Clorox Reports Strong Top-line Growth in Q2; Raises EPS Outlook for FY'06.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 and cost savings contributed to solid results for the company's fiscal second quarter, which ended Dec. 31, 2005. "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 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. . "Each of our business segments delivered 6 percent sales growth on top of company sales growth of 9 percent in the year-ago quarter. We feel positive about the initial response to our recent price increases and are excited about our third-quarter product launches, including Clorox(R) Anywhere Hard Surface(TM) sanitizing spray and 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 Sure Fire 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). Overall, our brands are healthy and we feel confident in our ability to execute our strategies over the long term." Second-quarter highlights 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 second-quarter net 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 $83 million, or 55 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, based on weighted average shares outstanding of 152 million. This compares with net earnings from continuing operations in the year-ago quarter of $136 million, or 72 cents per diluted share, based on weighted average shares outstanding of 190 million, for a decrease of 17 cents per diluted share, or 24 percent. 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 (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. ) from continuing operations in the year-ago quarter included 13 cents associated with the fiscal year 2005 share exchange 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 KGaA KGaA Kommanditgesellschaft Auf Aktien (German: Limited partnership on shares; business entity) . In the recent quarter, diluted EPS reflected higher incentive compensation and interest expense, as well as an impact of 4 cents from higher equity-compensation expense following the adoption of 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. Second-quarter sales grew 6 percent to $1.06 billion, compared with $1.00 billion in the year-ago quarter. Volume grew 2 percent, primarily due to increased shipments of home care products, institutional products and 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. products. Also contributing to volume growth were increased shipments of Glad(R) trash bags and Kingsford(R) charcoal products. Sales growth outpaced volume growth primarily due to the benefit of price increases and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix. Gross margin in the second quarter declined 210 basis points versus the year-ago quarter to 41 percent. This decline was primarily due to higher raw-material costs, along with transition costs related to the Kingsford(R) charcoal improvement. These factors were partially offset by the benefits of cost savings and price increases. In addition to strong sales growth and lower gross margin, diluted EPS from continuing operations in the recent quarter reflected lower income taxes and the continued benefit of a lower share base due to the Henkel share exchange. Net cash provided by operations in the second quarter was $142 million, compared with $189 million in the year-ago quarter. The year-over-year decline was primarily due to lost profits from businesses and investments transferred to Henkel, higher interest expense from debt issued to fund the Henkel share exchange and higher short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. , and higher working capital resulting from increased 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 due primarily to an increase in sales in the current quarter. These factors were partially offset by lower tax payments versus the year-ago quarter. During the quarter, Clorox repurchased 834,000 shares of the company's common stock at a cost of about $45 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. . Second-quarter results by business segment Following is a summary of key second-quarter results by business segment. All comparisons are with the second quarter of fiscal year 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, 4 percent volume growth and 5 percent growth in pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern earnings from continuing operations. The segment delivered increased shipments of Clorox(R) disinfecting wipes, Clorox(R) bathroom cleaner, 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. and institutional products. Also contributing to volume growth were shipments of the Clorox(R) BathWand system. These results were partially offset by lower shipments of Clorox(R) bleach pen, products in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and Brita water-filtration systems. Sales growth outpaced volume growth primarily due to the benefits of favorable product mix and price increases on Clorox(R) laundry Laundry can be:
Before industrialization and cleaning products. Pretax earnings from continuing operations primarily reflected the benefit of volume growth, cost savings, price increases and favorable product mix, partially offset by higher raw-material costs and increased marketing investment. Specialty Group Compared with the year-ago quarter, the segment reported 6 percent sales growth, flat volume and 11 percent decline in pretax earnings from continuing operations. Increased shipments of Glad(R) trash bags, all-time record shipments of GladWare(R) food containers and higher shipments of Kingsford(R) charcoal products were offset by lower shipments of food products 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. . Sales growth outpaced volume growth primarily due to the benefits of price increases on Glad(R) products and cat litter. Pretax earnings from continuing operations primarily reflected higher raw-material costs, product mix and transition costs related to the Kingsford(R) charcoal improvement, partially offset by the benefits of cost savings and price increases. International The segment delivered 6 percent sales growth on top of 16 percent sales growth in the year-ago quarter. The segment also reported 1 percent volume growth compared with 13 percent volume growth in the year-ago quarter, and a 15 percent decline in pretax earnings from continuing operations. Increased Latin America shipments behind new products and home-care category growth were substantially offset by lower volume in Australia from the discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of a low-margin product line, along with decreased shipments to nonstrategic export customers. Sales growth outpaced volume growth primarily due to the benefits of price increases in Latin America and favorable product mix in Latin America and Australia. Lower pretax earnings from continuing operations reflected the benefits of price increases and cost savings in the recent quarter, more than offset by higher raw-material costs and increased marketing investment in Latin America to support new products. In the year-ago quarter, pretax earnings from continuing operations reflected equity earnings and royalties from the company's former Spain joint venture investment with Henkel. Corporate The decline in pretax corporate earnings from continuing operations was caused by several factors, including the gain on the exchange of the Spain joint venture investment with Henkel in the year-ago quarter; higher interest expense from debt issued to fund the Henkel share exchange and higher short-term interest rates; higher equity-compensation expense following the adoption of SFAS No. 123-R; and increased accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. for incentive compensation. Outlook For the third quarter, Clorox continues to anticipate sales growth of 4-7 percent, reflecting the benefits of volume growth behind new products, price increases and a shift forward in the timing of some merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. events held in the fourth quarter of fiscal 2005. The company now anticipates third-quarter diluted EPS from continuing operations in the range of 68-73 cents, including the benefit of an anticipated slightly lower tax rate versus the previous outlook. Also included in the company's third-quarter outlook is a significantly higher marketing investment versus the year-ago quarter to support new products. For the fourth quarter, Clorox's outlook continues to be for sales growth in the range of 3-5 percent and diluted EPS from continuing operations in the range of $1.04-$1.14. Included in the company's fourth-quarter outlook are the continuing benefits of price increases, and the company's anticipation that commodity costs in the latter part of the fiscal year will be slightly lower than the extreme post-hurricane levels, although still significantly higher than year-ago levels. For fiscal 2006, Clorox now anticipates sales growth in the range of 4-6 percent and diluted EPS from continuing operations in the range of $2.97-$3.07, reflecting the company's strong second-quarter results. Clorox's fiscal-year outlook also includes 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 14-16 cents from expensing equity compensation following the adoption of SFAS No. 123-R. 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 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 2005 revenues of $4.4 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 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 $62.3 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 year 2005 alone made product donations valued at $4.9 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; 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 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. ; 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 and environmental matters, including the risk resulting from joint and several liability for environmental contingencies environmental contingencies (en·vīˑ·r  n·menˈ·t . 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. , P&G's increased equity in the joint venture, 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 Six Months Ended
------------------------- -------------------------
12/31/2005 12/31/2004 12/31/2005 12/31/2004
------------ ------------ ------------ ------------
Net sales $ 1,064 $ 1,000 $ 2,168 $ 2,048
Cost of products
sold 628 569 1,266 1,160
------------ ------------ ------------ ------------
Gross profit 436 431 902 888
------------ ------------ ------------ ------------
Selling and
administrative
expenses 161 134 305 264
Advertising costs 99 92 212 197
Research and
development costs 25 21 48 42
Restructuring and
asset impairment
costs - 2 1 32
Interest expense 32 17 62 25
Other income:
Equity earnings
and gain on
exchange of
Henkel Iberica,
S.A. - (22) - (25)
Other, net (1) (7) - (8)
------------ ------------ ------------ ------------
Earnings from
continuing
operations before
income taxes 120 194 274 361
Income taxes on
continuing
operations 37 60 83 118
Reversal of
deferred taxes
from equity
investment in
Henkel Iberica,
S.A. - (2) - (2)
------------ ------------ ------------ ------------
Earnings from
continuing
operations 83 136 191 245
------------ ------------ ------------ ------------
Discontinued
operations:
Gain on exchange - 550 - 550
Earnings from
exchanged
businesses - 11 1 33
Reversal of
deferred taxes
from exchanged
businesses - 6 - 6
Income tax
(expense)
benefit on
discontinued
operations - (4) - (12)
------------ ------------ ------------ ------------
Earnings from
discontinued
operations - 563 1 577
------------ ------------ ------------ ------------
Net earnings $ 83 $ 699 $ 192 $ 822
============ ============ ============ ============
Earnings per common
share:
Basic
Continuing
operations $ 0.56 $ 0.73 $ 1.27 $ 1.22
Discontinued
operations - 3.00 0.01 2.89
------------ ------------ ------------ ------------
Basic net
earnings per
common share $ 0.56 $ 3.73 $ 1.28 $ 4.11
============ ============ ============ ============
Diluted
Continuing
operations $ 0.55 $ 0.72 $ 1.25 $ 1.21
Discontinued
operations - 2.96 0.01 2.85
------------ ------------ ------------ ------------
Diluted net
earnings per
common share $ 0.55 $ 3.68 $ 1.26 $ 4.06
============ ============ ============ ============
Weighted average
common shares
outstanding (in
thousands)
Basic 150,080 187,310 150,457 200,107
Diluted 152,264 189,806 152,780 202,555
Segment Information (Unaudited)
Dollars in millions
Second Quarter Earnings/(Losses) from
---------------------- Continuing Operations
Net Sales Before Income Taxes
----------------------- -----------------------
Three Months Three Months
Ended Ended
--------------- % --------------- %
12/31/ 12/31/ Change 12/31/ 12/31/ Change
2005 2004 (1) 2005 2004 (1)
------- ------- ------- ------- ------- -------
Household Group --
North America $ 495 $ 465 6% $ 161 $ 154 5%
Specialty Group 405 381 6% 82 92 -11%
International 164 154 6% 33 39 -15%
Corporate - - - (156) (91) -71%
------- ------- ------- ------- ------- -------
Total Company $1,064 $1,000 6% $ 120 $ 194 -38%
======= ======= ======= ======= ======= =======
Year To Date Earnings/(Losses) from
---------------------- Continuing Operations
Net Sales Before Income Taxes
----------------------- -----------------------
Six Months Six Months
Ended Ended
--------------- % --------------- %
12/31/ 12/31/ Change 12/31/ 12/31/ Change
2005 2004 (1) 2005 2004 (1)
------- ------- ------- ------- ------- -------
Household Group --
North America $1,019 $ 973 5% $ 331 $ 321 3%
Specialty Group 830 793 5% 171 165 4%
International 319 282 13% 68 67 1%
Corporate - - - (296) (192) -54%
------- ------- ------- ------- ------- -------
Total Company $2,168 $2,048 6% $ 274 $ 361 -24%
======= ======= ======= ======= ======= =======
(1) Percentages based on rounded numbers.
Condensed Consolidated Balance Sheets (Unaudited)
Dollars in millions
12/31/2005 6/30/2005
----------- -----------
Assets
Current assets
Cash and cash equivalents $ 273 $ 293
Receivables, net 377 411
Inventories 359 323
Other current assets 58 63
----------- -----------
Total current assets 1,067 1,090
Property, plant and equipment, net 993 999
Goodwill, net 747 743
Trademarks and other intangible assets, net 595 599
Other assets, net 165 186
----------- -----------
Total assets $ 3,567 $ 3,617
=========== ===========
Liabilities and Stockholders' Deficit
Current liabilities
Notes and loans payable $ 521 $ 359
Current maturities of long-term debt 3 2
Accounts payable 274 347
Accrued liabilities 450 614
Income taxes payable 24 26
----------- -----------
Total current liabilities 1,272 1,348
Long-term debt 2,119 2,122
Other liabilities 631 618
Deferred income taxes 73 82
----------- -----------
Total liabilities 4,095 4,170
----------- -----------
Stockholders' deficit
Common stock 250 250
Additional paid-in capital 342 328
Retained earnings 3,781 3,684
Treasury shares, at cost: 99,717,120 and
98,143,620 shares at December 31, 2005, and
June 30, 2005, respectively (4,570) (4,463)
Accumulated other comprehensive net losses (331) (336)
Unearned compensation - (16)
----------- -----------
Stockholders' deficit (528) (553)
----------- -----------
Total liabilities and stockholders' deficit $ 3,567 $ 3,617
=========== ===========
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