OAKLAND, Calif., May 2, 2022 /PRNewswire/ -- The Clorox Company (NYSE: CLX) today reported results for the third quarter of fiscal year 2022, which ended March 31, 2022.
Third-Quarter Fiscal Year 2022 Summary
Following is a summary of key third-quarter results. All comparisons are with the third quarter of fiscal year 2021 unless otherwise stated.
"We saw continued strong demand for our products this quarter and delivered sequential gross margin improvement against the backdrop of a volatile and challenging environment," said CEO Linda Rendle. "While cost inflation continues to increase and uncertainty remains, we're seeing the strength and resiliency of our brands driving benefits across the business, and the actions we're taking to rebuild margin are gaining momentum. We're confident that our strategic choices and focus on operational performance position us well over the long term to create value for all our stakeholders."
This press release includes certain non-GAAP financial measures. See "Non-GAAP Financial Information" at the end of this press release for more details.
1Organic 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. |
Strategic and Operational Highlights
The following are highlights of business and ESG achievements in the third quarter:
Key Segment Results
The following is a summary of key third-quarter results by reportable segment. All comparisons are with the third quarter of fiscal year 2021, unless otherwise stated.
Health and Wellness (Cleaning; Professional Products; Vitamins, Minerals and Supplements)
2 Adjusted pretax earnings for the Health and Wellness segment 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. |
Household (Bags and Wraps, Grilling, Cat Litter)
Lifestyle (Food, Natural Personal Care, Water Filtration)
International (Sales Outside the U.S.)
Fiscal Year 2022 Outlook
The company updated its outlook to reflect the following:
Clorox Earnings Conference Call Schedule
At approximately 4:15 p.m. ET today, Clorox will post prepared management remarks regarding its third-quarter fiscal year 2022 results.
At 5 p.m. ET today, the company will host a live Q&A audio webcast with 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:
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.
The Clorox Company
The Clorox Company (NYSE: CLX) is a leading multinational manufacturer and marketer of consumer and professional products with about 9,000 employees worldwide and fiscal year 2021 sales of $7.3 billion. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products; Pine-Sol® cleaners; Liquid-Plumr® clog removers; Poett® home care products; Fresh Step® cat litter; Glad® bags and wraps; Kingsford® grilling products; Hidden Valley® dressings and sauces; Brita® water-filtration products; Burt's Bees® natural personal care products; and RenewLife®, Rainbow Light®, Natural Vitality CALM™, and NeoCell® vitamins, minerals and supplements. The company also markets industry-leading products and technologies for professional customers, including those sold under the CloroxPro™ and Clorox Healthcare® brand names. More than 80% of the company's sales are generated from brands that hold the No. 1 or No. 2 market share positions in their categories.
Clorox is a signatory of the United Nations Global Compact and the Ellen MacArthur Foundation's New Plastics Economy Global Commitment. The company has been broadly recognized for its corporate responsibility efforts, included on the Barron's 2022 100 Most Sustainable Companies list, 2022 Bloomberg Gender-Equality Index, the Human Rights Campaign's 2022 Corporate Equality Index and the 2021 Parity.org Best Places for Women to Advance list, among others. In support of its communities, The Clorox Company and its foundations contributed about $20 million in combined cash grants, product donations and cause marketing in fiscal year 2021. For more information, visit TheCloroxCompany.com and follow the company on Twitter at @CloroxCo.
CLX-F
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 related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of governments, consumers, customers, suppliers, employees and the company, on our business, operations, employees, financial condition and results of operations, and any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, 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, 2021, as updated from time to time in the company's Securities and Exchange Commission filings. These factors include, but are not limited to: intense competition in the company's markets; the impact of the changing retail environment, including the growth of alternative retail channels and business models, and changing consumer preferences; the impact of COVID-19 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 the company's products; and on worldwide, regional and local adverse economic conditions, including increased risk of inflation; volatility and increases in the costs of raw materials, energy, transportation, labor and other necessary supplies or services; risks related to supply chain issues and product shortages as a result of increased supply chain dependencies due to an expanded supplier network and a reliance on certain single-source suppliers; risks relating to the significant increase in demand for disinfecting and other products due to the COVID-19 pandemic continuing; dependence on key customers and risks related to customer consolidation and ordering patterns; risks related to the company's use of and reliance on information technology systems, including potential security breaches, cyber-attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or company information, or service interruptions, especially at a time when a large number of the company's employees are working remotely and accessing its technology infrastructure remotely; 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 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 relating 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 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; the ability of the company to successfully manage global political, legal, tax and regulatory risks, including changes in regulatory or administrative activity; the operations of the company and its suppliers being subject to disruption by events beyond the company's control, including work stoppages, cyber-attacks, weather events or natural disasters, political instability or uncertainty, disease outbreaks or pandemics, such as COVID-19, and terrorism; risks related to international operations and international trade, including 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; inflationary pressures, particularly in Argentina; 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 macroeconomic and geopolitical trends and events, including the unfolding situation in Ukraine and its regional and global ramifications and the effects of inflation; 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 ability of the company to implement and generate cost savings and efficiencies, and successfully implement its business strategies; 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 additional increases in the estimated fair value of The Procter & Gamble Company's interest in the Glad business; the performance of strategic alliances and other business relationships; the company's ability to attract and retain key personnel; the impact of Environmental, Social, and Governance issues, including those related to climate change and sustainability on our sales, operating costs or reputation; 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 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; 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
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 55% 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 over the course of the next five years. Approximately 70% of these incremental 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 tables provide reconciliations of organic sales growth/(decrease) (non-GAAP) to net sales growth/(decrease), the most comparable GAAP measure:
Three Months Ended March 31, 2022 | |||||||||
Percentage change versus the year-ago period | |||||||||
Health and Wellness | Household | Lifestyle | International | Total | |||||
Net sales growth / (decrease) (GAAP) | (3)% | 6% | 4% | 1% | 2% | ||||
Add: Foreign Exchange | — | — | — | 5 | — | ||||
Add/(Subtract): Divestitures/Acquisitions | — | — | — | — | — | ||||
Organic sales growth / (decrease) (non-GAAP) | (3)% | 6% | 4% | 6% | 2% | ||||
Nine Months Ended March 31, 2022 | |||||||||
Percentage change versus the year-ago period | |||||||||
Health and Wellness | Household | Lifestyle | International | Total | |||||
Net sales growth / (decrease) (GAAP) | (11)% | (1)% | 4% | 1% | (4)% | ||||
Add: Foreign Exchange | — | — | — | 3 | — | ||||
Add/(Subtract): Divestitures/Acquisitions | — | — | — | — | — | ||||
Organic sales growth / (decrease) (non-GAAP) | (11)% | (1)% | 4% | 4% | (4)% |
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 March 31 | ||||||||
2022 | 2021 | % Change | ||||||
As reported (GAAP) | $ 1.21 | $ (0.49) | 347% | |||||
Digital capabilities and productivity enhancements investment (1) | 0.10 | — | ||||||
VMS impairment (2, 3) | — | 2.11 | ||||||
As adjusted (Non-GAAP) | $ 1.31 | $ 1.62 | (19)% | |||||
Diluted Earnings Per Share | ||||||||
Nine Months Ended March 31 | ||||||||
2022 | 2021 | % Change | ||||||
As reported (GAAP) | $ 2.91 | $ 4.78 | (39)% | |||||
Digital capabilities and productivity enhancements investment (1) | 0.26 | — | ||||||
VMS impairment (2, 3) | — | 2.10 | ||||||
Saudi JV acquisition gain (4) | — | (0.60) | ||||||
As adjusted (Non-GAAP) | $ 3.17 | $ 6.28 | (50)% | |||||
(1) During the three and nine months ended March 31, 2022, the company incurred approximately $15 ($11 after tax) and $42 ($32 after tax), respectively, of operating expenses related to its digital capabilities and productivity enhancements investment. The expenses relate to the following: | ||||||||
Three Months Ended | Nine Months Ended | |||||||
March 31, 2022 | ||||||||
External consulting fees (a) | $ 10 | $ 29 | ||||||
IT project personnel costs (b) | 3 | 9 | ||||||
Other (c) | 2 | 4 | ||||||
Total | $ 15 | $ 42 | ||||||
(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. | ||||||||
(2) During the three and nine months ended March 31, 2021, noncash impairment charges of goodwill, trademarks and other assets were recorded of $329 ($267 after tax) related to the VMS SBU. | ||||||||
(3) The three months ended March 31, 2021, includes the dilution impacts of the difference between the diluted weighted-average shares used in calculating the diluted (losses) per share, as reported to the diluted weighted-average shares used in calculating the non-GAAP diluted earnings per share, as adjusted (127,108 shares). | ||||||||
(4) On July 9, 2020, the company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). As a result of this transaction, a noncash nonrecurring net gain was recognized of $82 ($76 after tax) in Other (income) expense, net in the quarter ended September 30, 2020, primarily due to the remeasurement of the carrying value of the company's previously held equity investment to fair value. | ||||||||
Full Year 2022 Outlook (Estimated Range) | ||||||||
Diluted Earnings Per Share | ||||||||
Low | High | |||||||
As estimated (GAAP) | $ 3.60 | $ 3.85 | ||||||
Digital capabilities and productivity enhancements investment (5) | 0.45 | 0.45 | ||||||
As adjusted (Non-GAAP) | $ 4.05 | $ 4.30 | ||||||
(5) In FY22, the company expects to incur approximately $73 ($55 after tax) of operating expenses related to its digital capabilities and productivity enhancements investment. |
Condensed Consolidated Statements of Earnings (Unaudited) | |||||||||
Dollars in millions, except per share data | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
03/31/2022 | 03/31/2021 | 03/31/2022 | 03/31/2021 | ||||||
Net sales | $ 1,809 | $ 1,781 | $ 5,306 | $ 5,539 | |||||
Cost of products sold | 1,160 | 1,007 | 3,429 | 3,008 | |||||
Gross profit | 649 | 774 | 1,877 | 2,531 | |||||
Selling and administrative expenses | 233 | 237 | 710 | 744 | |||||
Advertising costs | 153 | 200 | 502 | 566 | |||||
Research and development costs | 31 | 32 | 98 | 104 | |||||
Goodwill, trademark and other intangible asset impairments | — | 329 | — | 329 | |||||
Interest expense | 21 | 25 | 69 | 74 | |||||
Other (income) expense, net | 11 | 10 | 20 | (85) | |||||
Earnings (losses) before income taxes | 200 | (59) | 478 | 799 | |||||
Income taxes | 48 | — | 111 | 180 | |||||
Net earnings (losses) | 152 | (59) | 367 | 619 | |||||
Less: Net earnings attributable to noncontrolling interests | 2 | 2 | 6 | 6 | |||||
Net earnings (losses) attributable to Clorox | $ 150 | $ (61) | $ 361 | $ 613 | |||||
Net earnings (losses) per share attributable to Clorox | |||||||||
Basic net earnings (losses) per share | $ 1.22 | $ (0.49) | $ 2.93 | $ 4.86 | |||||
Diluted net earnings (losses) per share | $ 1.21 | $ (0.49) | $ 2.91 | $ 4.78 | |||||
Weighted average shares outstanding (in thousands) | |||||||||
Basic | 123,177 | 125,610 | 123,074 | 126,057 | |||||
Diluted | 123,877 | 125,610 | 123,943 | 128,030 |
Reportable Segment Information | |||||||||||||
(Unaudited) | |||||||||||||
Dollars in millions | |||||||||||||
Net sales | Earnings (losses) before income taxes | ||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||
3/31/2022 | 3/31/2021 | % Change(1) | 3/31/2022 | 3/31/2021 | % Change(1) | ||||||||
Health and Wellness (2) | $ | 662 | $ | 680 | (3)% | $ | 84 | $ | (183) | 146% | |||
Household | 539 | 510 | 6% | 92 | 97 | (5)% | |||||||
Lifestyle | 306 | 293 | 4% | 66 | 68 | (3)% | |||||||
International | 302 | 298 | 1% | 31 | 30 | 3% | |||||||
Corporate | — | — | — | (73) | (71) | 3% | |||||||
Total | $ | 1,809 | $ | 1,781 | 2% | $ | 200 | $ | (59) | 439% | |||
Net sales | Earnings (losses) before income taxes | ||||||||||||
Nine Months Ended | Nine Months Ended | ||||||||||||
3/31/2022 | 3/31/2021 | % Change(1) | 3/31/2022 | 3/31/2021 | % Change(1) | ||||||||
Health and Wellness (2) | $ | 2,055 | $ | 2,310 | (11)% | $ | 245 | $ | 315 | (22)% | |||
Household | 1,404 | 1,421 | (1)% | 138 | 266 | (48)% | |||||||
Lifestyle | 961 | 928 | 4% | 239 | 259 | (8)% | |||||||
International (3) | 886 | 880 | 1% | 80 | 184 | (57)% | |||||||
Corporate | — | — | — | (224) | (225) | — | |||||||
Total | $ | 5,306 | $ | 5,539 | (4)% | $ | 478 | $ | 799 | (40)% | |||
(1) Percentages based on rounded numbers. | |||||||||||||
(2) The earnings (losses) before income taxes for the Health and Wellness segment includes $329 non-cash impairment charges for the Vitamins, Minerals and Supplements strategic business unit for the three and nine months ended March 31, 2021. | |||||||||||||
(3) On July 9, 2020, the company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). As a result of this transaction, a noncash nonrecurring net gain was recognized of $82 ($76 after tax) in Other (income) expense, net in the nine months ended March 31, 2021, primarily due to the remeasurement of the carrying value of the company's previously held equity investment to fair value. | |||||||||||||
Condensed Consolidated Balance Sheets | |||||||||||
Dollars in millions | |||||||||||
3/31/2022 | 6/30/2021 | 3/31/2021 | |||||||||
(Unaudited) | (Unaudited) | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 241 | $ | 319 | $ | 492 | |||||
Receivables, net | 660 | 604 | 643 | ||||||||
Inventories, net | 803 | 752 | 688 | ||||||||
Prepaid expenses and other current assets | 165 | 154 | 139 | ||||||||
Total current assets | 1,869 | 1,829 | 1,962 | ||||||||
Property, plant and equipment, net | 1,312 | 1,302 | 1,251 | ||||||||
Operating lease right-of-use assets | 311 | 332 | 328 | ||||||||
Goodwill | 1,572 | 1,575 | 1,574 | ||||||||
Trademarks, net | 690 | 693 | 694 | ||||||||
Other intangible assets, net | 204 | 225 | 246 | ||||||||
Other assets | 364 | 378 | 386 | ||||||||
Total assets | $ | 6,322 | $ | 6,334 | $ | 6,441 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities | |||||||||||
Notes and loans payable | $ | 395 | $ | — | $ | — | |||||
Current maturities of long-term debt | 600 | 300 | 300 | ||||||||
Current operating lease liabilities | 73 | 81 | 74 | ||||||||
Accounts payable and accrued liabilities | 1,575 | 1,675 | 1,445 | ||||||||
Total current liabilities | 2,643 | 2,056 | 1,819 | ||||||||
Long-term debt | 1,887 | 2,484 | 2,483 | ||||||||
Long-term operating lease liabilities | 288 | 301 | 305 | ||||||||
Other liabilities | 843 | 834 | 819 | ||||||||
Deferred income taxes | 85 | 67 | 77 | ||||||||
Total liabilities | 5,746 | 5,742 | 5,503 | ||||||||
Stockholders' equity | |||||||||||
Preferred stock | — | — | — | ||||||||
Common stock | 131 | 131 | 131 | ||||||||
Additional paid-in capital | 1,195 | 1,186 | 1,190 | ||||||||
Retained earnings | 951 | 1,036 | 1,086 | ||||||||
Treasury stock | (1,358) | (1,396) | (1,111) | ||||||||
Accumulated other comprehensive net (loss) income | (519) | (546) | (553) | ||||||||
Total Clorox stockholders' equity | 400 | 411 | 743 | ||||||||
Noncontrolling interests | 176 | 181 | 195 | ||||||||
Total stockholders' equity | 576 | 592 | 938 | ||||||||
Total liabilities and stockholders' equity | $ | 6,322 | $ | 6,334 | $ | 6,441 |
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SOURCE The Clorox Company