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

Clorox Reports Q1 Fiscal Year 2024 Results, Updates Outlook


OAKLAND, Calif., Nov. 1, 2023 /PRNewswire/ -- The Clorox Company (NYSE: CLX) today reported results for the first quarter of fiscal year 2024, which ended Sept. 30, 2023.

First-Quarter Fiscal Year 2024 Summary

Following is a summary of key results for the first quarter, which was marked by the impact of the previously announced cyberattack. All comparisons are with the first quarter of fiscal year 2023 unless otherwise stated.

"After entering the fiscal year with solid momentum, the August cyberattack caused wide-scale disruptions that are impacting our short-term financial performance," said CEO Linda Rendle. "Looking forward, our near-term priorities are clear: We are laser focused on rebuilding customer inventories, preserving merchandising activities, and ultimately rebuilding distribution and market share.?We are confident that our portfolio of leading brands in essential categories and our IGNITE strategy will enable us to deliver consistent, profitable growth over time."

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 recent highlights of business and environmental, social and governance achievements:

Key Segment Results

The following is a summary of key first-quarter results by reportable segment. It reflects the impact of the previously announced cyberattack, which drove lower sales in all segments and lower segment adjusted earnings before interest and income taxes, or adjusted EBIT2, in three of four segments. All comparisons are with the first quarter of fiscal year 2023, unless otherwise stated. Prior periods presented have been recast to reflect the reportable segment changes effective in the fourth quarter of fiscal year 2023.

Health and Wellness (Cleaning; Professional Products)

Household (Bags and Wraps; Cat Litter; Grilling)

Lifestyle (Food; Natural Personal Care; Water Filtration)

International (Sales Outside the U.S.)

Fiscal Year 2024 Outlook

The company is updating the following elements of its fiscal year 2024 outlook:







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 EBIT 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. 

Clorox Earnings Conference Call Schedule

At approximately 4:15 p.m. ET today, Clorox will post prepared management remarks regarding its first-quarter fiscal year 2024 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.

About The Clorox Company

The Clorox Company (NYSE: CLX) champions people to be well and thrive every single day. Its trusted brands, which include Brita®, Burt's Bees®, Clorox®, Fresh Step®, Glad®, Hidden Valley®, Kingsford®, Liquid-Plumr®, Pine-Sol® and Natural Vitality®, can be found in about nine of 10 U.S. homes and internationally with brands such as Ayudin®, Clorinda®, Chux® and Poett®. Headquartered in Oakland, California, since 1913, Clorox was one of the first U.S. companies to integrate ESG into its business reporting. In 2023 the company was ranked No. 1 on Barron's 100 Most Sustainable Companies list. Visit thecloroxcompany.com to learn more.

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 regarding the expected or potential impact of the company's operational disruption stemming from a cyberattack, and any such forward-looking statements 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, 2023, and in the company's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023, and as updated from time to time in the company's Securities and Exchange Commission filings. These factors include, but are not limited to: unfavorable general economic and geopolitical conditions beyond our control, including supply chain disruptions, labor shortages, wage pressures, rising inflation, the interest rate environment, fuel and energy costs, foreign currency exchange rate fluctuations, weather events or natural disasters, disease outbreaks or pandemics, such as COVID-19, terrorism, and unstable geopolitical conditions, including ongoing conflicts in the Middle East and Ukraine and rising tensions between China and Taiwan, as well as macroeconomic and geopolitical volatility and uncertainty as a result of a number of these and other factors, including actual and potential shifts between the U.S. and its trading partners, especially China; volatility and increases in the costs of raw materials, energy, transportation, labor and other necessary supplies or services; the impact of the changing retail environment, including the growth of alternative retail channels and business models, and changing consumer preferences; 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 related to supply chain issues, product shortages and disruptions to the business, as a result of increased supply chain dependencies due to an expanded supplier network and a reliance on certain single-source suppliers; intense competition in the company's markets; risks related to the company's use of and reliance on information technology systems, including potential and actual security breaches, cyberattacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or company information, business, service or operational disruptions, or that impact the company's financial results or financial reporting, or any resulting unfavorable outcomes, increased costs or legal proceedings; the ability of the company to implement and generate cost savings and efficiencies, and successfully implement its transformational initiatives or strategies, including achieving anticipated benefits and cost savings from the implementation of the streamlined operating model and digital capabilities and productivity enhancements; dependence on key customers and risks related to customer consolidation and ordering patterns; the company's ability to attract and retain key personnel, which may continue to be impacted by challenges in the labor market, such as wage inflation and sustained labor shortages; 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; changes to our processes and procedures as a result of our digital capabilities and productivity enhancements investment that may result in changes to the company's internal controls over financial reporting; the ability of the company to successfully manage global political, legal, tax and regulatory risks, including changes in regulatory or administrative activity; risks related to international operations and international trade, including changing macroeconomic conditions as a result of inflation, volatile commodity prices and increases in raw and packaging materials prices, labor, energy and logistics; global economic or political instability; 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; continued high levels of inflation in Argentina; potential operational or supply chain disruptions from wars and military conflicts, including the conflict in Ukraine; 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 Environmental, Social, and Governance (ESG) issues, including those related to climate change and sustainability on our sales, operating costs or reputation; 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; the COVID-19 pandemic and related impacts, including 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 and sales of the company's products; and on worldwide, regional and local adverse economic conditions; risks relating to acquisitions, new ventures and divestitures, and associated costs, including for asset impairment charges related to, among others, intangible assets, including trademarks and goodwill, in particular the impairment charges related to the carrying value of the company's Vitamins, Minerals and Supplements business; and the ability to complete announced transactions and, if completed, integration costs and potential contingent liabilities related to those transactions; 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 increases in the estimated fair value of The Procter & Gamble Company's interest in the Glad business; 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 performance of strategic alliances and other business relationships; 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, as well as the cost of capital to the company; 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

Pension Settlement

In the second quarter of fiscal year 2024, a one-time, noncash settlement charge is expected to be recognized related to the previously disclosed termination of the domestic qualified pension plan, as plan obligations are settled through both lump sum payouts and annuity purchases. The actual amount of the settlement charge could vary based on the final valuation of assets and liabilities.

Cyberattack Costs

As previously disclosed, incremental costs were incurred by the company as the result of a cyberattack. These costs relate primarily to third-party consulting services, including IT recovery and forensic experts and other professional services incurred to investigate and remediate the attack, as well as incremental operating costs from the resulting disruption to the company's business operations.

The company has not recognized any insurance proceeds in the three months ended Sept. 30, 2023, related to the cyberattack. The timing of recognizing insurance recoveries may differ from the timing of recognizing the associated expenses. Costs associated with ongoing cybersecurity monitoring and prevention as well as enhancement to the company's cybersecurity program are not included within this adjustment. The company expects to continue to incur costs associated with the cyberattack in future periods.

Due to the nature, scope and magnitude of these costs, 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

In the first quarter of fiscal year 2023, Clorox began recognizing costs related to a plan that involves streamlining its operating model to meet its objectives of driving growth and productivity. The streamlined operating model is expected to enhance the company's ability to respond more quickly to changing consumer behaviors and innovate faster. The company anticipates the implementation of this new model will be completed in fiscal year 2024, with different phases occurring throughout the implementation period.

Once fully implemented, the company expects annual cost savings of approximately $75 million to $100 million, with benefits of approximately $35 million realized in fiscal year 2023. The benefits of the streamlined operating model are currently expected to increase future cash flows as a result of cost savings that will be generated primarily in the areas of selling and administration, supply chain, marketing and research and development. The company incurred $60 million of costs in fiscal year 2023 and anticipates incurring approximately $30 million to $40 million in fiscal year 2024 related to this initiative. Related costs are primarily expected to include employee-related costs to reduce certain staffing levels, such as severance payments, as well as for consulting and other costs. Due to the nonrecurring and unusual nature of these costs, 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.

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 65% 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 through fiscal year 2026. About 70% of these 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.

The following table provides reconciliation of organic sales growth / (decrease) (non-GAAP) to net sales growth / (decrease), the most comparable GAAP measure:


Three months ended Sept. 30, 2023


Percentage change versus the year-ago period


Health and Wellness


Household


Lifestyle


International


Total Company (1)

Net sales growth / (decrease) (GAAP)

(23) %


(23) %


(28) %


(5) %


(20) %

Add: Foreign exchange

?


?


?


14


2

Add/(Subtract): Divestitures/acquisitions

?


?


?


?


?

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

(23) %


(23) %


(28) %


9 %


(18) %













(1)

Total Company includes Corporate and Other.

 

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






9/30/2023


9/30/2022


% Change













As reported (GAAP)


$                0.17


$                0.68


(75) %



Cyberattack costs (1)


0.15


?





Streamlined operating model (2)


?


0.12





Digital capabilities and productivity enhancements investment (3)


0.17


0.13





As adjusted (Non-GAAP)


$                0.49


$                0.93


(47) %











(1) During the three months ended Sept. 30, 2023, the company incurred approximately $24 ($18 after tax) of costs related to the cyberattack. These costs relate primarily to third-party consulting services, including IT recovery and forensic experts and other professional services incurred to investigate and remediate the attack, as well as incremental operating costs from the resulting disruption to the company's business operations.            

(2) During the three months ended Sept. 30, 2023, and 2022, the company incurred $0 and $19 ($14 after tax), respectively, of restructuring and related costs, net related to implementation of the streamlined operating model.

(3) During the three months ended Sept. 30, 2023, and 2022, the company incurred approximately $27 ($21 after tax) and $20 ($15 after tax), respectively, of operating expenses related to its digital capabilities and productivity enhancements investment. The expenses relate to the following:













Three months ended








9/30/2023


9/30/2022






External consulting fees (a)


$                   21


$                   16






IT project personnel costs (b)


2


1






Other (c)


4


3






Total


$                   27


$                   20














(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.

























Full year 2024 outlook
(estimated range)








Diluted earnings per share







Low


High




As estimated (GAAP)


$                2.10


$                2.60




Pension settlement (4)


1.00


1.00





Cyberattack costs (5)


0.25


0.25




Streamlined operating model (6)


0.25


0.25




Digital capabilities and productivity enhancements investment (7)


0.70


0.70




As adjusted (Non-GAAP)


$                4.30


$                4.80













(4) In FY24, the company expects to incur approximately $155-$175 ($118-134 after tax) of costs related to termination of the domestic qualified pension plan. 

(5) In FY24, the company expects to incur approximately $40-$50 ($30-$38 after tax) of costs related to the cyberattack. These costs relate primarily to third-party consulting services, including IT recovery and forensic experts and other professional services incurred to investigate and remediate the attack, as well as incremental operating costs from the resulting disruption to the company's business operations.     

(6) In FY24, the company expects to incur approximately $30-$40 ($23-$30 after tax) of restructuring and related costs, net related to implementation of the streamlined operating model.

(7) In FY24, the company expects to incur approximately $100-$120 ($76-$91 after tax) of operating expenses related to its digital capabilities and productivity enhancements investment.

 

The following table provides reconciliation of adjusted EBIT (non-GAAP) to earnings (losses) before income taxes, the most comparable GAAP measure:


Reconciliation of earnings
(losses) before income
taxes to adjusted EBIT


Three months ended


9/30/2023


9/30/2022

Earnings (losses) before income taxes

$               29


$             116

Interest income

(10)


(2)

Interest expense

21


22

Cyberattack costs

24


?

Streamlined operating model

?


19

Digital capabilities and productivity enhancements investment 

27


20

Adjusted EBIT

$               91


$             175





 

 

Condensed Consolidated Statements of Earnings (Unaudited)



Dollars in millions, except per share data







Three months ended




09/30/2023


09/30/2022

Net sales



$             1,386


$             1,740

Cost of products sold



854


1,114

Gross profit



532


626

Selling and administrative expenses


276


261

Advertising costs



165


161

Research and development costs


29


32

Interest expense



21


22

Other (income) expense, net


12


34

Earnings before income taxes


29


116

Income tax expense


4


29

Net earnings

25


87

Less: Net earnings attributable to noncontrolling interests

3


2

Net earnings attributable to Clorox


$                  22


$                  85







Net earnings per share attributable to Clorox




Basic net earnings per share


$               0.17


$               0.69

Diluted net earnings per share


$               0.17


$               0.68







Weighted average shares outstanding (in thousands)




Basic


123,973


123,339

Diluted


124,650


123,914

 

Reportable Segment Information



(Unaudited)






Dollars in millions













Net sales


Three months ended


9/30/2023


9/30/2022


% Change(1)

Health and Wellness

$            504


$            657


(23) %

Household

325


423


(23)

Lifestyle

229


320


(28)

International

270


285


(5)

Corporate and Other (2)

58


55


5

Total

$         1,386


$         1,740


(20) %








Segment adjusted EBIT


Three months ended


9/30/2023


9/30/2022


% Change(1)

Health and Wellness 

$            104


133


(22) %

Household

(4)


22


(118)

Lifestyle

19


60


(68)

International

34


23


48

Corporate and Other

(62)


(63)


(2)

Total

$              91


$            175


(48) %

Interest income

10


2



Interest expense

(21)


(22)



Cyberattack costs (3)

(24)


?



Streamlined operating model (4)

?


(19)



Digital capabilities and productivity enhancements investment (5)

(27)


(20)



Earnings before income taxes

$              29


$            116


(75) %







(1)     Percentages based on rounded numbers.

(2)    Corporate and Other includes the Vitamin, Minerals and Supplements business.

(3)   Represents costs related to the cyberattack of $24 ($18 after tax) for the three months ended Sept. 30, 2023.

(4)    Represents restructuring and related costs, net for implementation of the streamlined operating model of $0 and $19 ($14 after tax) for the three months ended Sept. 30, 2023, and 2022, respectively.

(5)    Represents expenses related to the company's digital capabilities and productivity enhancements investment of $27 ($21 after tax) and $20 ($15 after tax) for the three months ended Sept. 30, 2023, and 2022, respectively.

 

Condensed Consolidated Balance Sheets








Dollars in millions














9/30/2023


6/30/2023


9/30/2022





(Unaudited)





(Unaudited)

ASSETS










Current assets











Cash and cash equivalents


$

518


$

367


$

278


Receivables, net



581



688



612


Inventories, net



710



696



755


Prepaid expenses and other current assets



102



77



118



Total current assets



1,911



1,828



1,763

Property, plant and equipment, net



1,317



1,345



1,322

Operating lease right-of-use assets



328



346



336

Goodwill



1,246



1,252



1,546

Trademarks, net



541



543



685

Other intangible assets, net



162



169



190

Other assets



486



462



311

Total assets


$

5,991


$

5,945


$

6,153













LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities











Notes and loans payable


$

347


$

50


$

348


Current operating lease liabilities



88



87



78


Accounts payable and accrued liabilities



1,678



1,659



1,584


Income Taxes Payable



115



121



?



Total current liabilities



2,228



1,917



2,010

Long-term debt



2,478



2,477



2,475

Long-term operating lease liabilities



290



310



308

Other liabilities



837



825



805

Deferred income taxes



27



28



59



Total liabilities



5,860



5,557



5,657

Commitments and contingencies










Stockholders' equity










Preferred stock



?



?



?

Common stock



131



131



131

Additional paid-in capital



1,246



1,245



1,193

Retained earnings



299



583



832

Treasury stock



(1,219)



(1,246)



(1,315)

Accumulated other comprehensive net (loss) income



(494)



(493)



(515)



Total Clorox stockholders' (deficit) equity



(37)



220



326

Noncontrolling interests



168



168



170

Total stockholders' equity



131



388



496

Total liabilities and stockholders' equity


$

5,991


$

5,945


$

6,153

 

(PRNewsfoto/The Clorox Company)

 

SOURCE The Clorox Company


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