CLOROX CO DE

Previous wording

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, 2023, which was filed with the SEC on August 10, 2023, 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 six month periods ended December 31, 2023 (the current period) to the three and six month periods ended December 31, 2022 (the prior period), with percentage and basis point calculations based on rounded numbers, except for per share data and the effective tax rate.

Current wording

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, 2023, which was filed with the SEC on August 10, 2023, 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, 2024 (the current period) to the three and nine month periods ended March 31, 2023 (the prior period), with percentage and basis point calculations based on rounded numbers, except for per share data and the effective tax rate.

Previous wording

The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products with approximately 8,700 employees worldwide. The Company has operations in approximately 25 countries or territories and sells its products in more than 100 markets, 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, cleaning and disinfecting products, Pine-Sol® and Tilex® cleaners; Liquid-Plumr® clog removers; Poett® home care products; Glad® bags and wraps; Fresh Step® cat litter; Kingsford® grilling products; Hidden Valley® dressings, dips, seasonings and sauces; Burt’s Bees® natural personal care products; Brita® water-filtration products; and Natural Vitality®, RenewLife®, NeoCell®and Rainbow Light®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.

Current wording

The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products with approximately 8,100 employees worldwide. The Company has operations in approximately 25 countries or territories and sells its products in more than 100 markets, 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, cleaning and disinfecting products, Pine-Sol® and Tilex® cleaners; Liquid-Plumr® clog removers; Poett® home care products; Glad® bags and wraps; Fresh Step® cat litter; Kingsford® grilling products; Hidden Valley® dressings, dips, seasonings and sauces; Burt’s Bees® natural personal care products; Brita® water-filtration products; and Natural Vitality®, RenewLife®, NeoCell®and Rainbow Light®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.

Previous wording

•International consists of products sold outside the United States. Products within this segment include laundry additives; home care products; water-filtration products; digestive health products; grilling products; cat litter; food; 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.

Current wording

•International consists of products sold outside the United States. Products within this segment include laundry additives; home care products; water-filtration products; digestive health products; grilling products; cat litter; food; bags and wraps; natural personal care products; and professional cleaning and disinfecting products marketed primarily under the Clorox, Clorinda®, Poett, Pine-Sol, Glad, Brita, RenewLife, Ever Clean® and Burt’s Bees brands.

Previous wording

The impacts of these system disruptions included order processing delays and significant product outages, resulting in a negative impact on net sales and earnings. The Company has since transitioned back to automated order processing. The Company experienced lessening operational impacts in the second quarter as it made progress in returning to normalized operations.

Current wording

The impacts of these system disruptions included order processing delays and significant product outages, resulting in a negative impact on net sales and earnings. The Company has since transitioned back to automated order processing. The Company experienced lessening operational impacts in the second quarter and has since returned to substantially normalized operations.

Previous wording

The effects of the cyberattack are expected to negatively impact fiscal year 2024 results, though some of the anticipated net sales not recognized in the first quarter as a result of the disruptions were recognized in the second quarter, and some are expected to be recognized in subsequent quarters of fiscal year 2024 as customers rebuild inventories.

Current wording

The effects of the cyberattack are expected to negatively impact fiscal year 2024 results, though some of the anticipated net sales not recognized in the first quarter as a result of the disruptions were recognized in the second and third quarters.

Previous wording

The Company also incurred incremental expenses of approximately $25 and $49 as a result of the cyberattack for the three and six months ended December 31, 2023, respectively. These costs relate to third-party consulting services, including IT recovery and forensic experts and other professional services incurred to investigate and remediate the attack, as well as incremental operating costs incurred from the resulting disruption to the Company’s business operations. The Company expects to incur lessening costs related to the cyberattack in future periods.

Current wording

The Company also incurred incremental expenses of approximately $8 and $57 as a result of the cyberattack for the three and nine months ended March 31, 2024, respectively. These costs relate to third-party consulting services, including IT recovery and forensic experts and other professional services incurred to investigate and remediate the attack, as well as incremental operating costs incurred from the resulting disruption to the Company’s business operations. The Company expects to incur lessening costs related to the cyberattack in future periods.

Previous wording

The Company has not recognized any insurance proceeds in the three and six months ended December 31, 2023 related to the cyberattack. The timing of recognizing insurance recoveries, if any, may differ from the timing of recognizing the associated expenses.

Current wording

The Company has not recognized any insurance proceeds in the three and nine months ended March 31, 2024 related to the cyberattack. The timing of recognizing insurance recoveries, if any, may differ from the timing of recognizing the associated expenses.

Previous wording

(1)This represents the net impact on net sales growth / (decrease) from pricing actions, mix and other factors.

Current wording

(2)This represents the net impact on net sales growth / (decrease) from pricing actions, mix and other factors.

Previous wording

(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 Measures” below for reconciliation of organic sales growth / (decrease) to net sales growth / (decrease), the most directly comparable GAAP financial measure.

Current wording

(3)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 Measures” below for reconciliation of organic sales growth / (decrease) to net sales growth / (decrease), the most directly comparable GAAP financial measure.

Previous wording

(3)Organic volume represents volume excluding the effect of any acquisitions and divestitures.

Current wording

(4)Organic volume represents volume excluding the effect of any acquisitions and divestitures. In the three months ended March 31, 2024, the volume impact of divestitures was (2)% and 0% for International and Total Company, respectively. In the nine months ended March 31, 2024, the volume impact of divestitures was (1)% and 0% for International and Total Company, respectively.

Previous wording

(4)Total Company includes Corporate and Other.

Current wording

(5)Total Company includes Corporate and Other.

Previous wording

Net salesand volume in the current three month period increased by 16% and 13%, respectively, primarily driven by higher shipments resulting from the cyberattack recovery as retailers rebuilt inventory. The variance between volume and net sales was primarily due to favorable price mix, partially offset by unfavorable foreign exchange rates.

Current wording

Net salesand volume in the current three month period decreased by 5% and 4%, respectively, driven by lower shipments across the Lifestyle, Health and Wellness and Household reportable segments, primarily due to distribution losses resulting from the cyberattack. The variance between volume and net sales was primarily due to unfavorable foreign exchange rates, partially offset by favorable price mix.

Previous wording

Net sales and volume in the current six month period decreased by 2% and 7% respectively. The volume decrease was primarily driven by pricing actions and the impact of the cyberattack. The variance between volume and net sales was primarily due to favorable price mix, partially offset by unfavorable foreign exchange rates.

Current wording

Net sales and volume in the current nine month period decreased by 3% and 6% respectively. The volume decrease was primarily driven by pricing actions and the impacts of the cyberattack. The variance between volume and net sales was primarily due to favorable price mix, partially offset by unfavorable foreign exchange rates.

Previous wording

Gross margin increased by 730 basis points in the current three month period from 36.2% to 43.5%. The increase was primarily driven by the benefit of pricing, higher volume and cost savings, partially offset by unfavorable foreign exchange rates.

Current wording

Gross margin increased by 40 basis points in the current three month period from 41.8% to 42.2%. The increase was primarily driven by the benefit of pricing and cost savings, partially offset by higher manufacturing and logistics costs, unfavorable foreign exchange rates and higher trade promotion spending.

Previous wording

Gross margin increased by 530 basis points in the current six month period from 36.1% to 41.4%. The increase was primarily driven by the benefit of pricing and cost savings, partially offset by unfavorable foreign exchange rates and lower volume.

Current wording

Gross margin increased by 360 basis points in the current nine month period from 38.1% to 41.7%. The increase was primarily driven by the benefit of pricing and cost savings, partially offset by unfavorable foreign exchange rates and lower volume.

Previous wording

Selling and administrative expenses, as a percentage of net sales, decreased by 20 basis points and increased by 200 basis points in the current three and six month periods, respectively. The dollar increase in selling and administrative expenses in the current three month period was primarily due to incremental costs associated with the cyberattack and the Company’s digital capabilities and productivity enhancements investment. The dollar increase in selling and administrative expenses in the current six month period was primarily due to incremental costs associated with the cyberattack, an arbitral decision related to a commercial dispute and the Company’s digital capabilities and productivity enhancements investment.

Current wording

Selling and administrative expenses, as a percentage of net sales, increased by 40 basis points and 140 basis points in the current three and nine month periods versus the prior periods, respectively. The dollar decrease in selling and administrative expenses in the current three month period was primarily due to lower incentive compensation expense. The dollar increase in selling and administrative expenses in the current nine month period was primarily due to incremental costs associated with the cyberattack and an arbitral decision related to a commercial dispute.

Previous wording

Advertising costs, as a percentage of net sales, increased by 20 basis points and 120 basis points in the current three and six month periods versus the prior periods, respectively. The increase in advertising costs reflects the Company’s continued support behind its brands. The Company’s U.S. retail advertising spend as a percentage of net sales was 10% in the current and prior three month periods.

Current wording

Advertising costs, as a percentage of net sales, increased by 110 basis points and 120 basis points in the current three and nine month periods versus the prior periods, respectively. The increase in advertising costs reflects the Company’s continued support behind its brands. The Company’s U.S. retail advertising spend as a percentage of net sales was 12% in both the current and prior three month periods.

Previous wording

Research and development costs, both as a percentage of net sales and dollars, were essentially flat in both the current three and six month periods as compared to the prior periods. The Company continues to invest behind product innovation and cost savings.

Current wording

Research and development costs, both as a percentage of net sales and dollars, were essentially flat in both the current three and nine month periods as compared to the prior periods. The Company continues to invest behind product innovation and cost savings.

Previous wording

Pension settlement charge, interest expense, other (income) expense, net and the effective tax rate on earnings

Current wording

Loss on divestiture, pension settlement charge, goodwill, trademark and other asset impairments, interest expense, other (income) expense, net and the effective tax rate on earnings (losses)

Previous wording

Pension settlement chargewas $171 in both the current three and six month periods and reflects the settlement of the domestic qualified pension plan. See Notes to Condensed Consolidated Financial Statements for further information.

Current wording

Pension settlement chargewas $171 in the current nine month period and reflects the settlement of the domestic qualified pension plan. See Notes to Condensed Consolidated Financial Statements for further information.

Previous wording

Other (income) expense, net was ($7) and ($4) in the current and prior three month periods, respectively, and $5 and $30 in the current and prior six month periods, respectively. The variance between the current and prior three month periods was not significant. The variance between the current and prior six month periods was primarily due to restructuring and related implementation costs associated with the streamlined operating model incurred in the prior period and the sale-leaseback transaction recorded in the current period, partially offset by unfavorable foreign exchange rates primarily related to the Company’s operations in Argentina in the current period.

Current wording

Other (income) expense, net was ($2) and $24 in the current and prior three month periods, respectively, and $3 and $54 in the current and prior nine month periods, respectively. The variance between the current and prior three month periods was primarily due to higher restructuring and related implementation costs associated with the streamlined operating model incurred in the prior period. The variance between the current and prior nine month periods was primarily due to higher restructuring and related implementation costs associated with the streamlined operating model incurred in the prior period and the sale-leaseback transaction recorded in the current period, partially offset by the net impact of interest income and Argentina foreign exchange rates in the current period.

Previous wording

Once fully implemented, the Company expects cost savings to be approximately $75 to $100 annually, with benefits of $35 realized in fiscal year 2023 and benefits of approximately $45 to $50 anticipated in fiscal year 2024. The benefits of the streamlined operating model are currently expected to increase future cash flows as a result of cost savings that will be generated primarily in the areas of selling and administration, supply chain, marketing and research and development.

Current wording

Once fully implemented, the Company expects cost savings to be approximately $75 to $100 annually. The benefits of the streamlined operating model are currently expected to increase future cash flows as a result of cost savings that will be generated primarily in the areas of selling and administration, supply chain, marketing and research and development.

Previous wording

The Company incurred $60 of costs in fiscal year 2023 and anticipates incurring approximately $30 to $40 of costs in fiscal year 2024 related to this initiative of which approximately $5 to $10 are expected to be employee-related costs to reduce certain staffing levels such as severance payments, with the remainder for consulting and other costs. Costs incurred are expected to be settled primarily in cash.

Current wording

The Company incurred $60 of costs in fiscal year 2023 and anticipates incurring approximately $30 to $40 of costs in fiscal year 2024 related to this initiative of which approximately $10 to $20 are expected to be employee-related costs to reduce certain staffing levels such as severance payments, with the remainder for consulting and other costs. Costs incurred are expected to be settled primarily in cash.

Previous wording

Restructuring and related implementation costs, net were $3 for both the three and six months ended December 31, 2023, which was related to other costs. Restructuring and related implementation costs, net were $4 and $23 for the three and six months ended December 31, 2022, of which $0 and $16 was related to employee-related costs and $4 and $7 was related to other costs, respectively. For further details on the streamlined operating model and restructuring, refer to the notes to condensed consolidated financial statements.

Current wording

Restructuring and related implementation costs, net were $10 and $13 for the three and nine months ended March 31, 2024, of which $4 and $4 was related to employee-related costs and $6 and $9 was related to other costs, respectively. Restructuring and related implementation costs, net were $21 and $44 for the three and nine months ended March 31, 2023, of which $14 and $30 was related to employee-related costs and $7 and $14 was related to other costs, respectively. For further details on the streamlined operating model and restructuring, refer to the Notes to Condensed Consolidated Financial Statements.

Previous wording

Diluted EPS decreased by $0.57, or 38%, in the current six month period, primarily due to the pension settlement charge, higher selling and administrative expenses, unfavorable foreign exchange rates and lower volume, partially offset by the benefits of pricing and higher gross margin.

Current wording

Diluted EPS increased by $0.74, or 336%, in the current nine month period, primarily due to the noncash impairment charges on assets held by the VMS business in the prior period and the benefits of pricing and higher gross margin in the current period, partially offset by losses relating to the divestiture of the Argentina business, the pension settlement charge, unfavorable foreign exchange rates and lower volume.

Previous wording

actions. The variance between volume and net sales was primarily due to the benefit of price increases. The increase in segment adjusted EBIT in the current period was primarily due to lower manufacturing and logistics costs and the benefit of price increases.

Current wording

Volume and net sales decreased by 5% and 3%, respectively, and segment adjusted EBIT increased by 24%, during the current nine month period. The volume decrease was primarily due to pricing actions and distribution losses resulting from the cyberattack. The variance between volume and net sales was primarily due to the benefit of price increases. The increase in segment adjusted EBIT in the current period was primarily due to lower manufacturing and logistics costs, the benefit of price increases as well as cost savings.

Previous wording

Volume, net sales and segment adjusted EBIT decreased by 7%, 3% and 4% respectively, during the current six month period. The volume decrease was primarily due tothe impact of the cyberattack. The variance between volume and net sales was mainly due to the benefit of price increases. The decrease in segment adjusted EBIT was primarily due to advertising investments and higher manufacturing and logistics costs, partially offset by favorable commodity costs.

Current wording

Volume, net sales and segment adjusted EBIT decreased by 7%, 6% and 12% respectively, during the current nine month period. The volume decrease was primarily due to distribution losses, supply chain constraints and the impact of the cyberattack. The variance between volume and net sales was mainly due to favorable price mix partially offset by higher trade promotion spending. The decrease in segment adjusted EBIT was primarily due to lower net sales and higher manufacturing and logistics costs, partially offset by favorable commodity costs.

Previous wording

Volume, net sales and segment adjusted EBIT increased by 6%, 9% and 33%, respectively during the current three month period. The volume increase was primarily due to higher shipments resulting from the cyberattack recovery as retailers rebuilt inventory. The variance between volume and net sales was mainly due to the benefit of price increases, partially offset by unfavorable foreign exchange rates. The increase in segment adjusted EBIT was primarily due to net sales growth partially offset by unfavorable foreign exchange rates.

Current wording

Volume, net sales and segment adjusted EBIT increased by 1%, 2% and 41%, respectively during the current three month period. The variance between volume and net sales was mainly due to the benefit of price increases, partially offset by unfavorable foreign exchange rates. The increase in segment adjusted EBIT was primarily due to net sales growth behind pricing partially offset by unfavorable foreign exchange rates, higher manufacturing and logistics costs and unfavorable commodity costs.

Previous wording

Volume decreased by 4%, and net sales and segment adjusted EBIT increased by 2% and 40% respectively, in the current six month period. The volume decrease was primarily due tothe impact of the cyberattack. The variance between volume and net sales was mainly due to the benefit of price increases, partially offset by unfavorable foreign exchange rates. The increase in segment adjusted EBIT was primarily due to the net impact of pricing, partially offset by unfavorable foreign exchange rates, higher manufacturing and logistics costs and unfavorable commodity costs.

Current wording

Volume decreased by 2%, and net sales and segment adjusted EBIT increased by 2% and 41% respectively, in the current nine month period. The volume decrease was primarily due tothe impact of the cyberattack. The variance between volume and net sales was mainly due to the benefit of price increases, partially offset by unfavorable foreign exchange rates. The increase in segment adjusted EBIT was primarily due to the net impact of pricing, partially offset by unfavorable foreign exchange rates, higher manufacturing and logistics costs and unfavorable commodity costs.

Previous wording

The business environment in Argentina continues to be challenging due to significant volatility in Argentina’s currency, high inflation, and economic recession. In December 2023, the new Argentine government announced broad economic policy changes, including repealing price controls, and a devaluation in the official Argentine government exchange rate, which had the effect of narrowing the spread between the official rate and the unofficial parallel rate. As of December 31, 2023 and June 30, 2023, the net asset position, excluding goodwill, of Clorox Argentina was $33 and $48, respectively. Of these net assets, cash balances were approximately $15 and $28 as of December 31, 2023 and June 30, 2023, respectively. Net sales from Clorox Argentina represented approximately 2% of the Company’s consolidated net sales for both the six months ended December 31, 2023 and the fiscal year ended June 30, 2023.

Current wording

As of June 30, 2023, the net asset position, excluding goodwill, of Clorox Argentina was $48. Of these net assets, cash balances were approximately $28 as of June 30, 2023. Net sales from Clorox Argentina represented approximately 2% of the Company’s consolidated net sales for both the nine months ended March 31, 2024 and the fiscal year ended June 30, 2023.

Previous wording

Net sales decreased by 7% and 1% in the current three and six month periods, respectively, due to lower net sales in the VMS business. Segment adjusted EBIT decreased by 22% and 12% in the current three and six month periods, respectively, primarily due to foreign exchange losses on Corporate and Other assets related to operations in Argentina.

Current wording

Net sales decreased by 10% and 4% in the current three and nine month periods, respectively, due to lower net sales in the VMS business. Segment adjusted EBIT increased by 31% in the current three month period primarily due to lower employee incentive compensation expenses. During the nine month period the segment adjusted EBIT increased by 5% primarily due to lower VMS operating expenses and reductions in employee related expenses primarily due to cost savings and lower employee incentive compensation, partially offset by foreign exchange losses on Corporate and Other assets related to operations in Argentina.

Previous wording

Net cash provided by operations was $173 in the current six month period, compared with $387 in the prior six month period. The decrease was primarily driven by higher tax and employee incentive compensation payments in the current six month period and an increase in working capital; partially by higher cash earnings in the current six month period. The increase in tax payments made in the current period was primarily driven by payment of fiscal year 2023 income taxes previously deferred as a result of the relief provided by the IRS announced in January 2023 due to winter storms in California. The increase in working capital in the current six month period is primarily due to increased Accounts Receivable due to timing, partially offset by lower inventory due to higher shipments as retailers rebuild inventories; both as part of the recovery from the cyberattack.

Current wording

Net cash provided by operations was $355 in the current nine month period, compared with $728 in the prior nine month period. The decrease was primarily driven by higher tax and employee incentive compensation payments in the current nine month period and an increase in working capital; partially offset by higher cash earnings in the current nine month period. The increase in tax payments made in the current period was primarily driven by payment of fiscal year 2023 income taxes previously deferred as a result of the relief provided by the IRS announced in January 2023 due to winter storms in California. The increase in working capital in the current nine month period is primarily due to decreased Accounts payable and accrued liabilities due to timing of payments.

Previous wording

Net cash used for investing activities was $56 in the current six month period, compared with $87 in the prior six month period. The year-over-year decrease was mainly due to cash proceeds from a sale-leaseback transaction and lower capital spending in the current six month period..

Current wording

Net cash used for investing activities was $94 in the current nine month period, compared with $142 in the prior nine month period. The year-over-year decrease was mainly due to cash proceeds from the sale of the Argentina business, a sale-leaseback transaction and lower capital spending in the current nine month period.

Previous wording

Net cash used for financing activities was $104 in the current six month period, compared with $315 in the prior six month period. The year-over-year increase was mainly due to higher cash sourced from short term borrowings in the current six month period.

Current wording

Net cash used for financing activities was $382 in the current nine month period, compared with $526 in the prior nine month period. The year-over-year decrease was mainly due to higher cash sourced from short term borrowings in the current nine month period.

Previous wording

As of December 31, 2023, the Company maintained $34 of foreign and other credit lines, of which $7 was outstanding.

Current wording

As of March 31, 2024, the Company maintained $34 of foreign and other credit lines, of which $9 was outstanding.

Previous wording

As of December 31, 2023, 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. There were no share repurchases of common stock during both the three and six months ended December 31, 2023 and 2022, respectively.

Current wording

As of March 31, 2024, 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. There were no share repurchases of common stock during both the three and nine months ended March 31, 2024 and 2023, respectively.

Previous wording

Adjusted earnings (losses) before interest and income taxes (adjusted EBIT)represents earnings (losses) before income taxes excluding interest income, interest expense and other significant items that are nonrecurring or unusual (such as the pension settlement charge, incremental costs related to the cyberattack, asset impairments, charges related to the streamlined operating model, charges related to the digital capabilities and productivity enhancements investment, significant losses/(gains) related to acquisitions and other nonrecurring or unusual items impacting comparability). The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. Management believes that the presentation of adjusted EBIT is useful to investors to assess operating performance on a consistent basis by removing the impact of the items that management believes does not directly reflect the performance of each segment's underlying operations. Adjusted EBIT margin is the ratio of adjusted EBIT to net sales.

Current wording

Adjusted earnings (losses) before interest and income taxes (adjusted EBIT)represents earnings (losses) before income taxes excluding interest income, interest expense and other significant items that are nonrecurring or unusual (such as the pension settlement charge, incremental costs related to the cyberattack, asset impairments, charges related to the streamlined operating model, charges related to the digital capabilities and productivity enhancements investment, significant losses/(gains) related to acquisitions / divestitures and other nonrecurring or unusual items impacting comparability). The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. Management believes that the presentation of adjusted EBIT is useful to investors to assess operating performance on a consistent basis by removing the impact of the items that management believes does not directly reflect the performance of each segment's underlying operations. Adjusted EBIT margin is the ratio of adjusted EBIT to net sales.

Previous wording

(1)Represents costs related to settlement of the domestic qualified pension plan. Due to the nature, scope and magnitude of these costs, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See notes to condensed consolidated financial statements for additional information.

Current wording

(2)Represents costs related to settlement of the domestic qualified pension plan. Due to the nature, scope and magnitude of these costs, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

(2)Represents incremental costs incurred as a result of the cyberattack the Company experienced beginning in the first quarter of fiscal year 2024. Due to the nature, scope and magnitude of these costs, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See notes to condensed consolidated financial statements for additional information.

Current wording

(3)Represents incremental costs incurred as a result of the cyberattack the Company experienced beginning in the first quarter of fiscal year 2024. Due to the nature, scope and magnitude of these costs, the Company’s management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company’s operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

(3)Represents restructuring and related implementation costs, net for the streamlined operating model. Due to the nonrecurring and unusual nature of these costs, the Company's management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company's operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See notes to condensed consolidated financial statements for additional information.

Current wording

(5)Represents restructuring and related implementation costs, net for the streamlined operating model. Due to the nonrecurring and unusual nature of these costs, the Company's management believes presenting these costs as an adjustment in the non-GAAP results provides additional information to investors about trends in the Company's operations and is useful for period over period comparisons. It also allows investors to view underlying operating results in the same manner as they are viewed by Company management. See Notes to Condensed Consolidated Financial Statements for additional information.