News Release
Contact: Zvi Eiref Embargo until 5/5/03
Chief Financial Officer 7:00 A.M. (Eastern Time)
609/279-7666
CHURCH & DWIGHT REPORTS FIRST QUARTER RESULTS
REAFFIRMS 2003 EPS OBJECTIVE OF $1.77-$1.81 PER SHARE
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PRINCETON, NJ, MAY 5, 2003 - Church & Dwight Co., Inc. (NYSE:CHD) today reported
first quarter net income of $20.9 million or $0.50 per diluted share, a 39%
increase over the $14.9 million or $0.36 per diluted share for the same period
last year. Last year's results included a $0.06 per share accounting charge
related to the step-up of opening inventory values by the Company's affiliate,
Armkel, LLC. Adjusting for this item, earnings per share increased by $0.08 per
share or 19% to $0.50 per share from $0.42 per share last year.
Robert A. Davies, III, Chairman and Chief Executive Officer of Church & Dwight,
commented, "We are pleased with our 19% earnings growth, and sales were
consistent with our objective for the quarter. During the quarter we were
cautious on marketing spending, and now expect to increase expenditures in
support of new product initiatives for the remainder of the year."
Church & Dwight sales declined 3.3% to $248.3 million from $256.8 million in the
same period of the previous year. Most of this $8.5 million decline was due to
the rationalization of the former Carter-Wallace pet care and USA Detergents
candle and cleaner product lines, a high percentage of which were discontinued
during 2002, and the transfer of certain export operations to Armkel. In
addition, this year's first quarter was one day shorter than the first quarter
of last year. At the product line level, strong growth in liquid laundry
detergent, and moderately higher sales of toothpaste were offset by lower sales
of laundry detergent powder, fabric softeners and household cleaners.
On a combined basis, including Armkel and other unconsolidated affiliates, sales
increased 1.3% to $358.0 million from $353.3 million last year. This gain
reflects strong growth by Armkel's U.S. and International businesses, described
later in this release.
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With the completion of the integration projects in late 2002, the Company
stepped up its rate of new product activity in the first quarter of 2003. In
personal care, the Company launched a new line of Arrid(R) antiperspirants
targeted primarily at women under the Arrid Total name, and added significant
new extensions to its Arm & Hammer(R) Dental Care toothpaste and Arm & Hammer
Ultramax(R) antiperspirant lines. In laundry, the Company expanded distribution
of both its Arm & Hammer and Xtra(R) liquid laundry detergent brands in the mass
channel, and introduced a new Arm & Hammer liquid fabric softener line. These
new products should reach broad national distribution in the second quarter.
During the second quarter, the Company will also begin shipments of Brillo(R)
Scrub'n'Toss(TM), a disposable cleaning pad, and a reformulated Arm & Hammer Pet
Fresh(TM) Carpet Deodorizer, which provides a significant new consumer benefit.
Gross margin improved 1.2 points to 29.7% from 28.5% in the same quarter last
year. At current prices, the Company expects to incur over $10 million in energy
and other commodity-based cost increases for the year, for materials such as
resin, surfactants and palm oil. While these cost increases will slow down gross
margin growth, the Company still expects to achieve a gross margin improvement
for the year, through reductions in other raw and packaging materials costs, and
improved manufacturing and distribution efficiencies.
During the quarter, the Company repaid debt of approximately $29 million. At
quarter-end, the Company had total outstanding debt of $340 million, and cash of
$67 million, for a net debt position of $273 million, a reduction of $92 million
from the same period-end last year. Earnings before interest, taxes,
depreciation and amortization (EBITDA), a measure widely used by investors, as
defined in the Company's bank loan agreements, are estimated at $36 million for
the quarter.
ARMKEL, LLC
Armkel, a 50/50 joint venture between Church & Dwight and the private equity
group, Kelso & Company, reported net income of $15.2 million compared to $0.3
million in the same period last year. Last year's results included an $8.1
million accounting charge related to the valuation of opening inventories.
Adjusting for this item, net income increased $6.8 million or 81% to $15.2
million from $8.4 million last year.
Armkel sales increased $12.3 million or 14.1% to $99.7 million compared to $87.4
million in the previous year. Domestic sales increased 7.2% to $52.1 million,
led by gains in condoms and pregnancy kits, and the launch of a new line of
specialty skin care products under the name Lineance(R). During the second
quarter, the Company is introducing a major new pleasure enhancing line
extension to the Trojan(R) condom line. International sales were $47.5 million,
a 14% increase over last year excluding foreign exchange gains, reflecting
higher oral and skin care sales in Europe and condom sales in Mexico.
As previously reported, Armkel sold its Italian subsidiary during the quarter
for $22.6 million, and recognized a pretax gain of approximately $1.9 million.
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Armkel had total outstanding debt of $415 million, and cash of $48 million, for
a net debt position of $367 million at quarter-end. This compares with a net
debt position of $402 million a year ago. During the past 12 months, Armkel has
paid approximately $40 million in severance, integration and other costs,
primarily related to the closing of its Cranbury, N.J. facility in mid-2002.
Based on the definition in its bank loan agreements, Armkel's EBITDA is
estimated at approximately $28 million for the quarter.
Mr. Davies added that, "An important measure of the success of the integration
effort in 2002 was the significant improvement in the cost structure of both
Church & Dwight and Armkel. As we look at the companies' operating performance,
we are very pleased to see that Church & Dwight and its unconsolidated
affiliates, in combination, reported a first quarter operating profit of $55.0
million compared to $46.8 million, adjusted for the previously mentioned
inventory accounting charge, in the same period last year. Combined gross profit
improved to 37.7% from the prior year's 35.8%, and combined operating margin
improved to 15.4% from 13.3% a year ago. We believe we can continue to improve
both gross and operating margins in the next few years. In the meantime, we feel
comfortable with the previously stated objective of $1.77-$1.81 earnings per
share for 2003."
Church & Dwight will host a conference call to discuss first quarter 2003
earnings results with the investment community on May 5 at 10:00 a.m. (ET). To
participate, dial in at 800-299-0148. A replay will be available two hours after
the call at 888-286-8010, access code 4268251, as well as on the company's
website. Also, you can participate via webcast by visiting the Investor
Relations section of the Company's website at www.churchdwight.com.
Church & Dwight Co., Inc. is the manufacturer of household, personal care and
specialty products, sold under the ARM & HAMMER brand name and other well-known
trademarks.
This release contains forward-looking statements relating, among others, to
short- and long-term financial objectives, sales growth, cash flow and cost
improvement programs. These statements represent the intentions, plans,
expectations and beliefs of Church & Dwight, 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), raw material and energy prices, the financial condition of
major customers, and the Company's determination and ability to exercise its
option to acquire the remaining 50% interest in Armkel. With regard to the new
product introductions referred to in this release, there is particular
uncertainty relating to trade, competitive and consumer reactions. Other
factors, which could materially affect the results, include the outcome of
contingencies, including litigation, pending regulatory proceedings,
environmental remediation and the 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 its filings with the U.S. Securities and Exchange
Commission. This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.
# # #
CHURCH & DWIGHT CO., INC.
Product Line Net Sales, Gross Profit and Operating Profit
Including Unconsolidated Affiliates
1st QUARTER 2003 vs. 2002
(Dollars in Millions) THREE MONTHS ENDED MARCH 28, 2003 THREE MONTHS ENDED MARCH 29, 2002
--------------------------------- ---------------------------------
CHD CHD & CHD CHD &
As Reported Affiliates Adj's * Affiliates As Reported Affiliates Adj's Affiliates
*
Deodorizers & Cleaning $ 53.2 $ - $ - $ 53.2 $ 62.6 $ - $ - $ 62.6
Laundry $ 100.6 $ - $ - $ 100.6 $ 100.2 $ - $ - $ 100.2
Personal Care $ 42.6 $ 52.1 $ - $ 94.7 $ 41.6 $ 48.6 $ - $ 90.2
International $ 7.9 $ 47.5 $ (0.8) $ 54.7 $ 8.4 $ 38.7 $ (0.1) $ 47.0
--------- -------- ------- -------- --------- -------- ----- --------
Total Consumer Products $ 204.3 $ 99.7 $ (0.8) $ 303.2 $ 212.8 $ 87.4 $ (0.1) $ 300.1
Specialty Products Division $ 44.0 $ 11.9 $ (1.2) $ 54.8 $ 44.0 $ 10.0 $ (0.7) $ 53.2
-------- -------- ------- -------- -------- -------- ----- --------
Total Reported Net Sales $ 248.3 $ 111.6 $ (1.9) $ 358.0 $ 256.8 $ 97.4 $ (0.9) $ 353.3
Gross Profit $ 73.8 $ 61.0 $ - $ 134.8 $ 73.3 $ 45.2 $ 8.1 $ 126.5
% of Net Sales 29.7% 37.7% 28.5% 35.8%
Operating Profit $ 28.8 $ 26.2 $ - $ 55.0 $ 27.2 $ 11.5 $ 8.1 $ 46.8
% of Net Sales 11.6% 15.4% 10.6% 13.3%
* Adjustments due to the elimination of intercompany sales and, in 2002, the
inventory step-up charge.
RECONCILIATION OF NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES TO EBITDA:
(Dollars in Millions) CHD
As Reported Armkel
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Net Cash Provided by $ 28.7 $ (1.4)
(Used in)
Operating Activities
Interest Expense $ 5.2 $ 8.0
Current Income Tax Provision $ 7.2 $ 3.1
Proceeds from Affiliates $ 0.7 $ -
Change in Working Capital $ (2.9) $ 16.6
Interest Income $ (0.3) $ (0.3)
Other $ (2.1) $ 2.0
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EBITDA $ 36.5 $ 28.0
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
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Three Months Ended
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(In thousands, except per share data) Mar. 28, 2003 Mar. 29, 2002
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Net Sales $248,298 $256,802
Cost of sales 174,464 183,552
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Gross Profit 73,834 73,250
Marketing expenses 16,943 16,832
Selling, general and administrative expenses 28,110 29,191
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Income from Operations 28,781 27,227
Equity in earnings of affiliates 8,152 917
Other income (expense), net (4,871) (5,716)
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Income before taxes and minority interest 32,062 22,428
Income taxes 11,107 7,416
Minority interest 9 89
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Net Income $ 20,946 $ 14,923
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Net Income Per Share - Basic $0.52 $0.38
Net Income Per Share - Diluted $0.50 $0.36
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Dividends Per Share $0.075 $0.075
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Weighted average shares outstanding - Basic 39,945 39,267
Weighted average shares outstanding - Diluted 41,852 41,488
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CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
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(Dollars in thousands) Mar. 28, 2003 Mar. 29, 2002
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Assets
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Current Assets
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Cash, equivalents and securities $ 67,242 $ 53,852
Accounts receivable 96,831 101,551
Inventories 85,912 101,970
Other current assets 25,204 37,519
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Total Current Assets 275,189 294,892
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Property, Plant and Equipment (Net) 240,755 239,375
Equity Investment in Affiliates 136,503 115,336
Intangibles and other assets 333,063 318,873
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Total Assets $985,510 $968,476
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Liabilities and Stockholders' Equity
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Short-Term Debt $ 66,418 $ 12,235
Other Current Liabilities 176,038 174,644
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Total Current Liabilities 242,456 186,879
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Long-Term Debt 273,603 406,995
Other Long-Term Liabilities 101,461 74,893
Stockholders' Equity 367,990 299,709
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Total Liabilities and Stockholders' Equity $985,510 $968,476
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