THE CLOROX COMPANY
(Dollars in millions, except per share data)
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is designed to provide a reader of The Clorox Company's (the
Company or Clorox) financial statements with a narrative from the perspective of
management on the Company's financial condition, results of operations,
liquidity and certain other factors that may affect future results. The
following discussion of the Company's financial condition and results of
operations should be read in conjunction with MD&A and the consolidated
financial statements and related notes included in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 2021 , which was filed with the
SEC on August 10, 2021 , and the unaudited condensed consolidated financial
statements and related notes contained in this Quarterly Report on Form 10-Q
(this Report). Unless otherwise noted, MD&A compares the three and nine month
periods ended March 31, 2022 (the current period) to the three and nine month
periods ended March 31, 2021 (the prior period), with percentage and basis point
calculations based on rounded numbers, except for per share data and the
effective tax rate.
EXECUTIVE OVERVIEW
Clorox is a leading multinational manufacturer and marketer of consumer and
professional products with approximately 9,000 employees worldwide. Clorox sells
its products primarily through mass retailers, grocery outlets, warehouse clubs,
dollar stores, home hardware centers, drug, pet and military stores, third-party
and owned e-commerce channels, and distributors. 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, dips, seasonings and sauces; Brita®
water-filtration systems and filters; Burt's Bees® natural personal care
products; and RenewLife®, Rainbow Light®, Natural Vitality® and NeoCell®
vitamins, minerals and supplements. The Company also markets industry-leading
products and technologies for professional customers, including those sold under
the CloroxPro™ and Clorox Healthcare® brand names. The Company has operations in
more than 25 countries or territories and sells its products in more than 100
markets.
The Company primarily markets its leading brands in midsized categories
considered to be financially attractive. Most of the Company's products compete
with other nationally advertised brands within each category and with "private
label" brands.
The Company operates through strategic business units (SBUs) which are also the Company's operating segments. These SBUs are then aggregated into four reportable segments: Health and Wellness, Household, Lifestyle and International. These four reportable segments consist of the following:
•Health and Wellness consists of cleaning products, professional products and vitamins, minerals and supplement products mainly marketed and sold in theU.S. Products within this segment include cleaning products such as laundry additives and home care products, primarily under the Clorox®, Clorox2®, Scentiva®, Pine-Sol®, Liquid-Plumr®, Tilex® and Formula 409® brands; professional cleaning and disinfecting products under the CloroxPro™, Clorox Healthcare® and Clorox® TurboProTM brands; professional food service products under the Hidden Valley® brand; and vitamins, minerals and supplement products under the RenewLife®, Natural Vitality®, NeoCell® and Rainbow Light® brands. •Household consists of cat litter products, bags and wraps and grilling products marketed and sold in theU.S. Products within this segment include cat litter products under the Fresh Step®, Scoop Away® and Ever Clean® brands; bags and wraps under the Glad® brand; and grilling products under the Kingsford® brand. •Lifestyle consists of food, natural personal care products and water-filtration marketed and sold in theU.S. Products within this segment include dressings, dips, seasonings and sauces, primarily under the Hidden Valley® brand; natural personal care products under the Burt's Bees® brand; and water-filtration systems and filters under the Brita® brand. •International consists of products sold outside theU.S. Products within this segment include laundry additives, home care products, water-filtration systems and filters, digestive health products; grilling products; cat litter products; food products, bags and wraps, natural personal care products, and professional cleaning and disinfecting products marketed primarily under the Clorox®, Ayudin®, Clorinda®, Poett®, Pine-Sol®, Glad®, Brita®, RenewLife®, Ever Clean® and Burt's Bees® brands. 19 --------------------------------------------------------------------------------
RECENT EVENTS RELATED TO COVID-19
For our fiscal quarter endedMarch 31, 2022 , the coronavirus (COVID-19) pandemic continued to cause economic and social disruptions that led to ongoing uncertainties. Demand for many of the products across the Company portfolio remained elevated compared to pre-pandemic levels. The Company expects a continuing inflationary environment heightened by the conflict inUkraine , marked by higher manufacturing and logistics costs as well as increased commodity costs. While we have not experienced significant disruptions in our operations during fiscal year 2022 to date, risks of future negative impacts due to transportation, logistical or supply constraints and higher commodity costs for certain raw materials remain present. We are continuing to address these impacts to our operations. We have taken an active role in addressing the ongoing pandemic's impact on our employees, operations, customers, consumers and communities, including taking precautionary measures, such as implementing contingency plans, making operational adjustments where necessary, and providing support to organizations that support front-line workers. As theU.S. and other countries have begun or are expected to begin to reopen their economies and the world moves into new phases of the pandemic, the Company will continue to focus on these priorities, while continuing to strive to serve people as consumer behaviors evolve inside and outside the home. The extent of COVID-19's effect on the Company's operational and financial performance in the future will depend on future developments, including the duration, spread, intensity and phase of the pandemic in different countries, the emergence of COVID-19 variants and the effectiveness of vaccines against these variants, the Company's continued ability to manufacture and distribute its products, any future government actions affecting consumers, our business operations, including any vaccine mandates, or the economy in general, and effectiveness of global vaccines, all of which are uncertain and difficult to predict considering the rapidly evolving landscape as the Company continues to expect a variable operating environment going forward. For additional information on the impacts and our response to the coronavirus pandemic, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Exhibit 99.1 of the Company's Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 . 20 -------------------------------------------------------------------------------- RESULTS OF OPERATIONS CONSOLIDATED RESULTS Three Months Ended Nine Months Ended 3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change Net sales$ 1,809 $ 1,781 2 %$ 5,306 $ 5,539 (4) % Three Months Ended March 31, 2022 Percentage change versus the year-ago period Reported (GAAP) Net Organic Sales Growth Sales Growth / Acquisitions & Foreign Exchange / (Decrease) Organic Volume (Decrease) Reported Volume Divestitures Impact Price/Mix/ Other (1) (Non-GAAP) (2) (3) Health and Wellness (3) % 1 % - % - % (4) % (3) % 1 % Household 6 2 - - 4 6 2 Lifestyle 4 6 - - (2) 4 6 International 1 2 - (5) 4 6 2 Total 2 % 2 % - % - % - % 2 % 2 % Nine Months Ended March 31, 2022 Percentage change versus the year-ago period Reported (GAAP) Net Organic Sales Growth Sales Growth / Acquisitions & Foreign Exchange / (Decrease) Organic Volume (Decrease) Reported Volume Divestitures Impact Price/Mix/Other (1) (Non-GAAP) (2) (3) Health and Wellness (11) % (6) % - % - % (5) % (11) % (6) % Household (1) (2) - - 1 (1) (2) Lifestyle 4 4 - - - 4 4 International 1 (1) - (3) 5 4 (1) Total (4) % (3) % - % - % (1) % (4) % (3) % (1) This represents the net impact on net sales growth / (decrease) from pricing actions, 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/(decrease) 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. Net sales and volume in the current three month period both increased by 2%, reflecting higher shipments across all reportable segments, primarily driven by the Lifestyle and Household reportable segments. Net sales and volume in the current nine month period decreased by 4% and 3%, respectively, reflecting lower shipments primarily in the Health and Wellness reportable segment. 21 -------------------------------------------------------------------------------- Three Months Ended
Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Gross profit $ 649 $ 774 (16) % $ 1,877 $ 2,531 (26) %
Gross margin 35.9 % 43.5 % 35.4 % 45.7 %
Gross margin decreased by 760 basis points in the current three month period
from 43.5% to 35.9%. The decrease was primarily driven by higher manufacturing
and logistics costs and unfavorable commodity costs, partially offset by the
benefit of price increases and cost savings.
Gross margin decreased by 1030 basis points in the current nine month period
from 45.7% to 35.4%. The decrease was primarily driven by higher manufacturing
and logistics costs and unfavorable commodity costs.
Expenses
Three Months Ended
% of Net Sales
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021
Selling and administrative
expenses $ 233 $ 237 (2) % 12.9 % 13.3 %
Advertising costs 153 200 (24) 8.5 11.2
Research and development costs 31 32 (3) 1.7 1.8
Nine Months Ended
% of Net Sales
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021
Selling and administrative
expenses $ 710 $ 744 (5) % 13.4 % 13.4 %
Advertising costs 502 566 (11) 9.5 10.2
Research and development costs 98 104 (6) 1.8 1.9
Selling and administrative expenses, as a percentage of net sales, decreased by
40 basis points in the current three month period and were essentially flat in
the current nine month period compared to the prior period. The dollar decrease
in the current nine month period in selling and administrative expenses was
primarily due to lower incentive compensation expenses and the benefit from cost
savings, partially offset by the Company's digital capabilities and productivity
enhancements investments.
Advertising costs, as a percentage of net sales, decreased by 270 basis points
and 70 basis points in the current three and nine month periods, respectively.
The dollar decrease in the current three month period in advertising costs was
primarily due to the timing of spending. The dollar decrease in the current nine
month period in advertising costs was primarily due to lower advertising
spending. The Company's U.S. retail advertising spend as a percentage of net
sales was 9% and 12% in the current and prior three month periods, respectively.
Research and development costs, as a percentage of net sales, were essentially flat in the current three and nine month periods as compared to the prior periods. The Company continues to invest behind product innovation and cost savings.
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Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 3/31/2022 3/31/2021
Goodwill , trademark and other asset
impairments $ - $ 329 $ - $ 329
Interest expense 21 25 69 74
Other (income) expense, net 11 10 20 (85)
Effective tax rate on earnings (losses) 23.9 % (1.4) % 23.3 % 22.5 %
Goodwill , trademark and other asset impairments of $329 in the prior three and
nine month periods reflected noncash impairment charges related to goodwill,
trademarks, and other assets held by the VMS business (included within the
Health and Wellness segment). See Notes to Condensed Consolidated Financial
Statements for further information regarding the impairments recorded.
Other (income) expense, net was $11 and $10 in the current and prior three month
periods, respectively, and $20 and ($85 ) in the current and prior nine month
periods, respectively. The variance between the current and prior nine month
periods was primarily due to the one-time, noncash remeasurement gain from the
Company's previously held equity interest in the Kingdom of Saudi Arabia (Saudi
joint venture) in the prior period.
The effective tax rate on earnings (losses) was 23.9% and 23.3% for the current
three and nine month periods, respectively, and (1.4)% and 22.5% for the prior
three and nine month periods, respectively. The substantially lower tax rate on
losses before income taxes in the prior three month period was driven by the
partial non-deductibility of impaired VMS goodwill.
Diluted net earnings (losses) per share
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Diluted net earnings (losses)
per share $ 1.21 $ (0.49) 347 % $ 2.91 $ 4.78 (39) %
Diluted net earnings (losses) per share (EPS) increased by $1.70 , or 347%, in
the current three month period, primarily due to the noncash impairment charges
on assets held by the VMS business in the prior period, as well as lower
advertising spending and higher net sales, partially offset by lower gross
margin all in the current period.
Diluted net EPS decreased by $1.87 , or 39%, in the current nine month period,
primarily due to lower gross margin, lower net sales and the one-time, noncash
remeasurement gain recognized on the previously held equity interest in the
Saudi joint venture in the prior period, partially offset by the noncash
impairment charges on assets held by the VMS business in the prior period and
lower advertising spending in the current period.
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--------------------------------------------------------------------------------SEGMENT RESULTS
The following presents the results of the Company's reportable segments and certain unallocated costs reflected in Corporate (see Notes to Condensed Consolidated Financial Statements for a reconciliation of segment results to consolidated results):
Health and Wellness
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Net sales $ 662 $ 680 (3) % $ 2,055 $ 2,310 (11) %
Earnings (losses) before
income taxes 84 (183) 146 245 315 (22)
Volume and earnings (losses) before income taxes increased by 1% and 146%,
respectively, and net sales decreased by 3% during the current three month
period. The increase in volume was due to higher shipments in Cleaning driven by
market share growth due to merchandising support, increased supply and
innovation, partially offset by lower shipments primarily in the Professional
Products portfolio due to the ongoing impacts of the COVID-19 pandemic. The
variance between volume and net sales was primarily due to higher trade
promotion spending and unfavorable mix, partially offset by the benefit of price
increases. The increase in earnings (losses) before income taxes was primarily
due to the noncash impairment charges on assets held by the VMS business in the
prior period, partially offset by higher manufacturing and logistics costs and
lower net sales all in the current period.
Volume, net sales and earnings before income taxes decreased by 6%, 11% and 22%,
respectively, during the current nine month period. The volume and net sales
decreases were primarily due to lower shipments in the Professional Products
portfolio due to higher COVID-19 related demand in the prior period. The
variance between volume and net sales was primarily due to unfavorable mix. The
decrease in earnings before income taxes was primarily due to lower net sales,
higher manufacturing and logistics costs and unfavorable commodity costs,
partially offset by the noncash impairment charges on assets held by the VMS
business in the prior period and lower advertising spending in the current
period.
Household
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Net sales $ 539 $ 510 6 % $ 1,404 $ 1,421 (1) %
Earnings before income taxes 92 97 (5) 138 266 (48)
Volume and net sales increased by 2% and 6%, respectively, and earnings before
income taxes decreased by 5% during the current three month period. The volume
and net sales increases were primarily driven by higher shipments in Litter
mainly due to innovation and continued growth in e-commerce channel in the
current period, partially offset by lower shipments in Grilling due to higher
demand in the prior period. The variance between volume and net sales was
primarily due to the benefit of price increases. The decrease in earnings before
income taxes was mainly due to unfavorable commodity costs and higher
manufacturing and logistics costs, partially offset by net sales growth and
lower advertising spending.
Volume, net sales and earnings before income taxes decreased by 2%, 1% and 48%,
during the current nine month period. The volume decrease was primarily driven
by lower shipments in Grilling due to higher demand in the prior period. The
variance between volume and net sales was primarily due to the benefit of price
increases and lower trade promotion spending, partially offset by unfavorable
mix. The decrease in earnings before income taxes was mainly due to unfavorable
commodity costs and higher manufacturing and logistics costs, partially offset
by lower advertising spending and cost savings.
Lifestyle
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Net sales $ 306 $ 293 4 % $ 961 $ 928 4 %
Earnings before income taxes 66 68 (3) 239 259 (8)
Volume and net sales increased by 6% and 4%, respectively, and earnings before
income taxes decreased by 3% during the current three month period. The volume
and net sales increases were primarily driven by higher shipments of Natural
Personal Care products primarily due to strong consumption, innovation and
expanded distribution. The variance between volume and net sales was mainly due
to higher trade promotion spending and unfavorable mix, partially offset by the
benefit of price
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--------------------------------------------------------------------------------increases. The decrease in earnings before income taxes was primarily due to unfavorable commodity costs and higher manufacturing and logistics costs, partially offset by lower advertising spending and net sales growth.
Both volume and net sales increased by 4% and earnings before income taxes
decreased by 8%, during the current nine month period. The volume and net sales
growth were primarily driven by higher shipments of Natural Personal Care
products primarily due to strong consumption, innovation and expanded
distribution, and higher shipments of Brita water-filtration products due to
expanded distribution and merchandising support. The decrease in earnings before
income taxes was primarily due to unfavorable commodity costs and higher
manufacturing and logistics costs, partially offset by net sales growth.
International
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Net sales $ 302 $ 298 1 % $ 886 $ 880 1 %
Earnings before income taxes 31 30 3 80 184 (57)
Volume, net sales and earnings before income taxes increased by 2%, 1% and 3%,
respectively, during the current three month period. Volume increased primarily
driven by higher shipments from ongoing demand for cleaning, disinfecting and
litter products.The increase in earnings before income taxes was primarily due
to net sales growth, partially offset by unfavorable commodity costs.
Volume and earnings before income taxes decreased by 1% and 57%, respectively,
and net sales increased by 1% during the current nine month period.The variance
between volume and net sales was mainly due to the benefit of price increases,
partially offset by the impact of unfavorable foreign currency exchange rates.
The decrease in earnings before income taxes was primarily due to the one-time,
noncash remeasurement gain recognized on the previously held equity interest in
the Saudi joint venture recognized in the prior period, unfavorable commodity
costs and higher manufacturing and logistics costs, partially offset by net
sales growth and cost savings all in the current period.
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--------------------------------------------------------------------------------EffectiveJuly 1, 2018 , under the requirements ofU.S. GAAP,Argentina was designated as a highly inflationary economy, and as a result theU.S. dollar replaced the Argentine peso as the functional currency of the Company's subsidiaries inArgentina . Consequently, gains and losses from non-U.S. dollar denominated monetary assets and liabilities of Clorox Argentina are recognized in Other (income) expense, net in the condensed consolidated statement of earnings. The business environment inArgentina continues to be challenging due to significant volatility inArgentina's currency, high inflation, economic recession, impacts of COVID-19 and temporary price controls. As ofMarch 31, 2022 andJune 30, 2021 , the net asset position, excluding goodwill, of CloroxArgentina was$44 and$48 , respectively. Of these net assets, cash balances were approximately$12 and$11 as ofMarch 31, 2022 andJune 30, 2021 , respectively. Net sales from Clorox Argentina represented approximately 2% of the Company's consolidated net sales for the nine months endedMarch 31, 2022 and the fiscal year endedJune 30, 2021 . For additional information on the impacts of, and our response to, the business environment inArgentina , refer to "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 .
Corporate
Corporate includes certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses.
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 % Change 3/31/2022 3/31/2021 % Change
Losses before income taxes $ (73) $ (71) 3 % $ (224) $ (225) - %
Losses before income taxes were essentially flat in the current three and nine
month periods due to increased investments in the Company's digital capabilities
and productivity enhancements offset by lower employee incentive compensation
expenses.
FINANCIAL POSITION AND LIQUIDITY
The Company's financial condition and liquidity remained strong as of
Nine Months Ended
3/31/2022 3/31/2021
Net cash provided by operations $ 451 $ 893
Net cash used for investing activities (167) (341)
Net cash used for financing activities (363) (944)
Operating Activities
Net cash provided by operations was$451 in the current nine month period, compared with$893 in the prior nine month period. The decrease was primarily driven by lower cash earnings and an increase in working capital (lower Accounts payable and accrued liabilities in the current year driven by lower spend and timing of payments and cash inflows from collections due to higher sales in the prior fiscal year, partially offset by higher inventory builds in the prior fiscal year to improve product availability). These decreases were partially offset by lower tax payments and lower employee incentive compensation payments in the current nine month period.
Payment Terms Extension and Supply Chain Financing
The Company initiated the extension of its payment terms with its suppliers in
the second half of fiscal year 2020 in order to improve working capital as part
of and to fund the IGNITE strategy and in keeping with evolving market
practices. The Company's current payment terms do not exceed 120 days in keeping
with industry standards. The Company's operating cash flows are directly
impacted as a result of the extension of the payment terms with the suppliers.
26
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As part of those ongoing efforts, the Company has arranged for a global
financial institution to offer a voluntary supply chain finance (SCF) program
for the benefit of the Company's suppliers. Leveraging the Company's credit
rating, the SCF program enables suppliers to directly contract with the
financial institution to receive payment from the financial institution prior to
the payment terms between the Company and the supplier, by selling the Company's
payables to the financial institution. The participation in the program is at
the sole discretion of the supplier and the Company has no economic interest in
a supplier's decision to enter into the agreement and has no direct financial
relationship with the financial institution, as it relates to the SCF program.
Once a supplier elects to participate in the SCF program and reaches an
agreement with the financial institution, the supplier elects which individual
Company invoices to sell to the financial institution. The terms of the
Company's payment obligations are not impacted by a supplier's participation in
the program and as such, the SCF program has no direct impact on the Company's
balance sheets, cash flows or liquidity. No guarantees are provided by the
Company or any of our subsidiaries under the SCF program. There would not be an
expected material impact to the Company's liquidity or capital resources if the
financial institution or a supplier terminated the SCF arrangement.
All outstanding amounts related to suppliers participating in SCF are recorded
within Accounts payable and accrued liabilities in the Consolidated Balance
Sheets and the associated payments are included in operating activities within
the Consolidated Statements of Cash Flows. As of March 31, 2022 and June 30,
2021 , the amount due to suppliers participating in SCF and included in Accounts
payable and accrued liabilities was $218 and $152 , respectively. While the
Company does not have direct access to information on, or influence over, which
invoices a participating supplier elects to sell to the financial institution,
the Company expects that the majority of these amounts have been sold to the
financial institution.
Investing Activities
Net cash used for investing activities was $167 in the current nine month
period, compared with $341 in the prior nine month period. The year-over-year
decrease was mainly due to the acquisition of an additional interest in the
Company's Saudi joint venture in the prior nine month period and lower capital
spending in the current nine month period.
Financing Activities
Net cash used for financing activities was$363 in the current nine month period, compared with$944 in the prior nine month period. The year-over-year decrease was mainly due to lower treasury stock purchases and net cash sourced from borrowings, partially offset by reduced proceeds from employee stock option exercises in the current nine month period.
Current period financing activities included repayment of
Capital Resources and Liquidity
As ofMarch 31, 2022 , current liabilities exceeded current assets by$774 , primarily due to$600 of the Company's senior notes with an annual fixed interest rate of 3.05% coming due for repayment inSeptember 2022 . These senior notes are expected to be repaid through net proceeds from new borrowings. In addition, the Company's cash generated from operations has decreased recently primarily due to higher manufacturing and logistics costs and unfavorable commodity costs. The Company continues to take actions to address some of the effects of such cost increases, which include implementing price increases, driving cost savings, and optimizing the Company's supply chain. Global financial markets have experienced a significant increase in volatility due to heightened uncertainty over the adverse economic impact caused by the COVID-19 outbreak and other geopolitical circumstances. Notwithstanding potential unforeseen adverse market conditions and as part of the Company's regular assessment of its cash needs, the Company believes it will have the funds necessary to support our short-term liquidity and operating needs based on our anticipated ability to generate positive cash flows from operations in the future, access to capital markets enabled by our strong short-term and long-term credit ratings, and current borrowing availability under the credit agreement. 27 --------------------------------------------------------------------------------
Credit Arrangements
OnMarch 25, 2022 , the Company entered into a new$1,200 revolving credit agreement (the Credit Agreement) that matures inMarch 2027 . The Credit Agreement replaced a prior$1,200 revolving credit agreement (the prior Credit Agreement) in place sinceNovember 2019 . The Credit Agreement also changed the interest rate benchmark used as a reference rate for certain borrowings under the Credit Agreement from the London Interbank Offered Rate (LIBOR) to the secured overnight financing rate (SOFR). The Company did not incur any termination fees or penalties in connection with entering the new Credit Agreement, which was considered a debt modification. There were no borrowings under either the new Credit Agreement or the prior Credit Agreement as ofMarch 31, 2022 andJune 30, 2021 , respectively, and the Company believes that borrowings under the new Credit Agreement are and will continue to be available for general corporate purposes. The Credit Agreement includes certain restrictive covenants and limitations. The primary restrictive covenant is a minimum ratio of 4.0, calculated as total earnings before interest, taxes, depreciation and amortization and other similar non-cash charges and certain other items (Consolidated EBITDA) to total interest expense for the trailing four quarters (Interest Coverage ratio), as defined and described in the Credit Agreement. The Company was in compliance with all restrictive covenants and limitations in the Credit Agreement as ofMarch 31, 2022 , and anticipates being in compliance with all restrictive covenants for the foreseeable future.
As of
Stock Repurchases and Dividend Payments
As ofMarch 31, 2022 , the Company had two stock repurchase programs: an open-market purchase program with an authorized aggregate purchase amount of up to$2,000 , which has no expiration date, and a program to offset the anticipated impact of dilution related to stock-based awards (the Evergreen Program), which has no authorization limit on the dollar amount and no expiration date. During the three months endedMarch 31, 2022 and 2021, the Company repurchased 0 and 1,648 thousand shares of common stock at a cost of$0 and$305 , respectively. During the nine months endedMarch 31, 2022 and 2021, the Company repurchased 152 and 3,072 thousand shares of common stock at a cost of$25 and$605 , respectively.
Dividends per share declared and total dividends paid to Clorox stockholders were as follows for the periods indicated:
Three Months Ended Nine Months Ended
3/31/2022 3/31/2021 3/31/2022 3/31/2021
Dividends per share declared $ 1.16 $ 1.11 $ 3.48 $ 3.33
Total dividends paid 143 140 428 420
CONTINGENCIES
See Notes to Condensed Consolidated Financial Statements for information on the Company's contingencies.
28
--------------------------------------------------------------------------------RECENTLY ISSUED ACCOUNTING STANDARDS
See Notes to Condensed Consolidated Financial Statements for a summary of recently issued accounting standards relevant to the Company.
NON-GAAP FINANCIAL MEASURES
The non-GAAP financial measures that are included in this MD&A and the reasons management believes they are useful to investors are described below. These measures should be considered supplemental in nature and are not intended to be a substitute for the related financial information prepared in accordance withU.S. GAAP. In addition, these measures may not be the same as similarly named measures presented by other companies. Organic sales growth / (decrease) is defined as net sales growth / (decrease) excluding the effect of foreign exchange rate changes and any acquisitions and divestitures. 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.
The following table provides a reconciliation of organic sales growth / (decrease) (non-GAAP) to net sales growth / (decrease) (GAAP), the most comparable GAAP measure:
Three Months Ended March 31, 2022
Percentage change versus the year-ago period
Health and
Wellness Household Lifestyle International Total
Net sales growth / (decrease) (GAAP) (3) % 6 % 4 % 1 % 2 %
Add: Foreign Exchange - - - 5 -
Add/(Subtract): Divestitures/Acquisitions - - - - -
Organic sales growth / (decrease) (non-GAAP) (3) % 6 % 4 % 6 % 2 %
Nine Months Ended March 31, 2022
Percentage change versus the year-ago period
Health and
Wellness Household Lifestyle International Total
Net sales growth / (decrease) (GAAP) (11) % (1) % 4 % 1 % (4) %
Add: Foreign Exchange - - - 3 -
Add/(Subtract): Divestitures/Acquisitions - - - - -
Organic sales growth / (decrease) (non-GAAP) (11) % (1) % 4 % 4 % (4) %
29-------------------------------------------------------------------------------- Cautionary Statement This Report, including the exhibits hereto and the information incorporated by reference herein, 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 endedJune 30, 2021 , and in this Report, as updated from time to time in the Company'sSecurities 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, including for asset impairment charges related to, among others, intangible assets, including trademarks and goodwill, in particular the impairment charges relating 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 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;
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•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 the
effects of 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;
•the ability of the Company to 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 Procter & Gamble Co.'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 (ESG) 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 Report are based on management's current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this Report. 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.
In this Report, unless the context requires otherwise, the terms "the Company,"
"Clorox," "we," "us," and "our" refer to
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