monitoring and prevention as well as enhancement to the company's
cybersecurity program are not included within this adjustment. The
company expects to incur lessening costs related to the cyberattack
in future periods.
Due to the nature, scope and magnitude of these costs, the
company's management believes presenting these costs as an
adjustment in the non-GAAP results provides additional information
to investors about trends in the company's operations and is useful
for period over period comparisons. It also allows investors to
view underlying operating results in the same manner as they are
viewed by company management.
Streamlined Operating Model
In the first quarter of fiscal year 2023, Clorox began
recognizing costs related to a plan that involves streamlining its
operating model to meet its objectives of driving growth and
productivity. The streamlined operating model is expected to
enhance the company's ability to respond more quickly to changing
consumer behaviors and innovate faster. The company anticipates the
implementation of this new model will be completed in fiscal year
2024, with different phases occurring throughout the implementation
period.
Once fully implemented, the company expects annual cost savings
of approximately $75 million to
$100 million, with benefits of
approximately $35 million realized in
fiscal year 2023. The benefits of the streamlined operating model
are currently expected to increase future cash flows as a result of
cost savings that will be generated primarily in the areas of
selling and administration, supply chain, marketing and research
and development. The company incurred $60
million of costs in fiscal year 2023 and anticipates
incurring approximately $30 million
to $40 million in fiscal year 2024
related to this initiative. Related costs are primarily expected to
include employee-related costs to reduce certain staffing levels,
such as severance payments, as well as for consulting and other
costs. Due to the nonrecurring and unusual nature of these costs,
the company's management believes presenting these costs as an
adjustment in the non-GAAP results provides additional information
to investors about trends in the company's operations and is useful
for period over period comparisons. It also allows investors to
view underlying operating results in the same manner as they are
viewed by company management.
Digital Capabilities and Productivity Enhancements
Investment
As announced in August 2021, the
company plans to invest approximately $500
million over a five-year period in transformative
technologies and processes. This investment, which began in the
first quarter of fiscal year 2022, includes replacement of the
company's enterprise resource planning system and transitioning to
a cloud-based platform as well as the implementation of a suite of
other digital technologies. Together it is expected that these
implementations will generate efficiencies and transform the
company's operations in the areas of supply chain, digital
commerce, innovation, brand building and more over the long
term.
Of the total $500 million
investment, approximately 65% is expected to represent incremental
operating costs primarily recorded within selling and
administrative expenses to be adjusted from reported EPS for
purposes of disclosing adjusted EPS through fiscal year 2026. About
70% of these operating costs are expected to be related to the
implementation of the ERP, with the remaining costs primarily
related to the implementation of complementary technologies.
Due to the nature, scope and magnitude of this investment, these
costs are considered by management to represent incremental
transformational costs above the historical normal level of
spending for information technology to support operations. Since
these strategic investments, including incremental operating costs,
will cease at the end of the investment period, are not expected to
recur in the foreseeable future and are not considered
representative of the company's underlying operating performance,
the company's management believes presenting these costs as an
adjustment in the non-GAAP results provides additional information
to investors about trends in the company's operations and is useful
for period-over-period comparisons. It also allows investors to
view underlying operating results in the same manner as they are
viewed by company management.
The following table provides reconciliation of organic sales
growth / (decrease) (non-GAAP) to net sales growth / (decrease),
the most comparable GAAP measure:
|
Three months ended
Dec. 31, 2023
|
|
Percentage change
versus the year-ago period
|
|
Health and
Wellness
|
|
Household
|
|
Lifestyle
|
|
International
|
|
Total
Company (1)
|
Net sales growth /
(decrease) (GAAP)
|
25 %
|
|
9 %
|
|
21 %
|
|
9 %
|
|
16 %
|
Add: Foreign
exchange
|
—
|
|
—
|
|
—
|
|
22
|
|
4
|
Add/(Subtract):
Divestitures/acquisitions
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Organic sales growth /
(decrease) (non-GAAP)
|
25 %
|
|
9 %
|
|
21 %
|
|
31 %
|
|
20 %
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
Dec. 31, 2023
|
|
Percentage change
versus the year-ago period
|
|
Health and
Wellness
|
|
Household
|
|
Lifestyle
|
|
International
|
|
Total
|
Net sales growth /
(decrease) (GAAP)
|
(1) %
|
|
(7) %
|
|
(3) %
|
|
2 %
|
|
(2) %
|
Add: Foreign
Exchange
|
—
|
|
—
|
|
—
|
|
18
|
|
3
|
Add/(Subtract):
Divestitures/Acquisitions
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Organic sales growth /
(decrease) (non-GAAP)
|
(1) %
|
|
(7) %
|
|
(3) %
|
|
20 %
|
|
1 %
|
|
(1) Total Company includes Corporate and
Other.
|
The following tables provide reconciliations of adjusted
diluted earnings per share (non-GAAP) to diluted earnings per
share, the most comparable GAAP measure:
Adjusted Diluted
Earnings Per Share (EPS)
|
|
|
|
|
|
|
|
|
|
(Dollars in millions
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
|
|
|
|
|
12/31/2023
|
|
12/31/2022
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
(GAAP)
|
|
$
0.75
|
|
$
0.80
|
|
(6) %
|
|
|
|
|
|
|
Pension
settlement charge (1)
|
|
1.04
|
|
—
|
|
|
|
|
|
|
|
|
Cyberattack costs
(2)
|
|
0.16
|
|
—
|
|
|
|
|
|
|
|
|
Streamlined operating
model (3)
|
|
0.02
|
|
0.02
|
|
|
|
|
|
|
|
|
Digital capabilities
and productivity
enhancements investment (4)
|
|
0.19
|
|
0.16
|
|
|
|
|
|
|
|
|
As adjusted
(Non-GAAP)
|
|
$
2.16
|
|
$
0.98
|
|
120 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
Six months
ended
|
|
|
|
|
|
|
12/31/2023
|
|
12/31/2022
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
(GAAP)
|
|
$
0.92
|
|
$
1.49
|
|
(38) %
|
|
|
|
|
|
|
Pension settlement
charge (1)
|
|
1.04
|
|
—
|
|
|
|
|
|
|
|
|
Cyberattack costs
(2)
|
|
0.30
|
|
—
|
|
|
|
|
|
|
|
|
Streamlined operating
model (3)
|
|
0.02
|
|
0.14
|
|
|
|
|
|
|
|
|
Digital capabilities
and productivity
enhancements investment (4)
|
|
0.36
|
|
0.28
|
|
|
|
|
|
|
|
|
As adjusted
(Non-GAAP)
|
|
$
2.64
|
|
$
1.91
|
|
38 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) During
the three and six months ended Dec. 31, 2023, the company incurred
approximately $171 ($130 after tax) of costs related to the
settlement of the domestic qualified pension plan.
|
|
|
(2) During
the three and six months ended Dec. 31, 2023, the company incurred
approximately $25 ($19 after tax) and $49 ($37 after tax),
respectively, of costs related to the cyberattack. These costs
relate primarily to third-party consulting services, including IT
recovery and
forensic experts and other professional services incurred to
investigate and remediate the attack, as well as incremental
operating costs
from the resulting disruption to the company's business
operations.
|
|
|
(3) During
both the three and six months ended Dec. 31, 2023, the company
incurred $3 ($2 after tax), and during the three and six
months ended Dec. 31, 2022, the company incurred approximately $4
($3 after tax) and $23 ($17 after tax), respectively, of
restructuring
and related costs, net related to implementation of the streamlined
operating model.
|
|
|
(4) During
the three and six months ended Dec. 31, 2023, the company incurred
approximately $32 ($24 after tax) and $59 ($45 after tax),
respectively, and during the three and six months ended Dec, 31,
2022, the company incurred approximately $25 ($20 after tax) and
$45
($35 after tax), respectively, of operating expenses related to its
digital capabilities and productivity enhancements investment.
The
expenses relate to the following:
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
|
|
|
|
12/31/2023
|
|
12/31/2022
|
|
12/31/2023
|
|
12/31/2022
|
|
|
|
|
|
External consulting
fees (a)
|
|
$
25
|
|
$
20
|
|
$
46
|
|
$
36
|
|
|
|
|
|
IT project personnel
costs (b)
|
|
2
|
|
1
|
|
4
|
|
2
|
|
|
|
|
|
Other
(c)
|
|
5
|
|
4
|
|
9
|
|
7
|
|
|
|
|
|
Total
|
|
$
32
|
|
$
25
|
|
$
59
|
|
$
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Comprised of third-party consulting fees incurred to assist in the
project management and the preliminary project stage of this
transformative investment.
The company relies on consultants for certain capabilities required
for these programs that the company does not maintain internally.
These costs support
the implementation of these programs incremental to the company's
normal IT costs and will not be incurred following
implementation.
|
|
|
|
(b)
Comprised of labor costs associated with internal IT project
management teams that are utilized to oversee the new system
implementations. Given the
magnitude and transformative nature of the implementations planned,
the necessary project management costs are incremental to the
historical levels of
spend and will no longer be incurred subsequent to implementation.
As a result of this long-term strategic investment, the company
considers these costs not
reflective of the ongoing costs to operate its business.
|
|
|
|
(c)
Comprised of various other expenses associated with the company's
new system implementations, including company personnel dedicated
to the project
that have been backfilled with either permanent or temporary
resources in positions that are considered part of normal operating
expenses.
|
|
|
|
|
|
|
|
|
|
Full year 2024
outlook
(estimated range)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
|
|
|
|
Low
|
|
High
|
|
|
|
|
|
|
As estimated
(GAAP)
|
|
$
3.06
|
|
$
3.26
|
|
|
|
|
|
|
Pension settlement
charge
|
|
1.04
|
|
1.04
|
|
|
|
|
|
|
|
|
Cyberattack costs
(5)
|
|
0.30
|
|
0.30
|
|
|
|
|
|
|
Streamlined operating
model (6)
|
|
0.20
|
|
0.20
|
|
|
|
|
|
|
Digital capabilities
and productivity
enhancements investment (7)
|
|
0.70
|
|
0.70
|
|
|
|
|
|
|
As adjusted
(Non-GAAP)
|
|
$
5.30
|
|
$
5.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) In FY24,
the company expects to incur approximately $50-$60 ($38-$46 after
tax) of costs related to the cyberattack. These costs
relate primarily to third-party consulting services, including IT
recovery and forensic experts and other professional services
incurred to
investigate and remediate the attack, as well as incremental
operating costs from the resulting disruption to the company's
business
operations.
|
|
|
(6) In FY24,
the company expects to incur approximately $30-$40 ($23-$30 after
tax) of restructuring and related costs, net related to
implementation of the streamlined operating model.
|
|
|
(7) In FY24,
the company expects to incur approximately $115-$135 ($87-$102
after tax) of operating expenses related to its digital
capabilities and productivity enhancements investment.
|
|
The following table provides reconciliation of adjusted EBIT
(non-GAAP) to earnings (losses) before income taxes, the most
comparable GAAP measure:
|
Reconciliation of
earnings (losses) before income taxes
to adjusted EBIT
|
|
Three months
ended
|
|
Six months
ended
|
|
12/31/2023
|
|
12/31/2022
|
|
12/31/2023
|
|
12/31/2022
|
Earnings (losses)
before income taxes
|
$
136
|
|
$
130
|
|
$
165
|
|
$
246
|
Interest
income
|
(7)
|
|
(3)
|
|
(17)
|
|
(5)
|
Interest
expense
|
26
|
|
23
|
|
47
|
|
45
|
Pension settlement
charge
|
171
|
|
—
|
|
171
|
|
—
|
Cyberattack
costs
|
25
|
|
—
|
|
49
|
|
—
|
Streamlined operating
model
|
3
|
|
4
|
|
3
|
|
23
|
Digital capabilities
and productivity enhancements investment
|
32
|
|
25
|
|
59
|
|
45
|
Adjusted
EBIT
|
$
386
|
|
$
179
|
|
$
477
|
|
$
354
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
|
|
|
|
|
Dollars in millions,
except per share data
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
|
12/31/2023
|
|
12/31/2022
|
|
12/31/2023
|
|
12/31/2022
|
|
Net sales
|
|
$
1,990
|
|
$
1,715
|
|
$
3,376
|
|
$
3,455
|
|
Cost of products
sold
|
|
1,124
|
|
1,095
|
|
1,978
|
|
2,209
|
|
Gross profit
|
|
866
|
|
620
|
|
1,398
|
|
1,246
|
|
Selling and
administrative expenses
|
|
322
|
|
282
|
|
598
|
|
543
|
|
Advertising
costs
|
|
186
|
|
156
|
|
351
|
|
317
|
|
Research and
development costs
|
|
32
|
|
33
|
|
61
|
|
65
|
|
Pension settlement
charge
|
|
|
171
|
|
—
|
|
171
|
|
—
|
|
Interest
expense
|
|
26
|
|
23
|
|
47
|
|
45
|
|
Other (income) expense,
net
|
|
(7)
|
|
(4)
|
|
5
|
|
30
|
|
Earnings before income
taxes
|
|
136
|
|
130
|
|
165
|
|
246
|
|
Income tax
expense
|
|
40
|
|
28
|
|
44
|
|
57
|
|
Net earnings
|
96
|
|
102
|
|
121
|
|
189
|
|
Less: Net earnings
attributable to noncontrolling interests
|
3
|
|
3
|
|
6
|
|
5
|
|
Net earnings
attributable to Clorox
|
|
$
93
|
|
$
99
|
|
$
115
|
|
$
184
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share
attributable to Clorox
|
|
|
|
|
|
|
|
|
Basic net earnings per
share
|
|
$
0.75
|
|
$
0.81
|
|
$
0.93
|
|
$
1.49
|
|
Diluted net earnings
per share
|
|
$
0.75
|
|
$
0.80
|
|
$
0.92
|
|
$
1.49
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding (in thousands)
|
|
|
|
|
|
|
|
|
Basic
|
|
124,176
|
|
123,546
|
|
124,075
|
|
123,443
|
|
Diluted
|
|
124,620
|
|
123,988
|
|
124,635
|
|
123,951
|
|
Reportable Segment
Information
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in
millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
Net
sales
|
|
Three months
ended
|
|
Six months
ended
|
|
12/31/2023
|
|
12/31/2022
|
|
%
Change(1)
|
|
12/31/2023
|
|
12/31/2022
|
|
%
Change(1)
|
Health and
Wellness
|
$
720
|
|
$
577
|
|
25 %
|
|
$
1,224
|
|
$
1,234
|
|
(1) %
|
Household
|
502
|
|
462
|
|
9
|
|
827
|
|
885
|
|
(7)
|
Lifestyle
|
403
|
|
332
|
|
21
|
|
632
|
|
652
|
|
(3)
|
International
|
311
|
|
286
|
|
9
|
|
581
|
|
571
|
|
2
|
Corporate and Other
(2)
|
54
|
|
58
|
|
(7)
|
|
112
|
|
113
|
|
(1)
|
Total
|
$
1,990
|
|
$
1,715
|
|
16 %
|
|
3,376
|
|
$
3,455
|
|
(2) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted
EBIT
|
|
Segment adjusted
EBIT
|
|
Three months
ended
|
|
Six months
ended
|
|
12/31/2023
|
|
12/31/2022
|
|
%
Change(1)
|
|
12/31/2023
|
|
12/31/2022
|
|
%
Change(1)
|
Health and
Wellness
|
$
259
|
|
$
124
|
|
109 %
|
|
$
363
|
|
$
257
|
|
41 %
|
Household
|
92
|
|
44
|
|
109
|
|
88
|
|
66
|
|
33
|
Lifestyle
|
109
|
|
74
|
|
47
|
|
128
|
|
134
|
|
(4)
|
International
|
32
|
|
24
|
|
33
|
|
66
|
|
47
|
|
40
|
Corporate and
Other
|
(106)
|
|
(87)
|
|
22
|
|
(168)
|
|
(150)
|
|
12
|
Total
|
$
386
|
|
$
179
|
|
116 %
|
|
477
|
|
$
354
|
|
35 %
|
Interest
income
|
7
|
|
3
|
|
|
|
17
|
|
5
|
|
|
Interest
expense
|
(26)
|
|
(23)
|
|
|
|
(47)
|
|
(45)
|
|
|
Pension settlement
(3)
|
(171)
|
|
—
|
|
|
|
(171)
|
|
—
|
|
|
Cyberattack costs
(4)
|
(25)
|
|
—
|
|
|
|
(49)
|
|
—
|
|
|
Streamlined operating
model (5)
|
(3)
|
|
(4)
|
|
|
|
(3)
|
|
(23)
|
|
|
Digital capabilities
and productivity enhancements
investment (6)
|
(32)
|
|
(25)
|
|
|
|
(59)
|
|
(45)
|
|
|
Earnings before income
taxes
|
$
136
|
|
$
130
|
|
5 %
|
|
$
165
|
|
$
246
|
|
(33) %
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Percentages based on rounded numbers.
|
(2)
Corporate and Other includes the Vitamin, Minerals and Supplements
business.
|
(3)
Represents the pension settlement charge of $171 ($130 after tax)
for the three and six months ended Dec. 31, 2023.
|
(4)
Represents costs related to the cyberattack of $25 ($19 after tax)
and $49 ($37 after tax) for the three and six months ended
Dec. 31, 2023, respectively.
|
(5)
Represents restructuring and related costs, net for implementation
of the streamlined operating model of $3 ($2 after tax) for both
the three and six months ended Dec. 31, 2023, and $4 ($3 after tax)
and $23 ($17 after tax) for the three and six months ended Dec. 31,
2022, respectively.
|
(6)
Represents expenses related to the company's digital capabilities
and productivity enhancements investment of $32 ($24 after tax) and
$59 ($45 after tax) for the three and six months ended Dec. 31,
2023, and $25 ($20 after tax) and $45 ($35 after tax) for the three
and six months ended Dec. 31, 2022, respectively.
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
Dollars in
millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2023
|
|
6/30/2023
|
|
12/31/2022
|
|
|
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
355
|
|
$
|
367
|
|
$
|
168
|
|
Receivables,
net
|
|
|
679
|
|
|
688
|
|
|
600
|
|
Inventories,
net
|
|
|
655
|
|
|
696
|
|
|
741
|
|
Prepaid expenses and
other current assets
|
|
|
115
|
|
|
77
|
|
|
113
|
|
|
Total current
assets
|
|
|
1,804
|
|
|
1,828
|
|
|
1,622
|
Property, plant and
equipment, net
|
|
|
1,314
|
|
|
1,345
|
|
|
1,322
|
Operating lease
right-of-use assets
|
|
|
354
|
|
|
346
|
|
|
349
|
Goodwill
|
|
|
1,252
|
|
|
1,252
|
|
|
1,553
|
Trademarks,
net
|
|
|
542
|
|
|
543
|
|
|
685
|
Other intangible
assets, net
|
|
|
156
|
|
|
169
|
|
|
183
|
Other assets
|
|
|
486
|
|
|
462
|
|
|
331
|
Total assets
|
|
$
|
5,908
|
|
$
|
5,945
|
|
$
|
6,045
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
Notes and loans
payable
|
|
$
|
247
|
|
$
|
50
|
|
$
|
209
|
|
Current operating lease
liabilities
|
|
|
92
|
|
|
87
|
|
|
80
|
|
Accounts payable and
accrued liabilities
|
|
|
1,649
|
|
|
1,659
|
|
|
1,589
|
|
Income Taxes
Payable
|
|
|
34
|
|
|
121
|
|
|
—
|
|
|
Total current
liabilities
|
|
|
2,022
|
|
|
1,917
|
|
|
1,878
|
Long-term
debt
|
|
|
2,479
|
|
|
2,477
|
|
|
2,476
|
Long-term operating
lease liabilities
|
|
|
311
|
|
|
310
|
|
|
318
|
Other
liabilities
|
|
|
852
|
|
|
825
|
|
|
826
|
Deferred income
taxes
|
|
|
26
|
|
|
28
|
|
|
56
|
|
|
Total
liabilities
|
|
|
5,690
|
|
|
5,557
|
|
|
5,554
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
—
|
|
|
—
|
|
|
—
|
Common stock
|
|
|
131
|
|
|
131
|
|
|
131
|
Additional paid-in
capital
|
|
|
1,245
|
|
|
1,245
|
|
|
1,207
|
Retained
earnings
|
|
|
241
|
|
|
583
|
|
|
782
|
Treasury
stock
|
|
|
(1,205)
|
|
|
(1,246)
|
|
|
(1,297)
|
Accumulated other
comprehensive net (loss) income
|
|
|
(359)
|
|
|
(493)
|
|
|
(502)
|
|
|
Total Clorox
stockholders' equity
|
|
|
53
|
|
|
220
|
|
|
321
|
Noncontrolling
interests
|
|
|
165
|
|
|
168
|
|
|
170
|
Total stockholders'
equity
|
|
|
218
|
|
|
388
|
|
|
491
|
Total liabilities and
stockholders' equity
|
|
$
|
5,908
|
|
$
|
5,945
|
|
$
|
6,045
|
CLX-F
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SOURCE The Clorox Company