Clorox Reports Q4 and Full-Year 2006 Results; Confirms Fiscal 2007 Outlook.OAKLAND Oakland, city (1990 pop. 372,242), seat of Alameda co., W Calif., on the eastern side of San Francisco Bay; inc. 1852. Together with San Francisco and San Jose, the city comprises the fourth largest metropolitan area in the United States. , Calif. -- 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. ) announced today that strong sales growth and cost savings contributed to solid operating results for the company's fiscal fourth quarter, which ended June June: see month. 30, 2006. "I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in pleased with our strong fourth-quarter sales growth and, overall, the company's performance for the year," said Interim Chairman and 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. Bob Matschullat. "We executed price increases on more than half of our U.S. portfolio and, excluding divestitures, delivered our fifth year in a row of sales growth of 5 percent or better. And despite unprecedented high commodity costs, we delivered our fifth consecutive year of cost savings over $100 million." In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), Clorox reported fourth-quarter net earnings of $142 million or 92 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. This compares with net earnings in the year-ago period of $156 million or $1.00 per diluted share, for a decrease of 8 cents per diluted share. Excluding the earnings impact of $16 million in after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charges or 11 cents diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. for noncash historical stock option compensation expense related to a voluntary, 10-year review undertaken by the audit committee of the company's board of directors (see related discussion below), the company delivered fourth-quarter diluted EPS of $1.03. Earnings results for the fourth quarter and fiscal year also included after-tax charges of $7 million or 5 cents diluted EPS related to Jerry Jer·ry n. pl. Jer·ries Chiefly British Slang A German, especially a German soldier. [Alteration of German. Johnston's health-related retirement from his positions as chairman and CEO. These after-tax charges include about $4 million related to expected accelerated vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of certain noncash stock compensation and $3 million in connection with expected salary continuation in accordance with the terms of the company's stock compensation and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. disability plans. For the fiscal year, on a GAAP basis, Clorox reported net earnings of $444 million or $2.90 diluted EPS based on weighted average shares outstanding of 153 million. This compares with net earnings in the year-ago period of $1.10 billion or $6.11 diluted EPS based on weighted average shares outstanding of 179 million, for a decrease of $3.21 diluted EPS. Year-ago net earnings included $3.23 diluted EPS from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and gain related to the Henkel Henkel KGaA (ISIN: DE0006048432, ISIN: DE0006048408) is an international household products company headquartered in Düsseldorf, Germany. The company has four business sectors operating in three strategic areas: Home Care share exchange. Excluding the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. earnings impact of noncash charges Noncash charge A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow. That is, this is treated as an accounting expense -- not a real expense that demands cash. for historical stock option grants, the company delivered fiscal 2006 diluted EPS of $3.01. "I'm disappointed that we're we're Contraction of we are. we're we are taking a charge related to historical stock option practices, but I'm pleased and reassured re·as·sure tr.v. re·as·sured, re·as·sur·ing, re·as·sures 1. To restore confidence to. 2. To assure again. 3. To reinsure. that our voluntary review of stock option practices revealed only unintentional errors and no misconduct MISCONDUCT. Unlawful behaviour by a person entrusted in any degree: with the administration of justice, by which the rights of the parties and the justice of the, case may have been affected. 2. ," Matschullat said. "I continue to feel good about the direction of the company. We remain focused on driving growth through consumer insights and building brands that make consumers' lives easier, healthier and better. Importantly, we are committed over the long term to achieving top-tier financial performance and generating total shareholder return in the top third of our peer group." Fourth-quarter highlights Fourth-quarter sales grew 5 percent to $1.32 billion, compared with $1.25 billion in the year-ago quarter. Volume declined less than 1 percent, as price increases earlier in the year continued to reduce shipments of affected products in line with expectations. Sales growth outpaced the change in volume primarily due to both price increases and trade-promotion spending efficiencies. Gross margin in the fourth quarter declined 40 basis points versus the year-ago quarter to 43.7 percent, primarily due to higher energy-related commodity, manufacturing and transportation costs, substantially offset by the benefit of price increases and cost savings. Net cash provided by operations in the fourth quarter was $301 million, or 23 percent of sales, compared with $302 million in the year-ago quarter. Fourth-quarter results by business segment Following is a summary of key fourth-quarter results by business segment. All comparisons are with the fourth quarter of fiscal 2005. Household Group - 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. Compared with the year-ago quarter, the segment reported 6 percent sales growth, 3 percent volume decline and 21 percent increase in pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern earnings. All-time-record shipments of Clorox(R) disinfecting wipes and increased shipments of 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 were more than offset by lower shipments of Clorox(R) BathWand(TM) versus the year-ago quarter, when the product was launched. Also contributing to the year-over-year volume decline were reduced shipments of Clorox 2(R) color-safe 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. , Clorox(R) bathroom cleaners and Clorox(R) Bleach Pen(R) gel, primarily due to price increases and higher competitive activity. Sales growth outpaced the change in volume primarily due to the impact of price increases and more efficient trade-promotion spending. Pretax earnings reflected the benefit of higher sales and cost savings, partially offset by higher commodity costs. Specialty Group Compared with the year-ago quarter, the segment reported 5 percent sales growth, flat volume and 3 percent increase in pretax earnings. All-time-record shipments of Fresh Step(R) 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. behind a significant product improvement were offset primarily by decreased shipments of Glad(R) products due to price increases. The segment also delivered all-time-record shipments of Kingsford(R) products. Sales growth outpaced the change in volume primarily due to the impact of price increases and more efficient trade-promotion spending. Pretax earnings reflected the benefit of higher sales and cost savings, substantially offset by higher commodity costs. International Compared with the year-ago quarter, the segment reported 3 percent sales growth, 6 percent volume growth on top of 13 percent volume growth in the year-ago quarter, and a 3 percent decrease in pretax earnings. Increased shipments of home-care products in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. and dilutable cleaners in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. were slightly offset by lower shipments of home-care products in Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. . Sales growth trailed volume growth primarily due to unfavorable foreign exchange rates. Pretax earnings reflected higher commodity costs and unfavorable product mix, partially offset by the benefit of increased sales and cost savings. Fiscal 2006 results Fiscal-year sales grew 6 percent to $4.6 billion behind price increases on more than 50 percent of the company's U.S. portfolio to help offset commodity cost pressure. Volume grew 1 percent, with price increases reducing shipments of affected products, as anticipated. During the year, the company introduced many new products or product improvements including Kingsford(R) 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 with SureFire Surefire is a California-based company that produces precision tactical flashlights commonly used in the law enforcement and military fields. Surefire flashlights are also popular in the civilian market for personal, occupational, and self-defense purposes. Grooves Grooves is an American electronic music magazine founded in 1999 by editor Sean Portnoy, initially concentrating on the then-burgeoning IDM music genre and expanding to its more experimental, abstract offshoots, such as microsound, microhouse and glitch, eventually ,(TM) Clorox(R) AnyWhere Hard Surface(TM) daily sanitizing spray, Fresh Step(R) cat litter with odor-eliminating carbon, Liquid-Plumr Liquid-Plumr is a chemical drain opener produced by the Clorox Corporation. It consists of 0.5-2.0% sodium hydroxide and 5-10% sodium hypochlorite, plus a surfactant. (R) Power Jet(TM) instant clog remover and GladWare(R) containers with interlocking interlocking /in·ter·lock·ing/ (-lok´ing) closely joined, as by hooks or dovetails; locking into one another. interlocking Obstetrics A rare complication of vaginal delivery of twins; the 1st lids. For the fiscal year, gross margin declined 100 basis points to 42.2 percent, primarily due to higher raw-material costs and other inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. impacts, partially offset by the benefit of price increases and strong cost savings. Net cash provided by operations in fiscal 2006 was $522 million, compared with $765 million in fiscal 2005. The year-over-year decrease was primarily due to lower cash provided by discontinued operations; increased working capital from receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed behind higher sales, lower accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. ; and the settlement of income tax matters. These results were partially offset by lower inventories due to effective inventory management. Capital expenditures were 3.9 percent of sales, in line with the company's long-term target of 4 percent of sales. During the year, Clorox repurchased 2.4 million shares of the company's common stock at a cost of about $135 million under its ongoing program to offset stock option dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. . Noncash charges for historical stock option grants Results for the fourth quarter and fiscal year include a pretax cumulative charge of approximately $25 million, or approximately $16 million on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. , resulting from noncash charges associated with historical stock option compensation expense relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc prior periods dating back to the third quarter of fiscal 1996. The after-tax charge reduced reported fourth-quarter and full-year diluted EPS by 11 cents. The amount of the stock option compensation expense attributable to each of the previous reporting periods was not material to any of such periods. Consequently, the cumulative charge was recorded in the Corporate segment in the fourth quarter of fiscal 2006. The company generated $4.4 billion in aggregate net earnings from the fiscal year ended June 30, 1996 through the fiscal year ended June 30, 2005. The company identified the additional stock option compensation expense in a comprehensive review of its stock option practices. The company's voluntary review, which began in June 2006 and was overseen by the audit committee of Clorox's board of directors with the assistance of outside counsel, was recently completed. The review identified no evidence of fraud, falsification falsification /fal·si·fi·ca·tion/ (fawl?si-fi-ka´shun) lying. retrospective falsification unconscious distortion of past experiences to conform to present emotional needs. of records, concealment Concealment See also Refuge. Ali Baba 40 thieves concealed in oil jars. [Arab. Lit.: Arabian Nights] ark of bulrushes Moses hidden in basket to escape infanticide. [O.T. of actions or documentation, or intentional in·ten·tion·al adj. 1. Done deliberately; intended: an intentional slight. See Synonyms at voluntary. 2. Having to do with intention. deviation DEVIATION, insurance, contracts. A voluntary departure, without necessity, or any reasonable cause, from the regular and usual course of the voyage insured. 2. from generally accepted accounting principles. No material liabilities were identified as a result of the review. "We are confident that the charge reflects unintentional errors in accounting for stock option grants made prior to October October: see month. 2004," said Gary G. Michael, chairman of the company's audit committee. "We are pleased that our current executive management team has been diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d in addressing this topic." The pretax charge for noncash compensation expense includes $15 million in equity compensation expense related to the determination of the appropriate measurement date for certain stock option grants, of which $2 million relates to certain stock options granted to officers prior to December 2001 and $13 million relates to certain stock options granted to non-officer employees prior to October 2004. The remaining $10 million in pretax charges results primarily from the requirement to use variable (i.e., mark to market) accounting with respect to certain options granted to officers due to existence of documented approval of the options within six months of the 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. in 2001 of stock options from the same officers. Beginning in fiscal 2006, Clorox adopted the fair-value method of accounting for stock options pursuant to Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 123-R. The company has determined that the matters resulting in this charge did not significantly affect its accounting under SFAS No. 123-R.
Q4 and Fiscal 2006 diluted EPS - non-GAAP(1)
(In dollars per diluted share) Q4 Q4 Full Year Full Year
Fiscal Fiscal Fiscal Fiscal
2006 2005 2006 2005
----------------------------------------------------------------------
Diluted EPS $0.92 $1.00 $2.90 $6.11
----------------------------------------------------------------------
EPS impact of charges for
additional noncash stock
option compensation expenses $0.11 $0.00 $0.11 $0.00
----------------------------------------------------------------------
EPS excluding earnings impact of
charges for additional noncash
stock option compensation
expenses $1.03 (2) $1.00 $3.01 (2) $6.11(3)
----------------------------------------------------------------------
(1) The preceding table provides a quantitative reconciliation of
the differences between financial measures that are not
presented in accordance with generally accepted accounting
principles in the United States of America (GAAP) and those
calculated in accordance with GAAP. Management believes the
presentation of a comparison of diluted earnings per share,
excluding the earnings impact of additional noncash stock
option compensation expenses (a non-GAAP financial measure)
with diluted earnings per share (a GAAP measure) provides
useful information to investors about current trends in the
ongoing business.
(2) Excluding charges related to the former CEO, diluted EPS would
have been $1.08 for the fourth quarter and $3.06 for the
fiscal year.
(3) Fiscal 2005 net earnings included $3.23 diluted EPS from
discontinued operations and gain related to the Henkel share
exchange based on weighted average shares outstanding of 179
million, compared to 153 million weighted average shares
outstanding for fiscal 2006.
Fiscal 2007 outlook For fiscal 2007, Clorox continues to anticipate sales growth within its previously communicated long-term target of 3-5 percent. Sales growth is expected to outpace out·pace tr.v. out·paced, out·pac·ing, out·pac·es To surpass or outdo (another), as in speed, growth, or performance. outpace Verb [-pacing, volume growth, particularly in the first two quarters, due to the carryover carryover n. in taxation accounting, using a tax year's deductions, business losses or credits to apply to the following year's tax return to reduce the tax liability. (See: carryback) benefit of fiscal 2006 price increases. The company's outlook for fiscal 2007 diluted EPS continues to be in the range of $3.20-$3.30. This outlook reflects an estimated $12-$15 million on a pretax basis, or 5-6 cents diluted EPS, for possible charges primarily related to 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). the company's information technology activities. No specific decisions have been made on restructuring activities, and any such actions require board review and approval. Fiscal 2007 outlook also reflects a higher tax rate versus fiscal 2006 and an estimated incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. impact of about 5 cents diluted EPS from the normal expensing of equity compensation following the adoption of SFAS No. 123-R. The company's tax rate for the fiscal year is expected to be in the range of 34-35 percent, versus 32 percent in fiscal 2006, with some anticipated variability among quarters. For the first quarter of 2007, Clorox continues to anticipate sales growth of 3-5 percent and diluted EPS in the range of 67-73 cents. Included in the first-quarter outlook is the company's anticipation that commodity costs, while lower than the extreme post-hurricane levels, will be significantly higher than prior-year levels. The first-quarter outlook also reflects increased advertising to support new products, weighted average shares outstanding consistent with current levels and a higher tax rate than in the prior-year quarter. The company's initial outlook for the second quarter is for sales growth at the lower end of the 3-5 percent range, compared with 6 percent sales growth in the prior-year quarter, and diluted EPS in the range of 48-54 cents. Included in the second-quarter outlook is the company's anticipation that commodity costs will be higher than in the prior year, but that gross margin will increase behind cost savings and the ongoing benefit of price increases. The outlook assumes that more than half of the aforementioned 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. will occur in the second quarter. For more information For supplemental financial information, including definitions of financial terms used in this earnings release and on today's conference call with the investment community (details below), visit the Financial Results area within the Investors section of the company's Web site at www.TheCloroxCompany.com. Note: Percentage and basis-point changes noted in this news release are calculated based on rounded numbers. 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 fourth-quarter results. The webcast can be accessed at www.TheCloroxCompany.com/investors/index.html. Following a live discussion, a replay of the webcast will be archived for one week on the company's Web site. The Clorox Company The Clorox Company is a leading manufacturer and marketer of consumer products with fiscal year 2006 revenues of $4.6 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(R) auto-care products, Fresh Step(R) and Scoop Away(R) cat litter, Kingsford(R) charcoal, Hidden Valley(R) and K C Masterpiece(R) dressings and sauces, Brita(R) water-filtration systems, and Glad(R) bags, wraps and containers. With 7,600 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 $66.3 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 2006 alone made product donations valued at $6 million. For more information about Clorox, visit www.TheCloroxCompany.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, costs, cost savings, earnings, cash outflows, plans, objectives, expectations, growth, or profitability, are forward-looking statements based on management's estimates, assumptions and projections. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," and variations on such words, and similar expressions 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 above. Important factors that could affect performance and cause results to differ materially from management's expectations are described in the sections entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "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 Operations" in the company's Annual Report on 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 fiscal year ended June 30, 2005, as updated from time to time in the company's SEC filings. These factors include, but are not limited to, general economic and marketplace conditions and events; competitors' actions; the company's costs, including changes in exposure to commodity costs such as resin resin, any of a class of amorphous solids or semisolids. Resins are found in nature and are chiefly of vegetable origin. They are typically light yellow to dark brown in color; tasteless; odorless or faintly aromatic; translucent or transparent; brittle, fracturing , diesel and chlor-alkali; increases in energy costs; consumer and customer reaction to price increases; customer-specific ordering patterns and trends; the company's actual cost performance; any future supply constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. which may affect key commodities; risks inherent in sole-supplier relationships; risks related to customer concentration; risks arising out of natural disasters; 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. ; uncertainties and costs regarding a change in the company's chief executive officer; the ability to manage and realize the benefits of joint ventures and other cooperative relationships, including the company's joint venture with The Procter & Gamble Company ("P&G") regarding the company's Glad(R) plastic bags, wraps and containers business; the success of new products; the integration of acquisitions and mergers; the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of non-strategic businesses; the implementation of the company's strategy; and the ability of the company to successfully manage tax, regulatory, product liability, intellectual property, environmental and other legal matters, including the risk resulting from joint and several liability for environmental contingencies environmental contingencies (en·vīˑ·r  n·menˈ·t and from the
cumulative charge resulting from additional stock option compensation
expense relating to prior periods. In addition, the company's
future performance is subject to risks particular to the share exchange
transaction with Henkel KGaA ("Henkel"), including the
sustainability of cash flows and the actual level of debt costs.
Declines in cash flow, whether resulting from tax payments, debt
payments, share repurchases Share RepurchaseA program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. , interest cost increases greater than management expects, or otherwise, could adversely affect the company's earnings. The company's forward-looking statements in this document are and will be based on management's then current views and assumptions regarding future events and speak only as of their dates. 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.
Condensed Consolidated Statements of Earnings (Unaudited)
Dollars in millions, except per-share amounts
Three Months Ended Twelve Months Ended
----------------------- ------------------------
6/30/2006 6/30/2005 6/30/2006 6/30/2005
----------- ---------- ----------- -----------
Net sales $ 1,319 $ 1,254 $ 4,644 $ 4,388
Cost of products sold 742 701 2,685 2,493
----------- ---------- ----------- -----------
Gross profit 577 553 1,959 1,895
Selling and
administrative
expenses 186 148 631 551
Advertising costs 126 132 450 435
Research and
development costs 26 24 99 88
Restructuring and
asset impairment
costs - (1) 1 36
Interest expense 32 27 127 79
Other (income)
expense:
Equity earnings and
gain on exchange of
Henkel Iberica,
S.A. - - - (25)
Other, net (4) (8) (2) 2
----------- ---------- ----------- -----------
Earnings from
continuing operations
before income taxes 211 231 653 729
Income taxes on
continuing operations 69 75 210 214
Reversal of deferred
taxes from equity
investment in Henkel
Iberica, S.A. - - - (2)
----------- ---------- ----------- -----------
Earnings from
continuing operations 142 156 443 517
----------- ---------- ----------- -----------
Discontinued
operations:
Gain on exchange - - - 550
Earnings from
exchanged
businesses - 1 1 37
Reversal of deferred
taxes from
exchanged
businesses - - - 6
Income tax expense
on discontinued
operations - (1) - (14)
----------- ---------- ----------- -----------
Earnings from
discontinued
operations - - 1 579
----------- ---------- ----------- -----------
Net earnings $ 142 $ 156 $ 444 $ 1,096
=========== ========== =========== ===========
Earnings per common
share:
Basic
Continuing
operations $ 0.94 $ 1.02 $ 2.94 $ 2.92
Discontinued
operations - - 0.01 3.28
----------- ---------- ----------- -----------
Basic net earnings
per common share $ 0.94 $ 1.02 $ 2.95 $ 6.20
=========== ========== =========== ===========
Diluted
Continuing
operations $ 0.92 $ 1.00 $ 2.89 $ 2.88
Discontinued
operations - - 0.01 3.23
----------- ---------- ----------- -----------
Diluted net
earnings per
common share $ 0.92 $ 1.00 $ 2.90 $ 6.11
=========== ========== =========== ===========
Weighted average
common shares
outstanding (in
thousands)
Basic 150,903 152,627 150,545 176,586
Diluted 153,489 155,059 153,001 179,176
Segment Information (Unaudited)
Dollars in millions
Fourth Quarter
-----------------------------------
Net Sales
----------------------------------
Three Months Ended %
-----------------------
6/30/2006 6/30/2005 Change (1)
---------- ---------- -----------
Household Group - North America $ 563 $ 530 6%
Specialty Group 596 569 5%
International 160 155 3%
Corporate - - -
---------- ---------- -----------
Total Company $ 1,319 $ 1,254 5%
========== ========== ===========
Segment Information (Unaudited)
Dollars in millions
Fourth Quarter
------------------------------------
Earnings/(Losses) from Continuing
Operations Before Income Taxes
-----------------------------------
Three Months Ended %
------------------------
6/30/2006 6/30/2005 Change (1)
------------- ---------- ----------
Household Group - North America $ 178 $ 147 21%
Specialty Group 179 174 3%
International 28 29 -3%
Corporate (174) (119) -46%
------------- ---------- ----------
Total Company $ 211(2)$ 231 -9%
============= ========== ==========
Year To Date
-----------------------------------
Net Sales
-----------------------------------
Twelve Months Ended %
------------------------
6/30/2006 6/30/2005 Change (1)
------------ ---------- ----------
Household Group - North America $ 2,113 $ 2,013 5%
Specialty Group 1,892 1,788 6%
International 639 587 9%
Corporate - - -
------------ ---------- ----------
Total Company $ 4,644 $ 4,388 6%
============ ========== ==========
Year To Date
-----------------------------------
Earnings/(Losses) from Continuing
Operations Before Income Taxes
-----------------------------------
Twelve Months Ended %
-------------------------
6/30/2006 6/30/2005 Change (1)
---------- ---------- ----------
Household Group - North America $ 671 $ 629 7%
Specialty Group 460 435 6%
International 129 123 5%
Corporate (607)(2) (458) -33%
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Total Company $ 653 $ 729 -10%
========== ========== ==========
(1) Percentages based on rounded numbers.
(2) Included in the Corporate segment's results is a pretax
cumulative charge of approximately $25 million, or $16 million
on an after-tax basis, resulting from noncash stock option
compensation expense relating to prior periods dating back to
the third quarter of 1996. Also included is an $11 million
pretax charge, or $7 million on an after-tax basis, related to
Jerry Johnston's retirement from his positions as chairman and
CEO.
Condensed Consolidated Balance Sheets (Unaudited)
Dollars in millions
6/30/2006 6/30/2005
---------- ----------
Assets
Current assets
Cash and cash equivalents $ 192 $ 293
Receivables, net 435 411
Inventories 292 323
Other current assets 88 63
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Total current assets 1,007 1,090
Property, plant and equipment, net 1,004 999
Goodwill, net 744 743
Trademarks and other intangible assets, net 604 599
Other assets, net 257 186
---------- ----------
Total assets $ 3,616 $ 3,617
========== ==========
Liabilities and Stockholders' Deficit
Current liabilities
Notes and loans payable $ 156 $ 359
Current maturities of long-term debt 152 2
Accounts payable 329 347
Accrued liabilities 474 614
Income taxes payable 19 26
---------- ----------
Total current liabilities 1,130 1,348
Long-term debt 1,966 2,122
Other liabilities 547 618
Deferred income taxes 129 82
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Total liabilities 3,772 4,170
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Stockholders' deficit
Common stock 250 250
Additional paid-in capital 397 328
Retained earnings 3,939 3,684
Treasury shares, at cost: 98,528,568 and
98,143,620 shares at June 30, 2006 and
2005, respectively (4,527) (4,463)
Accumulated other comprehensive net losses (215) (336)
Unearned compensation - (16)
---------- ----------
Stockholders' deficit (156) (553)
---------- ----------
Total liabilities and stockholders' deficit $ 3,616 $ 3,617
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