Gross margin decreased 20 basis points from 42.3 percent in the year-ago quarter to 42.1 percent. This includes a decline of 40 basis points due to margin compression in the company's International business, largely driven by high inflation and price controls in Argentina and Venezuela. In addition, lower charcoal sales contributed a decline of 30 basis points to the company's gross margin. These factors were partially offset by strong cost savings and the benefit of price increases.
Year-to-date net cash provided by continuing operations increased to $486 million from $333 million in the prior-year period. The year-over-year increase was due primarily to favorable changes in working capital, the year-ago settlement of interest rate forward contracts and higher earnings. For the full fiscal year, Clorox anticipates free cash flow of about 10 percent of sales, with capital expenditures expected to be about $180 million for the full fiscal year. The company defines free cash flow as cash provided by continuing operations less capital expenditures.
Key Segment Results
Following is a summary of key third-quarter results by reportable segment. All comparisons are with the third quarter of fiscal 2012, unless otherwise stated.
(Laundry, Home Care, Professional Products)
•1% volume increase •2% sales increase •2% pretax earnings decrease
Volume growth in the segment was up 1 percent. Home Care volume grew behind double-digit increases of Clorox® disinfecting wipes and innovation across multiple brands. The Professional Products business grew volume behind continued base business growth from record shipments of cleaning and healthcare products. Volume in the Laundry business declined, driven in large part by lower shipments of Clorox 2® stain fighter and color booster due to continued weak category trends. Sales outpaced volume due to the benefit of price increases. The decrease in pretax earnings was driven largely by higher nonrecurring manufacturing and logistics costs and advertising and sales promotion spending associated with the launch of new concentrated bleach, as well as other new products. These factors were partially offset by the benefit of strong cost savings and higher sales.
(Bags and Wraps, Charcoal, Cat Litter)
•4% volume decrease •1% sales decrease •1% pretax earnings decrease
The segment's volume decrease was driven largely by double-digit declines in Charcoal, due to unusually cold weather in most U.S. regions, resulting in a decline of more than 20 percent in category sales in March. Cat Litter shipments declined, driven primarily by the continued negative volume impact of last May's price increases. Glad® volume was up, largely due to continued strong growth and innovation in premium trash bag products, partially offset by decreased shipments in base trash bags and food storage products. The variance between volume and sales was largely due to the impact of price increases, partially offset by unfavorable mix and higher trade-promotion spending. Pretax earnings decreased primarily driven by higher manufacturing and logistics costs and lower charcoal sales, partially offset by the benefit of price increases and strong cost savings.
(Dressings and Sauces, Water Filtration, Natural Personal Care)
•1% volume increase •2% sales increase •7% pretax earnings decrease
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