The Clorox Management Discusses Q4 2012 Results - Earnings Call Transcript

The Clorox (CLX)

Q4 2012 Earnings Call

August 02, 2012 1:30 pm ET

Executives

Steve Austenfeld - Former Vice President of Investor Relations

Stephen M. Robb - Chief Financial Officer and Senior Vice President

Donald R. Knauss - Chairman, Chief Executive Officer and Chairman of Executive Committee

Lawrence S. Peiros - Chief Operating Officer and Executive Vice President

Analysts

Alice Beebe Longley - The Buckingham Research Group Incorporated

Linda Bolton-Weiser - Caris & Company, Inc., Research Division

Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division

John A. Faucher - JP Morgan Chase & Co, Research Division

Wendy Nicholson - Citigroup Inc, Research Division

Javier Escalante - Consumer Edge Research, LLC

Timothy A. Conder - Wells Fargo Securities, LLC, Research Division

Leigh Ferst - Wellington Shields & Co., LLC, Research Division

Dara W. Mohsenian - Morgan Stanley, Research Division

William Schmitz - Deutsche Bank AG, Research Division

Constance Marie Maneaty - BMO Capital Markets U.S.

Christopher Ferrara - BofA Merrill Lynch, Research Division

Lauren R. Lieberman - Barclays Capital, Research Division

Ian Gordon

Jason Gere - RBC Capital Markets, LLC, Research Division

Presentation

Operator

Thank you for standing by. Good day, ladies and gentlemen, and welcome to The Clorox Company's Fourth Quarter Fiscal Year 2012 Earnings Release Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Mr. Steve Austenfeld, Vice President of Investor Relations for The Clorox Company. Mr. Austenfeld, you may begin the conference.

Steve Austenfeld

Great. Thank you. Welcome, everyone, and thank you for joining Clorox's fourth quarter conference call. On the call with me today are Don Knauss, Clorox's Chairman and CEO; Larry Peiros, our Executive Vice President and Chief Operating Officer; and Steve Robb, our Chief Financial Officer. We're broadcasting this call via the Internet, and a replay of the call will be available for 7 days at our website, thecloroxcompany.com.

Let me remind you that on today's call, we will refer to certain non-GAAP financial measures including, but not limited to, free cash flow, EBIT margin, debt-to-EBITDA and economic profit. Management believes that providing insights on these measures enables investors to better understand and analyze our ongoing results of operations.

Reconciliation with the most directly comparable financial measures determined in accordance with GAAP can be found in today’s press release, this webcast's prepared remarks or in supplemental information available in the Financial Results area of our website, as well as in our filings with the SEC. In particular, it may be helpful to refer to tables located at the end of today's earnings release.

Please recognize that today's discussion contains forward-looking statements. Actual results or outcomes could differ materially from management's expectations and plans. Please review our most recent 10-K filing with the SEC and our other SEC filings for a description of important factors that could cause results or outcomes to differ materially from management's expectations and plans. The company undertakes no obligation to publicly update or revise any forward-looking statements.

Today, Larry will start with a discussion of our volume and sales results. Steve will follow with a review of our financial performance for the quarter and fiscal year, as well as discuss our current outlook for fiscal year '13. And finally, before turning to Q&A, Don will close, commenting on some areas of strategic focus for the fiscal year.

With that, let me turn it over to Larry.

Steve Austenfeld

Thanks, Steve, and hello to everybody on the call. Overall, our fourth quarter top line performance was strong, and we finished fiscal '12 in good fashion. We delivered sales growth of 4% on top of the 4% sales growth in the year-ago quarter. Even without the recent acquisitions, sales grew by 2.5%, and sales were up in all 4 of our business segments. Turning to volumes. Q4 volume was up 2%, about half the rate of sales growth, due to the benefit of price increases across most of the portfolio. Our new product innovation program delivered record levels in fiscal '12, with over 3 points of incremental sales growth. And our integrated marketing plan continued to drive strong market share results. We feel great about the quarter and the progress we are making in driving top line growth at a tough economic climate.

In our U.S. business, our all-outlet retail market share reached a record high. We were up about 0.5 share point over the past 52 weeks through a 28.1% share. Moreover, we gained or held share in every one of our U.S. categories. The share results are particularly encouraging given recent price increases on almost every U.S. brand.

The other good news is that our U.S. categories are getting healthier as pricing takes hold and the economy recovers. Overall category consumption on an all-outlet basis was up about 0.5 point for the past 52 weeks. This is the first consumption growth we have seen in our U.S. categories in the past 3 years.

Our Cleaning segment delivered a very strong quarter, with volume up 5% and sales up 7% behind volume gains and pricing. Home Care volume increased behind double-digit increases in our portfolio of Clorox-branded cleaning products, including strong gains in Clorox Disinfecting Wipes due to strong merchandising and solid innovation like our new bleach, our new Clorox Bleach Foaming Spray.

Gains in Home Care were partially offset by volume declines at Pine-Sol due to a substantial price increase driven by escalating pine oil costs. Our overall Home Care market share was up almost 1 full point, achieving a record all-out market share in the past 52 weeks.

Our Laundry business saw a volume decline, primarily due to the impact of price increases taken last August of the Clorox Bleach and Clorox 2 products. Dollar share was flat for the past 52 weeks, and the category is stabilizing after a couple years of significant decline. This month, we will begin the rollout of our new concentrated Clorox Bleach. Initial reaction has been very positive, and we expect a smooth transition and strong merchandising support.

On our Professional Products business, we saw another strong quarter. Volume was up by over 50%, driven by the recent acquisitions and a double-digit increase on the base business.

In our Household segment, volume declined 2%, and sales grew 3%. We then saw sales decline, driven primarily by losses on Glad storage products. Behind Glad, recent price increases and some distribution losses. Glad regular trash bags were also down in the quarter, but premium trash bins were up mid-single digits behind continued growth on Glad share with Febreze.

On Charcoal, volume was equal to the year-ago quarter and sales were up high single digits, driven by pricing and favorable mix.

Cat Litter volumes and sales were down in Q4 due to recent price increase and lower merchandising. On an all-outlet basis, Cat Litter continues to grow share for the past 52 weeks behind share gains on Presto.

In our Lifestyle segment, volume grew 2%, and sales grew 3%. Volume and sales were up strongly in our U.S. Burt's Bees business behind category growth in innovation including good, our Natural Personal care brand. Brita grew sales and volumes at the high single-digit rates behind the continuous success of the Brita Brottle. We realized that we're adding new bottles in different colors and recently launched a lot of the smaller bottles designed for kids.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Dow Sells Off as U.S. and China Trade Tensions Escalate

Dow Sells Off as U.S. and China Trade Tensions Escalate

China Central Bank Governor Says Stay 'Calm and Rational' After Market Free Fall

China Central Bank Governor Says Stay 'Calm and Rational' After Market Free Fall

Here Is Your Market Playbook During This Tariff-Driven Selloff

Here Is Your Market Playbook During This Tariff-Driven Selloff

Dropbox Is the New Defensive Stock to Own With the Market Falling Apart

Dropbox Is the New Defensive Stock to Own With the Market Falling Apart

The Quick Answer Why Trump's Trade War Makes Stocks at Least 10% Overvalued

The Quick Answer Why Trump's Trade War Makes Stocks at Least 10% Overvalued