Attached files
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| 8-K - 8-K - CHURCH & DWIGHT CO INC /DE/ | chd8kearnings05112010.htm |
Exhibit 99.1
Church
& Dwight Co., Inc.
News
Release
|
Contact:
|
Maureen
K. Usifer
Vice
President Investor Relations
609-683-5900
|
CHURCH & DWIGHT REPORTS RECORD FIRST QUARTER EPS OF $1.11
PRINCETON,
NJ, MAY 11, 2010 – Church & Dwight Co., Inc. (NYSE:CHD) today reported net
income for the quarter ended April 2, 2010 of $80.0 million or $1.11 per share,
compared to last year’s reported net income of $62.6 million or $0.88 per
share. Earnings per share increased 21%, excluding a plant
restructuring charge of $0.04 per share in 2009. This year’s first quarter was
six days longer than the comparable period in the prior year for its US
businesses due to the Company’s fiscal calendar.
First Quarter
Review
Reported
net sales for the first quarter increased 9.2% to $634.6
million. Organic sales increased 7.7% for the total Company and 8.1%
for our total domestic and international consumer business, which excludes the
impact of foreign exchange rate changes and divestitures.
James R.
Craigie, Chairman and Chief Executive Officer, commented, “We are very pleased
with our solid first quarter business results in what continues to be a
difficult economic and competitive environment. Consumer appeal for
our high-quality premium and value-oriented products continues to be
strong. Both gross margin and operating margin expanded, reflecting
the cost savings from our new laundry plant and the continuing benefit of our
robust cost reduction programs.”
Consumer
Domestic sales were $466.7 million, a $28.6 million increase or 6.5% above the
prior year first quarter sales. First quarter organic
sales increased by 8.1% as a result of higher sales of ARM & HAMMER liquid
laundry detergent, ARM & HAMMER Super Scoop cat litter, NAIR, ORAJEL,
TROJAN, AIM toothpaste and KABOOM bathroom cleaner, partially offset by lower
sales of XTRA liquid laundry detergent.
Consumer
International sales were $102.7 million, a $19.9 million increase or 24.0% above
the prior year first quarter sales. Excluding the16.2% favorable
effect of foreign exchange rate changes, organic sales increased by 8.0%,
primarily reflecting increased sales in Canada, Brazil, UK and
Australia.
Specialty
Products sales were $65.2 million, a $5.2 million increase or 8.6% above the
prior year first quarter sales. Excluding the 4% favorable effect of
foreign exchange rate changes, organic sales for the first quarter increased by
4.6%, primarily due to growth in sodium bicarbonate sales.
Gross
margin increased to 45.0% in the first quarter compared to 42.9% in the same
quarter last year. Excluding the $5.2 million plant restructuring
charge in last year’s first quarter, gross margin expanded 120 basis
points. The increase in gross margin reflects the benefits of cost
reduction programs, manufacturing at our new laundry facility and favorable
product mix. These benefits were partially offset by higher slotting
costs and remaining costs associated with the closing of the North Brunswick
plant.
Marketing
expense was $68.9 million in the first quarter, a $2.6 million increase over the
prior year first quarter. The marketing spending was focused on the
Company’s eight power brands. Marketing expense as a percentage of
net sales decreased 50 basis points to 10.9% in the quarter compared to 11.4% in
last year’s first quarter.
Selling,
general, and administrative expense (SG&A) was $84.6 million in the first
quarter, a $6.3 million increase over the prior year first
quarter. SG&A as a percentage of net sales was 13.3% in the
quarter, a decrease of 20 basis points from the prior year first
quarter. The increase in SG&A spending is attributed to foreign
exchange rate changes, higher research and development expenses and higher costs
associated with our global information systems upgrade.
Operating
income increased 26.1% to $132.0 million in the first quarter compared to $104.7
million in the prior year first quarter. Operating margin
expanded 280 basis points to 20.8%. Excluding the plant restructuring
charges in the prior year, operating margin expanded 190 basis
points.
Equity in
earnings of affiliates decreased $1.4 million due to lower income from a joint
venture.
The
effective tax rate in the first quarter was 36.2% compared to 37.1% in the prior
year first quarter.
Net Debt and Free Cash
Flow
At
quarter end, the Company had net debt of $298 million (total debt of $745
million less cash of $447 million). The Company repaid $71 million of
bank debt in the quarter.
For the
quarter, the Company reported $72.0 million of net cash from operations compared
to $92.0 million in the prior year. The decrease in net cash from
operations is primarily related to higher inventories related to new product
launches, higher receivables and higher cash tax payments. For the
first quarter, the Company generated $ 62.7 million in free cash flow compared
to $70.7 million in the prior period. Free cash flow is defined
as net cash from operations less capital expenditures.
Capital
expenditures in the first quarter were $9.2 million compared to $21.3 million in
the prior year first quarter. Last year’s first quarter
included approximately $15 million of capital expenditures related to the new
manufacturing facility in York County, Pennsylvania.
Acquisitions/Divestitures
In the
first quarter, the Company completed the divestitures of two of its non-core
brands, BRILLO and LAMBERT KAY pet products.
During
the second quarter, the Company entered into a definitive asset purchase
agreement to acquire the SIMPLY SALINE brand of products from Blairex
Laboratories, Inc. The proposed acquisition is subject to customary
conditions to closing. The transaction is expected to be completed
during the second quarter of 2010.
The
proposed acquisition meets the Company’s previously stated acquisition criteria:
the brand holds the #1 position in the nasal saline solution category, has high
growth potential, and is expected to be gross margin accretive to the
Company. Annual sales of Simply Saline are approximately $20
million. In addition, the acquisition will complement the Company’s
existing STERIMAR brand nasal saline solution business in Europe and other parts
of the world.
The
acquisitions and divestitures are expected to be neutral to earnings per share
in 2010 and accretive to earnings per share in 2011.
Outlook for
2010
With
regard to 2010, Mr. Craigie said, “We are launching our best new product line-up
ever in 2010 and the customer response has been excellent with distribution
gains across almost every key category. We expect to deliver organic
sales growth of approximately 4-5% in 2010 based on our strong pipeline of
innovative new products supported by effective marketing programs. We
remain confident in our previously announced earnings per share estimate of
$3.93 to $4.00 in 2010, which is an increase of 13% to15%, excluding plant
restructuring charges of $0.24 per share and the favorable litigation settlement
of $0.17 per share in 2009.”
“We
expect second quarter earnings per share of $0.93-$0.95, up 8%-10% excluding the
prior period plant restructuring charge of $0.05 per share. First
half earnings per share is expected to increase approximately 15% excluding
plant restructuring charges in 2009 of $0.09 per share.”
Church
& Dwight will host a conference call to discuss first quarter 2010 results
on May 11, 2010 at 10:00 a.m. (ET). To participate,
dial in at 877-616-8505, access code: 73121484,
(international: 706-643-6278, same access
code: 73121484). A replay will be available two hours
after the call at 800-642-1687 or 706-645-9291 (same access
code: 73121484). Also, you can participate via webcast by
visiting the Investor Relations section of the Company’s website at www.churchdwight.com.
Church
& Dwight Co., Inc. manufactures and markets a wide range of personal care,
household and specialty products under the Arm & Hammer brand name and
other well-known trademarks.
This
release contains forward-looking statements relating, among others, to new
product introductions and pipeline, contribution to revenue growth and gross
margin expansion from use of the new laundry detergent manufacturing plant and
warehouse facility, forecasted organic sales growth, earnings per share growth,
satisfaction of the conditions to completing the acquisition of the Simply
Saline brand, the effect of the Simply Saline proposed acquisition and the
divestitures of the Brillo and Lambert Kay brands on 2010 and 2011 earnings and
the impact of marketing programs. These statements represent the
intentions, plans, expectations and beliefs of the Company, and are subject to
risks, uncertainties and other factors, many of which are outside the Company’s
control and could cause actual results to differ materially from such
forward-looking statements. The uncertainties include assumptions as
to market growth and consumer demand (including the effect of political and
economic events on consumer demand), retailer actions in response to changes in
consumer demand and the economy, raw material and energy prices, the financial
condition of major customers and suppliers, interest rate and foreign currency
exchange rate fluctuations and changes in marketing and promotional
spending. With regard to the new product introductions referred to
generally in this release, there is particular uncertainty relating to trade,
competitive and consumer reactions. Other factors that could
materially affect actual results include the outcome of contingencies, including
litigation, pending regulatory proceedings, environmental matters and the
acquisition or divestiture of assets. For a description of additional
factors that could cause actual results to differ materially from the forward
looking statements, please see the Company’s quarterly and annual reports filed
with the SEC, including information in the Company’s annual report on Form 10-K
in Item 1A, “Risk Factors.”
|
CHURCH & DWIGHT CO., INC. AND
SUBSIDIARIES
|
Condensed Consolidated Statements of Income (Unaudited)
| Three Months Ended | |||||||||
| (In thousands, except per share data) |
Apr.
2, 2010
|
Mar.
27, 2009
|
|||||||
|
Net
Sales
|
$ | 634,553 | $ | 580,867 | |||||
|
Cost of sales
|
349,058 | 331,509 | |||||||
|
Gross
profit
|
285,495 | 249,358 | |||||||
|
Marketing
expenses
|
68,939 | 66,373 | |||||||
|
Selling,
general and administrative expenses
|
84,602 | 78,325 | |||||||
|
Income
from Operations
|
131,954 | 104,660 | |||||||
|
Equity
in earnings of affiliates
|
1,262 | 2,705 | |||||||
|
Other
income (expense), net
|
(7,867 | ) | (7,873 | ) | |||||
|
Income
before non-controlling interest and taxes
|
125,349 | 99,492 | |||||||
|
Income
taxes
|
45,376 | 36,916 | |||||||
|
Net
Income of Non-Controlling Interest
|
2 | 7 | |||||||
|
Net
Income attributable to Church & Dwight
|
$ | 79,971 | $ | 62,569 | |||||
|
Net
Income per share - Basic
|
$ | 1.13 | $ | 0.89 | |||||
|
Net
Income per share - Diluted
|
$ | 1.11 | $ | 0.88 | |||||
|
Dividend
per share
|
$ | 0.14 | $ | 0.09 | |||||
|
Weighted
average shares outstanding - Basic
|
70,773 | 70,234 | |||||||
|
Weighted
average shares outstanding - Diluted
|
72,007 | 71,312 | |||||||
|
CHURCH & DWIGHT CO., INC. AND
SUBSIDIARIES
|
|
Condensed
Consolidated Balance Sheets
(Unaudited)
|
| (Dollars in thousands) | Apr. 2, 2010 | Dec. 31, 2009 | ||||||
| Assets | ||||||||
|
Current
Assets
|
||||||||
|
Cash,
equivalents and securities
|
$ | 446,607 | $ | 447,143 | ||||
|
Accounts
receivable
|
241,677 | 222,158 | ||||||
|
Inventories
|
227,957 | 216,870 | ||||||
|
Other
current assets
|
38,097 | 42,094 | ||||||
|
Total
Current Assets
|
954,338 | 928,265 | ||||||
|
Property,
Plant and Equipment (Net)
|
452,158 | 455,636 | ||||||
|
Equity
Investment in Affiliates
|
11,689 | 12,815 | ||||||
|
Tradenames
and Other Intangibles
|
786,825 | 794,891 | ||||||
|
Goodwill
|
838,222 | 838,078 | ||||||
|
Other
Long-Term Assets
|
89,881 | 88,761 | ||||||
|
Total
Assets
|
$ | 3,133,113 | $ | 3,118,446 | ||||
|
Liabilities
and Stockholders' Equity
|
||||||||
|
Short-Term
Debt
|
$ | 176,066 | $ | 218,949 | ||||
|
Other
Current Liabilities
|
348,467 | 348,083 | ||||||
|
Total
Current Liabilities
|
524,533 | 567,032 | ||||||
|
Long-Term
Debt
|
568,970 | 597,347 | ||||||
|
Other
Long-Term Liabilities
|
363,074 | 352,295 | ||||||
|
Stockholders'
Equity
|
1,676,536 | 1,601,772 | ||||||
|
Total
Liabilities and Stockholders' Equity
|
$ | 3,133,113 | $ | 3,118,446 | ||||
|
CHURCH & DWIGHT CO., INC. AND
SUBSIDIARIES
|
|
Condensed Consolidated Statements of Cash Flow (Unaudited)
|
|
Three
Months Ended
|
||||||||
| (Dollars in Thousands) |
Apr.
2, 2010
|
Mar.
27, 2009
|
||||||
|
Net
Income
|
$ | 79,973 | $ | 62,576 | ||||
|
Depreciation
and amortization
|
18,185 | 21,670 | ||||||
|
Deferred
income taxes
|
4,031 | 10,106 | ||||||
|
Gain
on sale of assets
|
(1,031 | ) |
|
|||||
|
Asset
impairment charges and other asset write-offs
|
229 |
|
||||||
|
Non
cash compensation
|
1,805 | 2,707 | ||||||
|
Other
|
(508 | ) | (139 | ) | ||||
|
Changes
in assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(24,247 | ) | (7,980 | ) | ||||
|
Inventories
|
(13,072 | ) | (2,348 | ) | ||||
|
Prepaid
expenses and other current assets
|
(3,710 | ) | (1,466 | ) | ||||
|
Accounts
payable and accrued expenses
|
(17,293 | ) | (11,780 | ) | ||||
|
Income
taxes payable
|
25,610 | 20,413 | ||||||
|
Excess
tax benefits on stock options exercised
|
(3,025 | ) | (936 | ) | ||||
|
Other
liabilities
|
5,039 | (842 | ) | |||||
|
Net
cash from operating activities
|
71,986 | 91,981 | ||||||
|
Capital
expenditures
|
(9,246 | ) | (21,281 | ) | ||||
|
Proceeds
from sale of assets
|
8,215 |
|
||||||
|
Other
|
1,958 | 666 | ||||||
|
Net
cash provided by (used in) investing activities
|
927 | (20,615 | ) | |||||
|
Net
change in debt
|
(71,200 | ) | 15,016 | |||||
|
Payment
of cash dividends
|
(9,902 | ) | (6,309 | ) | ||||
|
Stock
option related
|
8,426 | 3,007 | ||||||
|
Purchase
of treasury stock
|
(78 | ) |
|
|||||
|
Net
cash (used in) provided by financing activities
|
(72,754 | ) | 11,714 | |||||
|
F/X
impact on cash
|
(695 | ) | (838 | ) | ||||
|
Net
change in cash and investments
|
$ | (536 | ) | $ | 82,242 | |||
|
Free
cash flow (net cash from operating activities less capital expenditures)
|
$ | 62,740 | $ | 70,700 | ||||
|
York
plant capital expenditures
|
|
14,700 | ||||||
|
Free
cash flow excluding York capital expenditures
|
$ | 62,740 | $ | 85,400 | ||||
Product Line Net
Sales
|
Three
Months Ended
|
Percent
|
|||||||||||
|
4/2/2010
|
3/27/2009
|
Change
|
||||||||||
|
Household
Products
|
$ | 303.2 | $ | 284.1 | 6.8 | % | ||||||
|
Personal
Care Products
|
163.5 | 154.0 | 6.1 | % | ||||||||
|
Consumer
Domestic
|
466.7 | 438.1 | 6.5 | % | ||||||||
|
Consumer
International
|
102.7 | 82.8 | 24.0 | % | ||||||||
|
Total
Consumer Net Sales
|
569.4 | 520.9 | 9.3 | % | ||||||||
|
Specialty
Products Division
|
65.2 | 60.0 | 8.6 | % | ||||||||
|
Total
Net Sales
|
$ | 634.6 | $ | 580.9 | 9.2 | % | ||||||
The following discussion
addresses the non-GAAP measures used in this press release and reconciliations
of non-GAAP measures to the most directly comparable GAAP
measures:
Adjusted Net Income per
Share, Adjusted Gross Margin and Adjusted Operating Profit
Margin
The press
release provides information regarding the Company’s net income per share, gross
margin and operating profit margin adjusted to exclude restructuring charges
related to plant closing expenses. Management believes that the presentation of
adjusted net income per share, gross margin and operating profit margin
(including reconciliation information in the press release) is useful to
investors because it enables them to assess the Company’s historical performance
exclusive of extraordinary events that do not reflect the Company’s day-to-day
operations.
Organic Sales
Growth
The press
release provides information regarding organic sales growth, namely net sales
growth excluding the effect of acquisitions, divestitures and foreign exchange
rate changes from year-over-year comparisons. Management believes that the
presentation of organic sales growth is useful to investors because it enables
them to assess, on a consistent basis, sales trends related to products that
were marketed by the Company during the entirety of relevant periods, without
the effect of foreign exchange rate changes that are out of the control of, and
do not reflect the performance of, management.
|
Three
Months Ended 4/2/2010
|
||||||||||||||||||||
|
Total
|
Worldwide
|
Consumer
|
Consumer
|
Specialty
|
||||||||||||||||
|
Company
|
Consumer
|
Domestic
|
International
|
Products
|
||||||||||||||||
|
Reported
Growth
|
9.2 | % | 9.3 | % | 6.5 | % | 24.0 | % | 8.6 | % | ||||||||||
|
Add:
|
||||||||||||||||||||
|
Divest.
|
1.2 | % | 1.4 | % | 1.6 | % | 0.2 | % | - | |||||||||||
|
Less:
|
||||||||||||||||||||
|
FX
|
2.7 | % | 2.6 | % | - | 16.2 | % | 4.0 | % | |||||||||||
|
Organic
Growth
|
7.7 | % | 8.1 | % | 8.1 | % | 8.0 | % | 4.6 | % | ||||||||||
Free Cash
Flow
Free cash
flow is net cash from operating activities less capital
expenditures. Free cash flow is used by the Company's management, and
management believes it is useful to investors, to help assess funds available
for investing activities, such as acquisitions and financing activities,
including debt payments, dividend payments and share
repurchases. Free cash flow also is one of the measures used in
determining management's annual incentive award. Free cash flow does
not represent cash available only for discretionary expenditures, since the
Company has mandatory debt service requirements and other contractual and
non-discretionary expenditures. Free cash flow excluding the capital
expenditures for the new Pennsylvania facility is used by management, and
management believes it is useful to investors, to assess funds available for
investing activities, such as acquisitions and financing activities, including
debt payments, dividend payments and share repurchases exclusive of
extraordinary events that do not reflect the Company's day-to-day
operations. Please refer to the condensed cash flow statement for
details.