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Classified in: Business, Covid-19 virus
Subjects: ERN, ERP

Clorox Reports Q4 and FY22 Results, Provides FY23 Outlook and Announces Streamlined Operating Model


OAKLAND, Calif., Aug. 3, 2022 /PRNewswire/ -- The Clorox Company (NYSE: CLX) today reported results for the fourth quarter and fiscal year 2022, which ended June 30, 2022.

Fourth-Quarter Fiscal Year 2022 Summary

The following is a summary of key fourth-quarter results. All comparisons are with the fourth quarter of fiscal year 2021 unless otherwise stated.

"Over this quarter and the fiscal year, we navigated through challenging operating conditions by taking pro-active steps to rebuild margin and invest in the areas of the business that would best position Clorox for long-term success. This has allowed us to report results in line with our expectations and deliver another quarter of sequential margin improvement," said CEO Linda Rendle. "The streamlined operating model we announced today to create a faster, simpler company is designed to increase efficiency, move decision-making closer to consumers and customers, and enable us to better meet their needs. This is another important step in implementing our IGNITE strategy of reimagining how we work, complementing the digital transformation initiative that's already underway.

"Looking to fiscal year 2023, the environment remains difficult, with consumer behaviors adapting to ongoing inflation as well as continued normalization in our cleaning and disinfecting portfolio. We're addressing these challenges head-on while taking steps to keep our categories healthy and offer superior consumer value. Guided by our IGNITE strategy, we're confident that, despite these headwinds, our actions will position us well to deliver profitable growth over time and build a stronger, more resilient company." 

This press release includes certain non-GAAP financial measures. See "Non-GAAP Financial Information" at the end of this press release for more details.  

Strategic and Operational Highlights

The following are highlights of business and ESG achievements in the fourth quarter:

Key Segment Results

The following is a summary of key fourth-quarter results by reportable segment. All comparisons are with the fourth quarter of fiscal year 2021, unless otherwise stated.

Health and Wellness (Cleaning; Professional Products; Vitamins, Minerals and Supplements)             

Household (Bags and Wraps; Grilling; Cat Litter)

Lifestyle (Food; Natural Personal Care; Water Filtration)

International (Sales Outside the U.S.)









1 Organic sales growth/(decrease) and adjusted EPS are non-GAAP measures. See Non-GAAP Financial Information at the end of this press release for reconciliations to the most comparable GAAP measures.

2 Adjusted pretax earnings for the Health and Wellness segment is a non-GAAP measure. See Non-GAAP Financial Information at the end of this press release for reconciliations to the most comparable GAAP measures.

 

Fiscal Year 2022 Summary

The following is a summary of key fiscal year 2022 results. All comparisons are to fiscal year 2021.

Streamlined Operating Model to Improve Margins and Drive Growth

As part of its journey to Reimagine Work ? one of the key pillars of its IGNITE strategy ? Clorox is announcing a streamlined operating model to create a simpler, faster company. The operating model, which the company will begin implementing in the first quarter of fiscal year 2023, is designed to increase efficiency as well as move decision-making closer to consumers and customers in order to better anticipate and meet their needs.

The new operating model is expected to generate ongoing annual savings of approximately $75 million to $100 million, with benefits beginning in fiscal year 2023. The company expects selling and administrative expenses to be approximately 13% of sales over time as a result of the changes and its ongoing productivity efforts. It also expects to take a charge in connection with the new operating model of approximately $75 million to $100 million over fiscal years 2023 and 2024, with approximately $35 million, or about 20 cents, to be recognized in fiscal year 2023, mostly in other income and expense.

Fiscal Year 2023 Outlook

Clorox Earnings Conference Call Schedule

At approximately 4:15 p.m. ET today, Clorox will post prepared management remarks regarding its fourth-quarter and fiscal year 2022 results.

At 5 p.m. ET today, the company will host a live Q&A audio webcast with CEO Linda Rendle and Chief Financial Officer Kevin Jacobsen to discuss the results.

Links to the live (and archived) webcast, press release and prepared remarks can be found at Clorox Quarterly Results.

For More Detailed Financial Information

Visit the company's Quarterly Results for the following: 

Note: Percentage and basis-point, or point, changes noted in this press release are calculated based on rounded numbers, except for per-share data and the effective tax rate.

The Clorox Company

The Clorox Company (NYSE: CLX) is a leading multinational manufacturer and marketer of consumer and professional products with about 9,000 employees worldwide and fiscal year 2022 sales of $7.1 billion. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products; Pine-Sol® cleaners; Liquid-Plumr® clog removers; Poett® home care products; Fresh Step® cat litter; Glad® bags and wraps; Kingsford® grilling products; Hidden Valley® dressings and sauces; Brita® water-filtration products; Burt's Bees® natural personal care products; and RenewLife®, Rainbow Light®, Natural Vitality CALMtm, and NeoCell® vitamins, minerals and supplements. The company also markets industry-leading products and technologies for professional customers, including those sold under the CloroxProtm and Clorox Healthcare® brand names. More than 80% of the company's sales are generated from brands that hold the No. 1 or No. 2 market share positions in their categories.

Clorox is a signatory of the United Nations Global Compact and the Ellen MacArthur Foundation's New Plastics Economy Global Commitment. The company has been broadly recognized for its corporate responsibility efforts, included on the Barron's 2022 100 Most Sustainable Companies list, 2022 Bloomberg Gender-Equality Index, the Human Rights Campaign's 2022 Corporate Equality Index and the 2022 Parity.org Best Places for Women to Advance list, among others. For more information, visit TheCloroxCompany.com and follow the company on Twitter at @CloroxCo.

CLX-F

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of governments, consumers, customers, suppliers, employees and the company, on our business, operations, employees, financial condition and results of operations, and any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions and uncertainties. Except for historical information, statements about future volumes, sales, organic sales growth, foreign currencies, costs, cost savings, margins, earnings, earnings per share, diluted earnings per share, foreign currency exchange rates, tax rates, cash flows, plans, objectives, expectations, growth or profitability are forward-looking statements based on management's estimates, beliefs, assumptions and projections. Words such as "could," "may," "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "will," "predicts," and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic and financial performance are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed. Important factors that could affect performance and cause results to differ materially from management's expectations are described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as updated from time to time in the company's Securities and Exchange Commission filings. These factors include, but are not limited to: intense competition in the company's markets; the impact of the changing retail environment, including the growth of alternative retail channels and business models, and changing consumer preferences; the impact of COVID-19 on the availability of, and efficiency of the supply, manufacturing and distribution systems for, the company's products, including any significant disruption to such systems; on the demand for the company's products; and on worldwide, regional and local adverse economic conditions, including increased risk of inflation; volatility and increases in the costs of raw materials, energy, transportation, labor and other necessary supplies or services; risks related to supply chain issues and product shortages as a result of increased supply chain dependencies due to an expanded supplier network and a reliance on certain single-source suppliers; risks relating to the significant increase in demand for disinfecting and other products due to the COVID-19 pandemic continuing; dependence on key customers and risks related to customer consolidation and ordering patterns; risks related to the company's use of and reliance on information technology systems, including potential security breaches, cyber-attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or company information, or service interruptions, especially at a time when a large number of the company's employees are working remotely and accessing its technology infrastructure remotely; the ability of the company to drive sales growth, increase prices and market share, grow its product categories and manage favorable product and geographic mix; risks relating to acquisitions, new ventures and divestitures, and associated costs; and the ability to complete announced transactions and, if completed, integration costs and potential contingent liabilities related to those transactions; risks related to the ability of the company to achieve anticipated results and cost savings from the streamlined operating model; the company's ability to maintain its business reputation and the reputation of its brands and products; lower revenue, increased costs or reputational harm resulting from government actions and compliance with regulations, or any material costs imposed by changes in regulation; the ability of the company to successfully manage global political, legal, tax and regulatory risks, including changes in regulatory or administrative activity; the operations of the company and its suppliers being subject to disruption by events beyond the company's control, including work stoppages, cyber-attacks, weather events or natural disasters, political instability or uncertainty, disease outbreaks or pandemics, such as COVID-19, and terrorism; risks related to international operations and international trade, including foreign currency fluctuations, such as devaluations, and foreign currency exchange rate controls; changes in governmental policies, including trade, travel or immigration restrictions, new or additional tariffs, and price or other controls; labor claims and civil unrest; inflationary pressures, particularly in Argentina; impact of the United Kingdom's exit from the European Union; potential negative impact and liabilities from the use, storage and transportation of chlorine in certain international markets where chlorine is used in the production of bleach; widespread health emergencies, such as COVID-19; and the possibility of nationalization, expropriation of assets or other government action; the impact of macroeconomic and geopolitical trends and events, including the unfolding situation in Ukraine and its regional and global ramifications and effects on inflation; the ability of the company to innovate and to develop and introduce commercially successful products, or expand into adjacent categories and countries; the impact of product liability claims, labor claims and other legal, governmental or tax proceedings, including in foreign jurisdictions and in connection with any product recalls; implement and generate cost savings and efficiencies, and successfully implement its business strategies; the accuracy of the company's estimates and assumptions on which its financial projections, including any sales or earnings guidance or outlook it may provide from time to time, are based; risks related to additional increases in the estimated fair value of The Procter & Gamble Company's interest in the Glad business; the performance of strategic alliances and other business relationships; the company's ability to attract and retain key personnel; the impact of environmental, social, and governance issues, including those related to climate change and sustainability on our sales, operating costs or reputation; environmental matters, including costs associated with the remediation and monitoring of past contamination, and possible increases in costs resulting from actions by relevant regulators, and the handling and/or transportation of hazardous substances; the company's ability to effectively utilize, assert and defend its intellectual property rights, and any infringement or claimed infringement by the company of third-party intellectual property rights; the effect of the company's indebtedness and credit rating on its business operations and financial results and the company's ability to access capital markets and other funding sources; the company's ability to pay and declare dividends or repurchase its stock in the future; the impacts of potential stockholder activism; and risks related to any litigation associated with the exclusive forum provision in the company's bylaws.

The company's forward-looking statements in this press release are based on management's current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this press release. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws.

Non-GAAP Financial Information

Digital Capabilities and Productivity Enhancements Investment 

As announced in August 2021, the company plans to invest approximately $500 million over a five-year period in transformative technologies and processes. This investment, which began in the first quarter of fiscal year 2022, includes replacement of the company's enterprise resource planning system and transitioning to a cloud-based platform as well as the implementation of a suite of other digital technologies. Together it is expected that these implementations will generate efficiencies and transform the company's operations in the areas of supply chain, digital commerce, innovation, brand building and more over the long term.   

Of the total $500 million investment, approximately 55% is expected to represent incremental operating costs primarily recorded within selling and administrative expenses to be adjusted from reported EPS for purposes of disclosing adjusted EPS over the course of the next five years. Approximately 70% of these incremental operating costs are expected to be related to the implementation of the ERP, with the remaining costs primarily related to the implementation of complementary technologies.  

Due to the nature, scope and magnitude of this investment, these costs are considered by management to represent incremental transformational costs above the historical normal level of spending for information technology to support operations. Since these strategic investments, including incremental operating costs, will cease at the end of the investment period, are not expected to recur in the foreseeable future, and are not considered representative of the company's underlying operating performance, the company's management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the company's operations and is useful for period-over-period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by company management. 

Streamlined Operating Model

As announced today, Clorox will begin to implement a streamlined operating model in the first quarter of fiscal year 2023. As a result, the company expects to incur costs of approximately $75 million to $100 million over fiscal years 2023 and 2024, with approximately $35 million, or about 20 cents, to be recognized in fiscal year 2023, primarily within other income and expense.

The following tables provide reconciliations of organic sales growth/(decrease) (non-GAAP) to net sales growth/(decrease), the most comparable GAAP measure:












Three Months Ended June 30, 2022


Percentage change versus the year-ago period


Health and

Wellness


Household


Lifestyle


International


Total

Net sales growth / (decrease) (GAAP)

(5) %


4 %


1 %


4 %


? %

Add: Foreign Exchange

?


?


?


8


1

Add/(Subtract): Divestitures/Acquisitions

?


?


?


?


?

Organic sales growth / (decrease) (non-GAAP)

(5) %


4 %


1 %


12 %


1 %

Net sales decrease attributable to Health and Wellness

?


?


?


?


4 %

Organic sales growth / (decrease) (non-GAAP) excluding Health and Wellness

?


?


?


?


5 %






















Twelve Months Ended June 30, 2022


Percentage change versus the year-ago period


Health and

Wellness


Household


Lifestyle


International


Total

Net sales growth / (decrease) (GAAP)

(10) %


? %


3 %


2 %


(3) %

Add: Foreign Exchange

?


?


?


4


1

Add/(Subtract): Divestitures/Acquisitions

?


?


?


?


?

Organic sales growth / (decrease) (non-GAAP)

(10) %


?


3 %


6 %


(2) %






















Twelve Months Ended June 30, 2021


Percentage change versus the year-ago period


Health and

Wellness


Household


Lifestyle


International


Total

Net sales growth / (decrease) (GAAP)

8 %


10 %


6 %


14 %


9 %

Add: Foreign Exchange

?


?


?


3


1

Add/(Subtract): Divestitures/Acquisitions

?


?


?


(8)


(1)

Organic sales growth / (decrease) (non-GAAP)

8 %


10


6 %


9 %


9 %

 

The following tables provide reconciliations of adjusted diluted earnings per share (non-GAAP) to diluted earnings per share, the most comparable GAAP measure:

Adjusted Diluted Earnings Per Share (EPS)





(Dollars in millions except per share data)


















Diluted Earnings Per Share





Three Months Ended June 30





2022


2021


% Change











As reported (GAAP)


$                            0.81


$                            0.78


4 %


Digital capabilities and productivity enhancements investment (1)


0.12


?




Professional Products supplier charge (2)


$                                ?


$                            0.17




As adjusted (Non-GAAP)


$                            0.93


$                            0.95


(2) %












Diluted Earnings Per Share




Twelve Months Ended June 30




2022


2021


% Change










As reported (GAAP)


$                            3.73


$                            5.58


(33) %


Digital capabilities and productivity enhancements investment (1)


0.37


?




Professional Products supplier charge (2)


?


0.17




VMS impairment (3)


?


2.10




Saudi JV acquisition gain (4)


?


(0.60)




As adjusted (Non-GAAP)


$                            4.10


$                            7.25


(43) %










(1) During the three and twelve months ended June 30, 2022, the company incurred approximately $19 ($15 after tax)

and $61 ($47 after tax), respectively, of operating expenses related to its digital capabilities and productivity

enhancements investment. The expenses relate to the following:

 





Three Months Ended


Twelve Months Ended







June 30, 2022





External consulting fees (a)


$                               14


$                               43





IT project personnel costs (b)


2


11





Other (c)


3


7





Total


$                               19


$                               61



 





(a) Comprised of third-party consulting fees incurred to assist in the project management and the preliminary project stage of this transformative investment. The company relies on consultants for certain capabilities required for these programs that the company does not maintain internally. These costs support the implementation of these programs incremental to the company's normal IT costs and will not be incurred following implementation.





(b) Comprised of labor costs associated with internal IT project management teams that are utilized to oversee the new system implementations. Given the magnitude and transformative nature of the implementations planned, the necessary project management costs are incremental to the historical levels of spend and will no longer be incurred subsequent to implementation. As a result of this long-term strategic investment, the company considers these costs not reflective of the ongoing costs to operate its business.





(c) Comprised of various other expenses associated with the company's new system implementations, including company personnel dedicated to the project that have been backfilled with either permanent or temporary resources in positions that are considered part of normal operating expenses.


(2) During the quarter ended June 30, 2021, noncash charges of $28 ($21 after tax) were recorded on investments and related arrangements made with a Professional Products business supplier.


(3) During the year ended June 30, 2021, noncash impairment charges of goodwill, trademarks and other assets were recorded of $329 ($267 after tax) related to the VMS business.


(4) On July 9, 2020, the company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). As a result of this transaction, a noncash nonrecurring net gain was recognized of $82 ($76 after tax) in Other (income) expense, net in the quarter ended September 30, 2020, primarily due to the remeasurement of the carrying value of the company's previously held equity investment to fair value.









Full Year 2023 Outlook (Estimated Range)







Diluted Earnings Per Share







Low


High




As estimated (GAAP)


3.10


3.47




Digital capabilities and productivity enhancements investment (5)


0.55


0.55




Streamlined operating model (6)


0.20


0.20




As adjusted (Non-GAAP)


3.85


4.22





















(5) In FY23, the company expects to incur approximately $75-$105 ($57-$80 after tax) of operating expenses related to its digital capabilities and productivity enhancements investment.


(6) In FY23, the company expects to incur approximately $25-$45 ($19-$34 after tax) of expenses primarily attributable to employee-related costs, as well as implementation and other associated costs as part of the new operating model.

 

Condensed Consolidated Statements of Earnings







Dollars in millions, except per share data











Three Months Ended


Twelve Months Ended




06/30/2022


06/30/2021


06/30/2022


06/30/2021




(Unaudited)


(Unaudited)


(Unaudited)



Net sales



$             1,801


$             1,802


$             7,107


$             7,341

Cost of products sold



1,133


1,134


4,562


4,142

Gross profit



668


668


2,545


3,199

Selling and administrative expenses


244


260


954


1,004

Advertising costs



207


224


709


790

Research and development costs


34


45


132


149

Goodwill, trademark and other intangible asset impairments

?


?


?


329

Interest expense



37


25


106


99

Other (income) expense, net


17


13


37


(72)

Earnings before income taxes


129


101


607


900

Income taxes



25


1


136


181

Net earnings

104


100


471


719

Less: Net earnings attributable to noncontrolling interests

3


3


9


9

Net earnings attributable to Clorox


$                101


$                  97


$                462


$                710











Net earnings per share attributable to Clorox









Basic net earnings per share


$               0.81


$               0.79


$               3.75


$               5.66

Diluted net earnings per share


$               0.81


$               0.78


$               3.73


$               5.58











Weighted average shares outstanding (in thousands)








Basic


123,230


124,106


123,113


125,570

Diluted


123,795


125,385


123,906


127,299

 

Reportable Segment Information










(Unaudited)














Dollars in millions





























Net sales


Earnings (losses) before income taxes


Three Months Ended


Three Months Ended


6/30/2022

6/30/2021


% Change(1)


6/30/2022

6/30/2021


% Change(1)

Health and Wellness (2)

$

635

$

670


(5) %


$

55

$

(10)


650 %

Household


580


560


4 %



96


109


(12) %

Lifestyle


292


290


1 %



41


61


(33) %

International


294


282


4 %



17


17


? %

Corporate


?


?


?



(80)


(76)


5 %

Total

$

1,801

$

1,802


? %


$

129

$

101


28 %
















Net sales


Earnings (losses) before income taxes


Twelve Months Ended


Twelve Months Ended


6/30/2022

6/30/2021


% Change(1)


6/30/2022

6/30/2021


% Change(1)

Health and Wellness (2) (3)

$

2,690

$

2,980


(10) %


$

300

$

305


(2) %

Household


1,984


1,981


? %



234


375


(38) %

Lifestyle


1,253


1,218


3 %



280


320


(13) %

International (4)


1,180


1,162


2 %



97


201


(52) %

Corporate


?


?


?



(304)


(301)


1 %

Total

$

7,107

$

7,341


(3) %


$

607

$

900


(33) %















(1) Percentages based on rounded numbers.

(2) During the quarter ended June 30, 2021, noncash charges of $28 ($21 after tax) were recorded on investments and related arrangements made with a Professional Products business supplier.

(3) The earnings (losses) before income taxes for the Health and Wellness segment includes $329 noncash impairment charges for the Vitamins, Minerals and Supplements business for the twelve months ended June 30, 2021.

(4) On July 9, 2020, the company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). As a result of this transaction, a noncash nonrecurring net gain was recognized of $82 ($76 after tax) in Other (income) expense, net in the twelve months ended June 30, 2021, primarily due to the remeasurement of the carrying value of the company's previously held equity investment to fair value.





















Condensed Consolidated Balance Sheets






Dollars in millions












6/30/2022


6/30/2021






(Unaudited)





ASSETS








Current assets









Cash and cash equivalents


$

183


$

319



Receivables, net



681



604



Inventories, net



755



752



Prepaid expenses and other current assets



106



154




Total current assets



1,725



1,829


Property, plant and equipment, net



1,334



1,302


Operating lease right-of-use assets



342



332


Goodwill



1,558



1,575


Trademarks, net



687



693


Other intangible assets, net



197



225


Other assets



315



378


Total assets


$

6,158


$

6,334












LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities









Notes and loans payable


$

237


$

?



Current maturities of long-term debt



?



300



Current operating lease liabilities



78



81



Accounts payable and accrued liabilities



1,469



1,675




Total current liabilities



1,784



2,056


Long-term debt



2,474



2,484


Long-term operating lease liabilities



314



301


Other liabilities



791



834


Deferred income taxes



66



67




Total liabilities



5,429



5,742












Stockholders' equity








Preferred stock



?



?


Common stock



131



131


Additional paid-in capital



1,202



1,186


Retained earnings



1,048



1,036


Treasury stock



(1,346)



(1,396)


Accumulated other comprehensive net (loss) income



(479)



(546)




Total Clorox stockholders' equity



556



411


Noncontrolling interests



173



181


Total stockholders' equity



729



592


Total liabilities and stockholders' equity


$

6,158


$

6,334


 

 

(PRNewsfoto/The Clorox Company)

 

SOURCE The Clorox Company


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