Clorox 10-Q Summary
Period: The filing covers the quarter and nine months ended March 31, 2022 (Clorox fiscal 2022 third quarter), compared with the periods ended March 31, 2021. The request metadata says “2021 Q3,” but the filing itself is for 2022 Q3.
Business context and results
Clorox sells consumer and professional products across four reportable segments: Health and Wellness, Household, Lifestyle, and International. Amounts below are in millions except per-share data.
| Metric | Quarter ended Mar. 31, 2022 | Prior-year quarter | Nine months ended Mar. 31, 2022 | Prior-year nine months |
|---|---|---|---|---|
| Net sales | $1,809 (+2%) | $1,781 | $5,306 (-4%) | $5,539 |
| Gross profit | $649 (-16%) | $774 | $1,877 (-26%) | $2,531 |
| Gross margin | 35.9% | 43.5% | 35.4% | 45.7% |
| Net earnings attributable to Clorox | $150 | $(61) | $361 | $613 |
| Diluted EPS | $1.21 | $(0.49) | $2.91 | $4.78 |
| Cash from operations | Not presented for quarter | Not presented for quarter | $451 | $893 |
Quarterly sales and volume each rose 2%; nine-month sales and volume fell 4% and 3%, respectively. The quarter’s gross margin declined 760 basis points and the nine-month margin declined 1,030 basis points, mainly from higher manufacturing, logistics, and commodity costs. Price increases and cost savings partly offset these pressures.
Segment performance and material changes
- Health and Wellness: Quarterly sales fell 3%; nine-month sales fell 11%, primarily reflecting lower Professional Products shipments versus elevated pandemic-related demand in the prior year. Nine-month segment earnings before tax fell 22%.
- Household: Quarterly sales rose 6%, supported by price increases and litter shipments; nine-month sales declined 1%. Earnings before tax fell 5% for the quarter and 48% for nine months, pressured by input and supply-chain costs.
- Lifestyle: Sales rose 4% in both periods. Earnings before tax declined 3% for the quarter and 8% for nine months, with cost inflation offsetting sales growth.
- International: Sales rose 1% in both periods. Nine-month earnings before tax fell 57%, reflecting the prior-year $85 noncash Saudi joint venture remeasurement gain as well as higher costs.
- The prior-year comparison included a $329 noncash impairment charge for the Vitamins, Minerals and Supplements business. This helps explain the current-quarter return to profit from a prior-year loss; it does not eliminate the current period’s margin and cost pressures.
Cash, debt, and liquidity
- Nine-month operating cash flow was $451, down from $893, primarily due to lower cash earnings and working-capital movements. Capital expenditures were $172, versus $232 a year earlier.
- Cash and cash equivalents were $241 at March 31, 2022, versus $319 at June 30, 2021. Total debt carrying amounts were approximately $2,882, including $395 of commercial paper, $600 of current maturities, and $1,887 of long-term debt; debt was $2,784 at June 30, 2021.
- Current liabilities exceeded current assets by $774, mainly because $600 of 3.05% senior notes were due in September 2022. Management expected repayment through new borrowings and stated it expected sufficient liquidity from operating cash flows, capital-market access, and its credit facility.
- A new $1.2 billion revolving credit agreement was entered into in March 2022, maturing in March 2027. No borrowings were outstanding under the facility at quarter-end; the company reported compliance with covenants.
- Dividends paid to Clorox stockholders were $428 for nine months. Share repurchases were $25, compared with $605 in the prior-year period.
- Supplier obligations included in accounts payable under the voluntary supply-chain-finance program were $218, up from $152 at June 30, 2021. Clorox said supplier participation does not change its payment obligations and that the program has no direct impact on its balance sheet, cash flows, or liquidity.
Outlook, risks, and contingencies
The filing provides no specific numerical sales, earnings, or margin guidance. Management described continuing inflation, heightened by the conflict in Ukraine, with higher commodity, manufacturing, and logistics costs. It cited pricing, cost savings, and supply-chain optimization as responses. Pandemic-related demand remained elevated versus pre-pandemic levels, while future demand and supply conditions remained uncertain.
Risks discussed include inflation and commodity costs, transportation and supply constraints, changes in pandemic-related demand, competition, reliance on major customers, foreign-exchange volatility, geopolitical conditions, and access to funding. Walmart and its affiliates accounted for 25% of net sales in the quarter and nine-month period. Environmental remediation liabilities were $28; management noted possible additional costs and uncertainty in remediation requirements. Management said other legal proceedings were not expected to have a material adverse effect, while acknowledging uncertainty.
Important facts for investors to verify
- Whether pricing and savings can offset ongoing commodity, manufacturing, and logistics inflation and restore gross margins.
- How the September 2022 $600 million note maturity was refinanced or repaid, and the company’s resulting borrowing costs and liquidity.
- Whether operating cash flow improves after its substantial year-over-year decline and how working capital, including supplier-finance balances, evolves.
- Whether lower Health and Wellness shipments and post-pandemic demand normalization persist, and whether segment profitability recovers.
- Potential changes in environmental remediation exposure beyond the $28 million recorded liability.