UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OctoberApril 1, 20042005
Commission file Numbernumber 1-10585
CHURCH & DWIGHT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware | 13-4996950 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
469 North Harrison Street, Princeton, N.J. | 08543-5297 | ||
(Address of principal executive office) | (Zip Code) |
Registrant’s telephone number, including area code: (609) 683-5900
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes x No ¨
As of November 5, 2004,May 6, 2005, there were 62,379,76563,485,239 shares of Common Stock outstanding.
ITEM | PAGE | |||
PART I | ||||
1. | Financial Statements | 3 | ||
2. | Management’s Discussion and Analysis | 21 | ||
3. | Quantitative and Qualitative Disclosure About Market Risk | 26 | ||
4. | Controls and Procedures | 26 | ||
PART II | ||||
6. | Exhibits | 27 |
PART I
ITEM | PAGE | |||
1. | Financial Statements | 3 | ||
2. | Management’s Discussion and Analysis | 15 | ||
3. | Quantitative and Qualitative Disclosure About Market Risk | 18 | ||
4. | Controls and Procedures | 18 | ||
PART II | ||||
4. | Submission of Matters to a Vote of Security Holders | 19 | ||
6. | Exhibits | 19 |
PART I - FINANCIAL INFORMATION
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
(Dollars in thousands, except per share data)
| Oct. 1, 2004 | Sept. 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | Apr. 1, 2005 | Apr. 2, 2004 | ||||||||||||||||||
Net Sales | $ | 420,310 | $ | 265,566 | $ | 1,057,086 | $ | 770,127 | $ | 420,674 | $ | 295,991 | ||||||||||||
Cost of sales | 259,721 | 185,024 | 680,259 | 536,178 | 260,437 | 199,429 | ||||||||||||||||||
Gross Profit | 160,589 | 80,542 | 376,827 | 233,949 | 160,237 | 96,562 | ||||||||||||||||||
Marketing expense | 51,019 | 22,905 | 111,325 | 66,136 | 37,647 | 24,188 | ||||||||||||||||||
Selling, general and administrative expenses | 56,169 | 28,763 | 132,213 | 85,109 | 55,438 | 33,914 | ||||||||||||||||||
Income from Operations | 53,401 | 28,874 | 133,289 | 82,704 | 67,152 | 38,460 | ||||||||||||||||||
Equity in earnings of affiliates | 1,143 | 5,164 | 13,759 | 25,844 | 1,270 | 9,824 | ||||||||||||||||||
Investment earnings | 860 | 256 | 1,699 | 910 | 783 | 464 | ||||||||||||||||||
Loss on early extinguishment of debt | — | — | (7,995 | ) | — | |||||||||||||||||||
Other income (expense), net | 551 | (83 | ) | 860 | 534 | |||||||||||||||||||
Other income (expense) — net | (740 | ) | 425 | |||||||||||||||||||||
Interest expense | (17,786 | ) | (4,821 | ) | (29,336 | ) | (14,716 | ) | (10,610 | ) | (4,531 | ) | ||||||||||||
Income before taxes and minority interest | 38,169 | 29,390 | 112,276 | 95,276 | ||||||||||||||||||||
Income before minority interest and taxes | 57,855 | 44,642 | ||||||||||||||||||||||
Minority interest | (9 | ) | 6 | |||||||||||||||||||||
Income before taxes | 57,864 | 44,636 | ||||||||||||||||||||||
Income taxes | 10,764 | 9,861 | 35,379 | 30,160 | 20,163 | 14,730 | ||||||||||||||||||
Minority interest | 4 | 7 | 17 | 22 | ||||||||||||||||||||
Net Income | 27,401 | 19,522 | 76,880 | 65,094 | 37,701 | 29,906 | ||||||||||||||||||
Retained earnings at beginning of period | 478,603 | 406,748 | 435,677 | 367,211 | 510,480 | 435,677 | ||||||||||||||||||
506,004 | 426,270 | 512,557 | 432,205 | 548,181 | 465,583 | |||||||||||||||||||
Dividends paid | 3,708 | 3,223 | 10,261 | 9,258 | 3,799 | 3,268 | ||||||||||||||||||
Retained earnings at end of period | $ | 502,296 | $ | 423,047 | $ | 502,296 | $ | 423,047 | $ | 544,382 | $ | 462,315 | ||||||||||||
Weighted average shares outstanding - Basic | 62,005 | 60,477 | 61,641 | 60,198 | 63,321 | 61,323 | ||||||||||||||||||
Weighted average shares outstanding - Diluted | 64,935 | 63,372 | 64,754 | 63,087 | 69,002 | 67,710 | ||||||||||||||||||
Earnings Per Share: | ||||||||||||||||||||||||
Net income per share - Basic | $ | 0.44 | $ | 0.32 | $ | 1.25 | $ | 1.08 | $ | 0.60 | $ | 0.49 | ||||||||||||
Net income per share - Diluted | $ | 0.42 | $ | 0.31 | $ | 1.19 | $ | 1.03 | $ | 0.56 | $ | 0.46 | ||||||||||||
Dividends Per Share | $ | 0.06 | $ | 0.05 | $ | 0.17 | $ | 0.15 | ||||||||||||||||
Dividends per share | $ | 0.06 | $ | 0.05 | ||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
| Oct. 1, 2004 | Dec. 31, 2003 | ||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 145,440 | $ | 75,634 | ||||
Accounts receivable, less allowances of $3,176 and $1,969 | 198,141 | 107,553 | ||||||
Inventories | 152,666 | 84,176 | ||||||
Deferred income taxes | 10,285 | 14,109 | ||||||
Note receivable – current | 1,015 | 942 | ||||||
Net assets held for sale | 11,000 | — | ||||||
Prepaid expenses | 8,231 | 6,808 | ||||||
Total Current Assets | 526,778 | 289,222 | ||||||
Property, Plant and Equipment (Net) | 330,827 | 258,010 | ||||||
Note Receivable | 7,751 | 8,766 | ||||||
Equity Investment in Affiliates | 13,223 | 152,575 | ||||||
Long-term Supply Contracts | 5,078 | 5,668 | ||||||
Tradenames and Other Intangibles | 372,444 | 119,374 | ||||||
Goodwill | 565,573 | 259,444 | ||||||
Other Assets | 43,705 | 26,558 | ||||||
Total Assets | $ | 1,865,379 | $ | 1,119,617 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Short-term borrowings | $ | 105,210 | $ | 62,337 | ||||
Accounts payable and accrued expenses | 249,087 | 148,958 | ||||||
Current portion of long-term debt | 6,948 | 3,560 | ||||||
Income taxes payable | 17,193 | 17,199 | ||||||
Total current liabilities | 378,438 | 232,054 | ||||||
Long-term Debt | 789,676 | 331,149 | ||||||
Deferred Income Taxes | 80,460 | 61,000 | ||||||
Deferred and Other Long Term Liabilities | 66,242 | 40,723 | ||||||
Postretirement and Postemployment Benefits | 18,571 | 15,900 | ||||||
Minority Interest | 284 | 297 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity | ||||||||
Preferred Stock-$1.00 par value | — | — | ||||||
Common Stock-$1.00 par value | 69,991 | 46,661 | ||||||
Additional paid-in capital | 39,598 | 51,212 | ||||||
Retained earnings | 502,296 | 435,677 | ||||||
Accumulated other comprehensive (loss) | (7,941 | ) | (13,962 | ) | ||||
603,944 | 519,588 | |||||||
Common stock in treasury, at cost: | ||||||||
7,637,954 shares in 2004 and 8,812,445 shares in 2003 | (72,236 | ) | (81,094 | ) | ||||
Total Stockholders’ Equity | 531,708 | 438,494 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,865,379 | $ | 1,119,617 | ||||
(Dollars in thousands, except share data) | Apr. 1, 2005 | Dec. 31, 2004 | ||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 101,902 | $ | 145,540 | ||||
Accounts receivable, less allowances of $1,879 and $1,171 | 187,944 | 166,203 | ||||||
Inventories | 157,837 | 148,898 | ||||||
Deferred income taxes | 5,308 | 7,600 | ||||||
Current portion of long-term note receivable | 1,213 | 1,015 | ||||||
Prepaid expenses | 10,741 | 11,240 | ||||||
Assets held for sale | 13,300 | 13,300 | ||||||
Total Current Assets | 478,245 | 493,796 | ||||||
Property, Plant and Equipment (Net) | 331,212 | 332,204 | ||||||
Note Receivable | 6,324 | 7,751 | ||||||
Equity Investment in Affiliates | 12,590 | 13,255 | ||||||
Long-term Supply Contracts | 4,684 | 4,881 | ||||||
Tradenames and Other Intangibles | 472,439 | 474,285 | ||||||
Goodwill | 512,941 | 511,643 | ||||||
Other Assets | 42,501 | 40,183 | ||||||
Total Assets | $ | 1,860,936 | $ | 1,877,998 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Short-term borrowings | $ | 106,538 | $ | 98,239 | ||||
Accounts payable and accrued expenses | 231,196 | 242,024 | ||||||
Current portion of long-term debt | 4,564 | 5,797 | ||||||
Income taxes payable | 23,598 | 11,479 | ||||||
Total Current Liabilities | 365,896 | 357,539 | ||||||
Long-term Debt | 679,356 | 754,706 | ||||||
Deferred Income Taxes | 114,338 | 108,216 | ||||||
Deferred and Other Long-term Liabilities | 42,795 | 39,384 | ||||||
Pension, Nonpension Postretirement and Postemployment Benefits | 57,260 | 57,836 | ||||||
Minority Interest | 281 | 287 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity | ||||||||
Preferred Stock-$1.00 par value | ||||||||
Authorized 2,500,000 shares, none issued | — | — | ||||||
Common Stock-$1.00 par value | ||||||||
Authorized 100,000,000 shares, issued 69,991,482 shares | 69,991 | 69,991 | ||||||
Additional paid-in capital | 50,597 | 47,444 | ||||||
Retained earnings | 544,382 | 510,480 | ||||||
Accumulated other comprehensive (loss) | (1,385 | ) | (3,110 | ) | ||||
663,585 | 624,805 | |||||||
Common stock in treasury, at cost: | ||||||||
6,542,719 shares in 2005 and 6,803,296 shares in 2004 | (62,575 | ) | (64,775 | ) | ||||
Total Stockholders’ Equity | 601,010 | 560,030 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,860,936 | $ | 1,877,998 | ||||
See Notes to Condensed Consolidated Financial Statements.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Nine Months Ended | Three Months Ended | |||||||||||||||
(Dollars in thousands)
| Oct 1, 2004 | Sept. 26, 2003 | Apr. 1, 2005 | Apr. 2, 2004 | ||||||||||||
Cash Flow From Operating Activities | ||||||||||||||||
Net Income | $ | 76,880 | $ | 65,094 | $ | 37,701 | $ | 29,906 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation, depletion and amortization | 28,891 | 22,300 | 10,895 | 8,984 | ||||||||||||
Net loss (gain) on disposal of assets | 154 | (346 | ) | |||||||||||||
Equity in earnings of affiliates | (13,759 | ) | (25,844 | ) | (1,270 | ) | (9,824 | ) | ||||||||
Deferred income taxes | 13,209 | 10,120 | 4,118 | 6,099 | ||||||||||||
Plant impairment charge and other asset write-offs | 2,208 | — | ||||||||||||||
Net loss on early extinguishment of debt | 7,995 | — | ||||||||||||||
Other | (138 | ) | 26 | |||||||||||||
Other (principally foreign exchange) | 2,310 | (62 | ) | |||||||||||||
Change in assets and liabilities: | ||||||||||||||||
Decrease in accounts receivable | 6,725 | 10 | ||||||||||||||
(Increase) decrease in inventories | (1,527 | ) | 5,511 | |||||||||||||
(Increase) decrease in accounts receivable | (21,775 | ) | 6,254 | |||||||||||||
Increase in inventories | (8,952 | ) | (14,143 | ) | ||||||||||||
Decrease in prepaid expenses | 2,183 | 1,615 | 484 | 233 | ||||||||||||
Increase (decrease) in accounts payable | 16,953 | (11,947 | ) | |||||||||||||
Decrease in accounts payable and accrued expenses | (10,856 | ) | (1,013 | ) | ||||||||||||
Increase in income taxes payable | 4,177 | 11,221 | 14,475 | 4,813 | ||||||||||||
Decrease in other liabilities | 166 | 752 | ||||||||||||||
Increase in other liabilities | 3,877 | 210 | ||||||||||||||
Net Cash Provided By Operating Activities | 143,963 | 78,858 | 31,161 | 31,111 | ||||||||||||
Cash Flow From Investing Activities | ||||||||||||||||
Additions to property, plant and equipment | (22,364 | ) | (22,474 | ) | (7,951 | ) | (6,396 | ) | ||||||||
Armkel acquisition (net of cash acquired) | (194,375 | ) | — | |||||||||||||
Proceeds from note receivable | 942 | 870 | ||||||||||||||
Distributions from affiliates | 4,301 | 3,629 | 1,937 | 1,218 | ||||||||||||
Proceeds from notes receivable | 1,015 | 942 | ||||||||||||||
Proceeds from sale of fixed assets | — | 916 | ||||||||||||||
Contingent acquisition payments | (5,068 | ) | (3,424 | ) | (561 | ) | (3,000 | ) | ||||||||
Other long-term assets | (1,615 | ) | (1,440 | ) | ||||||||||||
Proceeds from sale of fixed assets | 1,131 | — | ||||||||||||||
Other | 128 | (240 | ) | |||||||||||||
Net Cash Used In Investing Activities | (217,048 | ) | (22,839 | ) | (5,432 | ) | (6,560 | ) | ||||||||
Cash Flow From Financing Activities | ||||||||||||||||
Long-term debt borrowing | 540,000 | 100,000 | ||||||||||||||
Long-term debt (repayment) | (436,896 | ) | (208,438 | ) | ||||||||||||
Short-term debt borrowing | 43,700 | 60,000 | ||||||||||||||
Short-term debt (repayment) | (1,689 | ) | (2,469 | ) | ||||||||||||
Repayment of long-term debt | (77,128 | ) | (32,643 | ) | ||||||||||||
Net borrowing of short-term debt | 8,946 | — | ||||||||||||||
Proceeds from stock options exercised | 10,885 | 7,118 | 2,839 | 2,614 | ||||||||||||
Payment of cash dividends | (10,261 | ) | (9,258 | ) | (3,798 | ) | (3,268 | ) | ||||||||
Deferred financing costs | (3,662 | ) | (3,442 | ) | (261 | ) | (222 | ) | ||||||||
Net Cash Provided by (Used In) Financing Activities | 142,077 | (56,489 | ) | |||||||||||||
Net Cash Used In Financing Activities | (69,402 | ) | (33,519 | ) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 814 | 864 | 35 | — | ||||||||||||
Net Change In Cash and Cash Equivalents | 69,806 | 394 | (43,638 | ) | (8,968 | ) | ||||||||||
Cash And Cash Equivalents At Beginning Of Year | 75,634 | 76,302 | 145,540 | 75,634 | ||||||||||||
Cash And Cash Equivalents At End Of Period | $ | 145,440 | $ | 76,696 | $ | 101,902 | $ | 66,666 | ||||||||
Acquisitions in which liabilities were assumed are as follows: | ||||||||||||||||
Fair value of assets | $ | 902,146 | $ | — | ||||||||||||
Cash paid and investment in and receivable from Armkel | 416,514 | — | ||||||||||||||
Liabilities assumed | $ | 485,632 | $ | — | ||||||||||||
See Notes to Condensed Consolidated Financial Statements.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of OctoberApril 1, 2004,2005 and the consolidated statements of income and retained earnings for the three and nine months ended October 1, 2004 and September 26, 2003 and the consolidated statements of cash flow for the ninethree months then endedending April 1, 2005 and April 2, 2004 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flow at OctoberApril 1, 20042005 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2003.2004. The results of operations for the period ended OctoberApril 1, 20042005 are not necessarily indicative of the operating results for the full year.
On May 28, 2004, the Company completed the previously announced purchase ofpurchased the remaining 50% ownership interest of Armkel, LLC (“Armkel”) that it did not own from affiliates of Kelso & Company (“Kelso interest”the Armkel acquisition”) for a purchase price of $253.7approximately $262.0 million plus fees and Armkel was merged into the Company. Results of operations for theArmkel’s business are included in the Company’s consolidated financial statements from May 29, 2004. Prior to May 28, 2004, the Company accounted for its investment in Armkel under the equity method. All material intercompany transactions and profits have been eliminated in consolidation.
The Company’s fiscal year begins on January 1 of the year stated and ends on December 31. Quarterly periods are based on a 4-4-54 weeks - 4 weeks - 5 weeks methodology. As a result, the first quarter can include a partial or expanded week in the first four week period of the quarter. Similarly, the last five week period in the fourth quarter could be a partial or expanded week.
2. Inventories consist of the following:
(In thousands)
| Oct. 1, 2004 | Dec. 31, 2003 | April 1, 2005 | Dec. 31, 2004 | ||||||||
Raw materials and supplies | $ | 44,997 | $ | 26,205 | $ | 43,976 | $ | 40,996 | ||||
Work in process | 7,405 | 204 | 8,155 | 7,310 | ||||||||
Finished goods | 100,264 | 57,767 | 105,706 | 100,592 | ||||||||
$ | 152,666 | $ | 84,176 | $ | 157,837 | $ | 148,898 | |||||
3. Property, Plant and Equipment consist of the following:
(In thousands)
| Oct. 1, 2004 | Dec. 31, 2003 | ||||
Land | $ | 13,649 | $ | 6,165 | ||
Buildings and improvements | 132,680 | 109,860 | ||||
Machinery and equipment | 339,098 | 295,255 | ||||
Office equipment and other assets | 33,783 | 27,753 | ||||
Software | 17,830 | 12,459 | ||||
Mineral rights | 583 | 571 | ||||
Construction in progress | 18,490 | 9,574 | ||||
556,113 | 461,637 | |||||
Less accumulated depreciation, depletion and amortization | 225,286 | 203,627 | ||||
Net Property, Plant and Equipment | $ | 330,827 | $ | 258,010 | ||
In the second quarter of 2004 the Company recorded a plant impairment charge of $1.5 million, which was recorded as cost of sales in the Consumer Domestic segment, as the value could not be supported by projected cash flows.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands) | Apr. 1, 2005 | Dec. 31, 2004 | ||||
Land | $ | 13,547 | $ | 13,594 | ||
Buildings and improvements | 135,432 | 135,329 | ||||
Machinery and equipment | 351,419 | 350,591 | ||||
Office equipment and other assets | 37,394 | 37,255 | ||||
Software | 17,148 | 16,733 | ||||
Mineral rights | 997 | 999 | ||||
Construction in progress | 16,066 | 10,421 | ||||
572,003 | 564,922 | |||||
Less accumulated depreciation, depletion and amortization | 240,791 | 232,718 | ||||
Net Property, Plant and Equipment | $ | 331,212 | $ | 332,204 | ||
4. Earnings Per Share
Basic EPS is calculated based on income available to common shareholders and the weighted-average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from potential common stock issuable pursuant to the exercise of stock options outstanding.outstanding and the dilutive effect of contingently convertible debt instruments. The weighted average number of common shares outstanding used to calculate Basic EPS is reconciled to those shares used in calculating Diluted EPS as follows:
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||
(In thousands)
| Oct. 1, 2004 | Sept 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | Apr. 1 2005 | Apr. 2, 2004 | ||||||
Basic | 62,005 | 60,477 | 61,641 | 60,198 | 63,321 | 61,323 | ||||||
Dilutive effect of stock options | 2,930 | 2,895 | 3,113 | 2,889 | 2,455 | 3,161 | ||||||
Dilutive effect of convertible debt | 3,226 | 3,226 | ||||||||||
Diluted | 64,935 | 63,372 | 64,754 | 63,087 | 69,002 | 67,710 | ||||||
Anti-dilutive stock options outstanding | 86 | 842 | 888 | 1,616 | 20 | — | ||||||
On August 6, 2004 the Company announced a 3 for 2 stock split. The shares resulting from the stock split were distributed on September 1, 2004 to stockholders of record at the close of business on August 16, 2004. All share and per share information in this report reflects the impact of the stock split.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
In August 2003, the Company issued $100 million of 5.25% convertible senior debentures that may be converted into shares of the Company’s common stock prior to maturity at a conversion price of approximately $31.00 per share, subject to adjustment in certain circumstances. Because of the inclusion of a contingent convertibility feature of the debentures, the Company’s diluted net income per common share does not give effect to the dilution from the conversion of the debentures until the Company’s share price exceeds 120% of the initial conversion price or the occurrence of other specified events.
The Emerging Issues Task Force (EITF) concluded in EITF Issue 04-8: The Effect of Contingently Convertible Debt on Diluted Earnings per Share that contingently convertible debt (“Co-Cos”) be treated for diluted EPS purposes as if converted from debt to equity, beginning with the date the contingently convertible debt instrument is initially issued, even if the triggering events (such as stock price) have not yet occurred. The effective date would be reporting periods ending on or after December 15, 2004 and prior period EPS amounts presented for comparative purposes, would have to be restated.
The change in accounting rules for reporting Co-Cos will have an estimated $0.02 dilutive effect on earnings per share in 2004.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Stock-Based Compensation
The Company accounts for costs of stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”, rather than the fair-value based method in Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock-Based Compensation”. In connection with purchasing Kelso’s interest inthe Armkel acquisition, the Company paid cash and issued options to purchase 97,500 shares of Company common stock at an exercise price of $22.88 per share to certain executives underin accordance with the provisions of Armkel’s Equity Appreciation Rights Plan (“EAR Plan”). The unvested portion of the EAR Plan options is being amortized over a two year vesting period and is recognized as expense as vesting occurs. In 2004,2005, the amount recognized as expense for the stock options granted under the EAR Plan was $0.17$0.3 million for the third quarter and was $0.23 million for the nine months ended October 1, 2004.
During 2004, options to purchase approximately 900 thousand shares of Company common stock were granted at an average fair value of $10.58 per share.first quarter.
The Company’s pro forma net income and pro forma net income per share for the thirdfirst quarter of 20042005 and 2003,2004, determined as if the Company had adopted the fair value method of SFAS 123, are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
(In thousands, except for per share data)
| Oct. 1, 2004 | Sept. 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | ||||||||||||
Net Income | ||||||||||||||||
As reported | $ | 27,401 | $ | 19,522 | $ | 76,880 | $ | 65,094 | ||||||||
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects | 172 | — | 229 | — | ||||||||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (1,272 | ) | (1,043 | ) | (3,381 | ) | (2,862 | ) | ||||||||
Pro forma | $ | 26,301 | $ | 18,479 | $ | 73,728 | $ | 62,232 | ||||||||
Net Income per Share: basic | ||||||||||||||||
As reported | $ | 0.44 | $ | 0.32 | $ | 1.25 | $ | 1.08 | ||||||||
Pro forma | $ | 0.42 | $ | 0.30 | $ | 1.19 | $ | 1.03 | ||||||||
Net Income per Share: diluted | ||||||||||||||||
As reported | $ | 0.42 | $ | 0.31 | $ | 1.19 | $ | 1.03 | ||||||||
Pro forma | $ | 0.40 | $ | 0.29 | $ | 1.13 | $ | 0.98 |
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Three Months Ended | ||||||||
(In thousands, except for per share data) | Apr. 1, 2005 | Apr. 2, 2004 | ||||||
Net Income | ||||||||
As reported | $ | 37,701 | $ | 29,906 | ||||
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects | 172 | — | ||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (1,270 | ) | (1,037 | ) | ||||
Pro forma | $ | 36,603 | $ | 28,869 | ||||
Net Income per Share: basic | ||||||||
As reported | $ | 0.60 | $ | 0.49 | ||||
Pro forma | $ | 0.58 | $ | 0.47 | ||||
Net Income per Share: diluted | ||||||||
As reported | $ | 0.56 | $ | 0.46 | ||||
Pro forma | $ | 0.54 | $ | 0.44 |
6. Segment Information
As a result of purchasing the Kelso interest, theThe Company has redefined its operatingmaintains three reportable segments. These segments are based on differences in the nature of products and organizational and ownership structures. Specifically, the Company has identified the following segments: Consumer Domestic, Consumer International and Specialty Products Division (“SPD”).
Segment revenues are derived from the sale of the following products:
Segment | Products | |
Consumer Domestic | Deodorizing and cleaning, laundry, and personal care products | |
Consumer International | Primarily personal care products | |
SPD | Specialty chemical products |
The domestic resultsCompany has 50 percent ownership interests in Armand Products Company (“Armand”) and The ArmaKleen Company (“ArmaKleen”). Since the Company does not control these entities, they are accounted for under the equity method in the consolidated financial statements of the acquiredCompany. With respect to periods prior to the Armkel business since May 29, 2004acquisition, the equity earnings of Armkel’s domestic results are included in the Consumer Domestic segment, and Armkel’s formerits international subsidiaries (in addition to the Company’s existing international consumer subsidiary) compriseresults in the Consumer International segment. There has been no change to the SPD segment. The Company’sequity earnings prior to its acquisition of Kelso’s interest in Armkel, attributable to the Company’s equity investment in Armkel’s domesticArmand and international operationsArmaKleen are included in Income Before Taxes and Minority InterestCorporate.
Some of the Consumer Domestic and Consumer International segments, respectively. The Company’s earnings attributable to its equity investment in Armand Products and The Armakleen Companysubsidiaries that are included in Income Before TaxesConsumer International manufacture and Minority Interest ofsell personal care products to Consumer Domestic. These sales are eliminated from the Corporate segment. Prior to purchasing Kelso’s interest in Armkel, the Company’s segments were: ChurchConsumer International results.
CHURCH & Dwight Consumer, Armkel, Church & Dwight SPD, and Other Equity Affiliates. All prior periods have been conformed to the new segment presentation.DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Segment sales and income before taxes and minority interest for the third quarterfirst quarters of 2005 and nine month periods of 2004 and 2003 and total segment assets as of October 1, 2004 and December 31, 2003 are as follows:
(in thousands)
| Consumer Domestic | Consumer Internat’l | SPD | Corporate | Total | ||||||||||
Net Sales | |||||||||||||||
Third Quarter 2004 | $ | 299,285 | $ | 69,890 | $ | 51,135 | — | $ | 420,310 | ||||||
Third Quarter 2003 | 208,604 | 9,812 | 47,150 | — | 265,566 | ||||||||||
2004 Year to Date | 794,205 | 107,773 | 155,108 | — | 1,057,086 | ||||||||||
2003 Year to Date | 605,223 | 26,961 | 137,943 | — | 770,127 | ||||||||||
Income Before Taxes and Minority Interest(1) | |||||||||||||||
Third Quarter 2004 | 28,237 | 4,922 | 3,866 | 1,144 | 38,169 | ||||||||||
Third Quarter 2003 | 22,305 | 2,760 | 3,642 | 683 | 29,390 | ||||||||||
2004 Year to Date | 82,365 | 13,865 | 13,063 | 2,983 | 112,276 | ||||||||||
2003 Year to Date | 72,413 | 9,037 | 11,332 | 2,494 | 95,276 | ||||||||||
Total Assets | |||||||||||||||
October 1, 2004 | $ | 1,368,932 | $ | 263,941 | $ | 166,621 | $ | 65,886 | $ | 1,865,380 | |||||
December 31, 2003 | $ | 841,036 | $ | 50,868 | $ | 166,953 | $ | 60,760 | $ | 1,119,617 |
(in thousands) | Consumer Domestic | Consumer Internat’l | SPD | Corporate | Total | ||||||||||
Net Sales | |||||||||||||||
First Quarter 2005 | $ | 297,716 | $ | 69,355 | $ | 53,603 | $ | — | $ | 420,674 | |||||
First Quarter 2004 | 236,055 | 9,027 | 50,909 | — | 295,991 | ||||||||||
Income Before Taxes and Minority Interest(1) | |||||||||||||||
First Quarter 2005 | 40,992 | 10,852 | 4,741 | 1,270 | 57,855 | ||||||||||
First Quarter 2004 | 33,790 | 4,634 | 5,476 | 742 | 44,642 |
(1) | In determining Income Before Taxes and Minority Interest, Interest Expense, Interest Income, |
The Company’s net sales and total assets changed significantly since December 31, 2003 as a result of the consolidation of the operations and the assets associated with the former Armkel business.
The following table showsdiscloses product line revenues from external customers for the three and nine months ended OctoberApril 1, 20042005 and September 26, 2003:April 2, 2004.
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||
(In thousands)
| Oct. 1, 2004 | Sept 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | Apr. 1, 2005 | Apr. 2, 2004 | ||||||||||||
Deodorizing Products | $ | 68,824 | $ | 61,337 | $ | 194,489 | $ | 175,663 | $ | 63,759 | $ | 61,062 | ||||||
Laundry Products | 105,846 | 105,536 | 315,109 | 304,344 | 103,487 | 105,509 | ||||||||||||
Personal Care Products | 124,615 | 41,731 | 284,607 | 125,216 | 130,470 | 69,484 | ||||||||||||
Total Consumer Domestic | 299,285 | 208,604 | 794,205 | 605,223 | 297,716 | 236,055 | ||||||||||||
Total Consumer International | 69,890 | 9,812 | 107,773 | 26,961 | 69,355 | 9,027 | ||||||||||||
Total SPD | 51,135 | 47,150 | 155,108 | 137,943 | 53,603 | 50,909 | ||||||||||||
Total Consolidated Net Sales | $ | 420,310 | $ | 265,566 | $ | 1,057,086 | $ | 770,127 | $ | 420,674 | $ | 295,991 | ||||||
7. Supplemental Financial Information of Guarantor and Non-Guarantor Operations
The 6% senior subordinated notes are fully and unconditionally guaranteed by Church & Dwight Company, a Wyoming corporation, and the 9 ½% senior subordinated notes are fully and unconditionally guaranteed by several domestic subsidiaries of the Company on a joint and several basis. The guarantor financial information includes the Parent Company and an immaterial subsidiary whose total assets are approximately 1% of total guarantor assets. The following information is being presented in response to Item 3-10 of Regulation S-X, promulgated by the Securities and Exchange Commission.
Supplemental information for condensed consolidated balance sheets at April 1, 2005 and December 31, 2004, condensed consolidated income statements and statements of cash flows for the three months ended April 1, 2005 and April 2, 2004 are summarized as follows (amounts in thousands):
Statements of Income
For The Three Months Ended April 1, 2005 | |||||||||||||
Company and Guarantor | Non-Guarantor Subsidiaries | Eliminations | Total Consolidated | ||||||||||
Net sales | $ | 346,596 | $ | 82,806 | $ | (8,728 | ) | $ | 420,674 | ||||
Gross profit | 124,582 | 35,655 | — | 160,237 | |||||||||
Income before taxes | 43,386 | 14,469 | — | 57,855 | |||||||||
Net Income | 27,428 | 10,273 | — | 37,701 |
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. Supplemental Financial Information of Guarantor and Non-Guarantor Operations
For The Three Months Ended April 2, 2004 | |||||||||||||
Company and Guarantor | Non-Guarantor Subsidiaries | Eliminations | Total Consolidated | ||||||||||
Net sales | $ | 278,562 | $ | 22,213 | $ | (4,784 | ) | $ | 295,991 | ||||
Gross profit | 91,039 | 5,523 | — | 96,562 | |||||||||
Income before taxes | 41,425 | 3,217 | — | 44,642 | |||||||||
Net Income | 27,606 | 2,300 | — | 29,906 |
The 9 1/2 % senior subordinated notes due 2009 assumed by the Company as a result of Armkel’s merger into the Company are fully and unconditionally guaranteed by Church & Dwight Co., Inc. and certain domestic subsidiaries of the Company on a joint and several basis.Consolidated Balance Sheets
Supplemental information for condensed consolidated balance sheets at October 1, 2004 and December 31, 2003, condensed consolidated income statements for the three and nine months ended October 1, 2004 and September 26, 2003, and condensed consolidated statements of cash flows for the nine-month periods ended October 1, 2004 and September 26, 2003 is summarized as follows (amounts in thousands):
April 1, 2005 | |||||||||||||
Company and Guarantor | Non-Guarantor Subsidiaries | Eliminations | Total Consolidated | ||||||||||
Total Current Assets | $ | 170,973 | $ | 307,272 | $ | — | $ | 478,245 | |||||
Other Assets | 1,423,839 | 115,108 | (156,256 | ) | 1,382,691 | ||||||||
Total Assets | $ | 1,594,812 | $ | 422,380 | $ | (156,256 | ) | $ | 1,860,936 | ||||
Liabilities and Stockholders’ Equity | |||||||||||||
Total Current Liabilities | $ | 168,868 | $ | 197,028 | $ | — | $ | 365,896 | |||||
Other Liabilities | 857,828 | 114,232 | (78,030 | ) | 894,030 | ||||||||
Total Stockholders’ Equity | 568,116 | 111,120 | (78,226 | ) | 601,010 | ||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,594,812 | $ | 422,380 | $ | (156,256 | ) | $ | 1,860,936 | ||||
Statements of Income
For The Three Months Ended October 1, 2004 | ||||||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Total Consolidated | |||||||||||||
Net sales | $ | 346,653 | $ | 80,842 | $ | (7,185 | ) | $ | 420,310 | |||||||
Cost of sales | 220,293 | 46,613 | (7,185 | ) | 259,721 | |||||||||||
Gross profit | 126,360 | 34,229 | — | 160,589 | ||||||||||||
Operating expenses | 81,600 | 25,588 | — | 107,188 | ||||||||||||
Income from operations | 44,760 | 8,641 | — | 53,401 | ||||||||||||
Equity in earnings of affiliates | 1,143 | — | — | 1,143 | ||||||||||||
Investment earnings | 537 | 323 | — | 860 | ||||||||||||
Intercompany income (expense) | 121 | (121 | ) | — | — | |||||||||||
Other income (expense) | (362 | ) | 913 | — | 551 | |||||||||||
Interest expense | (16,753 | ) | (1,033 | ) | — | (17,786 | ) | |||||||||
Income before taxes | 29,446 | 8,723 | — | 38,169 | ||||||||||||
Income taxes | 8,195 | 2,569 | — | 10,764 | ||||||||||||
Minority interest | 4 | — | — | 4 | ||||||||||||
Net Income | $ | 21,247 | $ | 6,154 | $ | — | $ | 27,401 | ||||||||
Statements of Income
For The Three Months Ended September 26, 2003 | ||||||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Total Consolidated | |||||||||||||
Net sales | $ | 250,197 | $ | 19,836 | $ | (4,467 | ) | $ | 265,566 | |||||||
Cost of sales | 174,455 | 15,036 | (4,467 | ) | 185,024 | |||||||||||
Gross profit | 75,742 | 4,800 | — | 80,542 | ||||||||||||
Operating expenses | 49,903 | 1,765 | — | 51,668 | ||||||||||||
Income from operations | 25,839 | 3,035 | — | 28,874 | ||||||||||||
Equity in earnings of affiliates | 5,164 | — | — | 5,164 | ||||||||||||
Investment earnings | 208 | 48 | — | 256 | ||||||||||||
Intercompany income (expense) | (889 | ) | 889 | — | — | |||||||||||
Other income (expense) | (19 | ) | (64 | ) | — | (83 | ) | |||||||||
Interest expense | (4,240 | ) | (581 | ) | — | (4,821 | ) | |||||||||
Income before taxes | 26,063 | 3,327 | — | 29,390 | ||||||||||||
Income taxes | 8,945 | 916 | — | 9,861 | ||||||||||||
Minority interest | 7 | — | — | 7 | ||||||||||||
Net Income | $ | 17,111 | $ | 2,411 | $ | — | $ | 19,522 | ||||||||
December 31, 2004 | |||||||||||||
Company and Guarantor | Non-Guarantor Subsidiaries | Eliminations | Total Consolidated | ||||||||||
Total Current Assets | $ | 218,034 | $ | 275,762 | $ | — | $ | 493,796 | |||||
Other Assets | 1,441,369 | 113,597 | (170,764 | ) | 1,384,202 | ||||||||
Total Assets | $ | 1,659,403 | $ | 389,359 | $ | (170,764 | ) | $ | 1,877,998 | ||||
Liabilities and Stockholders’ Equity | |||||||||||||
Total Current Liabilities | $ | 197,139 | $ | 160,402 | $ | (2 | ) | $ | 357,539 | ||||
Other Liabilities | 923,524 | 118,244 | (81,339 | ) | 960,429 | ||||||||
Total Stockholders’ Equity | 538,740 | 110,713 | (89,423 | ) | 560,030 | ||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,659,403 | $ | 389,359 | $ | (170,764 | ) | $ | 1,877,998 | ||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Statements of Income
For The Nine Months Ended October 1, 2004 | ||||||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Total Consolidated | |||||||||||||
Net sales | $ | 930,367 | $ | 144,535 | $ | (17,816 | ) | $ | 1,057,086 | |||||||
Cost of sales | 608,775 | 89,300 | (17,816 | ) | 680,259 | |||||||||||
Gross profit | 321,592 | 55,235 | — | 376,827 | ||||||||||||
Operating expenses | 204,535 | 39,003 | — | 243,538 | ||||||||||||
Income from operations | 117,057 | 16,232 | — | 133,289 | ||||||||||||
Equity in earnings of affiliates | 13,759 | — | — | 13,759 | ||||||||||||
Investment earnings | 1,211 | 488 | — | 1,699 | ||||||||||||
Intercompany income (expense) | (673 | ) | 673 | — | — | |||||||||||
Other income (expense) | (8,007 | ) | 872 | — | (7,135 | ) | ||||||||||
Interest expense | (27,270 | ) | (2,066 | ) | — | (29,336 | ) | |||||||||
Income before taxes | 96,077 | 16,199 | — | 112,276 | ||||||||||||
Income taxes | 30,572 | 4,807 | — | 35,379 | ||||||||||||
Minority interest | 17 | — | — | 17 | ||||||||||||
Net Income | $ | 65,488 | $ | 11,392 | $ | — | $ | 76,880 | ||||||||
Statements of Income
For The Nine Months Ended September 26, 2003 | ||||||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Total Consolidated | |||||||||||||
Net sales | $ | 725,363 | $ | 58,410 | $ | (13,646 | ) | $ | 770,127 | |||||||
Cost of sales | 504,176 | 45,648 | (13,646 | ) | 536,178 | |||||||||||
Gross profit | 221,187 | 12,762 | — | 233,949 | ||||||||||||
Operating expenses | 144,453 | 6,792 | — | 151,245 | ||||||||||||
Income from operations | 76,734 | 5,970 | — | 82,704 | ||||||||||||
Equity in earnings of affiliates | 25,844 | — | — | 25,844 | ||||||||||||
Investment earnings | 845 | 65 | — | 910 | ||||||||||||
Intercompany income (expense) | (2,537 | ) | 2,537 | — | — | |||||||||||
Other income (expense) | 172 | 362 | — | 534 | ||||||||||||
Interest expense | (13,011 | ) | (1,705 | ) | — | (14,716 | ) | |||||||||
Income before taxes | 88,047 | 7,229 | — | 95,276 | ||||||||||||
Income taxes | 28,128 | 2,032 | — | 30,160 | ||||||||||||
Minority interest | 22 | — | — | 22 | ||||||||||||
Net Income | $ | 59,897 | $ | 5,197 | $ | — | $ | 65,094 | ||||||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Consolidated Balance Sheet
October 1, 2004 | ||||||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Total Consolidated | |||||||||||||
Current Assets | ||||||||||||||||
Cash and cash equivalents | $ | 93,992 | $ | 51,448 | $ | — | $ | 145,440 | ||||||||
Accounts receivable (net of allowances) | 3,335 | 194,806 | — | 198,141 | ||||||||||||
Inventories | 109,037 | 43,629 | — | 152,666 | ||||||||||||
Deferred income taxes | 8,410 | 1,875 | — | 10,285 | ||||||||||||
Note receivable – current | 1,015 | — | — | 1,015 | ||||||||||||
Net assets held for sale | 11,000 | — | — | 11,000 | ||||||||||||
Prepaid expenses | 4,962 | 3,269 | — | 8,231 | ||||||||||||
Total Current Assets | 231,751 | 295,027 | — | 526,778 | ||||||||||||
Property, Plant and Equipment (Net) | 277,507 | 53,320 | — | 330,827 | ||||||||||||
Notes Receivable | 75,019 | — | (67,268 | ) | 7,751 | |||||||||||
Equity Investment in Affiliates | 113,640 | — | (100,417 | ) | 13,223 | |||||||||||
Long-term Supply Contracts | 5,078 | — | — | 5,078 | ||||||||||||
Tradenames and Other Intangibles | 337,559 | 34,885 | — | 372,444 | ||||||||||||
Goodwill | 557,705 | 7,868 | — | 565,573 | ||||||||||||
Other Assets | 38,464 | 5,241 | — | 43,705 | ||||||||||||
Total Assets | $ | 1,636,723 | $ | 396,341 | $ | (167,685 | ) | $ | 1,865,379 | |||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Short-term borrowings | $ | — | $ | 105,210 | $ | — | $ | 105,210 | ||||||||
Accounts payable and accrued expenses | 175,290 | 73,818 | (21 | ) | 249,087 | |||||||||||
Intercompany accounts | (9,698 | ) | 9,698 | — | — | |||||||||||
Current portion of long-term debt | 6,948 | — | — | 6,948 | ||||||||||||
Income taxes payable | 14,986 | 2,207 | — | 17,193 | ||||||||||||
Total Current Liabilities | 187,526 | 190,933 | (21 | ) | 378,438 | |||||||||||
Long-term Debt | 788,737 | 939 | — | 789,676 | ||||||||||||
Notes Payable | — | 79,291 | (79,291 | ) | — | |||||||||||
Deferred Income Taxes | 73,571 | 6,889 | — | 80,460 | ||||||||||||
Deferred and Other Long-term Liabilities | 54,947 | 11,295 | — | 66,242 | ||||||||||||
Postretirement and Postemployment Benefits | 16,295 | 2,276 | — | 18,571 | ||||||||||||
Minority Interest | — | 284 | — | 284 | ||||||||||||
Commitments and Contingencies | — | — | — | — | ||||||||||||
Stockholders’ Equity | ||||||||||||||||
Common Stock | 46,661 | 66,761 | (66,761 | ) | 46,661 | |||||||||||
Additional paid-in capital | 62,928 | 17,761 | (17,761 | ) | 62,928 | |||||||||||
Retained earnings | 481,666 | 22,122 | (1,492 | ) | 502,296 | |||||||||||
Accumulated other comprehensive (loss) | (3,372 | ) | (2,210 | ) | (2,359 | ) | (7,941 | ) | ||||||||
587,883 | 104,434 | (88,373 | ) | 603,944 | ||||||||||||
Common stock in treasury, at cost | (72,236 | ) | — | — | (72,236 | ) | ||||||||||
Total Stockholders’ Equity | 515,647 | 104,434 | (88,373 | ) | 531,708 | |||||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,636,723 | $ | 396,341 | $ | (167,685 | ) | $ | 1,865,379 | |||||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Consolidated Balance Sheet
December 31, 2003 | ||||||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Total Consolidated | |||||||||||||
Current Assets | ||||||||||||||||
Cash and cash equivalents | $ | 68,975 | $ | 6,659 | $ | — | $ | 75,634 | ||||||||
Accounts receivable (net of allowances) | 30,501 | 77,052 | — | 107,553 | ||||||||||||
Inventories | 75,111 | 9,065 | — | 84,176 | ||||||||||||
Deferred income taxes | 14,054 | 55 | — | 14,109 | ||||||||||||
Note receivable – current | 942 | — | — | 942 | ||||||||||||
Prepaid expenses | 6,115 | 693 | — | 6,808 | ||||||||||||
Total Current Assets | 195,698 | 93,524 | — | 289,222 | ||||||||||||
Property, Plant and Equipment (Net) | 236,520 | 21,490 | — | 258,010 | ||||||||||||
Notes Receivable | 8,766 | — | — | 8,766 | ||||||||||||
Equity Investment in Affiliates | 189,435 | — | (36,860 | ) | 152,575 | |||||||||||
Long-term Supply Contracts | 5,668 | — | — | 5,668 | ||||||||||||
Tradenames and Other Intangibles | 117,550 | 1,824 | — | 119,374 | ||||||||||||
Goodwill | 247,702 | 11,742 | — | 259,444 | ||||||||||||
Other Assets | 24,870 | 1,688 | — | 26,558 | ||||||||||||
Total Assets | $ | 1,026,209 | $ | 130,268 | $ | (36,860 | ) | $ | 1,119,617 | |||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Short-term borrowings | $ | — | $ | 62,337 | $ | — | $ | 62,337 | ||||||||
Accounts payable and accrued expenses | 137,751 | 11,207 | — | 148,958 | ||||||||||||
Intercompany accounts | (14,214 | ) | 14,214 | — | — | |||||||||||
Current portion of long-term debt | 3,560 | — | — | 3,560 | ||||||||||||
Income taxes payable | 15,470 | 1,729 | — | 17,199 | ||||||||||||
Total Current Liabilities | 142,567 | 89,487 | — | 232,054 | ||||||||||||
Long-term Debt | 329,830 | 1,319 | — | 331,149 | ||||||||||||
Deferred Income Taxes | 60,447 | 553 | — | 61,000 | ||||||||||||
Deferred and Other Long-term Liabilities | 40,056 | 667 | — | 40,723 | ||||||||||||
Postretirement and Postemployment Benefits | 15,900 | — | — | 15,900 | ||||||||||||
Minority Interest | — | 297 | — | 297 | ||||||||||||
Commitments and Contingencies | — | — | — | — | ||||||||||||
Stockholders’ Equity | ||||||||||||||||
Common Stock | 46,661 | 14,701 | (14,701 | ) | 46,661 | |||||||||||
Additional paid-in capital | 51,212 | 17,761 | (17,761 | ) | 51,212 | |||||||||||
Retained earnings | 426,439 | 10,730 | (1,492 | ) | 435,677 | |||||||||||
Accumulated other comprehensive (loss) | (5,809 | ) | (5,247 | ) | (2,906 | ) | (13,962 | ) | ||||||||
518,503 | 37,945 | (36,860 | ) | 519,588 | ||||||||||||
Common stock in treasury, at cost | (81,094 | ) | — | — | (81,094 | ) | ||||||||||
Total Stockholders’ Equity | 437,409 | 37,945 | (36,860 | ) | 438,494 | |||||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,026,209 | $ | 130,268 | $ | (36,860 | ) | $ | 1,119,617 | |||||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Statements of Cash FlowsFlow
For The Nine Months Ended October 1, 2004 | ||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Total Consolidated | ||||||||||
Cash Flow From Operating Activities: | ||||||||||||
Net Income | $ | 65,488 | $ | 11,392 | $ | 76,880 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation, depletion and amortization | 26,884 | 2,007 | 28,891 | |||||||||
Equity in earnings of affiliates | (13,759 | ) | — | (13,759 | ) | |||||||
Deferred income taxes | 11,459 | 1,750 | 13,209 | |||||||||
Plant Impairment charge and other net asset write-offs | 2,208 | — | 2,208 | |||||||||
Net loss on early extinguishment of debt | 7,995 | — | 7,995 | |||||||||
Other | 1,760 | (1,898 | ) | (138 | ) | |||||||
Change in assets and liabilities: | ||||||||||||
Decrease (increase) in accounts receivable | 53,184 | (46,459 | ) | 6,725 | ||||||||
Decrease (increase) in inventories | 407 | (1,934 | ) | (1,527 | ) | |||||||
Decrease in prepaid expenses | 2,041 | 142 | 2,183 | |||||||||
Increase in accounts payable | 742 | 16,210 | 16,953 | |||||||||
Increase (decrease) in income taxes payable | 7,843 | (3,666 | ) | 4,177 | ||||||||
(Decrease) increase in intercompany and other liabilities | (4,092 | ) | 4,258 | 166 | ||||||||
Net Cash Provided by (Used in) Operating Activities | 162,159 | (18,196 | ) | 143,963 | ||||||||
Cash Flow From Investing Activities: | ||||||||||||
Additions to property, plant & equipment | (18,549 | ) | (3,815 | ) | (22,364 | ) | ||||||
Armkel acquisition (net of cash acquired) | (194,375 | ) | — | (194,375 | ) | |||||||
Proceeds from note receivable | 942 | — | 942 | |||||||||
Distributions from affiliates | 4,301 | — | 4,301 | |||||||||
Contingent acquisition payments | (5,068 | ) | — | (5,068 | ) | |||||||
Other long-term assets | (1,615 | ) | — | (1,615 | ) | |||||||
Proceeds from sale of fixed assets | — | 1,131 | 1,131 | |||||||||
Net Cash Used in Investing Activities | (214,364 | ) | (2,684 | ) | (217,048 | ) | ||||||
Cash Flow from Financing Activities: | ||||||||||||
Long-term debt borrowing | 540,000 | — | 540,000 | |||||||||
Long-term debt (repayment) | (436,136 | ) | (760 | ) | (436,896 | ) | ||||||
Short-term debt borrowing | 43,700 | — | 43,700 | |||||||||
Short-term debt (repayment) | (36 | ) | (1,653 | ) | (1,689 | ) | ||||||
Intercompany debt transactions | (67,268 | ) | 67,268 | — | ||||||||
Proceeds from stock options exercised | 10,885 | — | 10,885 | |||||||||
Payment of cash dividends | (10,261 | ) | — | (10,261 | ) | |||||||
Deferred financing costs | (3,662 | ) | — | (3,662 | ) | |||||||
Net Cash Provided by Financing Activities | 77,222 | 64,855 | 142,077 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | — | 814 | 814 | |||||||||
Net Change In Cash & Cash Equivalents | 25,017 | 44,789 | 69,806 | |||||||||
Cash And Cash Equivalents At Beginning of Year | 68,975 | 6,659 | 75,634 | |||||||||
Cash And Cash Equivalents At End of Period | $ | 93,992 | $ | 51,448 | $ | 145,440 | ||||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Statements of Cash Flows
For The Nine Months Ended September 26, 2003 | ||||||||||||
Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Total Consolidated | ||||||||||
Cash Flow From Operating Activities: | ||||||||||||
Net Income | $ | 59,898 | $ | 5,196 | $ | 65,094 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation, depletion and amortization | 21,198 | 1,102 | 22,300 | |||||||||
Equity in earnings of affiliates | (25,844 | ) | — | (25,844 | ) | |||||||
Deferred income taxes | 10,120 | — | 10,120 | |||||||||
Other | 26 | — | 26 | |||||||||
Change in assets and liabilities: | ||||||||||||
Decrease (increase) in accounts receivable | 108,217 | (108,207 | ) | 10 | ||||||||
Decrease in inventories | 4,105 | 1,406 | 5,511 | |||||||||
Decrease (increase) in prepaid expenses | 1,967 | (352 | ) | 1,615 | ||||||||
Decrease in accounts payable | (9,624 | ) | (2,323 | ) | (11,947 | ) | ||||||
Increase in income taxes payable | 11,221 | — | 11,221 | |||||||||
(Decrease) increase in intercompany and other liabilities | (51,548 | ) | 52,300 | 752 | ||||||||
Net Cash Provided by (Used in) Operating Activities | 129,736 | (50,878 | ) | 78,858 | ||||||||
Cash Flow From Investing Activities: | ||||||||||||
Additions to property, plant & equipment | (20,286 | ) | (2,188 | ) | (22,474 | ) | ||||||
Proceeds from note receivable | 870 | — | 870 | |||||||||
Distributions from affiliates | 3,629 | — | 3,629 | |||||||||
Contingent acquisition payments | (3,424 | ) | — | (3,424 | ) | |||||||
Other long-term assets | (1,440 | ) | — | (1,440 | ) | |||||||
Net Cash Used in Investing Activities | (20,651 | ) | (2,188 | ) | (22,839 | ) | ||||||
Cash Flow from Financing Activities: | ||||||||||||
Long-term debt borrowing | 100,000 | — | 100,000 | |||||||||
Long-term debt (repayment) | (265,721 | ) | 57,283 | (208,438 | ) | |||||||
Short-term debt borrowing | 60,000 | — | 60,000 | |||||||||
Short-term debt (repayment) | (2,469 | ) | — | (2,469 | ) | |||||||
Proceeds from stock options exercised | 7,118 | — | 7,118 | |||||||||
Payment of cash dividends | (9,258 | ) | — | (9,258 | ) | |||||||
Deferred financing costs | (3,442 | ) | — | (3,442 | ) | |||||||
Net Cash Provided by (Used in) Financing Activities | (113,772 | ) | 57,283 | (56,489 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | — | 864 | 864 | |||||||||
Net Change In Cash & Cash Equivalents | (4,687 | ) | 5,081 | 394 | ||||||||
Cash And Cash Equivalents At Beginning of Year | 71,745 | 4,557 | 76,302 | |||||||||
Cash And Cash Equivalents At End of Period | $ | 67,058 | $ | 9,638 | $ | 76,696 | ||||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
For The Three Months Ended April 1, 2005 | ||||||||||||
Company and Guarantor | Non- Guarantor Subsidiaries | Total Consolidated | ||||||||||
Net Cash Provided by (Used in) Operating Activities | $ | 37,463 | $ | (6,302 | ) | $ | 31,161 | |||||
Net Cash Used in Investing Activities | (3,836 | ) | (1,596 | ) | (5,432 | ) | ||||||
Net Cash (Used in) Provided by Financing Activities | (76,164 | ) | 6,762 | (69,402 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | — | 35 | 35 | |||||||||
Net Change In Cash & Cash Equivalents | (42,537 | ) | (1,101 | ) | (43,638 | ) | ||||||
Cash And Cash Equivalents At Beginning of Year | 81,949 | 63,591 | 145,540 | |||||||||
Cash And Cash Equivalents At End of Period | $ | 39,412 | $ | 62,490 | $ | 101,902 | ||||||
For The Three Months Ended April 2, 2004 | ||||||||||||
Company and Guarantor | Non- Guarantor Subsidiaries | Total Consolidated | ||||||||||
Net Cash Provided by Operating Activities | $ | 30,575 | $ | 536 | $ | 31,111 | ||||||
Net Cash Used in Investing Activities | (6,550 | ) | (10 | ) | (6,560 | ) | ||||||
Net Cash (Used in) Provided by Financing Activities | (36,961 | ) | 3,442 | (33,519 | ) | |||||||
Net Change In Cash & Cash Equivalents | (12,936 | ) | 3,968 | (8,968 | ) | |||||||
Cash And Cash Equivalents At Beginning of Year | 68,975 | 6,659 | 75,634 | |||||||||
Cash And Cash Equivalents At End of Period | $ | 56,039 | $ | 10,627 | $ | 66,666 | ||||||
8. Armkel, LLC
On May 28, 2004, the Company completed the previously announced purchase ofpurchased the remaining 50% of Armkel that it did not previously own from affiliates of Kelso for a purchase price of $253.7 million plus fees.
The Armkel acquisition was funded using available cash and by obtaining new Term A and B Loans through an amendment to the Company’s existing credit agreement. In connection with the amendment, the Company, among other things, was provided with a new Term A Loan in the amount of $100 million, and a new Term B Loan in the amount of $440 million, which were used to replace the Company’s existing credit facility of approximately $194 million, to replace Armkel’s principal credit facility of approximately $136 million and to provide $210 million to fund a portion of the purchase price for the transaction. The new Term B Loan has essentially the same terms as the replaced loans, but with more favorable interest rate provisions. Results of operations for the business are included in the Company’s consolidated financial statements from May 29, 2004.$262.0 million.
Pro forma comparative net sales, net income and basic and diluted earnings per share for the ninethree months ended October 1,April 2, 2004 and September 26, 2003 are as follows:
Nine Months Ended October 1, 2004 | Nine Months Ended September 16, 2003 | Three Months Ended April 2, 2004 | ||||||||||||||||
(Dollars in thousands, except per share data)
| Reported | Pro forma | Reported | Pro forma | Reported | Pro forma | ||||||||||||
Net Sales | $ | 1,057,086 | $ | 1,249,111 | $ | 770,127 | $ | 1,178,300 | $ | 295,991 | $ | 409,407 | ||||||
Net Income | 76,880 | 101,400 | 65,094 | 83,400 | $ | 29,906 | $ | 36,992 | ||||||||||
Earnings Per Share Basic | 1.25 | 1.65 | 1.08 | 1.39 | $ | 0.49 | $ | 0.60 | ||||||||||
Earnings Per Share Diluted | 1.19 | 1.57 | 1.03 | 1.32 | $ | 0.46 | $ | 0.56 |
The pro forma information gives effect to the Company’s purchase of Kelso’s interest in Armkel as if it occurred at January 1, 2003. Pro forma adjustments includeincluded the inventory step-up charge, equity appreciation rights, additional interest expense and the related income tax impact, as well as elimination of intercompany sales. In the current quarter, the reported and pro forma results are not applicable because the acquired business is included in the Company’s results.
Pro forma results of operations for the three months ended April 2, 2004, the year ended December 31, 2003 and the balance sheet as of April 2, 2004 were filed by the Company on Form 8-K on June 28, 2004.
The following table summarizesallocation of purchase price to certain intangibles has not yet been finalized since an independent appraisal is still in process. However, management does not believe that the preliminaryfinalization of the purchase price allocation relating to purchasing Kelso’s 50% interest in Armkel. An independent appraisal is currently in process:
(In thousands)
| |||
Current Assets | $ | 244,682 | |
Property, plant and equipment | 76,917 | ||
Tradenames and patents | 250,364 | ||
Goodwill | 311,661 | ||
Other long-term assets | 18,522 | ||
Total Assets acquired | 902,146 | ||
Current liabilities | 91,123 | ||
Long-term debt | 359,522 | ||
Other long-term liabilities | 37,553 | ||
Net assets acquired | $ | 413,948 | |
The following table summarizeswill have a material impact on the consolidated financial information for Armkel for the periods ending prior to May 28, 2004 during which the Company accounted for its 50% interest under the equity method.statements.
(In thousands)
| Three Months Ended September 26, 2003 | Five Months Ended May 28, 2004 | Nine Months Ended September 26, 2003 | ||||||
Income statement data: | |||||||||
Net sales | $ | 103,351 | $ | 192,767 | $ | 316,481 | |||
Gross profit | 57,602 | 109,915 | 180,613 | ||||||
Net income | 8,958 | 21,554 | 46,698 | ||||||
Equity in affiliate’s income recorded by the Company | 4,479 | 10,777 | 23,349 |
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following table summarizes financial information for Armkel for the quarter ended April 2, 2004 during which the Company accounted for its 50% interest under the equity method.
(In thousands) | Three Months Ended April 2, 2004 | ||
Income statement data: | |||
Net sales | $ | 113,773 | |
Gross profit | 65,685 | ||
Net income | 18,163 | ||
Equity in affiliate’s income recorded by the Company | 9,082 |
The Company invoiced Armkel $10.2$6.6 million and $19.0 millionprimarily for primarily administrative and management oversight services (which is included as a reduction of selling, general and administrative expenses), and purchased $0.8 million and $1.4$0.5 million of deodorant anti-perspirant inventory produced by Armkel in the first five monthsquarter of 2004 and the first nine months of 2003, respectively.2004. The Company sold Armkel $0.7 million and $1.9$0.4 million of Arm & Hammer products to be sold in international markets in the first five monthsquarter of 2004 and the first nine months of 2003, respectively. The Company had a net open receivable from Armkel at December 31, 2003 of approximately $6.7 million that primarily related to administrative services, partially offset by amounts owed for inventory.2004.
9. Short-term borrowingsBorrowings and Long-Term Debt
Short-term borrowings and long-term debt consist of the following:
(In thousands)
| Oct. 1, 2004 | Dec. 31, 2003 | ||||||||
Syndicated Financing Loan | $ | 230,000 | ||||||||
Term A Loan | $ | 29,438 | ||||||||
Amount due 2004 | $ | 373 | ||||||||
Amount due 2005 | 2,236 | |||||||||
Amount due 2006 | 5,217 | |||||||||
Amount due 2007 | 7,452 | |||||||||
Amount due 2008 & subsequent | 14,160 | |||||||||
Term B Loan | 438,900 | |||||||||
Amount due 2004 | $ | 1,100 | ||||||||
Amount due 2005 | 4,400 | |||||||||
Amount due 2006 | 4,400 | |||||||||
Amount due 2007 | 4,400 | |||||||||
Amount due 2008 & subsequent | 424,600 | |||||||||
Convertible Debentures due on August 15, 2033 | 100,000 | 100,000 | ||||||||
Securitization of Accounts Receivable due on January 15, 2005 | 100,000 | 56,300 | ||||||||
Senior Subordinated Note (9 1/2%) due August 15, 2009 | 225,000 | |||||||||
Discount on Senior Subordinated Note | (1,043 | ) | ||||||||
Various Debt from Brazilian Banks | 6,149 | 7,356 | ||||||||
Industrial Revenue Refunding Bond | 3,390 | 3,390 | ||||||||
Total debt | 901,834 | 397,046 | ||||||||
Less: current maturities | 112,158 | 65,897 | ||||||||
Net long-term debt | $ | 789,676 | $ | 331,149 | ||||||
(In thousands) | Apr. 1, 2005 | Dec. 31, 2004 | ||||||
Short-term borrowings | ||||||||
Securitization of Accounts Receivable due on April 13, 2005 | $ | 100,000 | $ | 93,700 | ||||
Various borrowings due to Brazilian Banks | 5,724 | 4,471 | ||||||
Other International Debt | 814 | 68 | ||||||
Total short-term borrowings | $ | 106,538 | $ | 98,239 | ||||
Long-term debt | ||||||||
Term B Loan | $ | 323,360 | $ | 400,337 | ||||
Amount due 2005 | 2,437 | |||||||
Amount due 2006 | 3,249 | |||||||
Amount due 2007 | 3,249 | |||||||
Amount due 2008 | 3,249 | |||||||
Amount due 2009 | 3,249 | |||||||
Amount due 2010 and subsequent | 307,927 | |||||||
Convertible Debentures due on August 15, 2033 | 100,000 | 100,000 | ||||||
Senior Subordinated Note (6%) due December 22, 2012 | 250,000 | 250,000 | ||||||
Senior Subordinated Note (9 ½%) due August 15, 2009 | 6,400 | 6,400 | ||||||
Premium on 9 ½% Senior Subordinated Note | 128 | 213 | ||||||
Various debt due to Brazilian Banks $630 in 2005, $469 in 2006, $228 in 2007 | 1,327 | 848 | ||||||
Industrial Revenue Refunding Bond Due in installments of $685 from 2005-2007 and $650 in 2008 | 2,705 | 2,705 | ||||||
Total long-term debt | 683,920 | 760,503 | ||||||
Less: current maturities | 4,564 | 5,797 | ||||||
Net long-term debt | $ | 679,356 | $ | 754,706 | ||||
The long-term debt principal payments required to be made are as follows:
(In thousands)
| ||||||
2004 | $ | 6,988 | ||||
2005 | 107,878 | $ | 3,752 | |||
2006 | 10,859 | 4,403 | ||||
2007 | 12,742 | 4,162 | ||||
2008 | 13,993 | 3,899 | ||||
2009 and subsequent | 749,374 | |||||
2009 | 9,777 | |||||
2010 and subsequent | 657,927 | |||||
$ | 901,834 | $ | 683,920 | |||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On May 28, 2004,During the first quarter of 2005, the Company entered into an amended and restated credit agreement (the “Credit Agreement”) with several banks and other financial institutions, The Bank of Nova Scotia, Fleet National Bank and National City Bank, each as a documentation agent, Citicorp North America, Inc., as syndication agent, and J.P. Morgan Chase Bank, as administrative agent. The Credit Agreement provides for (i) a five year term loan in a principal amount of $100paid approximately $77.0 million (the “Term A Loan”), (ii) a seven year term loan in a principal amount of $440 million, which term loan may be increased by up to an additional $250 million upon the satisfaction of certain conditions (the “Term B Loan,” and together with the Term A Loan, the “Term Loans”), and (iii) a five year multi-currency revolving credit and letter of credit facility in an aggregate principal amount of up to $100 million (the “Revolving Loans”). The Term Loans were used to finance the acquisition of the remaining 50% interest in Armkel not previously owned by the Company, pay amounts outstanding under Armkel’s principal credit facility of approximately $136 million and refinance the Company’s principal credit facility of approximately $194 million. The Revolving Loans, which are currently undrawn, are available for general corporate purposes. The obligations of the Company under the Credit Agreement are secured by substantially all of the assets of the Company and certain of its domestic subsidiaries. Those domestic subsidiaries have also guaranteed the loan obligations under the Credit Agreement. The Term Loans and the Revolving Loans bear interest under oneB Loan, of two rate options, selected by the Company, equal to either (i) a eurocurrency rate (adjusted for any reserve requirements) (“Eurocurrency Rate”) or (ii) the greater of the prime rate, the secondary market rate for three-month certificates of deposit (adjusted for any reserve requirements) plus 1%, or the federal funds effective rate plus 0.5% (“Alternate Base Rate”), plus (b) an applicable margin. The applicable margin is determined by the Company’s then current leverage ratio. At the closing date of the Credit Agreement, the applicable margin was (a) 1.75% for the Eurocurrency Rate and (b) 0.75% for the Alternate Base Rate.which $75.0 million were voluntary payments.
AsIn April 2005, the accounts receivable securitization facility was renewed with a result of the purchase of the Kelso interestnew maturity date in Armkel, LLC, the Company assumed $225 million of 9.5% subordinated notes (“Notes”) that were issued on August 28, 2001 at a discount and are due in 2009, with interest paid semi-annually on February 15 and August 15. The effective yield on the Notes is approximately 9.62%. The terms of the Notes provide for an optional prepayment of principal at a premium. The issue discount is being amortized using the effective interest method. The Notes are guaranteed by the Company and certain of the Company’s domestic subsidiaries. The Notes contain various financial and non-financial covenants. In connection with the acquisition, a fair value appraisal of the notes is currently in process.
During July 2004, as a result of purchasing Kelso’s interest in Armkel, the Company amended its Accounts Receivable Securitization Agreement to increase the capacity that can be borrowed from $60 million to $100 million. The increase in borrowing was used to fund a voluntary bank debt payment on Term A Loan on August 4, 2004.April 2006.
10. Goodwill Tradenames and Other Intangible Assets
The following table disclosestables disclose the carrying value of all intangible assets:
October 1, 2004 | December 31, 2003 | April 1, 2005 | December 31, 2004 | |||||||||||||||||||||||||||||||||||||
(In thousands)
| Gross Carrying Amount | Accum. Amort. | Net | Gross Carrying Amount | Accum. Amort. | Net | Gross Carrying Amount | Accum. Amort. | Net | Gross Carrying Amount | Accum. Amort. | Net | ||||||||||||||||||||||||||||
Amortized intangible assets: | Amortized intangible assets: |
| ||||||||||||||||||||||||||||||||||||||
Tradenames | $ | 77,258 | $ | (12,011 | ) | $ | 65,247 | $ | 69,645 | $ | (7,839 | ) | $ | 61,806 | $ | 77,413 | $ | (13,976 | ) | $ | 63,437 | $ | 77,433 | $ | (12,759 | ) | $ | 64,674 | ||||||||||||
Formulas | 22,320 | (2,450 | ) | 19,870 | 6,281 | (1,430 | ) | 4,851 | 22,320 | (3,603 | ) | 18,717 | 22,320 | (3,023 | ) | 19,297 | ||||||||||||||||||||||||
Non Compete Agreement | 1,143 | (321 | ) | 822 | 1,143 | (233 | ) | 910 | 1,143 | (379 | ) | 764 | 1,143 | (350 | ) | 793 | ||||||||||||||||||||||||
Total | $ | 100,721 | $ | (14,782 | ) | $ | 85,939 | $ | 77,069 | $ | (9,502 | ) | $ | 67,567 | $ | 100,876 | $ | (17,958 | ) | $ | 82,918 | $ | 100,896 | $ | (16,132 | ) | $ | 84,764 | ||||||||||||
Unamortized intangible assets - Carrying value | ||||||||||||||||||||||||||||||||||||||||
Unamortized intangible assets – Carrying value: | Unamortized intangible assets – Carrying value: |
| ||||||||||||||||||||||||||||||||||||||
Tradenames | $ | 286,505 | $ | 51,807 | $ | 389,521 | $ | 389,521 | ||||||||||||||||||||||||||||||||
Total | $ | 286,505 | $ | 51,807 | $ | 389,521 | $ | 389,521 | ||||||||||||||||||||||||||||||||
Intangible amortization expense amounted to $1.8 million for the three months of 2005 and $1.5 million for the same period of 2004. The increaseCompany’s estimated intangible amortization will be approximately $7.2 million in tradenames as compared toeach of the values at December 31, 2003 is primarily due to the inclusion of tradenames acquired in connection with the purchase of Armkel and the final valuation adjustments associated with the Unilever brands acquired in 2003.next five years.
The Armkel tradenameschanges in the carrying amount of goodwill for the three months ended April 1, 2005 are currently valued at their book value as of May 28, 2004. An appraisal is currently in process.follows:
(In thousands) | Consumer Domestic | Consumer International | Specialty | Total | |||||||||
Balance December 31, 2004 | $ | 468,393 | $ | 20,662 | $ | 22,588 | $ | 511,643 | |||||
Tradename reclassification (related to Armkel) | (2,766 | ) | 2,766 | — | — | ||||||||
Goodwill associated with the Armkel acquisition | 1,074 | — | — | 1,074 | |||||||||
Other | 224 | — | — | 224 | |||||||||
Balance April 1, 2005 | $ | 466,925 | $ | 23,428 | $ | 22,588 | $ | 512,941 | |||||
11. Comprehensive Income
The following table discloses the Company’s comprehensive income for the three months ended April 1, 2005 and April 2, 2004:
Three Months Ended | ||||||
(In thousands) | Apr. 1, 2005 | Apr. 2, 2004 | ||||
Net Income | $ | 37,701 | $ | 29,906 | ||
Other Comprehensive Income, net of tax: | ||||||
Foreign exchange translation adjustments | 1,725 | 161 | ||||
Interest rate swap agreements | — | 143 | ||||
Company’s portion of Armkel’s accumulated other comprehensive income | — | 1,511 | ||||
Comprehensive Income | $ | 39,426 | $ | 31,721 | ||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The changes in the carrying amount of goodwill for the nine months ended October 1, 2004 are as follows:
(In thousands)
| Consumer | Specialty | Total | |||||||||
Balance December 31, 2003 | $ | 236,851 | $ | 22,593 | $ | 259,444 | ||||||
Tradename and fixed asset valuation adjustments | (5,527 | ) | — | (5,527 | ) | |||||||
Book value of Armkel’s goodwill on day of acquisition | 205,156 | — | 205,156 | |||||||||
Additional goodwill associated with Armkel purchase | 106,505 | — | 106,505 | |||||||||
Other | — | (5 | ) | (5 | ) | |||||||
Balance October 1, 2004 | $ | 542,985 | $ | 22,588 | $ | 565,573 | ||||||
Intangible amortization expense amounted to $4.8 million for the nine months of 200412. Pension and $2.1 million for the same period of 2003. The estimated intangible amortization will be approximately $7.2 million in each of the next five years.
11. Comprehensive IncomePostretirement Plans
The following table presents the Company’s Comprehensive Income for the three and nine months ended October 1, 2004 and September 26, 2003:
Three Months Ended | Nine Months Ended | |||||||||||||
(In thousands)
| Oct. 1, 2004 | Sept. 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | ||||||||||
Net Income | $ | 27,401 | $ | 19,522 | $ | 76,880 | $ | 65,094 | ||||||
Other Comprehensive Income, net of tax: | ||||||||||||||
Foreign exchange translation adjustments | 1,387 | (874 | ) | 3,584 | 3,500 | |||||||||
Interest rate swap agreements | — | 822 | 143 | 1,383 | ||||||||||
Company’s portion of Armkel’s Accumulated | ||||||||||||||
Other Comprehensive Income (Loss) | — | (303 | ) | 2,294 | (2,169 | ) | ||||||||
Comprehensive Income | $ | 28,788 | $ | 19,167 | $ | 82,901 | $ | 67,808 | ||||||
12. Investment in Del Labs Inc.
On July 2, 2004, the Company announced that it has agreed to invest $30 million in a company formed by Kelso, to acquire Del Laboratories, Inc. The Company’s investment will be substantially in the form of convertible preferred stock, and will represent about 20% of the equity financing. Kelso will provide the remaining equity, with the participation of Del’s existing management team.
As part of this transaction, the Company will have certain rights with respect to the Orajel brand, including an option to acquire the business after three years. In the event that the Company does not exercise this option, the Company will have the right, subject to certain conditions, to convert its preferred stock into a 20% interest in the common stock of the new Del company.
The Company expects the transaction to close in this year’s fourth quarter subject to regulatory, financing and other customary conditions and will use cash on hand to fund the transaction.
13. Pension Disclosure
The following table presentsdiscloses the net periodic benefit cost for the Company’s Pension Planpension and Post-retirement Planpostretirement plans for the three months ended April 1, 2005 and nine months ending October 1, 2004 and September 26, 2003.April 2, 2004.
Pension Costs Three Months Ended | Pension Costs Nine Months Ended | |||||||||||||||
(In thousands)
| Oct. 1, 2004 | Sept. 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | ||||||||||||
Components of Net Periodic Benefit Cost: | ||||||||||||||||
Service cost | $ | 595 | $ | 37 | $ | 861 | $ | 111 | ||||||||
Interest cost | 1,525 | 363 | 2,621 | 1,089 | ||||||||||||
Expected return on plan assets | (1,413 | ) | (315 | ) | (2,410 | ) | (945 | ) | ||||||||
Amortization of prior service cost | 1 | 1 | 3 | 3 | ||||||||||||
Recognized actuarial (gain) or loss | 126 | 75 | 376 | 225 | ||||||||||||
Net periodic benefit cost | $ | 834 | $ | 161 | $ | 1,451 | $ | 483 | ||||||||
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Pension Costs Three Months Ended | ||||||||
(In thousands) | Apr. 1, 2005 | Apr. 2, 2004 | ||||||
Components of Net Periodic Benefit Cost: | ||||||||
Service cost | $ | 597 | $ | 41 | ||||
Interest cost | 1,606 | 353 | ||||||
Expected return on plan assets | (1,516 | ) | (316 | ) | ||||
Amortization of prior service cost | 5 | 1 | ||||||
Recognized actuarial loss | 51 | 123 | ||||||
Net periodic benefit cost | $ | 743 | $ | 202 | ||||
Post-retirement Costs Three Months Ended | Post-retirement Costs Nine Months Ended | Postretirement Costs Three Months Ended | ||||||||||||||||||||||
(In thousands)
| Oct. 1, 2004 | Sept. 26, 2003 | Oct. 1, 2004 | Sept. 26, 2003 | Apr. 1, 2005 | April 2, 2004 | ||||||||||||||||||
Components of Net Periodic Benefit Cost: | ||||||||||||||||||||||||
Service cost | $ | 140 | $ | 84 | $ | 389 | $ | 252 | $ | 126 | $ | 109 | ||||||||||||
Interest cost | 246 | 204 | 708 | 612 | 289 | 216 | ||||||||||||||||||
Expected return on plan assets | — | — | — | — | ||||||||||||||||||||
Amortization of prior service cost | (20 | ) | (20 | ) | (60 | ) | (60 | ) | 17 | (20 | ) | |||||||||||||
Recognized actuarial (gain) or loss | 3 | (22 | ) | 6 | (66 | ) | ||||||||||||||||||
Recognized actuarial gain | (1 | ) | — | |||||||||||||||||||||
Net periodic benefit cost | $ | 369 | $ | 246 | $ | 1,043 | $ | 738 | $ | 431 | $ | 305 | ||||||||||||
The Company estimates it will be requiredmade cash contributions of approximately $1.7 million to make a cash contribution tocertain of its pension plans in the first quarter and expects to make additional contributions of approximately $1.5$2.8 million during 2004. The contribution is $0.8 million higher than previously estimated due to the inclusionremainder of Armkel’s pension plan.2005.
In January 2004, the FASB issued FASB Staff Position (FSP) No. 106-1 “Accounting and Disclosure Requirements to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (the Act). The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The adoption of the provisions of FSP 106-1 in this quarter did not have a significant impact to the Company’s postretirement accumulated projected benefit obligation or net periodic benefit cost.
14.13. Commitments, contingencies and guarantees
a. | In December 1981, the Company formed a partnership with a supplier of raw materials which mines and processes sodium mineral deposits owned by each of the two partners in Wyoming. The Company purchases the majority of its sodium raw material requirements from the partnership. This agreement terminates upon two years’ written notice by either company. The Company has an annual commitment to purchase 240,000 tons, based upon market price. There are no other material transactions with the partnership or the Company’s partner. |
b. |
Medpointe and certain former Carter-Wallace shareholders were party to an indemnification agreement pursuant to which such shareholders would be required to indemnify Medpointe from a portion of the damages suffered by Medpointe in relation to the exercise of appraisal rights by the former Carter-Wallace shareholders in the merger. Pursuant to the agreement, the shareholders agreed to indemnify Medpointe for 40% of any Appraisal Damages (defined as the recovery greater than the per share merger price times the number of shares in the appraisal class) suffered by Medpointe in relation to the merger; provided that if the total amount of Appraisal Damages exceeds $33.3 million, then the indemnifying stockholders will indemnify Medpointe for 100% of any damages suffered in excess of that amount. The Company, in turn, was party to an agreement with Medpointe pursuant to which it agreed to indemnify Medpointe and certain related parties against 60% of any Appraisal Damages for which Medpointe remains liable. The maximum liability to the Company pursuant to the indemnification agreement was $12 million.
On March 27, 2003, GAMCO Investors, Inc. filed another complaint in the New York Supreme Court seeking damages from MedPointe, the former directors of Carter-Wallace, and one of the former shareholders of Carter-Wallace. The complaint alleges breaches of fiduciary duty in connection with certain employment agreements with former Carter-Wallace executives, the sale of Carter Wallace’s consumer products business to the Company and the merger of MCC Acquisition Sub Corporation with and into Carter-Wallace. The complaint sought monetary damages and equitable relief, including among other things, invalidation of the transactions. On May 21, 2004, the court dismissed certain of the plaintiffs’ claims. The Company was not named as a defendant in this action and believed it had no liability.
On October 12, 2004, Medpointe and the plaintiffs settled both of the legal actions described above. In connection with the settlement of the legal actions, the Company entered into a settlement agreement and release with Medpointe pursuant to which, in settlement of the Company’s indemnification obligations or other claims that Medpointe may have against the Company and certain persons related to the Company, the Company agreed to pay Medpointe $8.1 million, of which $4.9 million is included in interest expense in the third quarter of 2004 and $3.2 million was applied towards goodwill as of October 1, 2004. Payment was made by the Company on October 13, 2004.
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company’s distribution of condoms under the Trojan and other trademarks is regulated by the U.S. Food and Drug Administration (FDA). Certain of the Company’s condoms and similar condoms sold by its competitors, contain the spermicide nonoxynol-9 (N-9). The World Health Organization and other interested groups have issued reports suggesting that N-9 should not be used rectally or for multiple daily acts of vaginal intercourse, given the ingredient’s potential to cause irritation to human membranes. The Company expects the FDA to issue non-binding draft guidance concerning the labeling of condoms with N-9, although the timing of such draft guidance remains uncertain. The Company believes that condoms with N-9 provide an acceptable added means of contraceptive protection and is cooperating with the FDA concerning the appropriate labeling revisions, if any. However, the Company cannot predict the outcome of the FDA review. While awaiting further FDA guidance, the Company has implemented interim labeling revisions that caution against rectal use and more-than-once-a-day vaginal use of N-9-containing condoms, and has launched a public information campaign to communicate these messages to the affected communities. If the FDA or state governments promulgate rules which prohibit or restrict the use of N-9 in condoms (such as new labeling requirements), the financial condition and operating results of the Company could suffer. |
The Company has commitments to acquire approximately |
The Company has outstanding letters of credit of approximately |
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In connection with the acquisition of |
The Company, in the ordinary course of its business, is the subject of, or a party to, various pending or threatened legal actions. The Company believes that any ultimate liability arising from these actions will not have a material adverse effect on its financial position. |
14. Assets Held For Sale
As part of the Armkel acquisition, the Company has title to property and facilities in Cranbury, New Jersey, which includes research facilities that are in use as well as assets that are held for sale. In the third quarter of 2004, the Company entered into a contract to sell sections of the land available for development (and demolish the remaining buildings at the buyer’s expense), subject to obtaining environmental and other regulatory approvals. The Company expects to close on the sale before the end of 2005. In the first quarter of 2005, the Company entered into a contract to sell the remaining assets held for sale. The contract is subject to the buyer’s due diligence. The value expected to be received for all land at the Cranbury, NJ location (other than that related to the research facilities), net of costs to sell, is approximately $11.0 million. These assets are included in the Consumer Domestic segment.
In January 2005, the Company signed an agreement to sell its manufacturing plant in Mexico. The new owner of the plant will manufacture products for the Company. At the end of April, the Company closed on the sale of this facility and received, net of costs to sell, approximately $2.3 million, which is included in the Consumer International segment.
15. Reclassification
Certain prior year amounts have been reclassified in order to conform with the current year presentation.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS |
Results of Operations
The discussion of results of operations at the consolidated level is followed by a more detailed discussion of results of operations by segment for the thirdfirst quarter and nine month periods of 20042005 compared to the thirdfirst quarter and nine month periods of 2003.2004. The segment discussion also presents certain product line fluctuations. With the acquisition of the remaining 50% interest in Armkel, LLC (“Armkel”) that the Company did not previously own from affiliates of Kelso & Company (“Kelso”) on May 28, 2004, and Armkel’s subsequent merger with the Company, the results of operations of the former Armkel business are consolidated in the accompanying financial statements from the date of acquisition.
Consolidated Results
Net Sales
Net sales for the quarter increased by $154.7$124.7 million or 58.2%42.1% to $420.3$420.7 million, as compared to $265.6$296.0 million in the previous year’s thirdfirst quarter. Of the increase, $114.8$122.6 million reflects sales of products formerly owned by Armkel, and nowwhich are included in Company sales as a result of the acquisition of Kelso’s interest in Armkel late in the second quarter and $27.6 million reflects sales resulting from the acquisition of the former Unilever oral care business in the fourth quarter of 2003. Other increases included the reversal of prior year promotion accruals of approximately $1.3 million as a result of a change in estimateCompany’s condensed consolidated results, and favorable foreign exchange rates of $0.8 million (excluding the impact of the former Armkel subsidiaries). For the nine month period, net sales increased $287.0 million or 37.3% to $1,057.1 million. The primary reasons for the sales increase are the sales of products formerly owned by Armkel of $158.3 million and sales of $85.8 million resulting from the acquisition of the Unilever oral care business. Sales also increased due to favorable foreign exchange rates of $3.6 million, the reversal of the previously mentioned prior year promotion reserves of $4.3 million and the effect of six extra days in the first quarter of this year’s fiscal calendar.
Operating Costs
The Company’s gross margin in the current quarter increased to 38.2%38.1% from 30.3%32.6% in the prior year. The increase is in large part a result of the products formerly owned by Armkel, and the oral care business acquired from Unilever as these productswhich carry on average a higher gross profit margin than existingother Company products. The margin was also impacted byExcluding the effect on the third quarter of 2004impact of the former Armkel acquisition related inventory step up charge of $6.2 million, and the reversal of the previously mentioned prior year promotion reserves. In addition, efficient promotion spending, and supply chain efficiencies offset commoditybusiness, gross margin declined. This decline is due to sharp price increases for oil-based raw and packaging materials and certain commodity chemicals during the quarter and new product launch costs were higher in last year’s third quarter. Gross margin for the nine month period was 35.6% as compared to 30.4% for the nine month periodsecond half of 2003. The reasons for the improvement are consistent with those affecting the current quarter and includes a second quarter 2004 plant impairment charge of $1.5 million.2004.
Marketing expenses in the current quarter increased by $28.1were $37.6 million, to $51.0an increase of $13.5 million as compared to the same period of 20032004 primarily as a result of bothapproximately $15.0 million in expenses associated with the former Armkel and Unilever oral care business acquisitions.products. Marketing expenses for the Company’s pre-existing product lines were essentially unchanged. For the nine month period, marketingslightly lower than last year as a result of lower expenses of $111.3 million were $45.2 million higher than in 2003 for the same reasons as referenced above, as well as an increase in advertising expenses in support of certain household deodorizing and oral carecleaning products.
Selling, general and administrative (“SG&A”) expenses in the current quarter increased $27.4$21.5 million as compared to the same period last year. This is primarily a result of costs associated with the former Armkel business of approximately $18.0 million, higher broker commission$24.0 million. Other SG&A expenses declined due to lower deferred and performance-based compensation costs of $1.6 million as a result of higher sales, higher compensation relatedand decreases in information system costs of $3.9 million and costs to comply with certain provisions of the Sarbanes-Oxley Act of 2002 and related regulations of $1.1 million. SG&A expenses for the nine month period increased $47.1 million as compared to the same period last year. This is primarily a result of costs associated with the Armkel business of approximately $25.0 million, higher broker commission costs of $4.3 million as a result of higher sales, tradename amortization expenses associated with the acquired Unilever oral care business of $1.9 million, higher compensation related costs of $6.9 million, higher information system costs of $1.8 million and costs to comply with certain provisions of the Sarbanes-Oxley Act of 2002 and related regulations of $2.3 million.legislation.
Other Income and Expenses
The decrease in equity in earnings of affiliates of $4.0$8.6 million in the current quarter as compared to the year ago period was entirelyis due to the Company’s acquisition of Kelso’s interest in Armkel on May 28, 2004. The combined resultsearnings of the Company’s other equity investments Armand Products Company (“Armand”) and The Armakleen Company (“Armakleen”), slightly increased. For the nine month period the decrease in equity in earnings of affiliates of $12.1 million is primarily due to the reasons noted for the third quarter. Armkel’s net income for the five months ended May 28, 2004 was reduced as a result of an international tradename impairment charge of approximately $3.2 million (net of tax). The impact to the Company was a reduction of earnings in equity of affiliates of approximately $1.6 million. Armkel’s nine month 2003 results were positively impacted by a litigation settlement, partially offset by an impairment of an asset held for sale.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)
Other income and expense in 2005 includes the effect of foreign exchange remeasurement losses related to intercompany loans between the Company’s subsidiaries. The 2004 results fromamount reflects a gain on the sale of a warehouse by our Canadian subsidiary and in 2003 reflect foreign exchange gains by the Company’s Brazilian subsidiary.
Interest expense increased in the quarter and the nine month period as a result of interest associated with the third quarter settlement of the former Carter-Wallace shareholder appraisal suit of $4.9 million, interest associated with the assumption of Armkel’s indebtedness and the $225 million principal amount of Armkel’s 9.5% Senior Subordinated Notes, the increase in debtCompany’s additional indebtedness required to purchase Kelso’s interest in Armkel and to purchase the Unilever oral care business in late 2003, partially offset by the settlement of the Company’s remaining fixed rate interest rate swap contracts in the first quarter of 2004.
The loss on early extinguishment of debt pertained to existing deferred financing costs that were written off when the Company refinanced its bank debt.Armkel.
Taxation
The effective tax rate for the nine month periodquarter was 31.5%34.8% as compared to 31.7%33.0% for the same period of last year. Last year’s tax rate reflected the settlement of a state tax dispute, offset by a higher state tax rate and taxes associated with Armkel’s sale of its Italian subsidiary, which helped to depress the tax rate. The current year rate was impacted favorably by the estimated amount of additionalan amended prior year tax return that resulted in a benefit related to a prior year research and development tax credits included in recently filed and amended income tax returns.credit.
Segment results
As a result of purchasing the Kelso interest, theThe Company has redefined its operatingmaintains three reportable segments. These segments are based on differences in the nature of products and organizational and ownership structures. Specifically, the Company has identified the following segments: Consumer Domestic, Consumer International and Specialty Products Division (“SPD”).
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) |
Segment revenues are derived from the sale of the following products:
Segment | Products | |
Consumer Domestic | Deodorizing and cleaning, laundry, and personal care products | |
Consumer International | Primarily personal care products | |
SPD | Specialty chemical products |
The domestic resultsSome of the acquired Armkel business since May 29, 2004subsidiaries that are included in the Consumer Domestic segmentInternational manufacture and its international subsidiaries (in additionsell personal care products to the Company’s existing international consumer subsidiary) compriseConsumer Domestic. These sales are eliminated from the Consumer International segment. There has been no change to the SPD segment. There are no material intersegment sales. The Company’s earnings, prior to its acquisition of Kelso’s interest in Armkel, attributable to the Company’s equity investment in Armkel’s domestic and international operations are included in Income Before Taxes and Minority Interest of the Consumer Domestic and Consumer International segments, respectively. The Company’s earnings attributable to its equity investment in Armand Products and the Armakleen Company are included in Income Before Taxes and Minority Interest of the Corporate segment. Prior to purchasing Kelso’s interest in Armkel, the Company’s segments were: Church & Dwight Consumer, Armkel, Church & Dwight SPD and Other Equity Affiliates.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)results.
Segment sales and income before taxes and minority interest for the third quarterfirst quarters of 2005 and nine month period of 2004 and 2003 are as follows:
(in thousands)
| Consumer Domestic | Consumer Internat’l | SPD | Corporate | Total | ||||||||||
Net Sales | |||||||||||||||
Third Quarter 2004 | $ | 299,285 | $ | 69,890 | $ | 51,135 | — | $ | 420,310 | ||||||
Third Quarter 2003 | 208,604 | 9,812 | 47,150 | — | 265,566 | ||||||||||
2004 Year to Date | 794,205 | 107,773 | 155,108 | — | 1,057,086 | ||||||||||
2003 Year to Date | 605,223 | 26,961 | 137,943 | — | 770,127 | ||||||||||
Income Before Taxes and Minority Interest(1) | |||||||||||||||
Third Quarter 2004 | 28,237 | 4,922 | 3,866 | 1,144 | 38,169 | ||||||||||
Third Quarter 2003 | 22,305 | 2,760 | 3,642 | 683 | 29,390 | ||||||||||
2004 Year to Date | 82,365 | 13,865 | 13,063 | 2,983 | 112,276 | ||||||||||
2003 Year to Date | 72,413 | 9,037 | 11,332 | 2,494 | 95,276 | ||||||||||
Total Assets | |||||||||||||||
October 1, 2004 | $ | 1,368,932 | $ | 263,941 | $ | 166,621 | $ | 65,886 | $ | 1,865,380 | |||||
December 31, 2003 | $ | 841,036 | $ | 50,868 | $ | 166,953 | $ | 60,760 | $ | 1,119,617 |
(in thousands) | Consumer Domestic | Consumer Internat’l | SPD | Corporate | Total | ||||||||||
Net Sales | |||||||||||||||
First Quarter 2005 | $ | 297,716 | $ | 69,355 | $ | 53,603 | $ | — | $ | 420,674 | |||||
First Quarter 2004 | 236,055 | 9,027 | 50,909 | — | 295,991 | ||||||||||
Income Before Taxes and Minority Interest(1) | |||||||||||||||
First Quarter 2005 | 40,992 | 10,852 | 4,741 | 1,270 | 57,855 | ||||||||||
First Quarter 2004 | 33,790 | 4,634 | 5,476 | 742 | 44,642 |
(1) | In determining Income Before Taxes and Minority Interest, Interest Expense, Interest Income, |
Consumer Domestic
For the thirdfirst quarter of 2004,2005, Consumer Domestic Net Sales increased $90.7$61.7 million or 43.5%26.1% to $299.3$297.7 million. The increase includesPersonal care products increased $61.0 million due to sales of $56.0$62.9 million associated with the domestic results of the former Armkel business, $27.2products. Deodorizing products increased $2.7 million ofand laundry products decreased $2.0 million. Net sales associated with the fourth quarter 2003 acquisition of the oral care brands from Unilever and the reversal of $0.9 million of prior year promotion reserves due to a change in estimate. At the product line level, sales of deodorizers were moderately higher than last year and existing personal care products were flat. Laundry consumption was also higher than last year, although shipments were flat due to the timing of promotional activities. At the brand level, sales of Arm & Hammer and Xtra liquid laundry detergent, Arm & Hammer Baking Soda and Arm & Hammer Super Scoop were all significantly higher than last year, while sales of Arm & Hammer powder laundry detergent, fabric softener and antiperspirants were lower.
For the nine month period of 2004, Consumer Domestic Net Sales increased $189.0 million or 31.2% to $794.2 million. The increase includes sales of $79.6 million associated with the domestic results of the former Armkel business, $84.1 million of sales associated with the fourth quarter 2003 acquisition of the oral care brands from Unilever and the reversal of $3.8 million of prior year promotion reserves due to a change in estimate. At the product line level, deodorizing products and laundry products net sales were higher than last year and existing personal care products decreased. At the brand level, sales of Arm & Hammer and Xtra liquid laundry detergent, Arm & Hammer Baking Soda, Arm & Hammer toothpaste and Arm & Hammer Super Scoop were higher than last year while sales of Arm & Hammer powder laundry detergent and antiperspirants were lower. The nine month period was also affected by six extra days in the first fiscal quarter of this year as compared to2004, when their sales were not consolidated with those of the first fiscal quarter of 2003.Company, totaled approximately $58.0 million.
Consumer Domestic Income before Taxes and Minority Interest for the current quarter increased $5.9$7.2 million to $28.2 million mainly$41.0 million. This is due to operating results associated withthe increased contribution from the former Armkel business (despiteproducts, slightly lower marketing costs associated with certain deodorizing and cleaning products and lower SG&A for the impactreasons noted above attributable to the non-Armkel portion of the inventory step up charge of $4.6 million) and the contribution from the acquired Unilever brands. This increasebusiness. The higher profitability was partially offset by higher allocatedoil based manufacturing and freight costs. The segment was also impacted by higher interest expense (which includes the segment’s allocation of the interest expense element of the Medpointe Settlement Agreement) and as a result of purchasing Kelso’s interest in Armkel, the elimination of earnings in equity of affiliates.
For the nine month period, Income before Taxes and Minority Interest increased $10.0 million to $82.4 million due to operating results associated with the former Armkel business (despite the impact of the inventory step up charge of $8.0 million) and the contributioncosts resulting from the acquired Unilever brands. This increase was partially offset by a plant impairment charge of $1.5 million, higher allocated interest expense (which includes the segment’s allocation of the interest expense element of the Medpointe Settlement Agreement), the segment’s allocation of the deferred financing cost write-off and as a result of purchasing Kelso’s interest in Armkel a reduction of earnings in equity of affiliates.
The Company expects to significantly increase its marketing spending in the fourth quarter compared to the same period last year. In part, this increase is to support several personal care products introduced earlier in the year, including Arm & Hammer Enamel Care™ toothpaste, a patented product which combines the cleaning and whitening properties of baking soda with fluoride and liquid calcium to fill tooth surfaces and restore enamel luster; and Trojan® condoms with Warming Sensations™, a unique lubricant system which warms the skin on contact for enhanced pleasure. In addition, the increase reflects new initiatives in support of the acquired oral care products, particularly Mentadent® toothpaste and toothbrushes and Close-Up® toothpaste. On the household products side of the business, there will also be marketing spending to support the new cat litter product, Arm & Hammer Multi-Cat, designed for households with two or more cats.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)purchase.
Consumer International
Consumer International net salesNet Sales for the current quarter as compared to the same period of last year increased $60.1$60.3 million to $69.9$69.4 million. The current quarter included $59.7 million of sales attributable to the former Armkel international business and for the nine month periodeffect of favorable foreign exchange rates. Net sales of the former Armkel subsidiaries in the first quarter of 2004, when their sales were not consolidated with those of the Company, totaled approximately $55.8 million. The increase of $3.9 million includes a favorable foreign exchange effect of $3.1 million.
Income before Taxes and Minority Interest increased $80.8$6.2 million to $107.8$10.9 million as a result of the inclusion of the former Armkel international business results following the acquisition, and the effect of favorable foreign exchange rates.
Income before Taxes and Minority Interest increased $2.2 million in the current quarter to $4.9 million and increased $4.8 million to $13.9 million for the nine month period as a result of the inclusion of the former Armkel business results since the acquisition (despite the impact of the inventory step up charge of $1.6 million in the current quarter and $2.3 for the nine month period.). This increase was partially offset by the higher interest expense andcosts associated with the segment’s allocation of the deferred financing cost write-off and the Medpointe settlement agreement.Armkel acquisition.
Specialty Products (SPD)
Specialty Products Net Sales grew $4.0$2.7 million or 8.5%5.3% to $51.1$53.6 million in the currentfirst quarter of 2005, as a result of higher sales of Animal Nutrition and Specialty Chemicalanimal nutrition products and favorable foreign exchange rates. For the nine month period, net sales increased $17.2 million or 12.4% to $155.1 million for the same reasons as are applicable to the current quarter.
Specialty Products Income before Taxes and Minority Interest increased by $0.2decreased $0.7 million to $3.9$4.7 million primarily due toas a result of higher incomemanufacturing costs for certain specialty chemicals, and an increase in allocated interest expense, partially offset by higher profit contribution associated with higher net sales, partially offset by an allocation of higher interest expense and the deferred financing write-off. For the nine month period, Income before Taxes and Minority Interest increased $1.7 million to $13.1 million. The reasons for the nine month increase are consistent with the third quarter and were also impacted by the extra shipping days in the first quarter of 2004 as compared to the first quarter of 2003.animal nutrition product sales.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) |
Liquidity and Capital Resources
The Company had outstanding total debt of $901.8$790.5 million and cash of $145.4$101.9 million (of which approximately $48.0$58.4 million resides in foreign subsidiaries). This compares to total debt of $397.0$858.7 million at December 31, 2003.2004. The reason for the increasereduction of total debt since December 31, 2003the beginning of the fiscal year is primarily due to the Company’s assumption of $225 million principal amount of Armkel’s 9.5% Senior Subordinated Notes due 2009, the Company’s assumption of Armkel’svoluntary bank debt payments of approximately $136$75.0 million, and additional amounts borrowed in connection with the acquisition of Kelso’s interest in Armkel of approximately $254 million. The $613 million increase of debt was partially offset by debt repaymentsan increase of approximately $108 million.
The Company entered into an amended and restated credit agreement (the “Credit Agreement”) with several banks and other financial institutions, The Bank of Nova Scotia, Fleet National Bank and National City Bank, each as a documentation agent, Citicorp North America, Inc., as syndication agent, and J.P. Morgan Chase Bank, as administrative agent. The Credit Agreement provides for (i) a five year term loan in a principal amount of $100$6.3 million (the “Term A Loan”), (ii) a seven year term loan in the principal amount of $440 million, which term loan may be increased by up to an additional $250 million upon the satisfaction of certain conditions (the “Term B Loan,” and togetherassociated with the Term A Loan,Company’s accounts receivable securitization. In April 2005, the “Term Loans”), and (iii)accounts receivable securitization facility was renewed with a five year multi-currency revolving credit and letter of credit facility in an aggregate principal amount of up to $100 million (the “Revolving Loans”). The Term Loans were used to finance the acquisition of the remaining 50% interest in Armkel not previously owned by the Company, pay amounts outstanding under Armkel’s principal credit facility of approximately $136 million and refinance the Company’s principal credit facility of approximately $194 million. The Revolving Loans, which are currently undrawn, are available for general corporate purposes. The obligations of the Company under the Credit Agreement are secured by substantially all of the assets of the Company and certain of its domestic subsidiaries. Those domestic subsidiaries have also guaranteed the loan obligations under the Credit Agreement. The Term Loans and the Revolving Loans bear interest under one of two rate options, selected by the Company, equal to either (i) a eurocurrency rate (adjusted for any reserve requirements) (“Eurocurrency Rate”) or (ii) the greater of the prime rate, the secondary market rate for three-month certificates of deposit (adjusted for any reserve requirements) plus 1%, or the federal funds effective rate plus 0.5% (“Alternate Base Rate”), plus (b) an applicable margin. The applicable margin is determined by the Company’s current leverage ratio. At the closingnew maturity date of the Credit Agreement, the applicable margin was (a) 1.75% for the Eurocurrency Rate and (b) 0.75% for the Alternate Base Rate.
The principal debt payments required to be made are as follows:
(In thousands)
| |||
2004 | $ | 6,988 | |
2005 | 107,878 | ||
2006 | 10,859 | ||
2007 | 12,742 | ||
2008 | 13,993 | ||
2009 and subsequent | 749,374 | ||
$ | 901,834 | ||
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)
During July 2004, as a result of purchasing Kelso’s interest in Armkel, the Company amended its Accounts Receivable Securitization Agreement to increase the capacity that can be borrowed from $60 million to $100 million. The proceeds of the increased borrowing were used to make a voluntary Term A Loan payment on August 4, 2004.April 2006.
Adjusted EBITDA is a required component of the financial covenants contained in the Company’s primary credit facility and management believes that the presentation of Adjusted EBITDA is useful to investors as a financial indicator of the Company’s ability to service its indebtedness. Adjusted EBITDA may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to cash flows from operating activities, which is determined in accordance with accounting principles generally accepted in the United States. Financial covenants include a total debt to Adjusted EBITDA leverage ratio and an interest coverage ratio, which if not met, could result in an event of default and trigger the early termination of the credit facility, if not remedied within a certain period of time. Adjusted EBITDA was approximately $180.6$79.5 million for the first 9 monthsquarter of 2004.2005. The leverage ratio (total debt to Adjusted EBITDA) for the 12 months ended OctoberApril 1, 20042005 which, under the loan agreement, permits the inclusion of Armkel’s EBITDA prior to its acquisition by the Company for pro forma purposes was approximately 3.142.74 versus the agreement’s maximum 4.25, and the interest coverage ratio (Adjusted EBITDA to total interest expense) for the twelve months ended April 1, 2005 was approximately 6.045.44 versus the agreement’s minimum of 3.0. This credit facility is secured by the assets of the Company and certain domestic subsidiaries. The reconciliation of Net Cash Provided by Operating Activities (the most directly comparable GAAP financial measure) to Adjusted EBITDA for the three months ended April 1, 2005 is as follows (in thousands):
Net Cash Provided by Operating Activities | $ | 143,963 | $ | 31.2 | ||||
Interest Expense | 29,336 | 10.6 | ||||||
Current Income Tax Provision | 22,170 | 16.0 | ||||||
Distributions from Affiliates | 4,301 | 1.9 | ||||||
Change in Working Capital and Other Liabilities | (28,677 | ) | 22.7 | |||||
Investment Income | (1,699 | ) | (0.8 | ) | ||||
Deferred Financing Write-off | 7,995 | |||||||
Other | 3,241 | (2.1 | ) | |||||
Adjusted EBITDA (per loan agreement) | $ | 180,630 | $ | 79.5 | ||||
Net Cash Used in Investing Activities | $ | (217,048 | ) | $ | (5.4 | ) | ||
Net Cash Provided by Financing Activities | $ | 142,077 | ||||||
Net Cash Used in Financing Activities | $ | (69.4 | ) | |||||
During the nine monthsfirst quarter of 2004,2005, cash flow from operating activities was $144.0$31.2 million. Major factors affecting cash flow from operating activities included operating earnings before non-cash charges for depreciation and amortization, the write-off of deferred financing costs and a decrease$22.7 million increase in working capital.capital (excluding cash and cash equivalents) and other liabilities. Operating cash flow, together with an increase in bank debt, distributions from affiliates, proceeds from stock option exercises and existing cash, were used to fund the purchase of Kelso’s interest in Armkel,make voluntary and mandatory debt repayments, additions to property, plant and equipment, and the payment of dividends and debt repayments.
On July 2, 2004, the Company announced that it has agreed to invest $30 million in a company formed by Kelso & Company, a private equity group, to acquire Del Laboratories, Inc. The Company’s investment will be substantially in the form of convertible preferred stock, and will represent about 20% of the equity financing. Kelso & Company, New York, will provide the remaining equity, with the participation of Del’s existing management team.
As part of this transaction, the Company will have certain rights with respect to the Orajel brand, including an option to acquire the business after three years. In the event that the Company does not exercise this option, the Company will have the right, subject to certain conditions, to convert its preferred stock into a 20% interest in the common stock of the new Del Company.
The Company expects the transaction to close in this year’s fourth quarter subject to regulatory, financing and other customary conditions and will use cash on hand to fund the transaction.
The Company’s cash and cash equivalents will be used to invest in Del Labs, make voluntary debt repayments, pay cash dividends, make investments in property, plant and equipment and support operating needs.dividends.
Recent Accounting Pronouncements
In August 2003,December 2004, the Financial Accounting Standards Board (“FASB”) issued a revised version of SFAS No. 123, “Share-Based Payment”, a revision of FASB Statement No. 123, “Accounting for Stock Based Compensation” and eliminates the alternative of using the intrinsic value method under Accounting Principles Board Opinion No. 25 (“APB 25”) which was permitted in Statement 123 as originally issued. Under APB 25, issuing stock options to employees generally resulted in recognition of no compensation cost. SFAS No. 123R requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards in their income statements. For the Company, issued $100 million of 5.25% convertible senior debentures that may be converted into sharesthis Statement becomes effective January 1, 2006. As of the Company’s common stock prior to maturity at an initial conversion pricerequired effective date, any public company that used the fair-value method of approximately $31.00 per share, subject to adjustment in certain circumstances. Becausedisclosure under Statement 123 will apply this Statement using a modified version of prospective application. Under the inclusiontransition method, compensation cost is recognized on or after the required effective date for the portion of outstanding awards for which the contingent convertibility featurerequisite service has not yet been rendered, based on the grant date fair value of the debentures, the Company’s diluted net income per common share does not give effect to the dilution from the conversion of the debentures until the Company’s share price exceeds 120% of the initial conversion pricethose awards calculated under Statement 123 for either recognition or until the occurrence of certain specified events.pro forma disclosures.
The Emerging Issues Task Force (EITF) concluded in EITF Issue 04-8:American Jobs Creation Act of 2004 (the “AJCA”) was enacted on October 22, 2004. The EffectAJCA repeals an export incentive, creates a new deduction for qualified domestic manufacturing activities and includes a special one-time deduction of Contingently Convertible Debt on Diluted Earnings per Share that contingently convertible debt (“Co-Cos”) be treated for diluted EPS purposes as if converted from debt85% of certain foreign earnings repatriated to equity, beginning with the date the contingently convertible debt instrument is initially issued, even if the triggering events (such as stock price) have not yet occurred. The effective date would be reporting periods ending on or after December 15, 2004 and prior period EPS amounts presented for comparative purposes, would have to be restated.
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)U.S.
The changeFASB issued FSP FAS 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004” (FSP FAS 109-1) on December 21, 2004. In accordance with FSP FAS 109-1, the Company will treat the deduction for qualified domestic manufacturing activities, which is effective for the Company beginning January 1, 2005, as a reduction of the income tax provision in accounting rules for reporting Co-Cos will have an estimated $0.02 dilutive effect on earnings per share in 2004.future years as realized.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) |
In JanuaryDecember 2004, the FASB issued FASB Staff Position (FSP) No. 106-1FSP FAS 109-2, “Accounting and Disclosure Requirements toGuidance for the Medicare Prescription Drug, Improvement and ModernizationForeign Earnings Repatriation Provision within the American Jobs Creation Act of 2003” (the Act). The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy2004,” allowing companies additional time to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The adoptionevaluate the effect of the provisionsAJCA on plans for reinvestment or repatriation of FSP 106-1foreign earnings. The Company is in this quarter did not have a significant impact to the Company’s postretirement accumulated projected benefit obligation or net periodic benefit cost.process of evaluating the effects of the repatriation provision.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
The Company is facing higher costs for several categories of raw and packaging materials, particularly those based on energy prices. TheIn response, the Company has successful strategies in place to improveintensified its margin structure,enhancement strategies, and will intensify these strategies to counteris in the effectprocess of these cost increases. These strategies include traditionalimplementing a range of formulation, packaging, logistics and other cost reduction programs designed to improve supply chain and organizational efficiency; more efficient promotion spending using recently developed analytical tools; and selective price increases.programs.
ITEM 4.CONTROLS AND PROCEDURES
ITEM 4. | CONTROLS AND PROCEDURES |
a. | Evaluation of Disclosure Controls and Procedures |
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness the Company’s disclosure controls and procedures as of the end of the period covered by this report.Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A controls system, no matter how well designedforms, and operated, cannot provide absolute assurance that(ii) accumulated and communicated to our management, including the objectives of the controls system are met,Chief Executive Officer and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.
b. | Change in Internal Control over Financial Reporting |
No change in the Company’s internal control over financial reporting occurred during the Company’s thirdfirst fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Cautionary Note on Forward-Looking Statements
This report contains forward-looking statements relating to, among others, toother things, short- and long-term financial objectives, sales and earnings growth, gross profit margin, earnings per share, non-cash accounting charges, increased marketing and R&D spending, new product launches,cash flow, adoption of new accounting guidance, effect of the Company’s fiscal calendar,financial forecasts and financial forecasts.cost improvement programs. These statements represent the intentions, plans, expectations and beliefs of Church & Dwight,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), increases in raw material, packaging and energy prices, the Company’s ability to raise prices or reduce promotion spending, the Company’s ability to implement cost reduction programs in response to commodity price increases, the financial condition of major customers, the risks of currency fluctuations, changes in foreign laws and other risks associated with our international operations and trade, and competitive and consumer reactions to the Company’s productsproducts. Other factors, which could materially affect the results, include the outcome of contingencies, including litigation, pending regulatory proceedings, environmental remediation and other factors described in Church & Dwight’s quarterly and annual reports filed with the SEC.acquisition or divestiture of assets.
The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures the Company makes on related subjects in itsour filings with the U.S. Securities and Exchange Commission. This discussion is provided in reliance upon the Private Securities Litigation Reform Act of 1995.
PART II - Other InformationOTHER INFORMATION
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
The Company’s Annual Meeting of Stockholders was held on May 5, 2005. The following nominees were elected to the Company’s Board of Directors for a term of three years:
Nominee | For | Withheld | Broker Non-Votes | |||
James R. Craigie | 58,036,269 | 533,637 | 0 | |||
Robert A. Davies, III | 57,943,087 | 626,819 | 0 | |||
Rosina B. Dixon, M.D. | 58,059,320 | 510,586 | 0 | |||
Robert D. LeBlanc | 58,293,010 | 276,896 | 0 | |||
Lionel L. Nowell, III | 58,085,319 | 484,587 | 0 |
The Company’s continuing directors are as follows: John D. Leggett, III, John F. Maypole, Robert A. McCabe, Burton B. Staniar, T. Rosie Albright, Robert H. Beeby, J. Richard Leaman, Jr., Dwight C. Minton, John O. Whitney.
The voting results on other matters submitted to a stockholder vote at the Annual Meeting were as follows:
Proposal for the amendment of the Restated Certificate of Incorporation of the Company to increase the Company’s authorized common stock from 100 million shares to 150 million shares:
For | Against | Abstained | Broker Non-Votes | |||
56,320,712 | 2,154,527 | 94,667 | 0 |
Proposal for adoption of the 2005 Employee Stock Purchase Plan:
For | Against | Abstained | Broker Non-Votes | |||
48,134,883 | 1,023,254 | 196,634 | 9,215,135 |
Ratification of the appointment of Deloitte & Touche LLP as independent auditors of the Company’s 2005 financial statements:
For | Against | Abstained | Broker Non-Votes | |||
57,455,907 | 1,041,267 | 72,731 | 0 |
ITEM 6. | EXHIBITS |
(3.1) | Certificate of Amendment of Restated Certificate of Incorporation dated May 9, 2005, as filed with the Secretary of the State of Delaware on May 10, 2005. | |
(3.2) | Restated Certificate of Incorporation of the Corporation, as amended through May 9, 2005. | |
(3.3) | By-laws of the Company as amended – incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K dated September 19, 2003. | |
(11) | Computation of earnings per share. | |
(31.1) | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act. | |
(31.2) | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act. | |
(32.1) | Certification of the Chief Executive Officer of Church & Dwight Co., Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350. | |
(32.2) | Certification of the Chief Financial Officer of Church & Dwight Co., Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350. |
Exhibits
(31.1) Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
(31.2) Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act.
(32.1) Certification of the Chief Executive Officer of Church & Dwight Co., Inc. pursuant to Rule 13a-14(b) under the
Exchange Act and 18 U.S.C. Section 1350.
(32.2) Certification of the Chief Financial Officer of Church & Dwight Co., Inc. pursuant to Rule 13a-14(b) under the
Exchange Act and 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHURCH & DWIGHT CO., INC. | ||||||
(REGISTRANT) | ||||||
DATE: | May 10, 2005 | /s/ | ||||
ZVI EIREF | ||||||
VICE PRESIDENT FINANCE AND | ||||||
CHIEF FINANCIAL OFFICER | ||||||
DATE: | May 10, 2005 | /s/ GARY P. HALKER | ||||
GARY P. HALKER | ||||||
VICE PRESIDENT FINANCE AND | ||||||
TREASURER |
EXHIBITS
(3.1) | Certificate of Amendment of Restated Certificate of Incorporation dated May 9, 2005, as filed with the Secretary of the State of Delaware on May 10, 2005. | |
Restated Certificate of Incorporation of the Corporation, as amended through May 9, 2005. | ||
(3.3) | ||
(11) |
EXHIBITS
(31.1) | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act. | ||
(31.2) | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act. | ||
(32.1) | Certification of the Chief Executive Officer of Church & Dwight Co., Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350. | ||
(32.2) | Certification of the Chief Financial Officer of Church & Dwight Co., Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350. |
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