The Clorox Company |
Three Months Ended March 31, 2020 Percentage change versus the year-ago period | |||||||
Organic | |||||||
Reported | Net Sales | ||||||
(GAAP) | Growth/ | ||||||
Net Sales | Acquisitions | Foreign | Price | (Decrease) | |||
Growth/ | Reported | & | Exchange | Mix and | (Non- | Organic | |
(Decrease) | Volume | Divestitures | Impact | Other(1) | GAAP) (2) | Volume(3) | |
Cleaning | 32% | 34% | —% | —% | (2%) | 32% | 34% |
Household | 2 | 5 | — | — | (3) | 2 | 5 |
Lifestyle | 10 | 7 | — | — | 3 | 10 | 7 |
International | 11 | 16 | — | (11) | 6 | 22 | 16 |
Total | 15% | 18% | —% | (2%) | (1%) | 17% | 18% |
Nine Months Ended March 31, 2020 Percentage change versus the year-ago period | |||||||
Organic | |||||||
Reported | Net Sales | ||||||
(GAAP) | Growth/ | ||||||
Net Sales | Acquisitions | Foreign | Price | (Decrease) | |||
Growth/ | Reported | & | Exchange | Mix and | (Non- | Organic | |
(Decrease) | Volume | Divestitures | Impact | Other(1) | GAAP) (2) | Volume(3) | |
Cleaning | 10% | 12% | —% | —% | (2%) | 10% | 12% |
Household | (6) | (2) | — | — | (4) | (6) | (2) |
Lifestyle | 6 | 5 | — | — | 1 | 6 | 5 |
International | 3 | 6 | — | (9) | 6 | 12 | 6 |
Total | 3% | 6% | —% | (2%) | (1%) | 5% | 6% |
(1) This represents the net impact on net sales growth/ (decrease) from pricing action, mix and other factors.
(2) Organic sales growth/ (decrease) is defined as net sales growth/ (decrease) excluding the effect of any acquisitions and divestitures and foreign exchange rate changes. See “Non-GAAP Financial Information” below for reconciliation of organic sales growth to net sales growth/ (decrease), the most directly comparable GAAP financial information.
(3) Organic volume represents volume excluding the effect of any acquisitions and divestitures.
Non-GAAP Financial Information
Management believes that the presentation of organic sales growth / (decrease) is useful to investors because it excludes sales from any acquisitions and divestitures, which results in a comparison of sales only from the businesses that the company was operating throughout the relevant periods, and the impact of foreign exchange rate changes, which are out of the control of the company and management. However, organic sales growth / (decrease) may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded.
The Clorox Company |
Thefollowingtableprovidesareconciliationoforganicsales growth /(decrease)(non-GAAP)to net sales growth /(decrease) (GAAP),the mostcomparableGAAPmeasure:
Three Months Ended March 31, 2020 | ||||||||||
Percentage change versus the year-ago period | ||||||||||
Cleaning | Household | Lifestyle | International | Total | ||||||
Net sales growth / (decrease) (GAAP) | 32% | 2% | 10% | 11% | 15% | |||||
Add: Foreign Exchange | — | — | — | 11 | 2 | |||||
Add/(Subtract): Divestitures/Acquisitions | — | — | — | — | — | |||||
Organic sales growth / (decrease) (non-GAAP) | 32% | 2% | 10% | 22% | 17% | |||||
Nine Months Ended March 31, 2020 | ||||||||||
Percentage change versus the year-ago period | ||||||||||
Cleaning | Household | Lifestyle | International | Total | ||||||
Net sales growth / (decrease) (GAAP) | 10% | (6%) | 6% | 3% | 3% | |||||
Add: Foreign Exchange | — | — | — | 9 | 2 | |||||
Add/(Subtract): Divestitures/Acquisitions | — | — | — | — | — | |||||
Organic sales growth / (decrease) (non-GAAP) | 10% | (6%) | 6% | 12% | 5% |
The Clorox Company |
Supplemental Unaudited Condensed Information–Gross Margin Drivers
The table belowprovidesdetails on the drivers of grossmargin changeversus the prior year.
Gross Margin Change vs. Prior Year (basis points) | ||||||||
Driver | FY19 | FY20 | ||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |
Cost Savings | +130 | +140 | +170 | +150 | +150 | +180 | +150 | +150 |
Price Changes | +90 | +220 | +240 | +220 | +190 | +120 | +100 | +90 |
Market Movement (commodities) | -130 | -120 | -50 | +20 | -60 | +30 | +60 | +60 |
Manufacturing & Logistics | -280 | -190 | -190 | -90 | -190 | -50 | -80 | -50 |
All other(1,2,3,4) | +40 | +20 | -110 | -190 | -70 | -220 | -190 | +80 |
Change vs prior year | -150 | +70 | +60 | +110 | +20 | +60 | +40 | +330 |
Gross Margin (%) | 43.4% | 43.7% | 43.4% | 45.1% | 43.9% | 44.0% | 44.1% | 46.7% |
(1) | In Q3 of fiscal year 2019, “All other” includes about -70bps of negative impact from foreign exchange. |
(2) | In Q4 of fiscal year 2019, “All other” includes about -150bps of negative impact from higher trade promotion spending. |
(3) | In Q1 of fiscal year 2020, “All other” includes about -180bps of negative impact from higher trade promotion spending. |
(4) | In Q2 of fiscal year 2020, “All other” includes about -90bps of negative impact from higher trade promotion spending. |
The Clorox Company |
Supplemental Unaudited Condensed Information–Cash Flow
For thequarterended March 31, 2020
Capital expendituresfor the thirdquarterwere $47 million versus $49 million in the year-agoquarter.
Depreciationandamortization expensefor the thirdquarterwas $45 million versus $45 million in the year-agoquarter.
Net cashprovidedbyoperationsin the thirdquarterwas $308million,or 17.3% of net sales.
Supplemental Unaudited Condensed Information –Free Cash Flow
Fiscal Year Free Cash Flow Reconciliation
DollarsinMillionsandpercentagesbased onrounded numbers
Q3 Fiscal YTD 2020 | Q3 Fiscal YTD 2019 | |||
Net cash provided by operations – GAAP | $806 | $603 | ||
Less: Capital expenditures | $158 | $135 | ||
Free cash flow – non-GAAP(1) | $648 | $468 | ||
Free cash flow as a percentage of net sales – non-GAAP(1) | 13.7% | 10.2% | ||
Net sales | $4,738 | $4,587 |
(1) | In accordance with the SEC's Regulation G, this schedule provides the definition of certain non-GAAP measures and the reconciliation to the most closely related GAAP measure. Management uses free cash flow and free cash flow as a percentage of net sales to help assess the cash generation ability of the business and funds available for investing activities, such as acquisitions, investing in the business to drive growth, and financing activities, including debt payments, dividend payments and stock repurchases. Free cash flow does not represent cash available only for discretionary expenditures, since the Company has mandatory debt service requirements and other contractual and non-discretionary expenditures. In addition, free cash flow may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. |
These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be read in connection with the company’s consolidated financial statements presented in accordance with GAAP. |
The Clorox Company |
Supplemental Unaudited ReconciliationofEarningsBeforeIncomeTaxes to EBIT(1)(3)andEBITDA(2)(3)
Dollars in Millions andpercentagesbased on rounded numbers
FY 2019 | FY 2020 | |||||||||||||||
Q1 9/30/18 | Q2 12/31/18 | Q3 3/31/19 | Q4 6/30/19 | FY 6/30/19 | Q1 9/30/19 | Q2 12/31/19 | Q3 3/31/20 | |||||||||
Earnings before income taxes | $268 | $224 | $240 | $292 | $1,024 | $258 | $235 | $297 | ||||||||
Interest income | -$1 | $0 | -$1 | -$1 | -$3 | $0 | -$1 | $0 | ||||||||
Interest expense | $24 | $24 | $24 | $25 | $97 | $25 | $25 | $24 | ||||||||
EBIT(1)(3) | $291 | $248 | $263 | $316 | $1,118 | $283 | $259 | $321 | ||||||||
EBIT margin(1)(3) | 18.6% | 16.8% | 17.0% | 19.4% | 18.0% | 18.8% | 17.9% | 18.0% | ||||||||
Depreciation and amortization | $44 | $44 | $45 | $47 | $180 | $44 | $44 | $45 | ||||||||
EBITDA(2)(3) | $335 | $292 | $308 | $363 | $1,298 | $327 | $303 | $366 | ||||||||
EBITDA margin(2)(3) | 21.4% | 19.8% | 19.9% | 22.3% | 20.9% | 21.7% | 20.9% | 20.5% | ||||||||
Net sales | $1,563 | $1,473 | $1,551 | $1,627 | $6,214 | $1,506 | $1,449 | $1,783 | ||||||||
Total debt(4) | $2,565 | $2,520 | $2,607 | $2,683 | $2,683 | $2,736 | $2,795 | $2,926 | ||||||||
Debt to EBITDA(3)(5) | 2.0 | 1.9 | 2.0 | 2.1 | 2.1 | 2.1 | 2.1 | 2.2 |
(1) | EBIT (a non-GAAP measure) represents earnings before income taxes (a GAAP measure), excluding interest income and interest expense, as reported above. EBIT margin is the ratio of EBIT to net sales. |
(2) | EBITDA (a non-GAAP measure) represents earnings from before income taxes (a GAAP measure), excluding interest income, interest expense, depreciation and amortization, as reported above. EBITDA margin is the ratio of EBITDA to net sales. |
(3) | In accordance with the SEC's Regulation G, this schedule provides the definition of certain non-GAAP measures and the reconciliation to the most closely related GAAP measure. Management believes the presentation of EBIT, EBIT margin, EBITDA, EBITDA margin and debt to EBITDA provides useful additional information to investors about trends in the company's operations and is useful for period-over-period comparisons. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. They should be read in connection with the company’s consolidated financial statements presented in accordance with GAAP. |
(4) | Total debt represents the sum of notes and loans payable, current maturities of long-term debt and long-term debt. Current maturities of long-term debt and long-term debt are carried at face value net of unamortized discounts, premiums and debt issuance costs. |
(5) | Debt to EBITDA (a non-GAAP measure) represents total debt divided by EBITDA for the trailing four quarters. |