News Release
Contact: Zvi Eiref
Chief Financial Officer
609/279-7666
CHURCH & DWIGHT REPORTS THIRD QUARTER RESULTS
- --------------------------------------------------------------------------------
PRINCETON, NJ, NOVEMBER 3, 2003 - Church & Dwight Co., Inc. (NYSE:CHD) today
reported third quarter net income of $19.5 million or $0.46 per diluted share, a
$0.04 per share or 10% increase over the $17.6 million or $0.42 per diluted
share for the same period last year.
"We are pleased with our third quarter earnings, as well as with several other
positive developments, including expanded distribution for several product
lines, acquisition of Unilever's oral care business in the United States and
Canada, and the strengthening of the Company's capital structure," said Chairman
and Chief Executive Officer of Church & Dwight Robert A. Davies, III. "We expect
to increase fourth quarter spending on marketing and R&D, in advance of planned
new product introductions next year. For the full year, we remain comfortable
with our previously announced earnings objective of around $1.85 per diluted
share, even after an anticipated loss of $0.05 to $0.07 per diluted share due to
non-cash accounting charges for the recently acquired oral care business.
Excluding this last item, our objective would be at least $1.90 per diluted
share for the full year 2003."
Church & Dwight third quarter sales of $265.6 million were $1.8 million or 0.7%
above last year. This year's sales included a $0.7 million reversal of prior
year promotion reserves due to a change in estimate; last year's sales included
a similar change in estimate of $2.5 million. At the brand level, significantly
higher sales of liquid laundry detergent were partially offset by lower powder
laundry detergent sales. Deodorizer sales benefited from recent cat litter and
carpet deodorizer product introductions; however, cleaner sales were affected by
the Company's decision to recall, for safety reasons, a single item from the Sno
Bol(R) toilet bowl cleaner line. Toothpaste and antiperspirant sales were lower
due to a combination of competitive activity and lower promotional spending than
last year. International and specialty products sales were moderately higher
than last year.
During the quarter, the Company strengthened the presence of its Arm & Hammer(R)
and Xtra(R) laundry detergent product lines in the mass channel. In addition,
the Company expanded distribution of two products introduced earlier in the
year, Brillo(R) Scrub'n'Toss(TM) disposable cleaning pads and Arm & Hammer
Liquid Fabric Softener. Early in the quarter, the Company also launched a major
new variant of its cat litter line, Arm & Hammer Easy Flush(TM) Clumping Cat
Litter.
- more -
Third quarter gross margin of 30.3% was 0.5% below the same period last year.
Excluding the promotion reserve adjustments referred to earlier, gross margin
was flat, with a slightly higher margin on consumer products offset by a
substantially lower margin on specialty products. The lower specialty products
margin was largely due to a sharp increase in the cost of a palm oil derivative,
which is a key ingredient in the animal nutrition business. The higher consumer
products margin was due to improved manufacturing and purchasing efficiencies,
which were large enough to absorb significant start-up and introductory
promotion costs associated with the new product introductions, as well as the
cost of the product recall referred to earlier, and costs related to a 10%
reduction in inventory levels during the quarter.
The third quarter $2.1 million reduction in Other Expense was due to a
significant reduction in debt and lower interest rates, as well a $1.3 million
foreign exchange loss in the same period last year.
Nine months net income was $65.1 million or $1.55 per diluted share, which is
$0.32 per share or 26% above last year's $51.2 million or $1.23 per share. This
year's first half results included a net $0.07 per share contribution by the
Company's affiliate, Armkel LLC, primarily resulting from the settlement of
litigation, as well as a $0.06 per share gain from the reversal of prior year
tax reserves. Last year's first half results included a net $0.01 per share
acquisition-related charge. Excluding these special items in both years, net
income would have increased by $0.18 per share or 15% to $1.42 per share from
$1.24 per share last year.
Nine months net sales of $770.1 million were $8.9 million or 1.1% below last
year's $779.1 million. This reduction reflects the change in promotion reserve
estimates mentioned above, which amounted to $1.1 million this year and $5.3
million last year for the nine-month period, as well as the discontinuance
during the first half of 2002 of certain cleaning and pet care products
previously acquired from USA Detergents and Carter-Wallace, respectively.
As previously announced, in early August, the Company strengthened its financial
position by issuing $100 million in 5 1/4% unsecured convertible senior
debentures and used the proceeds to pay down existing debt. At quarter-end, the
Company had total outstanding debt of $318.7 million, and cash of $76.7 million,
for a net debt position of $242.0 million, a reduction of $82.6 million from the
same period last year. Earnings before interest, taxes, depreciation and
amortization (EBITDA), a measure widely used by investors, are estimated at $107
million for the nine months, based on the definition in the Company's loan
agreement, as shown on an attached exhibit. Net Cash Provided by Operating
Activities, the most directly comparable GAAP financial measure, was $79.7
million for the period.
Mr. Davies added, "Cash flow remains strong. In the two years since the
acquisition of the Carter-Wallace consumer products business in September 2001,
Church & Dwight has reduced its net debt position by almost $140 million, and
Armkel has reduced its net debt position by $60 million after spending more than
$60 million on integration and other acquisition-related costs."
- more -
ARMKEL, LLC
Armkel, a 50/50 joint venture between Church & Dwight and the private equity
group, Kelso & Company, reported net income of $9.0 million compared to $9.3
million in the same period last year.
Third quarter sales of $103.4 million were $2.4 million or 2.4% above last
year's $101.0 million as reported, and 1.8% below last year after excluding
foreign exchange translation gains. Domestic sales of $50.7 million were 8.5%
below last year. As previously reported, sales of Nair(R) depilatories were
severely affected by the cool and wet summer weather, which reduced the total
market size, as well as by increased competition. Sales of First Response(R)
pregnancy kits were also affected by competitive activity; and sales of
Trojan(R) condoms, while robust at the retail level, were slightly lower at the
wholesale level due to the timing of promotion activity. International sales of
$52.7 million were 15.6% ahead of last year as reported, and 6.4% higher
excluding foreign exchange translation gains. This increase reflects strong
sales of oral and skin care products in Europe, and condoms in Canada and
Mexico.
Nine months net income of $46.7 million compares to last year's $25.2 million.
This year's first half results included a gain from the settlement of
litigation. Excluding this and other special items, as shown on the attached
exhibit, net income would have increased $3.4 million or 10.8% to $34.9 million
from $31.5 million last year.
Nine months sales of $316.5 million were $23.7 million or 8.1% higher than last
year's $292.8 million as reported, and 3.4% higher adjusted for foreign exchange
translation gains. Domestic sales of $160.3 million were 1.2% below last year.
International sales of $156.2 million were 19.7% higher as reported, and 9.3%
higher adjusted for foreign exchange translation gains.
Armkel had total outstanding debt of $386.9 million, and cash of $52.4 million,
for a net debt position of $334.5 million at quarter-end, a reduction of $63.0
million from the same period last year. During this 12-month period, the Company
paid over $15 million in severance, integration and other acquisition-related
costs, and sold its Italian subsidiary for approximately $22.6 million. Armkel's
EBITDA, as defined in its loan agreement and excluding the settlement proceeds
described earlier, is estimated at approximately $75.3 million for the
nine-month period, as shown on the attached exhibit. Net Cash Provided by
Operating Activities was $35.5 million for the period.
ACQUISITION OF UNILEVER ORAL CARE BUSINESS
As previously reported, the Company completed its acquisition of Unilever's oral
care business in the United States and Canada on October 20, 2003. The purchase
price was approximately $104 million in cash, plus additional performance-based
payments of between $5 million and $12 million payable over the next eight
years. The acquisition was funded by refinancing an existing medium-term
borrowing facility managed by JPMorgan, and adding $100 million to the amount
available under such facility.
- more -
The purchase includes the Mentadent(R) brand of toothpaste and toothbrushes,
Pepsodent(R) and Aim(R) toothpaste, and exclusive licensing rights to
Close-Up(R) toothpaste. Nine months sales for these brands are estimated at
approximately $90 million. While the business has been in decline for several
years, the Company believes that the brand equities remain strong, and that the
business can be revitalized over a period of time through additional focus, new
product development and marketing support.
While it is difficult to predict, the Company currently expects the acquired
business to report a fourth quarter loss equivalent to approximately $0.05 to
$0.07 per share due to non-cash accounting charges related to the valuation of
opening inventories and the accelerated write-down of deferred financing costs
incurred on a previous financing transaction. While it is also difficult to
predict the earnings effect in 2004 due to manufacturing transition and other
considerations, the Company believes that the acquisition will become accretive
some time during the next 12 months.
Mr. Davies concluded, "The acquisition doubles the size of our oral care
business, and strengthens our position with both consumers and the trade, in the
same way as the 2001 acquisitions of USA Detergents and the consumer business of
Carter-Wallace strengthened our position in the detergents and antiperspirants
businesses, respectively.
The expected earnings accretion also makes us more confident in our ability to
meet our previously announced objective of achieving 12.5%-15% average annual
earnings per share growth for the three year period 2003-2005."
As previously reported, at its October 22 Board Meeting, the Board declared a
regular quarterly dividend of $0.08 per share. The dividend is payable December
1, 2003 to stockholders of record at the close of business on November 7, 2003.
This is the Company's 411th regular quarterly dividend.
Church & Dwight will host a conference call to discuss third quarter 2003
earnings results with the investment community on November 3 at 10:00 a.m.
(EST). To participate, dial in at 800-901-5241. A replay will be available two
hours after the call at 888-286-8010, access code 69293334, 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
anticipated earnings per share and annual earnings per share growth, prospects
for revitalization of the oral care business acquired from Unilever and
anticipated financial performance of such oral care business, and increased
spending in marketing and R&D. 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, the Company's ability to realize efficiencies from the
integration of the oral care business acquired from Unilever with the Company's
existing oral care business, 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 the Company's disclosures, in its filings
with the U.S. Securities and Exchange Commission, particularly those contained
in Risk Factors in Item 1 of Part 1 of the Company's Annual Report on Form 10K
for the year ended December 31, 2002. This discussion is provided as permitted
by the Private Securities Litigation Reform Act of 1995.
# # #
CHURCH & DWIGHT CO., INC.
Product Line Net Sales
3rd Quarter and Nine Months 2003 vs. 2002
(Dollars in Millions) Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 26, 2003 Sept. 27, 2002 Sept. 26, 2003 Sept. 27, 2002
-------------- -------------- -------------- --------------
Deodorizers and Cleaners $ 61.3 $ 62.7 $175.7 $188.7
Laundry $ 105.6 $101.1 $304.4 $299.1
Personal Care $ 41.7 $ 46.1 $125.2 $130.9
International $ 9.8 $ 7.7 $ 26.9 $ 23.7
------- ------- ------- -------
Total Consumer Products $218.4 $217.6 $632.2 $642.4
Specialty Products $ 47.2 $ 46.2 $137.9 $136.7
------- ------- ------ ------
Total Net Sales $265.6 $263.8 $770.1 $779.1
====== ====== ====== ======
Reconciliation of Net Cash Provided
By Operating Activities to EBITDA:
-----------------------------------
Nine Months Ended
Sept. 26, 2003
--------------------------------
------------------ -------------
(Dollars in Millions) CHD Armkel
--- ------
Net Cash Provided by Operating Activities $ 79.7 $ 35.5
Interest Expense $ 14.7 $ 25.9
Current Income Tax Provision $ 20.0 $ 7.2
Proceeds from Affiliates $ 3.6 $ -
Increase (Decrease) in Working Capital $ (6.4) $ 20.2
Interest Income $ (0.9) $ (0.8)
Litigation Settlement $ - $ (12.7)
Other $ (3.7) $ -
---------- ---------
EBITDA $ 107.0 $ 75.3
========== =========
ARMKEL LLC
Net Income Reconciliation
-------------------------
(Dollars in Millions)
Nine Months Ended
-----------------
Sept. 26, 2003 Sept. 27, 2002
-------------- --------------
Net Income as Reported $ 46.7 $ 25.2
Litigation Settlement $ (12.7) -
Write-down of Asset Held for Sale $ 3.1 -
Gain on sale of Italian Subsidiary $ (1.9) -
Italian Subsidiary Net Income $ (0.3) $ (1.8)
Inventory Step-up Charge - $ 8.1
--------- --------
Adjusted Net Income $ 34.9 $ 31.5
========= ========
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Sept. 26, 2003 Sept. 27, 2002 Sept. 26, 2003 Sept. 27, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net Sales $265,566 $263,786 $770,127 $779,051
Cost of sales 185,024 182,586 536,178 548,663
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 80,542 81,200 233,949 230,388
Marketing expenses 22,905 22,752 66,136 61,737
Selling, general and administrative expenses 28,763 30,299 85,109 88,982
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Operations 28,874 28,149 82,704 79,669
Equity in earnings of affiliates 5,164 5,453 25,844 17,734
Other income (expense), net (4,648) (6,762) (13,272) (19,029)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before minority interest and taxes 29,390 26,840 95,276 78,374
Income taxes 9,861 9,265 30,160 27,095
Minority Interest 7 -- 22 129
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $19,522 $17,575 $65,094 $51,150
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income per share - Basic $0.48 $0.44 $1.62 $1.29
Net Income per share - Diluted $0.46 $0.42 $1.55 $1.23
- ------------------------------------------------------------------------------------------------------------------------------------
Dividend per share $0.08 $0.075 $0.23 $0.225
Weighted average shares outstanding - Basic 40,318 39,794 40,132 39,548
Weighted average shares outstanding - Diluted 42,248 41,875 42,058 41,749
- ------------------------------------------------------------------------------------------------------------------------------------
CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands) Sept. 26, 2003 Sept. 27, 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Current Assets
Cash, equivalents and securities $76,696 $76,148
Accounts receivable 101,582 102,600
Inventories 78,411 89,133
Other current assets 23,485 32,562
- ---------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 280,174 300,443
- ---------------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment (Net) 247,325 240,975
Equity Investment in Affiliates 150,888 129,408
Intangibles and other assets 337,981 315,382
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $1,016,368 $986,208
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Short-Term Debt $64,118 $20,772
Other Current Liabilities 173,261 164,863
- ---------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 237,379 185,635
- ---------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt 254,574 379,969
Other Long-Term Liabilities 108,440 87,940
Stockholders' Equity 415,975 332,664
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,016,368 $986,208
- ---------------------------------------------------------------------------------------------------------------------------------