Clorox Reports 18% EPS Growth in Third Quarter; Raises Fiscal 2004 EPS Outlook and Provides Initial Outlook for Fiscal 2005.Business Editors OAKLAND, Calif.--(BUSINESS WIRE)--May 6, 2004 The Clorox Clorox commercial name for a sodium hypochlorite preparation marketed as household bleach, but also used for disinfection. Company (NYSE NYSE See: New York Stock Exchange :CLX (library, graphics) CLX - The Common Lisp library providing a low-level interface to the X Window System, equivalent to Xlib. Graphics toolkits can be built on top of CLX, e.g. McCLIM, Garnet, CLUE and CLIO. ) (PSE PSE 1. pale soft exudative pork. 2. portosystemic encephalopathy. :CLX) today announced that sales growth across all segments drove the company's strong earnings results for the third quarter of fiscal year 2004, which ended March 31, 2004. "We are delighted with our third-quarter performance," said President and Chief Executive Officer Jerry Johnston. "We continued to build momentum, and displayed fundamental strength across the company. The continued focus and hard work of Clorox people around the world helped drive our strong top- and bottom-line results." Clorox reported third-quarter net earnings of $126 million, or 59 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with net earnings in the year-ago period of $110 million, or 50 cents per diluted share, for an increase of 9 cents per diluted share, or 18 percent. Third-quarter sales grew 7 percent to $1.086 billion, compared with $1.019 billion in the base period, the largest year-over-year increase in eight quarters. Sales growth outpaced the 4 percent growth in volume primarily due to reduced coupon spending, price increases and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign exchange rates. Volume growth was driven by new products, all-time record shipments of Clorox(R) disinfecting wipes and Glad(R) trash bags, and increased shipments of Brita(R) water-filtration products, food products, charcoal charcoal, substance obtained by partial burning or carbonization (destructive distillation) of organic material. It is largely pure carbon. The entry of air during the carbonization process is controlled so that the organic material does not turn to ash, as in a and cat litter Cat litter (often called kitty litter) is one of any of a number of materials used in litter boxes to absorb moisture from cat feces and urine, which reduces foul odors such as ammonia and renders them more tolerable within the home. . Gross margin in the third quarter declined 40 basis points versus the year-ago quarter to 45.1 percent, primarily due to unfavorable raw-material costs and increased warehousing and transportation costs. These factors were partially offset by strong cost savings and the benefit of increased sales and volume. The company's working capital position averaged -1.9 percent of sales. Clorox generated $203 million of cash from operations in the third quarter, compared to $83 million in the year-ago period, an increase of 145 percent. This positive trend was due to higher earnings and lower working capital in the current period, and a $54 million pension contribution in the year-ago period. Third-Quarter Results by Business Segment Following is a summary of key third-quarter results by segment. All comparisons are with the third quarter of fiscal year 2003. Household Products -- North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. -- 3% volume growth -- 6% sales growth -- 22% pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern earnings growth Strong sales growth in the segment was driven by increased shipments of new products, including Glad(R) Press 'n Seal(TM) sealable plastic wrap, Clorox(R) Bleach bleach Solid or liquid chemical compound used to whiten or remove the natural colour of fibres, yarns, paper, and textile fabrics. Sunlight was the chief bleaching agent up to the discovery of chlorine in 1774 by Karl Wilhelm Scheele (b. 1742—d. Pen(TM) gel and Tilex(R) Mildew mildew, name for certain fungi and protists, for the diseases they cause in various crops, and for the discoloration (and sometimes the weakening and disintegration) they cause in such materials as leather, fabrics, and paper. Root(TM) penetrator and remover. Also contributing to sales growth were all-time record shipments of Clorox(R) disinfecting wipes and Glad(R) trash bags, and increased shipments of Brita(R) water-filtration products and Clorox(R) 2 color-safe bleach. Partially offsetting these positive trends were decreased shipments of Clorox(R) ReadyMop(TM) due to intense competitive activity. Sales growth outpaced volume growth due to lower trade- and consumer-promotion spending versus the year-ago period and favorable Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. exchange rates. Pretax earnings growth primarily reflected the benefit of higher sales and volume. Specialty Products -- 5% volume growth -- 5% sales growth -- No change in pretax earnings The segment's strong sales growth was driven by increased shipments of food products, charcoal and cat litter. The food products business delivered its ninth consecutive quarter of year-over-year volume growth, driven by increased shipments of Hidden Valley(R) bottled salad dressings and K C Masterpiece(R) barbecue barbecue [West Indian or South American], in the United States, traditionally an open-air gathering, political or social, in which meats are roasted whole over a pit of embers and food and drink are liberally enjoyed. products behind five new items. Kingsford(R) charcoal turned in its 12th consecutive quarter of year-over-year volume growth. The cat litter business delivered its eighth consecutive quarter of year-over-year volume growth for Scoop Away(R) cat litters and sixth consecutive quarter of year-over-year volume growth for Fresh Step(R) scoopable cat litter. Pretax earnings were unchanged versus the year-ago period, as the benefit of increased volume and cost savings was offset by costs related to the third-party production of some Match Light(R) charcoal. Household Products -- Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. & Other -- 2% volume growth -- 13% sales growth -- 13% pretax earnings growth Strong sales growth in the segment was primarily driven by favorable foreign exchange rates and volume growth, partially offset by unfavorable mix. Pretax earnings growth reflected increased sales and volume in Argentina due to economic recovery, improved consumption and market share gains in Venezuela and increased distribution of cleaning products in Asia-Pacific. Fiscal 2004 Outlook For the fourth quarter, Clorox continues to expect mid-single-digit volume growth compared to the year-ago period, with sales growing faster than volume. The company still anticipates fourth-quarter earnings per diluted share in the range of 82 cents to 85 cents. Consistent with its long-term goals Long-term goals Financial goals expected to be accomplished in five years or longer. , Clorox for fiscal 2004 continues to expect volume and sales growth in the range of 3 percent to 5 percent and double-digit growth in earnings per diluted share. Due to strong earnings in the third quarter, the company now anticipates earnings from $2.52 to $2.55 per diluted share. Initial Fiscal 2005 Outlook Clorox expects that fiscal year 2005 results will be consistent with the company's previously communicated long-term expectations for sales and volume growth of 3 percent to 5 percent. The company anticipates earnings per diluted share in the range of $2.58 to $2.66, with potential upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside if the company resumes its board-authorized stock-repurchase programs. As previously communicated, Clorox's major shareholder, Henkel KGaA, has announced it might sell some or all of its stake in Clorox to fund its acquisition of The Dial Corporation. While Clorox remains authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: to purchase shares of its common stock under board-authorized repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. programs, the company is temporarily holding off doing so pending further developments and further discussions with Henkel. For the first quarter of fiscal 2005, Clorox anticipates sales and volume growth of 3 percent to 5 percent. The company expects earnings per diluted share in the range of 53 cents to 55 cents. First-quarter earnings-per-diluted-share expectations include a 9 cent estimate for possible restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. related to the company's Glad(R) U.S. manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. . No decisions on restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities have been made, and any such actions require board review and approval. First-quarter earnings are expected to be impacted by significant spending to launch another gamechanger product, while also supporting the company's investment in Clorox(R) ToiletWand(TM) disposable toilet cleaning system, a gamechanger launched in April 2004. Clorox uses the term "gamechanger" to describe significant product innovations that produce meaningful growth for the category and the company. Another recent example is Glad(R) Press 'n Seal (TM) sealable wrap, which addressed two of consumers' biggest complaints about plastic wrap -- ease of use and ability to cling cling intr.v. clung , cling·ing, clings 1. To hold fast or adhere to something, as by grasping, sticking, embracing, or entwining: . Note: Percentage and basis-point changes noted in this news release are calculated based on rounded numbers. The company has posted additional details about its results at www.clorox.com/investors/qr.html. Today's Webcast Today at 10:30 a.m. Pacific time (1:30 p.m. Eastern time), Clorox will host a live audio webcast of a discussion with the investment community regarding the company's third-quarter results. The webcast can be accessed at www.clorox.com/investors. Following a live discussion, a replay of the webcast will be archived for one week on the company's Web site. Clorox to Discuss Strategic Plan in September Clorox will host a conference for the investment community in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of on Sept. 28, 2004. CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Jerry Johnston and members of the company's management team will present a new long-term strategic plan and financial targets. The media and public will be able to listen to a live audio webcast of the presentation. Details will be posted at www.clorox.com closer to the event date. The Clorox Company The Clorox Company is a leading manufacturer and marketer of consumer products with fiscal year 2003 revenues of $4.1 billion. Clorox markets some of consumers' most trusted and recognized brand names, including its namesake name·sake n. One that is named after another. [From the phrase for the name's sake.] namesake Noun bleach and cleaning products, Armor All(R) and STP STP or standard temperature and pressure, standard conditions for measurement of the properties of matter. The standard temperature is the freezing point of pure water, 0°C; or 273.15°K;. (R) auto care products, Fresh Step(R) and Scoop Away(R) cat litters, Kingsford(R) charcoal briquets, Hidden Valley(R) and K C Masterpiece(R) dressings and sauces, Brita(R) water-filtration systems, and Glad(R) bags, wraps and containers. With 8,900 employees worldwide, the company manufactures products in 25 countries and markets them in more than 100 countries. Clorox is committed to making a positive difference in the communities where its employees work and live. Founded in 1980, The Clorox Company Foundation has awarded cash grants totaling more than $55 million to nonprofit organizations Nonprofit Organization An association that is given tax-free status. Donations to a non-profit organization are often tax deductible as well. Notes: Examples of non-profit organizations are charities, hospitals and schools. , schools and colleges; and in fiscal 2003 alone made product donations valued at $5 million. For more information about Clorox, visit www.clorox.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Except for historical information, matters discussed above, including statements about future volume, sales and earnings growth, profitability, costs, cost savings 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 Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operation" in the company's SEC Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended June 30, 2003, as updated from time to time in the company's SEC filings. Those factors include, but are not limited to, general economic and marketplace conditions and events, competitors' actions, the company's costs, the effects on cash flow of tax payments, the success of information systems design and implementation, the ability to manage and realize the benefits of joint ventures and other cooperative relationships, risks inherent in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , the success of new products, the integration of acquisitions, and environmental, regulatory and intellectual property matters.
Condensed Consolidated Statements of Earnings (Unaudited)
In millions, except share and per-share amounts
Three Months Ended Nine Months Ended
------------------- -------------------
3/31/04 3/31/03 3/31/04 3/31/03
-------- -------- -------- --------
Net sales $ 1,086 $ 1,019 $ 3,081 $ 2,992
Cost of products sold 596 555 1,722 1,595
-------- -------- -------- --------
Gross profit 490 464 1,359 1,397
Selling and administrative
expenses 164 150 415 397
Advertising costs 107 119 301 333
Research and development
costs 22 20 61 53
Asset impairment costs - - - 33
Interest expense 8 6 21 22
Other income, net (6) (4) (5) (1)
-------- -------- -------- --------
Earnings from continuing
operations before income
taxes 195 173 566 560
Income taxes 68 61 198 203
-------- -------- -------- --------
Earnings from continuing
operations 127 112 368 357
Losses from discontinued
operations, net of tax
benefits of $0 for each
three-month period, and
$2 and $7 for the nine-
month periods ended March
31, 2004 and 2003,
respectively (1) (2) (4) (13)
-------- -------- -------- --------
Net earnings $ 126 $ 110 $ 364 $ 344
======== ======== ======== ========
Net earnings (losses) per
common share
Basic
Continuing operations $ 0.60 $ 0.52 $ 1.74 $ 1.64
Discontinued operations (0.00) (0.01) (0.02) (0.06)
-------- -------- -------- --------
Basic net earnings per
common share $ 0.60 $ 0.51 $ 1.72 $ 1.58
======== ======== ======== ========
Diluted
Continuing operations $ 0.59 $ 0.51 $ 1.72 $ 1.62
Discontinued operations (0.00) (0.01) (0.02) (0.06)
-------- -------- -------- --------
Diluted net earnings
per common share $ 0.59 $ 0.50 $ 1.70 $ 1.56
======== ======== ======== ========
Weighted average shares
outstanding (in thousands)
Basic 211,213 216,414 211,456 218,528
Diluted 213,606 218,696 214,052 221,078
Segment Information (Unaudited)
In millions
Earnings from Continuing
Net Sales Operations Before
Income Taxes
-------------------------- --------------------------
Three Months Three Months
Ended Ended
--------------- % --------------- %
3/31 3/31 3/31 3/31
2004 2003 Change (1) 2004 2003 Change (1)
------- ------- ---------- ------- ------- ---------
Household
Products -
North America $ 583 $ 549 6% $ 149 $ 122 22%
Specialty
Products 361 344 5% 135 135 0%
Household
Products -
Latin America
/Other 142 126 13% 34 30 13%
Corporate - - - (123) (114) -8%
------- ------- ---------- ------- ------- ---------
Total Company $ 1,086 $ 1,019 7% $ 195 $ 173 13%
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(1) Percentages based on rounded numbers
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