Clorox Reports Strong Second-Quarter Results; Provides Outlook for Third Quarter and Updates Fiscal 2005 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. )(PCX (1) A bitmapped graphics file format that handles monochrome, 2-bit, 4-bit, 8-bit and 24-bit color and uses RLE to achieve compression ratios of approximately 1.1:1 to 1.5:1. Images with large blocks of solid colors compress best under the RLE method. See PC Paintbrush. :CLX) today announced that strong sales growth, cost savings and margin-enhancing activities contributed solidly to the company's results for its fiscal second quarter, which ended Dec. 31, 2004. "We're we're Contraction of we are. we're we are very pleased with our second-quarter performance," said 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. Jerry Jer·ry n. pl. Jer·ries Chiefly British Slang A German, especially a German soldier. [Alteration of German. Johnston Johnston, town (1990 pop. 26,542), Providence co., N central R.I., a suburb of Providence; inc. 1759. Among its manufactures are jewelry, textiles, and fabricated metals. Johnston is the home of several insurance companies. . "We saw strength across nearly every aspect of the business, and Clorox people delivered even better results than expected." Clorox's focus on its 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. strategy is reflected in the company's results, Johnston reported. "Core business strength, increased market shares and new products are helping drive top-line growth," he said. "Our efforts to cut costs and enhance margins are evident in benefits from several areas, including our focus on lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. . And importantly, we also closed our share-exchange transaction with 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 ." As announced on Feb. 2, Clorox has applied discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. accounting treatment to its fiscal year 2004 and fiscal year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2005 results to reflect the impact of its share exchange with Henkel KgaA. This historical data is available within the Investors section of the company's Web site at www.TheCloroxCompany.com / Investors / Financial Information / Financial Results.
Q2 Earnings-Per-Diluted-Share (EPS) - GAAP
(In dollars per diluted share) Q2 - FY'05 Q2 - FY'04
----------- -----------
EPS from continuing operations $0.72 $0.47
EPS from discontinued operations $2.96 $0.04
(Includes operating results and gain associated
with businesses transferred to Henkel and
income from interim service agreements with
Henkel, as well as loss in year-ago period due
to discontinued Brazil operations. Also
includes associated tax impact of items
recorded in discontinued operations.)
----------- -----------
Total diluted EPS $3.68 $0.51
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 total second-quarter net earnings of $699 million, or $3.68 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 $109 million, or 51 cents per diluted share. Clorox reported second-quarter GAAP earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $136 million, or 72 cents per diluted share, versus earnings from continuing operations of $101 million, or 47 cents per diluted share, in the year-ago period. The company reported second-quarter GAAP earnings from discontinued operations of $563 million, or $2.96 per diluted share, compared with earnings from discontinued operations in the year-ago period of $8 million, or 4 cents per diluted share.
Q2 EPS From Continuing Operations, Excluding Nonrecurring Earnings
Impacts of Henkel Transaction -- Non-GAAP (1)
(In dollars per diluted share) Q2 - FY'05 Q2 - FY'04
----------- -----------
EPS from continuing operations $0.72 $0.47
EPS impact from elimination of earnings, $0.13 $0.00
royalties and gain from Henkel Iberica joint
venture investment, including associated tax
effects
EPS from continuing operations, excluding $0.59 $0.47
nonrecurring earnings impacts of Henkel
transaction
(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 (GAAP) and those calculated in accordance with GAAP.
Management believes the presentation of a comparison of diluted
earnings per share from continuing operations, excluding
nonrecurring earnings impacts of the Henkel transaction (a
non-GAAP financial measure) with diluted earnings per share from
continuing operations (a GAAP measure) provides useful information
to investors about current trends in the ongoing business.
Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations included 13 cents related to the earnings, royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. and gain from the Henkel Iberica joint venture investment, and associated tax effects. Excluding nonrecurring Non`re`cur´ring a. 1. Nonrecurrent; as, the costs of a layoff are considered as a nonrecurring expense s>. earnings impacts of the Henkel transaction, the company had second-quarter non-GAAP earnings per diluted share from continuing operations of 59 cents, compared with 47 cents per diluted share in the year-ago period. Second-Quarter Highlights Second-quarter sales grew 9 percent to $1.0 billion, compared with $920 million in the year-ago period. Sales and volume grew across nearly all businesses, most notably home care, Glad(R) trash bags and the 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. Division. Sales growth outpaced the 8 percent growth in volume primarily due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign exchange rates and the continued benefit of previous price increases. Gross margin in the second quarter grew 40 basis points versus the year-ago period to 43.1 percent, primarily due to stronger-than-expected cost savings, partially offset by increased raw-material costs. Clorox generated $189 million of cash provided by operations in the second quarter, compared with $188 million in the year-ago period. Second-Quarter Results by Business Segment Following is a summary of key second-quarter results by segment. All comparisons are with the second quarter of fiscal year 2004. All results, including sales and volume, include the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. discontinued operations treatment of historical results to reflect the impact of the Henkel transaction. 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. --9% sales growth --9% volume growth --11% 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 Glad trash bags and home-care products. The company delivered its 10th consecutive quarter of year-over-year volume growth for Glad trash bags behind the continued strength of Glad ForceFlex(R) trash bags. The home-care business delivered increased shipments of Clorox(R) disinfecting wipes, Clorox toilet toilet /toi·let/ (toi´lit) the cleansing and dressing of a wound. toilet the cleansing and dressing of a wound. toilet bowl cleaner and Pine-Sol Pine-Sol is a household cleaning agent used in bathrooms, kitchens, and other cleaning applications. The primary ingredients in Pine-Sol are pine oil, surfactants, and isopropanol. (R) cleaner. Also contributing to sales growth were strong shipments of the new Clorox ToiletWand(TM) disposable disposable Nursing adjective Referring to that which is discarded or disposed of noun An item used in health care-related Pt contact which is discarded after use–eg masks, gloves, gowns, needles, paper products, syringes, wipes. See Biohazardous waste. toilet-cleaning system. These positive results were partially offset by decreased shipments of Clorox ReadyMop(R) mopping system. Pretax earnings reflected the benefit of cost savings and increased sales, partially offset by unfavorable raw-material expenses. Specialty Products --5% sales growth --3% volume growth --13% pretax earnings growth Sales growth in the segment was primarily driven by increased shipments of 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 the 11th consecutive quarter of year-over-year volume growth for Scoop Away(R) cat litters and all-time all-time adj. Exceeding all others up to the present time: an all-time speed skating record. all-time Adjective Informal record shipments of Fresh Step(R) cat litters. Also contributing to sales growth were increased shipments of Hidden Valley(R) bottled salad dressings. These positive results were partially offset by continued strong competitive activity in auto-care products. Sales growth outpaced volume growth primarily due to more efficient trade-promotion spending, a shift in timing of some promotional activities and price increases. Pretax earnings reflected strong cost savings, partially offset by increased raw-material costs. International --16% sales growth --12% volume growth --19% pretax earnings growth Strong sales growth in the segment was driven by increased volume behind new products and category and share growth in Latin America, and the continued growth of the newly introduced Clorox home-cleaning products in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. . Sales growth outpaced volume growth primarily due to favorable foreign-exchange rates and price increases. Pretax earnings reflected the benefit of higher sales and strong cost savings, partially offset by increased raw-material costs. Outlook The outlook reported below includes the aforementioned discontinued operations treatment of historical results to reflect the impact of the Henkel transaction. Third-Quarter Outlook For the third quarter, Clorox anticipates sales growth in the range of 3 percent to 5 percent. On a GAAP basis, the company anticipates earnings per diluted share from continuing operations and fully diluted earnings per share in the range of 62 cents to 68 cents. Clorox's third-quarter earnings from continuing operations will not be impacted by the company's investment in the Henkel Iberica joint venture, and should not be materially affected by transitional services provided to Henkel. Fiscal 2005 Outlook For the full fiscal year, Clorox anticipates sales growth in the range of 3 percent to 5 percent. On a GAAP basis, Clorox now anticipates earnings per diluted share in the range of $5.93 to $6.03, which reflects the company's strong second-quarter results, partially offset by higher commodity costs. The company now anticipates earnings per diluted share from continuing operations in the range of $2.70 to $2.80. This 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. range includes the nonrecurring earnings, royalties and gain from the exchange of the Henkel Iberica joint venture investment of 14 cents, including the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of deferred taxes. The company's fiscal year 2005 outlook assumes full-year weighted average shares outstanding of about 180 million. Note: Percentage and basis-point changes noted in this news release are calculated based on rounded numbers. For additional information about the company's results, 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. 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 second-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 2004 revenues of $4.3 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 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. 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 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 briquets, Hidden Valley(R) and K C Masterpiece(R) dressings and sauces, Brita Brita is a German company that specializes in water filtration products. The company is the world's market leader in portable household water filtration. Brita products include water jugs, kettles and tap attachments, all of which use activated carbon as their primary filtering (R) water-filtration systems, and Glad(R) bags, wraps and containers. With 8,600 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 $58.3 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 2004 alone made product donations valued at $5 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 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 & Analysis" 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 June: see month. 30, 2004, 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, including changes in exposure to commodity costs; the company's actual cost performance; 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 ability to manage and realize the benefits of joint ventures and other cooperative cooperative Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the relationships, including the company's joint venture with Procter
tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and intellectual property matters. In addition, the company's future performance is subject to risks particular to the share exchange transaction with 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 Repurchase A 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. or otherwise, or interest cost increases greater than management expects, could adversely affect the company's earnings. The company's forward-looking statements 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)
In millions, except share and per-share amounts
Three Months Ended Six Months Ended
----------------------- -----------------------
12/31/2004 12/31/2003 12/31/2004 12/31/2003
----------- ----------- ----------- -----------
Net sales $1,000 $920 $2,048 $1,926
Cost of products sold 569 527 1,160 1,104
----------- ----------- ----------- -----------
Gross profit 431 393 888 822
----------- ----------- ----------- -----------
Selling and
administrative
expenses 134 127 264 246
Advertising costs 92 87 197 191
Research and
development costs 21 20 42 39
Restructuring and asset
impairment costs 2 - 32 -
Interest expense 17 7 25 13
Other (income) expense:
Equity earnings and gain
on exchange of
Henkel Iberica, S.A. (22) (2) (25) (5)
Other, net (7) - (8) 6
----------- ----------- ----------- -----------
Earnings from
continuing operations
before income taxes 194 154 361 332
Income taxes on
continuing operations 60 53 118 116
Reversal of deferred
taxes from equity
investment in Henkel
Iberica, S.A. (2) - (2) -
----------- ----------- ----------- -----------
Earnings from
continuing operations 136 101 245 216
Discontinued
operations:
Gain on exchange 550 - 550 -
Earnings from
exchanged businesses 11 16 33 39
Reversal of deferred
taxes from exchanged
businesses 6 - 6 -
Losses from Brazil
operations - (3) - (5)
Income tax expense on
discontinued
operations (4) (5) (12) (12)
----------- ----------- ----------- -----------
Earnings from
discontinued
operations 563 8 577 22
----------- ----------- ----------- -----------
Net earnings $699 $109 $822 $238
=========== =========== =========== ===========
Earnings per common
share:
Basic
Continuing
operations $0.73 $0.48 $1.22 $1.03
Discontinued
operations 3.00 0.04 2.89 0.10
----------- ----------- ----------- -----------
Basic net earnings
per common share $3.73 $0.52 $4.11 $1.13
=========== =========== =========== ===========
Diluted
Continuing
operations $0.72 $0.47 $1.21 $1.01
Discontinued
operations 2.96 0.04 2.85 0.10
----------- ----------- ----------- -----------
Diluted net
earnings per
common share $3.68 $0.51 $4.06 $1.11
=========== =========== =========== ===========
Weighted average common
shares outstanding (in
thousands)
Basic 187,310 210,500 200,107 211,577
Diluted 189,806 212,959 202,555 213,924
Segment Information (Unaudited)
In millions
Second Quarter
Net Sales
----------------------------------
Three Months Ended %
-----------------------
12/31/2004 12/31/2003 Change (1)
----------- ----------- ----------
Household Products- North America $584 $536 9%
Specialty Products 267 255 5%
International 149 129 16%
Corporate (2) - - -
----------- ----------- ----------
Total Company $1,000 $920 9%
=========== =========== ==========
Year To Date
Net Sales
----------------------------------
Six Months Ended %
-----------------------
12/31/2004 12/31/2003 Change (1)
----------- ----------- ----------
Household Products- North America $1,209 $1,121 8%
Specialty Products 568 560 1%
International 271 245 11%
Corporate (2) - - -
----------- ----------- ----------
Total Company $2,048 $1,926 6%
=========== =========== ==========
Second Quarter
Earnings from Continuing
Operations Before Income Taxes
----------------------------------
Three Months Ended %
-----------------------
12/31/2004 12/31/2003 Change (1)
----------- ----------- ----------
Household Products- North America $154 $139 11%
Specialty Products 93 82 13%
International 38 32 19%
Corporate (2) (91) (99) 8%
----------- ----------- ----------
Total Company $194 $154 26%
=========== =========== ==========
Year To Date
Earnings from Continuing
Operations Before Income Taxes
----------------------------------
Six Months Ended %
-----------------------
12/31/2004 12/31/2003 Change (1)
----------- ----------- ----------
Household Products- North America $295 $282 5%
Specialty Products 193 180 7%
International 65 61 7%
Corporate (2) (192) (191) -1%
----------- ----------- ----------
Total Company $361 $332 9%
=========== =========== ==========
(1) Percentages based on rounded numbers.
(2) Includes gain of $20 million related to the company's investment
in the Henkel Iberica, S.A., joint venture.
Condensed Consolidated Balance Sheets (Unaudited)
In millions
12/31/2004 6/30/2004
----------- -----------
Assets
Current assets
Cash and cash equivalents $300 $232
Receivables, net 354 460
Inventories 342 301
Income taxes receivable 8 -
Other current assets 43 50
----------- -----------
Total current assets 1,047 1,043
Property, plant and equipment, net 991 1,052
Goodwill, net 748 742
Trademarks and other intangible assets, net 606 633
Other assets, net 318 364
----------- -----------
Total assets $3,710 $3,834
=========== ===========
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Notes and loans payable $545 $289
Current maturities of long-term debt 2 2
Accounts payable 293 310
Accrued liabilities 629 643
Income taxes payable - 24
----------- -----------
Total current liabilities 1,469 1,268
Long-term debt 2,124 475
Other liabilities 390 377
Deferred income taxes 184 174
Stockholders' (deficit) equity
Common stock 250 250
Additional paid-in capital 314 301
Retained earnings 3,542 2,846
Treasury shares, at cost (4,339) (1,570)
Accumulated other comprehensive net losses (207) (274)
Unearned compensation (17) (13)
----------- -----------
Stockholders' (deficit) equity (457) 1,540
----------- -----------
Total liabilities and stockholders' (deficit)
equity $3,710 $3,834
=========== ===========
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