Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CLOROX CO /DE/ (21076) 10-Q published on Feb 04, 2019 at 4:15 pm
Reporting Period: Dec 30, 2018
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize a right-of-use asset and a lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation will depend on the classification of a lease as either a finance or an operating lease. ASU 2016-02 also requires expanded disclosures about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-11, "Leases (Topic 842), Targeted Improvements," which provides an optional transition method in applying the new lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period presented, or, as permitted by ASU 2018-11, at the beginning of the period in which it is adopted. The Company will adopt the new standard on July 1, 2019, on a modified retrospective basis using the optional transition method, and, accordingly, will not restate comparative periods. The Company has initiated its plan for the adoption and implementation of this new accounting standard, including assessing its lease arrangements and implementing software to meet the reporting and disclosure requirements of this standard. Additionally, the Company is in the process of identifying changes to its business processes and controls to support the adoption and is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. Refer to Note 12 of the Notes to Consolidated Financial Statements in Form 10-K for the fiscal year ended June 30, 2018 for the future minimum annual lease payments required under the Company’s existing non-cancelable operating and capital lease arrangements as of June 30, 2018.
Other (income) expense, net, was $7 and $(6) for the current and prior three-month periods, respectively, and $10 and $(3) in the current and prior six-month periods, respectively. The variances were primarily due to the impact from revaluation of the Company's trust assets related to its non-qualified deferred compensation plans (see Note 5 of the Notes to Condensed Consolidated Financial Statements).
Volume, net sales and earnings from continuing operations before income taxes decreased by 5%, 4% and 15%, respectively, in the current quarter. Both volume and net sales decreased, primarily driven by lower shipments of Glad® bags and wraps, mainly due to heightened competitive activity in trash bags and distribution losses in food storage products, and lower shipments in Charcoal, mainly due to a shift in the timing of shipments from the second quarter to the third quarter of the current fiscal year in support of an early-season customer program as well as continued lower consumption. These decreases were partially offset by higher shipments in Cat Litter, mainly due to innovation and increased merchandising support. The variance between volume and net sales was primarily due to the benefit of price increases, partially offset by unfavorable mix. The decrease in earnings from continuing operations before income taxes was mainly due to higher manufacturing and logistics costs and unfavorable commodity costs, partially offset by cost savings.
Volume, net sales and earnings from continuing operations before income taxes increased by 33%, 25% and 5%, respectively, in the current six-month period. Both volume growth and net sales growth were driven by the benefit of the April 2018 acquisition of the Nutranext dietary supplements business and higher shipments of Burt’s Bees®, Food and Brita® products. Increased shipments in Burt’s Bees® Natural Personal Care products were mainly due to continued strength in lip care supported by innovation and merchandising. Volume in Food grew, primarily driven by increased shipments of Hidden Valley® bottled salad dressing due to higher consumption and merchandising activity. Increased shipments in Brita® water filtration products were primarily driven by higher shipments of pour through systems and filters. Volume growth outpaced net sales growth, primarily due to unfavorable mix and higher trade promotion spending, partially offset by the benefit of price increases. The increase in earnings from continuing operations before income taxes was primarily due to net sales growth and cost savings, partially offset by higher manufacturing and logistics costs.
Volume was flat, net sales decreased by 8%, and earnings from continuing operations before income taxes increased by 9% in the current quarter. Volume reflected higher shipments primarily in Asia, offset by lower shipments in certain Latin American countries, mainly Argentina. The variance between volume and net sales was mainly due to unfavorable foreign currency exchange rates, higher trade promotion spending and unfavorable mix, partially offset by the benefit of price increases. The increase in earnings from continuing operations before income taxes was primarily due to the benefit of price increases, partially offset by the impact of unfavorable foreign currency exchange rates, mainly from devaluation of the Argentine peso, and inflationary pressure on manufacturing and logistics costs.